Appeal from the 269th District Court Harris County, Texas
Trial Court Cause No. 2012-47829
consists of Justices Boyce, Christopher, and Jamison.
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.
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.
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.
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.
Westview's Acquisition of the Note and the
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.
Pre-claim Discussions of Insurance Coverage
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.
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
Post-claim Discussions of Insurance Coverage
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.
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
The Claims Against Landmark and King-Phillips
August 2012, Westview sued Landmark and
King-Phillips. 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.
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.
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.
The Sanctions Against Yetiv
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 privilege, and the trial court
this ruling, Yetiv emailed Landmark's attorney Bruce
Wilkin and threatened to present disciplinary charges against
him and his firm unless by noon on the next business day
Wilkin announced in open court that there was no factual or
legal basis for the argument that the crime-fraud exception
applied; apologized for raising the argument; and withdrew it
entirely. Wilkin did not do so, and after both sides rested,
Landmark's lead counsel brought the email to the trial
court's attention. The trial court ordered Yetiv to show
cause why it should not sanction him under its inherent
powers or "take appropriate action" under Canon
3(D) of the Texas Code of Judicial Conduct.
the show-cause hearing, the trial court found that Yetiv
violated Rule 4.04 of the Texas Disciplinary Rules of
Professional Conduct. It ordered Yetiv to complete twelve
hours of continuing education in ethics and ordered the clerk
of the court to send the transcript of the show-cause hearing
and certified copies of the exhibits and the court's
orders to the Chief Disciplinary Counsel of the State Bar of
Texas. In addition, the trial court sanctioned Yetiv under
its inherent powers, ordering him to pay the defendants'
attorneys' fees "incurred as a result of the
proceedings arising from" the email. Yetiv did not
controvert King-Phillips's evidence that it reasonably
incurred $551 in attorney's fees, and the trial court
ordered that amount paid directly to King-Phillips's lead
counsel. Because Yetiv controverted the amount of
Landmark's attorneys' fees, the trial court held
another evidentiary hearing, after which it ordered Yetiv to
pay Landmark's attorneys' fees of $4, 378 into the
registry of the court. The trial court then rendered the
final judgment incorporating the partial summary judgments,
the directed verdict, the jury's verdict, and the
sanctions orders, and allowed Westview's motion for new
trial on factual-sufficiency grounds to be overruled by
operation of law.
challenges the trial court's rulings granting Landmark
partial summary judgment on coverage issues; granting
King-Phillips a directed verdict on Westview's DTPA,
Insurance Code, and negligent-misrepresentation claims on
limitations grounds; and excluding evidence that Landmark
issued an endorsement to the policy making FirstVal a named
insured with respect to Kingsgate Village Apartments.
Westview additionally raises several complaints of charge
error, and challenges the factual sufficiency of the evidence
to support each of the jury's answers pertaining to
Westview's claims. Yetiv challenges the trial court's
sanctions against him.
Westview is the primary appellant, we address its issues
Summary Judgment Regarding the Scope of Coverage
movant for traditional summary judgment has the burden of
showing that there is no genuine issue of material fact and
that it is entitled to judgment as a matter of law.
Tex.R.Civ.P. 166a(c); Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex.
2009). If the movant initially establishes a right to summary
judgment on the issues expressly presented in the motion,
then the burden shifts to the nonmovant to present to the
trial court any issues or evidence that would preclude
summary judgment. See City of Houston v. Clear Creek
Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979). We
review a summary judgment de novo. See Provident Life
& Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215
(Tex. 2003). When reviewing a traditional summary judgment,
we consider all the evidence in the light most favorable to
the nonmovant, crediting evidence favorable to the nonmovant
if a reasonable factfinder could, and disregarding contrary
evidence unless a reasonable factfinder could not. See
Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex.
The policy's terms
insurance policy generally is governed by the same rules of
construction that apply to other contracts. RSUI Indem.
Co. v. The Lynd Co., 466 S.W.3d 113, 118 (Tex. 2015). As
with any written contract, our primary concern is to identify
the parties' intentions as expressed in the document.
See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223,
229 (Tex. 2003). We accordingly begin our analysis with the
policy's language. See JAW The Pointe, L.L.C. v.
