Westview Drive Invs., LLC v. Landmark Am. Ins. Co.

• Decision Date: 28 February 2017
• Docket Number: NO. 14–15–00574–CV,14–15–00574–CV
• Citation: 522 S.W.3d 583
• Parties: WESTVIEW DRIVE INVESTMENTS, LLC and Jack Yetiv, Appellants v. LANDMARK AMERICAN INSURANCE CO. and King–Phillips Insurance Agency, Inc. aka InsurTrust Insurance, Appellees
• Court: Texas Court of Appeals

522 S.W.3d 583

WESTVIEW DRIVE INVESTMENTS, LLC and Jack Yetiv, Appellants

v.LANDMARK AMERICAN INSURANCE CO. and King–Phillips Insurance Agency, Inc. aka InsurTrust Insurance, Appellees

NO. 14–15–00574–CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed February 28, 2017

Rehearing Overruled March 28, 2017

Rehearing En Banc Overruled June 7, 2017

Alan B. Daughtry, Houston, TX, for appellant.

Kevin Michael Long, Stephen R. Wedemeyer, Bruce Ramsey Wilkin, Rick Lee Oldenettel, Houston, TX, for appellee.

Panel consists of Justices Boyce, Christopher, and Jamison.

OPINION

Tracy Christopher, Justice

In this insurance-coverage dispute, apartment-complex owner and former mortgagee Westview Drive Investments, LLC appeals from the take-nothing judgment rendered after a jury trial on its claims against King–Phillips Insurance Agency, Inc. for negligent misrepresentation, promissory estoppel, fraud, violations of the Deceptive Trade Practices–Consumer Protection Act ("DTPA"), and Chapter 541 of the Texas Insurance Code, and Westview's claims against insurer Landmark American Insurance Co. for breach of contract, fraud, and deceptive trade practices. Westview's principal and attorney Jack Yetiv appeals from the three sanctions orders rendered against him for emailing Landmark's attorney Bruce Wilkin during the trial and threatening to file a grievance against him if Wilkin did not make certain statements in open court.

We overrule Westview's challenges to the (a) partial summary judgment against it on the scope of coverage, (b) directed verdict against it on limitations grounds on its claims against King–Phillips for negligent misrepresentation and for violations of the DTPA and Chapter 541 of the Texas Insurance Code, and (c) trial court's evidentiary rulings. We also overrule Westview's complaints of charge error and its complaints that, contrary to the jury's verdict, the great weight of the evidence establishes that Landmark breached the policy; that King–Phillips had apparent authority to act for Landmark; that King–Phillips is liable to Westview under a theory of promissory estoppel; that Landmark and King–Phillips defrauded Westview; and that Landmark engaged in unfair or deceptive acts or practices. Finally, we conclude that the trial court did not abuse its discretion in sanctioning Yetiv. We accordingly affirm the trial court's judgment.

I. BACKGROUND

In early 2008, a group of companies affiliated with Texas Tomic Sharma Family LP owned four apartment complexes: Westview Forest Apartments, Kingsgate Village Apartments, and two others. Each apartment complex appears to have been owned by a different company. TTSF LP # 5 ("TTSF") owned Westview Forest Apartments, and the property was the security for a note owned by FirstVal 1, Ltd. Despite the different ownership of the four apartment complexes, all of them were covered under the same insurance policy issued by Landmark American Insurance Company, which had been obtained by retail insurance broker King–Phillips Insurance Agency, Inc. from a wholesale insurance broker.

As the mortgagee of Westview Forest Apartments, FirstVal required proof that the property was insured, so in February 2008, King–Phillips gave FirstVal a document referred to as an "EPI" for "Evidence of Property Insurance." The EPI identified Landmark and Westchester Surplus Lines as the companies issuing the insurance; TTSF as the named insured; and Westview Forest Apartments as the insured property. Under the heading "Additional Interest," the EPI lists FirstVal, and FirstVal's interest is identified as "Mortgagee." Although FirstVal also owned a note secured by the Kingsgate Village Apartments, the EPI at issue in this case concerns only the Westview Forest Apartments.

A. Westview's Acquisition of the Note and the Property

Shortly after FirstVal received the EPI, TTSF filed for bankruptcy protection. With the approval of the bankruptcy trustee, FirstVal sold the note on Westview Forest Apartments to Westview Drive Investments, LLC ("Westview") in late September of 2008. Jack Yetiv, president of Westview's corporate managing member, signed the note on Westview's behalf. As part of the sale, FirstVal assigned the EPI to Westview. On October 7, 2008, Westview foreclosed on the note and purchased the apartment complex.

