Rashell Holt v. John Robert Whedbee ( 2019 )

04/12/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
February 21, 2019 Session
RASHELL HOLT, ET AL. v. JOHN ROBERT WHEDBEE, ET AL.
Appeal from the Chancery Court for Knox County
No. 185385-2 Clarence E. Pridemore, Jr., Chancellor
No. E2018-01244-COA-R3-CV
This appeal concerns an alleged breach of contract. Patsy Yearwood (“Decedent”), an
insurance agent with John Robert Whedbee and James L. Whedbee at the Whedbee
Insurance Agency (“Defendants”), entered into an agreement (“the Agreement”) with
Defendants whereby Defendants would buy all of Decedent’s contracts of insurance and
expirations and renewals. For a set period of time, Decedent would receive 50% of her
commissions and renewals and Defendants were to receive the other 50%. Decedent, in
declining health, was to assist in retaining and producing business. Upon Decedent’s
death, her commissions were to go to her estate. Decedent died and three months later,
Defendants halted payments. Decedent’s daughter RaShell Holt, individually and as
Executrix of the Estate of Patsy Yearwood (“Plaintiff”), sued Defendants in the Chancery
Court for Knox County (“the Trial Court”). Defendants filed a motion for summary
judgment, which the Trial Court granted on the basis that Decedent first breached the
Agreement by not working in the period leading up to her death. Plaintiff appealed. We
find and hold that there is a genuine issue of material fact as to whether Decedent
breached the Agreement by ceasing to work. We hold further that, even if Decedent
stopped working, this in itself was not a breach of contract because her sickness and
death were anticipated in the Agreement. We hold further still that, even if Decedent
breached the Agreement, Defendants were not entitled to continue receiving all the
benefits of the Agreement while denying the estate its benefits. We reverse the judgment
of the Trial Court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed;
Case Remanded
D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which CHARLES D.
SUSANO, JR. and JOHN W. MCCLARTY, JJ., joined.
James C. Ensor, Knoxville, Tennessee, for the appellants, RaShell Holt and the Estate of
Patsy Yearwood.
John B. Dupree, Knoxville, Tennessee, for the appellees, John Robert Whedbee, James L.
Whedbee1, and Whedbee Insurance Agency, LLC.
OPINION
Background
In September 2011, Decedent entered into the Agreement with Defendants.
Defendants would purchase all of Decedent’s contracts of insurance and expirations and
renewals over the span of four years from October 1, 2011 to October 1, 2015. Decedent
was to receive 50% of her commissions and renewals and Defendants were to receive the
other half, until October 1, 2015, when all of Decedent’s commissions and her contracts
of insurance and expirations and renewals then would go to Defendants. Under the
Agreement, Decedent was to assist in retaining and producing business. If Decedent died
before the end of the four-year period, Defendants would then own all of Decedent’s
contracts of insurance and expirations and renewals. Upon Decedent’s death, her share
of 50% of her commissions would be paid to her estate. The Agreement, typed in all
capital letters and containing handwritten modifications, states:
THIS DOCUMENT IS A CONTRACT IN WHICH THE BUSINESS
KNOWN AS WHEDBEE INSURANCE AGENCY LLC AND OR JOHN
ROBERT WHEDBEE AND JAMES L WHEDBEE WILL PURCHASE
ALL OF PATSY YEARWOOD’S CONTRACTS OF INSURANCE AND
EXPIRATIONS AND RENEWALS OVER THE SPACE OF FOUR
YEARS FROM 10/01/2011 TO 10/01/2015.
BEGINNING 10/01/2011 THE COMMISION SPLIT WILL BE 50% TO
EACH PATSY YEARWOOD AND WHEDBEE INSURANCE AGENCY.
PATSY YEARWOOD WILL ASSIST IN RETAINING AND
PRODUCING BUSINESS DURING THIS CONTRACT. ON 10/01/2015
ALL CONTRACTS OF INSURANCE PRODUCED BY PATSY
YEARWOOD AND ALL EXPIRATIONS OWNED BY SAME WILL
BECOME THE SOLE PROPERTY OF WHEDBEE INSURANCE
AGENCY LLC, JOHN ROBERT WHEDBEE, AND OR JAMES L
WHEDBEE.
