Rashell Holt v. John Robert Whedbee

04/12/2019

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

February 21, 2019 Session

RASHELL HOLT, ET AL. v. JOHN ROBERT WHEDBEE, ET AL.

Appeal from the Chancery Court for Knox County

No. 185385-2 Clarence E. Pridemore, Jr., Chancellor

No. E2018-01244-COA-R3-CV

This appeal concerns an alleged breach of contract. Patsy Yearwood (“Decedent”), an

insurance agent with John Robert Whedbee and James L. Whedbee at the Whedbee

Insurance Agency (“Defendants”), entered into an agreement (“the Agreement”) with

Defendants whereby Defendants would buy all of Decedent’s contracts of insurance and

expirations and renewals. For a set period of time, Decedent would receive 50% of her

commissions and renewals and Defendants were to receive the other 50%. Decedent, in

declining health, was to assist in retaining and producing business. Upon Decedent’s

death, her commissions were to go to her estate. Decedent died and three months later,

Defendants halted payments. Decedent’s daughter RaShell Holt, individually and as

Executrix of the Estate of Patsy Yearwood (“Plaintiff”), sued Defendants in the Chancery

Court for Knox County (“the Trial Court”). Defendants filed a motion for summary

judgment, which the Trial Court granted on the basis that Decedent first breached the

Agreement by not working in the period leading up to her death. Plaintiff appealed. We

find and hold that there is a genuine issue of material fact as to whether Decedent

breached the Agreement by ceasing to work. We hold further that, even if Decedent

stopped working, this in itself was not a breach of contract because her sickness and

death were anticipated in the Agreement. We hold further still that, even if Decedent

breached the Agreement, Defendants were not entitled to continue receiving all the

benefits of the Agreement while denying the estate its benefits. We reverse the judgment

of the Trial Court.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed;

Case Remanded

D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which CHARLES D.

SUSANO, JR. and JOHN W. MCCLARTY, JJ., joined.

James C. Ensor, Knoxville, Tennessee, for the appellants, RaShell Holt and the Estate of

Patsy Yearwood.

John B. Dupree, Knoxville, Tennessee, for the appellees, John Robert Whedbee, James L.

Whedbee1, and Whedbee Insurance Agency, LLC.

OPINION

Background

In September 2011, Decedent entered into the Agreement with Defendants.

Defendants would purchase all of Decedent’s contracts of insurance and expirations and

renewals over the span of four years from October 1, 2011 to October 1, 2015. Decedent

was to receive 50% of her commissions and renewals and Defendants were to receive the

other half, until October 1, 2015, when all of Decedent’s commissions and her contracts

of insurance and expirations and renewals then would go to Defendants. Under the

Agreement, Decedent was to assist in retaining and producing business. If Decedent died

before the end of the four-year period, Defendants would then own all of Decedent’s

contracts of insurance and expirations and renewals. Upon Decedent’s death, her share

of 50% of her commissions would be paid to her estate. The Agreement, typed in all

capital letters and containing handwritten modifications, states:

THIS DOCUMENT IS A CONTRACT IN WHICH THE BUSINESS

KNOWN AS WHEDBEE INSURANCE AGENCY LLC AND OR JOHN

ROBERT WHEDBEE AND JAMES L WHEDBEE WILL PURCHASE

ALL OF PATSY YEARWOOD’S CONTRACTS OF INSURANCE AND

EXPIRATIONS AND RENEWALS OVER THE SPACE OF FOUR

YEARS FROM 10/01/2011 TO 10/01/2015.

BEGINNING 10/01/2011 THE COMMISION SPLIT WILL BE 50% TO

EACH PATSY YEARWOOD AND WHEDBEE INSURANCE AGENCY.

PATSY YEARWOOD WILL ASSIST IN RETAINING AND

PRODUCING BUSINESS DURING THIS CONTRACT. ON 10/01/2015

ALL CONTRACTS OF INSURANCE PRODUCED BY PATSY

YEARWOOD AND ALL EXPIRATIONS OWNED BY SAME WILL

BECOME THE SOLE PROPERTY OF WHEDBEE INSURANCE

AGENCY LLC, JOHN ROBERT WHEDBEE, AND OR JAMES L

WHEDBEE.

