No. 13302
IN THE SUPREME COURT OF THE STATE OF MONTANA
1978
HAROLD STURDEVANT,
Plaintiff and Appellant,
-vs-
GARY MILLS,
Defendant and Respondent.
Appeal from: District Court of the Eighteenth Judicial
District,
Honorable W. W. Lessley, Judge presiding.
Counsel of Record:
For Appellant:
Tipp and Hoven, Missoula, Montana
Raymond P. Tipp argued, Missoula, Montana
For Respondent:
Bennett and Bennett, Bozeman, Montana
Lyman H. Bennett I11 argued, Bozeman, Montana
Submitted: March 9, 1978
Decided :9UN 1 9 1978
Filed:
Mr. Justice Daniel J. Shea delivered the Opinion of the Court.
Plaintiff Harold Sturdevant, an insurance general agent,
appeals from a judgment of the District Court, Gallatin County,
denying recovery of advances made by him to Gary Mills, an insur-
ance agent.
Plaintiff is an insurance general agent residing in
Missoula, Montana. He recruited defendant to sell life insurance
written by Minnesota Mutual Life Insurance Company of St. Paul,
Minnesota, a company for which plaintiff was a general agent.
Defendant was to sell Minnesota Mutual policies out of an office
located in Bozeman, Montana.
By an agreement signed by plaintiff (hereinafter General
Agent) and defendant (hereinafter Agent) on December 15, 1969,
and approved by Minnesota Mutual two weeks later, Minnesota Mutual
agreed to advance $1,000 per month to General Agent for Agent's
use in financing his new operation. By the terms of this "Agent's
Advance Agreement", the advances were to be made against first-
year commissions the Agent was expected to earn in the course of
selling life insurance policies. The agreement provided that the
advances may be made if the Agent had met each of three conditions:
(1) Satisfactory performance on certain tests; (2) completion of
all precontract training; and, (3) selling of sufficient policies
to generate minimum monthly premium amounts set forth as "valida-
tion requirements" in the agreement. The agreement also provided:
"The Agent and General Agent agree that:
"A. All advances are loans to the General
Agent and Agent repayable on demand, and
guarantee the Company against loss on any
indebtedness created by these advances."
By early spring of 1970 the Agent was in financial diffi-
culty. His insurance sales had not met the "validation requirements"
of the Agent's Advance Agreement since his first month on the job.
H he General Agent was aware of the Agent's predicament and dis-
cussed the continuation of the advances with him and with Min-
nesota Mutual. The General Agent testified the insurance company
"took the position that it probably wasn't good business but it
was my money so if I wanted to advance it to go ahead." The
General Agent then continued to make $1,000 monthly advances to
the Agent.
The Agent's financial problems grew more acute. He met
with a Bozeman attorney and attempted to work out an assignment
for the benefit of creditors. The General Agent knew of the
assignment plan and thereafter withheld certain amounts from the
Agent's monthly advances to pay the Agent's creditors and the
Agent's attorney.
The assignment plan proved to be ineffective, and in
September 1970 the Agent filed for bankruptcy. The General Agent's
participation in the preparation of the Agent's bankruptcy peti-
tion was a matter in dispute at trial of the cause, with each
side presenting sharply conflicting evidence. The District Court
resolved those issues against the General Agent.
The Agent's testimony placed the General Agent at the
center of the bankruptcy preparations. He testified the General
Agent knew of his plan to file bankruptcy, that both were present
at a meeting with the Agent's attorney when bankruptcy was de-
cided, and that the General Agent advised him regarding creditors
to be listed on the bankruptcy petition. The Agent further testi-
fied the General Agent warned him that if either the General Agent
or Minnesota Mutual was listed as a creditor for the advances re-
ceived, the Agent would most likely lose his job.
The General Agent denied he had anything to do with the
bankruptcy. He denied discussing bankruptcy during the meeting
with the Agent's attorney. He also denied advising the Agent he
would be terminated from employment if he listed either the
petition.
General Agent or Minnesota Mutual in the bankruptcy/ He testi-
fied he knew nothing about the bankruptcy plan until after the
bankruptcy had already occurred.
The Agent's attorney testified all three were present at
the meeting and bankruptcy was discussed. However, he could not
recall anything specific about what was said at that or any other
meeting between the three.
When the Agent's bankruptcy petition was filed, neither
the General Agent nor Minnesota Mutual was included in its list
of creditors. The Agent continued to receive advances through
October 1970, even though his sales production remained minimal.
All commissions he had earned were retained as partial repayment
of money previously advanced. The advances ultimately totalled
approximately $11,000 and the retained commissions amounted to
between $1,100 and $3,500.
After the Agent's bankruptcy the General Agent paid Min-
nesota Mutual the balance owing on the amount the insurance com-
pany had advanced to the General Agent for the Agent's use. Ey
this time, the Agent had terminated his relationship with the
General Agent and Minnesota Mutual. The General Agent then
demanded repayment from the former Agent. Repayment was refused,
and three years later, on February 11, 1974, the General Agent
brought the present action to recover the advances.