IN THE EVENT OF PATSY YEARWOOD’S DEATH THIS [THE
BALANCE TO PAY MY ESTATE]2
1
A suggestion of death was filed below regarding James L. Whedbee. No action was taken as to the
suggestion.
2
This bracketed portion was handwritten and initialed.
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The signatories to the Agreement were Decedent, John Robert Whedbee and
James L. Whedbee.
In July 2012, Decedent died. Three months later, Defendants halted payments. In
June 2013, Plaintiff sued Defendants in the Trial Court. Plaintiff alleged that Defendants
“are collecting 100% on all contracts, renewals, and expirations of the Yearwood
contracts.” Plaintiff sought what was owed to Decedent’s estate under the Agreement.
Defendants filed an answer in opposition. Defendants admitted “that commissions on
premiums paid have been collected and charge-backs have been assigned pursuant to
normal protocol.” However, Defendants denied “that Yearwood entirely performed
under the contract because she was very ill and probably could not complete all of her
obligations thereunder.”
In October 2016, Defendants filed a motion for summary judgment contending
that Decedent first breached the Agreement by failing to assist in retaining and producing
business as required of her under the Agreement. Defendants submitted these as
undisputed facts:3
1. The intent of the parties in this case was that the commissions would be
split between the Whedbee Insurance Agency, LLC and Patsy Yearwood.
Affidavit of Robert Whedbee.
2. The intent of the parties in this case was that the Whedbee Insurance
Agency, LLC and Patsy Yearwood would be bound by the obligations
under the contract, not James L. Whedbee and John Robert Whedbee
individually. Id.
3. All commissions earned under the contract were direct deposited into the
Whedbee Insurance Agency, LLC bank account. Id.
4. No commission earned under the contract were ever received by the
Whedbee Insurance Agency LLC not not [sic] James L. Whedbee and John
Robert Whedbee individually. Id.
5. Mrs. Yearwood stopped coming into the office to assist in retaining and
producing business. Id.
6. Shortly after the contract was signed, Mrs. Yearwood stopped assisting
in the work on her accounts and in salvaging her business. Id.
7. Mrs. Yearwood failed to make contact with a very significant portion of
her clients prior to renewal times. Id.
8. Mrs. Yearwood failed to invite her clients into the office to meet Robert
Whedbee so that her contracts could transition to the Agency. Id.
3
In what likely was a drafting error, Defendants’ undisputed facts are said to be submitted by a “Dr.
Menachem Langer,” an individual not part of this appeal.
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9. Mrs. Yearwood did not know how to use the systems or upload
applications to the carriers and she could not do the work under the contract
thus causing Robert Whedbee to perform this work. Id.
10. Mrs. Yearwood did not code her files meaning that that [sic] the
Agency had great difficulty determining what accounts were subject to the
contract. Id.
11. Mrs. Yearwood did not return phone calls and Robert Whedbee was
forced to assist her customers even though he had no relationship with her
clients. Id.
12. The Agency tried to help with her customers but needed Mrs.
Yearwood’s assistance and could not retain the business because she was
not around the office to assist with customer relations. Id.
13. The Agency and the Whedbees were strangers to Mrs. Yearwood’s
customers. Id.
14. The failure to return calls occurred many times and 80% of Mrs.
Yearwood’s customers were lost because of this failure. Id.
15. In first few months Mrs. Yearwood came to work, but after that she fell
off and would not perform the tasks that were asked of her in order to assist
in retaining and producing business. Id.
16. Mrs. Yearwood was asked many times to return calls to her customers
but she would not return the calls frequently; because of this breach, the
business was lost. Id.
17. After all the accountings, Mrs. Yearwood was $495.66 in arrears after
the charge backs that happened because the policies were not renewed. Id.
18. Commissions were paid up front but when a policy cancelled, the agent
owes the pro-rated commission back to the Agency. Id.
