Date: 03-31-2007

Case Style: BDB Interests, L.C. d/b/a Gulf Coast Nissan and Steve Blanchard v. Arcadia Financial, Ltd.

Case Number: 14-06-00055-CV

Judge: Leslie B. Yates

Court: Texas Court of Appeals for the Fourteenth District on appeal from the County Court at Law No. 1 and Probate Court, Brazoria Count

Plaintiff's Attorney:

Donald L. Turbyfill and Deborah Colleen Simm Riherd of Devlin, Naylor & Turbyfill, P.L.L.C., Houston, Texas for Arcadia Financial LTD

Defendant's Attorney:

Michael Y. McCormick and Michael T. Fuerst, Houston, Texas forBDB Interest, L.C. dba Gulf Coast Nissian and Steve Blanchard Nissian

Description:

Gulf Coast, a car dealer, entered into a "Master Dealer Agreement" ("MDA") with Arcadia, a financing company, under which Gulf Coast agreed to assign retail sales installment contracts arising from car sales ("Customer Obligations") to Arcadia. Under certain circumstances outlined in the MDA, however, Arcadia could demand Gulf Coast repurchase Customer Obligations. This appeal concerns a breach of contract action by Arcadia against Gulf Coast for failure to repurchase a Customer Obligation under the MDA.

On September 3, 2002, Robert C. Jackson and his wife, Sarah M. Jackson, acting as his attorney-in-fact under a durable power of attorney, purchased a car from Gulf Coast (the "Jackson contract"), though Mr. Jackson was not present during the sale process. Mrs. Jackson financed the car, and, in its role as an agent for Servco Life Insurance Company ("Servco"), Gulf Coast included in the financing agreement an option to purchase credit life insurance that would cover any remaining payments on the vehicle if the policyholder died. Mrs. Jackson chose to purchase the insurance in Mr. Jackson's name for $1,098.61, which Gulf Coast added to the sales price and included in calculating payments under the financing agreement. Though the record contains no copy of the Servco insurance policy, the parties appear to agree the policy had a sixty-five-year age limit, and they do not dispute that Mr. Jackson was seventy-three years old at the time of the purchase. Mrs. Jackson testified that Gulf Coast never mentioned an age limit for the policy or that her husband may have exceeded such limit. Gulf Coast does not dispute this claim but maintains Mrs. Jackson withheld her husband's age.[1] Mrs. Jackson asserts that during the closing, she gave Gulf Coast a copy of Mr. Jackson's Texas driver's license. Gulf Coast admits it had possession of the license but claims it did not realize during the closing that Mr. Jackson exceeded the age limit for the policy. Mrs. Jackson never received a copy of a credit life insurance policy. After the closing, pursuant to the MDA, Gulf Coast assigned the Jackson contract to Arcadia. In return, Arcadia paid Gulf Coast the required consideration under the MDA, including the amount earmarked for the insurance.

On November 19, 2002, less than three months after the sale, Mr. Jackson died from "Advanced Alzheimer's" disease. On November 30, 2002, without notifying Mrs. Jackson, Gulf Coast made out a check to Arcadia refunding the $1,098.61 premium for Mr. Jackson's insurance policy. The following month, on December 2 or 3, 2002, Mrs. Jackson went to Gulf Coast seeking to collect on the insurance policy. According to Mrs. Jackson, the finance manager at Gulf Coast informed her for the first time that no policy ever issued for Mr. Jackson because he exceeded the policy's age limit. Gulf Coast concedes it never forwarded the premium to an insurance company to pay for a policy on Mr. Jackson. Mrs. Jackson also claims the finance manager said she would send the insurance premium back to Arcadia. After her visit to Gulf Coast, Mrs. Jackson said she repeatedly contacted Gulf Coast to confirm whether the finance manager had in fact sent the premium to Arcadia, but Gulf Coast employees "put [her] off many, many times." According to Mrs. Jackson, Gulf Coast failed to notify her it had sent the insurance premium to Arcadia or otherwise had not sent the premium to the insurance company to purchase the policy. Arcadia received the refund check on February 4, 2003 and applied the amount to reduce the principle balance on Mrs. Jackson's account.