The District Court, sitting without a jury, entered find-
ings of fact and conclusions of law on November 24, 1975. On
December 2, 1975, the District Court entered judgment in the
Agent's favor. The General Agent appeals from this judgment and
from the District Court's denial of his motions to amend the
findings of fact and conclusions of law and to set aside and va-
cate or modify the judgment and for a new trial.
he issue the General Agent presents for review is whether
the District Court erred in ruling that the Agent was not obli-
gated to repay the advances he received.
The General Agent first contends he is entitled to con-
tribution from the Agent because both parties were jointly obli-
gated to repay Minnesota Mutual any money received from the in-
surance company under the Agent's Advance Agreement. While the
agreement was considered by the District Court, and by its terms
it imposes joint liability upon the Agent and the General Agent
for repayment of advances funded by the insurance company, nothing
in the General Agent's pleadings indicates the suit was based in
any way on a joint obligation or alleges the General Agent was
compelled to pay what the Agent should have paid. The complaint
was not based on a theory of contribution, but on the simple theory
the Agent was indebted on a loan.
Since the question of whether contribution applies on the
facts of this case is raised for the first time on appeal, and was
not properly presented to the District Court, we will not review
it. Montana Association of Underwriters v. State of Montana,
(1977) Mont . , 563 P.2d 577, 34 St.Rep. 297, 302.
The General Agent's next contention is that the Agent must
repay the advances he received because those advances were loans
which he agreed to repay by signing the Agent's Advance Agreement.
The General Agent acknowledges he and the Agent made no agreement
between themselves regarding repayment of advances, and he also
concedes the Agent failed to meet the validation requirements set
forth in the Agent's Advance Agreement. Nevertheless, he argues
those facts have no effect on the Agent's obligation to reimburse
him for money advanced because all parties waived the validation
requirements and the agreement therefore remained in full force
and effect.
However, his reliance on a waiver is misplaced. He testi-
fied Minnesota Mutual told him he was on his own with respect to
continuing advances under the circumstances. The insurance
company's response does not constitute a waiver of the Agent's
nonperformance of the Agent's Advance Agreement. At most, it
reflects the company's judgment that it had little to lose in any
event. The risk was the General Agent's alone, not Minnesota
Mutual ' s.
The risk was taken due to the General Agent's desire to
reap the benefits of continuing advances made to the Agent; bene-
fits which would result when a sufficient amount of insurance was
sold through the Bozeman operation. The General Agent knew he
would have to repay Minnesota Mutual any money disbursed to the
Agent from the advances received from the insurance companyc He
also knew those advances were terminable at any time at the option
of either himself or Minnesota Mutual. He continued the advances
knowing the Agent did not meet the Agent's Advance Agreement and
after being told by Minnesota Mutual that he was on his own.
Under these circumstances, the advances were voluntary
payments to the Agent. As defined at 70 C.J.S. Payment S134, a
voluntary payment is:
" * * * a payment made without a mistake of fact
or fraud, duress, coercion, or extortion, on a
demand which is not enforceable against the payor
* * * and whether in a given case a payment is
voluntary depends on the facts of the particular
case, as indicating an intention on the part of
the payor to waive his legal rights. * * *'I
There was no mistake involved here, nor were the advances continued
because(of fraud, duress, coercion or extortion. They were con-
tinued because the General Agent envisioned a benefit from their
continuation. He did nothing to preserve his recovery rights
against the Agent. There was no agreement between him and the
agent requiring the Agent to repay the advances. Nor was there
any understanding between them that the Agent was incurring indi-
vidual liability as each advance was received.
Moreover, the General Agent's conduct with regard to the
Agent's bankruptcy is further indication of his right to demand
repayment of the advances. The District Court found the Agent did
not receive a discharge in bankruptcy of any indebtedness resulting
from the advances received because of the General Agent's repre-
sentation that the Agent would lose his employment if he named
either the General Agent or Minnesota Mutual in his bankruptcy
petition.
The General Agent's representations induced the Agent to
change his position for the worse. Facing a future in which his
job would be the only thing remaining after bankruptcy, he relied
on those representations in foregoing immediate discharge. When
a detrimental change in position is made in reliance on the con-
duct of another indicating a waiver of present rights, a waiver
of recovery rights is established. See, McDonald v. Northern
Benefit Assn., (1942), 113 Mont. 595, 610, 131 P.2d 479.
We hold on the facts of this case the General Agent has
no right to recover money voluntarily paid to the Agent in the
form of advances against sales. This is consistent with the rule
stated by the Oregon Supreme Court in Adams v. Crater Well Drilling,
Inc., (1976), 276 Or. 789, 556 P.2d 679, 681:
"As a general rule money which is voluntarily
paid with full knowledge of facts which would
excuse payment cannot be recovered. * * * "
It is also consistent with our conclusion that in equity
and good conscience the Agent should not be held liable for ad-
vances voluntarily made to him and not scheduled by him in reliance
on the General Agent's representations. The General Agent stood
to benefit from the risk of continuing advances, and under the
circumstances should not be able to avoid the consequences of
his enterprise.
The judgment of the District Court is affirmed.
We Concur:
Judge, Isr)tting with the Court.
Mr. Chief Justice Frank I. Haswell concurs with the result.