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finding a lessor may recover under an insurance policy even if the policy was void ab initio as to the lessee
Summary of this case from Am. Safety Indem. Co. v. Fairfield Shopping Ctr., LLCOpinion
Civil Action No. 3:03-CV-0522-P.
June 16, 2004
MEMORANDUM OPINION AND ORDER
Now before the Court are VT's Motion for Summary Judgment, filed March 8, 2004 and GEICO's Motion for Partial Summary Judgment, filed March 5, 2004. After careful consideration of the Parties' motions, the evidence, and the applicable law, the Court hereby GRANTS in part and DENIES in part VT's Motion for Summary Judgment, and GRANTS in part and DENIES in part GEICO's Motion for Partial Summary Judgment.
GEICO filed its response to VT's motion for summary judgment on March 25, 2004. GEICO filed a supplemental response brief on April 30, 2004. VT filed its reply brief on May 10, 2004.
VT filed its response to GEICO's motion for partial summary judgment on March 26, 2004. GEICO did not file a reply brief.
BACKGROUND AND PROCEDURAL HISTORY
On July 1, 1994, World Omni Financial Corporation ("World Omni" or "Plaintiff"), entered into a Customer Lease Plan Dealer Agreement ("the CLPD Agreement") with Autoflex Leasing — Dallas L.P. ("Autoflex"). The terms of the CLPD Agreement made certain representations and warranties with respect to all leases that World Omni would purchase from Autoflex. On November 11, 1999, Michael Bates obtained a lease for a 1997 Jaguar automobile ("the Jaguar") from Autoflex by fraudulently using the personal information of his alleged fiancee, Brenda Beyler. VT, Inc. ("VT" or "Plaintiff")/World Omni subsequently purchased both the Jaguar and Bates' lease from Autoflex.
Bates then applied for and obtained an automobile insurance policy ("the Policy") for the Jaguar from Defendant, GEICO General Insurance Company ("GEICO" or "Defendant"), again by fraudulently using Beyler's name and information. Subsequently, after a collision that rendered the Jaguar a total loss, Bates submitted a claim to GEICO under the Policy. During the course of its review of this claim, GEICO discovered that Bates had procured both the Jaguar and the Policy by fraudulently using Beyler's personal information. Having discovered that the Policy was obtained through fraud, GEICO voided the Policy. On March 29, 2000, GEICO sent a letter to VT stating that VT's claim under the Policy would be denied due to the discovery of fraud in the procurement of the Policy.
As a result, VT/World Omni, the actual owner of the Jaguar and the financier of Bates' lease, was unable to recover the value of the totaled Jaguar under the Policy. World Omni brought a lawsuit against Autoflex to recoup its losses in which it alleged that Autoflex had materially breached certain warranties and representations contained in the CLPD Agreement by selling World Omni a fraudulently obtained leasing agreement. The parties eventually settled the lawsuit, with Autoflex agreeing to pay World Omni $40,000, and World Omni agreeing to assign to Autoflex all its rights under the Policy, including all claims and causes of action against GEICO.
Autoflex, not realizing that World Omni's assignment violated a non-assignment clause in the Policy, filed a lawsuit against GEICO to recover under the terms of the Policy. GEICO removed the lawsuit to federal court, and moved for summary judgment based on improper assignment. Autoflex, realizing for the first time that the assignment was improper, acknowledged that it had no cause of action and voluntary dismissed its lawsuit with prejudice.
Subsequently, on January 23, 2003, World Omni and Autoflex entered into a written agreement. Under the terms of this agreement, counsel for Autoflex agreed to represent World Omni in a lawsuit against GEICO for recovery under the Policy. The terms of the agreement also provided that Autoflex would: (1) pay all costs associated with World Omni's lawsuit, (2) control the course of the litigation against GEICO, and (3) recoup the first $40,000, plus expenses, recovered from the lawsuit. Pursuant to this agreement, World Omni filed a lawsuit (the "Lawsuit") in state court against GEICO on February 18, 2003. GEICO removed the Lawsuit to this Court on March 11, 2003. In its Lawsuit, VT/World Omni seeks a declaratory judgment determining its rights and legal obligations under the Policy and asserts a breach of contract claim against GEICO for failing to pay benefits to VT/World Omni under the Policy. VT/World Omni also seeks recovery of its attorney fees.
Because VT, not World Omni, was allegedly listed as the loss payee in the Policy, the Court granted World Omni's motion to substitute VT as a plaintiff in this case.
GEICO answered the Lawsuit by asserting thirty-six defenses and a counterclaim. In its counterclaim, GEICO seeks a declaratory judgment determining that GEICO is not liable to Plaintiff under the loss payee clause of the Policy. GEICO also asserts counterclaims of breach of contract and conspiracy to commit fraud against VT/World Omni. In its breach of contract claim, GEICO argues that — assuming VT/World Omni did have rights under the Policy — VT/World Omni breached the Policy by assigning its rights to Autoflex in violation of the anti-assignment clause. GEICO's conspiracy claim against VT/World Omni is predicated on VT/World Omni and Autoflex's alleged effort to avoid the Policy's terms and the Court's order of dismissal by having Autoflex sue in VT/World Omni's name.
VT responded to GEICO's counterclaims by asserting twenty-six defenses. On September 15, 2003, the Court allowed GEICO to join Autoflex as a party to the Lawsuit. GEICO's complaint against Autoflex is based on an alleged breach of the dismissal documents filed by GEICO and Autoflex wherein Autoflex agreed to dismiss all Policy claims against GEICO with prejudice. GEICO is suing Autoflex for breach of those documents and argues that by filing the instant Lawsuit in World Omni's name, which asserts the same claims under the Policy that Autoflex dismissed, Autoflex has breached the terms of the dismissal documents. GEICO also asserts a fraud claim against Autoflex, alleging that Autoflex made a false representation when it told GEICO it would dismiss its claims under the Policy, knowing it was going to refile the case under World Omni's name. Finally, GEICO asserts a conspiracy claim against Autoflex, alleging that Autoflex and World Omni conspired to avoid the Policy's terms and the Court's order of dismissal by having Autoflex sue in World Omni's name. GEICO also seeks attorney fees from Autoflex.