Mrs. Jackson continued making payments to Arcadia through September 2003 but subsequently defaulted. In February 2004, Arcadia informed Gulf Coast that, according to its records, Mrs. Jackson had purchased a credit life insurance policy from Servco, but such policy had been cancelled because Mr. Jackson exceeded the age limit. Arcadia said Mrs. Jackson repeatedly told its representatives that Servco never contacted her in writing to inform her it cancelled the policy, and, as a result, she refused to make further payments on the Customer Obligation. Arcadia therefore demanded under the MDA that Gulf Coast repurchase the Jackson contract, alleging the following circumstances in the MDA had occurred: (1) the car buyer asserted a valid claim or defense against Arcadia that the buyer could assert against Gulf Coast, (2) certain warranties Gulf Coast made to Arcadia under the MDA proved untrue, and/or (3) Gulf Coast took, or failed to take, action affecting the validity or enforceability of the Jackson contract in the reasonable judgment of Arcadia. After Gulf Coast refused to repurchase the Jackson contract, Arcadia sued Gulf Coast for breach of the MDA under the above provisions. Gulf Coast filed a no-evidence motion for summary judgment, alleging Arcadia put forth no evidence of breach or damages. Arcadia responded with a traditional motion for partial summary judgment, contending no fact issues existed on the issues of breach and damages. The trial court denied Gulf Coast's no-evidence summary judgment and granted Arcadia's summary judgment without specifying any grounds. Gulf Coast now contends the trial court erred in granting summary judgment for Arcadia because no evidence exists that Gulf breached the MDA or that Arcadia incurred any damages as a result of Gulf Coast's alleged breach.

II. Standard of Review

The standard of review for a traditional motion for summary judgment is whether the successful movant at the trial level carried its burden of showing that there is no genuine issue of material fact and that judgment should be granted as a matter of law. See TEX. R. CIV. P. 166a(c); KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). The movant must conclusively establish all essential elements of his cause of action as a matter of law to be entitled to summary judgment. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). Evidence is conclusive only if reasonable people could not differ in their conclusions. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005). Once the movant establishes its right to summary judgment as a matter of law, the burden shifts to the non movant to present evidence raising a genuine issue of material fact, thereby precluding summary judgment. Clear Creek Basin Auth., 589 S.W.2d at 678B79. Under this traditional standard, this court must take as true all evidence favorable to the nonmovant and must make all reasonable inferences in the nonmovant's favor. See id.

When the trial court does not specify the basis for its summary judgment, we will affirm the judgment if any one of the theories advanced in the motion is meritorious. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004). In other words, the appealing party must show each independent ground alleged is insufficient to support the summary judgment granted. See Star Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995).

III. Analysis

The elements in a breach of contract claim include: (1) the existence of a valid contract, (2) the plaintiff performed or tendered performance, (3) the defendant breached the contract, and (4) the plaintiff was damaged as a result of the breach. Frost Nat'l Bank v. Burge, 29 S.W.3d 580, 593 (Tex. App.CHouston [14th Dist.] 2000, no pet.). The parties do not dispute the existence of a valid contract or performance. Rather, they dispute whether Gulf Coast breached the MDA by failing to repurchase the Jackson contract and whether Arcadia suffered any damages from an alleged breach. We address these issues in turn.

A. Breach of Contract

Section 6 of the MDA enumerates various circumstances under which Gulf Coast must repurchase Customer Obligations from Arcadia. In its motion, Arcadia claimed Gulf Coast breached its obligation to repurchase the Jackson contract after the circumstances in sections 6(b), (c), and (d) occurred. We must determine whether one of these provisions constitutes a proper basis for the trial court to have granted summary judgment for breach of contract. See Joe, 145 S.W.3d at 157.