19. Charge backs occurred with Mrs. Yearwood’s accounts. Id.
20. All due and owing commissions have been paid under the contract. Id.
In February 2017, Plaintiff filed a response to Defendants’ motion for summary
judgment. Plaintiff also filed her statement of disputed facts as well as her own affidavit.
In her affidavit, Plaintiff stated:
1. I am over the age of eighteen (18) years and am competent to testify to
the matters contained herein, all of which are based on my personal
knowledge.
2. While living, my mother worked as an insurance agent with John Robert
Whedbee and James L. Whedbee at the Whedbee Insurance Agency.
3. My mother signed a contract that I later attached to a Complaint filed
against John Robert Whedbee and James L. Whedbee and the Whedbee
Insurance Agency.
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4. My mother worked pursuant to the subject contract until she died on July
5, 2012.
5. My mother was paid regularly by the Whedbee Insurance Agency while
she was alive.
6. In October of 2012, James L Whedbee sent me (I am the Executrix of my
mother’s estate) a check for mother’s share of commissions for July,
August, and September of 2012.
7. On September 6, 2012, James L Whedbee wrote me a letter saying that
he may not be able to pay the estate in the future because the estate does not
have a license to sell insurance.
8. The estate has not received a check since the October 2012 check
mentioned above.
9. The Whedbee Insurance Agency, through John and James Whedbee have
since represented that they do not know which clients/contracts belonged to
my mother.
10. The Whedbee Insurance Agency has represented/represents to me that
all of the contracts have cancelled, thus the estate is owed no money.
11. The Whedbee Insurance Agency now states that they do not owe the
[e]state any money because she breached the contract while alive.
In October 2017, a hearing was conducted before the Trial Court regarding
Defendants’ motion for summary judgment. Later that month, the Trial Court entered an
order granting Defendants’ motion, stating in relevant part as follows:
1. Defendants filed a Motion for Summary Judgment on October 12,
201[6]. In this Motion, it is alleged Patsy Yearwood first breached the
contract between the parties by failing to assist in retaining and producing
business for the Defendants.
2. Plaintiffs filed a response to the Defendants’ Motion for Summary
Judgment on February 3, 2017. However, it did not contain a denial of the
allegation that Patsy Yearwood first breached the contract between the
parties.
3. It is well settled law in Tennessee that the party that first
materially breached a contract is “not entitled to damages stemming from
the other party’s later material breach of the same contract.” United Brake
System Inc, v. American Environmental Protection, 963 S.W.2d 749, 756
(Tenn. Ct. App. 1997).
Therefore, this Court is of the opinion the Defendants are entitled to
summary judgment as a matter of law and Plaintiffs’ cause of action is
DISMISSED.
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Plaintiff filed a motion to alter or amend. In June 2018, the Trial Court entered an order
denying Plaintiff’s motion. Plaintiff timely appealed to this Court.
Discussion
We restate and consolidate the multiple issues and sub-issues Plaintiff raises on
appeal into the following dispositive issues: 1) whether the Trial Court erred in granting
Defendants’ motion for summary judgment where the motion lacked any recitation that
there was no genuine issue of material fact; 2) whether material facts were in dispute
such that summary judgment was precluded; 3) whether the Trial Court erred in finding
that Decedent breached the Agreement by failing to assist in retaining and producing
business where the Agreement contemplated Decedent’s decline and death; and, 4)
whether the Trial Court erred in finding the “first-to-breach” rule applicable where
Defendants continued receiving all the benefits of the Agreement.
This case was decided by summary judgment. As our Supreme Court has
instructed:
Summary judgment is appropriate when “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.”
Tenn. R. Civ. P. 56.04. We review a trial court’s ruling on a motion for
summary judgment de novo, without a presumption of correctness. Bain v.
Wells, 936 S.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist
Healthcare–Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing
so, we make a fresh determination of whether the requirements of Rule 56
of the Tennessee Rules of Civil Procedure have been satisfied. Estate of
Brown, 402 S.W.3d 193, 198 (Tenn. 2013) (citing Hughes v. New Life Dev.
Corp., 387 S.W.3d 453, 471 (Tenn. 2012)).
