Opinion
CIVIL ACTION NO. 3:00-CV-2071-P
November 13, 2001
MEMORANDUM OPINION AND ORDER
Now before the Court for consideration is Defendant CGU Insurance Company's (F/K/A Commercial Union Insurance Company) Motion for Summary Judgment, filed August 16, 2001. Plaintiff's response was due on September 6, 2001, however, no response has been filed. After a thorough review of the summary judgment evidence, the pleadings, the briefs, and the applicable law, for the reasons set forth below, the Court is of the opinion that Defendant's Motion for Summary Judgment should be GRANTED.
BACKGROUND
This case arises out of the circumstances surrounding an insurance claim submitted by plaintiff St. Maarten Trading Company (hereinafter "St. Maarten") in connection with a fire at Plaintiff's manufacturing facility. In support of its motion, Defendant has submitted the affidavits of David Kuhn, adjuster for CGU Insurance Company (hereinafter "CU") regarding Plaintiff's claims, and Russell J. Bowman, attorney for the Defendant in this lawsuit, as well as other supporting documents. As previously stated, St. Maarten has not responded to Defendant's Motion for Summary Judgment. The Court, therefore, accepts as true the facts asserted by Defendant in the affidavits and documents submitted as evidence in support of its motion. See Eversley v. Mbank Dallas, 843 F.2d 172, 173-174 (5th Cir. 1988); see also Nordar Holdings, Inc. v. Western Sec. (USA) Ltd., No. 3:96-CV-0427-H, 1996 WL 739019 at * 2(N.D.Tex. Dec. 18, 1996) (Sanders, S.J.). Those facts are as follows.
Plaintiff submitted a claim to CU in connection with a fire that occurred on January 14, 1999 to the building at 1459 Prudential Drive, in Dallas, Texas. See Summ. J. App. at 1 (Kuhn Aff. at 1). At the time of the fire, St. Maarten had an insurance policy in effect with CU. See Id. As part of its general claims, Plaintiff made a claim for loss of business income resulting from this fire.
On May 25, 1999, Defendant's counsel, Russell J. Bowman, faxed a letter to Jeff Lynch, attorney for Plaintiff at the time, containing CU's offer to settle all of St. Maarten's claims related to the January 14, 1999 fire. See Summ. J. App. at 15 (Bowman Aff. at 2); see also Summ. J. App. at 18-20 (faxed letter). On May 27, 1999, Mr. Bowman telephoned Mr. Lynch, during which conversation it was agreed that St. Maarten would consent to settle all of its claims against CU, with the exception of any claim Plaintiff might have for the personal property of others. See Summ. J. App. at 15 (Bowman Aff. at 2). The settlement amount would be $315,000, above and beyond previous payments already made by CU totaling $210,000. See Id.; see also Summ. J. App. at 2 (Kuhn Aff. at 2). The attorneys further agreed that St. Maarten would sign a release which Mr. Bowman would send to Mr. Lynch together with the settlement check, which as Plaintiff's counsel requested, would also have his law firm, The Lynch Law Firm, named on the settlement check. See Id.
Pursuant to this conversation, Defendant issued a check in the amount of $315,000 and sent that check to its attorney, Mr. Bowman, in order to complete the settlement. See Summ. J. App. at 2 (Kuhn Aff. at 2). On June 2, 1999, Mr. Bowman hand delivered a letter to Mr. Lynch, accompanied by CU's check (number FG 33307) in the amount of $315,000, payable to St. Maarten and Mr. Lynch's law firm, as well as with a document entitled "Partial Release," which was to be signed by Plaintiff and returned to Mr. Bowman. See Summ. J. App. at 15-16 (Bowman Aff. 2-3); see also Summ. J. App. at 21-28.
