United States Court of Appeals

Fifth Circuit

FILED

January 5, 2004

Charles R. Fulbruge III

Clerk

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 02-21059

_____________________

SCOTT MAYO; ET AL.,

Plaintiffs,

DOUGLAS SIMS, by Deborah Sims, the independent executrix,

Plaintiff - Appellee,

versus

HARTFORD LIFE INSURANCE COMPANY; ET AL.,

Defendants,

WAL-MART STORES, INC.; WAL-MART STORES

INCORPRATED CORPORATION GRANTOR TRUST;

WACHOVIA BANK OF GEORGIA, N.A.,

Defendants - Appellants.

__________________________________________________________________

Appeal from the United States District Court

for the Southern District of Texas

USDC No. H-01-CV-2139

_________________________________________________________________

Before JOLLY, SMITH, and EMILIO M. GARZA, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

Wal-Mart Stores, Inc. (“Wal-Mart”) took out life insurance on

its employees and made itself the beneficiary. This interlocutory

appeal arises from a grant of partial summary judgment involving a

dispute over death benefits from one of these company-owned life

insurance (“COLI”) policies. Douglas Sims’ estate sued Wal-Mart on

the ground that the COLI policy taken out in Sims’ name violated
2

the Texas insurable interest doctrine. We hold that: 1) Texas

law, which requires an “insurable interest” for valid life

insurance policies, governs the dispute; 2) an employer has no

insurable interest in an ordinary employee under Texas law; and 3)

Wal-Mart failed to establish its affirmative defense that the

estate’s claims were barred by limitations. In so holding, we

affirm the district court’s denial of summary judgment for Wal-Mart

and affirm its grant of partial summary judgment for the Sims

estate.

I

In 1993, Wal-Mart established a trust to serve as the legal

holder of life insurance policies insuring the lives of its

employees and naming itself as beneficiary. The instrument

establishing the trust provided that Georgia law would govern the

trust’s construction, validity, and administration, and named

Wachovia Bank of Georgia, N.A. (“Wachovia”) as trustee. Wal-Mart

acted in pursuit of tax benefits related to the deductibility of

premium payments, and was only one of many similarly situated

companies which took this course of action. After Congress and the

IRS eliminated the tax advantages of Wal-Mart’s COLI program, WalMart unwound the otherwise unprofitable program, surrendering the

last of its policies by 2000.

Wal-Mart’s COLI policies insured the lives of all employees

(also called “associates”) with service time sufficient for

enrollment in the Wal-Mart Associates’ Health and Welfare Plan,
3

unless those associates elected not to participate in a special

death benefit program that Wal-Mart introduced in conjunction with

the COLI program. Fewer than one percent of the 350,000 eligible

employees opted out of the program, which was discontinued by early

1998. Wal-Mart’s COLI program was intended to be “mortality

neutral,” such that the death benefits paid to Wal-Mart upon its

associates’ deaths would fund employee benefit plans and death

expenses, or otherwise be repaid to the insurer as self-correcting

“cost of insurance” adjustments.

Douglas Sims was a Wal-Mart associate from May 1987 until his

death on December 1, 1998, and was insured under a COLI policy from

December 21, 1993 until his death (though the special death benefit

program had been discontinued prior to Sims’ death). On June 28,

2001, after his estate discovered the existence of this policy, it

sued Wal-Mart, alleging a violation of the Texas insurable interest

doctrine. The estate sought, in relevant part, a declaratory

judgment of its rights under Sims’ COLI policy, the imposition of

a constructive trust on the policy benefits, and disgorgement of

the money Wal-Mart unjustly received at some point in 1999.

Wal-Mart moved for summary judgment on the grounds that, in

relevant part, Georgia law applies (and thus Sims has no claim)

and, in the alternative, the Texas statute of limitations bars

Sims’ claim. After the district court denied this motion, Wal-Mart

moved for reconsideration, renewing its choice of law argument and

adding that recent developments in Texas law placed doubt on the
4

public policy underlying the state’s insurable interest doctrine.