Lexington Ins. Co., 460 S.W.3d 597, 602 (Tex. 2015)
("In determining a question of insurance coverage, we
look first to 'the language of the policy because we
presume parties intend what the words of their contract
say.'" (quoting Gilbert Tex. Constr., L.P. v.
Underwriters at Lloyd's London, 327 S.W.3d 118, 126
(Tex. 2010) (sub. op.))). We strive to harmonize the entire
agreement, giving effect to all of the policy's words and
provisions so that none are rendered meaningless.
Id. at 603.
parties offer differing constructions of the policy but only
one is reasonable, then the policy is unambiguous and we will
adopt that construction. See RSUI Indem. Co., 466
S.W.3d at 118. But if the policy's provisions are unclear
or inconsistent, and after applying the pertinent rules of
construction, more than one interpretation is reasonable,
then the contract is ambiguous. See, e.g., J.M.
Davidson, Inc., 128 S.W.3d at 229 (addressing contracts
generally); Gonzalez v. Mission Am. Ins. Co., 795
S.W.2d 734, 737 (Tex. 1990) (specifically addressing
insurance policies). An ambiguous policy is construed against
the insurer and in favor of coverage. See, e.g.,
Gonzalez, 795 S.W.2d at 737; RSUI Indem.
Co., 466 S.W.3d at 118. Whether a contract is
ambiguous is a question of law for the court to decide; the
parties' mere disagreement about the contract's
meaning does not create an ambiguity. See In re Deepwater
Horizon, 470 S.W.3d 452, 464 (Tex. 2015).
The policy's "named insured"
maintains that because it is the owner of the Westview Forest
Apartments, the Landmark policy affords it the same
"named insured" coverage provided to the apartment
complex's prior owner TTSF. But at all times from
Westview's purchase of the note through the date of the
fire, the policy listed as named insureds only TTSF and its
affiliated companies having some interest in one or more of
four apartment complexes.
Westview foreclosed on the property, it did not automatically
acquire the same coverage afforded to TTSF. The policy
states, "Your rights and duties under this policy may
not be transferred without our written consent except in the
case of death of an individual named insured, " and it
defines "'you' and 'your' [to] refer to
the Named Insured shown in the Declarations." It is
undisputed that Landmark never consented in writing to the
transfer of TTSF's rights under the policy to Westview.
Thus, under the policy's unambiguous terms, Landmark did
not provide Westview "named insured" coverage.
The policy's "mortgageholders"
policy provision-the "mortgageholders"
provision-affords lesser coverage to an entity other than the
named insured. The scope of that coverage is shown by the
provision's placement in the policy and by its terms.
Landmark policy contains two "coverage parts, "
namely, commercial inland marine and commercial property.
Each coverage part includes a variety of "coverage
forms." The commercial inland marine coverage part
includes "accounts receivable" and "valuable
papers and records" coverage forms. The commercial
property coverage part includes "business income"
and "building and personal property" coverage
forms. The "mortgageholders" provision is found
only in the "building and personal property"
mortgageholders provision states, "We will pay for
covered loss of or damage to buildings and structures to each
mortgageholder shown in the Declarations in their order of
precedence, as interests may appear." Under this
unambiguous language, a mortgageholder has coverage for loss
of or damage to Westview Forest Apartments'
"buildings and structures, " as that expression is
used in the policy.
declarations identify FirstVal as the mortgageholder on the
Westview Forest and Kingsgate Village properties, and when
FirstVal sold the note to Westview, Westview became the
mortgageholder of the Westview Forest Apartments. Although
the declarations page was not amended to add Westview,
Landmark nevertheless honored FirstVal's assignment to
Westview of FirstVal's interest in the policy as the
mortgageholder of the Westview Forest Apartments. Landmark
accordingly afforded Westview the coverage that the policy
provided to a mortgageholder, that is, coverage for loss of
or damage to Westview Forest Apartments' "buildings
Westview's arguments for broader coverage
contends that the trial court erred in granting partial
summary judgment holding that the policy provided coverage to
Westview only as a mortgageholder. According to Westview, it
is entitled to named-insured coverage because (a) it
succeeded to FirstVal's rights under the policy's EPI
and declarations; (b) TTSF assigned the policy and all other
property to the mortgageholder, including insurance proceeds
from its business-interruption, accounts-receivable, and
valuable-papers coverage; (c) TTSF agreed to procure the
insurance for the mortgageholder's benefit; and (d) Texas
Insurance Code section 862.055 entitles a mortgageholder to
collect fully on a fire-insurance policy if the named insured
cannot do so. We discuss each argument in turn.