***
[I]n Tennessee, as in the federal system, when the moving party does not
bear the burden of proof at trial, the moving party may satisfy its burden of
production either (1) by affirmatively negating an essential element of the
nonmoving party’s claim or (2) by demonstrating that the nonmoving
party’s evidence at the summary judgment stage is insufficient to establish
the nonmoving party’s claim or defense. We reiterate that a moving party
seeking summary judgment by attacking the nonmoving party’s evidence
must do more than make a conclusory assertion that summary judgment is
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appropriate on this basis. Rather, Tennessee Rule 56.03 requires the
moving party to support its motion with “a separate concise statement of
material facts as to which the moving party contends there is no genuine
issue for trial.” Tenn. R. Civ. P. 56.03. “Each fact is to be set forth in a
separate, numbered paragraph and supported by a specific citation to the
record.” Id. When such a motion is made, any party opposing summary
judgment must file a response to each fact set forth by the movant in the
manner provided in Tennessee Rule 56.03. “[W]hen a motion for summary
judgment is made [and] . . . supported as provided in [Tennessee Rule 56],”
to survive summary judgment, the nonmoving party “may not rest upon the
mere allegations or denials of [its] pleading,” but must respond, and by
affidavits or one of the other means provided in Tennessee Rule 56, “set
forth specific facts” at the summary judgment stage “showing that there is a
genuine issue for trial.” Tenn. R. Civ. P. 56.06. The nonmoving party
“must do more than simply show that there is some metaphysical doubt as
to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.
Ct. 1348. The nonmoving party must demonstrate the existence of specific
facts in the record which could lead a rational trier of fact to find in favor of
the nonmoving party. If a summary judgment motion is filed before
adequate time for discovery has been provided, the nonmoving party may
seek a continuance to engage in additional discovery as provided in
Tennessee Rule 56.07. However, after adequate time for discovery has
been provided, summary judgment should be granted if the nonmoving
party’s evidence at the summary judgment stage is insufficient to establish
the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P.
56.04, 56.06. The focus is on the evidence the nonmoving party comes
forward with at the summary judgment stage, not on hypothetical evidence
that theoretically could be adduced, despite the passage of discovery
deadlines, at a future trial.
Rye v. Women’s Care Cntr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn.
2015).
We first address the issue of whether the Trial Court erred in granting Defendants’
motion for summary judgment where the motion lacked any recitation that there was no
genuine issue of material fact. Defendants argue this issue was waived because it was
first raised in Plaintiff’s motion to alter or amend. Indeed, “[a] Rule 59 motion should
not be used to raise or present new, previously untried or unasserted theories or legal
arguments.” In re M.L.D., 182 S.W.3d 890, 895 (Tenn. Ct. App. 2005). Based on this
limited record, it appears Plaintiff raised this issue for the first time in her motion to alter
or amend. The issue is therefore waived.
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If, however, the issue were properly before us, Plaintiff would not prevail on it.
Plaintiff cites Keystone Ins. Co. v. Griffith, 659 S.W.2d 364, 366 (Tenn. Ct. App. 1983)
for the proposition that the failure to include a recitation that there was no genuine issue
of material fact is fatal to a motion for summary judgment. This Court took a different
view in the more recent case of Dondero v. Accuray Incorporated, No. E2017-01741-
COA-R3-CV, 2018 WL 3600014 (Tenn. Ct. App. July 26, 2018), Rule 11 appl. perm.
appeal denied Nov. 15, 2018. Facing the same issue, we stated:
In the reply briefs filed by the Donderos, they attempt to raise an additional
issue regarding whether two of the defendants’ motions for summary
judgment should have been denied for failure to recite that there was no
genuine issue of material fact. Issues cannot be raised for the first time in a
reply brief. See Owens v. Owens, 241 S.W.3d 478, 499 (Tenn. Ct. App.
2007) (“A reply brief is a response to the arguments of the appellee. It is
not a vehicle for raising new issues.”). We note, however, that this
argument lacked merit in any event. See Anderson v. DTB Corp., No. 89-
172-II, 1990 WL 33380, at *2 (Tenn. Ct. App. Mar. 28, 1990) (“A motion
for summary judgment need not contain any particular incantation to
comply with the rules as long as it states the basis for the motion and the
relief being sought.”)