We first address whether the trial court could have properly granted summary judgment for breach under Section 6(d). That section requires Gulf Coast to repurchase a Customer Obligation where A[Gulf Coast] has taken or takes any action or fails to take any action of any kind which affects the validity or enforceability of the Customer Obligation in the reasonable judgment of Acadia." As a threshold matter, we note that the language of Section 6(d) is akin to a Asatisfaction clause," and, accordingly, we apply the relevant law governing such clauses. See Young v. Neatherlin, 102 S.W.3d 415, 420 (Tex. App.CHouston [14th Dist.] 2003, no pet.) (applying satisfaction clause principles to provision in contract for sale and transport of homes that allowed seller to deem contract void and grant refund if, in seller's Aopinion," obstacles and/or circumstances made delivery of houses infeasible); see also Commc'ns Transmission, Inc. v. Tristar Commc'ns, Inc., 798 F. Supp. 406, 408 (W.D. Tex. 1992) (applying Texas law and holding that contract provision stating that one party had right to terminate contract if, based on that party's Asole and exclusive determination," other party's service became Aunacceptable," constituted type of satisfaction clause). In cases involving satisfaction clauses, A[t]he general rule is that the judgment of the party regarding the adequacy of performance will be upheld if made in good faith." Black Lake Pipe Line Co. v. Union Constr. Co., 538 S.W.2d 80, 88 (Tex. 1976). Where the contract grants one of the contracting parties the ultimate authority to determine whether a satisfaction clause has been satisfied, the Texas Supreme Court has adopted an objective, reasonableness standard for reviewing whether that party made its determination in good faith. See Tex. Dep't of Transp. v. Jones Bros. Dirt & Paving Contractors, Inc., 92 S.W.3d 477, 481 (Tex. 2002); see also Cranetex, Inc. v. Precision Crane & Rigging of Houston, Inc., 760 S.W.2d 298, 302 (Tex. App.CTexarkana 1988, writ denied). This standard does not seek to determine the actual mental satisfaction of the party making the determination; rather it examines whether the performance would satisfy a reasonable person. See Cranetex, 760 S.W.2d at 302.

Arcadia contends it exercised reasonable judgment in determining that Gulf Coast took or failed to take action affecting the validity or enforceability of the Jackson contract because Gulf Coast failed to (1) make an effort to purchase a life insurance policy on Mr. Jackson, namely by failing to forward the premium to an insurance company, and (2) inform Mrs. Jackson that no insurance policy issued on Mr. Jackson until after he died and she attempted to confirm coverage.[2] Therefore, Arcadia maintains that Gulf Coast, in refusing to repurchase the Jackson contract, breached its obligation under Section 6(d) as a matter of law. Gulf Coast counters that fact issues remain over whether Gulf Coast's actions or inactions were improper and whether Arcadia's determination was reasonable, given Mrs. Jackson's potentially Aunreasonable" actions and assumptions regarding the purchase of the vehicle and the insurance coverage. Gulf Coast asserts that Mr. Jackson merely applied for insurance, and, because he failed to qualify, Gulf Coast accordingly forwarded the premium to Arcadia to reduce the principal amount owed. Thus, Gulf Coast concludes the Jackson contract remains valid and enforceable because Arcadia still has all its rights and remedies under the contract against Mrs. Jackson. Gulf Coast further reasons that Aif Mrs. Jackson's actions were unreasonable . . . , then Arcadia's judgment as to the affect [sic] of Gulf Coast's actions on the validity and enforceability of the Jackson contract was likewise unreasonable."

Considering the summary judgment record, we conclude Gulf Coast has failed to raise a fact issue as to whether Arcadia acted reasonably in determining that Gulf Coast took or failed to take action affecting the validity or enforceability of the Jackson contract under Section 6(d) and thus whether Gulf Coast breached its obligation to repurchase under that provision. The uncontroverted evidence reveals that Arcadia demanded that Gulf Coast repurchase the Jackson contract after Mrs. Jackson defaulted. The evidence further shows Mrs. Jackson defaulted because of her inaccurate assumptions regarding the credit life insurance, which were due in large part to Gulf Coast's action or inaction. For example, it is undisputed that Gulf Coast failed to inform her that no policy issued until after she came to the dealership seeking to collect on such policy. Significantly, Mrs. Jackson provided Gulf Coast Mr. Jackson's driver's licenseCclearly reflecting his disqualifying ageCduring the sales process some three months before she came to collect on the policy. Moreover, after she learned no policy had issued, Mrs. Jackson never received final word from Gulf Coast on whether it refunded the insurance premium to Arcadia or forwarded the premium to an insurance company to purchase a policy on Mr. Jackson. As a result, Mrs. Jackson testified that she presumed, albeit inaccurately, that an insurance policy she paid for would cover the remaining payments. As such, the evidence shows that Gulf Coast's repeated, uncontroverted failures to inform Mrs. Jackson as to the status of the credit life insurance policy directly influenced her default on the contract with Arcadia and affected Arcadia's ability to enforce the contract.[3] Therefore Arcadia presented evidence that it acted reasonably in determining that Gulf Coast took action or inaction affecting the validity or enforceability of the Jackson contract and thus demanding repurchase from Gulf Coast. See Anahuac, Inc. v. Wilkes, 622 S.W.2d 634, 637 (Tex. App.CAustin 1981, no writ) (holding that general contractor was justified in terminating contract pursuant to satisfaction clause for its dissatisfaction with work of subcontractor because of undisputed inaccuracies in subcontractor's construction work). Compare Cranetex, Inc. v. Precision Crane & Rigging of Houston, Inc., 760 S.W.2d 298, 302 (Tex. App.CTexarkana 1988, writ denied) (holding that dissatisfaction was unreasonable because record showed Ano bona fide basis for dissatisfaction").

