Myaer v. Nodak Mutual Insurance Co.

2012 ND 21, 812 N.W.2d 345, 2012 N.D. LEXIS 21, 2012 WL 426727

• Court: North Dakota Supreme Court
• Decided: February 10, 2012
• Docket: 20110153
• Status: Published

Opinions

VANDE WALLE, Chief Justice.

[¶ 1] Nodak Mutual Insurance Company appealed from a judgment awarding Barry Myaer $34,938.24 plus interest in his breach of contract action against Nodak. We conclude the district court did not err in ruling Myaer was entitled to deferred commissions payable to him in December 2009, but did err in ruling those commissions could exceed 10 percent under the terms of the parties’ contract. We affirm in part, reverse in part, and remand for further proceedings.

I

[¶ 2] On July 7, 2009, Nodak terminated Myaer’s “Career Producer’s Contract” after he had served as a captive insurance agent for the company in Mohall for almost 29 years. The most recent Career Producer’s Contract Myaer signed was dated December 28, 2004, but Nodak had subsequently sent similar contracts throughout the years, the last of which was effective January 1, 2009. The contract provided different commission calculations depending on the type of policy written by Myaer. The contract provided for a 10 percent commission on gross premiums for sales of multi-peril crop insurance (“MPCI”).

[¶ 3] The premium payments for MPCI policies were normally paid in two installments by the policyholders. An addendum to the contract provided:

A. Career Producer will receive 50% of the commissions payable in the month following those policies processed by AFBIS.

B. Career Producer will receive balance of commissions due on those policies that are paid in full in the month following processed premium.

According to Myaer, the first installment was paid in August after acreage reports were submitted and the second installment was paid in December after policyholders paid their premiums in full. The contract addendum also provided for reductions of the 10 percent commission under certain circumstances:

C. A commission reduction of 1% will be applied to all gross premiums if all submissions and loss reports are not submitted on-line.

D. A commission reduction of 1% will be applied to all gross premiums if all MPCI notes including any outstanding interest are not paid and received in the home office prior to November 1st.

[¶ 4] The contract also explained when commissions were “earned”:

COMMISSIONS, CREDITS, AND REFUNDS. Commissions on any policy or on added coverage shall be earned when: (1) the policy or added coverage has been accepted by the Company or the other insurers identified in the Ad-dendums to this Contract; (2) the policy is issued; and (3) premium is received and processed by the Company.

The contract provided that it “may be canceled by either party, with or without cause, at any time upon giving notice, in writing, to the other party,” and further provided: “Upon cancellation of this Contract, no further commission or premium credit shall accrue.”

[¶ 5] After Myaer’s termination in July 2009, Nodak paid him $20,338.72 in August 2009 for commissions owed to him. Myaer’s “MPCI Commission Statement” for the 2009 crop year indicated $22,500.45 in deferred commissions remained to be paid. However, in December 2009, . Nodak did not pay Myaer the deferred commissions on the policies he had sold, claiming he was no longer entitled to them. Nodak claimed Myaer was not entitled to further commissions because his contract was terminated before policyholders had paid the second installments on their premiums.

[¶ 6] In April 2010, Myaer brought this action against Nodak claiming, among other theories not relevant to the appeal, that it had breached the Career Producer’s Contract by failing to pay him the deferred commissions in December 2009. Both parties moved for summary judgment. Myaer filed an affidavit setting forth his calculations of what he was owed and claiming, “[t]he way MPCI commissions were typically paid, if I did my reports via the Internet and all farmers’ notes were paid, my total commission would be 12 per cent....” Nodak presented a copy of the Career Producer’s Contract, and filed a “Motion in Limine to Exclude Testimony Contrary to Career Producer’s Contract.” Nodak argued Myaer’s claim to a 12 percent commission was barred by the parol evidence rule because it conflicted with the express terms of the 2009 contract, which provided for a maximum 10 percent commission.

[¶ 7] The district court granted summary judgment in favor of Myaer, but did not address Nodak’s motion in limine. The court ruled that, under the terms of the contract, Myaer’s right to receive the second installment of commissions had already “accrued” at the time Nodak terminated the contract. The court awarded him a 10 percent commission on the policies he had sold in the amount of $22,500.45 and also awarded him a “bonus” in the amount of $9,003.70 in accordance with Myaer’s calculations, reasoning “it does not appear that Nodak has actually challenged the work product of Mr. Myaer.” Myaer was also awarded pre- and post-judgment interest.

II

[¶ 8] Nodak argues the district court erred in concluding Myaer is entitled to the deferred commissions payable in December 2009 because the ruling ignores the plain language of the Career Producer’s Contract.

[¶ 9] The standard for reviewing a summary judgment is well-established:

“Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable' inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.”

