Court Opinion

ID: 9514826
Source: CourtListenerOpinion
Date Created: 2023-08-06 22:51:56.395594+00
Date Added: 2024-06-11T09:06:21.416181
License: Public Domain

GILBERTSON, Justice
(dissenting).
Parker’s Contract Claim
[¶ 28.] The Court concludes Western Dakota was not bound by the Parker Agreement. It also states Western Dakota expressly eliminated responsibility for any of First American’s debts or obligations. Essentially, the Court’s opinion concludes Parker is without legal recourse because when First American sold its right to receive renewal commissions to Western Dakota, First American was the one who broke its promise to Parker, not Western Dakota. I respectfully disagree with the Court’s opinion.
[¶ 24.] Paragraph ten of the Parker Agreement specifies it will be binding upon any party acquiring all or substantially all of First American’s assets and business. On May 11, 1994 Western Dakota did subsequently purchase substantially all of First American’s then existing insurance business. In its purchase of First American’s assets, Western Dakota assumed the terms and conditions of the Parker Agreement:
The assets being purchased means and includes all client or customer lists, including expiration and renewal dates, customer data, all insurance dailies and all records and information with respect thereto, files and right to renewal commissions, (the “Business”), (emphasis added).
The Court’s opinion concludes Western Dakota’s purchase of the right to First American’s renewal commissions did not equal a legal assumption of First American’s promise to share a percentage of its commissions with Parker. The Court’s opinion states “Parker had no title or ownership interest in First American’s insurance business or renewal commissions.” The Parker agreement states that the “insurance business” developed by Parker “shall be the permanent and exclusive property of [First American] ...,” and that the “insurance business” was purchased by Western Dakota. Parker has never denied this. However, the Parker Agreement specifically states Parker is entitled to a percentage of the commissions she develops with respect to the business. Therefore, even though the insurance business was sold by First American and bought by Western Dakota, the applicable percentage of the renewal commissions was by contract previously promised to Parker, as the Parker Agreement specifies. In fact, both Parker and Tom Lane, the negotiator and signatory of the Parker Agreement for First American, testified the very purpose of the Parker Agreement was to protect Parker’s entitlement to her percentage of the renewal commissions. Lane testified:
Q: Could you tell me, please, to the best of your ability, what the purpose of Paragraph 10 was in your mind.
A: (Lane) Well, to I guess to remove [Parker’s] concern that if we sold to somebody this would all go away and it was to continue on. That, I know, was a real concern of hers at the time. She knew and trusted us, she didn’t know who else would be there, that type of thing.
Q: Okay. Was it your intention based on this paragraph then if the agency were sold, i.e., all or substantially all' of [First American’s] assets and business, then [Parker’s] contract would continue on with the company that purchased those assets?
A: Yes, yes.
Moreover, the Parker Agreement states “.... Parker shall be entitled to that percentage hereinafter set forth of reneiual commissions received by [First American] for all products sold serviced and handled by her during the term of this Agreement ...” (emphasis added). Further, the Agreement states “Parker’s entitlements *190hereunder, if any, shall be paid monthly commencing upon termination of her employment. ..It specifically addressed the issue now before us with this clause:
This Agreement shall inure to the benefit of and shall be binding upon [First American], its successors and assigns, including without limitation any person, partnership, or corporation which may require [sic] all or substantially all of [First American’s] assets and business[.]
The trial court correctly found as fact that Western Dakota knew of the existence of the Parker Agreement before it entered into the purchase agreement.
[¶ 25.] When Western Dakota purchased First American’s assets, it received only those rights to renewal commissions First American could sell. A buyer receives no better title than the seller can provide. In Michigan Mut. Life Ins. Co. v. Coleman, 118 Tenn. 215, 100 S.W. 122, 127 (1907), the court stated: “[t]here is indeed, a provision in the contract that, upon the termination of the contract at any time, the company had the right ‘to transfer the business’ of the agent to any person it may choose; but this by no means includes rights of property and interest in renewals already accrued, but merely the transfer of the agency.” First American did not have the exclusive right to all renewal commissions. Pursuant to the Parker Agreement, First American agreed to pay Parker, upon termination of her employment, 50% for group health and 56.25% or all other products of insurance in renewal commissions. Thus, the trial court was correct in its finding that “the ‘right to renewal commissions’ referenced in the 1994 purchase agreement was subject to the rights of Parker to her renewal commissions set forth in the Parker Agreement made prior to the asset purchase.”
