15625 Ft. Bend Ltd. v. Sentry Select Ins. Co.

• Decision Date: 13 March 2014
• Docket Number: Civil Action No. H–12–cv–0600.
• Citation: 991 F.Supp.2d 932
• Parties: 15625 FT. BEND LTD. dba Mercedes–Benz of Sugarland, Plaintiff, v. SENTRY SELECT INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

991 F.Supp.2d 932

15625 FT. BEND LTD. dba Mercedes–Benz of Sugarland, Plaintiff,

v.SENTRY SELECT INSURANCE COMPANY, Defendant.

Civil Action No. H–12–cv–0600.

United States District Court,

S.D. Texas,

Houston Division.

March 13, 2014.

George Alexander Pence, Law Firm of George A. Pence, Houston, TX, for Plaintiff.

Russell J. Bowman, Bowman & Stella, P.C., Irving, TX, for Defendant.

OPINION AND ORDER

MELINDA HARMON, District Judge.

Pending before the Court in the above referenced cause, seeking to recover payment under an Error and Omissions Liability Policy and Commercial Excess/Umbrella Policy issued by Defendant Sentry Select Insurance Company (“Sentry”) to Plaintiff 15625 Ft. Bend Ltd. d/b/a Mercedes–Benz of Sugarland (“Mercedes–Benz”) for thirty-eight vehicles sold to, but not paid for by, vehicle wholesaler Tag Teams, Inc. and its President, Thinh Tieu a/k/a Timmy Tieu (“Tieu”), removed from state court on diversity jurisdiction, are Sentry's first amended motion for partial summary judgment (instrument # 11) and second motion for partial summary judgment (# 20). The second motion addresses those claims not covered by the first motion, so that together, they seek summary judgment on all claims in the case. Mercedes–Benz did not respond to the second motion.

After reviewing the record and the applicable law, for the reasons indicated below, the Court concludes that summary judgment on all claims should be grated in favor of Sentry against Mercedes–Benz.

Standard of Review

Summary judgment under Federal Rule of Civil Procedure 56(c) is appropriate when, viewing the evidence in the light most favorable to the nonmovant, the court determines that “the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” A dispute of material fact is “genuine” if the evidence would allow a reasonable jury to find in favor of the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Initially the movant bears the burden of identifying those portions of the pleadings and discovery in the record that it finds demonstrate the absence of a genuine issue of material fact on which movant bears the burden of proof at trial; a “complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Lujan v. National Wildlife Federation, 497 U.S. 871, 885, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir.1998).

If the movant meets its burden and points out an absence of evidence to prove an essential element of the nonmovant's case on which the nonmovant bears the burden of proof at trial, the nonmovant must then present competent summary judgment evidence to support the essential elements of its claim and to demonstrate that there is a genuine issue of material fact for trial. National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d 698, 712 (5th Cir.1994). “[A] complete failure of proof concerning an essential element of the nonmoving party's case renders all other facts immaterial.” Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The nonmovant may not rely merely on allegations, denials in a pleading or unsubstantiated assertions that a fact issue exists, but must set forth specific facts showing the existence of a genuine issue of material fact concerning every element of its cause(s) of action. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998). Conclusory allegations unsupported by evidence will not preclude summary judgment. National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d at 713; Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir.1996). “ ‘[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise Farm Life Ins. Co. v. Gutterman, 896 F.2d 116, 118 (5th Cir.1990), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).’ ” “Nor is the ‘mere scintilla of evidence’ sufficient; ‘there must be evidence on which the jury could reasonably find for the plaintiff.’ ” Id., quoting Liberty Lobby, 477 U.S. at 252, 106 S.Ct. 2505. The Fifth Circuit requires the nonmovant to submit “ ‘significant probative evidence.’ ” Id., quoting In re Municipal Bond Reporting Antitrust Litig., 672 F.2d 436, 440 (5th Cir.1982), and citing Fischbach & Moore, Inc. v. Cajun Electric Power Co-op., 799 F.2d 194, 197 (5th Cir.1986). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5th Cir.1999), citing Celotex, 477 U.S. at 322, 106 S.Ct. 2548, and Liberty Lobby, 477 U.S. at 249–50, 106 S.Ct. 2505.

The court must consider all evidence and draw all inferences from the factual record in the light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d at 712–13.

