Zipp Industries v. Ranger Ins. Co.

• Decision Date: 18 January 2001
• Citation: 39 S.W.3d 658
• Parties: (Tex.App.-Amarillo 2001) ZIPP INDUSTRIES, INC., APPELLANT v. RANGER INSURANCE COMPANY, APPELLEE NO. 07-00-0046-CV
• Court: Texas Court of Appeals

Page 658

39 S.W.3d 658 (Tex.App.-Amarillo 2001)

ZIPP INDUSTRIES, INC., APPELLANT v. RANGER INSURANCE COMPANY, APPELLEE

NO. 07-00-0046-CV

Court of Appeals of Texas Amarillo.

January 18, 2001

FROM THE 286TH DISTRICT COURT OF HOCKLEY COUNTY; NO. 98-06-17289; HONORABLE ANDY KUPPER, JUDGE

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Before BOYD, C.J., and REAVIS and JOHNSON, JJ.

Boyd, Chief Justice

In this appeal, and in three issues, appellant Zipp Industries, Inc.(Zipp) challenges a summary judgment in favor of appellee Ranger Insurance Company (Ranger) on Zipp's claims arising out of a draw made by Zipp upon a letter of credit to pay insurance premiums made after confirmation pursuant to Chapter 11 of the Bankruptcy Code. Disagreeing that any of the three issues reveal reversible error, we affirm the judgment of the trial court.

Zipp's predecessor, Anderson Grain Company (Anderson) operated grain storage facilities and was required to maintain a bond to cover any shortages which might occur. In doing so, it obtained a $500,000 bond from Ranger in 1993. To secure its bond, Ranger required an unconditional and irrevocable letter of credit in the amount of $250,000.¹ Anderson obtained such a letter from Texas Commerce Bank. In January 1995, Texas Commerce Bank declined to renew the letter of credit and Anderson obtained a replacement letter of credit from the Dai Ichi Kangyo Bank, Ltd. (the Bank) in the amount of $200,000.

In May 1996, Anderson sought to replace the Ranger bond with one from another insurer. It did so contingent upon Ranger's release of the letter of credit securing the first bond. In response to that request, Ranger returned the expired Texas Commerce Bank letter of credit rather than the letter of credit from the Bank. This error apparently went unnoticed by the parties.

Ranger's bond expired on September 20, 1996. It is undisputed that no claims for grain shortages were ever made against this bond. In October 1996, Anderson and three related companies² filed voluntary petitions in bankruptcy seeking reorganization under Chapter 11 of the Bankruptcy Code. Ranger filed a claim in that proceeding for approximately $130,000 in unpaid premiums. This claim was not contested by Anderson when it was filed. On May 27, 1997, the bankruptcy court signed an order confirming the reorganization plan of the four companies. A nunc pro tunc order correcting the May 27 confirmation order was signed June 5, 1997. The reorganization included a merger of Anderson and Zipp with the merged company using the Zipp Industries name. The plan gave creditors, including Ranger, ownership of the merged company's stock and an unsecured note for 90 percent of their claims.

On July 8, 1997, Ranger presented a draft drawn on the letter of credit from the Bank for $130,000 in premiums, which was paid. In August 1997, Zipp objected to Ranger's claim in the bankruptcy proceeding on the basis that the claim was paid when the Bank honored Ranger's draft for the same amount sought in the claim. The bankruptcy court sustained the objection and disallowed Ranger's claim. At oral argument, counsel for Zipp represented that stock certificates and the note in favor of Ranger have been prepared and are being held pending the resolution of this proceeding.

Subsequently, on June 1, 1998, Zipp filed suit against Ranger in state court for breach of contract, breach of warranties under former section 5.111 of the Business and Commerce Code,³ fraud, and negligent misrepresentation. On August 24, 1999, the parties stipulated the relevant facts and filed a written agreement to that effect. On September 30, 1999, Ranger filed a motion seeking summary judgment. As bases for the judgment sought, Ranger asserted three general grounds: 1) the letter of credit contains no limitations upon its use, therefore any agreement limiting its use is ineffective because it could only be proven through parol evidence in violation of applicable statutes; 2) Zipp is estopped from asserting its claims against Ranger; and 3) there is no evidence of any modification of the terms of the letter of credit. Ranger also asserted additional specific arguments on its individual causes of action. In its December 5 order granting the motion, the trial court did not state the basis upon which it did so.

In pursuing its appeal, Zipp presents three issues. They are 1) whether the judgment was improper because of waiver or estoppel; 2) the exclusion of evidence under the parol evidence rule; and 3) whether there was no evidence supporting Zipp's causes of action.

