Pasant v. Jackson National Life Insurance

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 94-10153

JAMES PASANT,
Plaintiff-Counter-
Defendant-Appellant,

versus

JACKSON NATIONAL LIFE
INSURANCE COMPANY,
Defendant-Counter-
Plaintiff-Appellee.

Appeal from the United States District Court
for the Northern District of Texas

(April 26, 1995)

Before REYNALDO G. GARZA, DeMOSS and BENAVIDES, Circuit
Judges.

FORTUNATO P. BENAVIDES, Circuit Judge:

Plaintiff-Appellant James Pasant ("J. Pasant") appeals the

district court's judgment granting Defendant-Appellee Jackson

National Life Insurance Company's ("JNL") motion for summary

judgment and denying J. Pasant's cross motion for summary judgment.

We reverse in part and affirm in part.

FACTS AND PROCEDURAL HISTORY

JNL was founded in 1961 by J. Pasant's father, Anthanese J.

Pasant ("A.J. Pasant"), and in subsequent years A.J. Pasant hired

his three sons, including J. Pasant, to work in the family

controlled business. By 1986, JNL was a publicly traded company,
with A.J. Pasant acting as President, Chairman of the Board and

Chief Executive Officer ("CEO").

In late 1986, Prudential PLC of London, England ("Prudential")

acquired JNL. A.J. Pasant was allowed to retain his positions as

President, CEO and Chairman of the Board after the takeover. As

part of the acquisition, Prudential entered into renewable one-year

employment contracts with each member of the Pasant family. On

September 18, 1986, JNL entered into a written employment agreement

with J. Pasant (hereafter referred to as the "1986 contract"). The

1986 contract provided that: 1) J. Pasant would continue as vice-

president and managing officer of JNL's Texas subsidiary; 2) J.

Pasant would receive an annual minimum guaranteed income of

$200,000, as well as incentive compensation; and 3) in the event

that J. Pasant's employment was terminated, he would receive

$87,500 in return for a covenant not to compete. The 1986 contract

was to last from November 25, 1986 to November 24, 1987. At the

option of JNL, the contract could be renewed for two additional

one-year periods.

The JNL Board of Directors met for the first time after

Prudential's acquisition on December 19, 1986. Both A.J. Pasant

and J. Pasant were in attendance. During that meeting, three new

committees were created and approved by the Board. The

compensation committee was established to handle management

appointments and salary policy, with the appointment of the

president and other senior management of JNL to be the

responsibility of Prudential itself. A.J. Pasant and his three

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sons, including J. Pasant, were appointed to the executive

committee only.

JNL exercised its first renewal option, and extended J.

Pasant's contract to November 24, 1988. When the second one-year

period ended, J. Pasant notified JNL through Prudential that he

wished to renegotiate some provisions of his employment contract.

By letter dated November 17, 1988, Prudential notified J. Pasant

that he would continue as vice-president and managing officer of

the Texas subsidiary until the subsidiary was merged into the

parent company, at which time he would be regional manager of JNL's

Texas operation. J. Pasant was also notified that he would receive

a guaranteed minimum annual salary of $250,000, as well as a bonus

based on sales volume. The employment contract was extended to

December 31, 1989, and the $87,500 non-compete covenant amount was

extended to December 31, 1990.

Not satisfied with his new employment compensation conditions,

J. Pasant began negotiations with A.J. Pasant. On November 21,

1988, A.J. Pasant executed an amendment to the 1986 contract

providing for an increase in the non-compete covenant amount from

$87,500 to $175,000 and a $150,000 relocation allowance after J.

Pasant's termination (hereafter referred to as "first amendment").

On that same date, A.J. Pasant and J. Pasant executed a Deferred

Compensation Agreement ("Agreement") providing for $100,000 to be

paid to J. Pasant in quarterly payments over five years.

Prudential did not receive a copy of that Agreement.

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 A.J. Pasant executed a second amendment on November 28, 1988

that modified the 1986 contract in the following ways: 1) it

clarified that the change in J. Pasant's title from vice-president

and managing officer to regional manager would not significantly

alter his duties; 2) it guaranteed that J. Pasant would receive a

minimum salary of $250,000; and 3) it extended the employment

agreement through December 31, 1989.

