Bankdirect Capital Fin., LLC v. Plasma Fab, LLC, 15-0635

Citation519 S.W.3d 76
Decision Date12 May 2017
Docket NumberNo. 15-0635,15-0635
Parties BANKDIRECT CAPITAL FINANCE, LLC, a Subsidiary of Texas Capital Bank, N.A., Petitioner, v. PLASMA FAB, LLC and Russell McCann, Respondents
CourtSupreme Court of Texas

Karen Sue Neeley, Kennedy Sutherland LLP, Austin, for Amici Curiae Texas Bankers Association, Texas Mortgage Bankers Association, and The Independent Bankers Association of Texas.

Sandra Garza Rodriguez, D. Ferguson McNiel III, Vinson & Elkins, L.L.P., Houston, Amy Tankersley Perry, Vinson & Elkins L.L.P., Dallas, David B.H. Williams, David J. Strubbe, Williams Bax & Saltzman, P.C., Chicago IL, for Petitioner.

John C. Hart, Bruce H. Rogers, Brown Dean Wiseman Proctor Hart & Howell LLP, Fort Worth, Brandon Duane Gleason, J. Hampton Skelton, Skelton & Woody, Austin, Otto S. Good, Ruben Valadez, Langley & Banack, Inc., San Antonio, for Respondents.

Justice Willett delivered the opinion of the Court, in which Justice Green, Justice Lehrmann, Justice Boyd, Justice Devine, and Justice Brown joined.

Verbis legis tenaciter inhaerendum.

"Hold tight to the words of the law." This maxim, fittingly the lead epigraph to Reading Law ,1 captures the foremost task of legal interpretation: divining what the law is , not what the interpreter wishes it to be.

The lion's share of modern appellate judging is reading legislative language and decoding what it means. On that score, our interpretive precedent favors bright lines and sharp corners. If a case can be decided according to the statute itself, it must be decided according to the statute itself. This is a bedrock principle.

Today's case asks whether a notice provision in the Texas Premium Finance Act should be read as written, or instead whether the Court should adopt a "substantial compliance" approach that excuses slip-ups. We opt for the former. The Legislature has codified "substantial compliance" throughout Texas law—including in other Insurance Code notice provisions—forgiving less-than-strict conformity with various statutory commands. But it did not do so here. We decline to engraft what lawmakers declined to enact.

We affirm the court of appeals' judgment.

I

The relevant facts are both undisputed and uncomplicated.

In May 2008, Plasma Fab, LLC obtained a general liability insurance policy from Scottsdale Insurance Company and financed the policy through a premium finance agreement with BankDirect Capital Finance, LLC. BankDirect paid the annual premium to Scottsdale, and Plasma Fab made monthly payments to BankDirect.

The agreement between BankDirect and Plasma Fab included a power-of-attorney clause that gave BankDirect authority, upon Plasma Fab's default, to cancel the insurance policy, collect the unearned premiums from Scottsdale, and apply them to the loan balance. Importantly, the power-of-attorney clause granted BankDirect this cancel-and-collect authority only "after proper notice has been mailed as required by law," specifically section 651.161 of the Texas Premium Finance Act ("Cancellation of Insurance Contract"), which prescribes certain notice-before-cancellation requirements.2 One such requirement: The premium finance company must mail to the defaulting insured a notice of intent to cancel that states a time by which default must be cured, and "[t]he stated time may not be earlier than the 10th day after the date the notice is mailed."3

Plasma Fab was habitually late in making premium payments to BankDirect. In fact, Scottsdale, through BankDirect, had twice canceled Plasma Fab's insurance policy before due to late payments. Each time, BankDirect mailed written notice to Plasma Fab, giving notice of its intent to cancel the policy if Plasma Fab did not pay the past-due premium. Each time, Plasma Fab failed to cure its default by the scheduled cancellation date, and BankDirect directed Scottsdale to cancel the policy. Each time, Plasma Fab eventually paid the overdue premium, and BankDirect contacted Scottsdale and requested reinstatement of the policy. But this time, when Plasma Fab missed its November 2008 payment, BankDirect sent a notice of intent to cancel the policy effective December 4. The notice was dated November 24, ten days before the cancellation date. But it was not mailed until November 25, nine days before the cure deadline stated in the notice. The notice thus violated section 651.161(b) because the "stated time" in the notice was "earlier than the 10th day after the date the notice [was] mailed."4

Plasma Fab did not pay the past-due premium by December 4, and BankDirect sent a notice of cancellation to Scottsdale that evening. Four days later, a fire destroyed an apartment complex where Plasma Fab's employees worked. The next day, Plasma Fab tendered the overdue amount, and BankDirect requested that Scottsdale reinstate the policy. Scottsdale refused, citing internal procedures forbidding reinstatement of policies that have been cancelled three times. In February 2009, Plasma Fab was sued for damages arising out of the fire. Scottsdale denied coverage, and judgment for almost $6 million was ultimately rendered against Plasma Fab.

Plasma Fab and Russell McCann, its sole shareholder, sued Scottsdale and BankDirect for breach of contract, breach of fiduciary duty, deceptive trade practices, and negligent misrepresentation. Plasma Fab contended the defendants had no right to cancel the policy because BankDirect failed to comply with the Insurance Code's ten-day notice requirement. The trial court disagreed and granted summary judgment to Scottsdale and BankDirect on all claims.5

The court of appeals reversed as to Plasma Fab's claims against BankDirect, holding that because BankDirect mailed its notice one day late, it lacked authority to cancel the policy.6

II

The issue is simply stated: Did BankDirect properly exercise its authority under Insurance Code section 651.161 when it cancelled Plasma Fab's insurance policy?