Riverwood Commercial Park, LLC v. Standard Oil Co., Inc., 2011 ND 95, ¶ 6, 797 N.W.2d 770 (quoting Missouri Breaks, LLC v. Burns, 2010 ND 221, ¶ 8, 791 N.W.2d 33).

[¶ 10] Generally, the interpretation of a written contract is a question of law for the court, making summary judgment an appropriate method of disposition in contract disputes. See Tri-State Ins. Co. v. Commercial Grp. W., LLC, 2005 ND 114, ¶ 10, 698 N.W.2d 483; Garofalo v. Saint Joseph’s Hosp., 2000 ND 149, ¶ 7, 615 N.W.2d 160. We construe written contracts to give effect to the parties’ mutual intention when the contract was formed, and if possible, we look to the writing alone to determine the parties’ intent. See Doeden v. Stubstad, 2008 ND 165, ¶ 14, 755 N.W.2d 859; N.D.C.C. § 9-07-03. Words in a contract are construed in. their ordinary and popular sense, unless they are used by the parties in a technical sense, or unless a special meaning is given to them by usage. See Riverwood Commercial Park, LLC, 2011 ND 95, ¶ 7, 797 N.W.2d 770; N.D.C.C. § 9-07-09. Under N.D.C.C. § 9-07-10, “[tjechnical words are to be interpreted as usually understood by persons in the profession or business to which they relate, unless clearly used in a different sense.” We may look to principles of 'the applicable law at issue to see whether an undefined term has a technical meaning. See Hanneman v. Continental W. Ins. Co., 1998 ND 46, ¶ 29, 575 N.W.2d 445. Although extrinsic evidence is not admissible to contradict unambiguous written contract language, extrinsic evidence may be considered to show the parties’ intent if the contract is ambiguous. See Kuperus v. Willson, 2006 ND 12, ¶ 11, 709 N.W.2d 726. Whether a contract is ambiguous is a question of law. Id. We independently examine and construe a contract to determine if the district court erred in its interpretation. See Irish Oil and Gas, Inc. v. Riemer, 2011 ND 22, ¶ 11, 794 N.W.2d 715.

[¶ 11] We have recognized that “one working on commission may not be entitled" to commissions made before termination if the contract so provides.” Garofalo, 2000 ND 149, ¶ 14, 615 N.W.2d 160. Nodak argues this is the situation here based on the plain language of the parties’ contract. According to Nodak, one of the conditions precedent for Myaer to “earn] ]” a commission is that the “premium is received and processed by the Company,” and the second installment of the premiums upon which the deferred commissions payable in December 2009 were based had not been received and processed by Nodak at the time of Myaer’s July 2009 termination. Therefore, Nodak argues, the December 2009 deferred commissions had not yet “accrue[d]” when Myaer was terminated and he is not entitled to those commissions. Nodak contends this case is similar to Johnson v. Peterbilt of Fargo, Inc., 438 N.W.2d 162, 163 (N.D.1989), in which a majority of this Court held a contractual provision stating no commission will be paid to a salesman where the item sold is not delivered until after the salesman’s termination from employment was not void as against public policy. The employment contract in Johnson specifically provided that “‘COMMISSIONS WILL NOT BE PAID TO SALESMEN ... ON SALES WHERE THE UNIT OR UNITS ORDERED IS DELIVERED AFTER THE TERMINATION OF SALESMAN’S EMPLOYMENT,”’ and the employee quit his job before two trucks he had sold were delivered. Id. In this case, the right to commissions after termination of the parties’ contract is not clearly defined as it was in Johnson. Myaer’s right to the deferred commissions depends on when they “accrue[d].”

[¶ 12] Nodak relies on a dictionary definition of the word “accrue” to ascertain its “plain meaning.” The word “accrue” has been defined as: “to come into existence as an enforceable claim.” Webster’s Third New International Dictionary 13 (1971); see also Larson v. Norkot Mfg., Inc., 2002 ND 175, ¶ 10, 653 N.W.2d 33 (indicating a claim for relief accrues when all of the necessary elements of the claim have occurred). However, the word “accrue” has also been defined as: “to come by way of increase or addition.” Webster’s Third New International Dictionary 13 (1971). Myaer essentially argued, and the district court agreed, that in the context of employment contract provisions governing the payment of insurance commissions, the word “accrue” is a technical term that has acquired the latter definition quoted above.

[¶ 13] The district court focused on the contract provision stating, “[u]pon cancellation of this Contract, no further commission or premium credit shall accrue,” and relied on 4 Lee R. Russ, Thomas F. Segalla, Couch on Insurance '§ 57:55, at p. 57-107 (3d ed.2005) (footnote omitted), in which the authors state:

[U]nder an agency contract provision that an agent’s interest in premiums to “accrue” on business secured is to cease on termination of his or her employment, “accrue” means grow, increase, or augment, and does not apply to the unpaid portion of a premium on a policy in force at the time his or her contract was terminated, although the contrary would be true as to future renewal premiums.