It is well established in the Fifth Circuit that “[a] federal court may not grant a ‘default’ summary judgment where no response has been filed.” Bradley v. Chevron U.S.A., Inc., No. Civ. A. 204CV092J, 2004 WL 2847463, *1 (N.D.Tex. Dec. 10, 2004), citing Eversley v. MBank of Dallas, 843 F.2d 172, 174 (5th Cir.1988); Hibernia Nat. Bank v. Administracion Cent. Sociedad Anonima, 776 F.2d 1277, 1279 (5th Cir.1985). Nevertheless, if no response to the motion for summary judgment has been filed, the court may find as undisputed the statement of facts in the motion for summary judgment. Id. at *1 and n. 2, citing id.; see also Thompson v. Eason, 258 F.Supp.2d 508, 515 (N.D.Tex.2003) (where no opposition is filed, the nonmovant's unsworn pleadings are not competent summary judgment evidence and movant's evidence may be accepted as undisputed). See also UNUM Life Ins. Co. of America v. Long, 227 F.Supp.2d 609 (N.D.Tex.2002) (“Although the court may not enter a ‘default’ summary judgment, it may accept evidence submitted by [movant] as undisputed.”); Bookman v. Shubzda, 945 F.Supp. 999, 1002 (N.D.Tex.1996) (“A summary judgment nonmovant who does not respond to the motion is relegated to [his] unsworn pleadings, which do not constitute summary judgment evidence.”).

Allegations of Plaintiff's Original Petition and Suit for Declaratory Judgment

According to Plaintiff's Original Petition and Suit for Declaratory Judgment (# 1–1), beginning in 2010 Tag Team, Inc. and Tieu regularly purchased cars from Mercedes–Benz on behalf of CNJ Auto Finance. Usually a car dealership does not release car titles until funds for the purchase are received, but in Tieu's case, a title clerk released titles to and possession of some vehicles without receiving a draft, but relying instead on Tieu's representation that the funds would be provided upon sale of the cars. The title clerk purportedly committed other unspecified errors and omissions during the title paper preparation, further damaging Mercedes–Benz. After Mercedes–Benz was unable to recover the vehicles from subsequent buyers, it submitted its claims to Sentry under the Error and Omissions Liability coverage and Commercial Excess/Umbrella coverage. Mercedes–Benz complains that Sentry wrongfully denied its claims and continues to delay payment of damages to Mercedes–Benz.

Mercedes–Benz brings claims against Sentry for bad faith, breach of insurance contracts, unfair settlement practices (misrepresenting material facts relating to the coverage at issue, failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of the claims, failing to promptly provide Plaintiff with a reasonable explanation of the basis of the policies, and failing within a reasonable time to affirm or deny coverage or submit a reservation of rights) in violation of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act (“DTPA”), and prompt payment of a claim under the Texas Insurance Code.

Sentry's First Amended Motion for Partial Summary Judgment (# 11)

Sentry identifies the following issues to be decided by the Court (# 11 at p. 2):

(1) whether Plaintiff has coverage for a first party property loss under the third party liability coverage provided by the Title Error and Omissions coverage and the Excess/Umbrella coverage of the Sentry policy;

(2) whether Plaintiff's extra-contractual claims should be dismissed as a matter of law, since those claims are not available in connection with third party liability coverage, which is the type of coverage at issue; and

(3) whether Sentry is liable for any defense costs incurred by Plaintiff prior to Plaintiff requesting that Sentry provide it with a defense.

Sentry recites the following as undisputed facts, supported by references to documents in the record. Mercedes–Benz is a car dealership licensed by the State of Texas. It sold 38 vehicles to wholesaler Tieu, and Tieu took delivery of them in exchange for drafts issued to pay for them. # 15–1, pp. 44, 56; # 16–1, pp. 26–27; # 14–1, pp. 81–119. The drafts were not honored, causing damage to Mercedes–Benz in the amount of $1,048,425. # 16–1, pp. 17, 26–17. Mercedes–Benz's title clerk, Sue Baze (“Baze”), released the titles to the vehicles to Tieu before the payments for them were received, and someone else at the car dealership released the vehicles to Tieu, who subsequently never paid for them. # 12–1, p. 32; # 16–1, pp. 6, 15, 16, 20–21, 26–27.

When Mercedes–Benz discovered the loss, it made a claim to Sentry, which paid Plaintiff the $100,000 limit of the false pretense coverage of the policy, then paid another $100,000 in entering into a...