CISNEROS v. JOHN HANCOCK MUTUAL LIFE INSURANCE CO., (W.D.Tex. 1998)

EDWARD C. PRADO, United States District Judge.

On this date the Court considered the Defendant's Motion for Summary Judgment, filed October 20, 1997, the Plaintiff's Response, filed November 12, 1997, the Defendant's Reply, filed December 3, 1997, and the Plaintiff's Sur-Response, filed January 20, 1998 in the above-styled and numbered cause. After careful consideration, the court will grant in part and deny in part the motion.

Background

Robert Cisneros was an agent for John Hancock Mutual Life Insurance Company ("Hancock") for approximately 25 years. During his long, successful tenure with Hancock, Cisneros expended significant amounts of time, money and effort in establishing markets for Hancock throughout the United States and in other countries. Cisneros claims his efforts were made in reasonable reliance upon agreements, understandings, and representations made by Hancock which include the following:

a. that if Cisneros would make extensive investments of time and money, he would obtain irrevocably vested interests in his John Hancock franchises and all of his customer accounts and in the Exclusive Territory, including the territory eventually served by John Hancock's Austin franchise (the "Austin agency");

b. that the relationship between Cisneros and Hancock would be a long term relationship extending for many years — at the very least through Cisneros' normal retirement age of 65.

c. that despite any written agreements between the parties that may have contained specific termination provisions, Hancock would only terminate Cisneros for fraud or defalcation; and

d. that Cisneros would have a John Hancock "Franchise" and own his own business.

Cisneros states that, relying on these agreements, he established significant account relationships with numerous customers throughout the State of Texas and in Mexico. In short, he established a successful, independent Hancock Franchise known as a Formula General Agency, which, he claims, was ultimately misappropriated by Hancock. A Formula General Agent is an independent business person who has a franchise. That is to say, he pays all of his own expenses, operates as an independent business person, and makes a profit or loss based upon his own efforts and those of the salespeople he employs. After Cisneros had been doing this for several years, John Hancock in 1990 requested that Cisneros merge his successful San Antonio franchise with an Austin John Hancock agency that was failing. Cisneros did merge his agency with the Hancock Austin agency. Cisneros claims that this merger resulted in dragging down the overall performance of the Cisneros General Agency. Cisneros further claims that Hancock commenced a pattern of bad faith actions and contract violations that adversely influenced the performance of the Cisneros agency. Cisneros further claims that in early 1993, Hancock attempted to force Cisneros to amend his contract to require mandatory arbitration. After he refused, Hancock continued a campaign of harassment and arbitrary application of the Hancock rules for general agencies. On October 22, 1993 Hancock ultimately forced Cisneros to leave the agency, effective October 31, 1993. Cisneros brings this lawsuit alleging several causes of action: breach of contract, tortious interference with contract, conversion, common law and statutory fraud, duress and coercion, and promissory estoppel. In this motion, Hancock moves for summary judgment on each of these claims.

Cisneros had originally also included causes of action for revocation of a power or agency coupled with an interest or franchise, breach of fiduciary duty, defamation, and post-termination interference. However, Cisneros has now waived these claims. Additionally, Loida Cisneros was also originally included as a Plaintiff, but she dropped her claims, leaving Robert Cisneros as the sole Plaintiff in this cause of action.

Summary Judgment Standard

A party is entitled to summary judgment pursuant to Fed.R.Civ.P. 56(c) where the party demonstrates on the record there is no genuine issue of material fact and the party is entitled to judgment as a matter of law. Where a summary judgment motion is properly supported, the opposing party may not rest on the allegations or denials of his pleadings, but must come forward with sufficient evidence to demonstrate a "genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To defeat a defendant's summary judgment motion, a plaintiff must direct the district court's attention to evidence sufficient to establish a genuine issue of fact as to each material element on which plaintiff would bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A dispute concerning a material fact is "genuine" and sufficient to overcome a summary judgment motion "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. Summary judgment may be granted where "the [nonmovant's] evidence is merely colorable, or is not significantly probative." Id. at 249-50.

Analysis

The Plaintiff claims that he entered into both a written and an oral employment contract with the Defendant, in which both parties agreed that Plaintiff would be a Hancock agent for life or until he retired. The Defendant moves for summary judgment stating that the oral contract is barred by the statute of frauds and the written contract was terminable at will, and furthermore, it was terminated for poor performance. There are two separate contracts that must be examined. First, there is the written contract between the parties, the General Agent Contract, which provides that it is terminable by either party at-will. This contract is governed by Massachusetts law based upon a choice of law in its form contract. The contract states, "This contract shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Massachusetts." The Defendant claims that since this contract is terminable at will, the Defendant could terminate the contract for any reason as a matter of law, and Plaintiff therefore has no breach of contract cause of action as a matter of law. However, the Defendant's reasoning is incorrect under Massachusetts law. According to Fortune v. The National Cash Register Company, 373 Mass. 96, 101 (Mass. 1997), "[A] written contract contains an implied covenant of good faith and fair dealing, and a termination not made in good faith constitutes a breach of the contract." Plaintiff has offered much evidence that Hancock did not terminate him in good faith, and therefore Plaintiff's breach of contract action with regard to the written contract survives Defendant's motion for summary judgment.