VT/World Omni seeks to withdraw its affirmative defenses of ratification, res judicata, collateral estoppel, law of the case, election of remedies, modification of the contract, novation and mutual mistake. (Pl.'s Resp. at 6.) Because VT/World Omni did not seek leave to amend its pleadings to withdraw these defenses, and because VT/World Omni did not respond to GEICO's motion for summary judgment on these defenses, the Court hereby GRANTS GEICO's motion for summary judgment on the defenses listed herein.
Several of VT's and Autoflex's so-called "affirmative defenses" have not been withdrawn and GEICO has not moved for summary judgment on them. For example, the "defenses" of failure to state a claim, benefit of the bargain, economic loss rule, failure to mitigate, contributory/comparative negligence, failure to plead fraud with particularity, conditions precedent, acts or omissions of third parties or GEICO as a superceding cause of GEICO's damages, contract ambiguity, limitations on amount of punitive damages, due process, equal protection, excess fines, contracts clause, failure to adhere to statutory cancellation provisions, lack of standing, and motion for leave to amend to add additional defenses remain pending at this juncture. The Court seriously doubts the legitimacy of some, if not all, of these defenses, and urges VT to re-examine its pleading and handle these defenses in an appropriate manner.
Autoflex responds by asserting twenty-one defenses and filing a declaratory judgment action seeking a declaration from the Court that (1) neither the terms of the dismissal order nor the agreed motion for dismissal are contractual in nature; (2) if they are contractual, they lack consideration; (3) if they are contractual and supported by consideration, they do not prevent VT/World Omni from prosecuting its claims against GEICO or prevent Autoflex and VT/World Omni from entering into an agreement regarding the prosecution of these claims.
Autoflex seeks to withdraw its affirmative defenses of ratification, prior material breach, res judicata, collateral estoppel, law of the case, election of remedies, modification of contract, mutual mistake. (Pl.'s Resp. at 6.) Because Autoflex did not seek leave to amend its pleadings to withdraw these defenses, and because Autoflex did not respond to GEICO's motion for summary judgment on these defenses, the Court hereby GRANTS GEICO's motion for summary judgment on the defenses listed herein.
GEICO responds to Autoflex's claims with twelve defenses.
MOTIONS FOR SUMMARY JUDGMENT
On March 5, 2004, GEICO filed a motion for partial summary judgment. In its motion, GEICO argues there is no evidence to support VT's breach of contract claim, declaratory judgment action, and request for attorney fees. GEICO also maintains that there is no evidence to support VT's and Autoflex's defenses. Finally, GEICO seeks summary judgment on its breach of contract, fraud, and conspiracy claims.
On March 8, 2004, VT filed a motion for summary judgment. In its motion, VT seeks summary judgment on GEICO's defenses and counterclaims. VT does not seek summary judgment on its own claim for breach of contract/declaratory judgment.
VT'S CLAIMS AGAINST GEICO
GEICO seeks summary judgment on VT's breach of contract and declaratory judgment claims and on several of its own affirmative defenses.
I. VT'S BREACH OF CONTRACT CLAIM.
GEICO argues that VT can present no evidence supporting its breach of contract claim. (Def.'s Mot. at 16.)
After reviewing the briefing and evidence in this case, the Court concludes that there is sufficient evidence to establish: (1) that the Policy/contract existed, (2) that VT is listed as the loss payee, (3) that VT and GEICO have a contractual relationship, (4) that VT made a claim under the Policy, and (5) that GEICO refused to pay any benefits to VT. Therefore, the Court DENIES GEICO's motion for summary judgment on VT's breach of contract claim. ( See VT's Resp. at 4.)
II. VT'S CLAIM FOR ATTORNEYS' FEES.
A party can recover reasonable attorneys' fees on a contract claim if it can show: (1) recovery of a valid claim in a suit on a contract; (2) representation by an attorney; (3) presentment of the claim to the opposing party; and (4) failure of the opposing party to tender payment of the amount owed before expiration of 30 days from the day of presentment. See Victoria Air Conditioning, Inc. v. Southwest Tex. Mech. Insulation Co., 850 S.W.2d 720, 725 (Tex.App.-Corpus Christi 1993, writ denied); Tex. Civ. Prac. Rem. Code Ann. § 38.002. Thus, to recover attorneys' fees a party generally must obtain a judgment. See Victoria, 850 S.W.2d at 725.
GEICO argues that VT's claim for attorneys' fees should be dismissed because (1) there has been no judgment rendering VT a prevailing party, (2) there is no evidence that VT presented its claim to GEICO; and (3) there is no evidence that GEICO failed to pay the alleged amount within 30 days of presentment.
Because this is a case in which a judgment may be rendered in VT's favor, because there is some evidence indicating that VT did present a claim to GEICO for the amount allegedly owed under the Policy (Pl.'s App. at 10), and because GEICO refused to pay the amount presented, as evidenced by this lawsuit and the letter dated March 29, 2000 (Pl.'s App. at 10), GEICO's motion for summary judgment on VT's claim for attorneys' fees is hereby DENIED.
III. GEICO'S AFFIRMATIVE DEFENSES.
A. Res Judicata.
In its motion, GEICO contends that VT's claim is barred by the doctrine of res judicata. (Def.'s Mot. at 24.) GEICO maintains that VT seeks to enforce the same contract claim that was dismissed with prejudice in the Autoflex v. GEICO case.
For a prior judgment to bar an action on the basis of res judicata, four elements must be met: (1) the parties in both suits must be identical; (2) the claims in both suits must be the same; (3) the prior judgment must have been rendered by a court of competent jurisdiction; and (4) the decision in the prior proceeding must have been a final judgment on the merits. See Clark v. Amoco Prod. Co., 794 F.2d 967, 972 (5th Cir. 1986); Nilsen v. City of Moss Point, 701 F.2d 556, 559 (5th Cir. 1983).
