Texas Soil Recycling v. Intercargo Ins. Co.
| Decision Date | 15 November 2001 |
| Docket Number | No. 00-20337,00-20337 |
| Citation | 273 F.3d 644 |
| Parties | (5th Cir. 2001) TEXAS SOIL RECYCLING, INC., Plaintiff-Appellant, BOBBY E. SELTZ; JOE R. CALVERT; LISA G. CALVERT, Plaintiffs-Counter Defendants-Appellants, and JAMES J. GILLILAND, JR., Counter Defendant-Appellant v. INTERCARGO INSURANCE COMPANY, Defendant-Counter Claimant-Appellee |
| Court | U.S. Court of Appeals — Fifth Circuit |
[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Texas
Before GARWOOD, PARKER, and DENNIS, Circuit Judges.
Texas Soil Recycling Inc., Bobby E. Seltz, Joe E. Calvert, Lisa G. Calvert, and James J. Gilliland (collectively "plaintiffs") appeal from the district court's order granting summary judgment in favor of Intercargo Insurance Company. Plaintiffs contend that the district court erred in dismissing their claims for negligence, negligent misrepresentation, grossly negligent misrepresentation, and violation of the Texas Deceptive Trade Practices Act as barred by the statute of limitations. Plaintiffs also contend that the district court erred in granting summary judgment to Intercargo on plaintiffs' promissory estoppel and fraud claims and on Intercargo's counterclaim for indemnity. While this appeal was pending, Intercargo filed a motion for leave to allow the district court to correct its order on final summary judgment. We affirm the judgment of the district court and deny Intercargo's motion for leave without prejudice.
Texas Soil Recycling, Inc. (Texas Soil) was formed in 1991 to clean soil that had become contaminated with hydrocarbons. Texas Soil leased a site near Houston, Texas from Waste Reduction Systems, Inc. (WRS) for its operations. WRS operated a landfill adjacent to the site and used the remediated soil from Texas Soil as fill dirt for the landfill. The lease between Texas Soil and WRS required Texas Soil to obtain a $75,000 performance bond to secure any environmental clean-up costs associated with the site upon termination of the lease. At the suggestion of WRS, Texas Soil obtained the bond from Intercargo Insurance Company through Rose-Tillmann, Inc., an insurance brokerage firm. In February 1992, James Gilliland, Bobby Seltz, Joe Calvert, and Lisa Calvert (the indemnitors) signed a general agreement of indemnity in Intercargo's favor for any damages or losses incurred by the execution of the bond. Intercargo renewed the bond on February 12, 1993 through Cheri Davis, a surety bond underwriter for Rose-Tillmann, for one year.1
Later that year, WRS and Texas Soil executed an amended lease that required Texas Soil to renew the performance bond at least 45 days prior to the bond's expiration. If Texas Soil failed to renew the bond timely, the lease provided for default unless Texas Soil obtained a renewed bond within 20 days after written notice of the failure to renew. Default gave WRS the option of terminating the lease, taking possession of the premises, and pursuing any remedy provided by law. The parties agree that Texas Soil did not renew its bond with Intercargo 45 days prior to the expiration of the bond. Nor did Texas Soil seek an indemnity bond from another source in order to comply with its lease.
On January 10, 1994, 33 days before the bond's expiration, Cheri Davis of Rose-Tillmann sent a fax to Steve Hecht of Texas Soil stating that the bond "will renew" on February 12, 1994, and requesting certain financial statements in order to renew the bond. On that same day, the chief financial officer of WRS sent Hecht a letter notifying him of Texas Soil's failure to renew the bond 45 days prior to the expiration of the bond and of Texas Soil's right to cure the default within 20 days. Texas Soil sent the information requested by Cheri Davis for the bond renewal.
Plaintiffs claim that Davis promised them several times over the phone that the bond would be issued. They also claim that on February 8, 1994, during a telephone conference call, the Chairman and CEO of Rose-Tillmann, Craig Johnston, advised plaintiffs that he would execute the bond that afternoon. During a deposition in 1997, Johnson confirmed that Intercargo had approved the bond renewal prior to February 7, 1994.2 However, WRS had notified Intercargo, by letter dated February 7, 1994, that it had terminated Texas Soil's lease and was making demand under the bond. The claim by WRS on the bond terminated the Intercargo's ability to renew the bond. That same day, WRS sent Texas Soil notice that it was in default, that WRS had elected to terminate Texas Soil's right of possession of the leased premises, and that WRS was making a claim on the bond. Without its lease, Texas Soil went out of business and filed for bankruptcy.