However, Plaintiff also claims that he entered into an oral contract with the Defendant that he would be employed for life or until retirement. This oral contract was made in Texas and thus is governed by Texas law. Under Texas law it is barred by the statute of frauds. The statute of frauds in Texas provides that an oral agreement that cannot be performed within one year from the date of its making is unenforceable unless it is in writing. Tex. Bus. Com. Code Ann. § 26.01. The statute of frauds bars oral contracts which must last longer than one year. See Pruitt v. Levi Strauss Co., 932 F.2d 458, 463 (1991). According to Pruitt, under Texas law, an oral employment agreement that provides employment until normal retirement age is unenforceable because the agreement cannot be performed within a year. The court states that this is the case unless, or course, promisee is within one year of normal retirement age at time promise is made. The court further states that the agreement to provide lifetime or permanent employment must be in writing to be enforceable because it cannot be performed within a year. Id. at 464-465. In the instant case, the oral contract is barred by the statute of frauds. Plaintiff claims that he was verbally told that he would have a job for life or until age 65. Plaintiff is in his early fifties. Thus, any contract to employ Plaintiff for life or up to the age of 65 must have been in writing. Since this oral contract was not in writing, it is barred by the statute of frauds.

Plaintiff's second cause of action is that Defendant tortiously interfered with Plaintiff's contracts with his agents. However, this cause of action is barred by the Texas two-year statute of limitations. Under Texas law, a tortious interference claim is governed by a two-year statute of limitations. Tex. Civ. Prac. Rem. Code § 16.003 (Vernon Supp. 1997). Plaintiff claims that his tortious interference claims are not barred by limitations because Plaintiff states that his General Agency was not actually terminated (as a result of Hancock's interference) until October 31, 1993. (Plaintiff filed his lawsuit on October 31, 1995.) Plaintiff further asserts that the tortious interference claim is not barred by limitations because he did not suffer any damages until the termination of Plaintiff's General Agent Contract on October 31, 1993. However, Plaintiff's cause of action accrued before October 31, 1993; it accrued on October 22, 1993, the date that Plaintiff was notified he should leave the agency effective October 31, 1993.

Texas and federal law establish that "[w]ith respect to tort actions generally, the limitations period begins to run at the time the duty owed to one person is breached by a wrongful act of another. 5636 Alpha Road v. NCNB Tex. Nat'l Bank, 879 F. Supp. 655 (N.D. Tex. 1995); Ponder v. Brice Mankoff, 889 S.W.2d 638 (Tex.App. .— Houston (14th Dist.] 1994, writ denied) ("general rule is that tort cause of action accrues when tort is committed notwithstanding fact that damages or their extent is not ascertainable until a later date"); Dotson v. Alamo Funeral Home, 577 S.W.2d 308 (Tex.App.-San Antonio 1979, no writ.) (as a general rule, the statute of limitations begins to run on cause of action in tort when duty is breached even though Plaintiff is ignorant of his cause of action).

In Delaware State College v. Ricks, 449 U.S. 250 (1980), the Supreme Court held that in employment discrimination actions, the Plaintiff's cause of action accrued on the date he was notified that he would be denied tenure regardless of the fact that the effects of the tenure denial, such as actual loss of teaching position, did not occur until later; the proper focus being the time of the act and not upon the time at which the consequences of the act became most painful. Similar, Plaintiff's cause of action accrued no later than October 22, 1993, when he was notified he should leave the Agency effective October 31, 1993. Regardless of when the purported effects of the termination were felt by Plaintiffs, Plaintiffs were fully aware of their cause of action more than two years prior to the time Plaintiffs filed suit on October 31, 1995. See Delaware State College and Ponder v. Brice Mankoff. Consequently, Plaintiff's claim for tortious interference with contract must be dismissed.

Plaintiff's claims of duress and coercion are also barred by the statute of limitations for the same reasons. Plaintiff claims that Hancock used duress and coercion to force Plaintiff to merge with the Austin agency. Plaintiff merged with the Austin Agency in 1990. On October 22, 1993, he was notified he should leave the Agency effective October 31, 1993. Plaintiff's cause of action accrued on October 22, 1993, and since Plaintiff did not file suit until October 31, 1995, his claims for duress and coercion is barred by the statute of limitations.

Plaintiff also seeks relief under the common law theory of promissory estoppel, claiming that Defendant's promise that he would have his agency for life or until age 65 and its promises of full and fair commission compensation and pension benefits should be enforced under a theory of promissory estoppel if they are not enforced directly in the contract. The Defendant, on the other hand, argues that it is entitled to summary judgment on Plaintiff's promissory estoppel claim because a written contract to the contrary existed between plaintiff and Defendant. However, Plaintiff is entitled to argue promissory estoppel on the alleged promise that Cisneros would have his agency for life or until retirement. There is no such written contract, and the alleged oral contract is barred by the statute of frauds. When a contract is barred by the statute of frauds, promissory estoppel is the appropriate remedy. Since there is no contract stating that Plaintiff would have his agency for life or until retirement, plaintiff is permitted to show that he relied on Defendant's promises to his detriment. Promissory is a contract substitute implied by law. Hence, Plaintiff is entitled to assert the doctrine of promissory estoppel.