Sims then filed a motion for partial summary judgment, seeking a

declaration that Wal-Mart lacked an insurable interest in Sims’

life. Wal-Mart responded with a cross-motion for summary judgment,

arguing that Wal-Mart had an insurable interest in Sims.

The district court granted Wal-Mart’s motion for

reconsideration, but again denied summary judgment on all grounds

in an amended opinion. The court then granted partial summary

judgment in favor of Sims, but certified its order under 28 U.S.C.

§ 1292(b) for interlocutory appeal on the following issues: (1)

which state’s substantive law applies to Sims’ claims; (2) whether

Wal-Mart has an insurable interest in Sims’ life; and (3) whether

the statute of limitations bars Sims’ claims. This court granted

Wal-Mart leave to appeal the district court order.

II

This court reviews grants or denials of summary judgment de

novo, applying the same legal standards as the district court.

Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th

Cir. 1998). The issues we will address are: 1) the choice of

which state’s law to apply; 2) an analysis of the Texas insurable

interest doctrine as it applies to this case; and 3) the applicable

statute of limitations. We take these up in order.

A

First, Wal-Mart contends that the district court erred in

applying the substantive law of Texas rather than Georgia to the
5

parties’ dispute. This court reviews de novo a district court’s

choice of law determination. In re Air Disaster at Ramstein Air

Base, Germany, 81 F.3d 570, 576 (5th Cir. 1996).

In making a choice of law determination, a federal court

exercising diversity jurisdiction must apply the choice of law

rules of the forum state, here Texas. Klaxon v. Stentor Elec. Mfg.

Co., 313 U.S. 487, 496 (1941); see also Spence v. Glock,

Ges.m.b.H., 227 F.3d 308, 311 (5th Cir. 2000). Texas courts use

the “most significant relationship” test set forth in the

Restatement (Second) of Conflict of Laws (1971) for all choice of

law cases except contract cases in which the parties have agreed to

a valid choice of law clause. Duncan v. Cessna Aircraft Co., 665

S.W.2d 414, 420-21 (Tex. 1984). As the district court correctly

noted, neither Sims nor Wal-Mart asserts that a statutory directive

governs the choice of law determination here, and neither have they

agreed on which state’s law to apply (the trust instrument’s

invocation of Georgia law being of no moment because Sims was not

a party to that contract), so this Court applies the Restatement’s

fact-based analysis. Id.; Maxus Exploration Co. v. Moran Bros.,

Inc., 817 S.W.2d 50, 53-54 (Tex. 1991).

Section 6 of the Restatement lists several general factors to

be used by courts in making choice of law determinations:

a) the needs of the interstate and

international systems;

b) the relevant policies of the forum; 

c) the relevant policies of other interested

states and the relative interests of
6

those states in the determination of the

particular issue; 

d) the protection of justified expectations;

e) the basic policies underlying the

particular field of law;

f) certainty, predictability, and uniformity

of result; and

g) ease in determination and application of

the law to be applied.

RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(2) (1971). The district

court thoroughly and conscientiously analyzed each § 6 factor as it

applies to this case. We have little to add to this analysis, only

emphasizing that Sims’ claim centers on an alleged violation of the

Texas insurable interest doctrine (as it has evolved via common law

and legislative guidance), and that Texas’ interest in seeing its

policy correctly applied far overwhelms any other consideration.

Further, while the Restatement does not provide a specific

analytical schemata for determining insurable interest claims, it

does address choice of law analyses for various kinds of disputes

that can be analogized to this one. These later sections

demonstrate the concrete application of the “most significant

relationship” test, and all incorporate § 6 as the starting point

for any such analysis. Of potential relevance here are: § 145,

governing issues in tort; § 188, governing contract disputes; §

192, governing certain life insurance contracts; and § 221,

governing claims for unjust enrichment.

