Colonial County Mutual Ins. v. Valdez

• Decision Date: 31 August 2000
• Docket Number: No. 13-98-540-CV,13-98-540-CV
• Citation: 30 S.W.3d 514
• Parties: (Tex.App.-Corpus Christi 2000) COLONIAL COUNTY MUTUAL INSURANCE COMPANY, Appellant, v. HECTOR VALDEZ, Appellee
• Court: Texas Court of Appeals

Page 514

30 S.W.3d 514 (Tex.App.-Corpus Christi 2000)

COLONIAL COUNTY MUTUAL INSURANCE COMPANY, Appellant, v. HECTOR VALDEZ, Appellee.

No. 13-98-540-CV

COURT OF APPEALS THIRTEENTH DISTRICT OF TEXAS, CORPUS CHRISTI

August 31, 2000

On appeal from the 197th District Court of Cameron County, Texas. [Copyrighted Material Omitted]

Before Justices Dorsey, Chavez, and Rodriguez.

OPINION

Opinion by Justice Dorsey.

Appellant Colonial County Mutual Insurance Company (Colonial) appeals from a trial court judgment in favor of Hector Valdez on his claims against Colonial for violations of the Deceptive Trade Practices Act (DTPA) and the Insurance Code. We reverse the damage award for additional damages, reform the trial court's judgment to reflect that reduction in damages and, as reformed, affirm.

Facts

Hector Valdez bought a 1992 Plymouth Acclaim in November 1994, and arranged insurance for the car with Colonial through the Diego Luna Insurance Agency. An employee of the insurance agency told Hector that the car was insured "against theft, against accidents, against medical expenses, everything concerning the insurance." A few months after obtaining this insurance, Hector sold the car to his son, Rene Valdez, for $7,000. Rene obtained a loan from Mercantile Bank in order to make the purchase. Hector called the Diego Luna Insurance Agency and told them Mercantile Bank would be calling them to make "changes" and "arrangements" on the insurance. Diego Luna testified that an employee of Mercantile Bank did call, and asked to verify insurance on the car for "a Mr. Valdez." The bank was told that "Mr. Valdez" had insurance. Hector continued to pay insurance premiums on the car while Rene owned it. It is undisputed that Hector never told Colonial or Diego Luna Insurance Agency that he had sold the car to Rene. It is also undisputed that Hector was never informed, orally or in writing, that he could only insure the car if he owned it.

In November 1995 Hector's policy was automatically renewed. On January 14, 1996 the car was stolen. Hector reported the theft and Colonial proceeded to investigate. During this investigation, Colonial discovered that Rene was the owner of the car. On March 19, 1996 Colonial sent Hector a letter informing him that "the handling of this claim is being conducted under a Reservation of Rights" because Colonial was investigating whether Hector had an "insurable interest" in the car. On April 5, 1996 Colonial filed a declaratory judgment action in Travis County to determine whether Hector had an insurable interest in the car. In a summary judgment dated August 11, 1997, the Travis County trial court ruled that Hector did not have an insurable interest.

The instant case was tried in February 1998, and the jury heard evidence regarding the Travis County summary judgment in Colonial's favor. In June 1999, the Third Court of Appeals reversed the Travis County declaratory judgment, holding that Colonial had failed to establish as a matter of law that Hector did not have an insurable interest, and remanded for further proceedings. See Valdez v. Colonial County Mut. Ins. Co., 994 S.W.2d 910 (Tex. App.--Austin 1999, pet. denied).

In the instant case, the jury found that Colonial had engaged in a false, misleading, or deceptive act or practice under the Deceptive Trade Practices Act, had engaged in an unfair or deceptive act under section 21.21 of the Texas Insurance Code¹ and had engaged in this conduct knowingly. Hector was awarded $20,000 for mental anguish, $11,500 in attorney fees for the Travis County lawsuit, $6,500 for lost benefit of the bargain, $8,000 in attorney fees for the instant case, and $76,000 in additional damages premised on the finding that Colonial had acted knowingly. On appeal, Colonial contends that the jury's findings on liability and damages are not supported by legally or factually sufficient evidence, and that the trial court erred in denying its motion to transfer venue.

