the Insurance Exchange Agency of Texas v. First Insurance Funding Corporation ( 2005 )

Reversed and Remanded and Memorandum Opinion filed July 26, 2005

Reversed and Remanded and Memorandum Opinion filed July 26, 2005.

In The

Fourteenth Court of Appeals

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NO. 14-04-00182-CV

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THE INSURANCE EXCHANGE AGENCY OF TEXAS, INC., Appellant

V.

FIRST INSURANCE FUNDING CORPORATION, Appellee

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On Appeal from the 11th District

Harris County, Texas

Trial Court Cause No. 03-03058

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M E M O R A N D U M   O P I N I O N

Appellee First Insurance Funding Corporation (AFirst Insurance@) sued appellant The Insurance Exchange Agency of Texas, Inc. (AInsurance Exchange Agency@) for breach of contract and other claims. Insurance Exchange Agency asserted it was not a party to the contracts in question and preserved this argument in its pleadings with a verified denial.  The trial court granted First Insurance=s motion for summary judgment.  Because we determine the summary-judgment evidence did not conclusively prove the company that signed the contracts was Insurance Exchange Agency, we reverse the trial court=s judgment and remand for further proceedings.

I.  Factual and Procedural Background

First Insurance originally filed this suit against AThe Insurance Exchange@ for alleged breach of contract, conversion and/or constructive trust, breach of statutory duties, fraud, and negligence. In its amended petition, First Insurance appears to have sued only AThe Insurance Exchange Agency of Texas, Inc.@  However, there is a potential ambiguity in the amended petition because it appears to refer to two defendants in the AParties@ section C (1) AInsurance Exchange,@ with a registered agent for service of process in Dallas, and (2) AThe Insurance Exchange Agency of Texas, Inc.,@ with a registered agent for service of process in Sugar Land.  However, because the amended petition previously had defined AInsurance Exchange@ to mean AThe Insurance Exchange Agency of Texas, Inc.@ throughout the pleading, it appears that the amended petition names only AThe Insurance Exchange Agency of Texas, Inc.@ as a defendant, although it confuses the issue by listing the same defendant twice as if it were two different defendants with different agents for service of process.  After Insurance Exchange Agency answered by pleading a general denial, verified denials, and affirmative defenses, First Insurance moved for a summary judgment on its breach-of-contract claim.  Insurance Exchange Agency responded by asserting, among other things, that it was not a party to the alleged contracts made the basis of this suit by First Insurance.

The trial court granted summary judgment in favor of First Insurance after Insurance Exchange Agency failed to appear at a scheduled hearing on the motion. The trial court later entered an amended final judgment awarding First Insurance a money judgment against ATHE INSURANCE EXCHANGE AGENCY OF TEXAS, INC. sometimes also known as THE INSURANCE EXCHANGE.@ Insurance Exchange Agency timely appealed, asserting the trial court erred in granting First Insurance=s motion for summary judgment.

II. Standard of Review

In reviewing a traditional motion for summary judgment, we take as true all evidence favorable to the nonmovant, and we make all reasonable inferences in the nonmovant=s favor.  Dolcefino v. Randolph, 19 S.W.3d 306, 916 (Tex. App.CHouston [14th Dist.] 2000, pet. denied).  If the movant=s motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment.  Id.

III.  Issues and Analysis

Has Insurance Exchange Agency lost its right to prosecute this appeal under section 171.252 of the Texas Tax Code?

As a preliminary matter, First Insurance claims Insurance Exchange Agency does not have standing to appeal under the Texas Tax Code.  See Tex. Tax Code Ann. '' 171.251, 171.252 (Vernon 2002).  Section 171.252 of the Texas Tax Code provides that, if the corporate privileges of a corporation are forfeited under section 171.251 of the Texas Tax Code, then that corporation loses its right to sue or defend in Texas courts.  See id.  Even if Insurance Exchange Agency=s corporate privileges have been forfeited under section 171.251, this would not affect this court=s jurisdiction or Insurance Exchange Agency=s standing.  See Flameout Design & Fabrication, Inc. v. Pennzoil Caspian Corp., 994 S.W.2d 820, 838B39 (Tex. App.CHouston [1st Dist.] 1999, no pet.) (stating that loss of right to sue or defend in Texas courts under section 171.252 is not jurisdictional). 