VT maintains that the parties are not identical in both suits. (Pl.'s Resp. at 9.) In response, GEICO argues that the "identical parties" element of the two lawsuits is met via the "virtual representation" doctrine, wherein a party's claims can be barred by a prior judgment to which he was not a party. ( See Def.'s Mot. at 25.) The Fifth Circuit has held that a nonparty to litigation may be bound in three situations: "(1) where a nonparty succeeds to a party's interest in property bound by prior judgment; (2) where the nonparty controlled the previous litigation; or (3) where the nonparty's interests were represented adequately in the original suit." See Clark, 794 F.2d at 973. In this case, GEICO argues that VT/World Omni's interests were so closely aligned with Autoflex's interests in the original litigation as to be a virtual representation of the other.
The Court finds that VT should not be bound to the original adjudication. Autoflex did not have an "interest" in any property bound by the prior judgment because Autoflex never had any rights under the Policy due to an invalid assignment.
Therefore, GEICO's motion for summary judgment is DENIED with respect to its defense of res judicata and VTI's motion for summary judgment is GRANTED with respect to GEICO's defense of res judicata.
B. Lack of Insurable Interest.
GEICO argues that because Beyler had no real insurable interest in the Jaguar, VT never had an insurable interest as the loss payee. (Def.'s Mot. at 32-33.) Although it is unclear whether Beyler or Bates was the actual lessee, there was a lessee with an insurable interest in the Jaguar. It is also undisputed that VT was listed as the loss payee under the Policy. (Pl.'s App. at 106.) A loss payee is a person named in an insurance policy to be paid in the event of a loss or damage to the insured property. Black's Law Dictionary 946 (6th ed. 1990). Thus, as the loss payee, VT had an insurable interest in the Jaguar. ( See Section III.C., infra.) VT also had an insurable interest as the owner of the Jaguar. (Pl.'s App. at 8.)
The Court rejects GEICO's argument that World Omni/VT lost its insurable interest, if any, when World Omni assigned the Policy to Autoflex. (Def.'s Mot. at 33.) All parties agree the assignment was ineffective and void. It had no legal effect, and did not cause World Omni/VT to lose any rights under the Policy. Therefore, GEICO's motion for summary judgment on its insurable interest defense is DENIED.
C. Loss Payable Clause.
In this case, the loss payable clause of the Policy states:
Loss or damage under Coverage for Damage to Your Auto shall be paid as interest may appear to you and the loss payee shown in the declarations or in this endorsement. This insurance covering the interest of the loss payee shall not become invalid because of your fraudulent acts or omissions unless the loss results from your conversion, secretion, or embezzlement of your covered auto.
(Def.'s Mot. at 35.)
1. Effect of Insured's Fraud.
There are several different types of loss payable clauses. See Old Am. Mutual Fire Ins. Co. v. Gulf States Fin. Co., 73 S.W.3d 394, 395 (Tex.App.-Houston [1st Dist.] 2002, pet. denied). The first sentence of this particular loss payee clause is commonly referred to as an "open clause," and provides that the loss payee stands in the shoes of the insured and enjoys the same rights as the insured. Id. However, this loss payee provision also contains additional language protecting VT from the insured's "fraudulent acts or omissions." Thus, even if the insured were to lose coverage for its fraudulent acts or omissions, VT would not lose its coverage. In other words, VT is protected even if the insured committed fraud.
Texas courts have held that the loss payable clause constitutes an independent contract between the insurer and the loss payee. See Don Chapman Motor Sales, Inc. v. Nat'l Sav. Ins. Co., 626 S.W.2d 592, 597 (Tex.App.-Austin 1981, writ ref'd n.r.e.). In this case, the contract between GEICO and VT is identical to the contract between GEICO and the insured — except as specifically changed by the loss payable clause — and this clause changes the contractual coverage by protecting VT from the insured's fraudulent acts.
VTs right to recover under the Policy cannot be defeated by the type of fraud in which Bates allegedly engaged. Courts generally have held that these clauses allow recovery by a loss payee even where there has been a material misrepresentation in the procurement of the policy. See, e.g., Farmers State Bank of Russell v. Western Nat'l Mut. Ins. Co., 454 N.W.2d 651, 653 (Minn.Ct.App. 1990); see also Pl.'s Resp. at 19 n. 40.
GEICO argues that because Beyler, not Bates, is the named insured, VT is only protected against fraud committed by Beyler. (Def.'s Mot. at 36.) GEICO contends that because Bates, not Beyler, committed fraud in procuring the Policy, the loss payee clause does not protect VT's alleged rights as the loss payee. ( Id.)
The loss payable clause exists to protect the innocent loss payee from the loss of its collateral due to a collision — the very risk assumed by GEICO in this case — even in the event that the insured may not be able to recover due to fraud. It is worded so as to protect VT's interest even if the insured loses his interest due to his own fraud. It is immaterial whether Beyler or Bates committed the fraud. That conduct does not invalidate VT's rights as the loss payee. See, e.g., Great Am. Ins. Co. of N.Y. v. Southwestern Fin. Co., 297 P.2d 403, 404 (Okla. 1956) (loss payee was protected against misrepresentations, even when misrepresentations were made by an imposter posing as the policyholder or owner of the insured property.)
2. Effect of the Loss Payee's Wrongdoing.
The above discussion only addresses the effect of the insured's misconduct on VT's rights. It does not address the effect of VT's own (mis)conduct on VT's rights. GEICO contends that VT's, Autoflex's, and World Omni's own negligence in failing to contact Beyler prior to executing the lease, causes VT to lose its protection under the loss payee clause. (Def.'s Mot. at 36-38.)
VT responds by listing three reasons why GEICO's argument fails: (1) there is no Policy provision stating that the loss payee's alleged negligence can terminate the coverage provided to the loss payee; (2) neither World Omni, Autoflex, nor VT owed GEICO any duty with respect to the lease or the Policy; and (3) GEICO cannot prove that Autoflex was the agent of World Omni or VT. GEICO responds by citing two cases for the proposition that VT's interests can be invalidated due to its own acts or omissions. (Pl.'s Mot. at 15-16.)
