Pearson v. Geico Casualty ( 2020 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT November 6, 2020
_______________________________________
Christopher M. Wolpert
Clerk of Court
ROGER PEARSON, on behalf of
himself and all others similarly
situated; LONNIE McRAE, on
behalf of himself and all others
similarly situated,
Plaintiffs - Appellants.
v. No. 19-1303
(D.C. No. 1:17-CV-02116-CMA-MEH)
GEICO CASUALTY COMPANY, (D. Colo.)
Defendant - Appellee.
_________________________________________
ORDER AND JUDGMENT *
__________________________________________
Before HOLMES, BACHARACH, and MORITZ, Circuit Judges.
___________________________________________
This case arose out of insurance claims by Mr. Roger Pearson and
Mr. Lonnie McRae after their cars were “totaled” in separate accidents. In
responding to the claims, the insurer (Geico Casualty Co.) sent checks to
the insureds. The insureds cashed the checks, but then claimed that the
insurer had violated a state statute (Colo. Rev. Stat. § 10-4-639(1))
* This order and judgment does not constitute binding precedent except
under the doctrines of law of the case, res judicata, and collateral estoppel.
But the order and judgment may be cited for its persuasive value if
otherwise appropriate. Fed. R. App. P. 32.1(a); 10th Cir. R. 32.1(A).
requiring insurers to reimburse policyholders for what they had paid in
registering and titling the two cars. According to the insureds, the insurer
paid less than the actual fees.
When the insurer denied a request to pay the actual fees incurred, the
insureds sued for bad faith under Colorado’s common law and statutes. 1
The district court directed the parties to show cause why their claims were
not barred by an accord and satisfaction. With the benefit of additional
briefing, the court granted summary judgment to the insurer, concluding
that the insureds’ version of the facts would trigger an accord and
satisfaction. The insureds appeal, and we affirm.
1. After the insurer paid only part of the registration and title fees,
the insureds sued.
With each check, the insurer stated that the payments covered “the
Base Value of [the insureds’] vehicle, plus any applicable fees and
adjustments.” Appellants’ Restricted App’x, vol. 1, at 36, 38. With the
statements, the insurer provided lists of the covered items. One of these
items was called “State and Local Regulatory Fees.” Appellant’s App’x,
vol. 1, at 133, 140. For this item, the insurer stated that it was paying
1
The insureds also sued under the Colorado Consumer Protection Act,
but the district court dismissed this claim and the insureds do not challenge
that dismissal.
2
$26.50. 2 Id. According to the insureds, however, the actual fees were at
least $67.96 for one car and $70.93 for the other. Id. at 101–03.
2. The insureds’ claims are barred by the doctrine of accord and
satisfaction.
In this appeal, the parties disagree on whether the insureds’ cashing
of the checks constituted an accord and satisfaction.
A. We apply the summary-judgment standard that governed in
district court.
Because the district court decided this issue through summary
judgment, we engage in de novo review, applying the same standard that
governed in district court. Patterson v. PowderMonarch, LLC, 926 F.3d
633, 637 (10th Cir. 2019). On factual issues, we view the evidence in the
light most favorable to the insureds. Cowdrey v. City of Eastborough, Kan.,
730 F.2d 1376, 1377 n.2 (10th Cir. 1984). On legal issues, we apply the
substantive law of the forum state (Colorado). See Scottsdale Ins. Co. v.
Tolliver, 636 F.3d 1273, 1277 (10th Cir. 2011).
B. In applying this standard, we apply Colorado’s test for an
accord and satisfaction.
Under Colorado law, a party owing money can try to satisfy an
obligation by offering less than what is owed. See United States Welding,
Inc., v. Advanced Circuits Inc., 420 P.3d 278, 281, 283 (Colo. 2018). If the
2
For one of the cars, the insurer might have paid more than $26.50.
For purposes of this appeal, however, we assume for the sake of argument
that the insurer paid only $26.50 for each car’s title and registration.
3
offer is accepted, the original obligation is altered through an accord and
satisfaction. Id.To show an accord and satisfaction, the offering party must prove
that
 an offer was made to fully satisfy the claim and
 the offer was accepted.
Hudson v. American Founders Life Ins. Co. of Denver, 377 P.2d 391, 396
(Colo. 1962). If these elements are proven, an accord and satisfaction
would exist even if the offering party had paid less than what was actually
owed. R.A. Reither Constr., Inc. v. Wheatland Rural Elec. Ass’n, 680 P.2d
1342, 1345 (Colo. App. 1984).