B. Pre-claim Discussions of Insurance Coverage

Beginning at around the same time as the foreclosure, King–Phillips's agent Greg McGehee began speaking with FirstVal's Dwayne Young, Yetiv, and Yetiv's attorney John Quinlan about an unpaid premium on the Landmark policy covering both the Westview Forest Apartments and the Kingsgate Village Apartments. To continue the coverage then in effect, Yetiv agreed with Young that FirstVal would pay the premium-finance company the portion of the premium allocable to the Westview Forest and Kingsgate Village Apartments, and Westview would reimburse FirstVal for Westview's share. Regarding the coverage that would be afforded to Westview under the policy, Quinlan emailed Yetiv that he thought the carrier needed to agree to change the named insured. After FirstVal made the premium payment, Yetiv forwarded Quinlan's email to Young and asked if the insurer or agent would commit to provide an EPI naming Westview as an insured. Young forwarded the email chain to McGehee and asked McGehee to address those concerns. McGehee responded to Young that he did not know the answer, and asked Young to forward his response "to all parties concerned." Five days later, McGehee emailed Young that he still did not have a final answer.

On November 5, 2008, a fire destroyed the Westview Forest Apartments' leasing office. Yetiv did not report the fire, but continued to request evidence that Westview had property coverage under the Landmark policy. On November 13, 2008, McGehee emailed Yetiv that a transfer of coverage was left to the carrier's discretion, and on December 5, 2008, King–Phillips wrote to Yetiv that it was unable to transfer TTSF's coverage to Westview. Six weeks later, Yetiv reported the fire to King–Phillips and filed a claim on Westview's behalf.

C. Post-claim Discussions of Insurance Coverage

Westview sought insurance proceeds to cover the replacement of the building and its contents, and the loss of accounts receivable, valuable papers, business income, Westview's business personal property, and Yetiv's business personal property that was kept at the apartment complex's leasing office. Landmark informed Westview that the policy afforded Westview only the coverage available to a mortgagee, which was limited to coverage for covered losses to buildings or structures. The policy defined "building" to include (1) personal property used to maintain or service the building or its premises; and (2) materials, equipment, and supplies used for making additions, alterations, or repairs to the building. Landmark paid Westview more than $334,000 for these losses and to reimburse Westview for its emergency expenses to secure the building immediately after the fire.

Westview continued to assert that it was entitled to all of the coverage afforded to the named insured TTSF, and in addition, Westview made claims "on behalf of" TTSF. In response, Landmark pointed out that the policy limited coverage on TTSF's claims to the amount of TTSF's financial interest in the covered property. Landmark asked for evidence that TTSF's financial interest in the property survived the foreclosure, but none was ever produced.

D. The Claims Against Landmark and King–Phillips

In August 2012, Westview sued Landmark and King–Phillips.¹ Westview asserted a claim against Landmark for breach of contract and claims against both defendants for promissory estoppel, fraudulent inducement, negligent misrepresentation, violations of Chapter 541 of the Texas Insurance Code, and violations of the DTPA. Westview alleged that McGehee and King–Phillips had actual and apparent authority to act as Landmark's agents. With the exception of a breach-of-contract claim, all of Westview's complaints against Landmark were based on conduct by McGehee or King–Phillips as Landmark's alleged agents.

The trial court granted Landmark partial summary judgment holding that under the policy, Westview was a mortgageholder rather than a named insured, and that the policy did not provide coverage to a mortgageholder for business personal property, business income, accounts receivable, or valuable papers and records. The trial court also granted Westview partial summary judgment holding that under Texas Insurance Code section 4001.051, King–Phillips is Landmark's agent for the purpose of claims brought under Chapter 541 of the Texas Insurance Code. The trial court denied the motion as to any claims that the statute authorized King–Phillips or McGehee to alter any policy terms.

Before the case was submitted to the jury, the trial court granted King–Phillips's motion for directed verdict on Westview's DTPA, Insurance Code, and negligent-misrepresentation claims on limitations grounds. The jury was asked whether Landmark was liable for breach of contract, promissory estoppel, and unfair or deceptive acts or practices; whether King–Phillips acted with Landmark's apparent authority; and whether either defendant was liable for fraud. The jury answered each question in the negative.

E. The Sanctions Against Yetiv

At trial, Yetiv testified that he waited for over two months before reporting the fire because Westview's attorney Edward Rothberg agreed with him that it would be better to first obtain evidence of insurance coverage. Landmark and King–Phillips responded by serving Rothberg and Rothberg's former law firm with subpoenas duces tecum to discover Rothberg's communications with Yetiv about disclosing the fire. Westview moved to quash the subpoenas on the ground that the documents were protected by attorney-client privilege. In response, Landmark and King–Phillips argued that the documents fell within the crime-fraud exception to the...