Plasma Fab, LLC v. Bankdirect Capital Fin., LLC

• Decision Date: 08 July 2015
• Docket Number: NO. 03–13–00331–CV,03–13–00331–CV
• Citation: 468 S.W.3d 121
• Parties: Plasma Fab, LLC and Russell McCann, Appellants v. BankDirect Capital Finance, LLC, a Subsidiary of Texas Capital Bank, N.A.; and Scottsdale Insurance Company, Appellees
• Court: Texas Court of Appeals

468 S.W.3d 121

Plasma Fab, LLC and Russell McCann, Appellants

v.BankDirect Capital Finance, LLC, a Subsidiary of Texas Capital Bank, N.A.; and Scottsdale Insurance Company, Appellees

NO. 03–13–00331–CV

Court of Appeals of Texas, Austin.

Filed: May 8, 2015

Rehearing Overruled June 25, 2015

Rehearing En Banc Overruled July 8, 2015

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT, NO. D–1–GN–12–001816, HONORABLE STEPHEN YELENOSKY, JUDGE PRESIDING

Otto S. Good, Ruben Valadez, Langley & Banack, Inc., San Antonio, TX, J. Hampton Skelton, Skelton & Woody, Austin, TX, Bruce H. Rogers, John C. Hart, Brown, Dean, Wiseman, Proctor, Hart & Howell, L.L.P., Fort Worth, TX, for Appellant.

Gregory R. Ave, Randall G. Walters, Walters Balido & Crain, LLP, Dallas, TX, David Williams, David Strubbe, Williams Bax & Saltzman. P.C., Chicago, IL, D. Ferguson McNiel, David Bobbitt Noel Jr., Vinson & Elkins, LLP, Houston, TX, Amy Tankersley, Vinson & Elkins, LLP, Austin, TX, Christopher Patrick Peirce, Dallas, TX, for Appellee.

Before Justices Puryear, Goodwin, and Field

OPINION

Melissa Goodwin, Justice

Plasma Fab, LLC and Russell McCann, sole owner of Plasma Fab, (jointly Plasma Fab) appeal the trial court's order granting the motions for summary judgment of BankDirect Capital Finance, LLC, a Subsidiary of Texas Capital Bank, N.A., and Scottsdale Insurance Company. The central issue in BankDirect's and Scottsdale's motions for summary judgment, and on appeal, is whether a general liability insurance policy Plasma Fab purchased from Scottsdale and financed through premium finance company BankDirect was in effect at the time of Plasma Fab's loss. For the reasons that follow, we affirm the trial court's order in part and reverse and remand in part.

FACTUAL AND PROCEDURAL BACKGROUND

Plasma Fab, an ornamental iron construction contractor, purchased a general liability policy from Scottsdale in May 2008 and financed payment through premium finance company BankDirect. BankDirect paid all premiums in advance, and Plasma Fab was to make monthly payments to BankDirect. The premium finance agreement gave BankDirect a limited power of attorney and authority to cancel the policy on behalf of Plasma Fab and seek a refund of unearned premiums for nonpayment of premium “after proper notice has been mailed as required by law.” Plasma Fab was chronically late making payments, and twice the policy was cancelled and reinstated. It is the third cancellation that is at issue.

On November 24, 2008, BankDirect prepared a notice of intent to cancel the policy effective December 4, 2008, which was ten days following the date the notice was prepared. However, BankDirect did not mail the notice of intent to cancel to Plasma Fab until the next day, November 25, 2008, so that the stated date of cancellation was only nine days after the date the notice was mailed. On December 4, 2008, after 5:00 p.m., BankDirect mailed a notice of cancellation to Scottsdale effective December 4, 2008.

In February 2009, Plasma Fab was sued for causing a fire on December 8, 2008, that destroyed the La Frontera apartment complex in Round Rock, Texas. Scottsdale denied coverage on the ground that the policy had been cancelled prior to the fire. After a judgment was rendered against Plasma Fab for approximately $6 million, Plasma Fab filed suit against Scottsdale for breach of contract and violations of the Insurance Code for which remedy is allowed under the Deceptive Trade Practices Act (DTPA). See Tex. Ins.Code §§ 541.060(a)(1), (a)(2)(A), (a)(3); Tex. Bus. & Com. Code § 17.50(4). Plasma Fab also sued BankDirect for breach of contract, breach of fiduciary duty, deceptive trade practices, and negligent misrepresentation. Scottsdale and BankDirect filed motions for summary judgment on all claims, which the trial court granted. This appeal followed.¹

DISCUSSION

In five issues, Plasma Fab challenges the trial court's summary judgment on the ground that the policy had not been effectively cancelled at the time of the fire. We review a trial court's decision to grant summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex.2010). To prevail on a summary judgment motion, the movant must demonstrate that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Tex.R. Civ. P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215–16 (Tex.2003). When the trial court does not specify the grounds for granting the motion, we must uphold the judgment if any of the grounds asserted in the motion and preserved for appellate review are meritorious. Knott, 128 S.W.3d at 216.

