Filed: Jun. 24, 2004
Latest Update: Feb. 21, 2020
Summary: United States Court of Appeals Fifth Circuit F I L E D IN THE UNITED STATES COURT OF APPEALS June 24, 2004 FOR THE FIFTH CIRCUIT Charles R. Fulbruge III _ Clerk No. 03-20635 _ NAUTILUS INSURANCE COMPANY Plaintiff-Appellant versus JOHN GANNON, INC.; ET AL. Defendants RAY KELLER; DUKE-KELLER OUTDOOR ADVERTISING, INC. Defendants-Appellees _ Appeal from the United States District Court for the Southern District of Texas, Houston Division (USDC No. H-02-1072) _ Before JONES, DENNIS, and PICKERING, Ci
Summary: United States Court of Appeals Fifth Circuit F I L E D IN THE UNITED STATES COURT OF APPEALS June 24, 2004 FOR THE FIFTH CIRCUIT Charles R. Fulbruge III _ Clerk No. 03-20635 _ NAUTILUS INSURANCE COMPANY Plaintiff-Appellant versus JOHN GANNON, INC.; ET AL. Defendants RAY KELLER; DUKE-KELLER OUTDOOR ADVERTISING, INC. Defendants-Appellees _ Appeal from the United States District Court for the Southern District of Texas, Houston Division (USDC No. H-02-1072) _ Before JONES, DENNIS, and PICKERING, Cir..
More
United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
June 24, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
______________________ Clerk
No. 03-20635
______________________
NAUTILUS INSURANCE COMPANY
Plaintiff-Appellant
versus
JOHN GANNON, INC.; ET AL.
Defendants
RAY KELLER; DUKE-KELLER OUTDOOR ADVERTISING, INC.
Defendants-Appellees
___________________________________________________
Appeal from the United States District Court for
the Southern District of Texas, Houston Division
(USDC No. H-02-1072)
___________________________________________________
Before JONES, DENNIS, and PICKERING, Circuit Judges.
DENNIS, Circuit Judge:*
Nautilus Insurance Company (“Nautilus”) brought this action
against John Gannon, Inc. (“JGI”), Ray Keller, and Duke-Keller
Outdoor Advertising, Inc. (collectively “Keller”) seeking a
declaratory judgment that Nautilus has no duty to defend or
*
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this opinion should not be published and is not precedent except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.
1
indemnify Keller from JGI’s suit against Keller. The district
court held that Nautilus had both a duty to defend and a duty to
indemnify and entered a final judgment. We reverse.
BACKGROUND
JGI wanted to put up a billboard in a Sam’s Club parking lot
near Conroe, Texas. JGI contacted Ray Keller, who allegedly
represented that he was an agent of Frances Coberly of Wal-
Mart/Sam’s Club and that he had authority to give JGI a lease to
erect the billboard. JGI and Keller entered into an agreement
regarding the construction of the billboard and a document entitled
“Land Lease Agreement.” After JGI applied for a billboard permit
with the Texas Department of Transportation (“TXDOT”), TXDOT
discovered that Keller was not authorized to enter into such an
agreement on behalf of Ms. Coberly. TXDOT denied the permit and
temporarily suspended JGI’s advertising license.
JGI sued Keller alleging, inter alia, fraud, negligent
misrepresentation, and breach of contract. Nautilus had previously
issued a commercial general liability insurance policy to Keller.
After JGI sued Keller, Nautilus filed this action seeking a
declaratory judgment that the policy provides no coverage for any
claims arising out of the JGI-Keller relationship. In relevant
part, the policy obligates Nautilus to cover damages that Keller is
required to pay because of “property damage” caused by an
2
“occurrence.”1 Both Nautilus and Keller filed motions for summary
judgment. The district court ruled in favor of Keller holding,
inter alia, that JGI’s claims against Keller arguably stated an
occurrence that gave rise to property damage and held that Nautilus
had a duty to defend and to indemnify Keller. Nautilus timely
appealed.
ANALYSIS
Jurisdiction
Keller argues that this court lacks appellate jurisdiction
over this action because, Keller alleges, the district court
resolved only whether Nautilus had a duty to defend Keller and not
whether Nautilus had a duty to indemnify Keller. The Texas Supreme
Court has stated that where, as here, a trial court finds that
there is a duty to defend and “coverage may turn on the facts
actually proven in the underlying lawsuit,” it may “be necessary to
defer the resolution of indemnity issues until the liability
litigation is resolved.” Farmers Tex. County Mut. Ins. Co. v.
