Metroflight, Inc. v. Shaffer

• Citation: 581 S.W.2d 704
• Decision Date: 16 March 1979
• Docket Number: No. 19636,19636
• Parties: METROFLIGHT, INC., Appellant, v. Surry SHAFFER and the Shaffer Insurance Agency, Appellee.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 704

581 S.W.2d 704

METROFLIGHT, INC., Appellant, v. Surry SHAFFER and the Shaffer Insurance Agency, Appellee.

No. 19636.

Court of Civil Appeals of Texas, Dallas.

March 16, 1979.

Rehearing Denied April 12, 1979.

Randall A. Hopkins, Baker & Botts, Houston, for appellant.

William N. Hamilton, Stephen L. Baskind, Vial, Hamilton, Koch, Tubb, Knox & Stradley, Dallas, for appellee.

Before GUITTARD, C. J., and AKIN and ROBERTSON, JJ.

AKIN, Justice.

On this appeal from a summary judgment, the principal question is whether the appellant's cause of action is barred because appellant asserted facts in this suit which were inconsistent with facts asserted against another party in a prior suit, and appellant accepted benefits in settlement of that prior suit. Appellant Metroflight previously sued its insurance carriers in federal court claiming insurance coverage. Metroflight dismissed the federal suit after it accepted an out of court settlement. Metroflight then brought the present suit against its insurance agent, appellee Shaffer, in state court for failure to obtain adequate insurance. Shaffer was granted a summary judgment against Metroflight based upon the election of remedies doctrine. We hold that the trial court properly granted summary judgment in favor of Shaffer because Metroflight is barred by the doctrine enunciated in Lomas & Nettleton Co. v. Huckabee, 558 S.W.2d 863 (Tex.1977) (per curiam). Accordingly, we affirm.

I. Metroflight v. Southern Marine and Argonaut The Federal Suit.

In 1974, an airplane crashed which was owned by appellant Metroflight, a common carrier airline. Metroflight instituted a declaratory judgment action in federal court in 1974 against Southern Marine and Aviation Underwriters, Inc. and Argonaut Insurance Company, the companies from which Metroflight's insurance agent had secured insurance for Metroflight. Appellee Shaffer, Metroflight's insurance agent, had the responsibility of counseling Metroflight with respect to its insurance requirements and for securing Metroflight's insurance policies. In 1972, Shaffer advised Metroflight that new insurance policies would be financially desirable, and he chose Southern Marine and Argonaut to be the insurance underwriters after he had prepared specifications and had obtained competitive bids. In contrast to the insurance coverage held by Metroflight prior to 1972, the new insurance policies recommended by Shaffer rendered part of Metroflight's air operations uninsured because of a certain pilot endorsement. This pilot endorsement, which was not contained in the specifications prepared by Shaffer, excluded from coverage any loss unless the pilot had attended specific flight training schools within the preceding ninety (90) days and was so listed with the insurer. This insurance policy was renewed in 1973, but Shaffer never informed Metroflight that the pilot endorsement exclusion would leave part of their operations uninsured, and Metroflight did not learn of the lack of coverage until after the crash. A few days after the crash in 1974, Metroflight hired a law firm to investigate whether the insurance procured by Shaffer provided coverage for the crash, and within six weeks after the crash, Metroflight brought a declaratory judgment action in federal court against its insurance carriers, Southern Marine and Argonaut. This federal suit was brought as a result of Shaffer's representations to Metroflight that the insurers had assured Shaffer that the insurers would not deny coverage by asserting the pilot endorsement.

In its pleading in the federal suit, Metroflight claimed that the insurance policy covered the losses sustained by the crash. Metroflight also alleged that the insurers should be estopped from asserting the pilot endorsement as a defense because the insurers had waived the exclusion due to factual knowledge possessed by the insurers prior to the loss. Essentially, Metroflight pleaded insurance coverage. In response, the insurance carriers denied that Metroflight was entitled to any relief under the insurance policy. The insurance carriers argued that coverage was excluded by the pilot endorsement because the pilot involved in the crash had not met the requirements of the endorsement.

