Brown v. Protective Life Insurance

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 23, 2005
_______________________ Charles R. Fulbruge III
Clerk
Cause No. 04-31120
Summary Calendar
_______________________
MARYLENA BROWN,
on behalf of herself and others similarly situated,
Plaintiff-Appellant.
versus
PROTECTIVE LIFE INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
Civil Action No. 04-1132-S
Before JONES, BARKSDALE, and PRADO, Circuit Judges.
PER CURIAM:*
This is an appeal from the district court’s grant of
Protective Life Insurance Company’s (“Protective”) motion to
dismiss for failure to state a claim. For the reasons stated
below, we AFFIRM.
In 1996, Marylena Brown and her now-deceased husband
bought a vehicle from Banner of New Orleans Inc. (“Banner”). To
finance the purchase, the Browns entered into a retail installment
contract (“RIC”) and purchased credit life insurance underwritten
*
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
by Protective. The Browns financed their vehicle purchase using a
pre-computed loan1 in the amount of $23,612.58, $1,876.70 of which
was paid to Protective for credit life insurance.2 Soon
thereafter, Banner assigned the RIC to Crescent Bank & Trust
(“Crescent Bank”), to which the Browns agreed. R. 310. Upon the
death of Brown’s husband, Protective paid the outstanding loan
amount to Crescent Bank. Pursuant to a related suit, Brown later
received excess benefits for coverage of unearned interest.
The instant suit is the fourth attempt of Brown’s counsel
to allege claims under the Louisiana Motor Vehicle Sales Finance
Act (“LMVSFA”), La. R.S. 6:951, et seq., against Protective.3 The
gravamen of Brown’s complaint is that Protective sold her (and her
deceased husband) excessive credit life insurance in relation to
her purchase and financing of a vehicle in 1996. She contends that
the amount of coverage exceeded the finance amount and included
1
“A precomputed consumer credit transaction means a consumer credit
transaction under which loan finance charges or credit service charges are
computed in advance over the entire scheduled term of the transaction and
capitalized into the face amount of the debtor’s promissory note or other
evidence of indebtedness.” LA. R.S. 9:3516(25).
2
Under the credit life insurance policy, Protective agreed to pay off
all outstanding amounts due under the RIC to the beneficiary upon the death of
the insured.
3
See Young v. Ray Brandt Dodge, Inc., 176 F.R.D. 230 (E.D. La. 1997)
(denying counsel’s attempt to certify a class action against motor vehicle
dealers and credit insurers, including Protective for violation of the LMVSFA and
RICO); Young v. Ray Brandt Dodge, Inc., No. 96-1560 (E.D. La. Dec. 18, 1997)
(same); Dixon v. Ford Motor Credit Co., 137 F. Supp. 2d 702 (E.D. La. 2000)
(dismissing RICO claims with prejudice and dismissing LMVSFA claims without
prejudice for want of jurisdiction), aff’d, 252 F.3d 1356 (5th Cir.), cert.
denied, 122 S. Ct. 349 (2001); Brown v. Protective Life, et al., 02-0018 (E.D.
La. Nov. 22, 2002), aff’d, 353 F.3d 405 (5th Cir. 2003) (same).
2
coverage for unearned interest for the term of the RIC in violation
of the LMVSFA.
Granting Protective’s motion to dismiss for failure to
state a claim, the district court found that the LMVSFA, which
pertains to the sale and financing of motor vehicles, does not
provide a cause of action against insurance companies. The
district court also dismissed Brown’s state law tort claims for
tortious conduct and fraud under LA. REV. STAT. 22:1220, as well as
her contract claims under LA. REV. STAT. 22:658. The district court
did not expressly dismiss Brown’s unjust enrichment claim in its
written Order and Reasons, but entered judgment dismissing Brown’s
case in its entirety. Brown’s appeal concerns only the LMVSFA
claims and her unjust enrichment claim.
This court reviews a district court’s grant of a Rule
12(b)(6) motion to dismiss de novo, applying the same standards as
that court. Cornish v. Correctional Serv. Corp., 402 F.3d 545,
548-49 (5th Cir. 2005).
First we hold that, directed solely to the sale and
financing of motor vehicles and defining the legal relationship of
the “Retail Buyer” and “Retail Seller,” the LMVSFA does not provide
a cause of action against insurance companies like Protective.
Textually, Protective does not come within any of the
financier/seller-related definitions under a plain reading of the
3
LMVSFA.4 Under the LMVSFA, a “Retail Seller or Seller” is defined
as:
a person who sells a motor vehicle to a retail buyer or
a person who lends money to a retail buyer subject to a
retail installment contract.
LA. R.S. 6:951(3) (emphasis added). Protective did not “sell” a
vehicle to the Browns; Banner was the dealer-seller. Nor did
Protective “lend[] money” to the Browns for the purchase of the
vehicle. As explicitly stated in the RIC:
Dealer/Creditor: Banner of N.O. Inc.
I have entered into a credit sale with you to finance the
purchase of the following motor vehicle.
R. 310 (emphasis added). Under the LMVSFA, as mirrored by the
terms of the contract, Brown entered into the credit sale agreement
to finance the vehicle purchase with Banner, making Banner (and
later Crescent Bank) Brown’s exclusive lender and creditor.