IN THE EVENT OF PATSY YEARWOOD’S DEATH THIS [THE

BALANCE TO PAY MY ESTATE]2

1

A suggestion of death was filed below regarding James L. Whedbee. No action was taken as to the

suggestion.

2

This bracketed portion was handwritten and initialed.

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The signatories to the Agreement were Decedent, John Robert Whedbee and

James L. Whedbee.

In July 2012, Decedent died. Three months later, Defendants halted payments. In

June 2013, Plaintiff sued Defendants in the Trial Court. Plaintiff alleged that Defendants

“are collecting 100% on all contracts, renewals, and expirations of the Yearwood

contracts.” Plaintiff sought what was owed to Decedent’s estate under the Agreement.

Defendants filed an answer in opposition. Defendants admitted “that commissions on

premiums paid have been collected and charge-backs have been assigned pursuant to

normal protocol.” However, Defendants denied “that Yearwood entirely performed

under the contract because she was very ill and probably could not complete all of her

obligations thereunder.”

In October 2016, Defendants filed a motion for summary judgment contending

that Decedent first breached the Agreement by failing to assist in retaining and producing

business as required of her under the Agreement. Defendants submitted these as

undisputed facts:3

1. The intent of the parties in this case was that the commissions would be

split between the Whedbee Insurance Agency, LLC and Patsy Yearwood.

Affidavit of Robert Whedbee.

2. The intent of the parties in this case was that the Whedbee Insurance

Agency, LLC and Patsy Yearwood would be bound by the obligations

under the contract, not James L. Whedbee and John Robert Whedbee

individually. Id.

3. All commissions earned under the contract were direct deposited into the

Whedbee Insurance Agency, LLC bank account. Id.

4. No commission earned under the contract were ever received by the

Whedbee Insurance Agency LLC not not [sic] James L. Whedbee and John

Robert Whedbee individually. Id.

5. Mrs. Yearwood stopped coming into the office to assist in retaining and

producing business. Id.

6. Shortly after the contract was signed, Mrs. Yearwood stopped assisting

in the work on her accounts and in salvaging her business. Id.

7. Mrs. Yearwood failed to make contact with a very significant portion of

her clients prior to renewal times. Id.

8. Mrs. Yearwood failed to invite her clients into the office to meet Robert

Whedbee so that her contracts could transition to the Agency. Id.

3

In what likely was a drafting error, Defendants’ undisputed facts are said to be submitted by a “Dr.

Menachem Langer,” an individual not part of this appeal.

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9. Mrs. Yearwood did not know how to use the systems or upload

applications to the carriers and she could not do the work under the contract

thus causing Robert Whedbee to perform this work. Id.

10. Mrs. Yearwood did not code her files meaning that that [sic] the

Agency had great difficulty determining what accounts were subject to the

contract. Id.

11. Mrs. Yearwood did not return phone calls and Robert Whedbee was

forced to assist her customers even though he had no relationship with her

clients. Id.

12. The Agency tried to help with her customers but needed Mrs.

Yearwood’s assistance and could not retain the business because she was

not around the office to assist with customer relations. Id.

13. The Agency and the Whedbees were strangers to Mrs. Yearwood’s

customers. Id.

14. The failure to return calls occurred many times and 80% of Mrs.

Yearwood’s customers were lost because of this failure. Id.

15. In first few months Mrs. Yearwood came to work, but after that she fell

off and would not perform the tasks that were asked of her in order to assist

in retaining and producing business. Id.

16. Mrs. Yearwood was asked many times to return calls to her customers

but she would not return the calls frequently; because of this breach, the

business was lost. Id.

17. After all the accountings, Mrs. Yearwood was $495.66 in arrears after

the charge backs that happened because the policies were not renewed. Id.

18. Commissions were paid up front but when a policy cancelled, the agent

owes the pro-rated commission back to the Agency. Id.