Wal-Mart frames the issue in this case as a contractual

dispute, and accordingly argues that § 188 should guide this

Court’s choice of law analysis. Section 188 provides that “[t]he
7

rights and duties of the parties with respect to an issue in

contract are determined by the local law of the state which, with

respect to that issue, has the most significant relationship to the

transaction and the parties[.]” RESTATEMENT (SECOND) OF CONFLICT OF LAWS

§ 188(1) (1971). The § 188 inquiry is directed at unearthing and

upholding contracting parties’ intent as to the governing law.

As Sims and the district court point out, however, this case

does not involve a dispute over the “rights and duties of parties”

to a contract. Instead, this case involves the application of

Texas’ common law on insurable interests in the context of an

insurance contract to which Sims was not a party. Section 188's

focus on vindicating the intent of contracting parties, and on

balancing factors surrounding the negotiation and finalization of

their agreement, simply does not resound in this dispute. That is,

properly framed, the contracts between Wal-Mart and its insurer are

only tangentially related to the particular substantive issue

before the court, and there is no dispute over the contracting

parties’ obligations. A § 188 analysis, even one as ably performed

as the district court’s was, thus seems inapposite.

An alternative approach, that neither party nor the district

court considered, is to view Sims’ claim as one involving a

tortious act akin to conversion, or the wrongful -- because

allegedly violating the insurable interest doctrine -- taking of

the property of another. Section 145 lists the following contacts
1See Gutierrez v. Collins, 583 S.W.2d 312, 319 (Tex. 1979).

8

to be taken into account in applying § 6 principles: the place

where the injury occurred, the place where the conduct causing the

injury occurred, the domicile of the parties, and the place where

the relationship between the parties was centered. RESTATEMENT

(SECOND) OF CONFLICT OF LAWS § 145 (1971).

The parties “reside” in Texas (Wal-Mart by place of business)

and the employment relationship was also wholly in Texas. The

injury and the conduct causing it took place either in Texas or

Georgia (or both), depending on whether one considers the injury to

be the misappropriation of money, the insuring of a non-insurable

interest, or some other construction of the relevant events. The

plurality of factors favor the application of Texas law,

particularly given that courts evaluate such contacts for their

quality, not their quantity1 -- and that all of the factors must be

considered in the light of § 6.

Sims contends that § 221 provides the best guidance, as this

section “applies to claims, which are based neither on contract nor

on tort, to recover for unjust enrichment.” RESTATEMENT (SECOND) OF

CONFLICT OF LAWS § 221, cmt. a (1971). This view appears to be a

plausible interpretation of the claim. Section 221, after

reiterating the importance of the § 6 factors, adds the following

unjust-enrichment-specific factors: the place where a relationship

between the parties was centered, the place where the enrichment
2See also Canton v. Leach Corp., 896 F.2d 939, 943 (5th Cir.

1990) (“Texas has a distinct interest in applying its restitution

policy to a course of action that enriched [the corporation] at the

expense of a Texas citizen.”).

9

was received, the place where the act conferring the enrichment was

done, the domicile of the parties, and the place where a physical

thing related to the enrichment was situated during the time of the

enrichment. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 221 (1971).

Sims lived in Texas and was employed by Wal-Mart in Texas.

The enrichment was conferred and received in either Georgia or

Texas (depending on how one characterizes the triggering event,

Sims’ death, as well as the flow of death benefits). The “thing”

related to the alleged enrichment -- and the crux of the insurable

interest dispute -- was (if anything) Sims’ life, which was also,

of course, in Texas. If Sims’ claim is for unjust enrichment, or

if § 221 otherwise applies, then the relevant factors favor Texas.2

Finally, § 192 specifies the choice of law analysis in cases

involving life insurance contracts, but only those that have been

issued to the insured upon his application. RESTATEMENT (SECOND) OF

CONFLICT OF LAWS § 192, cmt. a (1971). Although not wholly on point,

this provision does offer some guidance. It reads in its entirety:

The validity of a life insurance contract

issued to the insured upon his application and

the rights created thereby are determined, in

the absence of an effective choice of law by

the insured in his application, by the local

law of the state where the insured was

domiciled at the time the policy was applied

for, unless, with respect to the particular
3Comment a of § 192 also states that the section “does not

apply to life insurance issued upon the life of someone other than

the applicant; as to such insurance, no more definite rule can be

stated . . . than that stated in § 188.” As we found earlier, §

188, while clearly applying to a dispute between the parties to the

COLI contract, does not help much in the present case. In any

event, as the district court found, the § 188 factors also favor

Texas law.

