Skyline Management, Inc. VS Marion A. Allen, Inc.. of Georgia d/b/a The Allen Group, Marion A. Allen, Inc. of Louisiana and Marion A. Allen
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NOT DESIGNATED FOR PUBLICATION ATE L S OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2010 CA 1294 SKYLINE MANAGEMENT INC VERSUS MARION A ALLEN INC OF GEORGIA DBA THE ALLEN GROUP MARION A AL INC OF LOUISIANA AND EN L MARION A ALLEN DA TE OF JUDGMENT OEC 2 2 2010 ON APPEAL FROM THE TWENTY SECOND JUDICIAL DISTRICT COURT NUMBER 99 14856 DIV A PARISH OF ST TAMMANY STATE OF LOUISIANA HONORABLE RAYMOND S CHII JUDGE DRESS Randall A Smith Counsel for Plaintiff Appellee Michael W Hill Skyline Management Inc J Geoffrey Ormsby New Orleans Louisiana Ronnie Johnson DefendantsAppellants Juston M O Brien Marion A Allen Inc of Georgia dba the Allen Group and Jamie D Seymour Baton Rouge I ouisiana Marion A Allen BEFORE KUHN PETTIGREW AND KLINE JJ Disposition AFFIRMED The Honorable William F Kline Jr is serving pro tempore by special appointnicnt of the Louisiana Supreme Court KUHN J Defendants appellants Marion A Allen Inc of Georgia dba the Allen Group MAAG and Marion A Allen individually appeal the trial court judgment s awarding 968 plus interest and costs to Skyline Management Inc Skyline 50 540 based on a finding that MAAG and Skyline had entered into a joint venture and that in addition to MAAG corporate liability Allen was personally liable for breach of s the joint venture agreement We affinn In 1992 Skyline through its consultant Earl Krenning and MAAG through its insurance agent Allen began development and sales of several national insurance products for Transport International Pool Inc General Electric Modular Space and General Electric Capital Insurance Agency all subsidiaries of General Electric Capital Corporation collectively the GE Entities The trial court concluded that through Krenning and Allen Skyline and MAAG orally entered into a joint venture agreement for which a share of any commissions and profits derived from the products would be allocated between Skyline and MAAG After commencement of the parties efforts to develop products for the GE Entities but prior to the joint venture agreement between Skyline and MAAG Krenning was convicted on October 31 1992 on federal charges in conjunction with his ownership and operation of Sovereign Casualty and Fire Insurance Sovereign Krenning was sentenced in December 1993 and began serving a prison sentence in March 1995 while his appeal was pending The trial court determined that Allen was well informed by Krenning of the federal indictment and his resulting legal problems but nevertheless entered into the joint venture with 2 Skyline on behalf of MAAG in March 1994 and began sending monthly payments of 5 to Skyline 00 000 While Krenning served the federal prison sentence James Farrell began working on the development and sales of insurance products to the GE Entities on behalf of Skyline On July 13 1995 in a letter to Krenning wife Allen advised s Skyline that the GE deal is not prospering and that he did not see much reason to believe it will be any better 00 000 5 American Thus he discontinued the monthly payments of But in April 1995 MAAG had entered into agency agreements with Southern Insurance Company to provide the insurance products developed by the joint venture and in June 1995 MAAG fonnalized an agreement with the GE Entities for those products The trial court concluded that Allen knew the products had in fact been developed and issued when he sent Mrs Krenning the letter and that his misrepresentation in the letter to her was illustrative old both s Allen flagrant disregard for the truth and his intent to deceive his venture partner Krenning was released from prison in March 1998 Krenning subsequently learned through an industry trade magazine which featured a picture of Allen on the front cover that Allen had become prosperous as a result of the products MAAG and Skyline had developed for the GE Entities After Allen told Krenning in January 1999 that he could not and would not pay Skyline for its interest in the products this lawsuit was filed After a trial on the merits the trial court ruled in favor of Skyline awarding damages Appellants do not challenge the quantum of the award but suggest the trial court erred in its conclusions that a legal joint venture existed and that Allen was personally liable to Skyline for damages 3 Appellants initially assert that because the evidence established that the parties contemplated a signed written agreement and neither the proposal offered by Krenning nor that by Allen was signed the trial court erred in finding a joint venture existed They maintain that a signed written agreement was a condition precedent to the formation of a joint venture They also claim that resolution of Krenning s legal troubles was another condition precedent to a joint venture between Skyline and MAAG The existence or nonexistence of a joint venture is a question of fact although what constitutes a joint venture is a question of law Judson v Davis 20041699 p 21 La App 1 st Cir 629 916 So 1 106 1120 writ denied 2005 1998 La 05 2d 06 10 2 924 So 167 This court reviews factual findings under the manifest 2d errorclearly wrong standard See Stobart v State 617 So 880 882 La 1993 2d And with questions of law we simply detennine whether the trial court was legally correct See Sanders v Pilley 96 0196 p 5 La App 1 Cir 11 684 So 96 8 2d 460 463 writ denied 97 0352 La 3 691 So 90 97 21 2d We find no error in the trial court conclusion that a joint venture was s fonned between Skyline and MAAG when MAAG began paying Skyline monthly payments of 5 as advances on Krenning interest in the products he 00 000 s developed on behalf of Skyline La C art 1927 see O v Whitlow 32 Glee 955 p 6 La App 2d