Draper v. Garcia, C14-89-00051-CV

• Decision Date: 28 June 1990
• Docket Number: No. C14-89-00051-CV,C14-89-00051-CV
• Citation: 793 S.W.2d 296
• Court: Texas Court of Appeals
• Parties: Thomas DRAPER d/b/a Draper & Associates, Appellant, v. Jim GARCIA, Appellee. (14th Dist.)

Page 296

793 S.W.2d 296

Thomas DRAPER d/b/a Draper & Associates, Appellant, v. Jim GARCIA, Appellee.

No. C14-89-00051-CV.

Court of Appeals of Texas Houston (14th Dist.).

June 28, 1990.

Winston P. Crowder, Houston, for appellant.

Yocel Alonso, Bellaire, for appellee.

Before PAUL PRESSLER, CANNON and ELLIS, JJ.

OPINION

ELLIS, Justice.

This is an appeal from a summary judgment. Appellant Thomas Draper d/b/a Draper & Associates initially filed suit against Tommie L. Hastings, Hastings Trucking, Inc. and Hastings Truck and Equipment Services, Inc. for nonpayment of insurance policy premiums. Draper amended his petition to include claims against appellee Jim Garcia for legal malpractice, conspiracy to violate federal bankruptcy laws, common law fraud and conspiracy to commit common law fraud. The trial court severed the causes of action against Garcia and then granted his motion for summary judgment. We affirm.

A defendant who moves for summary judgment assumes the burden of showing as a matter of law that the plaintiff has no cause of action against him. Citizens First Nat'l Bank of Tyler v. Cinco Exploration Co., 540 S.W.2d 292, 294 (Tex.1976). The question is thus whether defendant's summary judgment proof established as a matter of law that there was no genuine issue of material fact as to one or more of the essential elements of plaintiff's cause of action. Id. Summary judgments are reviewed on appeal according to the following rules:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

Appellant Draper sets forth the facts as follows. In 1982 and 1983, he was the sole proprietor of Draper & Associates, which was the local recording agent for Victoria Lloyds Insurance Company. He also owned and controlled Victoria Lloyds and several other insurance companies. Draper was responsible for the assessment and collection of all premium payments not directly billed by Victoria Lloyds and was contractually bound to pay those premiums not collected within thirty days of their due dates. Tommie Hastings was a sand and gravel hauler in southeast Texas and the owner of several corporations through which his trucking business operated. Prior to 1982, Draper wrote several policies for Hastings covering business and personal property. Jim Garcia was an attorney with Chaumont & Garcia, P.C. Jose Diaz, a former partner in that firm, was in-house counsel for Hastings Trucking, Inc. and Hastings Truck and Equipment Services, Inc.

In 1982 Jim Hancock, a family acquaintance, approached Draper about insurance for Hastings' companies. Hastings had three conditions. He wanted a retrospective premium endorsement policy. In such a policy, the insured's base rate is determined by his record, and the final premium is based solely on the amount of money paid when all claims have been fully adjudicated. The amount owed may not be determined until some time after the expiration of the policy, at which time the insured receives a final bill. Hastings also wanted a ten thousand dollar deductible to allow him to deal with small claims and thus keep his insurance costs low. Finally, Hastings wanted Jim Garcia to handle all of the litigation for claims arising under the auto and general liability policies. In lieu of a fifty thousand dollar letter of credit as proof of ability to pay, Draper was shown a consolidated balance sheet for Hastings Trucking and Hastings Truck and Equipment Services. On the basis of this statement and Hastings' representations, Draper believed the companies to be financially solvent.

Victoria Lloyds was concerned about Garcia's handling of the Hastings claims because that was not the usual procedure. Therefore, a meeting was held to discuss the proposed claims procedures. Draper did not attend the meeting but sent one of his employees, Nita Baker. The participants agreed that Garcia would be the attorney on all claims including those within the ten thousand dollar deductible written outside the retro premium base and on all claims with a reserve of over ten thousand dollars. On those claims outside the retro premium base, Garcia would act with supervision from the Victoria Lloyds claims manager. Garcia later drafted a memorandum confirming the agreements reached at the meeting. Draper characterizes this memorandum as confirmation of Garcia's contractual relationship with Draper & Associates and Victoria Lloyds "to represent both them and the Hastings entities in the settling of claims under the insurance policies."