10

issue, some other state has a more significant

relationship under the principles stated in §

6 to the transaction and the parties, in which

event the local law of the other state will be

applied.

RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 192 (1971) (emphasis added).

If Sims had taken out the policy, therefore, even if it had been

through a Georgia trust, its terms would be governed by Texas law.

We fail to see how the fact that Wal-Mart took it out militates

against this principle.3

In sum, every viable “most significant relationship” analysis

performed in following the forum state’s choice of law provisions

points to the application of Texas law to this case. We thus

AFFIRM the district court on this issue.

B

We now apply Texas’ insurable interest doctrine. Wal-Mart

contends that, even if Texas law applies, the district court erred

in determining that its COLI policy violated the Texas insurable

interest doctrine. The district court concluded that the policy

was void because Wal-Mart lacks a sufficient financial interest in

the lives of its rank-and-file employees.
11

For this diversity action, and because the Texas Supreme Court

has not ruled on the insurable interest doctrine in the light of a

half-century’s legislative amendments, the district court was

required to make an Erie-guess as to how that court would apply

substantive state law. Erie R.R. Co. v. Tompkins, 304 U.S. 64

(1938); Transcontinental Gas Pipe Line Corp. v. Transportation Ins.

Co., 953 F.2d 985, 988 (5th Cir. 1992) (“[I]t is the duty of the

federal court to determine as best it can, what the highest court

of the state would decide.”).

Wal-Mart’s motion requesting certification of this question --

whether and how the Texas insurable interest doctrine applies to

this case -- to the Texas Supreme Court was carried with the

present appeal. Although the Texas Supreme Court has not recently

addressed the insurable interest doctrine, the question is not so

complex or opaque as to justify certification. Further, this

Court’s familiarity with the doctrine, see discussion infra, and

the unambiguous line of Texas lower court decisions, make

certification unnecessary. Accordingly, we DENY the motion to

certify.

As such, we review the district court’s Erie-guess de novo.

Williamson v. Elf Aquitaine, Inc., 138 F.3d 546, 549 (5th Cir.

1998). In this regard, deference cannot be given to the rulings by

the district court, even though it sits in the state whose law is

being applied. Id. (citing Salve Regina College v. Russell, 499
12

U.S. 225, 238 (1991) (“When de novo review is compelled, no form of

appellate deference is acceptable.”)).

Texas requires a person insuring the life of another to have

an insurable interest in the insured person’s life. Empire Life

Ins. Co. of America v. Moody, 584 S.W.2d 855, 859 (Tex. 1979);

Drane v. Jefferson Standard Life Ins. Co., 161 S.W.2d 1057, 1058-59

(Tex. 1942). The state’s common law insurable interest doctrine

deems that “it is against the public policy of the State of Texas

to allow anyone who has no insurable interest to be the owner of a

policy of insurance upon the life of a human being.” Griffin v.

McCoach, 123 F.2d 550, 551 (5th Cir. 1941). Consequently,

insurance policies procured by those lacking a sufficient interest

in the life of the insured are unenforceable. Going back to 1942,

Texas courts have recognized three categories of individuals having

an adequate interest: 1) close relatives; 2) creditors; and 3)

those having an expectation of financial gain from the insured’s

continued life. Drane, 161 S.W.2d at 1058-59; Tamez v. Certain

Underwriters at Lloyd’s, London, 999 S.W.2d 12, 17-18 (Tex. App.