That Protective paid the policy proceeds directly to
Crescent Bank does not change the explicit creditor-debtor
relationship between Brown and Banner/Crescent Bank. Defeating her
own argument that this particular payment of proceeds brings
Protective within the purview of the LMVSFA, Brown repeatedly
recognizes that credit insurance is intended to inure to the
benefit of the creditor. Thus, Protective, as a policy provider of
4
Brown’s transaction is covered by the version of the LMVSFA
operative at the time of her purchase in 1996, LA. R.S. 6:951, et seq. The
statute was revised in 1999, LA. R.S. 6:969.33G, et seq., to permit recovery only
against the “extender of credit.”
4
credit life insurance, properly paid the policy proceeds to the
creditor — Crescent Bank.5
Further, Protective does not qualify as a “Sales Finance
Company” under the LMVSFA.
As provided by the LMVSFA, a “Sales Finance Company” is:
a person engaged, in whole or in part, in the business of
purchasing retail installment contracts from one or more
retail sellers or in the business of lending money on
promissory notes . . . .
LA. R.S. 6:951(9) (emphasis added). Not only does Protective not
qualify as a purchaser (as does Crescent Bank) or lender (as does
Banner) under the LMVSFA, but Protective’s insurance agreement with
Brown is expressly excluded from the “Sales Finance Company”
definition which excludes “the pledge of an aggregate number of
such contracts to secure a bonafide loan thereon . . . .” Id.The fact that Protective’s insurance agreement was part
of or connected to Brown’s RIC does not convert Protective into a
sales finance company under the LMVSFA. The terms of the LMVSFA
simply do not permit its extension to companies providing insurance
premiums financed “as part of the same retail installment contract
which financed the vehicle.” R. 87, 342. Protective’s underwriting
occurred apart from the transactions that established the legal
relationships between Brown, Banner/Crescent Bank — the only
relationships referred to in the LMVSFA. Perhaps it would be a
5
Moreover, Protective’s payment to Crescent Bank has the same effect
as if it had paid Brown, the beneficiary, directly because she would have
obligated to pay the balance owed to Crescent Bank, the holder of the RIC.
5
different matter if Protective were both the insurer and the loan
creditor, but where, as here, Protective’s function as an insurer
is distinct from Banner’s and Crescent Bank’s function as
creditors, there is no basis for imposing creditor-liability on the
party whose actions fall squarely within the “business of
insurance.”6
Moreover, Protective does not qualify as a “holder” of a
retail installment contract, which the LMVSFA defines as:
the retail seller under or subject to the contract or
another assignee entitled to enforce a retail installment
contract against the buyer.
LA. R.S. 6:951(10). Here, Protective is neither a “retail seller
under or subject to” the RIC. Rather, as the assignee, Crescent
Bank was the “holder” entitled to enforce the RIC. That being so,
Protective was also not amenable to the LMVSFA’s penalty provision,
which provides that:
Any seller or holder, willfully violating R.S. 956 or
R.S. 957, shall be barred from recovery of finance
charges, delinquency or collection charge on the
contract.
LA. R.S. 6:960(B) (emphasis added). Thus, no textual reading of
the LMVSFA supports the conclusion that an insurance company in
6
See Perry v. Fidelity Union Life Ins. Co., 606 F.2d 468, 470 (5th
Cir. 1979) (stating that “[w]hen an insurance company offers premium financing
as an inducement for persons to purchase policies, it plays two distinct roles
in its relationship with the purchaser. On the one hand, the company is an
insurer, the purchaser an insured; but on the other hand, the company is a
creditor, the purchaser a debtor. The former relationship constitutes the
business of insurance, while the latter does not.”) (internal marks and citation
omitted); Cody v. Comm. Loan Corp. of Richmond Cty., 606 F.2d 499, 503 (5th Cir.
1979) (discussing Perry’s distinction between the ancillary lending activities
of an insurance company and its provision of insurance).
6
Protective’s position constitutes a “seller,” “sales finance
company,” or “holder” thereunder.
Nor is Protective vicariously liable under the LMVSFA,
LA. R.S. 6:950, et seq. The language of the statute does not
support the conclusion that Banner was Protective’s licensing agent
for lending purposes. To the contrary, Banner (and later Crescent
Bank) was Brown’s express lender-creditor. Banner did not sell the
vehicle, lend money to finance the vehicle, or assign the RIC used
to finance the vehicle on behalf of Protective. Brown offers no
facts that could demonstrate that Banner and Protective had an
agency relationship that would render Protective liable under the
LMVSFA.
Because the LMVSFA makes no reference to and contains no
definitional provision that covers an insurance company in
Protective’s position, the statute, as the district court correctly
concluded, does not cover companies that provide credit life
insurance in relation to a vehicle financing contract.7
Finally, we reject Brown’s contention that the district
court’s dismissal of her unjust enrichment claim (which she
intertwined with other claims in her complaint) must be reversed.
Contrary to Brown’s representations, the district court took notice
of the claim in its opinion, see R. 85, and, at the least,
7
Brown’s counsel made a certified admission that the LMVSFA does not
apply to Protective, specifically arguing that LA. R.S. 6:960B, the penalty
provision, may only be imposed against sellers and holders of RICs to the
exclusion of insurance companies like Protective. R. 305-08.
7
Protective addressed and refuted the claim at a motions hearing,
see R. Vol. 2 at 18. That the district court’s written reasons
lack delineation does not mean that the claim was inadequately
addressed or resolved. If any inference is made, it is that the
district court’s written findings, when supported by the record,
are consistent with its general holding and dismissal order. See
First Nat. Bank of Denham Springs v. Indep. Fire. Ins. Co., 934
F.2d 73, 76 (5th Cir. 1991).
For these reasons, we AFFIRM the district court’s
judgment dismissing Brown’s case for failure to state a claim.
AFFIRMED.
8