C. We reject the insureds’ five arguments.
The insureds present five arguments against the existence of an
accord and satisfaction:
1. There was no meeting of the minds.
2. The insurer misrepresented or omitted material facts.
3. The insurer did not say that its offer would satisfy the statutory
obligation to pay the actual expenses incurred for registration
and title.
4. The characterization as an accord and satisfaction would
undermine public policy.
5. The insureds stated that they were owed more than $26.50 for
registration and title.
4
We reject these arguments. The insurer offered $26.50 for each car
with a statement that this amount would represent full payment for the
registration and title fees. This statement wasn’t false or misleading.
Though the insureds insisted on more, they cashed the checks, triggering
an accord and satisfaction under Colorado law. Enforcing this accord and
satisfaction wouldn’t undermine the state’s public policy irrespective of
any possible dispute over the sufficiency of the payment.
1. A meeting of the minds existed.
Denying a meeting of the minds, the insureds argue that they were
unaware of the insurer’s statutory obligation to pay the actual registration
and title fees. This argument is misguided.
A meeting of the minds requires a mutual understanding of the facts,
not the law. See Metropolitan State Bank v. Cox, 302 P.2d 188, 193 (Colo.
1956) (stating that a mutual mistake of fact is required to vitiate a
contract); Bowles v. Miller, 40 P.2d 243, 245 (Colo. 1935) (“Mistake which
entitles the party asserting the same to relief . . . is a mistake of fact, not a
mistake of law.”); see also First Nat. Bank v. Shank, 128 P. 56, 59 (Colo.
1912) (“A mistake as to the legal effect of the contract, where the language
used is such as intended is not available as a defense at law nor grounds
for reformation.”). Though the insureds might not have known about the
insurer’s alleged statutory obligation, no fact-finder could reasonably infer
a factual misunderstanding: The insurer characterized the payment as a
5
“total loss settlement,” and any misunderstanding would have involved the
law rather than the facts.
The insureds suggest that even if the misunderstanding had involved
the law, the insurer should have disclosed its statutory obligation to pay
the actual registration and title fees. But the insureds were responsible for
knowing the law; they couldn’t prevent an accord and satisfaction by
assuming that the insurer would tell them what the statutes required. See
Boyles Bros. Drilling Co. v. Orion Indus., Ltd., 761 P.2d 278, 281 (Colo.
App. 1988) (stating that a mistake of law, induced by another’s
misrepresentation about a statute, wouldn’t ordinarily provide relief
because parties cannot ordinarily rely on what others say about the law).
In their reply brief, the insureds argue for the first time that the
Colorado statute requires insurers to ask the insureds the amount of their
fees for registration and title. But the insureds waived this argument by
failing to assert it until the reply brief. In re Motor Fuel Temperature Sales
Practices Litig., 872 F.3d 1094, 1112 n.5 (10th Cir. 2017).
2. The insurer did not misrepresent or omit facts in
communicating the offers to the insureds.
The insureds also point out that an accord and satisfaction cannot be
based on a fraudulent offer. See North American Union v. Montenie, 189 P.
16, 17 (Colo. 1920). According to the insureds, they were misled by the
references to unspecified “State and Local Regulatory Fees” and “any
6
applicable fees.” Appellants’ App’x, vol. 1, at 53–54, 113, 120;
Appellant’s Restricted App’x, vol. 1, at 36, 39. The insureds emphasize
that the insurer failed to specify which fees were being paid, suggesting
that the insurer had fraudulently concealed the statutory obligation to pay
title and registration fees.
This suggestion is invalid: The insurer didn’t say anything to suggest
that it was paying all of the fees required by the statute. 3
3. The insureds were bound to understand that cashing the
checks would constitute satisfaction of their claims.
The insureds also argue that the insurer didn’t say that cashing the
checks would constitute a release. But an accord and satisfaction does not
require a specific statement that claims have been released. For example,
3
The insureds twice state that the insurer had a duty “to inform
insureds of the extent of coverage.” Appellant’s Opening Br. at 18–19. But
the insureds do not develop an argument that the insurer breached such a
duty. See Femedeer v. Haun, 227 F.3d 1244, 1255 (10th Cir. 2000)
(“Perfunctory complaints that fail to frame and develop an issue are not
sufficient to invoke appellate review.”). In any event, the Colorado statute
appears to specify when an insurer must disclose coverage. For example,
the statute expressly requires insurers to “clearly disclose . . . what
benefits are provided relating to towing or storage of a motor vehicle.”
Colo. Rev. Stat. § 10-4-639(2). For reimbursement of registration and title
expenses, however, the statute says nothing about disclosure to the insured.