[¶26.] The Court is correct when it states the general rule is that a corporation purchasing the assets of another corporation will not be subject to the liabilities of the seller, and that four exceptions have developed to the rule. Hamaker v. Kenwel-Jackson Mach., Inc., 387 N.W.2d 515, 518 (S.D.1986) (citing Leannais v. Cincinnati, Inc., 565 F.2d 437, 439 (7th Cir.1977)). However, the basis for this traditional corporate law doctrine is that “a sale of corporate assets transfers an interest separable from the corporate entity and does not result in a transfer of unbargained-for liabilities from the seller to the purchaser.” Hall v. Armstrong Cork, Inc., 103 Wash.2d 258, 692 P.2d 787, 790 (1984). The rationale for this rule is that a purchasing corporation should receive the same protection traditionally given to any purchaser of property. Id. Thus, “the bona fide purchaser who gives adequate consideration and who lacks notice of prior claims against the property acquires no liability for those claims.”2 Eagle Pacific Insurance Co. v. Christensen Motor Yacht Corp., 135 Wash.2d 894, 959 P.2d 1052, 1055 (1998) (citing Hall, 692 P.2d at 790) (emphasis added). Western Dakota, while it did pay consideration for First American’s assets, had actual notice of the Parker Agreement before the purchase was complete. Thus, Western Dakota knew Parker had a claim against a certain percentage of renewal commissions, and when it purchased the “right to renewal commissions” of First American, it also purchased the Parker Agreement. Western Dakota has been receiving the *191benefits of renewal commissions procured by Parker, and it should only follow that it should also accept the burdens running with them.
[¶ 27.] The right of an insurance agent to his renewal commissions has been recognized as a substantial property right.3 Cockrell v. Grimes, 740 P.2d 746, 748 (Okla.App.1987); General American Life Ins. Co. v. Roach, 179 Okla. 301, 65 P.2d 458, 460 (1937); Coleman, 100 S.W. at 127; Schrimplin v. Farmers’ Life Ass’n., 123 Iowa 102, 98 N.W. 613, 617 (1904); Hercules Mutual Life Assurance v. Brinker, 77 N.Y. 435, 1879 WL 10724, at *6 (1879). See also People ex rel. Palmer v. Peoria Life Ins. Co., 376 Ill. 517, 34 N.E.2d 829, 833-34 (1941) (Wilson, J., dissenting) (“An agent does not lose his right to renewal commissions ... by receivership of the issuing company or the transfer of its policies to a successor company.”); 4 Couch on Ins. § 57:44 (3d ed) (“The successor to the original insurer may be bound to continue to pay renewal premiums to agents of the original insurer.”). “The agent’s right to a percentage of the premium on a policy is a property right which becomes fixed as soon as the policy is taken out, and then is realized when the premiums are actually paid from time to time.” Cockrell, 740 P.2d at 749 (citing Wear v. Farmers & Merchants Bank, 605 P.2d 27, 30 (Alaska 1980)). Similarly here, Parker’s contract with First American authorized by SDCL 58-30-86, provided that Parker was enti-tied to renewal commissions in the amount of 50% for group health policies and 56.25% for all other insurance policies “sold, serviced and handled by her,” and that the commissions were payable to her for each year in which the policies “were thereafter renewed with First American, in the same insurance company or carrier.” Indeed, it has been held that “[t]he- right of an agent to commissions on renewal premiums is determined by the terms of his contract of employment.” Wagner v. Land, 152 Okla. 225, 4 P.2d 81, 84 (1931). In this case, the contract pf employment provides Parker was to receive' commissions on renewal premiums even after termination of the employment contract and the sale of assets by First American, as long as the premiums were paid to its successor. Cockrell, 740 P.2d at 748. The principle stated by the court in Cockrell applies to this case:
Under Roach that portion of the premiums collected which constitutes Cock-rell’s commissions are- not assets of the insolvent insurer, but are the vested property of Cockrell, and are held in trust for him. As long as the insurance policies written by Cockrell are in effect and premiums are being paid on those policies, the commissions on those premiums is the separate, vested property of Cockrell and not the assets of the insolvent insurer.

