Wesson v. Jefferson Sav. & Loan Ass'n

• Decision Date: 10 November 1982
• Docket Number: No. C-1242,C-1242
• Citation: 641 S.W.2d 903
• Court: Texas Supreme Court
• Parties: Era R. WESSON, Petitioner, v. JEFFERSON SAVINGS & LOAN ASSOCIATION, Respondent.

Page 903

641 S.W.2d 903

Era R. WESSON, Petitioner, v. JEFFERSON SAVINGS & LOAN ASSOCIATION, Respondent.

No. C-1242.

Supreme Court of Texas.

Nov. 10, 1982.

Rehearing Denied Dec. 15, 1982.

Mehaffy, Weber, Keith & Gonsoulin, Louis M. Scofield, Jr., Beaumont, for petitioner.

Gilbert T. Adams, Beaumont, for respondent.

SPEARS, Justice.

Era Wesson, individually and as executrix of her husband's estate, sued Jefferson Savings and Loan for an alleged breach of a duty to procure mortgage cancellation insurance. The trial court granted Mrs. Wesson's motion for summary judgment. The court of appeals reversed the judgment of the trial court and remanded the cause for a trial on the merits. Unpublished, Rule 452, Tex.R.Civ.Pro. We affirm the judgment of the court of appeals.

In February 1968, Mr. and Mrs. Doyle Wesson obtained a home loan from Jefferson Savings & Loan Association. The loan commitment letter specified that the loan was subject to "mortgage cancellation insurance required." The closing statement lists "Estimated Monthly Payments" which included "mortgage cancellation insurance--$19.95." Neither party, however, procured the mortgage cancellation insurance.

The Wessons paid $206.00 a month for the first two years of the loan. This payment included $57.57 which was placed in an escrow account to cover taxes and the yearly premium payments for hazard and mortgage cancellation insurance. Since the insurance was never procured, after the first two years of payments there was an excess of approximately $450.00 in the escrow account. In May 1970, the escrow payment was decreased by $10.00 and the excess was applied to the principal debt. In April 1971, the monthly escrow payment was reduced by $9.00.

The Wessons were sent an annual statement showing how the escrow funds were disbursed. The yearly statements listed the amounts paid into the escrow account and the amounts disbursed. The disbursements were coded as either "Tax Disbursements," "Insurance Disbursements," or "Miscellaneous Disbursements." The Wessons were never informed that, contrary to their belief, they did not have mortgage cancellation insurance.

When Mr. Wesson died, Jefferson Savings & Loan informed Mrs. Wesson she did not have mortgage cancellation insurance. She filed suit against Jefferson Savings & Loan for their failure to procure the insurance. Both parties filed motions for summary judgment. The trial court granted Mrs. Wesson's motion and ordered that the balance due on her loan be discharged. The court of appeals reversed and remanded, holding there was a material fact issue of whether Jefferson Savings & Loan could have obtained the insurance without at least the assistance of the Wessons.

In order to uphold a summary judgment, the moving party must establish that as a matter of law there are no genuine issues of fact. City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex.1979); Wilcox v. St. Mary's University of San Antonio, 531 S.W.2d 589, 591 (Tex.1975).

In the absence of an agreement, the mortgagee is under no obligation to insure the mortgaged property. 3 Couch, Cyclopedia of Insurance Law Sec. 25.84 (2nd Ed. 1960); Colonial Savings & Loan v. Taylor, 533 S.W.2d 61, 64 (Tex.Civ.App.--Houston [1st Dist.] 1975, rev'd on other grounds 544 S.W.2d 116 (Tex.1976). A creditor cannot be held liable for failure to procure an insurance policy unless it agreed to assume the duty of acquiring the insurance. ¹ See Colonial Savings Ass'n v. Taylor, 544 S.W.2d 116, 120 (Tex.1976); Parsons v. Watley, 492 S.W.2d 61, 64 (Tex.Civ.App.--Eastland 1973, no writ); Wynnewood State Bank v. Brigham, 434 S.W.2d 874, 878 (Tex.Civ.App.--Texarkana 1968, writ ref'd n.r.e.); Robert & St. John Motor Co. v. Bains, 57 S.W.2d 872, 872 (Tex.Civ.App.--Eastland 1933, no writ). This could be accomplished through an agreement between the parties or by an obligation imposed upon the creditor in the mortgage agreement itself. For example, in Jack Criswell Lincoln Mercury, Inc. v. Tsichlis, 549 S.W.2d 255, 259 (Tex.Civ.App.--Beaumont 1977, no writ) the debtor was held entitled to recover from a car dealer for the loss of his vehicle since the dealer had orally represented to the debtor that property insurance would be procured. Additionally, in G.F.C. v. Williams, 231 S.W.2d 565, 568 (Tex.Civ.App.--Dallas 1950, no writ) the court found that by including a sum for premiums within the amount of the note, the lender bank contracted to procure the insurance.

Even though the mortgage commitment letter specifically provided "mortgage cancellation insurance required," this provision does not expressly state which party was to procure the required insurance, and could be interpreted to place the burden on either party. The contract term is ambiguous, and extrinsic evidence may be introduced to show an agreement between the parties. See Roy L. Jones, Inc. v. Home Transp. Co., 422 F.2d 179, 181 (5th Cir.1970); Trinity Universal Insurance Co. v. Ponsford Bros., 423 S.W.2d 571, 574 (Tex.1968); Amistad, Inc. v. Frates Communities, Inc., 611 S.W.2d 121, 127 (Tex.Civ.App.--Waco 1981, writ ref'd n.r.e.).

The petitioner, Mrs. Wesson, argues Jefferson Savings & Loan owed a legal duty to procure mortgage cancellation insurance or to inform the Wessons that none was procured. She contends a fiduciary duty arose out of a depositor/depository relationship between the parties through Jefferson's control of an "escrow" account into which premiums were paid monthly. ²

Mrs. Wesson relies primarily on the case of City of Fort Worth v. Pippen, 439 S.W.2d 660 (Tex.1969). In Pippen, the City of Fort Worth deposited funds with a title company to be used to acquire certain properties. The vice-president of the title company and a city employee handled the transactions in a manner that enabled them to receive personally part of the purchase price. The title company was held liable for the breach of its fiduciary duty to the city. This court found the title company owed the city a duty of loyalty, a duty to make full disclosure, and a duty to exercise a high degree of care.

The Pippen case can be distinguished from the case before us. The court found there was no escrow agreement or escrow account involved, but rather based its decision on the theory that an agent owes a fiduciary duty to its principal. Additionally, the Pippen case involved fraud and embezzlement in the handling of the city's funds. No such fact situation exists in the instant case.

Additionally, Mrs. Wesson relies on language in Watkins v. Valley Fidelity Bank & Trust, 63 Tenn.App. 493, 474 S.W.2d 915, 918 (1971):

When...