On the face of the settlement check, under the section entitled "In Payment Of," it contained a notation stating "Full and Final payment except for PPO." See Summ. J. App. at 4. The partial release enclosed with the June 2, 1999 letter also included language to the effect that "St. Maarten has agreed to accept payment of $315,000 in full and sufficient consideration for this release . . . and which represents the total proceeds due to St. Maarten for any sum it might be entitled to from Commercial Union and any of its affiliated companies as a result of the January 14, 1999 fire, except for any additional claim [it] may have . . . for the property of others." See Id. at 22. Additionally, the release also stipulated that in consideration for the foregoing, St. Maarten released and discharged CU
"from any and all claims, demands and causes of action of any conceivable kind or character, without limitation, arising by tort, contract or statute . . . [and] for any damage to property, loss of income, attorney's fees, costs, exemplary damages, treble damages, claims under any law, rule, regulation, statute or administrative order . . . as well as any claim for pre- or post-judgment interest, statutory damages, penalties, court costs and claims for damages or consequential losses of every conceivable kind or character regarding or relating in any way to the January 14, 1999 fire."See Id. at 24-25 (emphasis added). Mr. Bowman's letter of June 2, 1999 also instructed Mr. Lynch that the check was being tendered to him in trust, and the funds were not to be disbursed until the release had been signed and sent back to him. See Id. at 21.
Defendant's attorney never received the signed partial release from St. Maarten, Mr. Lynch or any other attorney representing St. Maarten. See Summ. J. App. at 16 (Bowman Aff. at 3). The $315,000 settlement check, however, was cashed by St. Maarten, and its was honored by CU's bank on June 10, 1999. See Summ. J. App. at 2 (Kuhn Aff. at 2); see also Summ. J. App. at 13 (copy of ACTS Payment Allocation Summary showing $315,000 settlement check to St. Maarten honored 6/10/99).
On June 2, 2000, St. Maarten filed an action for breach of an insurance contract in County Court at Law No. 4, Dallas County, Texas, seeking to recover business interruption losses it claims were covered under the terms and conditions of its Policy with CU related to the fire loss of January 14, 1999. See Notice of Removal at 1 and Exh. A at 3 (PL's Orig. Pet.). CU timely removed this lawsuit, and has now moved this Court for summary judgment on all of St. Maarten's claims for insurance proceeds based on the defense of accord and satisfaction. See Id. at 1; see also Def.'s Mot. Summ. J. at 1-2. Moreover, Defendant also moves for judgment in the amount of $2,640 for reasonable attorneys fees, $7,500 for appellate attorney's fees, $ 150 for court costs, and for any and all other relief it may be entitled to at law or at equity.
The Court here also notes that by Order dated July 23, 2001, it granted S. Bradley Rhorer's Motion to Withdraw as Attorney for plaintiff St. Maarten Trading Company. Pursuant to the long standing interpretation of 28 U.S.C. § 1654, the Court ordered Plaintiff to obtain licensed counsel to represent it in this civil action, and to make an appearance within thirty days following this Order. To date Plaintiff has not complied with this Order, and as previously noted, did not file a Response to Defendant's Motion for Summary Judgment.
DISCUSSION
I. Standard for Summary JudgmentSummary judgment shall be rendered when the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate in any case where the critical evidence is so weak or tenuous on an essential fact that it could not support a judgment in favor of the nonmovant. Little v. Liquid Air Corp., 37 F.3d 1069, 1076 (5th Cir. 1994). However, all evidence and the reasonable inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).
The moving party bears the burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial, and of identifying those portions of the record that demonstrate such an absence. Celotex, 477 U.S. at 323. Once the moving party has made an initial showing, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The mere existence of some factual dispute will not defeat a motion for summary judgment. Willis v. Roche Biomedical Lab., Inc., 61 F.3d 313, 315 (5th Cir. 1995). Only disputes over facts that might affect the outcome of the suit under the governing law will preclude summary judgment. Id. Moreover, a dispute about a material fact is genuine only if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id. The Court will not, in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts. Little, 37 F.3d at 1075. Therefore, if the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case, and on which he bears the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23. A motion for summary judgment cannot be granted simply because there is no opposition, even if the failure to oppose it violates a local rule. See Hibernia Nat'l Bank v. Administracion Central Sociedad Anonima, 776 F.3d 1277, 1279 (5th Cir. 1985). However, when the nonmovant fails to provide a response identifying disputed issues of fact, the Court is entitled to accept the movant's description of the undisputed facts as prima facie evidence of its entitlement to judgment. See Eversley v. Mbank Dallas, 843 F.2d at 173-174; see also Nordar Holdings, 1996 WL 739019 at *2.
