# FILED August 10, 1998 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON

ANCRO FINANCE COMPANY, ) Individually and BURLAWN STR EET, ) Individually, and BURLAWN STREET ) for the use and benefit of Ancro Finance, ) ) Plaintiffs/Appella

nts, ) Shelby Law No. 83037

) vs. ) ) Appeal No. 02A01-9708-CV-00177 CONSUMERS USA INSUR ANCE ) COMPANY, ) ) Defendant/Appellee. )

APPEAL FROM THE CIRCUIT COURT OF SHELBY COUNTY

AT MEMPHIS, TENNESSEE

THE HONORABLE ROBERT L. CHILDERS, JUDGE

For the Plaintiffs/A

ppellants : For the Defendant/Appellee : W. Ray Jamieson Allan B. Thorp Benjamin T. Wages, Jr. Memphis, Tennessee Memphis, Tennessee
AFFIRMED

HOLLY KIRBY LILL

ARD, J.
CONCUR: ALAN E. HIGHERS, J. DAVID R. FARMER, J.OPINION

This is an insurance case. The plaintiff purchased an automobile insurance policy from the defendant. Through a series of events, the check given for the first installment of the insurance contract did not clear bec

ause of a prior st

op-payment orde

r. Be fore a valid

check could be delivered, the plaintiff’s automobile burned. The insurance company defend ant denied coverage and this suit ensued. The tr

ial court grante

d summary judgment in

favor of the def

endant. We aff

irm. Plaintiff/Appellant

Burlawn Street (“

Street”) purcha

sed an automobile f

rom Enterprise

A/S in Memphis, Tennessee on February 24, 1996. The same day, Street obtained a comprehensive and collision auto insurance policy from Consumers USA Insurance Company (“Consumers”). Sarah C. Johnson, Street’s relative, wrote a check for $131.75 on her account at NBC bank as payment for the first installment on the policy. Plaintiff/Appellant Ancro Finance Company (“Ancro”) provided financing for the purchase, based on the insurance policy and binder issued by Consumers. Ancro purchased

the sales contract between Street and the auto dealer. As a

prerequisite to th

is purchase, Ancro required that it be named as loss payee under the insurance binder issued by Consumers. On March 1, 1996, Ms. Johnson put a stop order on the check for the first installment on the policy, all eg edly because she believed the amount had already been paid. On March 2, Street’s automobile

burned. Johnson rescinded the stop order of the check on March 4, and Street notified Consumers of the loss on the same day. On March 4, Street tendered a cash payment on the policy to Consumers; he ass

erts that it was re

fused. On March 5 , three days afte r the loss, the check was presented for payment. The bank did not pay the check, purportedly because o f the ori ginal stop order. On March 6, the bank marked the check “stop payment,” and it was ultimately r et urned to Consumers. The parties dispute whether the account on which the check was written had sufficient funds to pay the check. Co nsumers refus ed to pay the loss. Street and Ancro filed this lawsuit to recover policy benefitsfrom Consumers. Consumers filed a motion for summary judgment, arguing that the check for the first installment on the insurance contract was written on an account with insuf

ficient funds, and thereforethe contract was void from the inception and Consumers had no duty to pay the claim. The trial court granted the motion, and Street and Ancro appealed. On appeal, Street and Ancro argue that the trial court erred in granting summary judgment in favor of Consumers, bec

ause the check for the initial installment on the policy was not returned for insufficient funds, but insteadwas marked “stop payment” due to Johnson’s mistaken stop order.2

Ancro also argues that it was entitled to notice under the cancellation provision of the insurance policy and that Ancro had a right to recover independent of Street’s right to recover. A motion for summary judgment should be granted when the movant demonstrates that there

are no genuine issues of materia l fact and that the

moving party is

entitled to a judgment as a matter of law. Tenn. R. Civ. P. 56.03. The party mov ing for summary judgment bears the burden of demonstrating that no g enuine issue of material fact exists. Byrd v. Hall, 847 S.W.2d 208, 211 (Tenn. 1993). On a motion for summary judgment, the court must take the strongest legitimate view of the evidence in favo r of the nonmoving party, allow all reasonable inferences in favor of that party, and discard all

countervailing evidence. Id. at 210-11. Summary judgment is only appr

opriate when the facts and the legal conclusions drawn from the f ac ts reasonably permit only one conclusion. Carvell

v. Bottoms , 900 S.W.2d 23, 26 (Tenn. 1995). Since only questions of law are involved, there is no presumption of correctness regarding a trial court's grant of summary judgment. Id. Therefore, our review of the trial court’s gra

nt of summary judgme

nt is de novo on the record before this Court. Id. Cowden v. Sovran Ba nk/Central South , 816 S.W.2d 741, 744 (Tenn. 1991). On appeal, Street and Ancro argue that the trial court erred in finding that the policy was void because the check issued for the policy payment was not returned for insufficient funds. They contend that the check was good when it was written, and that it was unpaid because of a mistake made by the bank. In the alternative, Street and Ancro contend that the policy was in effect at the time of the loss because C onsumers delayed seeking payment,