1998); Stillwagoner v. Travelers Ins. Co., 979 S.W.2d 354, 361

(Tex. App. 1998).

Wal-Mart argues that it has a reasonable expectation of

pecuniary benefit in the continued lives of its employees

sufficient to bring it within the last of the three categories

described in Drane. Texas courts have held, however, that the

state of employment alone does not give an employer an insurable
4See Tamez, 999 S.W.2d at 18-19 (“[A]n employer does not have

a pecuniary interest in the continued life of its employee, unless

that employee is crucial to the operation of the business.”);

Stillwagoner, 979 S.W.2d at 361-62 (“Even in the absence of

evidence we may assume that [decedent’s] death forced some

readjustments which normally accompany the death of an employee.

But an insurable interest does not result from the cessation of

ordinary service.”).

13

interest. See, e.g., Stillwagoner, 979 S.W.2d at 361 (“The mere

existence of an employer/employee relationship is never sufficient

to give the employer an insurable interest in the life of the

employee.”).

Wal-Mart contends that, in addition to the bare

employer/employee relationship, it possesses an expectation of

financial gain from the continued lives of its employees by virtue

of the costs associated with the death of an employee, such as

productivity losses, hiring and training a replacement, and payment

of death benefits. These are costs that are associated with the

loss of any employee, however, and, as Texas precedent clearly

indicates, employers lack an insurable interest in ordinary

employees. E.g., id. at 362. Indeed, Texas courts have recently

rejected similar arguments based on the costs flowing from an

employee’s death.4 And, as Sims ripostes, Wal-Mart does not claim

that Sims was of any special importance to the company, much less

that Wal-Mart’s “success or failure was dependent upon [the insured

employee].” Stillwagoner, 979 S.W.2d at 362-63.

Given that courts will uphold the insurable interest doctrine

in the absence of contrary legislation, Wal-Mart argues that just
5The Texas Insurance Code itself was recently re-codified in

“a nonsubstantive revision.” Acts of 2001, 77th Leg., ch. 1419,

eff. June 1, 2003. Thus, effective June 1, 2003, article 3.49

became Tex. Ins. Code §§ 1103.001-.005 (Vernon 2003).

6Effective June 1, 2003, article 3.49-1 became Tex. Ins. Code

§§ 1103.051-056 (Vernon 2003).

14

such legislative pronouncements have expanded the definition of

insurable interest after Drane. A review of this legislation

shows, however, that while the Texas Legislature has crafted

certain addenda to the insurable interest doctrine, none of these

modifications are relevant to the present case.

In 1951, for example, the Texas Legislature re-codified

article 5048 of the Texas Civil Statutes as article 3.49 of the

Texas Insurance Code.5 This provision allows a business to be

named as beneficiary in a policy insuring the lives of officers,

stockholders, and partners -- the individuals in whom the business

has an insurable interest. Tex. Ins. Code §§ 1103.003-.004 (Vernon

2003). As the district court pointed out, this provision is

inapplicable because Sims was not a stockholder, officer, or

partner of Wal-Mart.

Next, in 1953, the Legislature enacted article 3.49-1 of the

Texas Insurance Code, which was amended in 1999.6 Originally,

insureds of new or existing life insurance policies could grant (in

writing) an insurable interest to “any person” or entity by naming

him or her as beneficiary or owner of that policy. With the 1999

legislation, adults can, as of January 1, 2000, consent in writing
7“A policy delivered, issued for delivery, or renewed before

January 1, 2000, is governed by the law as it existed immediately

before the effective date of this Act, and that law is continued in

effect for that purpose.” Acts 1999, 76th Leg., ch. 438, § 3.

8Effective June 1, 2003,the relevant provision became Tex.

Ins. Code §§ 1131.703 (Vernon 2003).

