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Texas Supreme Court Weekly Update May 12, 2017

On Behalf of | May 12, 2017 | Texas Supreme Court Weekly Update

Last week the Texas Supreme Court issued 8 opinions and 0 grants. Three of these opinions are of particular interest.

First, in BankDirect Capital Finance LLC v. Plasma Fab LLC and Russell McCann the Court addressed BankDirect’s argument as to whether a “substantial compliance” approach applies to Section 651.161(b) of the Texas Premium Finance Act (“Cancellation of Insurance Contract”).

In its opinion the Court addressed the issue of notice as defined in the statute and whether or not the definition was ambiguous. The Court concluded that the definition was unambiguous because of the clearly-stated 10 day notice precondition to cancellation in Section 651.161(b). Therefore, unlike other statutes, Section 651.161(b) does not allow for substantial compliance. In other words, despite the fact that the insurance policy was not paid on time on 3 separate occasions, the Court still required the carrier to provide sufficient notice to the policy holder when cancelling a policy under Section 651.161(b).

In the Concurrence, Justice Guzman explained that the Courts reasoning for this holding was inconsistent with Roccoforte v. Jefferson County but concurred with the decision because BankDirect both stated a shortened cure deadline and then cancelled it prematurely.

In the dissent, Chief Justice Hecht explained that the Court is required to look at the factors and language in the Code Construction Act and case law in regards to statutory language for assistance in determining the effect of not complying with the “10th day” language. If done so, then section 651.161(b)’s 10-day requirement could be construed as substantial compliance.

Second, in University of the Incarnate Word v. Valerie Redus and Robert Redus, for purposes of interlocutory appeal, the Texas Supreme Court addressed whether the term “governmental unit,” as it is defined in the Texas Tort Claims Act, applies to private universities that operate state-authorized police departments.

While discussing factors used to determine a “governmental unit,” the Court concluded that since “law enforcement is uniquely governmental, the function of the Legislature has authorized the [university] to perform and the way the Legislature has authorized the [university] to perform it is strongly indicate that the [university] is a governmental unit as to that function.” Because the university was authorized to function as a governmental unit with respect to law enforcement, the university was entitled to pursue an interlocutory appeal under 51.014(a)(8) of the Texas Civil Practice & Remedies Code. However, the court went on to explain that the question of whether an entity has sovereign immunity is a separate question with a separate analytical framework. Thus, the university has the right to the appeal as per their police department, but governmental immunity is a separate issue for the court to decide.

Third, in First Bank v. Richard Brumitt, the Court addressed whether extrinsic evidence may be considered to show a third party as a contract beneficiary. The case involved commitment letters that did not have the Plaintiff’s name or the name of the company he was selling on them, but were used by the Plaintiff to show he was a third party beneficiary.

While discussing the issue of a third party beneficiary, the Court explained that the trial court erred by not deciding if the commitment letters were ambiguous and whether they clearly, fully, and unequivocally expressed the parties’ mutual intent to make the Plaintiff a third party beneficiary. In other words, the jury should not have decided the issue, the Court was tasked with the responsibility to “construe the contact as a matter of law.” Furthermore, the Court explained that in regards to the parol-evidence rule that the “circumstances’ surrounding a contract may “assist” a court with its conclusion, but they do not allow Courts to rely on such evidence to “add to or alter the terms” within the agreement. Therefore, the Court reversed and remanded the lower courts.


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