GEICO relies on two cases for the proposition that the loss payee's rights can be invalidated by the acts of the loss payee. (Def.'s Mot. at 36.) First, in Old American Mutual Fire Insurance Co., 73 S.W.3d 394 (Tex.App.-Houston [1st Dist] 2002, pet. denied), the Texas Court of Appeals held that the loss payable clause (identical to the one in this case) protects the loss payee only from the insured's fraudulent conduct, not from any other act or neglect. Because that case dealt only with the conduct of the insured, not the conduct of the loss payee, it is inapposite to this issue.
In Morris Co. National Bank v. John Deere Ins. Co., 254 F.3d 538, 541 (5th Cir. 2001), the Fifth Circuit Court of Appeals noted in dicta that a loss payee's fraudulent conduct can invalidate its rights under the loss payee clause. The Morris case did not address the issue of whether the loss payee's own negligence could invalidate its rights under the loss payee clause. Thus, neither of GEICO's cited cases support the argument GEICO seeks to make.
GEICO has not presented any legal authority to support its argument that the negligence of a loss payee or its agent can invalidate the loss payee's rights under the loss payee clause. Thus, GEICO's motion for summary judgment on its defenses relying on the loss payable clause is DENIED and VT's motion for summary judgment on GEICO's defenses relying on the loss payable clause is GRANTED.
D. Void Ab Initio.
GEICO also argues that VT may not recover on its claim under the Policy because the Policy was void ab initio due to Bates' alleged misrepresentation in the Policy application. (Def.'s Mot. at 28-32.) In response, VT argues that GEICO has not cited any Policy provision or statutory or administrative law that allows GEICO to retroactively cancel the Policy. (Pl.'s Resp. at 11-15.)
Even if GEICO could cancel the Policy with respect to Bates and/or Beyler, VT's interests are not affected because VT's rights under the Policy are protected by the language in the loss payable clause. As stated supra Section III.B.1, even if Bates procured the Policy through fraud, the Policy is not void ab initio as to VT.
E. Standing.
GEICO also argues that VT lacks standing to litigate its claims as a loss payee because VT assigned its rights in the Policy to Autoflex. (Def.'s Mot. at 34.) Both parties have agreed on one thing in this case — the attempted assignment by VT to Autoflex was invalid and ineffective. They dismissed an entire lawsuit on that basis alone. For GEICO to now argue that the assignment was valid or that the invalid and ineffective assignment affected VT's rights is disingenuous at best.
Therefore, GEICO's motion for summary judgment on its standing defense is hereby DENIED and VT's motion for summary judgment on GEICO's standing defense is hereby GRANTED.
F. Waiver and Release.
GEICO contends that VT waived and released its rights as a loss payee under the Policy when it executed the assignment to Autoflex. (Def.'s Mot. at 39.) Both Parties have agreed on one thing in this case — the attempted assignment by VT to Autoflex was invalid and ineffective. Both Parties dismissed an entire lawsuit on that basis alone. For GEICO to now argue that the assignment was valid and affected VT's rights or that the invalid and ineffective assignment affected VT's rights is disingenuous at best.
Therefore, GEICO's motion for summary judgment on its waiver and release defenses is hereby DENIED and VT's motion for summary judgment on GEICO's waiver and release defenses is hereby GRANTED.
G. Election of Remedies Doctrine.
GEICO argues that VT's lawsuit is barred by the election of remedies doctrine, which prevents a party from pursuing two inconsistent remedies. ( See Def.'s Mot. at 41.) GEICO contends that this doctrine prohibits VT from suing GEICO because VT already pursued a claim against Autoflex. (Def.'s Mot. at 41.)
The doctrine of election of remedies is an affirmative defense that, under certain circumstances, bars a person from pursuing two inconsistent remedies. See Medina v. Herrera, 927 S.W.2d 597, 600 (Tex. 1996). The Texas Supreme Court has held that an election will bar recovery "when the inconsistency in the assertion of a remedy, right, or state of facts is so unconscionable, dishonest, contrary to fair dealing, or so stultifies the legal process or trifles with justice or the courts as to be manifestly unjust." Id. The election of remedies doctrine "may constitute a bar to relief when (1) one successfully exercises an informed choice (2) between two or more remedies, rights, or states of facts (3) which are so inconsistent as to (4) constitute manifest injustice." Id.
There is no evidence that VT/World Omni's claim against Autoflex for recovery of the lease payments under the lease is inconsistent with its claim against GEICO for the loss of the damaged automobile under the insurance policy. Nor is there any evidence that VT/World Omni's claim against Autoflex for selling WorldOmni a fraudulently-obtained lease is inconsistent with its claim against GEICO for breaching the policy by refusing to honor VT's claim under the loss payment provision. Nor is there any evidence of manifest injustice. For these reasons, GEICO's motion for summary judgment on its election of remedies defense is hereby DENIED and VT's motion for summary judgment on GEICO's election of remedies defense is hereby GRANTED.
H. Prior Material Breach.
GEICO contends that VT's claims are precluded because World Omni materially breached the Policy by assigning its alleged rights under the Policy to Autoflex. (Def.'s Mot. at 41.) In response, VT argues that GEICO is estopped from asserting this defense because GEICO first breached the Policy by failing to honor the claim of the loss payee and by attempting to cancel the Policy ab initio. VT also argues that because World Omni was not a party to the Policy it could not have committed a prior material breach.
For purposes of this case, World Omni and VT are one in the same — substitution of VT should not affect the legal or factual issues of the case.
The Court agrees and finds that because GEICO breached the agreement in the first instance by improperly refusing to honor the claim of the loss payee ( see supra) and by improperly attempting to cancel the policy ab initio, GEICO is hereby estopped from asserting this defense.
For this reason, GEICO's motion for summary judgment on this defense is DENIED and VT's motion for summary judgment on this defense is GRANTED.
I. Estoppel.
VT moves for summary judgment on GEICO's estoppel and quasi-estoppel defenses. GEICO does not move for summary judgment on these defenses.