Dondero, 2018 WL 3600014, at *5 n. 2. The proposition that no particular incantation is
necessary in a motion for summary judgment is a sound one, which we follow. We are
less interested in whether Defendants’ motion for summary judgment proclaimed there
was no genuine issue of material fact than we are in whether there was a genuine issue of
material fact, an issue we will address next.
We look to Defendants’ motion for summary judgment, Plaintiff’s response, and
supporting documents to determine whether there was a genuine issue of material fact.
Defendants’ statement of undisputed facts identified fairly specific ways in which
Decedent failed to assist in retaining and producing business. For instance, Defendants
assert that Decedent did not return phone calls, did not code her files, did not invite her
clients into the office, and stopped coming into the office, all of which was damaging to
the business. On the other hand, Plaintiff stated in her affidavit that Decedent “worked
pursuant to the subject contract until she died on July 5, 2012.” According to
Defendants, Plaintiff’s generic assertion fails to rebut their detailed cataloguing of
Decedent’s shortcomings and fails to create a genuine issue of material fact.
Plaintiff’s statement, brief as it is, contradicts Defendants’ submitted facts. If
Defendants agree with Plaintiff that Decedent worked pursuant to the Agreement until
her death, then they would have no grounds for alleging Decedent breached the
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Agreement. We add that the Agreement says nothing specifically about, for instance,
answering phones or coding files. Furthermore, the fact that Defendants continued to pay
until three months after Decedent’s death suggests they had no misgivings about the
quality of her work. Indeed, according to Plaintiff’s affidavit, Defendants only alleged
Decedent breached the Agreement after offering a litany of excuses as to why they could
not pay: the estate lacked a license to sell insurance; all of the contracts were cancelled;
and Defendants did not know which accounts belonged to Decedent. The parties’
positions are at odds, and it is inappropriate to weigh competing factual claims at the
summary judgment stage. We find and hold that the parties disputed whether Decedent
worked pursuant to the Agreement until her death, and the Trial Court erred in granting
summary judgment to Defendants on the basis of that disputed material fact.
Even if it were undisputed that Decedent stopped assisting in retaining and
producing business, our next issue concerns whether such stoppage would constitute a
material breach of the Agreement. Decedent was sick and dying, and the Agreement
contemplated this reality. Defendants even stated in their answer that Decedent was
probably too ill to fulfill her obligations. The Agreement includes a specific handwritten
provision for Decedent’s estate to receive what was owed to her under the Agreement
after she died. This was not an employment contract but instead, as argued by Plaintiff, a
contract whereby Decedent sold her book of business. The fact that Decedent grew too
sick to help in retaining and producing business was not, in itself, a material breach of the
Agreement. On the contrary, it was anticipated. Decedent, sick and dying, did not have
to code files and answer phones right up until the moment she died to avoid breaching the
Agreement.
The final issue we address is whether the Trial Court erred in finding the “first-to-
breach” rule applicable where Defendants went on receiving the benefits of the
Agreement. As an initial matter, Plaintiff argues that Defendants waived the first-to-
breach defense by raising it for the first time in their motion for summary judgment rather
than in their answer. As quoted above, however, Defendants in their answer did
articulate the factual basis for their defense that Decedent failed to fulfill her contractual
obligations before her death. Plaintiff had ample opportunity to prepare for this approach
by Defendants. We decline to find waiver, and return to the merits.
Plaintiff argues that, even if Decedent first materially breached the Agreement,
Defendants are not entitled to go on receiving all of the benefits under the Agreement.
We note that “all of the benefits” includes not only the benefits Defendants were to
receive under the Agreement but also those benefits that were to go to Decedent and then
her estate. This Court has discussed the first-to-breach rule as follows:
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The Defendants seek to assert the first-to-breach rule, namely: “A
party who has materially breached a contract is not entitled to damages
stemming from the other party’s later material breach of the same contract.”