II. Accord and Satisfaction
The defense of accord and satisfaction rests upon a new contract, express or implied, in which the parties agree to the discharge of the existing obligation by means of the lesser payment tendered and accepted. Jenkins v. Henry C. Beck Co., 449 S.W.2d 454, 455 (Tex. 1969). Under Texas law, a valid accord and satisfaction of a money demand may occur on payment of an amount less than the creditor contends is due, when the claim is unliquidated or when there is a dispute between the parties as to liability on a liquidated claim. Hinson v. Cox, 633 S.W.2d 330, 331 (Tex.App.-Dallas 1982, writ ref'd n.r.e.). Acceptance of a lesser amount, even under protest, results in an accord and satisfaction which is binding on the creditor and precludes recovery for any unpaid amount. See Id.
To conclusively establish the affirmative defense of accord and satisfaction, the evidence must establish an assent of the parties to an agreement that the amount paid by the debtor to the creditor was in full satisfaction of the entire claim. See Jenkins, 449 S.W.2d at 455. As such, there must be an unmistakable communication to the creditor that tender of the lesser sum is upon the condition that acceptance will constitute satisfaction of the underlying obligation. See Id. The conditional tender must be expressed by acts or declarations with sufficient clarity that the creditor is bound to know that his acceptance of the tendered payment will constitute full payment of his claim. H.L. `Brownie' Choate, Inc. v. Southland Drilling Co., 447 S.W.2d 676, 679 (Tex. 1969). The conditions, however, need not be expressed on the check itself, but may be expressed in a letter transmitting the check. See Miller Bros. Co. v. Lesinsky Co., 202 S.W. 992, 993 (Tex.Civ.App.-El Paso 1918, no writ); see also Carter v. Smith, No. 03-98-000308, 1999 WL 644734 at *3 (Tex.App.-Austin 1999) (unpublished).
In this case, the evidence is undisputed that the settlement check issued to Plaintiff's attorney contained the condition that it was in "Full and Final payment except for PPO." See Summ. J. App. at 4. Moreover, the release which CU's attorney sent with the check specifically set forth that all claims which St. Maarten had as a result of the January 14, 1999 fire, except for any claim for damage to personal property of others, were to be released in exchange for the payment of $315,000. See Id. at 22. Additionally, this release specifically included any and all claims for any damage to property, loss of income, attorneys' fees, and others costs regarding or relating in any way to the January 14, 1999 fire. See Summ. J. App. at 24-25 (emphasis added).
The evidence is also undisputed that although Mr. Bowman's letter of June 2, 1999 instructed Mr. Lynch that the check was being tendered to him in trust, and that the funds were not to be disbursed until the release had been signed and sent back to Defendant's attorney, he never received such signed partial release from either St. Maarten, Mr. Lynch or any other attorney representing St. Maarten. See Summ. J. App. at 16, 21. However, evidence is uncontroverted that the $315,000 settlement check was cashed by St. Maarten, and its was honored by CU's bank on June 10, 1999. See Summ. J. App. at 2 (Kuhn Aff. at 2); see also Summ. J. App. at 13 (copy of ACTS Payment Allocation Summary showing $315,000 settlement check to St. Maarten honored 6/10/99).