In order to prevail on the defense of estoppel, GEICO must establish that (1) VT made a false representation or concealed material facts; (2) with actual or constructive knowledge of the facts; (3) to a party (GEICO) who was without knowledge or the means of acquiring knowledge of the real facts; (4) that VT made the false representation with the intent that it should be acted upon; and (5) that GEICO relied on the false representation to its detriment. See Pioneer Oil Co. v. Vallejo, 750 S.W.2d 928, 929 (Tex.App.-Corpus Christi 1988, n.w.h.) Because GEICO has not provided any evidence of a misrepresentation that GEICO relied on to its detriment, VT's motion for summary judgment on GEICO's estoppel defense is hereby GRANTED.
"Quasi estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken by him." Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 240 (Tex.App.-Corpus Christi 1994, writ denied). The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one in which he acquiesced, or of which he accepted a benefit. See id. Quasi estoppel applies where a party accepts the benefits of a transaction, then takes an inconsistent position to avoid corresponding obligations or effects. Id.
GEICO cites to some evidence that it believes establishes that VT's claims are barred by quasi estoppel. (Def.'s Resp. at 31.) It does not provide cites to the record for any of these alleged inconsistencies, nor does GEICO explain how that evidence satisfies the elements of quasi estoppel. ( See id.)
GEICO has not presented any evidence that World Omni/VT's claim against Autoflex under the lease is inconsistent with its claim against GEICO under the insurance policy. There is no evidence that VT is taking a position inconsistent with one in which he accepted a benefit. Nor is there any evidence of unconscionability. For these reasons, VT's motion for summary judgmenton GEICO's quasi estoppel defense is GRANTED.
J. Offset, One Satisfaction, and Double Recovery.
VT argues that GEICO's offset, one satisfaction rule, and doctrine of double recovery defenses are barred by the collateral source rule. GEICO does not move for summary judgment on those defenses.
Offset is a claim that serves to counterbalance or to compensate for another claim. Black's Law Dictionary 1085 (6th ed. 1991).
The "one satisfaction" rule provides that a party who suffers but one injury can recover only one satisfaction for damages arising from that injury. See El Paso Nat. Gas Co. v. Berryman, 858 S.W.2d 362, 364 (Tex. 1993).
Under Texas law, a plaintiff who submits numerous theories of liability to the jury for the same injury, and who obtains findings of liability on two or more of those theories, is entitled to only a single recovery; if prior to entry of judgment the plaintiff fails to elect the theory on which he wishes to recover, the trial court must enter judgment on the theory that affords the plaintiff the greatest recovery. See Sterling Trust Co. v. Adderley, 119 S.W.3d 312, 322 (Tex.App.-Fort Worth 2003, pet. granted).
VT maintains that all of these defenses are predicated on the premise that World Omni/VT already recovered $40,000 from Autoflex in a settlement of World Omni's suit against Autoflex for breach of the CLPD Agreement. VT argues that these defenses fail because (1) the $40,000 payment was received by World Omni, not VT, for the separate claim arising from the alleged breach of a separate contract between World Omni and Autoflex, and (2) even if such payment was attributable to VT, it is a collateral source to the proceeds of the Policy.
Because VT does not dispute GEICO's position that the collateral source rule only applies to situations where the injured party receives (1) insurance benefits, (2) workers compensation benefits, (3) social security, pension, or retirement benefits, (4) veteran benefits, or (5) gratuitous benefits or compensation — none of which are at issue here — the Court accepts GEICO's argument as true and rejects VT's collateral source argument. ( See Def.'s Resp. at 32; Pl.'s Reply at 17-18.)
VT also argues that the offset, one satisfaction rule, and doctrine of double recovery defenses fail because World Omni/VT is not seeking double recovery for the same injury; rather, it seeks separate recoveries for two separate injuries. VT points out that World Omni sought recovery of $50,000 from Autoflex for the remaining amount due under the lease agreement, whereas in this action, VT seeks recovery of $48,000, which is the cash value of the destroyed vehicle. (Pl.'s Reply at 17.)
Because these are two separate injuries and recoveries, the Court hereby GRANTS VT's motion for summary judgment on GEICO's defenses of offset, one-satisfaction, and double recovery.
K. Condition Precedent and Anticipatory Repudiation.
VT argues that GEICO has no evidence to support its condition precedent and anticipatory repudiation defenses. GEICO does not move for summary judgment on those defenses. Because GEICO does not respond to VT's anticipatory repudiation argument at all, VT's motion for summary judgment on GEICO's anticipatory repudiation defense is hereby GRANTED.
"Conditions precedent to an obligation to perform are those acts or events, which occur subsequently to the making of a contract, that must occur before there is a right to immediate performance and before there is a breach of contractual duty." Hohenberg Bros. Co. v. George E. Gibbons Co., 537 S.W.2d 1, 2 (Tex. 1976). GEICO argues that the following "conditions precedent" have not been satisfied: (1) the policy is void ab initio; (2) VT assigned all rights under the Policy and the lease to Autoflex; and (3) the loss payee endorsement provides no coverage to VT. (Def.'s Resp. at 38.) However, GEICO does not explain how these are "conditions precedent" and there is no evidence that these are "conditions precedent." Moreover, the Court has found supra that the Policy was not void ab initio, that VT did not assign any rights to Autoflex, and that the loss payee endorsement does provide coverage to VT.
Therefore, VT's motion for summary judgment on GEICO's conditions precedent defense is hereby GRANTED.
L. Unclean Hands.
GEICO argues that VT's and Autoflex's declaratory judgment claims should be dismissed based on the unclean hands doctrine. (Def.'s Resp. at 39; Def.'s Mot. at 44-46.) GEICO moves for summary judgment on its unclean hands defense against Autoflex (Def.'s Mot. at 44-46), but does not move for summary judgment on its unclean hands defense against VT. VT moves for summary judgment on GEICO's unclean hands defense against VT.
"The `clean hands' maxim is strictly an equitable doctrine not applicable outside equitable proceedings." Furr v. Hall, 553 S.W.2d 666 (Tex.Civ.App.-Amarillo 1977, writ refused n.r.e.). Because a declaratory judgment action is not an equitable proceeding, the unclean hands defense may not be asserted. See id. ("a declaratory judgment action is neither legal nor equitable[,] but is sui generis."); Beadle v. Bonham State Bank, 880 S.W.2d 160, 162 (Tex.App.-Texarkana 1994, j'ment aff'd in part, rev'd in part, 907 S.W.2d 465 (Tex. 1995) (same).
