Rash v. Hilb, Rogal & Hamilton Co.

Present: All the Justices

TIMOTHY R. RASH, ET AL.
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 950896 March 1, 1996

HILB, ROGAL & HAMILTON
COMPANY OF RICHMOND

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Randall G. Johnson, Judge

I.

In this appeal, we consider issues that arose during the

trial of a suit in equity for a breach of contract, tortious

interference with contractual relations, and common law

conspiracy.
II.

Hilb, Rogal & Hamilton Company of Richmond (HRH) filed its

amended bill of complaint against Susan M. Rash, Timothy R. Rash,

and Rash & Associates, Inc., a Virginia corporation. HRH alleged

that Mr. Rash breached his employment agreement, which included a

covenant not to compete. HRH further alleged that Mrs. Rash

tortiously interfered with its contractual relations and that Mr.

and Mrs. Rash had engaged in a common law conspiracy. HRH sought

damages, injunctive relief, costs, and attorney's fees.

At the conclusion of an ore tenus hearing, the chancellor
held that these allegations had been proven. The chancellor

assessed damages against the Rashes and Rash & Associates and

awarded costs, attorney's fees, and certain injunctive relief.

The chancellor held that the Rashes and Rash & Associates are

jointly and severally liable to HRH in the amount of $111,891,

which was stipulated by the litigants to be 75% of all

commissions that Mrs. Rash or Rash & Associates received from
certain accounts that were formerly serviced by HRH. The

chancellor's decree established a constructive trust requiring

that Mrs. Rash and Rash & Associates, as constructive trustees,

pay to HRH 75% of all commissions earned from certain accounts

that were formerly serviced by HRH. The Rashes and Rash &

Associates appeal.

III.

When a chancellor hears evidence ore tenus, his decree is

entitled to the same weight as a jury verdict, and we are bound

by the chancellor's findings of fact unless they are plainly

wrong or without evidence to support them. Morris v. Mosby, 227

Va. 517, 522, 317 S.E.2d 493, 497 (1984). Additionally, we will

review the evidence and all reasonable inferences fairly deduced

therefrom in the light most favorable to HRH, the prevailing

party below. Id.

HRH is an insurance sales firm which sells various types of

insurance, including insurance benefits products. In September

1990, HRH purchased certain tangible and intangible assets of The

James River Financial Group, Inc., including its division that

sold insurance benefits products.

As employees of the James River Financial Group, the Rashes

were involved in the marketing of benefits insurance products.

Mr. Rash was part owner of the James River Financial Group, and

he received a portion of the purchase price when HRH acquired the

James River Financial Group's assets.

After HRH acquired the James River Financial Group's assets,

Mr. Rash became a senior vice president of HRH. In this

capacity, he was in charge of HRH's group benefits division. Mr.
Rash's employment agreement with HRH, which he signed after

consultation with legal counsel, contains a covenant that

prohibits him from competing directly or indirectly against HRH

upon termination of his employment.

Mrs. Rash also became an employee of HRH. She worked as a

benefits consultant for HRH and, in that capacity, she had

complete access to HRH's confidential customer and business

information. She also worked closely with Mr. Rash, and she

accompanied him when he tried to solicit new business accounts

for HRH. Mrs. Rash was not required to sign a covenant not to

compete.
In November 1992, Mr. Rash initiated negotiations with HRH

to purchase its group benefits business. According to Mr. Rash,

Mrs. Rash was working "behind the scenes" during the negotiations

to purchase the business from HRH. During these negotiations,

the Rashes decided that if they were unable to acquire HRH's

group benefits division, Mrs. Rash would form her own competitive

insurance company and solicit HRH's accounts. Mr. Rash forwarded

a letter to his attorney stating, "I definitely believe that

either Susan or I would be successful in acquiring several of the

accounts which they don't want to sell. We could possibly keep

them all!"

Mr. Rash was unsuccessful in his attempt to purchase HRH's

group benefits division. Subsequently, the Rashes resigned from

their employment with HRH effective March 31, 1994. Later that

day, the Rashes went to a store where Mrs. Rash used Mr. Rash's

credit card to purchase a facsimile machine. Mr. Rash knew that

Mrs. Rash was purchasing this facsimile machine for use in her
new business, Rash & Associates. On another occasion, Mrs. Rash

used her husband's credit card to purchase office equipment and a

printer for Rash & Associates. Ultimately, Rash & Associates

reimbursed Mr. Rash for these expenses.

During its first month of operation, Rash & Associates,

which competed for HRH's insurance benefits accounts, conducted

business in the Rashes' jointly-owned residence. Mrs. Rash used

her husband's leased automobile to conduct business on behalf of

Rash & Associates.
Mrs. Rash encountered problems when she tried to acquire

operating capital for her new corporation. The initial business

purchases and operating expenses for her company were provided by

Mr. Rash. Mr. Rash deposited a check payable to him in the

amount of $8,000 in a joint checking account that he owned with

Mrs. Rash. Mr. Rash knew that Mrs. Rash intended to use some of

these funds to pay for Rash & Associates' operating expenses.

Mrs. Rash informed Mr. Rash that she was trying to borrow

money for Rash & Associates and that she had become frustrated

with the process of borrowing money. The Rashes discussed with

their attorney the possibility of encumbering their jointly-owned

home as security to obtain financing for Rash & Associates. Mrs.

Rash asked her husband if he would be willing to join in such a

transaction. Mr. Rash refused to do so.

During a conversation with their attorney, the Rashes

discussed the use of their jointly-owned mutual funds as

collateral to obtain the necessary financing for Rash &

Associates. Subsequently, Mr. Rash assigned his interest in the

mutual funds to his wife, who used them as collateral to obtain a
loan for Rash & Associates. Mr. Rash testified that he made the

assignment because he did not want his name to appear on any

documents relating to Rash & Associates.