Prudential learned of the existence of the two amendments in

early 1989. In October 1990, David Pasant informed J. Pasant that

JNL would honor the modifications enumerated in the second

amendment executed on November 28, 1988. J. Pasant was also told

that the modifications included in the first amendment executed

November 21, 1988, as well as the Agreement executed on the same

date, would not be accepted or honored by JNL.

J. Pasant was terminated from JNL in February 1991. JNL

refused to fulfill the terms of the first amendment and the

Agreement. JNL also refused to pay the $87,500 under the non-

compete covenant in the original 1986 contract.

J. Pasant filed suit against JNL in Texas state court in July

1991, and JNL removed it to federal court based on diversity

jurisdiction. JNL moved for summary judgment, asserting that the

first amendment and Agreement were unenforceable. J. Pasant filed

a cross-motion for summary judgment, asserting that JNL ratified

the disputed amendment and Agreement. The district court granted

JNL's motion for summary judgment and denied J. Pasant's cross-

motion. The court rejected J. Pasant's claims on the first

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amendment and Agreement based on its holding that A.J. Pasant did

not possess the authority to enter into the first amendment or

Agreement; that neither were supported by consideration; that JNL

did not ratify either; and that J. Pasant could not rely on the

defense of equitable estoppel. The court did, however, order JNL

to pay J. Pasant the non-compete covenant amount of $87,500

contained in the 1986 contract.

STANDARD OF REVIEW

We review de novo the district court's judgment granting JNL's

motion for summary judgment and denying J. Pasant's cross-motion

for summary judgment. Bodenheimer v. PPG Industries, Inc., 5 F.3d

955, 956 (5th Cir. 1993). Summary judgment is appropriate when

there exists no genuine issue of material fact so that the moving

parties is entitled to judgment as a matter of law. See FED. R.

CIV. P. 56(c). In making this determination, the Court must draw

all justifiable inferences in favor of the nonmoving party.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505,

2513, 91 L.Ed.2d 202 (1986).

ANALYSIS

"Transactions involving an interested director are subject to

strict judicial scrutiny but are not voidable unless they are shown

to be unfair to the corporation. . . . [T]he burden of proof is on

the interested director to show that the action under fire is fair

to the corporation." Gearhart Indus., Inc. v. Smith Int'l, Inc.,

741 F.2d 707, 720 (5th Cir. 1984).

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Actual Authority

J. Pasant contends that from 1972, when he was first hired, to

1986, when Prudential took over, A.J. Pasant possessed exclusive

authority over matters concerning his employment compensation

terms. As proof of A.J. Pasant's authority over employment

compensation issues, J. Pasant asserts that, even after the

Prudential takeover, A.J. Pasant negotiated and executed all of his

employment compensation issues, many of which were approved and

ratified by JNL and Prudential. For example, J. Pasant points out

that in 1987 A.J. Pasant gave him a $50,000 annual salary increase

and that, from 1986-1988, A.J. Pasant unilaterally awarded several

performance-based bonuses, all of which were approved and/or

ratified by JNL and Prudential. Additionally, Prudential and JNL

expressly ratified the second amendment through David Pasant's

letter from October 1990.

The law of actual authority in Texas is well established.

Actual authority includes both express and implied authority.

Express authority exists "where the principal has made it clear to

the agent that he wants the act under scrutiny to be done." City

of San Antonio v. Aguilar, 670 S.W.2d 681, 683 (Tex. App. 4 Dist.

1984). Implied authority, however, exists "where there is no proof

of express authority, but appearances justify a finding that in

some manner the agent was authorized; in other words, there is

circumstantial proof of actual authority." Id. at 683-84. Implied

authority may arise in several ways: (1) from some indication from

the principal that the agent possesses the authority; (2) from

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being the necessary implication of an expressly authorized act; and

(3) from a previous course of dealing. Wells Fargo Business Credit

v. Ben Kozloff, Inc., 695 F.2d 940, 945 (5th Cir.), cert. denied,

464 U.S. 818, 104 S.Ct. 77, 78 L.Ed.2d 89 (1983); Texas

Conservative Oil Co. v. Jolly, 149 S.W.2d 265, 267 (Tex. Civ. App.-

-El Paso 1941, no writ).

