Sarah Jane ENGLISH, Petitioner, v. Jerry E. FISCHER, and Alice Ann Fischer, Respondents, 660 S.W.2d 521

WALLACE, Justice. This is a suit for damages by a homeowner against the mortgagee for failure to turn over the proceeds of a fire insurance policy in order to aid the homeowner in rebuilding after a fire. The trial court rendered judgment for the homeowner and the court of appeals affirmed, 649 S.W.2d 83. We reverse the judgments of the courts below and render judgment for the mortgagee. Jerry Fischer and wife Alice (Fischer) purchased a home from Sarah Jane English (English) in 1967. Part of the consideration received by English was a promissory note for $62,500 secured by a lien on the house.

In 1979 the house was partially destroyed by fire. Fischer requested that English endorse the insurance check to them for purposes of rebuilding. English verbally agreed to do so but after checking with her ex-husband decided not to. Both Mr. Fischer and English’s ex-husband are attorneys. The repairs to the home were delayed for over a year. According to Fischer the delay was due to the inability to secure a loan to pay for the repairs without the insurance proceeds. The insurance company inter-pleaded the insurance proceeds of $110,000 into the registry of the court on January 10, 1980.

On September 13,1980, Fischer posted a bond and withdrew the insurance proceeds. The jury found that during the delay the cost of repair increased $127,616. The issues before us are: (1) whether Texas courts should imply a covenant of good faith and fair dealing in all contracts; (2) whether the deed of trust in this case provided for disposition of the insurance proceeds; (3) whether there was consideration for English’s verbal agreement to endorse the insurance check; and (4) whether Fischer’s cause of action came within the Deceptive Trade Practices Act.

IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING The court of appeals affirmed the trial court judgment and awarded Fischer judgment for $127,616. representing the increase in construction cost. A basis for the judgments below was the adoption of a novel theory of law enunciated only by California courts. That theory holds that in every contract there is an implied covenant that neither party will do anything which injures the right of the other party to receive the benefits of the agreement.

The courts below call this a covenant of “good faith and fair dealing.” This concept is contrary to our well-reasoned and long-established adversary system which has served us ably in Texas for almost 150 years. Our system permits parties who have a dispute over a contract to present their case to an impartial tribunal for a determination of the agreement as made by the parties and embodied in the contract itself.

To adopt the laudatory sounding theory of “good faith and fair dealing” would place a party under the onerous threat of treble damages should he seek to compel his adversary to perform according to the contract terms as agreed upon by the parties. The novel concept advocated by the courts below would abolish our system of government according to settled rules of law and let each case be decided upon what might seem “fair and in good faith,” by each fact finder. This we are unwilling to do.

DISBURSEMENT OF INSURANCE PROCEEDS The contract between Fischer and English at the time of purchase of the house and lot in question consisted of a promissory note secured by a deed of trust. The deed of trust contained a provision which specifically covered the disbursement of insurance proceeds in the event of damage to the property. That provision states: It is agreed and stipulated that . .. (Fischer) ... shall keep said property fully insured in some company or companies approved by the holder of said indebtedness (English), to whom the loss, if any, shall be payable and by whom the policy shall be kept.

The parties thus specifically agreed to and embodied in their written contract that in the event of total or partial damage to the property the insurance proceeds would be paid to English. Fischer contends this provision speaks only to the possibility of a partial or full destruction of the property which would diminish its value to a sum less than that remaining unpaid on the indebtedness.

It is clear from the wording of the provision that the contemplation of the parties was that the property was to be insured at its value, that English was to have possession of the insurance policy or policies and that any loss payable under the policy or policies was to be payable to English. The loss payable under the policies would not necessarily have any relation to the amount of the indebtedness, rather it would relate to the amount of insurance in force.

We hold that the parties specifically contracted for the disbursement of the proceeds of the fire insurance and that English was entitled to apply such proceeds to the indebtedness and pay the remainder to Fischer. Fischer contends that Naquin v. Texas Sav. & Real Estate Inv. Ass’n, 95 Tex. 313, 67 S.W. 85, 87 (1902) is contrary to our holding. The two cases are distinguishable by the different provisions of the deeds of trust pertaining to insurance proceeds.

In Naquin the deed of trust provides: It is further agreed that the said Naquin shall keep the improvements on said property insured for the benefit of [the] association .... Naquin sought to have the insurance proceeds used to liquidate the debt but the lien holder insisted upon rebuilding the house. This Court in determining the right of the parties in that particular case held that the Association was correct in rebuilding the house because they held the insurance proceeds for the benefit of both parties.

In the present case the contract between the parties specifically provided that the proceeds were to be paid to English. Nowhere in the Naquin opinion did this Court suggest that the parties could not contract as to the disposition to be made on the insurance proceeds in the event of fire. CONSIDERATION FOR VERBAL AGREEMENT TO ENDORSE CHECK By reply point Fischer urges that we should consider their contract theory of damages even though the court of appeals did not write on that point. In the interest of judicial economy we have agreed to do so.

Fischer contends that the verbal agreement of English to endorse the insurance check and deliver it to them was supported by consideration in that she would benefit by her collateral being increased in value as a result of the rebuilding. They further contend that their reliance on her promise to endorse the check and having the builder commence work toward rebuilding constituted promissory estoppel. We will first consider the question of increase in value of the collateral. The note held by English had a balance of approximately $57,000 and bore interest at 5½% per annum.

Fischer’s suit asked for and the judgments below provided for $127,-616 for the increase in cost of repairs due to inflation. Fischer alleged that the rebuilding could not be commenced without the insurance proceeds because of high interest rates and lack of mortgage money. Fischer is contending on the one hand that a promissory note bearing interest at 5½% per annum secured by a lien on a house worth $200,000 when rebuilt would be of more benefit to English than $57,000 cash. On the other hand Fischer argues that they could not borrow money to rebuild the house because of high interest rates and inflation.

The contradiction in the allegations is apparent. As a matter of law English received no consideration for making the verbal agreement to endorse the check. We next consider the question of promissory estoppel. The requisites of promissory estoppel are: (1) a promise, (2) foreseeability of reliance thereon by the promisor, and (3) substantial reliance by the promisee to his detriment. Aubrey v. Workman, 384 S.W.2d 389, 393 (Tex.Civ. App. — Fort Worth 1964, writ ref’d n.r.e.).

The record shows that the only acts taken by Fischer in reliance upon English’s verbal agreement to endorse the check was to clean up some of the burned house in preparation for rebuilding. Everything done by Fischer would necessarily have been done whether the check was endorsed or not. Since Fischer proved no detrimental reliance on the promise by English the theory of promissory estoppel is not operable in this case. DECEPTIVE TRADE PRACTICES ACT The trial court and the court of appeals were correct in denying Fischer’s claim for damages under the Deceptive Trade Practices Act.

The house was purchased in 1967 and only in regard to that transaction could Fischer be a consumer. Unless Fischer had been able to show some representation or warranty on the part of English which would have continued past the effective date of the DTPA (May 21, 1973), they are barred from any complaint as to the 1967 sale. Woods v. Littleton, 554 S.W.2d 662 (Tex.1977). What Fischer seeks in this action is the proceeds from an insurance policy which is neither “goods” nor “services.” Therefore they are not consumers, Riverside Nat’l Bank v. Lewis, 603 S.W.2d 169 (Tex.1980).

The judgments of the courts below are reversed and judgment is rendered that respondents take nothing. Dissenting opinion by KILGARLIN, J., in which RAY, J., joins.