19. Charge backs occurred with Mrs. Yearwood’s accounts. Id.

20. All due and owing commissions have been paid under the contract. Id.

In February 2017, Plaintiff filed a response to Defendants’ motion for summary

judgment. Plaintiff also filed her statement of disputed facts as well as her own affidavit.

In her affidavit, Plaintiff stated:

1. I am over the age of eighteen (18) years and am competent to testify to

the matters contained herein, all of which are based on my personal

knowledge.

2. While living, my mother worked as an insurance agent with John Robert

Whedbee and James L. Whedbee at the Whedbee Insurance Agency.

3. My mother signed a contract that I later attached to a Complaint filed

against John Robert Whedbee and James L. Whedbee and the Whedbee

Insurance Agency.

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4. My mother worked pursuant to the subject contract until she died on July

5, 2012.

5. My mother was paid regularly by the Whedbee Insurance Agency while

she was alive.

6. In October of 2012, James L Whedbee sent me (I am the Executrix of my

mother’s estate) a check for mother’s share of commissions for July,

August, and September of 2012.

7. On September 6, 2012, James L Whedbee wrote me a letter saying that

he may not be able to pay the estate in the future because the estate does not

have a license to sell insurance.

8. The estate has not received a check since the October 2012 check

mentioned above.

9. The Whedbee Insurance Agency, through John and James Whedbee have

since represented that they do not know which clients/contracts belonged to

my mother.

10. The Whedbee Insurance Agency has represented/represents to me that

all of the contracts have cancelled, thus the estate is owed no money.

11. The Whedbee Insurance Agency now states that they do not owe the

[e]state any money because she breached the contract while alive.

In October 2017, a hearing was conducted before the Trial Court regarding

Defendants’ motion for summary judgment. Later that month, the Trial Court entered an

order granting Defendants’ motion, stating in relevant part as follows:

1. Defendants filed a Motion for Summary Judgment on October 12,

201[6]. In this Motion, it is alleged Patsy Yearwood first breached the

contract between the parties by failing to assist in retaining and producing

business for the Defendants.

2. Plaintiffs filed a response to the Defendants’ Motion for Summary

Judgment on February 3, 2017. However, it did not contain a denial of the

allegation that Patsy Yearwood first breached the contract between the

parties.

3. It is well settled law in Tennessee that the party that first

materially breached a contract is “not entitled to damages stemming from

the other party’s later material breach of the same contract.” United Brake

System Inc, v. American Environmental Protection, 963 S.W.2d 749, 756

(Tenn. Ct. App. 1997).

Therefore, this Court is of the opinion the Defendants are entitled to

summary judgment as a matter of law and Plaintiffs’ cause of action is

DISMISSED.

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Plaintiff filed a motion to alter or amend. In June 2018, the Trial Court entered an order

denying Plaintiff’s motion. Plaintiff timely appealed to this Court.

Discussion

We restate and consolidate the multiple issues and sub-issues Plaintiff raises on

appeal into the following dispositive issues: 1) whether the Trial Court erred in granting

Defendants’ motion for summary judgment where the motion lacked any recitation that

there was no genuine issue of material fact; 2) whether material facts were in dispute

such that summary judgment was precluded; 3) whether the Trial Court erred in finding

that Decedent breached the Agreement by failing to assist in retaining and producing

business where the Agreement contemplated Decedent’s decline and death; and, 4)

whether the Trial Court erred in finding the “first-to-breach” rule applicable where

Defendants continued receiving all the benefits of the Agreement.

This case was decided by summary judgment. As our Supreme Court has

instructed:

Summary judgment is appropriate when “the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact

and that the moving party is entitled to a judgment as a matter of law.”

Tenn. R. Civ. P. 56.04. We review a trial court’s ruling on a motion for

summary judgment de novo, without a presumption of correctness. Bain v.

Wells, 936 S.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist

Healthcare–Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing

so, we make a fresh determination of whether the requirements of Rule 56

of the Tennessee Rules of Civil Procedure have been satisfied. Estate of

Brown, 402 S.W.3d 193, 198 (Tenn. 2013) (citing Hughes v. New Life Dev.

Corp., 387 S.W.3d 453, 471 (Tenn. 2012)).