Under Texas law, if the creditor's acceptance is not to be in full accord with the terms of the debtor's tender, the debtor may not cash the check and it is said that he comes under a duty to return it and notify the debtor that the claims cannot be settled on the basis set out in the debtor's offer. See Turner v. Day, 322 S.W.2d 300, 305 (Tex.Civ.App.-Waco 1959, writ ref'd n.r.e.). In any event, the creditor may not unilaterally disregard or modify the terms of the debtor's offer, cash the check, and bind the debtor to the modified terms or claim that more money is actually owing. See Texas P.Ry. Co. v. Poe, 115 S.W.2d 591, 592 (Tex. 1938); see also Hixson, 633 S.W.2d at 332 (creditor may not, by his own acts, vary the terms and conditions recited in the letter and in the restrictive endorsement upon which debtor tendered the check).
In this case, the Court finds that when St. Maarten received CU's check, there was a bona fide dispute between the parties as to the amount due under the insurance policy, and that the check when sent was accompanied by a sufficiently clear and definite statement that it was in full payment of the amount due. See Miller Bros., 202 S.W. at 993. Plaintiff here was given the choice of either accepting the check as full payment of the disputed insurance recovery, or to return the same, unaccepted, and sue CU for its full claim. See Hixson, 633 S.W.2d at 331-332. Having decided to accept and cash the check, there was an accord and satisfaction of all of St. Maarteen's claims related to the January 14, 1999 fire (except for any claims for the personal property of others), thus precluding it from proceeding against CU for the loss of business income in this case. By cashing the $315,000 settlement check, St. Maarten implicitly agreed to the only conditions under which it was authorized to cash it. See Root Fehl v. Murray Tool Co., 26 S.W.2d 189, 191 (Tex. 1930); see also Hixson, 633 S.W.2d at 331-332. As such, all of the claims asserted by St. Maarteen in this lawsuit shall be dismissed as a matter of law.
II. Counterclaim for Damages
Defendant also moves for judgment in the amount of $2,640 for reasonable attorneys fees, $7,500 for appellate attorney's fees for any appeal to the Fifth Circuit, $150 for court costs, and for any and all other relief to which it may be entitled to at law or at equity. See Def.'s Mot. Summ. J. at 1-2. CU argues that St. Maarten's asserted in this lawsuit which were without any merit, considered so baseless that Plaintiff's own attorney withdrew, asserting that he could no longer pursue the claims based on the obligations to this Court under Rule 11. See Br. Supp. Def.'s Mot. Summ. J. at 4-5; see also Footnote 1 supra.
CU submits the affidavit its attorney, Russell J. Bowman, as evidence in support of these claims. Having reviewed the affidavit of Mr. Bowman regarding the amount of fees incurred as a result of defending this cause of action, along with the file and pleadings in this case, the Court finds that the number of hours expended by counsel was reasonable and necessary for the defense of this action. The Court is familiar with the hourly rates charged by attorneys with similar ability, skill and knowledge as the aforementioned attorney in the Dallas legal market and finds that these hourly rates are reasonable and customary. Moreover, Plaintiff has offered no evidence to show that the fees are unreasonable or excessive, or that the services were not performed as set forth in the affidavit. Accordingly, the Court finds that $2,640 is a reasonable fee for the services performed by Mr. Bowman. The Court also awards Defendant $150 to reflect the costs of the filing fee incurred by the removal of this lawsuit to federal court. With respect to Defendant's claim for attorneys' fees on appeal, the Court grants to CU the amount of $7,500, to be awarded in the event an appeal is necessary, and Defendant is successful on appeal.
CONCLUSION
Accordingly, upon careful review of the parties' arguments and the relevant law, for the reasons stated previously, the Court concludes that Defendant's Motion for Summary Judgment shall be and are hereby GRANTED. Furthermore, the Court awards Defendant damages in the amount of $2,790, reflecting the costs and attorney's fees incurred in the defense of this frivolous lawsuit, as well as the amount of $7,500 in the event an appeal is necessary and Defendant is successful on appeal.
So Ordered.