Texas Soil subsequently filed suit against WRS in state court. During those proceedings, Texas Soil's attorney deposed Cheri Davis and Craig Johnston. WRS filed suit in state court against Intercargo, based upon its claim against the bond. Intercargo then made a demand upon the indemnitors for the amount claimed by WRS. The two cases were consolidated, and WRS eventually settled with Intercargo for $86,563.95. The indemnitors did not reimburse Intercargo.
On January 29, 1998, Texas Soil, Bobby Seltz, Joe Calvert and Lisa Calvert3 filed suit in the Southern District of Texas against Intercargo alleging breach of contract, fraud, negligence, negligent misrepresentation, grossly negligent misrepresentation, and violation of the Texas Deceptive Trade Practices Act because of Intercargo's failure to renew the bond. The individual plaintiffs also sought declaratory judgment that the general agreement of indemnity was null and unenforceable because of Intercargo's wrongful conduct. Intercargo counterclaimed for breach of the indemnity agreement, requested judgment for the amount of its damages and attorney's fees in connection with the indemnity agreement, and joined James Gilliland as a party.
Intercargo filed a motion for partial summary judgment on January 4, 1999 that the statute of limitations barred plaintiffs' causes of action for negligence, negligent misrepresentation, grossly negligent misrepresentation, and violation of the Texas Deceptive Trade Practices Act. The court agreed and held that those claims were time-barred. Intercargo filed additional motions for summary judgment and partial summary judgment on the remaining claims. The court granted Intercargo's motion for summary judgment on Texas Soil's breach of contract, promissory estoppel, and fraud claims on March 28, 2000. The court also granted summary judgment to Intercargo on its counterclaim for damages resulting from WRS's claim on the bond, awarding Intercargo $86,563.95 in damages and $45,635.25 in attorneys' fees. Texas Soil timely filed an appeal in this court. While the appeal was pending, Intercargo filed a motion for leave to allow the district court to correct its order on final summary judgment pursuant to Rule 60(a) of the Federal Rules of Civil Procedure.
We review a district court's decision to grant or deny summary judgment de novo, applying the same criteria as the trial court.4 Summary judgment is proper when the pleadings, depositions, admissions, and the answer to interrogatories together with affidavits, demonstrate that no genuine issue exists as to any material fact and that the movant is entitled to judgment or partial judgment as a matter of law.5
We turn first to Texas Soil's claim that the statute of limitations did not bar its claims of deceptive trade practices, negligence, negligent misrepresentation, and grossly negligent misrepresentation. As this is a diversity case in which the causes of action arise under state law, the district court properly applied Texas statutes of limitations to the claims presented.6 Under Texas law, claims for negligence, negligent misrepresentation, and grossly negligent misrepresentation must be brought within two years from the time the cause of action accrues.7 In general, a cause of action accrues and the limitations period begins when a wrongful act causes a legal injury.8 In some cases, however, Texas courts have held that an action does not accrue until the plaintiff knew, or in the exercise of reasonable diligence should have known, of the wrongful action causing injury.9 The "discovery rule" has been codified in the Texas Deceptive Trade Practices - Consumer Protection Act (DTPA), which provides that claims must be brought within two years after the date on which the false, misleading, or deceptive act or practice occurred, was discovered, or in the exercise of reasonable diligence should have been discovered.10 Discovery does not necessarily mean "actual knowledge of the particulars of a cause of action."11 Instead, the question is whether the plaintiff has "knowledge of facts which would cause a reasonable person to diligently make inquiry to determine his or her legal rights."12 When the plaintiff pleads the discovery rule as an exception to limitations, the defendant moving for summary judgment on limitations grounds has the burden of negating that exception by establishing that there is no genuine issue of fact about when the plaintiff discovered or should have discovered the nature of his injury.13 Intercargo has met that burden.
Unquestionably, Texas Soil's injury occurred in February 1994 when it defaulted on its lease and WRS evicted it from the property. Texas Soil knew the nature of its injury at that time, namely that Intercargo did not renew the bond. Because Texas Soil did not file this lawsuit until January 1998, those claims subject to a two-year statute of limitations cannot stand.
Texas Soil argues that its claims did not accrue until it learned during discovery in the state lawsuit that Rose-Tillmann employees knew that WRS was attempting to prevent the bond's renewal. In KPMG Peat Marwick v. Harrison...
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