***

[I]n Tennessee, as in the federal system, when the moving party does not

bear the burden of proof at trial, the moving party may satisfy its burden of

production either (1) by affirmatively negating an essential element of the

nonmoving party’s claim or (2) by demonstrating that the nonmoving

party’s evidence at the summary judgment stage is insufficient to establish

the nonmoving party’s claim or defense. We reiterate that a moving party

seeking summary judgment by attacking the nonmoving party’s evidence

must do more than make a conclusory assertion that summary judgment is

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appropriate on this basis. Rather, Tennessee Rule 56.03 requires the

moving party to support its motion with “a separate concise statement of

material facts as to which the moving party contends there is no genuine

issue for trial.” Tenn. R. Civ. P. 56.03. “Each fact is to be set forth in a

separate, numbered paragraph and supported by a specific citation to the

record.” Id. When such a motion is made, any party opposing summary

judgment must file a response to each fact set forth by the movant in the

manner provided in Tennessee Rule 56.03. “[W]hen a motion for summary

judgment is made [and] . . . supported as provided in [Tennessee Rule 56],”

to survive summary judgment, the nonmoving party “may not rest upon the

mere allegations or denials of [its] pleading,” but must respond, and by

affidavits or one of the other means provided in Tennessee Rule 56, “set

forth specific facts” at the summary judgment stage “showing that there is a

genuine issue for trial.” Tenn. R. Civ. P. 56.06. The nonmoving party

“must do more than simply show that there is some metaphysical doubt as

to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.

Ct. 1348. The nonmoving party must demonstrate the existence of specific

facts in the record which could lead a rational trier of fact to find in favor of

the nonmoving party. If a summary judgment motion is filed before

adequate time for discovery has been provided, the nonmoving party may

seek a continuance to engage in additional discovery as provided in

Tennessee Rule 56.07. However, after adequate time for discovery has

been provided, summary judgment should be granted if the nonmoving

party’s evidence at the summary judgment stage is insufficient to establish

the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P.

56.04, 56.06. The focus is on the evidence the nonmoving party comes

forward with at the summary judgment stage, not on hypothetical evidence

that theoretically could be adduced, despite the passage of discovery

deadlines, at a future trial.

Rye v. Women’s Care Cntr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn.

2015).

We first address the issue of whether the Trial Court erred in granting Defendants’

motion for summary judgment where the motion lacked any recitation that there was no

genuine issue of material fact. Defendants argue this issue was waived because it was

first raised in Plaintiff’s motion to alter or amend. Indeed, “[a] Rule 59 motion should

not be used to raise or present new, previously untried or unasserted theories or legal

arguments.” In re M.L.D., 182 S.W.3d 890, 895 (Tenn. Ct. App. 2005). Based on this

limited record, it appears Plaintiff raised this issue for the first time in her motion to alter

or amend. The issue is therefore waived.

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If, however, the issue were properly before us, Plaintiff would not prevail on it.

Plaintiff cites Keystone Ins. Co. v. Griffith, 659 S. W. 2d 364, 366 (Tenn. Ct. App. 1983)

for the proposition that the failure to include a recitation that there was no genuine issue

of material fact is fatal to a motion for summary judgment. This Court took a different

view in the more recent case of Dondero v. Accuray Incorporated, No. E2017-01741-

COA-R3-CV, 2018 WL 3600014 (Tenn. Ct. App. July 26, 2018), Rule 11 appl. perm.

appeal denied Nov. 15, 2018. Facing the same issue, we stated:

In the reply briefs filed by the Donderos, they attempt to raise an additional

issue regarding whether two of the defendants’ motions for summary

judgment should have been denied for failure to recite that there was no

genuine issue of material fact. Issues cannot be raised for the first time in a

reply brief. See Owens v. Owens, 241 S.W.3d 478, 499 (Tenn. Ct. App.

2007) (“A reply brief is a response to the arguments of the appellee. It is

not a vehicle for raising new issues.”). We note, however, that this

argument lacked merit in any event. See Anderson v. DTB Corp., No. 89-

172-II, 1990 WL 33380, at *2 (Tenn. Ct. App. Mar. 28, 1990) (“A motion

for summary judgment need not contain any particular incantation to

comply with the rules as long as it states the basis for the motion and the

relief being sought.”)