Rash & Associates eventually acquired many group benefits

insurance accounts that had been serviced by HRH. Mrs. Rash

testified that in 1994, Rash & Associates received $136,011 in

commissions, and $135,000 of those commissions were from former

HRH accounts.
IV.

Mr. Rash asserts that the chancellor erred in holding that

he violated his covenant not to compete and that he engaged in a

competing business by allowing his wife to use jointly-held

marital assets to fund Rash & Associates. Additionally, Mr. Rash

asserts that he did not "engage" in his wife's business. HRH

argues, and we agree, that there is substantial evidence to

support the chancellor's finding that Mr. Rash breached his

employment agreement.

The covenant not to compete states in relevant part:
[After termination, Mr. Rash] shall not directly or
indirectly as an owner, stockholder, director,
employee, partner, agent, broker, consultant or other
participant, for a period of three (3) years from the
date of such termination:

. . . .

(e) engage in any manner in any business competing
directly or indirectly with [HRH].

(Emphasis added).

As we have often stated, "[t]he parties' contract becomes

the law of the case unless it is repugnant to some rule of law or

public policy." Winn v. Aleda Const. Co., 227 Va. 304, 307, 315,

315 S.E.2d 193, 194 (1984). Accord D.C. McClain, Inc. v.
Arlington County, 249 Va. 131, 135, 452 S.E.2d 659, 662 (1995).

Additionally, we "must give effect to the intention of the

parties as expressed in the language of their contract, and the

rights of the parties must be determined accordingly." Foti v.

Cook, 220 Va. 800, 805, 263 S.E.2d 430, 433 (1980).

The record is replete with evidence that Mr. Rash acted as a

participant who, at the very least, indirectly engaged in a

business that competed against HRH. For example, as we mentioned

above, Mr. Rash relinquished his interest in a jointly-owned

mutual fund account so that Mrs. Rash could use those funds as

collateral to secure a loan that was used for operating capital

for Rash & Associates. And, as the chancellor found, Rash and

Associates would not have been able to conduct business without

this loan.
V.

The Rashes challenge that portion of the chancellor's decree

awarding damages against them. Mrs. Rash asserts that she did

not tortiously interfere with Mr. Rash's contract with HRH or

with HRH's business expectancies. Further, she contends that the

chancellor erred by awarding contract damages on the tortious

interference claim and that the damages were punitive and without

relationship to the actual harm suffered by HRH. Mr. Rash argues

that the chancellor erred in imposing liquidated damages against

him because his contract of employment purportedly does not

provide for such damages. He also claims that the liquidated

damage provision in his contract is unenforceable because it

bears no relationship to the actual losses sustained by HRH.

As HRH observes, we cannot consider these arguments advanced
by the Rashes because there is an independent basis to support

the chancellor's ruling on these issues and that basis has not

been challenged on appeal. In his final decree, the chancellor

found that the Rashes had engaged in a common law conspiracy

against HRH. The chancellor made a unitary award of damages, and

an unspecified portion of those damages are compensation for the

Rashes' common law conspiracy against HRH. The Rashes do not

assign error to the chancellor's finding that they had engaged in

a common law conspiracy; nor do they assign error to that portion

of the chancellor's decree which awards damages to HRH because of

the Rashes' common law conspiracy.
Therefore, those portions of the chancellor's decree holding

that the Rashes had engaged in a common law conspiracy and that

HRH is entitled to recover damages resulting from that conspiracy

have become final and are not before this Court on appeal. Rule

5:17(c); see United Leasing Corp. v. Thrift Ins. Corp., 247 Va.

299, 308, 440 S.E.2d 902, 907 (1994); Crist v. Metropolitan
Mortgage Fund, 231 Va. 190, 193, 343 S.E.2d 308, 310 (1986);

Stamie E. Lyttle Co. v. County of Hanover, 231 Va. 21, 27, 341

S.E.2d 174, 178 (1986); Haynes v. Bekins Van & Storage Co., 211

Va. 231, 233, 176 S.E.2d 342, 344 (1970).

VI.

The Rashes assert that the trial court erred by imposing a

constructive trust in favor of HRH. We disagree.

In Leonard v. Counts, 221 Va. 582, 588-89, 272 S.E.2d 190,

195 (1980), we stated:
Constructive trusts are those which the law
creates, independently of the intention of the parties,
to prevent fraud or injustice. Porter v. Shaffer, 147
Va. 921, 928, 133 S.E. 614, 616 (1926). While there is
a distinction between resulting and constructive
 trusts, albeit often difficult to determine, the same
remedial principles apply to both. Id. at 928-29, 133
S.E. at 616. Constructive trusts have also been
defined more comprehensively as follows:

"Constructive trusts arise, independently of
the intention of the parties, by construction
of law; being fastened upon the conscience of
him who has the legal estate, in order to
prevent what otherwise would be a fraud.
They occur not only where property has been
acquired by fraud or improper means, but also
where it has been fairly and properly
acquired, but it is contrary to the
principles of equity that it should be
retained, at least for the acquirer's own
benefit."
1 Minor on Real Property § 462 at 616 (2d ed. Ribble
1928).

Accord Overby v. White, 245 Va. 446, 449-50, 429 S.E.2d 17, 19

(1993); Greenspan v. Osheroff, 232 Va. 388, 400, 351 S.E.2d 28,

36-37 (1986).

Here, the chancellor found that the Rashes engaged in a

common law conspiracy by diverting HRH's contracts to Mrs. Rash's

corporation. Certainly, such conduct constitutes an improper

means which, under the facts and circumstances of this case,

justifies the imposition of the constructive trust.

VII.

Because we find no error in the decree appealed from, it

will be affirmed.
Affirmed.