Nonetheless, presuming for the sake of argument that First Insurance can raise for the first time on appeal the alleged inability of Insurance Exchange Agency to prosecute this appeal under section 171.252 and presuming that section 171.252 applies to the right to prosecute an appeal, First Insurance=s argument fails because First Insurance has not shown that Insurance Exchange Agency=s corporate privileges have been forfeited. In support of its argument, First Insurance offers a copy of a certificate from the Texas Comptroller of Public Accounts that lists Insurance Exchange Agency as Anot in good standing.@ However, not being in good standing does not necessarily mean that corporate privileges have been forfeited. First Insurance has not shown that Insurance Exchange Agency=s corporate privileges have been forfeited. Accordingly, we overrule First Insurance=s section 171.252 objection and proceed to review the other issues Insurance Exchange Agency raises on appeal.

Did the trial court err in granting summary judgment in favor of Insurance Exchange Agency?

In its second issue, Insurance Exchange Agency claims the trial court erred in granting summary judgment because First Insurance did not prove it was entitled to judgment as a matter of law.^[1]  Specifically, Insurance Exchange Agency asserts that First Insurance did not satisfy its summary-judgment burden by proving as a matter of law that Insurance Exchange Agency is a party to the contracts in question.  First Insurance based its contract claims on contracts that it allegedly had with Insurance Exchange Agency.  Therefore, it had to prove conclusively, based on the summary-judgment evidence, that one or more contracts exist between First Insurance and Insurance Exchange Agency.  See MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986) (stating that plaintiff moving for summary judgment must conclusively prove all essential elements of its claim); Frost Nat=l Bank v. Burge, 29 S.W.3d 580, 593 (Tex. App.CHouston [14th Dist.] 2000, no pet.) (stating elements of contract claim, including existence of valid contract). 

First Insurance claims Insurance Exchange Agency did not properly preserve its argument that it was not a party to the contracts.  We disagree.  Insurance Exchange Agency asserted there was a defect in the parties by verified denial in its original answer and also raised the issue in its response to First Insurance=s motion for summary judgment.  See Tex. R. Civ. P. 93(4).  Raising a defect-of-parties argument in verified pleadings is sufficient to preserve this issue for appeal.  See CHCA East Houston, L.P. v. Henderson, 99 S.W.3d 630, 632B34 (Tex. App.CHouston [14th Dist.] 2003, no pet.); Wiggins v. Overstreet, 962 S.W.2d 198, 200 (Tex. App.CHouston [14th Dist.] 1998, pet. denied) (affirming defect‑of‑parties objection that individual was not proper party).  By filing a verified denial asserting a defect of parties and by asserting in its summary-judgment response that it is not a party to the contracts in question, Insurance Exchange Agency preserved error as to this argument in the trial court.^[2]

To obtain summary judgment, First Insurance had the burden of establishing as a matter of law that no genuine issue of material fact exists as to each element of its breach-of-contract claims.  Rhône-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222B23 (Tex. 1999).  Unless First Insurance conclusively established that Insurance Exchange Agency is a party to the contracts in question, Insurance Exchange Agency had no burden to respond or provide evidence on this issue.  See id.  The summary-judgment evidence includes copies of three contracts that identify First Insurance as one party and show the signature of an agent for either AInsurance Exchange@ or AInsurance Exchange/Houston.@  First Insurance alleges McKinley Shumate signed the three contracts and that he was president of Insurance Exchange Agency, but there is no timely filed summary-judgment evidence to prove this assertion.  The contracts do reflect a signature, but it is not clear whose signature is on these contracts.  Furthermore, even if Shumate did sign the contracts, there is no evidence indicating on which corporation=s behalf he was acting as an agent. 

In fact, First Insurance=s own evidence raised a fact issue as to who is a party to the contracts.  In its motion for summary judgment and on appeal, First Insurance asserts that Insurance Exchange Agency was fully aware of its obligations if the three customers in question failed to pay their installments and First Insurance cancelled their policies.  In support of this assertion regarding Insurance Exchange Agency=s awareness, First Insurance cites a letter attached to its summary-judgment motion.  Shumate authored and signed this letter on the letterhead of AThe Insurance Exchange USA, Inc.,@ rather than AThe Insurance Exchange Agency of Texas, Inc.,@ C the corporation against which First Insurance filed this suit and obtained a judgment in the trial court.  The summary-judgment evidence does not conclusively prove that Insurance Exchange Agency is a party to the contracts in question.^[3]

In an effort to prove Shumate is the president of Insurance Exchange Agency, First Insurance relies on Insurance Exchange Agency=s response to an interrogatory.  This document, however, was attached to First Insurance=s reply to Insurance Exchange Agency=s response to the summary-judgment motion and was filed only five days before the summary-judgment hearing.  Though there is no specific time requirement by which a reply must be filed, a movant=s summary-judgment evidence must be filed no later than twenty-one days before the hearing.  Tex. R. Civ. P. 166a(c). Evidence filed late may not be considered for purposes of the motion or on appeal without leave from the court.  Benchmark Bank v. Crowder, 919 S.W.2d 657, 663 (Tex. 1996).  First Insurance did not obtain leave from the trial court, and therefore, the interrogatory response may not be considered as support for the motion.^[4] 