Griffin, 955 S.W.2d 81, 84 (Tex. 1997). The parties here agree
that, because the district court found a duty to defend and because
1
The policy provides: “We will pay those sums that the
insured becomes legally obligated to pay as damages because of a
‘bodily injury’ or ‘property damage’ to which this insurance
applies. We will have the right and duty to defend the insured
against any ‘suit’ seeking those damages. ... This insurance
applies to ‘bodily injury’ and ‘property damage’ only if: (1)
The ‘bodily injury’ or ‘property damage’ is caused by an
‘occurrence’; and (2) The ‘bodily injury’ or ‘property damage’
occurs during the policy period.”
3
the question of a duty to indemnify would turn on the facts proven
in the underlying litigation between JGI and Keller, it would have
been proper for the court to defer the question of whether Nautilus
has a duty to indemnify Keller until after the litigation.
But, rightly or wrongly, the district court held that Nautilus
had both a duty to defend Keller and a duty to indemnify Keller and
entered a “Final Judgment” granting Keller’s motion for summary
judgment. Whether an order is subject to appeal depends on its
effect and whether it has the attributes of finality. Glen Oaks
Utilities, Inc. v. City of Houston, 280 F.2d 330, 333 (5th Cir.
1960). Because the district court’s order ended the litigation on
the merits, it was final.2 Quackenbush v. Allstate Ins. Co., 517
2
Keller argues that the judgment does not adjudicate the
question of whether Nautilus has a duty to indemnify Keller from
JGI’s claims. The “Final Judgment” grants Keller’s motion for
summary judgment, and Keller asserts that it moved for summary
judgment that Nautilus did owe a duty to defend. But the first
paragraph of Keller’s motion for summary judgment states:
“[Keller] request[s] that the Court adjudicate under Rule 56 of
the Federal Rules of Civil Procedure that [Nautilus] does owe
[Keller] a defense and indemnity on the claims against [Keller]
by [JGI] in the underlying case out of which this coverage
dispute arose.” It is true that, at the conclusion of the
motion, Keller only mentioned the duty to defend. This
inconsistency raises a question as to the effect of the district
court’s order.
If there is some ambiguity in the judgment regarding its
finality, this court will treat the decision as a final order if
the district court intended to effect a final dismissal of the
claim. Picco v. Global Marine Drilling Co., 900 F.2d 846, 849
n.4 (5th Cir. 1990). The district court titled the order “Final
Judgment” and included the statement: “This is a Final Judgment.”
In its supporting memorandum opinion, the court stated: “The
Court finds that Nautilus does have a duty to defend and
indemnify Keller in the underlying state case.... Accordingly
4
U.S. 706, 712 (1996). Whether the district court’s conclusions
were incorrect or premature is of no jurisdictional import.
Standard of Review
We review a district court’s grant of summary judgment de
novo. Baton Rouge Oil & Chem. Workers Un. v. Exxon Mobil Corp.,
289 F.3d 373, 376 (5th Cir. 2002). We will grant summary judgment
if there is no genuine dispute as to any issue of material fact and
the moving party is entitled to judgment as a matter of law.
Id.
JGI’s claims against Keller do not allege “property damage” and,
thus, do not fall under the terms of the policy.
We will address only the question of whether JGI’s claims
against Keller potentially state a claim for property damage, as
that issue is dispositive. Under Texas law, “[a]n insurer’s duty
to defend is determined solely by the allegations in the pleadings
and the language of the insurance policy.” King v. Dallas Fire
Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002). This “eight corners”
doctrine means that if the underlying claim against the insured
does not allege facts that fall within the scope of the policy, the
insurer has no duty to defend the insured.
Id. But an insurer is
... [Keller’s] motion for summary judgment is GRANTED.” It is
clear that the district court ruled on both the duty to defend
and the duty to indemnify, thus ending the litigation on the
merits, and accordingly entered a final judgment.
5
obligated to defend the insured if there is even potentially a case
under the complaint within the coverage of the policy. Nat’l Union
Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139,
141 (Tex. 1997). All doubts regarding an insurer’s duty to defend
are resolved in favor of the insured.
King, 85 S.W.3d at 187.