The standards by which a summary judgment is reviewed are so well established that a detailed recitation of them is unnecessary. See Nixon v. Mr. Management Co., 690 S.W.2d 546-49 (Tex. 1985). Less well established are the standards for reviewing a "no-evidence" motion for summary judgment under Rule 166a(i) of the Rules of Civil Procedure. Under that rule, a party may seek a summary judgment when there is no evidence of one or more essential elements of a claim or defense upon which an adverse party has the burden of proof. Because a no-evidence summary judgment is essentially the same as a pretrial directed verdict, we apply the same legal sufficiency standard in reviewing both. Bush v. FFP Operating Partners, 994 S.W.2d 190, 195 (Tex.App.--Amarillo 1999, pet. denied).

Thus, the proper inquiry is whether the non-movant produced any probative evidence to raise a material fact issue. In answering this query, we consider all the evidence in the light most favorable to the party against whom the summary judgment was rendered and disregard all contrary evidence and inferences. Id. More than a scintilla of evidence exists when the evidence rises to a level such that reasonable and fair-minded people could differ in their conclusions. Id. Alternatively, less than a scintilla of evidence exists when the evidence does no more than create a mere suspicion of a fact. Kindred v. ConChem, Inc., 650 S.W.2d 61, 63 (Tex. 1983). If the non-movant presents more than a scintilla of probative evidence to raise a genuine material fact issue, summary judgment would be improper. Id.

When a summary judgment does not specify the grounds upon which it is based, the judgment will be affirmed if any of the grounds presented in the motion are meritorious. Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995). In view of this rule, even if some of Zipp's issues might be meritorious, the judgment may be affirmed on other grounds asserted in the motion.

Waiver or Estoppel

As we have noted, Zipp's first issue asks us to determine if the trial court erred in granting the summary judgment on the basis of waiver or estoppel. In that regard, in its summary judgment motion, Ranger argued Zipp's claims are barred by the doctrines of waiver estoppel and res judicata because of the prior bankruptcy litigation. Waiver occurs when a party either intentionally relinquishes a known right or engages in intentional conduct inconsistent with claiming that right. In re Epic Holdings, Inc., 985 S.W.2d 41, 57 (Tex. 1998). Res judicata, also known by its more descriptive name of claim preclusion, prevents the relitigation of a claim or cause of action between the same parties that has, or could have been, finally adjudicated in a prior suit. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). Application of the doctrine requires proof of the following elements: 1) a prior final judgment on the merits by a court of competent jurisdiction; 2) identity of parties or those in privity with them; and 3) a second action based on the same claims as were raised or could have been raised in the first action. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). The policies behind the doctrine reflect the need to bring all litigation to an end, prevent vexatious litigation, maintain stability of court decisions, promote judicial economy, and prevent double recovery. Id.

It is undisputed that the claims asserted in this proceeding were not asserted or litigated in the bankruptcy court. Thus, the issue before us is whether these claims could have been brought in that proceeding. Ranger contends that "the bankruptcy court clearly had jurisdiction over the matter [of its draw on the letter of credit] as it related to a claimed debt subject to the Plan and enforcement of the Plan." However, other than cases reciting the general elements of waiver and res judicata, Ranger cites no authority for that proposition. In arguing that proposition, it relies exclusively on the portion of the confirmation order reciting the matters over which the bankruptcy court was to retain jurisdiction. In opposing Ranger's theory, Zipp has cited several federal cases that discuss the extent of a bankruptcy court's post-confirmation jurisdiction.

In re Haws, 158 B.R. 965 (Bankr. S.D. Tex. 1993) recognized that some reorganization plans, such as the one before us, seek to expressly reserve the bankruptcy court jurisdiction over other issues. Id. at 969. The court noted, however, that a bankruptcy court's jurisdiction is limited to that granted by Congress or that necessary to effectuate a reorganization plan and it may not be expanded by the court's own action. Id. See also In re Wood, 825 F.2d 90 (5th Cir. 1987) (discussing federal courts' bankruptcy jurisdiction). The relevant jurisdictional bounds of bankruptcy courts and federal district courts is set out in 28 U.S.C. §§ 157 and 1334 respectively.

The statute governing federal district courts, 28 U.S.C. § 1334, lists the following four types of bankruptcy matters over which these courts have jurisdiction:

(1) "cases under title 11,"

(2) "proceedings arising under title 11," and

(3) proceedings "arising in" a case under title 11, and

(4) proceedings "related to" a case under title 11.

The first listing, namely, "cases under title 11," refers to the...