McClain v. Kimbrough Constr. Co., 806 S.W.2d 194, 199 (Tenn. Ct. App.
1990). We note, however, that “[a] party owed performance may . . . waive
its right to assert the first uncured material breach as a bar to recovery on its
own subsequent breach.” Madden Phillips Constr., Inc. v. GGAT Dev.
Corp., 315 S.W.3d 800, 812 (Tenn. Ct. App. 2009). A party “waive[s] its
right to assert first material breach as a bar to recovery if it accepts the
benefits of the contract with knowledge of the breach.” Id. at 813. Under
some circumstances, a party’s failure to assert the “first” breach may not
result in waiver. In Madden Phillips Constr., the Court explained this
principle and gave examples of situations in which a party’s failure to assert
a breach may not result in waiver:
Ordinarily, a party who first materially breaches may not
recover under the contract. United Brake Sys. [v. AEP ], 963
S.W.2d [749] at 756 [ (Tenn. Ct. App. 1997) ]. A non-
breaching party may nevertheless waive its right to assert first
material breach as a bar to recovery if it accepts the benefits
of the contract with knowledge of a breach. Aero Squadron,
169 S.W.3d at 635-36 (citing 17 Am.Jur.2d Contracts § 447
(1964)); see also SMR Techs., Inc. v. Aircraft Parts Int’l
Combs, Inc., 141 F. Supp. 2d 923, 934 (W.D. Tenn. 2001),
vacated for lack of subject matter jurisdiction, No. 00-2563,
2004 WL 595010 (W.D. Tenn. Mar. 23, 2004). But there are
circumstances where acceptance of contractual benefits does
not constitute waiver. For example:
[M]ere efforts on the part of an innocent party
to persuade the promisor, who repudiates his
agreement, to reject that repudiation and
proceed honorably in the performance of his
agreement have been held not to involve a
waiver of the innocent party’s right to avail
himself of the breach after the efforts finally
prove unsuccessful. Moreover, it has been held
that the fact that a party did not act upon a
breach but negotiated with the other party for a
new contract does not constitute an
acquiescence in the breach where such action
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was induced by misrepresentation by such other
party. A defendant is precluded from claiming
a waiver of breach of contract where he
fraudulently induces the plaintiff to permit him
to continue and thereafter violates the promises
he made to induce the plaintiff to give such
permission.
W.F. Holt Co. v. A & E Elec. Co., 665 S.W.2d 722, 733-34
Tenn. Ct. App. 1983) (alteration in original) (quoting 17
Am.Jur.2d Contracts § 447 (1964)).
Id. at 813. Thus, where a party to a contract fails to assert the other party’s
breach for reasons such as fraudulent inducement or the party’s attempt to
convince the breaching party to comply with the contract, the failure to
assert the breach may not constitute waiver.
White v. Empire Exp., Inc., 395 S.W.3d 696, 715-16 (Tenn. Ct. App. 2012).
Thus, a party asserting the first-to-breach rule may waive that defense if said party
continues to receive benefits under the contract with knowledge of a breach. Here,
Defendants continue to receive the benefits of the Agreement while no longer paying
under the Agreement. This they may not do. Even if Decedent materially breached the
Agreement, which has not been established at this summary judgment stage, Defendants
are not entitled to keep 100% of the commissions and Decedent’s entire book of business
all while refusing to meet their obligations under the Agreement.
For their part, Defendants state that there is nothing owed. If Defendants are
correct about that, it is unclear why this case has not been resolved by just doing an
accounting. In any event, how much, if anything, is owed by Defendants is yet another
factual dispute making summary judgment inappropriate. For the multiple reasons
discussed throughout, we reverse the grant of summary judgment and remand for further
proceedings consistent with this Opinion.
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Conclusion
The judgment of the Trial Court is reversed, and this cause is remanded for
collection of the costs below and further proceedings consistent with this Opinion. The
costs on appeal are assessed against the Appellees, John Robert Whedbee, James L.
Whedbee, and Whedbee Insurance Agency, LLC.
____________________________________
D. MICHAEL SWINEY, CHIEF JUDGE
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