Dondero, 2018 WL 3600014, at *5 n. 2. The proposition that no particular incantation is

necessary in a motion for summary judgment is a sound one, which we follow. We are

less interested in whether Defendants’ motion for summary judgment proclaimed there

was no genuine issue of material fact than we are in whether there was a genuine issue of

material fact, an issue we will address next.

We look to Defendants’ motion for summary judgment, Plaintiff’s response, and

supporting documents to determine whether there was a genuine issue of material fact.

Defendants’ statement of undisputed facts identified fairly specific ways in which

Decedent failed to assist in retaining and producing business. For instance, Defendants

assert that Decedent did not return phone calls, did not code her files, did not invite her

clients into the office, and stopped coming into the office, all of which was damaging to

the business. On the other hand, Plaintiff stated in her affidavit that Decedent “worked

pursuant to the subject contract until she died on July 5, 2012.” According to

Defendants, Plaintiff’s generic assertion fails to rebut their detailed cataloguing of

Decedent’s shortcomings and fails to create a genuine issue of material fact.

Plaintiff’s statement, brief as it is, contradicts Defendants’ submitted facts. If

Defendants agree with Plaintiff that Decedent worked pursuant to the Agreement until

her death, then they would have no grounds for alleging Decedent breached the

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Agreement. We add that the Agreement says nothing specifically about, for instance,

answering phones or coding files. Furthermore, the fact that Defendants continued to pay

until three months after Decedent’s death suggests they had no misgivings about the

quality of her work. Indeed, according to Plaintiff’s affidavit, Defendants only alleged

Decedent breached the Agreement after offering a litany of excuses as to why they could

not pay: the estate lacked a license to sell insurance; all of the contracts were cancelled;

and Defendants did not know which accounts belonged to Decedent. The parties’

positions are at odds, and it is inappropriate to weigh competing factual claims at the

summary judgment stage. We find and hold that the parties disputed whether Decedent

worked pursuant to the Agreement until her death, and the Trial Court erred in granting

summary judgment to Defendants on the basis of that disputed material fact.

Even if it were undisputed that Decedent stopped assisting in retaining and

producing business, our next issue concerns whether such stoppage would constitute a

material breach of the Agreement. Decedent was sick and dying, and the Agreement

contemplated this reality. Defendants even stated in their answer that Decedent was

probably too ill to fulfill her obligations. The Agreement includes a specific handwritten

provision for Decedent’s estate to receive what was owed to her under the Agreement

after she died. This was not an employment contract but instead, as argued by Plaintiff, a

contract whereby Decedent sold her book of business. The fact that Decedent grew too

sick to help in retaining and producing business was not, in itself, a material breach of the

Agreement. On the contrary, it was anticipated. Decedent, sick and dying, did not have

to code files and answer phones right up until the moment she died to avoid breaching the

Agreement.

The final issue we address is whether the Trial Court erred in finding the “first-to-

breach” rule applicable where Defendants went on receiving the benefits of the

Agreement. As an initial matter, Plaintiff argues that Defendants waived the first-to-

breach defense by raising it for the first time in their motion for summary judgment rather

than in their answer. As quoted above, however, Defendants in their answer did

articulate the factual basis for their defense that Decedent failed to fulfill her contractual

obligations before her death. Plaintiff had ample opportunity to prepare for this approach

by Defendants. We decline to find waiver, and return to the merits.

Plaintiff argues that, even if Decedent first materially breached the Agreement,

Defendants are not entitled to go on receiving all of the benefits under the Agreement.

We note that “all of the benefits” includes not only the benefits Defendants were to

receive under the Agreement but also those benefits that were to go to Decedent and then

her estate. This Court has discussed the first-to-breach rule as follows:

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The Defendants seek to assert the first-to-breach rule, namely: “A

party who has materially breached a contract is not entitled to damages

stemming from the other party’s later material breach of the same contract.”