15

to the “purchase” of, or the “application” for, new insurance on

their lives, which policies are purchased or applied for by a third

party. Tex. Ins. Code §§ 1103.054-056 (Vernon 2003). This

provision was not retroactive.7 Though “this subchapter shall be

liberally construed to effectuate [its] purposes,” Tex. Ins. Code

§§ 1103.052 (Vernon 2003), Sims never designated Wal-Mart as a

beneficiary or owner of an insurance policy on his life. Sims also

never provided consent, written or otherwise, for Wal-Mart to take

out insurance on -- or otherwise acquire an insurable interest in

-- his life. As such, article 3.49-1 and its re-codified progeny

are also inapplicable.

Finally, in 1989, the Legislature enacted a provision that,

under certain circumstances, allows an employer to obtain insurance

on the lives of its employees to provide funds to offset fringebenefit-related liabilities.8 The COLI policy at issue does not

meet the requirements of the 1989 statute, however, and Wal-Mart

does not contend that it does (Wal-Mart merely cites the statute as

an example of the Legislature’s action in this area). Thus, to the

extent that this provision expanded insurable interests, it did so

in a way that does not affect the disposition of this case.
9Wal-Mart contends that Tamez and Stillwagoner should not

govern, as both were decided before the 1999 substantive amendment

to then-article 3.49-1 of the Texas Insurance Code. As discussed

supra, however, this statute does nothing to support Wal-Mart’s

position, as Sims never gave the required written consent for WalMart to be designated as beneficiary.

16

None of these legislative enactments -- which were thoroughly

briefed by the parties and analyzed by the district court -- apply

to the facts of this case, and we have found no other ones that do.

Indeed, Tamez and Stillwagoner were both decided in the light of

the law as it stood in 1998 (the year of Sims’ death), and both

clearly rejected employers’ claims of having insurable interests in

ordinary employees.9

Further, as the district court noted, the insurable interest

doctrine was last taken up by the Texas Supreme Court in 1979 (not

1942, as Wal-Mart implies). Empire Life, 584 S.W.2d 855. Empire

Life quoted and adopted the Drane decision and repeated the

longstanding rule that a putative beneficiary or owner only has an

insurable interest in the life of another where the beneficiary is

“(1) so closely related by blood or affinity that he wants the

other to continue to live, irrespective of the monetary

considerations; (2) a creditor; [or] (3) one possessing a

reasonable expectation of pecuniary benefit or advantage from the

continued life of another.” 584 S.W.2d at 859; Drane, 161 S.W.2d

at 1058-59; Tamez, 999 S.W.2d at 17; Stillwagoner, 979 S.W.2d at

360-61. This Court has also recently acknowledged this Texas line

of cases. DeLeon v. Lloyd’s, London, 259 F.3d 344, 350 (5th Cir.
10In such a case, once the named beneficiary (the one lacking

an insurable interest) is paid, Texas law applies the equitable

remedy of constructive trust to enable recovery by the wronged

party. DeLeon, 259 F.3d at 350-51; Cheeves v. Anders, 28 S.W. 274,

275-76 (Tex. 1894); Tamez, 999 S.W.2d at 15-16 and n.1;

Stillwagoner, 979 S.W.2d at 360. In this manner -- and if there is

no procedural bar such as the statute of limitations discussed

infra -- the lawful beneficiary, Sims, recovers the proceeds

unlawfully procured by Wal-Mart.

17

2001) (quoting the Drane rule and its enumeration of the three

valid insurable interest classes).

It is clear that Drane and its progeny have held fast to the

common law insurable interest doctrine, and the Texas Legislature’s

enactments altering that well-established doctrine have been slow

and careful. While the statutory provisions analyzed supra

demonstrate an ever-broadening approach to insurable interests,

there is no indication that the Texas Supreme Court would create

other exceptions without explicit statutory authorization. And, as

the district court concisely put it, it is not the role of federal

courts sitting in diversity to ignore longstanding and consistently

applied Texas legal authorities. We decline to either contradict

state court precedent or expand upon the express language of

legislative enactments.