Furthermore, Gulf Coast's bare assertion that Arcadia continues to possess rights and remedies under the Jackson contract fails to create a genuine issue of material fact regarding whether Arcadia acted unreasonably in determining that Gulf Coast's actions or inactions affected the validity or enforceability of the contract. See Clear Creek Basin Auth., 589 S.W.2d at 679. Gulf Coast's additional contentions focus solely on Mrs. Jackson's conduct and disregard its own uncontroverted actions and omissions throughout the sales process and thereafter on which Mrs. Jackson relied. Therefore, we conclude the summary judgment evidence establishes Arcadia acted reasonably in determining that Gulf Coast took action or inaction affecting the validity and enforceability of the Jackson contract and therefore demanding Gulf Coast repurchase the contract under 6(d). Because such demand compelled Gulf Coast to repurchase the Jackson contract under Section 6(d), its failure to do so constituted a breach of the MDA as a matter of law. Accordingly, we hold that the trial court could have properly granted summary judgment on this ground. Because we conclude Section 6(d) constituted a proper basis for summary judgment on the element of breach, we need not address the other potential grounds. See Joe, 145 S.W.3d at 157.

B. Causation and Damages

Gulf Coast additionally asserts that Arcadia did not suffer any damages because Arcadia is a secured creditor and may pursue various remedies against Mrs. Jackson for defaulting. Gulf Coast argues that any actions or omissions it may have made as to the Jackson contract did not cause or contribute to Arcadia's damages. Gulf Coast maintains, rather, that Mrs. Jackson's own representations, actions, and fraudulent conduct resulted in her default on the Customer Obligation and thereby caused Arcadia's damages. Arcadia counters that Section 10 of the MDA expressly provides that Arcadia need not Aexhaust its rights and remedies under [the Jackson contract] or against other persons or collateral before being entitled to payment in accordance with the Dealer's obligations hereunder." Additionally, Arcadia asserts that the parties stipulated to the amount of damages as the repurchase value of a Customer Obligation as defined by the MDA. Arcadia contends that such damages arose from Gulf Coast's failure to repurchase the Jackson contract in breach of the MDA. We agree with Arcadia. Gulf Coast's contention that Arcadia has shown no damages because it possesses remedies as a secured creditor ignores the express language of Section 10 of the MDA, which provides that Arcadia need not pursue any potential remedies under the Jackson contract or against any person or Acollateral." Moreover, parties to a contract may stipulate to the amount of damages to be recovered in the event of a breach. Aguiar v. Segal, 167 S.W.3d 443, 455 (Tex. App.CHouston [14th Dist.] 2005, pet. denied). Such an agreement binds the parties and furnishes the measure of damages. Id. As noted, Arcadia established Gulf Coast's obligation to repurchase the Jackson contract under MDA Section 6(d). In the event Gulf Coast must repurchase a Customer Obligation like the Jackson contract under Section 6, that section expressly provides for the amount Gulf Coast Awill" pay Arcadia the unpaid balance of the Customer Obligation, plus any expenses of collection incurred by Arcadia after default by the Dealer, including attorneys' fees, less the unearned portion of the original finance charge included in the Customer Obligation . . . and [such amount] shall bear interest . . . from the date Arcadia requests repurchase until paid in full. Arcadia sought as damages an amount Anot less than the unpaid principal balance on the [Jackson] Contract, plus accrued and unpaid interest, and loan fees," as well as reasonable attorneys' fees and court costs. This amount derives from the express language in the MDA concerning the amount Gulf Coast must pay in the event of a repurchase, and Gulf Coast has offered no evidence to controvert this amount. Accordingly, we conclude there is no fact issue regarding causation or damages and hold that the trial court properly granted summary judgment on this ground.

Outcome: Accordingly, we overrule Gulf Coast’s sole issue and affirm the trial court’s judgment.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None