For this reason, GEICO cannot assert this defense to VT's and Autoflex's declaratory judgment claims and VT and Autoflex are entitled to summary judgment.
1. Autoflex.
With regard to Autoflex, GEICO argues that because Autoflex signed and filed the dismissal documents promising to dismiss its claims with prejudice, then engaged VT to pursue the claims on its behalf, Autoflex has unclean hands. (Def.'s Mot. at 46.)
Contrary to GEICO's assertions, Autoflex did not represent in the dismissal documents that it was dismissing its claims against GEICO with prejudice to refiling the claims in World Omni's name. The evidence is undisputed that Autoflex did not intend for the dismissal to "effect [sic] its rights to the [insurance] proceeds of the claim when properly pursued by the named insured, World Omni Financial Corp." (Pl.'s App. at 86 [Pl.'s Mem. in Support of Mot. for Voluntary Dismissal].) In fact, Autoflex specifically stated in its Motion for Voluntary Dismissal in the Autoflex v. GEICO case that "World Omni Financial Corp. has . . . confirmed its obligation and willingness to pursue the claims under the policy, which it legally owns, but the benefits of which are conferred upon the Plaintiff [Autoflex] here." (Pl.'s App. at 87.) Autoflex requested that "the dismissal be without prejudice to its right in the proceeds of a proper prosecution of the subject claims, however, with prejudice to the refiling of suit on such claim and policy in its own name." ( Id.) GEICO's corporate representative admitted to having read the above-referenced document, which specifically preserved World Omni's right to prosecute this case. Nowhere does Autoflex promise not to control or fund World Omni's lawsuit. GEICO has not offered any evidence that it was misled, and therefore its unclean hands defense is without merit. VT's summary judgment motion on GEICO's unclean hands defense against Autoflex is hereby GRANTED.
2. VT.
GEICO also argues that VT's declaratory judgment action should be dismissed based on the unclean hands doctrine. Specifically, GEICO argues that VT has unclean hands because (1) it has no financial interest in the case, yet is prosecuting it on behalf of Autoflex and (2) it failed to conduct an independent investigation before agreeing to finance the lease agreement. (Def.'s Resp. at 39-40.)
The doctrine of unclean hands is applied to one whose conduct in connection with the same matter or transaction has been unconscientious or unjust or marked by a want of good faith or has violated principles of equity and righteous dealing. Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 26-27 (Tex.App. — Tyler 2000, pet. denied).
The Court has found that GEICO was not misled by VT ( see supra) and the evidence shows that VT is prosecuting this case in an attempt to make itself and Autoflex whole. There is no evidence that VT has been unconscientious or has behaved unjustly or that VT has acted with a want of good faith or has violated principles of equity and righteous dealing. Therefore, VT's summary judgment motions on GEICO's unclean hands defense is hereby GRANTED. GEICO's motion for summary judgment on its clean hands defense as to Autoflex's declaratory judgment claim is hereby DENIED.
M. Laches
Laches is an equitable doctrine that prevents a plaintiff from asserting a claim due to a lapse of time. See Brewer v. Nationsbank of Tex., 28 S.W.3d 801, 804 (Tex.App. — Corpus Christi 2000, no writ.) The party asserting the defense has the burden of proof. Id.
Laches should not bar an action on which the statute of limitations has not run unless allowing the action "would work a grave injustice." Id. Here, it is undisputed that VT's breach of contract claim is not barred by limitations. Therefore, to succeed on the defense of laches, GEICO must show: (1) there was an unreasonable delay by VT in asserting its claims, (2) GEICO made a good faith change in position to its detriment because of the delay, and (3) there is some element of estoppel or such extraordinary circumstances that it would be inequitable to allow VT to proceed with its claim against GEICO after the delay. See City of Corpus Christi v. Taylor, 2004 WL 253728, No. 13-02-077-CV, (Tex.App.-Corpus Christi 2004, no pet.).
GEICO argues that the doctrine of laches bars VT from prosecuting this lawsuit because VT unreasonably delayed filing its suit against GEICO for nearly three years. (Def.'s Resp. at 40.) GEICO contends it was prejudiced because it had to defend the Autoflex suit in the interim based on an improper assignment. (Id.) GEICO also argues that Autoflex's dismissal of its suit with prejudice and VT's decision to prosecute the case on Autoflex's behalf merit application of the laches doctrine. (Id. at 40-41.)
GEICO has not demonstrated that it made a good faith change in position to its detriment because of the alleged delay. GEICO has known for years that it was going to have to defend a lawsuit for refusing to pay the loss payee in this case. Although time elapsed while the Parties and the judicial system resolved the identity of the proper plaintiff to prosecute this claim, GEICO has been on notice that it would have to defend its actions. Because GEICO has failed to demonstrate that the circumstances are so extraordinary that it would be inequitable to allow VT to proceed with its claim, the Court hereby GRANTS VT's motion for summary judgment on GEICO's laches defense.
CONCLUSION ON VT'S CLAIMS
With regard to VT's breach of contract claim and declaratory judgment claims against GEICO, it is undisputed that the Policy/contract existed, that VT is listed as the loss payee, that VT and GEICO had a contractual relationship, that VT made a claim under the Policy, and that GEICO refused to pay any benefits to VT. Because the Court has entered summary judgment in VT's favor and against GEICO on all GEICO's defenses, the Court finds that VT was entitled to recover under the loss payment clause. Therefore, VT is hereby entitled to summary judgment on its breach of contract and declaratory judgment claims.
GEICO'S COUNTERCLAIMS
Plaintiff seeks summary judgment on GEICO's counterclaims for breach of contract, conspiracy to commit fraud and declaratory judgment. GEICO also seeks summary judgment on its own counterclaims for fraud, breach of contract, and conspiracy to commit fraud. I. FRAUD — AGAINST AUTOFLEX.