Failure to Disclose under the DTPA

Colonial argues that the evidence is legally and factually insufficient to support claims that it violated the DTPA or insurance code by failing to disclose information. We first address Colonial's challenge to the jury's finding under 17.46(b)(23) of the DTPA which defines "false, misleading, or deceptive acts or practices" to include:

the failure to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.

Tex. Bus. Com. Code Ann. § 17.46 (b)(23) (Vernon Supp. 2000).

Colonial argues that a mere nondisclosure of material information is not enough to establish DTPA liability under that definition. See Century 21 Real Estate Corp. v. Hometown Real Estate Co., 890 S.W.2d 118, 126 (Tex. App.--Texarkana 1994, writ denied). We agree.

Under the plain language of 17.46(b)(23), the failure to disclose known information concerning goods or services is only a violation if it was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed. Tex. Bus. Comm. Code Ann. § 17.46(b)(23); accord Century 21 Real Estate, 890 S.W.2d at 126. To prove a DTPA action for failure to disclose, a plaintiff must show the following:

1. A failure to disclose information concerning goods or services;

2. Which was known at the time of the transaction 3. Which was intended to induce them into a transaction; and

4. That they would not have entered into the transaction if the information had been disclosed.

Kessler v. Fanning, 953 S.W.2d 515, 521 (Tex. App.--Fort Worth 1997, no pet.).

There is no evidence that the company failed to disclose information with the intent to induce Valdez into entering the contract. The matter that was not disclosed that became material was the necessity of Valdez to maintain an "insurable interest" in the car in order to recover on the policy. He was not told that if he sold the car, or otherwise lost his interest in the vehicle, he would no longer be covered. We find absolutely no evidence in the record that the company knew or should have known that Valdez intended, thought about, or even considered selling his car, so that information about the necessity of an "insurable interest" would become important to the sale of the policy.

For a failure to disclose to become actionable under this portion of the DTPA, it must be done with the intent to induce the purchaser to buy. Valdez did not tell the company of his intention to sell the car and keep the policy, or that such matters were material at the time the policy was purchased. We find no evidence that the withholding of information about the necessity of the policy holder having an "insurable interest" in the insured property was done with the intention of inducing Valdez to buy the policy.

Accordingly, there is no evidence to support recovery under section 17.46(b)(23) of the DTPA.

Harmless Error

Having so held, we now must determine whether submission of a single faulty theory of liability will require reversal. We hold that, because liability was found under an additional question that would justify imposition of the entire award of damages, the error is harmless.

Texas Rule of Appellate Procedure 44.1(a) states that no judgment may be reversed on appeal on the ground that the trial court made an error of law unless the court of appeals concludes that the error complained of:

(1) probably caused the rendition of an improper judgment; or

(2) probably prevented the appellant from properly presenting the case to the court of appeals.

Tex. R. App. P. 44.1. We hold that submission of the faulty theory in the DTPA question was harmless because the jury charge also contained a separate question regarding liability under the insurance code that was sufficient, alone, to justify the award of damages. Accordingly, submission of the incorrect liability theory was harmless error.

Three liability questions were submitted to the jury. The first related to the DTPA causes of action, and included four alternative liability theories. The question read:

Did Colonial County Mutual Insurance Company engage in any false, misleading, or deceptive act or practice that Hector Valdez relied upon to his detriment and was a producing cause of damages to Hector Valdez?

"Producing cause" means an efficient, exciting, or contributing cause that, in a natural sequence, produced the damages, if any. There may be more than one producing cause.

"False, misleading, or deceptive act or practice" means any of the following:

(a) Filing suit founded upon a written contractual obligation of and signed by the defendant to pay money arising out of or based on a consumer transaction for goods, services, loans, or extensions of credit intended primarily for personal, family, household, or agricultural use in any county other than in the county in which the defendant resides at the time of the commencement of the action or in the county in which the defendant in fact signed the contract; or

(b) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he does not; or

(c) Representing that an agreement confers or involves rights, remedies or obligations which it does not have or involve, or which are prohibited by law; or

(d) The failure to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.

Answer "Yes" or "No".

Answer: YES

This Court has held...