Id.

[¶ 28.] In conclusion, this type of a contract was specifically authorized by SDCL 58-*19230-86. The contract stated that Parker’s rights were to continue even if the policies she sold were assigned by First American to another. Western Dakota knew of the contract when it purchased First American’s assets. When it purchased First American’s assets, Western Dakota bound itself to the Parker Agreement.4 As such I would affirm the trial court on this issue.
Parker’s Unjust Enrichment Claim
[¶ 29.] Parker sought recovery in the alternative on the basis of unjust enrichment. The sole reason Western Dakota prevailed on this claim is because the trial court had already granted relief upon Parker’s contract claim. For Parker to prevail on a claim of unjust enrichment she must establish: (1) Western Dakota has received a benefit, (2) Western Dakota is cognizant of the benefit; and (3) the retention of the benefit without reimbursing Parker would unjustly enrich it. Juttelstad v. Juttelstad, 1998 SD 121, ¶ 19, 587 N.W.2d 447, 451 (citing Bollinger v. Eldredge, 524 N.W.2d 118, 123 (S.D.1994)). Western Dakota received a benefit as it is receiving commissions from insurance policies, which had been sold by Parker pursuant to the Parker Agreement. When Western Dakota purchased the assets of First American, it knew of the Parker Agreement. Parker had sold these policies in lieu of working for a competitor and to now allow Western Dakota to retain the full 100% of the commission (in comparison to 50% and 43.75% retained by First American) for policies it had no part in selling is unjust enrichment.5
Conversion
[¶ 30.] “Conversion is the act of exercising control or dominion over personal property in a manner that repudiates the *193owner’s right in the property or in a manner that is inconsistent with such right.” Rushmore State Bank v. Kurylas, Inc., 424 N.W.2d 649, 659 (S.D.1988). The definition of “property interests should be liberally, rather than strictly, construed.” Id. at 652, (citing Carlson v. Hudson, 277 N.W.2d 715, 719 (S.D.1979)). Here also the trial court granted a verdict to Western Dakota solely because it had previously ruled for Parker on the contract claim.
[¶81.] When Western Dakota received renewal premiums on policies of insurance written by Parker, a former employee and manager of First American, a constructive trust was created, and Western Dakota became a trustee for Parker to the extent of her renewal commission interest in such premiums. See Palmer, 34 N.E.2d at 834 (Wilson, J., dissenting). One who wrongfully detains a thing of value by breach of contract, unjust enrichment or conversion is an implied trustee for the benefit of the owner. SDCL 55-1-7. One who gains a thing of value by a wrongful act, unless he has some other and better right thereto, holds the item as an implied trustee for the benefit of the person who would otherwise have had it. SDCL 55-1-8; Rosebud Sioux Tribe v. Strain, 432 N.W.2d 259, 264 (S.D.1988). If the renewal commissions are not paid to Parker, Western Dakota will “receive a windfall contrary to the familiar principle that equity will not tolerate an unjust enrichment.” Palmer, 34 N.E.2d at 834.
[¶ 32.] Parker’s commissions vested upon payment of commissions paid by the insurance company to the party entitled to receive them, be it First American or Western Dakota. The money earned by Parker is her property, not that of Western Dakota. A windfall will result if Western Dakota is allowed to keep Parker’s percentage of renewal commissions. Parker was a valuable and productive employee of First American for almost a decade. She helped build a significant book of insurance business during her tenure there, and by contract is entitled to require Western Dakota to honor the Parker Agreement it expressly assumed when it purchased the assets of First American. As such, if this Court does not affirm the trial court on the contractual claim, it should reverse the trial court on the failure to rule on the merits of unjust enrichment and the conversion claims and based on the trial court’s findings enter judgment in favor of Parker.
[¶33.] For the above reasons I would affirm the trial court’s order requiring Western Dakota to pay Parker her share of renewal commissions, and therefore, respectfully dissent.