Texas law is the applicable law concerning the doctrine of promissory estoppel since the promise was made in Texas. However, which law governs is irrelevant for this cause of action because Plaintiff has a cause of action for promissory estoppel under both Texas and Massachusetts law.

Plaintiff's next cause of action is for conversion. Plaintiff claims that Defendant has wrongfully and without justification, converted Plaintiff's substantial business assets, including the good will, agents, commissions from the Cisneros General Agency and Cisneros' post terminal commissions. The Defendant argues that Defendnat is not guilty of conversion as a matter of law. Under Texas law, conversion is defined as "the unauthorized and unlawful exercise of dominion and control over property inconsistent with or to the exclusion of another's superior rights in that property." National Union Fire Ins. v. Care Flight Ambulance, 18 F.3d 323, 325 (5th Cir. 1994). The Defendant correctly states that the General Agent Contract between Plaintiff and Defendant specifically provides that Defendant has a superior right to the General Agency. However, despite the fact that Defendant had a superior right to the General Agency as a whole, Defendant is not entitled to summary judgment because it is a question of fact as to whether conversion occured with regard to Plaintiff's individual assets such as his commissions, pension, etc.

Finally, plaintiff seeks relief under common law and statutory fraud. Plaintiff seeks relief under the common law theory of fraud, alleging that certain material misrepresentations were made to him concerning owning his own business and he relied on these representations, which were false, misleading and were made with reckless disregard for the truth. The Defendant claims that as a matter of law the evidence establishes that Defendant did not engage in fraud. However, Plaintiff has come forward with summary judgment evidence that establishes that the Defendant did commit fraud. Therefore, a genuine issue of material fact exists as to whether the Defendant committed fraud, and summary judgment must be denied on this issue.

The plaintiff also argues that Defendant committed statutory fraud, claiming that the Defendant has violated the Texas Insurance Code by making statements "with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which [are] untrue, deceptive or misleading." Tex. Ins. Code Art. 21.21, § 4. The Plaintiff claims that Defendant fraudulently represented to Plaintiff that he would own his own business, that he could own a Hancock franchise, and that Cisneros and the other General Agents would hold their positions as long as they did not commit fraud themselves. The Defendant claims that the Plaintiff does not have standing to sue under Art. 21.21 because he was not an intended beneficiary of the statute. The Defendant cites Favor v. Hochheim Prairie Farm Mutual Insurance Ass'n, 939 S.W.2d 180, 182 (Tex.App.-San Antonio 1996, writ denied) to support its argument. In Favor, the Court stated that an insurance agent who was not an insured or intended beneficiary of a policy did not have standing to sue the insurer under Article 21.21.

However, in Tweedell v. Hochheim Prairie Farm Mut. Ins. Ass'n, 962 S.W.2d 685 (Tex.App.-Corpus Christi 1998), the court disagreed with Favor, stating that the Plaintiff as an insurance agent had standing to sue under Article 21.21. This court agrees with Tweedell because the statute clearly grants an insurance agent standing to sue. Section 16(a) of article 21.21 provides:

Any person who has sustained actual damages as a result of another's engaging in an act or practice declared in Section 4 of this Article or in rules or regulations lawfully adopted by the Board under this Article to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance or in any practice defined by Section 17.46 of the Business Commerce Code, as amended, as an unlawful deceptive trade practice may maintain an action against the person or persons engaging in such acts or practices.

Tex. Bus. Com. Code Ann. art. 21.21 § 16(a) (Vernon Supp. 1998). A "person" is defined as "any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters, and life insurance counselors." Tex. Bus. Com. Code Ann. art. 21.21 § 2(a) (Vernon Supp. 1998). Section 16(a) clearly grants standing to any person who has sustained actual damages as a result of another's engaging in an act or practice declared in section 4 of article 21.21 to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance. Because insurance agents are included in the section 2 definition of "person," the court held that any agent who suffers actual damages because of another person's engaging in activities proscribed by article 21.21, section 4 of the Insurance Code has standing to bring a cause of action under article 21.21 of the Insurance Code. See Id.

In Tweedell the Plaintiffs were independent insurance agents authorized to sell insurance for Hochheim prairie Farm Mutual Insurance Association. The Hochheim Companies terminated Plaintiffs' sales representative and agency contracts and refused to renew all policies issued by Plaintiffs because of overall combined high loss ratios for the years 1986-1989. Plaintiffs sued the Hochheim Companies and their officers for breach of fiduciary duties and violations of article 21.21 of the Insurance Code. The court held that the insurance agents had standing to sue. Id. Likewise, in the instant case, Plaintiff has standing to sue under article 21.21.

Accordingly, it is hereby ORDERED that the Defendant's Motion for summary judgment is DENIED with regard to breach of written contract, conversion, common law and statutory fraud, and promissory estoppel. However, Defendant's Motion for summary judgment is GRANTED with regard to breach of oral contract, tortious interference with contract and duress and coercion.