We therefore reject Wal-Mart’s challenge to the Texas

insurable interest doctrine, and find that its COLI policy on the

life of Douglas Sims violated Texas law.10 The district court’s

ruling on this issue is AFFIRMED.

C
11The district court ruled that either Tex. Civ. Prac. & Rem.

Code § 16.004(a)(3) (West 2003) (statute of limitations for

contract claims is four years) or Tex. Civ. Prac. & Rem. Code §

16.051 (West 2003) (residual statute of limitations is four years)

applies, not specifying which.

18

Now that we have found that Sims has presented a valid claim

under Texas law as properly applied, we must look at whether such

a claim is barred by the relevant statute of limitations. The

district court’s determination of the proper limitations period is

subject to de novo review. In re Hinsley, 201 F.3d 638, 644 (5th

Cir. 2000). This limitations determination requires more than mere

checking of calendrical tables, however, as it is perhaps the most

complex issue presented in this appeal.

In analyzing limitations, the district court first determined

that, however the claim forming the basis for this action is

characterized, the applicable limitations period was four years.11

It then ruled that Sims’ request for a declaratory judgment that

Wal-Mart lacked an insurable interest in Sims’ life and thus

violated Texas law was timely because the claim was brought within

four years of Wal-Mart’s termination of its COLI policy (thus

ending a continuing violation). The district court also found that

Sims’ request for a constructive trust was timely because it was

brought within four years of Sims’ death.

The first step in evaluating the district court’s limitations

analysis is to determine the correct statute of limitations to

apply. To that end, the applicable limitations period (like the
12See also Bado Equip. Co. v. Bethlehem Steel Corp., 814 S.W.2d

464, 477 (Tex. App. 1991) (constructive trust remedy unavailable

when underlying claim is barred by statute of limitations).

13See discussion in Part II-A, supra.

19

choice of law) should be determined with reference to the theory on

the basis of which the Sims estate pursues its claims. The

district court characterized this action as comprising two claims,

one for declaratory judgment and one for a constructive trust

arising out of unjust enrichment related to a contractual dispute.

This analysis is somewhat an inversion of legal principles: Both

declaratory relief and constructive trusts are remedial devices

rather than causes of action themselves. See, e.g., Okpalobi v.

Foster, 244 F.3d 405, 423 (5th Cir. 2001) (en banc); DeLeon, 259

F.3d at 351; Meadows v. Bierschwale, 516 S.W.2d 125, 131 (Tex.

1974) (“[c]onstructive trusts, being remedial in character”).

12

Further, as we stated earlier, the contracts between Wal-Mart and

its insurer are only tangentially related to the particular claim

before the court; there is no dispute over the contracting parties’

obligations.13 What, then, is the underlying cause of action?

There is clearly only one, though it can be stated in two

ways: Sims claims that Wal-Mart engaged in either unjust

enrichment or conversion stemming from the insurable interest

violation. See, e.g., Heldenfels Bros., Inc. v. Corpus Christi,

832 S.W.2d 39, 41 (Tex. 1992) (“A party may recover under the

unjust enrichment theory when one person has obtained a benefit
14The court in Villegas was interpreting Tex. Civ. Stat. art.

5526 (Vernon 1925), which, in the current codification, is §

16.003.

20

from another by . . . taking of an undue advantage.”); Green Int’l

Inc. v. Solis, 951 S.W.2d 384, 391 (Tex. 1997) (“Conversion is the

wrongful exercise of dominion and control over another’s property

in denial of or inconsistent with his rights.”). By taking out an

insurance policy on Sims’ life without his knowledge or consent --

and collecting the policy’s proceeds at Sims’ death -- Wal-Mart

unjustly profited from the death of someone in whom it had no

insurable interest. Stated another way, Wal-Mart, having violated

the insurable interest doctrine, unlawfully took funds that, under

Texas law, rightfully belonged to Sims’ estate.

The applicable limitations period for Sims’ claim -- whether

it is formally labeled “unjust enrichment” or “conversion” -- is

two years, not four. Tex. Civ. Prac. & Rem. Code § 16.003(a) (West

2003); Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 737 (Tex.