a. A mortgageholder's coverage under the
policy's EPI and declarations
policy's coverage of FirstVal's interest in Westview
Forest Apartments was transferred to Westview, but what was
the scope of that coverage? According to Westview, the
policy's EPI and declarations give a mortgageholder the
same coverage as that afforded to a named insured.
however, has made mistaken assumptions about the terms used
in these documents. The EPI concerning Westview Forest
Apartments identified TTSF as the only "named
insured" and identified FirstVal as an "additional
interest." According to Westview, an "additional
interest" is the same as an "additional named
insured" or an "additional insured, " and as
such, an "additional interest" is entitled to the
same coverage provided to the named insured. This is
insured" and "additional named insured" are
terms with well-established technical meanings in insurance
policies. See W. Indem. Ins. Co. v. Am. Physicians Ins.
Exch., 950 S.W.2d 185, 188 (Tex. App.-Austin 1997, no
writ). An "additional insured" is one whose
status-such as that of an employee or a household
member-places him within the policy's definition of
"insured." See id. at 189. An
"additional named insured" is one who is
specifically identified as a named insured to an
already-existing policy. See id. The EPI contained a
box to be filled in with the identity of any "additional
named insured(s), " and tellingly, the box is empty.
than characterizing FirstVal as an "insured, " the
EPI described FirstVal only as having an "additional
interest." As used in this context, "interest"
means "a stake, share, or involvement in an undertaking,
esp. a financial one." New Oxford American Dictionary
905 (Angus Stevenson & Christine Lindberg, eds., 3d ed.
2010). This definition describes FirstVal's interest as a
mortgageholder because when the EPI was issued, FirstVal had
a security interest in the insured property. FirstVal's
financial interest as a mortgageholder is the only interest
that it ever had in Westview Forest Apartments, and that is
the only interest it assigned to Westview.
argument regarding the policy's declarations follows the
same lines as its argument about the EPI, and fails for the
same reason. When the fire occurred, the declarations
identified only the TTSF companies as the named insureds,
listed FirstVal only as "mortgage holder."
Moreover, the declarations state, "In return for the
payment of the premium, and subject to all the terms of
this policy, we agree with [TTSF] to provide the
insurance as stated in this policy." Under the
policy's terms, the coverage provided to mortgagees is
specified in the mortgageholders provision, and that coverage
is narrower than the coverage provided to the named insured.
Coverage under TTSF's assignment of its policy to the
next contends that if a mortgagor has assigned its policy to
the mortgagee, then the mortgagee is entitled to collect all
coverages included in the policy, including proceeds payable
for business interruption, loss of accounts receivable, and
loss of or damage to valuable papers. The only case it cites
in support of this proposition is Peacock Hospitality,
Inc. v. Association Casualty Insurance Co., 419 S.W.3d
649, 652 (Tex. App.-San Antonio 2013, no pet.). We find no
such holding in that case, which is factually
distinguishable. Peacock did not involve demands for
coverage for business interruption, accounts receivable, or
valuable papers. The coverage dispute in Peacock
concerned only the amount due for building repairs, and here,
Landmark and Westview agreed on the amount to be paid to
replace the leasing office. Further, Landmark's policy
provided that the TTSF's rights could not be transferred
without Landmark's written consent, which was never
Coverage implied by TTSF's agreement to procure insurance
for the mortgagee's benefit
also contends that under Texas law, a mortgagee can collect
on the mortgagor's insurance policy if the mortgagor
agreed to procure insurance for the mortgagee's benefit.