Autoflex does not move for summary judgment on GEICO's fraud claim against it. However, VT does move for summary judgment on the conspiracy claim which is predicated on GEICO's fraud claim against Autoflex. VT also states in its response to GEICO's motion for summary judgment that summary judgment should be entered against GEICO on its claims of fraud and conspiracy against Autoflex and VT. (Pl.'s Resp. at 30.) Because VT makes a summary judgment argument with respect to the fraud claim against Autoflex, the Court will analyze it as a motion for summary judgment. ( See Pl.'s Mot. at 28-29.)
GEICO contends that Autoflex perpetrated a fraud against GEICO when Autoflex represented that it would dismiss all its claims against GEICO with prejudice, yet proceeded to file another lawsuit against GEICO in the name of World Omni. (Def.'s Mot. at 48-49.) GEICO further argues that when World Omni agreed to act on behalf of Autoflex in this lawsuit, a conspiracy between the two occurred. ( Id. at 49-50.)
To establish the elements of an actionable misrepresentation, GEICO must prove that: "(1) a material representation was made, (2) the representation was false, (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion, (4) the representation was made with the intention that it be acted upon by the other party, (5) the party acted in reliance upon the representation, and (6) the party suffered injury." Johnson Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998).
After reviewing the evidence in this case, the Court finds that GEICO cannot establish the requisite elements of misrepresentation or reliance. GEICO argues that Autoflex misrepresented in the dismissal documents in the Autoflex v. GEICO case that Autoflex "was dismissing all its claims against GEICO with prejudice to `refile same or any part thereof, . . .' because it subsequently brought and is controlling and funding another lawsuit against GEICO in the name of World Omni (and now VT)." (Def.'s Mot. at 48.) Yet the evidence is undisputed that Autoflex did dismiss its own claims against GEICO with prejudice, just as the dismissal documents represented.
Further, even if Autoflex did represent in the dismissal documents that it was dismissing its claims against GEICO with prejudice to refiling the claims in World Omni's name, GEICO could not have reasonably relied on such a representation. The evidence is undisputed that Autoflex did not intend for the dismissal to "effect [sic] its rights to the [insurance] proceeds of the claim when properly pursued by the named insured, World Omni Financial Corp." (Pl.'s App. at 86 [Pl.'s Mem. in Support of Mot. for Voluntary Dismissal].) In fact, Autoflex specifically stated in its Motion for Voluntary Dismissal in the Autoflex v. GEICO case that "World Omni Financial Corp. has . . . confirmed its obligation and willingness to pursue the claims under the policy, which it legally owns, but the benefits of which are conferred upon the Plaintiff [Autoflex] here." (Pl.'s App. at 87.) Autoflex requested that "the dismissal be without prejudice to its right in the proceeds of a proper prosecution of the subject claims, however, with prejudice to the refiling of suit on such claim and policy in its own name." ( Id.) GEICO's corporate representative admitted to having read the above-referenced document, which specifically preserved World Omni's right to prosecute this case. Nowhere does Autoflex promise not to control or fund World Omni's lawsuit.
Because GEICO cannot raise a fact issue as to the existence of a misrepresentation or reliance, GEICO's motion for summary judgment on its fraud claim against Autoflex is hereby DENIED, VT's motion for summary judgment on GEICO's fraud claim against Autoflex is hereby GRANTED, and GEICO's fraud claim against Autoflex is hereby DISMISSED.
II. CONSPIRACY TO COMMIT FRAUD — AGAINST VT AND AUTOFLEX.
A. Against Autoflex.
GEICO contends that Autoflex is liable for conspiring with World Omni to commit the alleged fraud. Specifically, GEICO argues that when Autoflex agreed to represent World Omni in this lawsuit for recovery under the Policy, a conspiracy occurred. (Def.'s Mot. at 49-50.) GEICO moves for summary judgment on its conspiracy to commit fraud claim against Autoflex. (Def.'s Mot. at 48-49.)
A defendant's liability for conspiracy depends on participation in some underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable. Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1995). In this case, because GEICO failed to prove the existence of the underlying tort of fraud by Autoflex, GEICO's motion for summary judgment is hereby DENIED and its conspiracy claim against Autoflex is hereby DISMISSED.
B. Against VT/World Omni.
GEICO contends that World Omni is liable for conspiring with Autoflex to commit this alleged fraud. Specifically, GEICO argues that when Autoflex agreed to represent World Omni in this lawsuit for recovery under the Policy, a conspiracy occurred. (GEICO Mot. at 49-50.)
A defendant's liability for conspiracy depends on participation in some underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable. See Tilton v. Marshall, 925 S.W.2d at 681. In this case, because GEICO failed to prove the existence of the underlying tort of fraud by Autoflex, GEICO's motion for summary judgment is hereby DENIED, VT's motion for summary judgment is hereby GRANTED and GEICO's conspiracy claim against VT is hereby DISMISSED.
III. BREACH OF CONTRACT.
A. Against Autoflex.
GEICO moves for summary judgment on its breach of contract claim against Autoflex. (Def.'s Mot. at 47-48.) Autoflex does not move for summary judgment on GEICO's breach of contract claim. GEICO also moves for summary judgment on Autoflex's declaratory judgment action.
In its motion, GEICO argues that the dismissal documents filed by the parties in the Autoflex v. GEICO case constituted a valid contract that was breached by Autoflex when Autoflex agreed to finance and control this case for World Omni. Autoflex responds by arguing that (1) the dismissal documents do not constitute an enforceable contract; (2) and even if a contract exists, the agreement lacks consideration. (Pl.'s Resp. at 28-30.)
The threshold issue the Court must address is whether the dismissal documents constitute a valid contract. (Pl.'s Resp. at 27-30.) To establish the existence of a valid contract, a party must plead and prove five elements: "(1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding." Barger v. Sutton, NO. CIV.A.SA01CA0294FBNN, 2003 WL 22097184, at *5 (W.D. Tex. Jul 31, 2003); Prime Products, Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex.App.-Houston [1st Dist.] 2002, pet. denied). "In order for an agreement to be a valid, enforceable contract, there must be a meeting of the minds with respect to the subject matter of the agreement and as to all of its essential terms." See Barger, 2003 WL 22097184, at *5.