2001); HECI Exploration Co. v. Neel, 982 S.W.2d 881, 885 (Tex.

1998); cf. American Nat’l Ins. Co. v. Villegas, 32 S.W.2d 1109,

1110 (Tex. Civ. App. 1930) (holding that suit to recover premiums

paid by plaintiff lacking insurable interest was governed by twoyear limitations period).14

Thus, the district court erred in holding that unjust

enrichment claims -- such as Sims’ claim here -- are governed by

the same four-year limitations provision as contract claims, Tex.
15Sims’ attempts to distinguish Horwood and HECI lack merit.

Sims argues that HECI was governed by the portion of § 16.003(a)

relating to property damage (the facts of the case included damage

to an oil reservoir), and that Horwood’s affirmation of HECI is

dicta in that the case was ultimately decided on a waiver of the

limitations defense. Both these contentions are belied by the

plain text of the respective decisions. HECI, 982 S.W.2d at 885

(“[A] two-year statute of limitations [bars a] claim for unjust

enrichment.”); Horwood, 58 S.W.3d at 737 (“HECI . . . noted that a

two-year statute governed unjust enrichment claims.”).

16See also S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996) (claim

accrues when “a wrongful act causes some legal injury, even if the

fact of injury is not discovered until later, and even if all

resulting damages have not yet occurred”). This test is premised

on Texas policies so powerful that the fact that even a legitimate

claim is precluded “is not reason enough to justify a judicial

exception to the statute.” Robinson v. Weaver, 550 S.W.2d 18, 20

21

Civ. Prac. & Rem. Code § 16.004(a)(3). In fact, as cited supra,

the Texas Supreme Court has recently re-affirmed its (also recent)

holding that a different provision, Tex. Civ. Prac. & Rem. Code §

16.003(a), with a two-year limitations period, applies to unjust

enrichment claims. Horwood, 58 S.W.3d at 737; HECI, 982 S.W.2d at

885.15

Now that we have established the correct limitations period,

we must determine when this period started, and whether it ended

before June 28, 2001, the date this suit was filed. In determining

when claims accrue, Texas follows the “legal injury” test, under

which “[a] cause of action generally accrues, and the statute of

limitations begins to run, when facts come into existence that

authorize a claimant to seek a judicial remedy.” Johnson & Higgins

of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514 (Tex.

1998).16 The legal injury here arose when Wal-Mart received the
(Tex. 1977).

17See discussion at conclusion of Part II-B, supra.

18Summary judgment is proper where the pleadings and summary

judgment evidence present no genuine issue of material fact and the

moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

22

proceeds of the illegal policy, as this is when Wal-Mart received

funds that should have gone to Sims’ estate -- and when the

appropriate remedy (a constructive trust) arises.17

The limitations period on Sims’ claim would therefore have

ended two years after Wal-Mart received the policy proceeds from

its insurer. Wal-Mart has failed to produce facts, however, to

show that the statute of limitations had run when this suit was

filed; it failed to produce the date -- beyond a bare contention

that it was at some point in 1999 -- when it received the money.

And limitations is a defense that must be pled and proven by the

party asserting it to the same standard as a substantive claim,

Fed. R. Civ. P. 8(c), which in this case is the summary judgment

standard.18 Wal-Mart may or may not have received the policy

proceeds more than two years before June 28, 2001, but Wal-Mart has

not provided any evidence of this. 

In short, Wal-Mart has failed to carry its burden of proof.

The district court thus did not err in denying Wal-Mart summary

judgment on the limitations defense, and its ruling on this issue

is AFFIRMED.

III
23

For the foregoing reasons, Wal-Mart’s motion to certify to the

Texas Supreme Court is DENIED, the rulings of the district court

are AFFIRMED, and this case is REMANDED for proceedings not

inconsistent with this opinion.

MOTION TO CERTIFY DENIED; AFFIRMED AND REMANDED.