[¶ 14] The relevant case cited by the authors for this proposition is American Sur. Co. v. Sheerin, 203 S.W. 1120 (Tex.Ct.Civ.App.1918). In Sheerin, an insurance broker procured for the company an application for a bond for two years on the condition that he receive 20 percent of the premium. Id. at 1121. One half of the premium was payable during the first year and the other half was payable during the second year. Id. After the first payment was made, the local agent for the company was changed. Id. The issue involved who was entitled to the commission on the second half of the premium:

The American Surety Company and its local agent agreed to the conditions, and the bond was issued through the local ágency, was delivered to the bánk, which, according to the arrangement, paid the one-half of the premium then due, and a year subsequently the other half. It is thus obvious that Sheerin had concluded every essential step necessary to entitle him to his compensation under his arrangement with American Surety Company. The fact that the company extended credit to the bank did not reduce the period of the bond to any less term than two years, or lessen the liability of the bank to pay the premium when due, or require any other act on the part of Sheerin in order to earn his commission. The transaction was completed and all parties bound. It is not uncommon for insurance companies to extend credit in payment of premiums, and when proven such extensions are held to be a waiver of policy provisions requiring actual payment in order to create liability. Had the bank failed to pay the premium when it matured, it may be that the American Surety Company would not have been bound to Sheerin; but since the bank did pay it, and since Sheerin secured the business, we see no reason why he is not entitled to the fruits of his labor.

Counsel for defendant in error argue, however, that since Sheerin’s commission was a portion of that allotted to Matthews, the local agent, at the time the bond was written, Sheerin’s right to the commission is no greater than the former’s, and that under Matthews’ contract he had no interest in the commission when the last installment was paid. Matthews ceased to be the agent of the American Surety Company about May 1, 1915. The second installment on the premium matured in the following November. Matthews’ contract provided that, “in the event of this agreement being terminated by any cause, all the interest of the agent in any future premium or premiums that may accrue on the business secured hereunder shall cease and determine at the date of such termination.” Obviously, the unpaid portion of the premium on the bond executed and in force was not a premium which might “accrue” on the same bond in the future. “Accrue” means to grow, increase, augment, additional. Hence the provision has reference to premiums to accrue in the future as distinguished from those which have accrued, as we hold the premium in controversy did when the bond was written under the circumstances stated.

Id. at 1122.

[¶ 15] Nodak argues Sheerin is distinguishable because the only condition precedent to “earn” the second installment of the commission was for the agent to “secure[] the business.” 203 S.W. at 1121. Nodak contends that, unlike the situation in Sheerin, Myaer’s commissions were not “earned” under his contract until the premiums were paid by the policyholders and processed by the company. We see more similarities than dissimilarities between Sheerin and this case. As in Sheerin, payment of the second installment of the premiums was an act to be performed by the policyholders, not by Myaer. The court in Sheerin recognized that the agent would not have been entitled to the second installment of the commission if the second premium had not been paid, just as the contract provisions governing when a commission is “earned” direct in this case. Id. at 1122. Myaer had completed all of the actions on his part necessary to entitle him to the commissions, and if the policyholders paid the second installment of premiums, under Sheerin Myaer was entitled to the deferred commissions on those premiums.

[¶ 16] Nodak seeks to equate the term “accrue” with the contract provision stating that a commission is “earned” when the “premium is received and processed by the Company.” However, the terms “earned” and “accrue” are not synonymous in this context. In the area of insurance policy commissions, the term “accrue” has acquired a technical meaning to “grow, increase, or augment, and does not apply to the unpaid portion of a premium on a policy in force at the time [the agent’s] contract was terminated.” 4 Couch on Insurance, supra. Nodak could have specified in the employment contract that commissions would not be “earned,” rather than “accrue,” after termination of employment. It did not do so.

[¶ 17] Considering the technical meaning given to the term “accrue” in this context, we agree with the district court that, as a matter of law, Myaer is entitled to the deferred commissions.

Ill

[¶ 18] Nodak argues the district court erred in awarding Myaer a 12 percent commission because the parties’ contract expressly limited his commission to 10 percent.

[¶ 19] We reject Myaer’s contention that Nodak failed to preserve this issue for appeal. Not only was the Career Producer’s Contract before the district court, but Nodak filed a “Brief in Support of Motion in Limine to Exclude Testimony Contrary to Career Producer’s Contract” on March 3, 2011, almost one week before the court issued the summary judgment ruling. In its brief, Nodak relied on the parol evidence rule and argued Myaer “has attempted to inflate the amount of the additional commission he believes is owed to him by inventing commission bonus provisions that do not exist.” Nodak pointed out the contract provisions limiting commissions to 10 percent and providing only for reductions of one percent if submissions were not submitted online and one percent if notes were not paid in full. The court’s observation “it does not appear that Nodak has actually challenged the work product of Mr. Myaer” is incorrect. Nodak raised the issue in the district court.