Draper also maintains he was ultimately responsible for Jim Garcia's bill. He states that one term of the insurance policies was that payment of all loss adjustment expenses, the claims service's fees and Garcia's attorney's fees, were part of the ten thousand dollar deductible. The liability deductible agreement made Victoria Lloyds responsible for all losses including the deductible; however, Hastings and his companies were to pay the deductible. In the event he did not do so, they would become part of the audit calculations, and Draper & Associates was responsible for remitting payment of that amount. Draper asserts that Draper & Associates was also legally responsible for Garcia's fees because Victoria Lloyds made a filing with both the Texas Railroad Commission and the Interstate Commerce Commission to show that coverage had been provided to Hastings and that Victoria Lloyds was responsible for any liability claims without regard to a deductible.

Draper & Associates bound coverage on two policies, general liability and automobile liability and worker's compensation, beginning July 1, 1982, for both Hastings Trucking and Hastings Truck and Equipment Services. Once the policies were finalized, Victoria Lloyds made insurance liability filings with the appropriate state and federal agencies.

The two trucking companies operated under a motor carrier certificate owned by Tommie Hastings and originally leased to Hastings Trucking. On August 16, 1982, the lease of that certificate was transferred to Hastings Truck and Equipment Services. On September 22, 1982, Diaz filed a Chapter 11 bankruptcy petition on behalf of Hastings Trucking. On April 29, 1983, Victoria Seger, an attorney with Chaumont & Garcia, filed a motion to be substituted in as counsel for Diaz. Draper & Associates and Victoria Lloyds were not told of the bankruptcy filing, and Draper renewed the worker's compensation policy for an additional year on July 1, 1983.

Draper sold Draper & Associates in August 1983. The sale did not include the outstanding liabilities, which included all accounts receivable such as the amount owed on the three Hastings insurance policies. According to the final audits on those policies, Hastings and his companies owed $301,631.00. Hastings refused to pay that amount, and Draper personally absorbed the loss. When he filed suit, Garcia answered on behalf of Hastings and the Hastings entities. It was not until Garcia filed a plea in abatement in that suit on behalf of Hastings Trucking that Draper found out about the bankruptcy filing. He then amended his petition to add Garcia and his firm as parties and to allege common law fraud, conspiracy to commit common law fraud and conspiracy to violate federal bankruptcy laws. This latter cause of action was later dropped.

Garcia takes issue with certain of these facts. He maintains that he was retained by Hastings to represent the Hastings companies in personal injury/property damage litigation (excluding worker's compensation cases) filed against those companies. This included, but was not limited to, litigation which was covered by the insurance contract between Hastings and Victoria Lloyds. Furthermore, he denies that the memorandum was a contract. Garcia claims the negotiations concerning the purchase of the insurance were conducted by Hastings personnel and that he was not involved. He also denies involvement in the discussions about or the initial filing of the Hastings Trucking bankruptcy.

Draper challenges the summary judgment with four points of error. In point of error one, he argues that the trial court erred in granting Garcia's motion for summary judgment on the legal malpractice claim because Draper timely presented competent summary judgment evidence which raised questions of fact on each of the allegedly negated elements of the cause of action. Draper argues that Garcia committed malpractice by representing the insurance companies and Hastings Trucking without informing the insurance companies of the conflict of interest that arose between the two. Draper asserts that this failure to inform "was done with the intent to keep the insurance policies in effect and have Draper continue to extend the insurance coverage."

Garcia argues that fundamental to Draper's allegations is his contention that Garcia owed him a duty and that this duty arose out of an attorney-client relationship. Garcia maintains there was no such relationship and therefore no duty. Draper, however, contends that he has raised a question of fact on the issue of an attorney-client relationship. He argues that as a local recording agent, he acted as an agent of both the insured and the insurer. See Maintain, Inc. v. Maxson-Mahoney-Turner, Inc., 698 S.W.2d 469, 472 (Tex.App.--Corpus Christi 1985, writ ref'd n.r.e.). This relationship with both Tommie Hastings and Victoria Lloyds allowed him to be in privity of contract with Garcia, and the...