Court Opinion

ID: 9857953
Source: CourtListenerOpinion
Date Created: 2023-09-24 16:10:11.324865+00
Date Added: 2024-06-11T10:01:02.652138
License: Public Domain

Sam Birjd, Judge. Appellant John Gibson Auto Sales, Inc. (Gibson), appeals from an order granting summary judgment in favor of appellee Direct Insurance Company (Direct). Gibson is an automobile dealer in Hot Springs. On February 9, 2005, pursuant to an Installment Sale Contract, Gibson sold a 1998 GMC Suburban vehicle to Rochelle Hunter. According to the contract, Hunter paid $1,000 as a down payment and Gibson financed a balance of $11,700, to be paid in monthly installments of principal and interest. The contract required Hunter to obtain a casualty insurance policy covering the vehicle, and she acquired such a policy from Direct. On June 5, 2005, the vehicle sustained a loss, and Gibson, claiming to be a lien holder and loss payee under the policy, made demand upon Direct for payment of its loss. Direct refused to pay, contending that the insurance policy had been cancelled prior to the loss to the vehicle due to non-payment of premiums. On June 25, 2005, Gibson filed a complaint in the Garland County Circuit Court praying for judgment in the amount of $11,849.59, less applicable deductibles, and for statutory penalties, costs, interest, and attorney fees. In its answer, Direct denied that Hunter’s insurance policy was in effect on June 5, 2005, denied that Gibson was a loss payee on that date, and alleged that the insurance policy in question had been effectively cancelled on June 3, 2005, due to non-payment of premiums. On November 1, 2005, Gibson filed a motion for summary judgment, contending that Direct had failed to give Gibson proper notice of cancellation of the policy as required by Ark. Code Ann. § 23-89-304. In the brief supporting its motion, Gibson argued that, under the statute, an insurer’s notice of cancellation of an insurance policy must be given at least twenty days prior to termination, except that where the cancellation is for nonpayment of premiums, the notice is not effective unless it is given at least ten days prior to termination and contains a statement of the reason the policy is to be cancelled. Gibson attached to its motion the written notice of cancellation that it received from Direct, which was dated May 23, 2005, and provided for an effective date ofjune 3, 2005, but which did not contain a statement of the reason why the policy was being cancelled. In addition, Gibson attached a “Cancellation of Policy” dated June 13, 2005. Gibson contended that, because the May 23 notice did not contain the reason why the policy was being canceled, the cancellation could not have been effective until June 13, which was twenty days after the notice was sent. Furthermore, pointing to the June 13 cancellation notice, Gibson argued that Direct’s “own documents show the policy was in effect on the date of the loss.” Gibson therefore claimed that coverage under the policy was in effect on the date of the loss, which was June 5, 2005. Direct filed a cross-motion for summary judgment on November 21, 2005, claiming that Gibson was “not a bank or other lending institution” and that statutory notice of intent to cancel the policy was required to be given only to the insured and “any bank or lending institution shown on the policy and having a lien on the insured’s automobile.” Direct argued that because Gibson was neither a bank nor other lending institution, Gibson was not entitled to notice, but that notice had been given to Gibson as a courtesy, rather than as a requirement of Ark. Code Ann. § 23-89-304. In its reply to Direct’s motion, Gibson conceded that it was not a bank but argued that it was a lending institution under the statute. To support its claim, Gibson asserted that, in its normal course of business, it loaned monies and was subject to both state and federal regulations as to lending. It also asserted that the intent of the statute is to give notice of cancellation to alien holder, so the lien holder can take appropriate action to protect its interest. By letter dated January 6, 2006, the trial court announced that it was granting Direct’s cross-motion for summary judgment, finding that the “[sole] issue [was] whether plaintiff [Gibson] in this case is a ‘lending institution.’ ” The court determined that Gibson was not a lending institution, and Gibson now appeals. Summary judgment was appropriate in this case, as both parties concede that there are no issues of material fact left to be resolved and the issue is purely one of law, involving the interpretation of Ark. Code Ann. § 23-89-304(b) (Supp. 2003). See State Farm Mut. Auto. Ins. Co. v. Henderson, 356 Ark. 335, 150 S.W.3d 276 (2004). We review issues of statutory interpretation de novo, as it is for this court to decide what a statute means. Id. In this respect, we are not bound by the trial court’s decision; however, in the absence of a showing that the trial court erred, its interpretation will be accepted as correct on appeal. Id. Arkansas Code Annotated section 23-89-304(b) states as follows: (1) No notice of cancellation to any bank or other lending institution shown on the policy and having a lien on the insured’s automobile shall be effective unless mailed or delivered by the insurer to the bank or other lending institution. (2) No notice of cancellation to any bank or other lending institution shall be effective unless mailed or delivered at least twenty (20) days prior to the termination of the insurance protecting the interest of the bank or lending institution, provided that, when cancellation is for nonpayment of premium, at least ten (10) days’ notice of cancellation accompanied by the reason therefor shall be given. Simply stated, subsection (1) provides that, to be effective, policy cancellation notices must be mailed or delivered to banks or other lending institutions that have a lien on an insured’s automobile and are shown on the policy. Subsection (2) further provides that, to be effective, insurance policy cancellation notices to banks or other lending institutions must be mailed or delivered at least twenty days before termination of the insurance policy, except that, when the reason