Duzich v. Marine Office of America Corp.

Decision Date08 October 1998
Docket NumberNo. 13-96-463-CV,13-96-463-CV
Citation980 S.W.2d 857
PartiesJohn DUZICH, Appellant, v. MARINE OFFICE OF AMERICA CORP., Fidelity & Casualty Company of New York and Coastal Bend Production Credit Association, Jointly and Severally, Appellees.
CourtTexas Court of Appeals

Gail D. C. Dorn, William H. Berry, Jr., Corpus Christi, for Appellant.

Gregory T. Perkes, Lee Casstevens, David Atnip, Wood, Burney, Cohn & Viles, Gary Norton, Frederick J. McCutchon, Wood, Boykin & Wolter, Corpus Christi, for Appellee.

Before DORSEY, YANEZ and RODRIGUEZ, JJ.

OPINION

YANEZ, Judge.

This appeal stems from a fisherman's ill-fated lawsuit against his insurers, Marine Office of America Corp. (MOAC), Fidelity & Casualty Co. (Fidelity), and the mortgagees of his vessel, Coastal Plains Production Credit Association (Coastal Plains), 1 and Farm Credit Bank (FCB).

John Duzich claims his insurers wrongfully failed to defend or indemnify him in collection proceedings that flowed from a judgment rendered against him in a third party action that was otherwise covered by his insurance policy. Duzich ultimately settled that debt, together with at least part of those of his mortgagee, in federal court. He then brought suit against his insurers on multiple theories. 2 Also, after receiving a subsequent demand letter from his mortgagee, he sought a judicial declaration that any debts he owed on the vessel were foreclosed by agreed judgment in a prior federal court proceeding. After the mortgagees filed a counterclaim for the deficiency, Duzich added several affirmative claims against them, including usury, unfair debt collection practices, violations of the DTPA, and breach of contract. All parties moved for summary judgment. Both the insurers and the mortgagees obtained summary judgment in their favor, and the court ordered Duzich to pay $289,715.23 on the note, plus costs and attorney's fees. By nineteen points of error, he appeals the judgment. We affirm in part, reverse and render in part, and reverse and remand in part.

FACTUAL HISTORY

In 1980, Duzich owned and operated a fishing vessel, the Miss Suni Suzanne. Duzich and the vessel were insured under two policies issued and adjusted by MOAC, which named Fidelity as the insurer: one was a hull policy protecting the vessel, the other a personal injury policy protecting against suits from third parties. During an outing off the coast of Virginia and North Carolina on December 1, 1980, a seaman working on the vessel, Ronald Baham, sustained a minor injury. At Baham's request, Duzich brought the vessel to shore and escorted Baham to a hospital for treatment. From the hospital, he telephoned Jim Cox, of Whitney-Vaky Insurance of the incident, as he had on prior occasions. Duzich had purchased the policy from Whitney-Vaky, and he believed that Cox was Fidelity's local agent. Cox instructed Duzich to forward any papers in any action that might commence thereafter to him.

Duzich heard nothing else about the matter until his boat was arrested while in port on January 8, 1982. He was informed at that time that Baham had obtained a default judgment against him and the vessel on November 8, 1981, in a federal court in Virginia. A U.S. Marshal's bond was set, but Duzich was unable to tender that amount. Instead, Duzich notified Cox of the arrest by telephone, and wrote to Cox on January 19, 1982, demanding a defense or settlement of the forfeiture proceedings by January 24, 1982.

Apparently, Cox forwarded the letter to James Buchanan, counsel for MOAC, because Duzich received a letter dated January 21 from Buchanan informing him that his notice of the suit was untimely, and that MOAC would probably not undertake any defense for that reason, but that it could not determine the issue by January 22[sic], as requested. On January 25, Buchanan notified Duzich's attorney that Duzich had an indemnification policy, rather than a general liability policy that required a defense. He encouraged Duzich to settle the matter in accordance with his duties to mitigate damages, and said that after any settlement, Duzich could again present his claim, at which point MOAC would make a coverage determination. Three days later, Buchanan sent another letter, indicating MOAC had decided to deny coverage "based upon the late reporting of the claim" after default, but again suggested that his claim could be resubmitted if Duzich was successful in having the Virginia judgment set aside. By separate letter of that same date, Buchanan declined Duzich's request that it pay a bond to release the vessel from the marshal's custody.