Cir 4 756 So 1288 1292 where the parties substantially 00 7 2d comply with an oral agreement neither one can later back out on grounds that they failed to execute a writing see also Breaccr Bros Constr Co v Associated Contractors 226 La 720 72829 77 So 17 20 La 1954 where there is a 2d I complete verbal contract and a subsequent agreement that it shall be reduced to writing failure to carry out the subsequent agreement does not impair the contract The trial court found and the evidence supports the factual finding that the parties began performing despite Krenning articulation of reducing the agreement s to writing And MAAG continued to pay Skyline those monthly payments although a written agreement was not finalized between the parties Thus the record supports the trial court conclusion that a reduction of the agreement to writing was not a s condition precedent of the joint venture While appellees maintain that it was undisputed that Krenning was told in September 1994 that there could be no agreement until he resolved his legal difficulties Krenning testified that he apprised Allen of his legal problems According to Krenning Allen knew that Sovereign had been shut down that as a result Krenning was facing federal charges and that he had actually been tried on those charges Krenning stated that he sent Allen a copy of the federal indictment and kept him informed of the changes in his litigation including the appeal Documentary evidence included a letter that Allen personally wrote the federal court judge requesting leniency for Krenning in his sentence and a copy of a motion to dismiss faxed to Allen in November 1994 while MAAG continued to tender payments of 5 containing a reference to Krenning earlier conviction 00 000 s Thus despite appellants strong assertions to the contrary the record supports a finding that the resolution of Krenning legal problems was not a condition s precedent to the joint venture Accordingly the trial court was not manifestly erroneous in concluding a joint venture existed between Skyline and MAAG 5 Appellants next contend that the joint venture is void and unenforceable because it violates public policy The gist of their contention is that Krenning could not receive insurance commissions through Skyline since he was an unlicensed convicted felon The parties agree that La R 22 was applicable to this case at the S 1113D 1 time the parties entered into the joint venture agreement and that it provided in relevant part No insurer insurance agent insurance broker surplus lines insurance broker or insurance solicitor shall pay directly or indirectly any commission brokerage or other valuable consideration to any person for services as an insurance agent insurance broker surplus lines insurance broker or insurance solicitor within the state unless such person held a valid license during the period the services were rendered for that line of insurance as required by law for such services No person other than a person duly licensed by the Department of Insurance as an insurance agent insurance broker surplus lines insurance broker or insurance solicitor at the time such services were performed shall accept any such commission brokerage or other valuable consideration Any person duly licensed under this Part may pay his commissions or assign his commissions or direct that his commissions be paid to a partnership of which he is a partner employee or agent or to a corporation of which he is an officer employee or agent This Subsection shall not prohibit payment or receipt of any renewal or other deferred commissions or by any person entitled thereto under this Section Emphasis and footnote added The trial court stated in its written reasons for judgment While it is clear that the intent of the statute is to prohibit unlicensed agents from receiving commissions so as to protect the policyholder the statute contains an exception for partnerships The court is of the opinion that both Krenning and Allen were aware of this exception aware of the licensing laws aware of the profit potential for the new insurance product and aware of what each man needed s from the other to make a success of the their joint venture La R 22 was amended by La Acts 1997 No 1412 S 1113 1 to eliminate the provisions applicable to this case permitting payment of commissions by any person duly licensed under this Part to a partnership of which he is a partner 6 We find no error in these conclusions by the trial court In light of the plain language of La R 22 contrary to appellants contention we find that S 11 1 131 public policy was not violated since MAAG was a duly licensed agent that directed a portion of its commissions be paid to the joint venture partnership between it and Skyline The agreement as determined by the trial court was that for Krenning s s consultant fee Skyline was to be paid a set amount of the commissions based on the total number of sales and that contingency commissions profits were to be divided equally Because of the provisions of La R 22 which S 11131 1 permitted MAAG to direct payment of its commissions to the joint venture there was no violation of public policy Additionally we note that appellants claim that Skyline which was owned by s Krenning children was a subterfuge for Krenning an unlicensed agent to receive commissions he could not otherwise legally claim Michael Manes was accepted as an expert in the field of insurance licensing with respect to whether an individual needs a license to solicit certain types of business and whether an agency needs a license to receive commissions Manes explained that the products that Skyline and MAAG were venturing to develop and sell jointly were affinity group programs which were designed to mass market insurance to a specific group of organizations in this case the GE Entities The essence of