Under the policy in question, property damage includes the
“[l]oss of use of tangible property that is not physically
injured.” Texas law states that “tangible property is commonly
understood to be property that is capable of being handled or
touched.” Lay v. Aetna Ins., 599 S.W.2d 684, 686 (Tex. Civ. App.
–- Austin 1980, writ ref’d n.r.e.). It has also been defined as ".
. . such property as may be seen, weighed, measured, and estimated
by the physical senses."
Id. (citing 73 C.J.S. Property § 5
(1951)). The district court held that JGI alleged that Keller’s
misrepresentations “caused the loss of the use of the leasehold
interest in the billboard” and that such an allegation potentially
falls within the coverage of the policy.
Keller defends the district court’s holding, arguing that JGI
claims that it lost a leasehold interest in real property and that
a leasehold interest in real property constitutes tangible
property.3 Assuming without deciding that a leasehold interest in
3
Keller also points out that JGI claims that it lost the use
of the billboard structure. But the billboard structure never
existed. A nonexistent billboard is not tangible property; thus,
the loss of its use cannot constitute the loss of use of tangible
property.
6
real property could constitute tangible property, a review of the
pleadings in the underlying suit shows that JGI did not in fact
have a leasehold interest in real property.
JGI’s petition indicates that the contract between JGI and
Keller stated that the parties would “jointly build the Sign, sell
the sign for approximately $400,000, and split the proceeds
fifty/fifty.” The contract obligated Keller to “secure the lease
with Wal-Mart/Sam’s” and obligated JGI to “secure the permit.”
This agreement did not create a lease between Keller and JGI; it
only contractually obligated the parties to undertake different
tasks in an effort to build and sell the sign.
JGI’s petition also indicates that JGI and Keller signed a
second document, titled a “Land Lease Agreement,” which JGI
attached to its petition and incorporated into its petition. But
this agreement simply purports to grant JGI permission to apply for
a billboard permit from TXDOT.4 Thus, like the contract, this
agreement did not grant JGI a leasehold interest in the land.
Additionally, even if the agreements had purported to give JGI a
leasehold interest in the land, JGI would not have had a leasehold
interest in real property because, according to JGI’s allegations,
Keller did not have the authority to grant JGI a lease in the
4
The agreement provides: “As owner of 1407 Loop 336 W. I-45,
Mr. Ray Keller is authorizing John Gannon Inc. permission to
obtain all permits to erect a billboard on Mr. Ray Keller’s
property at 1407 - I-45 Loop 336 W.”
7
property. And JGI has not alleged any action on behalf of Wal Mart
or Frances Coberly that would have given Keller apparent authority
to enter into such a lease.
JGI therefore never had a leasehold interest in real property5
but only had a contractual relationship with Keller that gave JGI
certain expectancies. Any damages for breach of contract,
negligent misrepresentation, or fraud to which JGI may be entitled
are purely economic damages that do not fall within the definition
of property damage. See, e.g., State Farm Lloyds v. Kessler, 932
S.W.2d 732, 737 (Tex. App. -- Ft. Worth, 1996, writ denied)
(holding that home buyers had alleged economic damages - not
property damages - by claiming that they did not get the home they
had bargained for because the sellers had misrepresented the
condition of the home). Thus, Nautilus has no duty to defend
Keller against JGI’s claims and, for the same reason, no duty to
indemnify Keller for any damages stemming from those claims.6
CONCLUSION
5
Keller argues that the policy does not require that the
claimant allege ownership of the tangible property. But the
policy does require the “loss of use of tangible property,” and
JGI cannot have lost the use of the real property in question if
JGI never had the use of that property.
6
“[T]he duty to indemnify is justiciable before the
insured's liability is determined in the liability lawsuit when
the insurer has no duty to defend and the same reasons that
negate the duty to defend likewise negate any possibility the
insurer will ever have a duty to indemnify.” Farmers Tex. County
Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997).
8
JGI’s claims against Keller do not allege property damage.
Nautilus thus has no duty to defend or indemnify Keller against
JGI’s claims. The district court’s decision granting summary
judgment in favor of Keller is reversed. Nautilus’ motion for
summary judgment is granted, and judgment is rendered accordingly.
JUDGMENT FOR KELLER REVERSED; JUDGMENT FOR NAUTILUS RENDERED.
9