During this time, Duzich was unable to earn his livelihood, and he fell behind on his boat mortgage payments. Coastal Bend, which owned the note at the time, accelerated his debt and demanded full payment. In July 1982, it brought a separate action in the United States District Court for the Southern District of Texas against Duzich in personam, and against the boat in rem, seeking to recover the balance due on the note. 3 This cause was soon consolidated with Baham's federal action.

On July 8, 1982, Duzich's attorney informed Buchanan by letter that the federal court in Corpus Christi was to conduct a hearing addressing the validity of the Virginia judgment, and he asked whether MOAC had determined if it would defend Duzich if he successfully attacked the Virginia judgment. Apparently neither Duzich nor his attorney ever heard from MOAC on this issue. On October 4, 1982, Duzich's attorney notified Buchanan by letter that the federal district court in Texas had refused to follow the Virginia judgment, and requested that MOAC pay Duzich's attorney's fees.

Left without coverage, Duzich was forced to settle the Baham and Coastal actions to limit his exposure. 4 On June 11, 1984, an agreed judgment in the consolidated federal actions was entered. The judgment recited the following facts: The Miss Suni Suzanne was sold on November 12, 1982, at public auction. Of the total of $29,500 that was paid into the registry of the court, the U.S. Marshal was paid $15,619.85 (including the cost of dockage), leaving a balance of $13,880.15: $2,500 to Coastal Bend, $7,250 to Baham's attorneys, and $4,130.15 to Baham. It was also agreed that Duzich would be given credit of $75,000 on his promissory note for the Miss Suni Suzanne, as this was the bid price of Coastal Bend for the purchase of the boat. The dismissal order indicated "all stipulations and undertakings are canceled and that the principals and sureties thereon are discharged of record."

Duzich's Lawsuit

On June 10, 1985, Duzich filed his lawsuit against MOAC, Fidelity, and Whitney-Vaky. 5 At the heart of the claims was that MOAC and Fidelity refused to defend Duzich against a judgment erroneously entered against him in Virginia throughout the course of the collection proceedings in Texas. Essentially, Duzich maintains he notified MOAC as soon as he learned of the default judgment because he was not aware of any claims prior to that time. Despite his timely notice, MOAC declined to assist his efforts to have the default judgment set aside, post bond necessary to release his boat from the U.S. Marshal's custody, or defend him against other collections efforts that followed the default judgment. MOAC's argument to the trial court was that it was never required to provide a defense for Duzich because he only had an indemnity policy (distinct from a general liability policy), and whatever duties it might otherwise have had under the policy were relieved by Duzich's failure to provide timely notice of the accident/claim filed against him. It also argued that a specific policy exclusion exempted forfeitures from coverage.

In addition to his claims against MOAC and Fidelity, Duzich also sought declaratory relief against Coastal, then FCB (after FCB purchased the note), that he was no longer liable on the mortgage note which those entities held on his boat. This action was most likely prompted by a demand letter Coastal sent on June 5, 1985, requesting payment of an alleged deficiency of $173,448.26 on the note. After Coastal had filed its in rem action against the boat, and its case was consolidated with Baham's, the boat was eventually sold at a foreclosure sale for $75,000 (purchased by Coastal).

By this suit, Duzich sought declaration that he was not liable on the note, and that any attempt to collect on the note would be barred by res judicata and collateral estoppel. In January 1989, Coastal Bend filed a counterclaim alleging Duzich still owed more than $213,300 on the note, and that the order of dismissal did not relieve him of any personal liability. Nearly four years later, in January 1993, Duzich added claims against Coastal of intentional infliction of emotional distress, negligence and gross negligence, usury, and violations of federal lending laws.

All claims were finally adjudicated at three different hearings in 1995 and 1996. The trial court granted a partial summary judgment in favor of FCB and Coastal on September 18, 1995, disposing of "all claims asserted by Plaintiffs and granting FCB of Texas affirmative relief." All that remained in these cases were the fact issues regarding attorney's fees owed to FCB. The court granted summary judgment in favor of MOAC and Fidelity on January 31, 1996. After hearing FCB's claim for attorneys' fees, it signed a final judgment on May 28, 1996, awarding FCB $289,715.28, together with interest in the amount of $33.94 per day from July 15, 1995 to September 18, 1995, plus interest on the total amount accruing at ten percent until finally paid. It also ordered Duzich to pay $15,000 for FCB's attorneys' fees, plus contingent fees in the event of an appeal.

POINTS ON APPEAL

Appellant brings nineteen points of error on appeal. Eleven points attack the court's ruling with respect to his claims against MOAC and Fidelity. He contends that he should have had...

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