In support of this position, Westview cites several cases
holding that if a security agreement requires the mortgagor
to procure insurance for the mortgagee's benefit and the
policy contains no such provision, then equity will imply its
existence. See, e.g., Beneficial Standard Life
Ins. Co. v. Trinity Nat'l Bank, 763 S.W.2d 52, 55
(Tex. App.-Dallas 1988, writ denied) (op. on reh'g);
Cont'l Ins. Co. v. Stewart & Stevenson Servs.,
Inc., 306 S.W.2d 415, 420 (Tex. Civ. App.-Houston 1957,
writ ref'd n.r.e.); Fid. & Guar. Ins. Corp. v.
Super-Cold Sw. Co., 225 S.W.2d 924, 927 (Tex. Civ.
App.-Amarillo 1949, writ ref'd n.r.e.). According to
Westview, it can collect all coverages afforded by the policy
because the deed of trust between TTSF and the original
mortgagee required TTSF to procure insurance for the
mortgagee's benefit. Stated differently, Westview
contends that it has an equitable lien on the proceeds of all
of coverage available to the named insured. Cf. Trinity
Nat'l Bank, 763 S.W.2d at 54-55.
equitable lien is imposed on insurance proceeds when (1) the
named insured owns property, (2) a third party has a secured
interest in the property, (3) the named insured agreed to
protect the third-party's security interest by obtaining
insurance with a loss-payable clause in the third party's
favor, and (4) the named insured failed to procure the agreed
coverage. See id. In those circumstances,
the third party is entitled to an equitable lien in the
amount of the outstanding secured debt on the insurance
proceeds under the principle that "equity treats that as
done which should have been done." Super-Cold Sw.
Co., 225 S.W.2d at 927. The equitable lien then fulfills
the missing loss-payable clause's purpose "to
protect the security interest of one who has advanced money
to others for the purchase of property" by allowing the
third party to recover insurance proceeds up to the amount of
the outstanding debt "so that the mortgagee, who has
advanced money on the property, will be protected."
Helmer v. Tex. Farmers Ins. Co., 632 S.W.2d 194, 196
(Tex. App.-Fort Worth 1982, no writ). Compare Trinity
Nat'l Bank, 763 S.W.2d at 55 (holding that a
mortgageholder could not recover under the equitable-lien
doctrine where the property owner's debt had been
extinguished by the mortgageholder's foreclosure)
with Wade v. Seeburg, 688 S.W.2d 638, 639 (Tex.
App.-Texarkana 1985, no writ) (holding that, under the
equitable-lien doctrine, the trial court correctly awarded
the secured party the amount of the outstanding debt). Thus,
an equitable lien will not be imposed if the named insured no
longer owns the property or if the debt which the property
secured has been extinguished. See Chartis Specialty Ins.
Co. v. Tesoro Corp., 113 F.Supp.3d 924, 938 (W.D. Tex.
2015), aff'd sub nom. AIG Specialty Ins. Co. v.
Tesoro Corp., 840 F.3d 205 (5th Cir. 2016);
Helmer, 632 S.W.2d at 196.
Westview produced some evidence that TTSF agreed to procure
insurance covering the mortgageholder's interest,
Westview did not establish that the other requirements for
imposing an equitable lien were satisfied. To the contrary,
the evidence conclusively establishes that TTSF fulfilled its
obligation to obtain a policy containing a loss-payable
clause protecting the mortgageholder's interest and that,
at the time of loss, TTSF neither owned the property nor owed
a particular amount on the mortgageholder's note.
Westview therefore is not entitled to an equitable lien on
insurance proceeds payable under the named insured's
Coverage mandated by Texas Insurance Code section
Westview represents that Texas Insurance Code section 862.055
"entitles lenders to collect fully on a fire insurance
policy if the named insured cannot do so, as was the case
here." But this statute actually says that
"[t]he interest of a mortgagee" under a
fire-insurance policy "may not be invalidated" by
the mortgagor's or property owner's act or neglect,
or by an occurrence beyond their control. See Tex.
Ins. Code Ann. § 862.055 (West 2009).
statute does not apply here because Westview's interest
as a mortgagee was not invalidated. To the contrary, Westview
was treated as a mortgagee under the policy, and in that
capacity, was paid more than $334, 000.
all of the foregoing reasons, we overrule Westview's
challenge to the trial court's partial summary judgment
on the scope of its coverage under the policy.
Directed Verdict on ...