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Paul Schulte v. Dave Carlson

February 13, 2013

PAUL SCHULTE, PLAINTIFF-APPELLEE,
v.
DAVE CARLSON, DEFENDANT-APPELLANT.



Appeal from the Iowa District Court for Polk County, Robert A. Hutchison, Judge.

The opinion of the court was delivered by: Danilson, J.

Defendant appeals the district court's judgment for plaintiff on a breach of contract claim. AFFIRMED.

Considered by Potterfield, P.J., and Danilson and Tabor, JJ.

Defendant Dave Carlson appeals the district court's judgment for Paul Schulte on a breach of contract claim. Carlson claims Schulte was not a party to the agreement, and was not an intended third-party beneficiary, meaning he did not have standing to bring this action. He also claimed Schulte had not proven the following elements of a breach of contract action: (1) mutual assent to the terms of the contract; (2) breach of the contract by Carlson; and (3) damages. We affirm the decision of the district court entering judgment for Schulte.

I. Background Facts & Proceedings

Bearance Management Group, formerly known as TrueNorth Companies, L.C., is an insurance and financial services agency. Bearance had a working relationship with the financial services group, a separate entity, although the group shared office space with Bearance. The financial services group solicited business on behalf of Bearance, and received commissions from financial services it generated. The financial services group was operated by Schulte. Schulte and other members of his group were not employees of Bearance, but rather served as independent contractors.*fn1 Because Schulte had an oral agreement with Bearance, he was charged by Bearance for the expenses of the entire financial services group.*fn2

In 2007, a representative of Bearance and Schulte discussed adding a 401(k) specialist to the financial services group. Schulte approached Carlson, who stated he needed a base income of $4000 per month, plus commissions, to become a member of the financial services group. On August 23, 2007, Bearance entered into a written agreement with Carlson as follows:

Status: You will be a 1099 sub-contractor/consultant. Compensation: We are prepared to offer you a "draw" against your revenue production of $4000 per month. We could effectively begin our relationship on August 6, 2007, or later if you choose. All commission income written by you will be used to reduce this "draw" compensation. If you write commission income in excess of the "draw," you will be entitled to a portion of that commission income as agreed upon. We will review this program with you in December 2007 to determine the specifics of our relationship moving forward as of January 1, 2008.

A written notation on the agreement shows it was extended effective December 1, 2007.

Carlson was the only member of the financial services group that received a draw. He received $4000 per month from Bearance. Bearance in turn added $4000 each month to the expenses it charged Schulte. In addition to his draw of $4000 each month, Carlson received commissions. In some months his commissions exceeded $4000 and in other months his commissions were less than that amount. The payment to Carlson of $4000 per month was never reduced by the amount of commissions he received.

The financial services group operated on a team approach, so that each member of the team who worked on a project that generated commissions received a portion of those commissions. When commissions were to be received from the broker dealer, Schulte called a meeting, and all of the members who worked on that project signed off on the division of commissions. Schulte then contacted the broker dealer, and checks were sent to each team member in the amount designated by Schulte. Thus, all of the commissions received by Carlson were authorized by Schulte.

Carlson terminated his relationship with the financial services group to procure other employment in February 2010, after working with the group for about thirty months. Schulte subsequently filed this action against Carlson, claiming he was a third-party beneficiary of the written agreement between Bearance and Carlson. Schulte claimed that under the agreement, in the months that Carlson's commissions exceeded $4000, Carlson was required to pay back the $4000 draw he had received. Also, in months Carlson's commissions were less than $4000, he was required to pay back the amount of those commissions. Schulte claimed he should receive these payments because he was required to repay Bearance the $4000 each month it had paid Carlson. Schulte claimed Carlson had been overpaid $65,551.47.

The case was tried before the court. Daniel Seemuth, the Des Moines office leader for Bearance, testified Carlson did not have an obligation to repay Bearance for the draw or commissions Carlson received, and that any such arrangement would have been a separate agreement between Schulte and Carlson. He testified he was unaware of any separate agreement between the two of them.

Schulte testified that while Carlson was working with the financial services group the monthly payment of $4000 was never reduced by the commissions he received. When questioned about deducting the amount of the draw from Carlson's commissions, Schulte testified:

No, we didn't, because initially it was to help him get on his feet. I mean, if we all of a sudden started-if he is not writing the commission and we are beating him up for it, the idea was, let's get him on his feet, let's get him up and running. This is a long-term relationship. It's a big part of our business, so we were patient as far as funding and investing and him getting up and running.

Schulte also testified to a conversation he had with Carlson about this matter:

I distinctly remember a conversation on or about the middle of December 2007 where I approached Dave and said, hey, don't- what are you doing with those commissions that were paid to you from the broker dealer? And his response is, you know, I'm not spending them. I've got them there. And I said, great. Because again, we didn't want to beat him up. We were doing the draw to help him get on his feet. I said, don't spend them until we figure out how we are ...


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