We conclude that a genuine issue of material fact exists

concerning whether A.J. Pasant had implied actual authority to

negotiate and execute the first amendment and Agreement. Reviewing

the summary judgment evidence in the light most favorable to the

nonmovant, we find that J. Pasant has presented evidence indicating

that the officers of JNL and Prudential continued a course of

dealing whereby A.J. Pasant possessed the authority to negotiate

employment agreements by pointing J. Pasant's employment

negotiations in the direction of A.J. Pasant. Although Prudential

created a compensation committee to handle management appointments

and salary policies within JNL after the takeover, compensation and

appointment issues concerning the president and senior management

personnel were not expressly covered under the authority of the

committee. Thus, Prudential did not expressly remove A.J. Pasant's

authority to negotiate and execute agreements, modifications, or

amendments regarding salary and other compensation issues. In

addition, Prudential and JNL continued to approve and/or ratify

raises and performance-based bonuses issued by A.J. Pasant for J.

Pasant after the Prudential takeover. Therefore, we reverse the

district court's finding that A.J. Pasant did not possess implied

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actual authority to negotiate and execute the first amendment and

Agreement.

Consideration

J. Pasant contends that his future services as a regional

manager for JNL provided sufficient consideration for the first

amendment and Agreement. Under the 1986 Contract, J. Pasant's

obligations ended on November 25, 1989. However, he continued to

work for JNL until February 1991 in reliance of the first amendment

and Agreement. J. Pasant argues that these two years of services

after the 1986 contract expired establishes adequate consideration.

It is well-settled in Texas that consideration may take the

form of a benefit to the promissor or a detriment to the promisee.

Diamond Paint Co. of Houston v. Embry, 525 S.W.2d 529, 533 (Tex.

Civ. App.--Houston (14th Dist.) 1975). The burden of proving a

lack of consideration is on the pleader. Winters v. Langdeau, 360

S.W.2d 515, 516 (Tex. 1962). "It is a rebuttable statutory

presumption that a written instrument is prima facie proof of

consideration." Richardson v. Office Bldgs. of Houston, 704 S.W.2d

373, 375 (Tex. App. 14 Dist. 1985).

JNL contends that the compensation provided by the first

amendment and Agreement was merely to reward J. Pasant for past

services to JNL, which cannot form the basis for valid

consideration.1 JNL argues that, on the date that the first

amendment was executed, A.J. Pasant wrote to J. Pasant that he

1
Tim W. Koerner & Associates, Inc. v. Aspen Labs, Inc.,
492 F. Supp. 294, 303 (1980), aff'd, 683 F.2d 416 (5th Cir.
1982).

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wished to increase J. Pasant's compensation because of his "efforts

with the Company since 1982." JNL notes that A.J. Pasant also

wrote that he wanted to thank J. Pasant "for the tremendous efforts

[he] [had] put forth since 1982 on behalf of Jackson National."

JNL also argues that the Agreement itself states that J. Pasant

"has rendered valuable services" to JNL.

Even if part of A.J. Pasant's motivations was a reward J.

Pasant for past services, a promise that is supported by a mixture

of gift and bargain is supported by adequate consideration.

CALAMARI AND PERILLO, CONTRACTS § 4-7 at 200 (3d ed. 1987); see Mahrer

v. Mahrer, 510 S.W.2d 402, 404 (Tex. Civ. App.--Dallas 1974). We

find that adequate consideration exists to support the disputed

amendments. Because the original 1986 Contract ended in November

1989, JNL cannot argue that J. Pasant's continued work for JNL was

already covered under the original contract. The services that J.

Pasant rendered from November 1989 until his termination in

February 1991 provided adequate consideration for the agreements.

Therefore, we reverse the judgment of the district court granting

summary judgment on the issue of consideration.

REMAINING ISSUES ON APPEAL

J. Pasant also raises on appeal the issues of express

authority, apparent authority, estoppel, and ratification. We

agree with the district court conclusions that, 1) A.J. Pasant did

not have express authority, 2) A.J. Pasant did not have apparent

authority, 3) estoppel does not apply, and 4) JNL's silence did not

constitute ratification of the first amendment and Agreement.

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 CONCLUSION

For the reasons articulated above, we REVERSE the district

court's summary judgment denying J. Pasant relief on the basis that

the first amendment and Agreement were unenforceable.

Specifically, because a fact issue is present with respect to

whether 1) A.J. Pasant did have implied authority to act on behalf

of JNL or to bind it to the first amendment and Agreement and 2)

the first amendment and Agreement lacked consideration, we REMAND

J. Pasant's claims against JNL. The district court's findings with

respect to all other issues are left undisturbed and are AFFIRMED.

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