[¶ 20] The parol evidence rule is a rule of substantive law and precludes use of evidence of prior oral negotiations and agreements to vary the terms expressed in a written contract. See Citizens State Bank-Midwest v. Symington, 2010 ND 56, ¶ 19, 780 N.W.2d 676; Des Lacs Valley Land Corp. v. Herzig, 2001 ND 17, ¶ 7, 621 N.W.2d 860. The parol evidence rule is codified in N.D.C.C. § 9-06-07, which provides that “[t]he execution of a contract in writing, whether the law requires it to be written or not, supercedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument.” A court may consider parol evidence when a written agreement is ambiguous, or when the written agreement does not reflect the parties’ intent because of fraud, mistake, or accident. Symington, at ¶ 20. However, “[p]arol evidence cannot vary or contradict the terms of a complete, written contract adopted as a definite expression of the parties’ agreement.” Jorgensen v. Crow, 466 N.W.2d 120, 123 (N.D.1991). A decision to admit parol evidence is a question of law, fully reviewable on appeal. Symington, at ¶ 20.

[¶ 21] In his affidavit, Myaer stated “[t]he way MPCI commissions were typically paid, if I did my reports via the Internet and all farmers’ notes were paid, my total commission would be 12 percent.” Myaer claimed the 2004 contract entitled him to a one percent bonus if all information was submitted “via the Internet” and an additional one percent if “all notes are paid by the policyholders.” Although an addendum to the 2004 contract allowed a one percent bonus for MPCI notes paid and received by a certain date, the contract does not mention any bonus for submission of information “via the Internet.” The 2004 contract may have included a one percent commission incentive to encourage the agents to submit their information on line. But it is clear from the current contract that by 2009, when the use of computers had become more customary, that Nodak adopted a penalty provision for failure to submit information on line rather than an increase in commission as an incentive to do so. In any event, the 2004 contract allowed Nodak to “modify rates for renewals or any bonuses that might apply,” and Nodak did so by 2009. Although Myaer points out that he did not sign the 2009 employment contract, he admitted “[t]his agreement was sent to me by email.” In Sadler v. Basin Elec. Power Coop., 431 N.W.2d 296, 298 (N.D.1988), we said:

“In the case of unilateral contracts for employment, where an at-will employee retains employment with knowledge of new or changed conditions, the new or changed conditions may become a contractual obligation. In this manner, an original employment contract may be modified or replaced by a subsequent unilateral contract. The employee’s retention of employment constitutes acceptance of the offer of a unilateral contract; by continuing to stay on the job, although free to leave, the employee supplies the necessary consideration for the offer.” Pine River [State Bank v. Mettille], 333 N.W.2d [622, 627 (Minn.1983) ], citing Stream v. Continental Machines, Inc., 261 Minn. 289, 293, 111 N.W.2d 785, 788 (1961).

Although Myaer was labeled in the agreement as an “independent contractor” rather than an at-will employee, which necessitates application of general rules of contract interpretation rather than principles applicable in a typical employer-employee relationship, see Huber v. Farmers Union Serv. Ass’n, 2010 ND 151, ¶ 21, 787 N.W.2d 268, the concept of unilateral contracts is a contract principle which applies to contracts between employers and independent contractors. See Ford v. American Express Fin. Advisors, Inc., 98 P.3d 15, 19-20 (Utah 2004). By continuing his employment as a career producer with knowledge of the changed commission provisions, Myaer accepted Nodak’s offer of a unilateral contract. See, e.g., Guercio v. Production Automation Corp., 664 N.W.2d 379, 383-84 (Minn.Ct.App.2003). The provisions of the 2009 contract govern in this case.

[¶ 22] The 2009 contract provided for a 10 percent commission which only allowed for a reduction of one percent if submissions were not submitted online and a reduction of one percent if MPCI notes were not paid and received by a certain date, Myaer’s contrary affidavit testimony about how “commissions were typically paid” “on its face violates the parol evidence rule.” Alerus Fin., N.A. v. The Marcil Grp. Inc., 2011 ND 205, ¶ 30, 806 N.W.2d 160.

[¶23] We conclude the district court erred as a matter of law in holding Myaer is entitled to more than a 10 percent commission.

IV

[¶ 24] We affirm the district court’s ruling that Myaer was entitled to the deferred commissions, but reverse the court’s ruling that those commissions could exceed 10 percent. We remand for recalculation of the proper amount of Myaer’s deferred commissions.

[¶ 25] DALE V. SANDSTROM, CAROL RONNING KAPSNER and MARY MUEHLEN MARING, JJ., concur.