In 1976, Metroflight and the insurance companies executed a settlement agreement, and the federal suit was dismissed with prejudice. This settlement was accomplished after lengthy and detailed pretrial discovery which indicated: (1) that Metroflight was indeed operating outside the scope of the pilot endorsement; (2) that the insurers had not waived this endorsement; and (3) that they were not estopped from asserting it. The settlement agreement provided that Southern Marine and Argonaut would pay eighty percent of all claims against Metroflight arising from the crash. The payments by the insurance companies were termed "loans" to Metroflight; however, Metroflight was obligated to pay back these loans only if it recovered a judgment against Shaffer in a subsequent suit. The settlement agreement stipulated, therefore, that Metroflight would sue Shaffer for Shaffer's alleged failure to secure appropriate insurance coverage, and if it recovered damages from Shaffer, Metroflight would then use the proceeds to repay the loans from Southern Marine and Argonaut. In effect, the insurance companies partially paid the claims and were subrogated to Metroflight's claim against Shaffer.

II. Metroflight v. Shaffer The State Suit.

In February of 1977, Metroflight filed this action against Shaffer in state court. Metroflight based its lawsuit upon the following causes of action: (1) breach of duty by an agent for various omissions and errors; (2) breach of contract; (3) negligence; (4) breach of fiduciary duty; and (5) violation of the Texas Deceptive Trade Practices-Consumer Protection Act. Shaffer's three defenses on which the trial judge granted summary judgment included: (1) the election of remedies doctrine; (2) the two-year statute of limitations; and (3) Metroflight's lack of consumer status under the Deceptive Trade Practices Act. We address only the election of remedies question since that issue is dispositive of this case.

Metroflight asserts five arguments in support of its claim that the trial judge erred in holding that this suit was barred by the settlement in the federal suit: (1) the alleged inconsistent remedies in the federal and state suits do not arise from the same state of facts, and thus, the election of remedies doctrine is inapplicable; (2) Shaffer was not a party to the federal declaratory judgment action nor was he a party to the contract sought to be enforced therein; (3) the state suit, in contrast to the federal action, concerned the assertion of distinct causes of action against different persons arising out of different transactions; (4) Metroflight's election was not an informed election in view of Shaffer's misrepresentations; and (5) the election of remedies doctrine is an equitable doctrine which cannot be used to aid wrongdoers, such as Shaffer. We conclude, however, that the Per curiam opinion of the supreme court in Lomas & Nettleton Co. v. Huckabee, 558 S.W.2d 863 (Tex.1977), is controlling here and necessitates an affirmance of the summary judgment on the ground that Metroflight's suit is barred by the settlement of the federal suit.

III. Lomas and Nettleton v. Huckabee.

The facts in Lomas & Nettleton v. Huckabee are analogous to the facts here, and since this case rests upon the Huckabee opinion, a discussion of Huckabee is necessary. Plaintiff Huckabee purchased a fire insurance policy from American States Insurance that covered loss to his realty as well as loss to his personal possessions. This policy was sent to Lomas & Nettleton, but they refused to accept the policy although funds were available in Huckabee's escrow account to pay the premium. Lomas & Nettleton returned the policy to American States for cancellation and then, through its own agent, purchased a fire insurance policy with Republic Insurance covering the realty but not Huckabee's personalty. Thereafter, a loss was sustained by fire; the insurance companies denied coverage, and Huckabee sued them. American States filed a third-party action against Lomas & Nettleton asserting that its policy was not in effect because Lomas & Nettleton had refused to accept it and that if it had any liability to Huckabee, it was entitled to be indemnified by Lomas & Nettleton. Huckabee settled with Republic Insurance for one-half of the loss sustained to the realty and dismissed Republic. Next, Huckabee settled with American States for another one-half of the loss to his realty, and for eighty percent of the loss to his personalty. The latter settlement was in the nature of a "loan" to Huckabee to be repaid only if Huckabee was successful in recovering against Lomas & Nettleton. After settlement, Huckabee dismissed American States with prejudice and then amended his petition to include Lomas & Nettleton, alleging that Lomas & Nettleton wrongfully refused to accept the tendered American States policy, and thus, was liable to Huckabee for the loss of his personalty. The trial court sustained a motion for summary judgment in favor of Lomas & Nettleton on the ground that by suing the insurance companies and accepting settlements, Huckabee had elected his remedy and was barred by the election of remedies doctrine from asserting a claim against Lomas & Nettleton for loss of his personalty. The Waco Court of Civil Appeals, Huckabee v. Lomas & Nettleton Co., 550 S.W.2d 371 (Tex.Civ.App. Waco 1977), reversed on the ground that the election of remedies doctrine did not apply because the causes of action asserted against Lomas & Nettleton and American States were distinct causes of action arising out of independent transactions with different entities. 550 S.W.2d at 373.

The supreme court reversed the Waco Court of Civil Appeals and affirmed the trial court on...