for the cancellation is non-payment of premiums, the time for giving effective notice is reduced to ten days and the notice must contain the reason for the policy’s cancellation. On appeal, Gibson contends that the trial court erred in its finding that Ark. Code Ann. § 23-89-304(b) did not require that it be given notice of cancellation of the insurance policy, arguing that the clear intent of the statute was to provide advance notice to lien holders that insurance would be cancelled. Gibson asserts that, although it is not a bank, as an “other lending institution” it is entitled to notice under the statute, pointing to the fact that it is regulated by both state and federal regulations for lending. The problem with this argument is that there is nothing in the record to establish that Gibson is a “lending institution.” Although Gibson asserted that it loaned monies and was subject to both state and federal regulations as to lending, it produced no evidence that its primary function was the business of lending. We recognize that the term “lending institution,” as used in Ark. Code Ann. § 23-89-304(b), is not defined in the statute. However, in our view, the term “lending institution” means an organization that is primarily engaged in the lending business; if the organization’s credit and lending operations, however extensive, and even though regularly carried on, is an incidental function of its main business, then the organization is not a lending institution for the purpose of Ark. Code Ann. § 23-89-304(b).  Here, there is simply no proof that Gibson’s primary function was the business of lending. Rather, the evidence shows that Gibson was an automobile dealer and that its loan to Hunter was simply an extension of credit that was incidental to Gibson’s main business — selling automobiles. Though Gibson claimed that it “loaned monies,” it produced no evidence to show that this was its primary function. We therefore hold that Gibson was not a “lending institution” within the meaning of Ark. Code Ann. § 23-89-304(b), and we affirm the trial court’s decision to grant summary judgment in favor of Direct. The dissenting judge does not disagree with the trial court’s conclusion that Gibson was not a lending institution within the meaning of Ark. Code Ann. § 23-89-304. Rather, the dissent contends that whether or not Gibson is a lending institution is irrelevant because Direct did not offer proof that the policy had been terminated prior to the loss to the vehicle on June 5, 2005. The dissenting position ignores the pleadings, summary-judgment motions, and arguments of the parties below, and overlooks the sole basis of the trial court’s decision. The parties’ pleadings and motions demonstrate that the case presented to the trial court evolved into the single question of whether Gibson was a lending institution. For example, the essence of Gibson’s complaint is that it was entitled to recover for the June 5, 2005 damage to Hunter’s car because Gibson was named in the policy as a loss payee. Direct’s answer denied that the policy was in effect because the policy had been cancelled on June 3, 2005, due to non-payment ofpremiums. On November 1, 2005, Gibson filed its summary-judgment motion to which was attached, among other things, copies of notices of “Intent to Cancel Policy” addressed to John Gibson Auto dated May 23, 2005 and June 13, 2005, respectively. Both notices bore the applicable policy number, identified the insured (Hunter) and the insured vehicle, and contained an effective cancellation date of June 3, 2005. Gibson did not argue in its motion that it did not receive notices of the policy’s cancellation on June 3, 2005. Rather, it argued that “proper notice of cancellation was not given” in the manner required by Ark. Code Ann. § 23-89-304. Specifically, it argued that since the notice dated May 23 did not contain a statement of the reason for the cancellation as required by Ark. Code Ann § 23-89-304(b)(2), it was not effective to cancel the policy until twenty days after the notice was given. Gibson then pointed to the June 13, 2005 cancellation notice and argued that Direct’s “own documents” demonstrate that the policy was still in effect on June 5. On November 21, 2005, Direct filed its cross-motion for summary judgment alleging and arguing that, because Gibson was not a bank or other lending institution, it was not entitled, under Ark. Code Ann. § 23-89-304(b)(l)-(2), to notice of cancellation of a policy. In its reply to Direct’s motion, Gibson alleged that the parties were in agreement as to the relevant facts in this case, and conceded that the “true issue is whether [Gibson] as a loss payee was entitled to the 20 day notice as required by A.C.A. § 23-89-304(b) (1).” Gibson admitted that it was not a bank but argued that, as a lien holder, it was an “other lending institution” within the meaning of the statute. From the foregoing summary of the pleadings and arguments, it is clear that the issue framed by the parties in their respective pleadings and motions for summary judgment was whether Gibson was a “bank or other lending institution” within the meaning of § 23-89-304. In the letter setting forth its findings, the court noted that “the [sole] issue is whether [appellant] in this case is a ‘lending institution.’ ” In its order granting Direct’s motion for summary judgment, the only finding made by the court was that Gibson “has not established that it is a lending institution.” Gibson’s only point on appeal is that the trial court erred in its finding that Ark. Code Ann. § 23-89-304(b) did not require that notice of cancellation of the insurance policy be given to Gibson. The dissentingjudge would have us decide this case upon an issue that was not ruled upon by the trial court. When a party does not obtain a ruling on an argument before the trial court, the issue is procedurally barred from our consideration on appeal. Israel v. Oskey, 92 Ark. App. 192, 212 S.W.3d 45 (2005). Therefore, we cannot decide this case, as the dissent urges us to, on the issue of whether the casualty insurance policy had been terminated prior to the loss of the vehicle. Affirmed. Pittman, C.J., and Gladwin, Crabtree and Roaf, JJ., agree. Baker, J., dissents.