When BankDirect mailed the cancellation notice, it was acting pursuant to the parties' finance agreement.7 But that agreement only granted BankDirect the authority to cancel "after proper notice has been mailed as required by law," namely section 651.161(b) :

The insurance premium finance company must mail to the insured a written notice that the company will cancel the insurance contract because of the insured's default in payment unless the default is cured at or before the time stated in the notice. The stated time may not be earlier than the 10th day after the date the notice is mailed.8

This statutory notice provision says ten days, but what does it mean? Can nine-days' notice be sufficient?

BankDirect urges a "substantial compliance" approach to interpreting section 651.161(b). That is, if the stated cancellation date is less than ten days after the notice was mailed, cancellation should be deemed effective on the earliest date allowed by the statute. Here, BankDirect argues, "the ‘effective on the earliest date’ rule satisfies the purpose of the notice statute," adding that here, Plasma Fab actually received more than the required ten days to cure its default—waiting until Day Fourteen (the day after the fire occurred) before paying the past-due November premium. The cancellation notice was thus not in effective; it merely became effective on the tenth day—December 5. This view is eminently rational. Workable. Logical. There is just one glitch: It finds no home in the statute.

Many Texas statutes have slippery language. Section 651.161(a)(b) is not one of them. Premium finance companies "may not cancel" an insured's policy unless they mail a notice of intent to cancel that states a cure deadline that is not earlier than the tenth day after the date the notice is mailed.9 This notice requirement is unambiguous, and "[w]here text is clear, text is determinative."10 Plain language disallows ad-libbing, a cardinal principle we have reaffirmed regularly.11 BankDirect insists "legislative intent" compels a "substantial compliance" standard, but "the truest manifestation of what lawmakers intended is what they enacted."12 The Legislature "expresses its intent by the words it enacts and declares to be the law."13

Our refusal to engraft a "substantial compliance" exception seems particularly prudent given how ubiquitous "substantial compliance" is throughout Texas law. The Legislature has codified it repeatedly, including in other Insurance Code notice provisions. For example, section 826.105, governing the conversion of a mutual insurance company into a stock insurance company, states, "If the converting company in good faith substantially complies with the notice requirements of this chapter, the company's failure to send a member the required notice does not impair the validity of an action taken under this chapter."14 A near-verbatim provision in another insurance-related statute likewise forgives noncompliant notice.15

"Substantial compliance" needs no judicial assist. Lawmakers have sprinkled it far and wide, in numerous statutes spanning diverse categories of legislation, including the Occupations Code,16 the Business Organizations Code,17 the Election Code,18 the Government Code,19 the Local Government Code,20 the Estates Code,21 the Business and Commerce Code,22 the Water Code,23 the Finance Code,24 the Property Code,25 and the Health and Safety Code.26 This record of statutory usage demonstrates one thing convincingly: When the Legislature desires a not-so-bright line forgiving noncompliance, it knows what to say and how to say it. Instead, and we must presume the Legislature acted intentionally, not inadvertently, "it chose to enact more restrictive language, and we are bound by that restriction."27 If, as BankDirect argues, judges are free to engraft "substantial compliance" whenever it seems reasonable, then the Texas statutes taking pains to codify it represent an "inexplicable exercise in redundancy."28

This is not to say this Court has never recognized "substantial compliance" in...

To continue reading

Request your trial
58 cases
  • Bonsmara Natural Beef Co. v. Hart of Tex. Cattle Feeders, LLC
    • United States
    • Texas Supreme Court
    • June 26, 2020
    ...judge-interpreters be sticklers.... about not rewriting statutes under the guise of interpreting them." BankDirect Capital Fin. v. Plasma Fab, LLC , 519 S.W.3d 76, 86 (Tex. 2017). We judges "are bound by the Legislature's prescribed means (legislative handiwork), not its presumed intent (ju......
  • In re Interest of H.S.
    • United States
    • Texas Supreme Court
    • June 15, 2018
    ...clarity." Centerpoint Builders GP, LLC v. Trussway Ltd. , 496 S.W.3d 33, 36 (Tex. 2016) ; see also BankDirect Capital Fin., LLC v. Plasma Fab, LLC , 519 S.W.3d 76, 86 (Tex. 2017) ("Separation of powers demands that judge-interpreters be sticklers."). If possible, no words should be rendered......
  • ACS Primary Care Physicians Sw., P.A. v. UnitedHealthcare Ins. Co.
    • United States
    • U.S. District Court — Southern District of Texas
    • January 22, 2021
    ...impulses is less prudish than prudent: If it is not necessary to depart, it is necessary not to depart." Bankdirect Capital Fin., LLC v. Plasma Fab, LLC , 519 S.W.3d 76, 85 (Tex. 2017). In this regard, Plaintiffs have not shown that the prior PPO statute was not clear, nor have they demonst......
  • San Jacinto River Auth. v. Medina
    • United States
    • Texas Supreme Court
    • April 16, 2021
    ...2009). "Time-honored canons of interpretation, both semantic and contextual, can aid interpretation." BankDirect Capital Fin., LLC v. Plasma Fab, LLC , 519 S.W.3d 76, 84 (Tex. 2017). "Strictly speaking," however, the "canons" are "but grounds of argument resorted to for ... ascertaining the......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT