CRAWFORD v. PROTECTIVE LIFE INSURANCE COMPANY, (W.D.Tex. 2000)

HONORABLE DAVID BRIONES, United States District Judge.

On this day, the Court considered Defendant Protective Life Insurance Company's "Motion for Summary Judgment and Brief in Support Thereof," filed in the above-captioned cause on August 11, 2000. Plaintiffs Travis Crawford, TRC Reinsurance Company, Ltd., Travis Crawford Buick-GMC Truck, L.P. and Crawford Chevrolet, Inc. filed a "Response to Defendant's Motion for Summary Judgment and Brief in Support Thereof" on August 21, 2000. Thereafter, on August 23, 2000, Defendant filed a "Reply and Objections to Plaintiff's Response to Defendant's Motion for Summary Judgment and Brief in Support Thereof."

After due consideration, the Court is of the opinion that Defendant's Motion should be granted for the reasons that follow.

FACTS

Defendant Protective Life Insurance Company ("Protective" or "Defendant") is a stock company chartered in the state of Tennessee with principle offices in Birmingham, Alabama. Protective is admitted and authorized to conduct the business of credit insurance in forty-nine states and is qualified to do business as a capital stock legal reserve life and health insurer.

Plaintiff Travis Crawford ("Crawford") is an individual residing in Santa Fe, New Mexico. Crawford owns Plaintiff Travis Crawford Buick-GMC Truck, L.P., ("Crawford Buick"), an automobile dealership located in El Paso, Texas, and Plaintiff Crawford Chevrolet, Inc. ("Crawford Chevrolet"), an automobile dealership located in San Fe, New Mexico. Crawford also owns Plaintiff TRC Reinsurance Company, Ltd. ("TRC"), a reinsurance company organized under the laws of the Turks and Caicos Islands, British West Indies, with principal offices in El Paso, Texas. In addition to selling automobiles to the general public, Crawford Buick and Crawford Chevrolet also offer their customers various credit insurance policies in conjunction with an automobile sale, namely, credit life and disability coverage.

In August 1996, Crawford, on behalf of Paso del Norte Life Insurance Company, predecessor to TRC, entered into negotiations with the firm of Pettes Hesser, Ltd., agents for Protective, regarding the possible execution of a reinsurance agreement with Defendant. Defendant sent proposed Reinsurance Agreements to Crawford, but those were never executed by either of the parties.

On October 1, 1996, Crawford Buick and Crawford Chevrolet, acting through Crawford, each executed a Producer Agreement with Defendant, whereby Crawford Buick and Crawford Chevrolet were appointed as non-exclusive agents to sell to their customers credit life and disability insurance issued by Defendant. Thereafter, Crawford Buick and Crawford Chevrolet began sending to Defendant all premium payments derived from Crawford Buick and Crawford Chevrolet's sale of credit life and disability insurance to their customers.

On March 5, 1999, Defendant sent to Crawford an offer to reinsure credit insurance issued on Defendant's policies by Crawford Chevrolet and Crawford Buick from December 1, 1998, onward. In the same letter, Defendant addressed a contention by Crawford that he and Protective had entered into an agreement, at the same time that the Producer Agreements were signed, to "warehouse" the premiums from the sale of credit life and disability insurance. Protective maintained that it was not aware of any such agreement but, in an effort to resolve the dispute, offered to enter into a retroactive warehousing agreement, effective with coverage issued on or after August 1, 1996 — the date the Producer Agreements were signed — contingent upon Plaintiffs paying a warehousing risk extension fee of $57,013.48. Crawford countered with a letter rejecting both the offer to reinsure and the warehousing proposal and making demand for the return of the premiums allegedly held by Defendant. Crawford averred in the letter that it was his understanding from negotiations with the firm of Pettes Hesser that the premiums sent to Protective would be "warehoused" in an escrow account, pursuant to a warehousing agreement. In exchange, Crawford continued, Defendant was to receive a commission of between eight percent and ten percent for the administrative expense of handling the claims and a lump sum fee of $4,000 for annual reports. Defendant denied and continues to deny having any knowledge or record of such a warehousing agreement.

On October 20, 1999, Plaintiffs filed an Original Petition in 346th Judicial District Court of El Paso County, Texas, alleging breach of contract, unjust enrichment and conversion by Defendant. Plaintiffs seek compensatory damages, attorney's fees and costs.

On November 29, 1999, Defendant removed the cause to this Court. The instant Motion for Summary Judgment was filed on August 11, 2000.

SUMMARY JUDGMENT STANDARD

Summary judgment should be granted only where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). The party that moves for summary judgment bears the initial burden of identifying those portions of the pleadings and discovery on file, together with any affidavits, which it believes demonstrate the absence of a genuine issue of material fact. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). "If the moving party fails to meet this burden, the motion must be denied, regardless of the nonmovant's response." Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). If the movant does meet this burden, however, the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial. See, e.g., Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. "If the non-movant fails to meet this burden, then summary judgment is appropriate." Tubacex, 45 F.3d at 954.

When making a determination under Rule 56, factual questions and inferences are viewed in a light most favorable to the nonmovant. See Lemelle v. Universal Mfg. Corp., 18 F.3d 1268, 1272 (5th Cir. 1994). The party opposing a motion supported by evidence cannot discharge his burden by alleging mere legal conclusions. See Anderson v. Liberty Lobby, 477 U.S. 242, 248-49, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). Instead, the party must present affirmative evidence in order to defeat a properly supported motion for summary judgment. See id.

DISCUSSION

Plaintiffs allege in the "Original Petition" causes of action based on breach of contract, conversion, and unjust enrichment. Defendant's "Motion for Summary Judgment and Brief in Support Thereof" avers that Plaintiffs have shown no genuine issue of material fact to sustain causes of action for conversion and unjust enrichment. Consequently, Defendant maintains that it is entitled to summary judgement as a matter of law. The Court concurs with Defendant's position.

CONVERSION AND UNJUST ENRICHMENT

In support of a conversion claim, a plaintiff must prove: (1) the plaintiff owned, had legal possession of, or was entitled to possession of the property; (2) the defendant assumed and exercised dominion and control over the property in an unlawful and unauthorized manner, to the exclusion of and inconsistent with the plaintiff's rights; (3) the plaintiff made a demand for the property; and (4) the defendant refused to return the property. See Waisath v. Lack's Stores, Inc., 474 S.W.2d 444, 446 (Tex. 1971). Defendant argues that Plaintiffs have not established the elements of a conversion action since they are unable to show facts proving the first two elements of the claim. Protective contends that Crawford, while acting on behalf of Crawford Buick and Crawford Chevrolet, was a mere middleman between itself and the customers purchasing insurance. Protective reasons that neither Crawford, Crawford Chevrolet, nor Crawford Buick had any right to legal possession of the premiums paid for the purchase of credit insurance. Moreover, Protective avers that by taking control of the premiums, it never exercised dominion over the property in an unlawful and unauthorized manner. Rather, in exchange for premiums received, Protective provided insurance to Crawford's customers, as authorized in the contractual Producer Agreements.

Notwithstanding the conversion claim, Protective also disputes Plaintiffs' claim for unjust enrichment and maintains that it cannot be sustained. Unjust enrichment does not provide an independent basis for a cause of action. See Amoco Prod. Co. v. Smith, 946 S.W.2d 162, 164 (Tex.App. 1997); City of Corpus Christi v. Heldenfels Bros., Inc., 802 S.W.2d 35, 40 (Tex.App. 1990). The term "unjust enrichment" is used to characterize "the result or the failure to make restitution of benefits received under such circumstances as to give rise to an implied or quasi-contract to repay." Fun Time Ctrs., Inc. v. Continental Nat'l Bank of Fort Worth, 517 S.W.2d 877, 884 (Tex.Civ.App. 1974); see also Allen v. Berrey, 645 S.W.2d 550, 553 (Tex.App. 1982). "Generally, a party seeking to recover the reasonable value of services rendered or materials supplied will be entitled to recover on a theory of unjust enrichment only if no express contract covers these services or materials." Bado Equip. Co. v. Bethlehem Steel Corp., 814 S.W.2d 464, 473 (Tex.App. 1991); see also Truly v. Austin, 744 S.W.2d 934, 936 (Tex. 1988); Economy Forms Corp. v. Williams Bros. Constr. Co., 754 S.W.2d 451, 458 (Tex.App. 1988). "`Where there exists a valid express contract covering the subject matter, there can be no implied contract,' and hence no recovery in quantum meruit." Freeman v. Carroll, 499 S.W.2d 668, 670 (Tex.Civ.App. 1973) (citing Woodard v. Southwest States, Inc., 384 S.W.2d 674, 675 (Tex. 1964)).

Protective avers that there was no implied contract. The benefit bestowed upon it by virtue of the premium payments which Plaintiffs sent was received pursuant to a written contract to which Crawford agreed and which he himself executed. Protective further reasons that it was never unjustly enriched since, in exchange for the premium payments it received, Protective provided insurance coverage, as agreed under the Producer Agreements. In sum, Protective maintains that it obtained the benefit which Crawford seeks to recover though a valid written contract, the terms of which it had fully satisfied.

Plaintiffs do not dispute Defendant's arguments regarding Plaintiffs' claims based on conversion and unjust enrichment. Accordingly, Defendant has shown that there is no genuine issue of material fact in dispute as to the threshold inquiries for either claim, and Protective is therefore entitled to summary judgement on Plaintiffs' conversion and unjust enrichment claims.

Even if Plaintiffs did dispute Defendant's position, they would have met with little success, since Plaintiffs have not provided sufficient evidence to create a jury question as to those claims.

BREACH OF CONTRACT

Plaintiffs allege that "sometime after August 1996" the parties entered into an oral agreement whereby Protective would "warehouse" premiums received from the sale of credit life and disability insurance policies, pay losses, and receive a commission of between eight and ten percent as well as "approximately" $4,000 for preparation of annual reports. Plaintiffs further allege that the agreement was temporary in nature and that both parties anticipated it would end when a reinsurance agreement could be approved and entered into by the parties. Finally, Plaintiffs maintain that the agreement was breached by Defendant, and they seek expectancy damages based on that breach. In order to prove a prima facie case for breach of contract, a party must first show (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to the plaintiff resulting from that breach. See Prudential Sec., Inc. v. Haughland, 973 S.W.2d 394, 396 (Tex.App. 1998); McCulley Fine Arts Gallery, Inc. v. "X" Partners, 860 S.W.2d 473, 477 (Tex.App. 1993). "Absent an enforceable contract, there can be no breach." Lynx Exploration Prod. Co. v. 4-Sight Operating Co., 891 S.W.2d 785, 788 (Tex.App. 1995). Plaintiffs have not presented sufficient evidence to support a finding that a valid contract had been created between the parties. Since the Plaintiffs have not met even this threshold inquiry, the Court need not reach the remaining elements for an action for breach of contract.

The terms of an oral contract may be proven by circumstantial as well as direct evidence. See PGP Gas Prod., Inc. v. Reserve Equip., Inc., 667 S.W.2d 604, 607 (Tex.App. 1984); Peters v. Norris, 402 S.W.2d 216, 219 (Tex.Civ.App. 1966). Examples of evidence that might show the terms or existence of an oral contract include a written memorandum drawn by a third party but not signed or executed by other parties; testimony of one party as to the understanding of the contract as gained from statements of a broker representing both parties; or an unsigned memorandum following a verbal agreement, setting out in detail contemplated property transfers. See generally 14 TEX. JUR.3d Contracts § 381 (1997).

In support of the contention that a contract in fact existed, Plaintiffs submit Crawford's affidavit in which Crawford describes, in the vaguest of terms, evidence that an agreement had been made to "warehouse" funds. Crawford never once states that an agreement was actually reached between the two parties. Rather, he employs noncomittal terms to imply the affirmative formation of an agreement. Crawford states that he "understood" that Protective would "warehouse" and escrow the insurance premiums, and that he "anticipated" that the warehousing agreement would last several months. Crawford then adds that he "authorized the execution" of Producer Agreements dated October 1, 1996, "in reliance" on the intent to "warehouse" the premiums. There is no indication in any part of the affidavit that an agreement was actually reached between the two parties, and that any of Protective's agents actually agreed to the assumptions under which Crawford maintains he was operating. Crawford never describes any of the conditions surrounding the agreement and provides no specific dates for these negotiations short of offering that they took place "sometime after August 1996." Crawford never reveals the names of the parties with whom the alleged agreement was reached, nor does he provide any information regarding the process of the negotiations. How did the parties arrive at the numbers to which Crawford now makes claims? Crawford never tells.

Plaintiffs also submit two letters from William B. Hardie ("Hardie"), attorney for Plaintiffs, addressed to William L. McCarty, counsel for Defendant. Therein, Hardie explains Plaintiffs' position regarding the "warehousing" agreement and the insurance premiums. Hardie notes that Crawford's understanding that the premiums would be "warehoused" is confirmed by Wayne E. Pettes ("Pettes") of Pettes Hesser. Aside from Crawford's own assertions, there is no evidentiary basis to support Hardie's contentions. Plaintiffs do not, for instance, produce a corroborating affidavit from Pettes. The Court is left wondering why, after maintaining that Pettes could confirm the existence of the agreement, Plaintiffs fail to produce any statement in which Pettes corroborates at least one of their assertions. Protective, for its part, does submit a copy of a letter from Pettes to Crawford dated February 14, 1997, in which Pettes outlined Crawford's pending agreements with various other insurance companies. That letter, however, makes no reference to a warehousing agreement with Protective. Pettes discussed in that letter a warehousing agreement between Plaintiffs and Heritage Life Insurance Company ("Heritage"), which covered policies issued by Heritage and written between April 20, 1995, and December 31, 1995. However, there is no mention of any similar warehousing agreement with Protective. The Court notes that the Pettes letter submitted by Defendant does not sufficiently prove the non-existence of the alleged warehousing agreement. It does, however, cast some doubt on Plaintiffs' allegations.

Plaintiffs also tender copies of a proposed reinsurance agreement, never executed by the parties, as evidence that the parties were in fact negotiating the terms of a reinsurance agreement and an attendant warehousing agreement. That document, however, makes no mention of a warehousing agreement, and there is no language to even suggest that a warehousing agreement was entered into.

In short, Plaintiffs, in their pleadings and affidavits, offer no evidence that a warehousing agreement was ever created. Aside from Plaintiff Crawford's own assertions, there is nothing in the record which proves the terms or existence of an oral contract to "warehouse" all credit insurance coverages issued by the dealerships under Protective policies since October 1, 1996.

As a consequence of the shortcomings of Plaintiffs' case, Defendant succeeds in showing that no genuine issue of material fact is in dispute as to the existence of the contract. Protective's position that no evidence exists to support such a claim is supported by Plaintiffs' failure to provide sufficient evidence to buttress their assertion that a contract in fact existed. As Plaintiffs fail to meet the first element required in a breach of contract claim, Defendant is entitled to Summary Judgement as a matter of law.

Without sufficient proof of the existence of a contract, affirmative defenses, if any, need not be raised. Defendant's briefed arguments that the agreement, if indeed it existed, would be unenforceable pursuant to the Statute of Frauds shall therefore not be addressed by the Court.

Accordingly, IT IS HEREBY ORDERED that Defendant Protective Life Insurance Company's Motion for Summary Judgment is GRANTED.