First Insurance also asserts that Insurance Exchange Agency referred to itself interchangeably as both AInsurance Exchange@ and AThe Insurance Exchange Agency of Texas, Inc.@ in its original answer, supplemental answer, and summary-judgment response.  First Insurance further asserts that Shumate submitted a signed verification on behalf of AThe Insurance Exchange@ and that he signed a summary-judgment affidavit on behalf of AThe Insurance Exchange Agency of Texas, Inc.@  As to the summary-judgment affidavit, this assertion is incorrect because Shumate does not state that he signs this affidavit on behalf of any entity.  The original answer does state that the defendant is AThe Insurance Exchange,@ and Shumate=s verification does state that he is an agent of AThe Insurance Exchange.@  Furthermore, it is understandable that Insurance Exchange Agency and its counsel may have been confused as to the denomination of the defendant in this case because: (1) First Insurance originally sued AThe Insurance Exchange@; (2) First Insurance=s amended petition appears to refer to two defendants C AInsurance Exchange@ with a registered agent for service of process in Dallas and AThe Insurance Exchange Agency of Texas, Inc.@ with a registered agent for service of process in Sugar Land; and (3) First Insurance=s amended petition repeatedly uses AInsurance Exchange@ as a defined term to mean AThe Insurance Exchange Agency of Texas, Inc.@^[5]  In any event, Insurance Exchange Agency=s answers and summary-judgment response are not summary-judgment evidence, and they do not constitute a judicial admission that Insurance Exchange Agency is a party to the contracts in question or that it is also known as AInsurance Exchange@ or AInsurance Exchange/Houston.@

First Insurance does not allege any alter ego or piercing-the-corporate veil theory, and it does not allege in its petition that Insurance Exchange Agency does business as AThe Insurance Exchange.@  The summary-judgment evidence does not conclusively establish as a matter of law that Shumate signed the contracts in question or that the person who signed these contracts did so as agent of Insurance Exchange Agency.  First Insurance did not meet its burden of conclusively proving the existence of valid contracts between First Insurance and Insurance Exchange Agency.  Therefore, we conclude that the trial court erred in granting a summary judgment against Insurance Exchange Agency.  Accordingly, we sustain the first and second issues, reverse the trial court=s judgment and remand for further proceedings consistent with this opinion.^[6]

/s/        Kem Thompson Frost

Justice

Judgment rendered and Memorandum Opinion filed July 26, 2005.

Panel consists of Chief Justice Hedges and Justices Hudson and Frost.

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^[1]  Insurance Exchange Agency=s first issue is similar to its second.  In its first issue, Insurance Exchange Agency argues the trial court erred in granting summary judgment because First Insurance did not prove that Insurance Exchange Agency is a party to the contracts in question.  Thus, both the first and second issue are dependent upon a determination of whether First Insurance conclusively proved that Insurance Exchange Agency is a party to the contracts in question.

^[2]  It also should be noted that First Insurance did not trigger Texas Rule of Civil Procedure 93(7) because it did not allege in its petition that Insurance Exchange Agency signed or executed any written instrument. See Tex. R. Civ. P. 93(7).

^[3]  Insurance Exchange Agency attached an affidavit from Shumate to its summary-judgment response.  In this affidavit Shumate states that a review of the agreements in question does not show that AThe Insurance Exchange of Texas, Inc.@ is a party. Although First Insurance correctly points out that this statement is conclusory and not competent summary-judgment evidence, this does not affect First Insurance=s burden to conclusively prove that Insurance Exchange Agency is a party to the contracts in question.

^[4]  In any event, the interrogatory response on which First Insurance relies as proof that Shumate is the president of Insurance Exchange Agency is not conclusive.  From the wording of the question and the response, it is not clear whether Shumate is the president of Insurance Exchange, of Insurance Exchange Agency, or of both.  Furthermore, an interrogatory response that AThe Insurance Exchange Agency of Texas, Inc.@ is the correct legal name of the defendant does not speak to the issue of whether that defendant is a party to the contracts in question.

^[5]  The terminology used in the original answer may have been incorporating the defined term from  First Insurance=s petition, or it may be that the defendant did not see the defined term in the petition and thought it was being sued as AThe Insurance Exchange.@

^[6]  Because we sustain Insurance Exchange Agency=s first and second issues, we need not address its other appellate arguments.