See Colo. Rev. Stat. § 10-4-639(1).
7
cashing checks characterized as “payment in full” would suffice. Anderson
v. Rosebrook, 737 P.2d 417, 419 (Colo. 1987).
Here, any reasonable fact-finder would find the required element
because
 the insurer tendered checks for a “total loss settlement” and
 the insureds were bound to understand that the offer was to
fully satisfy their claims.
4. Characterization as an accord and satisfaction would not
undermine the state’s public policy.
The insureds also contend that characterization as an accord
satisfaction would undermine the public policy reflected in the state statute
(Colo. Rev. Stat. § 10-4-639(1)). For this contention, the insureds argue
that the statutory aim is to provide full reimbursement for what they
actually paid for registration and title.
We disagree. The statute does require payment of registration and
title fees. But the statute does not say that insurers
 are powerless to amend this obligation through an accord and
satisfaction or
 must tell insureds of this obligation.
Instead, state law supports the freedom of parties to contract as they wish
and to settle disputes. See Ravenstar, LLC v. One Ski Hill Place, LLC, 401
P.3d 552, 555 (Colo. 2017) (recognizing “a strong policy of freedom of
contract”); Colo. Ins. Guar. Ass’n v. Harris, 827 P.2d 1139, 1142 (Colo.
8
1992) (recognizing a policy favoring settlement of disputes). We have little
reason to upend the parties’ agreement to pay and accept $26.50 to fully
settle the claim for registration and title fees. See McCracken v.
Progressive Direct Ins. Co., 896 F.3d 1166 (10th Cir. 2018) (concluding
that Colorado’s public policy of encouraging the settlement of insurance
disputes supported the decision to enforce a release despite the policy of
ensuring compensation to insureds). 4
5. An accord and satisfaction existed even if the insureds had
wanted more money for the registration and title.
The insureds also focus on the payment for the second loss of a car.
By the time that they received the check for this car, the insureds had
allegedly learned that the insurer was obligated to pay more than $26.50
for registration and title. With this knowledge, the insureds requested more
money. But they cashed the checks anyway. By cashing the checks, the
insureds accepted the payments despite the request for more money. See
Anderson v. Rosebrook, 737 P.2d 417, 419–21 (Colo. 1987) (en banc) (“In
the case of a check offered as ‘payment in full’ for a disputed amount,
generally a creditor cannot avoid the consequences of accepting the accord,
4
The district court cited Mischek v. Mutual Automobile Ins. Co., 770
Fed. App’x 917 (10th Cir. 2019), and the parties disagree about the
applicability of this opinion. But Mischek is not precedential. See 10th Cir.
R. 32.1(A). So the disagreement about Mischek’s applicability does not
affect our decision.
9
i.e., cashing the check, by declaring that he does not assent to the
condition attached by the debtor.”).
3. The insureds were not prejudiced by the sua sponte grant of
summary judgment.
The insureds also point out that the insurer didn’t move for summary
judgment. Though a district court can consider summary judgment sua
sponte, the court must comply with the Federal Rules of Civil Procedure.
These rules require the court to identify for the parties the material facts
that may not be genuinely disputed. Fed. R. Civ. P. 56(f)(3).
For the sake of argument, we may assume that the district court
didn’t comply with this requirement. Even with this assumption, we could
reverse only if noncompliance with the rules had been prejudicial. See
First Am. Kickapoo Operations, L.L.C. v. Multimedia Games, Inc., 412
F.3d 1166, 1170 (10th Cir. 2005). In this case, any possible noncompliance
would not have been prejudicial.
The insureds disagree, arguing that without compliance, they
couldn’t disprove acceptance of the checks as satisfaction of the insurer’s
duty to pay. But in district court, the insureds submitted declarations
stating that they had only conditionally accepted the checks. The district
court considered the affidavits, but concluded that the insureds’ cashing of
the checks showed acceptance of the insurer’s $26.50 for registration and
10
title. In the face of this conclusion, the insureds don’t identify any other
evidence that would have created a material factual dispute.
In their reply brief, the insureds also argue for the first time that,
upon proper notice, they would have presented evidence of the insurer’s
bad faith and coercive tactics to induce acceptance of the check for the
second car. But the insureds waived this argument because they didn’t
make it until their reply brief. See p. 6, above.
4. We affirm the grant of summary judgment.
The district correctly applied the doctrine of accord and satisfaction,
and the insureds have not shown prejudice even if the district court failed
to identify the lack of a genuine factual dispute. So we affirm the grant of
summary judgment to the insurer.
Entered for the Court
Robert E. Bacharach
Circuit Judge
11