Argued and Submitted December 10, 2014.
Released for Publication July 22, 2015.
APPEAL FROM: District Court of the Eleventh Judicial District, In and For the County of Flathead, Cause No. DV 11-1297A. Honorable Ted O. Lympus, Presiding Judge.
For Appellant: Amy Poehling Eddy (argued), Law Office of Amy Eddy, PLLC, Kalispell, Montana.
For Appellee: Peter F. Habein, Kimberly S. More (argued), Crowley Fleck, PLLP, Billings, Montana.
JIM RICE. We concur:
MIKE McGRATH, PATRICIA COTTER, BETH BAKER, JAMES JEREMIAH SHEA, LAURIE McKINNON,
MICHAEL E WHEAT.
Jim Rice, Justice.
[¶1] Posnien, Inc., appeals from the entry of judgment by the Eleventh Judicial District
Court, Flathead County, finding that Posnien lacked " rights in the collateral" of the economic interest in the Allstate agency sold to Baird 7, and therefore cannot sustain a claim for conversion against Allstate. We reverse and remand for further proceedings, [379 Mont. 399] addressing the following issue:
[¶2] Did the District Court err in determining that Posnien retained no security interest in the Allstate agency book of business sold to Baird 7 pursuant to the terms of Allstate's Contract Documents?
FACTUAL AND PROCEDURAL BACKGROUND
[¶3] Fay Mason Posnien was an Exclusive Agent for Allstate, her office located in Kalispell. In 2000, Fay incorporated Posnien, Inc., after Allstate informed her it would no longer permit agencies to operate as sole proprietorships. In 2006, Fay decided to sell the agency and retire. After Allstate placed an advertisement on its website listing the agency for sale, Mary Baird, incorporated as Baird 7, offered to purchase the agency from Posnien for $450,000.
[¶4] Prior to selling the agency, Posnien was required to obtain Allstate's approval of Baird 7 as the purchaser and the terms of the agreement. The process of obtaining Allstate's approval required the involvement of Allstate's Montana Field Manager, Mike Brown. During the process, Brown provided Baird with documents showing the agency's history of revenue and expenses, while Baird provided Brown with a proposed business plan. Additionally, Brown reviewed Baird's tax returns and other financial documents. Beyond the exchange of documents, Brown conducted personal interviews with Baird to determine whether he believed she would be successful as an Allstate agent. Following the process, Brown wrote a letter to Allstate recommending approval of the transaction, and Allstate ultimately approved transfer of the agency.
[¶5] Under the agreement between the parties, Baird 7 agreed to make a $150,000 down payment. To make this payment, Baird 7 obtained a loan from Kenneth and Gretchen Gose, while Posnien agreed to finance the remainder of the purchase price. The book of business, understood as an agency's " customer accounts," was valued at $435,000 by the Buy-Sell Agreement.
[¶6] On March 1, 2007, the sale closed and Baird became an Exclusive Agent for Allstate. To become an Exclusive Agent, Mary Baird executed an Exclusive Agency Agreement (Agreement) with Allstate on behalf of Baird 7, incorporating by reference the Exclusive Agency Independent Contractor Manual (Manual). Under the Agreement, an agent owns an " economic interest" in the agency's book of business, which may be used as collateral for business loans, although ownership is retained by Allstate. Part of the agent's economic interest includes the option to receive termination payments at the time an agent decides to end her affiliation with Allstate. Pursuant to the Agreement, [379 Mont. 400] Baird collateralized her right to receive termination payments to secure a loan from the Goses. Baird similarly granted Posnien a security interest in the book of business. Baird executed a UCC Financing Statement at the time of closing, stating that Posnien had a security interest in the book of business along with all assets owned by the Baird 7 agency. On March 2, 2007, Posnien filed the statement with the Secretary of State and the Flathead County Clerk and Recorder.
[¶7] The agency continued to be successful following the transfer until Baird's termination as an agent on April 11, 2011. Under the Agreement, any agency relationship may be terminated for cause in instances of fraudulent conduct. Allstate learned Baird had falsified the date of loss on a claim for damage to her own boat under a personal Allstate policy. In response to Baird's fraudulent claim, Allstate immediately closed the Baird 7 agency pursuant to the Agreement's termination provisions and " ...