Although determinations regarding a party's intent are usually reserved for the trier of fact "`courts use an objective standard, considering what the parties did and said,'" to determine intent. Id. (citation omitted). In other words, courts look to the language of the contract, unless ambiguous, to determine the intention of the parties. Id. Consistent with the parol evidence rule, it is this written objective evidence of intent, not the parties' subjective understandings, that controls the Court's analysis. Id. Similarly, issues such as a party's state of mind, which are ordinarily questions of fact, can become questions of law. Id. When the evidence is so conclusive that reasonable minds could not differ, an issue which was once a question of fact, becomes one of law. Id.
In the instant case, the objective evidence of the parties' states of mind are the Agreed Motion to Dismiss with Prejudice and Autoflex's Motion for Voluntary Dismissal in the Autoflex v. GEICO case. The Agreed Motion to Dismiss simply states that the parties "move the Court to dismiss with prejudice all Plaintiff's claims which were raised or which could have been raised by Plaintiff in this case . . . Plaintiff and Defendant jointly request that the Court enter this order dismissing all claims with prejudice to the rights of Plaintiff to refile same or any part thereof . . ." (Agreed Mot. to Dismiss with Prejudice at 1.) There is no language prohibiting Autoflex from entering into an agreement with World Omni to control and fund this lawsuit in World Omni's name. There is no evidence that the parties intended that the language in the Agreed Motion to Dismiss be interpreted to prohibit Autoflex from controlling and financing this lawsuit in World Omni's name.
In fact, the undisputed evidence suggests that Autoflex intended for World Omni to file this lawsuit for Autoflex's benefit. Autoflex's Motion for Voluntary Dismissal states that Autoflex did not intend for the dismissal to affect World Omni's right to pursue the claim against GEICO or to affect Autoflex's rights to the proceeds. Autoflex does not promise not to control or fund the World Omni's lawsuit. Specifically, the motion states that Autoflex did not intend for the dismissal to "effect [sic] its rights to the [insurance] proceeds of the claim when properly pursued by the named insured, World Omni Financial Corp." (Pl.'s App. at 86 [Pl.'s Mem. in Support of Mot. for Voluntary Dismissal].) Autoflex stated in its Motion for Voluntary Dismissal that "World Omni Financial Corp. has . . . confirmed its obligation and willingness to pursue the claims under the policy, which it legally owns, but the benefits of which are conferred upon the Plaintiff [Autoflex] here." (Pl.'s App. at 87.) Autoflex also requested that "the dismissal be without prejudice to its right in the proceeds of a proper prosecution of the subject claims, however, with prejudice to the refiling of suit on such claim and policy in its own name." ( Id.)
There is no evidence to suggest there was a meeting of the minds or an agreement between Autoflex and GEICO whereby Autoflex would dismiss the Autoflex v. GEICO case and abandon its rights to sponsor and recover in a suit prosecuted by World Omni. For this reason, GEICO's motion for summary judgment on its breach of contract claim against Autoflex is hereby DENIED. Because there is no evidence of a meeting of the minds, the Court hereby DISMISSES GEICO's breach of contract claim against Autoflex. The Court also GRANTS Autoflex's declaratory judgment claim and finds that neither the terms of the court's dismissal order nor the agreed motion for dismissal with prejudice are contractual in nature.
B. Against VT/World Omni.
GEICO contends that VT/World Omni materially breached the Policy by assigning its alleged rights to Autoflex in violation of the Policy's anti-assignment clause. (GEICO CC at ¶ 16.) GEICO maintains that this caused Autoflex to file a legally baseless lawsuit against GEICO that required GEICO to hire attorneys and incur defense costs. (Id.)
In response, VT argues that because World Omni was not a party to the Policy, World Omni cannot be held responsible for any breach of the Policy. However, the Court finds that, for purposes of this case, World Omni and VT are one in the same — substitution of VT as the loss payee should not and did not affect the legal or factual issues of the case.
VT also asserts the defense of prior material breach to GEICO's breach of contract counterclaim. (Pl.'s Resp. at 6-7.) GEICO moves for summary judgment on those defenses. VT argues that because GEICO breached the terms of the Policy by refusing to pay VT pursuant to the loss payee clause (March 29, 2000) long before World Omni sought to assign its rights to Autoflex (May 13, 2002), GEICO is estopped from asserting a breach of contract claim against VT for attempting to make the assignment. (Def.'s App. at 217; Pl.'s App. at 10.)
It is a well established rule that a party who himself has breached a contract cannot then maintain a suit for its breach. See Dobbins v. Redden, 785 S.W.2d 377, 378 (Tex. 1990); Gulf Pipe Line Co. v. Nearen, 138 S.W.2d 1065, 1068 (Tex. 1940). Therefore, the Court finds that because GEICO breached the agreement in the first instance by improperly refusing to honor the claim of the loss payee, GEICO is hereby estopped from asserting this counterclaim. Therefore, GEICO's motion for summary judgment on VT's defense of prior material breach is DENIED and VT's defense of prior material breach is GRANTED as a matter of law.
CONCLUSION ON GEICO'S COUNTERCLAIMS
Therefore, for the reasons stated herein, GEICO's counterclaims against VT for breach of contract and conspiracy to commit fraud are DISMISSED with prejudice. VT's motion for summary judgment on GEICO's declaratory judgment action is hereby GRANTED. GEICO's counterclaims against Autoflex for fraud, breach of contract, and conspiracy to commit fraud are DISMISSED with prejudice. The Court also GRANTS Autoflex's declaratory judgment claim.
DAMAGES
Because VT has prevailed on its breach of contract claim against GEICO, the Court hereby concludes that VT is entitled to recovery of $47,210.22.
This amount is calculated as follows: $48,210.22 (payoff value of lease at the time of accident) minus $1,000 (salvage recovery) for a total award of $47,210.22. ( See Def.'s Mot. at 9 n. 1; Pl.'s Resp. at 4 n. 6.)
It is so ORDERED.