. The Court criticizes this dissent for relying on Eagle Pacific. That case involves the fourth exception that does not apply to this case. Eagle Pacific does adhere, however, to the rule upon which the Court relies, "[n]or-mally, when a corporation sells its assets to another corporation, the purchasing corporation does not become liable for the debts of the selling corporation.” 959 P.2d at 1055; see also Hamaker, 387 N.W.2d at 518. This case was cited purely to explain the rationale behind this rule. Certainly it aids the reader in understanding this explicit rule of corporate law. It is an explicit rule because it is good public policy to protect those purchasing corporations that have no knowledge of any prior claims against property of the selling corporation. However, those purchasing corporations with knowledge of prior claims should not be granted such protection.

. An insurance agent’s right to receive a commission from an insurance company is based upon a contract. Parker was an insurance "agent” as defined by SDCL 58-30-1 as she was licensed by the Director of the Division of Insurance, However, her "right” as an agent to solicit and sell insurance contracts that are relevant to this suit does not flow directly between her and the insurance company. She worked as an employee in various capacities for her employer, First American, who was also an "agent" within the definition of SDCL 58-30-1. Her right to payment when the commissions were received by her employer on insurance she sold, was also based upon contract. Therefore, the above-cited cases are authority for the premise that contractual obligations to pay a -portion of an insurance commission to Parker are an enforceable property right based on contract. SDCL 58-30-86 specifically recognizes the legality of these types of contracts as long as both contract parties are agents:
No agent or soliciting agent may directly or indirectly share his commissions or other compensation received or to be received by him on account of a transaction under his license with any person not also licensed under this chapter as to the same kind or kinds of insurance involved in such transactions. Violation of this section is a Class 2 misdemeanor.
As such these cases are persuasive authority for Parker's position.

. The Majority faults the dissent for "failure to cite any authority that holds that a private agreement between an employer and an employee to share future receipts, is binding on a later purchaser of the corporate employer’s assets.” The majority should hold itself to the same standard as it has no persuasive authority to the contrary. Its sole "authority” is Shaw v. Republic Drill Corp., 810 F.2d 149 (7th Cir.1987) wherein the federal court in a two paragraph opinion refused to uphold an employee’s contractual claim because the employee failed to cite any Illinois cases which supported his position and the federal court felt it improper to speculate how the Illinois courts would decide the issue. Shaw’s holding is simply ”[w]e write only to emphasize that our policy will continue to be one that requires plaintiffs desirous of succeeding on novel state law claims to present those claims initially in state court.” Id. at 150.
As the highest appellate court in South Dakota we are not bound by such a limitation. What we are bound by is our long-standing rule of appellate review that we will not seek reasons to reverse but rather will affirm a trial court if there is a basis to do so. See Boland v. City of Rapid City, 315 N.W.2d 496, 499 (S.D.1982) ("A trial court’s rulings and decisions are presumed to be correct and this court will not seek reasons to reverse.”). In other words, it is the obligation of Western Dakota to show why the trial court erred, not the obligation of Parker to show why the trial court was correct. See Crook v. Pap, 303 N.W.2d 818, 819 (S.D.1981) per curiam (citing Custer County Bd. of Ed. v. State Commission on Elementary and Secondary Ed., 86 S.D. 215, 193 N.W.2d 586 (1972) (burden is on the party alleging error to show it affirmatively by the record, thus, error may not be presumed on appeal)).

. The Court declares no unjust enrichment can exist because, ”[i]t is true that Western Dakota received a benefit, but Western Dakota paid for it.” This begs the question as it does not conclude Western Dakota paid the fair market value for the right to the commissions with no discount for the Parker obligations. The trial court made no finding that Western Dakota paid a nondiscounted fair market value despite the fact Western Dakota repeatedly sought it. It did not accept this contention of Western Dakota. Instead it held, “by virtue of the unambiguous language found in May 11, 1994 Purchase Agreement, Western Dakota purchased the contract between [Parker] and First American systems.” The trial court did state in its findings, "DQeft for trial, then, was the issue of damages and Plaintiff's equitable unjust enrichment claim. The parties agreed to waive jury trial on those remaining issues, and said issues were tried before the Court on April 7, 1998. The Court was able to judge the credibility of the witnesses and weigh the evidence accordingly.” Thus any claim by Western Dakota of full payment failed.