Waiver

We begin with Plasma Fab's fifth issue, in which it addresses BankDirect's contention in its motion for summary judgment that Plasma Fab waived its right to complain of cancellation of the policy by cashing BankDirect's check for the return of unearned premiums. Waiver is an affirmative defense that must be pleaded and proven by the party asserting it. SeeTex. R. Civ. P. 94; Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 344 (Tex.2011). The elements of waiver include (1) an existing right, benefit, or advantage held by a party; (2) the party's actual knowledge of its existence; and (3) the party's actual intent to relinquish the right, or intentional conduct inconsistent with the right. Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773, 778 (Tex.2008). Although waiver is usually a question of fact, where, as here, the relevant facts are clearly established and undisputed, it becomes a question of law. Jernigan v. Langley, 111 S.W.3d 153, 156–57 (Tex.2003) (per curiam).

The record shows that BankDirect issued check number 92444 dated May 8, 2009, in the amount of $205.82. Although the check was made payable to Plasma Fab, LLC, it was endorsed for deposit by William Gammon Insurance, Plasma Fab's insurance agent. There is no evidence in the summary judgment record indicating when, how, or even whether the refund was subsequently transferred to and accepted or cashed by Plasma Fab. Nor is there any evidence showing that Plasma Fab was aware of its right to complain of the cancellation and intentionally relinquished or knowingly acted inconsistently with that right. On this record, we cannot conclude that BankDirect met its summary judgment burden of establishing as a matter of law its affirmative defense that Plasma Fab waived its complaint concerning cancellation of the policy. SeeTex. R. Civ. P. 94; Kirk v. Kemper Investors Life Ins. Co., 448 F.Supp.2d 828, 838–39 (S.D.Tex.2006) (explaining that insurer had not shown waiver where testimony of insured's life insurance beneficiary did not indicate he knew he had right to bring claim or that by accepting check he was giving up that claim, and where there was no evidence he consulted attorney); Italian Cowboy Partners, 341 S.W.3d at 344; Knott, 128 S.W.3d at 215–16; cf.Cates v. Continental Cas. Co., 366 S.W.2d 126, 127–28 (Tex.Civ.App.—Dallas 1963, no writ) (where insured endorsed and cashed refund check with statement on back that it was in full refund of all premiums and policy was surrendered as null and void from date of issue, parties entered new binding contract and insured could not sue insurer under policy). We sustain Plasma Fab's fifth issue.

Plasma Fab's Claims Against BankDirectPower of Attorney

In its second issue, Plasma Fab challenges the summary judgment as to BankDirect on the ground that the cancellation was ineffective because BankDirect failed to comply with statutory requirements and therefore lacked authority to cancel under the terms of the power of attorney. Although Plasma Fab couches its argument in terms of BankDirect's “lack[ing] authority” and “ha [ving] no power,” its assertions amount to an argument that BankDirect exceeded the authority given it under the limited power of attorney. The premium finance agreement provided as follows:

4. Power of Attorney. Insured hereby irrevocably appoints BankDirect as its Attorney–in–Fact upon the occurrence of an Event of Default (defined below) and, after proper notice has been mailed as required by law, grants to BankDirect authority to effect cancellation of the Policies, and to receive any unearned premium or other amounts with respect to the Policies assigned as security herein, and to sign any check or draft issued thereto in Insured's name and to direct the insurance companies to make said check or draft payable to BankDirect....

By its plain language, the agreement afforded BankDirect authority to cancel the policy only upon the occurrence of two conditions—default by Plasma Fab and the mailing by BankDirect of proper notice as required by law. It is undisputed that Plasma Fab failed to timely pay its premium and defaulted, thus triggering the first condition of the power of attorney. Plasma Fab argues that BankDirect also failed to meet the second condition by failing to comply with the notice requirements of the Premium Finance Act. See Tex. Ins.Code §§ 651.001—.209 (the Act). Section 651.161(b) of the Act provides that to cancel for nonpayment of premium, a premium finance company must mail to the insured a written notice that the company will cancel by a stated date unless the default is cured, and the stated date “may not be earlier than the 10th day after the date the notice is mailed.” See id. § 651.161(b). It is clear from the record that BankDirect mailed a notice of intent to cancel with an effective date only nine days after the date of the mailing.

BankDirect does not dispute that it failed to strictly comply with section 651.161(b) and instead focuses on the effectiveness of the cancellation in light of its failure to comply. BankDirect cites Texas and federal cases involving cancellations by insurance companies under policy terms and cases from other state jurisdictions involving cancellations by premium finance companies. The courts in ...