and that the bank’ s mistake in handling the stop payment order did not void the policy. Consumers alleges that, on the day the check was written and for seven days prior to the loss, the funds in the account were insufficient to cover the check. Consumers contends that Street didnot intend to pay the initial policy premium before the loss. Consum ers al leges that the stop payment order wa

s an intentional ac

t to prevent payme

nt of the policy pre

mium. Although the reason for the stop payment order is a contested factual issue, it is undisputed that the premium ha

d not been paid at th

e time of the loss. Consumers argues that this case i s controlled by the Tennessee Supreme Court’s decision in Tallent

v. Tennessee Farme

rs Mut. Ins. Co. , 785 S.W.2d 339 (Tenn. 1990). Tallent involved t he renewal of an e xisting homeowner

s’ insurance policy. The insurer maile d the homeowner, T

allent, a renewal declaration and premium notice, advising Tallent th at h er coverage would expire the following month. Id. at 341. On the3

expirat ion date, Ta llent wrote a check for the premium and mailed the check to the insurance company. When the insurance company received the check, it issued a receipt informing Tallent that the policy was reinstated. A few d ays later , the bank returned Tallent’s check to the insurance company for insufficient funds. The insurance company immediately sent a notice to Tallent stating that, because of the dishonored check, the policy had lapsed as of the original expiration date. A fire loss occurred

before Tallent c

ould reinstate the

policy by tenderin

g her premium paym

ent in cash. After examining Tallent’s bank records, the court found that “the plaintiff did not on the date when she issued the c heck or at an y time thereafter have as much as $299, the amount of the premium, on deposit in

her checking account.” Id. The court also fo und that Tallent “k

new or must be charged with knowing that the c heck cou ld not have been honored upon presentation to the drawee bank.” Id . The court then ruled that the check was not accepted by the insurance company as unconditional pa

yment, regardle

ss of the receipt: “In the absence of an agreement to the contrary, the delivery of a check to an insurer and its acceptance thereof is not payment of the debt until the check itself has been paid. Thus the mere givin g or sending of a wo

rthless check to

the insurer does not effect the payment of a premium.” Id. at 343 (quoting 14A Appleman, Insurance Law and Practice , § 8144 (1985)). Therefore, the Tallent court held that payment of the initial premium was a condition precedent to reinstatement of the policy. Therefore, because the premium was not paid, the policy lapsed. Unlike Tallent , in this case, the reason the check was returned is in dispute. However, it is undisputed that the premium had not been paid when the loss occurred. Payment occurs when the bank accepts the check upon presentment, not when the check is written. Id. at 343 (citing Sizemore

v. E.T. Barwick Indus., Inc. , 225 Tenn. 226, 465 S.W.2d 873 (1971)). Under Tallent , payment of

an insurance premi

um by check crea

tes a presumption that

the payment, and the terms of the policy,

are conditional upon the bank honoring the check upon presentment. Tallent , supra at 343. In this case, Street and Ancro pro f fered no evidence that the insurer agreed to accept the check as a n unconditional payment, which would rebut the presumption. Id. at 344.1 The policy provide d, in pertinent par

t: We may cancel by mailing to the named insured shown in the declarations at the address last know

n by us: a. at least ten (10) days notice: 1) if cancellation is for non-payment of premium; or 2) if notice is mailed during the first 60 days this policy is in effect and this is not a renewal or continuation policy; or b. at least 20 days notice in all other cases. 4 Street and Ancro note th at the insurance contract provided for ten-day notice before cancellation, 1 and that business cu stom in th e insurance industry permits the loss payee to cure within this time period. Ho

wever, in this ca

se, the poli cy terms do not apply because the policy

never went into effect. Therefore, the provision for notice of ca

ncellation of the

policy is irreleva

nt. Street and Ancro also argue that Consumers failed to timely deposit the initial check given withthe application and binder, and that the plaintiffs are therefore entitled to coverage. They cite

no authority to support this argument. Tennessee Code Annotated defines “check” as an instrument that is “payable on demand.” Tenn. Code Ann. § 47-3-104(f) (1996). There is no statute or contract that required Consume

rs to deposit

the check within a

certain time. This argumen

t is without merit. On appeal, Ancro argues that it was entitled to notice of cancellation under the terms of the insurance policy, irrespec tiv e of St

reet’s right to recover under the policy, because the policy containeda provision for notice to the loss payee of lapse or cancellation. However, as noted above, the policy terms on notic e of c ancellation do not

apply because th

e policy never we

nt into effect. This argument is without merit. In sum, regardless of the reasons for the stop payment order on the check, under the facts of this case, Street, as the insured, was responsible for providing a valid initial payment for the policy to Consumers. Because this was not done, the policy never went into effect. T herefore, the t

rial court did not err i

n granting Consumer

s’ motion for summar

y judgment.5

The decision of the tr

ial court is affir

med. Costs are taxe

d against the Appellants, for

which execution may issue if necessary.

HOLLY KIRBY LILLARD, J. CONCUR:

ALAN E. HIGHERS, J.

DAVID R. FARMER, J.