McClain v. Kimbrough Constr. Co., 806 S.W.2d 194, 199 (Tenn. Ct. App.

1990). We note, however, that “[a] party owed performance may . . . waive

its right to assert the first uncured material breach as a bar to recovery on its

own subsequent breach.” Madden Phillips Constr., Inc. v. GGAT Dev.

Corp., 315 S.W.3d 800, 812 (Tenn. Ct. App. 2009). A party “waive[s] its

right to assert first material breach as a bar to recovery if it accepts the

benefits of the contract with knowledge of the breach.” Id. at 813. Under

some circumstances, a party’s failure to assert the “first” breach may not

result in waiver. In Madden Phillips Constr., the Court explained this

principle and gave examples of situations in which a party’s failure to assert

a breach may not result in waiver:

Ordinarily, a party who first materially breaches may not

recover under the contract. United Brake Sys. [v. AEP ], 963

S.W.2d [749] at 756 [ (Tenn. Ct. App. 1997) ]. A non-

breaching party may nevertheless waive its right to assert first

material breach as a bar to recovery if it accepts the benefits

of the contract with knowledge of a breach. Aero Squadron,

169 S.W.3d at 635-36 (citing 17 Am.Jur.2d Contracts § 447

(1964)); see also SMR Techs., Inc. v. Aircraft Parts Int’l

Combs, Inc., 141 F.Supp.2d 923, 934 (W.D. Tenn. 2001),

vacated for lack of subject matter jurisdiction, No. 00-2563,

2004 WL 595010 (W.D. Tenn. Mar. 23, 2004). But there are

circumstances where acceptance of contractual benefits does

not constitute waiver. For example:

[M]ere efforts on the part of an innocent party

to persuade the promisor, who repudiates his

agreement, to reject that repudiation and

proceed honorably in the performance of his

agreement have been held not to involve a

waiver of the innocent party’s right to avail

himself of the breach after the efforts finally

prove unsuccessful. Moreover, it has been held

that the fact that a party did not act upon a

breach but negotiated with the other party for a

new contract does not constitute an

acquiescence in the breach where such action

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was induced by misrepresentation by such other

party. A defendant is precluded from claiming

a waiver of breach of contract where he

fraudulently induces the plaintiff to permit him

to continue and thereafter violates the promises

he made to induce the plaintiff to give such

permission.

W.F. Holt Co. v. A & E Elec. Co., 665 S.W.2d 722, 733-34

Tenn. Ct. App. 1983) (alteration in original) (quoting 17

Am.Jur.2d Contracts § 447 (1964)).

Id. at 813. Thus, where a party to a contract fails to assert the other party’s

breach for reasons such as fraudulent inducement or the party’s attempt to

convince the breaching party to comply with the contract, the failure to

assert the breach may not constitute waiver.

White v. Empire Exp., Inc., 395 S.W.3d 696, 715-16 (Tenn. Ct. App. 2012).

Thus, a party asserting the first-to-breach rule may waive that defense if said party

continues to receive benefits under the contract with knowledge of a breach. Here,

Defendants continue to receive the benefits of the Agreement while no longer paying

under the Agreement. This they may not do. Even if Decedent materially breached the

Agreement, which has not been established at this summary judgment stage, Defendants

are not entitled to keep 100% of the commissions and Decedent’s entire book of business

all while refusing to meet their obligations under the Agreement.

For their part, Defendants state that there is nothing owed. If Defendants are

correct about that, it is unclear why this case has not been resolved by just doing an

accounting. In any event, how much, if anything, is owed by Defendants is yet another

factual dispute making summary judgment inappropriate. For the multiple reasons

discussed throughout, we reverse the grant of summary judgment and remand for further

proceedings consistent with this Opinion.

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Conclusion

The judgment of the Trial Court is reversed, and this cause is remanded for

collection of the costs below and further proceedings consistent with this Opinion. The

costs on appeal are assessed against the Appellees, John Robert Whedbee, James L.

Whedbee, and Whedbee Insurance Agency, LLC.

____________________________________

D. MICHAEL SWINEY, CHIEF JUDGE

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