an affinity program is to create products and services on a mass basis to meet the fairly uniformed needs of individuals within specific groups The products developed allow for efficiency and effectiveness that benefits the end users According to Manes Skyline created a mechanism that made it easy for the enduser lessees of GE Entities products to do business with the GE Entities Thus 7 in their joint venture Skyline was the idea person and MAAG with its agency background industry reputation and resources was the service person who would implement the products Manes specifically noted that Krenning and Skyline were not acting as producers or sales agents in the development of the products because they were not interacting directly with the enduser lessees Based on the duties Krenning undertook as established by the documentary and testimonial evidence Manes described them as backroom functions which he described as the development phase functions of an affinity group program Krenning discussed development of the products with the various GE Entities parties but he was not involved in the ultimate negotiations with the end users who actually purchased policies Manes opined that the reason an insurance license is required for individuals engaged in the sales of insurance is to regulate the person conduct with s the end user i to protect the ultimate consumer Based on that opinion Manes e had no problem concluding that Skyline and Krenning acted only in consulting functions and therefore did not need licenses to act Although the joint venture expressed compensation for efforts s Skyline in terms of the allocation of commissions between the partners Manes explained how the payment was simply a s consultant fee Based on the expert testimony of Manes we find no error in the trial court s conclusion that Skyline was not merely a subterfuge for Krenning to divert commissions he could not otherwise legally receive The trial court implicitly found that the allocation of a portion of the joint venture partnership commissions to s Skyline was a consultant fee This factual finding supported by the evidence is s not manifestly erroneous And in light of the provisions of La R 22 1 1 13D S l 1 payment of its commissions by MAAG to the joint venture was not against public policy In the final challenge of the trial court judgment appellant Allen claims that s the finding that he is personally liable for the damages resulting from MAAG s breach of the joint venture contract between MAAG and Skyline is erroneous Skyline introduced into evidence a letter written by Allen in July 1995 informing Skyline that the GE deal was not prospering that he did not have any reason to believe it would be profitable and that he was discontinuing monthly payments of 5 to Skyline But the record establishes that as of June 1995 00 000 the requisite agreements were in place between MAAG and the GE Entities for the insurance products that the joint venture had developed The trial court finding s that Allen misrepresented the status of the products for the GE Entities and intentionally deceived his joint venture partner when he wrote the letter and discontinued allocating a portion of the commissions and profits to Skyline as agreed to in March 1994 is supported by the evidence and therefore not clearly wrong We find no error in the trial court legal conclusion that Allen is personally s liable for his misrepresentation See La R 12 where fraud or deceit has been S 95 practiced on a third party by the shareholder acting through the corporation the courts may disregard the corporate entity and impose personal liability for those debts upon the shareholder see also McDonough Marine Serv a Div of 3 Y Although Skyline did not identify fraud as an affirmative defense in its petition it did Y specifically plead facts sufficient to give defendants including Allen in his individual capacity fair and adequate notice of the nature of this defense See Hanks v Wilson 93 0554 pp 67 La App 1 st Cir 3 633 So 1345 1348 see also LaCross v Cornerstone Christian 94 11 2d Academy of Laftryette Inc 2004341 p 5 La App 3d Cir 12 896 So 105 109 04 15 2d writ denied 2005 La 3 869 So 1037 0128 05 24 2d 9 Marmac Corp v Doucet 95 2087 pp 46 La App 1 st Cir 6 694 So 96 28 2d 308 305 4 For these reasons we affirm the trial court judgment awarding damages in s the amount of 968 plus interest and costs to Skyline against Marion A 50 540 Allen Inc of Georgia dba the Allen Group and Marion Allen individually severally and in solido Appeal costs are assessed against defendants appellants AFFIRMED Continued a Allen urges that a finding that he intentionally interfered with the joint venture agreement between MAAG and Skyline cannot be supported Initially we note that we have found the judgment imposing personal liability is supported by the theories of veil piercing and fraud see 8 Glenn G Morris Wendell H Holmes Louisiana Civil Law Treatise Business Organizations 13 33 1999 and thus will not reverse that portion of the judgment To the extent that the trial court specifically determined that Allen intentionally interfered with the joint venture agreement jurisprudence from this circuit supports that conclusion See WKCTV Video Electronic College Inc v Reynolds 618 So 1023 La App 1st Or 1993 Although Allen asserts that 2d his actions of interfering were justified because as a shareholder of MAAG he had a duty under 18 U 0 S 1033 to terminate the joint venture agreement with a convicted felon the contract existed between MAAG and Skyline which was not a convicted felon And while Skyline did not have an insurance agency License the evidence established that both its president and employee Farrell did Allen Thus the trial court did not err in imposing personal liability against 10
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