Abbott v. Blue Cross and Blue Shield

• Decision Date: 30 July 2003
• Docket Number: No. 03-98-00558-CV.,03-98-00558-CV.
• Citation: 113 S.W.3d 753
• Parties: Greg ABBOTT, Attorney General of the State of Texas, Appellant, v. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC.; Group Life and Health Insurance Company; Group Medical and Surgical Services; Rio Grande HMO, Inc.; Healthcare Benefits, Inc.; Dental Benefits, Inc.; Motiva, Inc.; Comstar Communications, Inc.; Arizona/Texas International, Inc.; Custom General Agency, Inc.; and Texcare HMO, Inc., Appellees.
• Court: Texas Court of Appeals

113 S.W.3d 753

Greg ABBOTT, Attorney General of the State of Texas, Appellant, v. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC.; Group Life and Health Insurance Company; Group Medical and Surgical Services; Rio Grande HMO, Inc.; Healthcare Benefits, Inc.; Dental Benefits, Inc.; Motiva, Inc.; Comstar Communications, Inc.; Arizona/Texas International, Inc.; Custom General Agency, Inc.; and Texcare HMO, Inc., Appellees.

No. 03-98-00558-CV.

Court of Appeals of Texas, Austin.

July 30, 2003.

Gregory S. Coleman, Solicitor General, John W. Vinson, Asst. Atty. Gen., for Appellant.

William M. Parrish, Howard Nirken, Jenkens & Gilchrist, P.C., Austin, John M. Wylie, Robert B. Gilbreath, Tyree C. Collier, Jenkens & Gilchrist, P.C., Dallas, Will D. Davis, Heath, Davis & Mccalla, P.C., Austin, for Appellees.

Before Justices B.A. SMITH, YEAKEL and ABOUSSIE.^*

OPINION

LEE YEAKEL, Justice.

The Texas Attorney General, appellant, brought suit in district court¹ against appellee Blue Cross and Blue Shield of Texas, Inc. ("Blue Cross/Texas") and others² opposing a proposed merger between Blue Cross/Texas and Healthcare Service Corporation of Illinois, doing business as Blue Cross and Blue Shield of Illinois ("Blue Cross/Illinois"), asserting, inter alia, that Blue Cross/Texas is a common-law charity that must preserve its assets for charitable purposes and the merger is prohibited by the Texas Non Profit Corporation Act.³ After trial and after the district court apprized the parties by letter of his decision, but before the court rendered a final judgment, the parties partially settled their dispute, allowing Blue Cross/Texas and Blue Cross/Illinois to merge and agreeing that, if Blue Cross/Texas is held to be a common-law charitable corporation, the merged entity will ultimately pay to one or more charitable trusts or foundations designated by the attorney general the sum of $350,000,000 plus interest.⁴ The district court's final judgment holds that Blue Cross/Texas is not a charity. The Attorney General appeals, presenting one issue to this Court: whether the district court erred in holding that Blue Cross/Texas is not a common-law charitable corporation.⁵ We will affirm the district-court judgment.

FACTUAL BACKGROUND

For all practical purposes, the concept of what is now generally known as group health insurance began in 1929 when representatives of Baylor Hospital in Dallas created a prepaid hospital service plan known as the "Baylor Plan." Initially devised to provide group hospital insurance only to Dallas public school teachers seeking treatment at Baylor Hospital, the Baylor Plan proved successful and was extended to provide coverage to other employment groups seeking treatment at other hospitals. The Baylor Plan apparently operated without any state regulation; by contract the individual participants would pool a small sum of money each month from which the hospital expenses of all contributors would be paid. See 25 Years of Progress in Hospital Care Prepayment, American Hospital Association (1955) (The 25th Anniversary Year Brochure).

In 1939, the 46th Texas Legislature acted to allow corporations to provide group hospital services. Act of May 2, 1939, 46th Leg., R.S., ch. 1, §§ 1-16, 1939 Tex. Gen. Laws 123, repealed by Act of June 7, 1951, 52d Leg., R.S., ch. 491, § 4, 1951 Tex. Gen. Laws 868, 1095. ("House Bill 191"). House Bill 191 authorized corporations to be created "for the purpose of establishing, maintaining and operating a nonprofit hospital service plan, whereby hospital care may be provided by [the] corporation through an established hospital or hospitals... with which [the corporation] has contracted for such care...." Id. § 1 at 123. H.B. 191 was effective May 10, 1939. Id. at 126. Corporations organized pursuant to House Bill 191 were to be subject to the supervision of the State Insurance Commission and Board of Insurance Commissioners. See id. §§ 3, 7-8, 12-13, 15 at 124-26.⁶

Less than two weeks later, on May 23, 1939, articles of incorporation for Blue Cross/Texas were signed.⁷ The articles were approved by the Texas Secretary of State, who issued Blue Cross/Texas's corporate charter on June 2, 1939. Blue Cross/Texas operated continuously until its merger with Blue Cross/Illinois in 1998. Under the terms of the merger, Blue Cross/Illinois is the surviving merged entity.

Throughout its almost sixty-year existence, Blue Cross/Texas's only purpose was to operate a nonprofit hospital service plan under chapter 20 of the Texas Insurance Code or its predecessor. See Tex. Ins.Code Ann. arts. 20.01-.21 (West 1981 & Supp.2001).

STANDARD OF REVIEW

The parties disagree as to the standard this Court should follow in reviewing the district-court judgment. The district court filed findings of fact and conclusions of law. See Tex.R. Civ. P. 296-298. The Attorney General argues that this case was tried on stipulated facts and should be reviewed as an "agreed case." See Tex.R. Civ. P. 263. "An agreed statement of facts under rule 263 is similar to a special verdict; it is the parties' request for judgment under the applicable law." State Farm Lloyds v. Kessler, 932 S.W.2d 732, 735 (Tex.App.-Fort Worth 1996, writ denied) (citing Chiles v. Chubb Lloyds Ins. Co., 858 S.W.2d 633, 634 (Tex. App.-Houston [1st Dist.] 1993, writ denied)). If this is a rule 263 agreed case, the only issue on appeal is whether the district court properly applied the law to the agreed facts. See id.; Chiles, 858 S.W.2d at 635. In such instance, this Court would be limited in our consideration to those agreed facts. See Sharyland Water Supply Corp. v. Hidalgo County Appraisal Dist., 783 S.W.2d 297, 298 (Tex.App.-Corpus Christi 1989), aff'd sub nom. North Alamo Water Supply Corp. v. Willacy County Appraisal Dist., 804 S.W.2d 894 (Tex.1991). Such a review is less deferential to the trial court, because a "trial court has no discretion in deciding what the law is or in properly applying it." Kessler, 932 S.W.2d at 735 (citing Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992)). If the trial court files findings of fact in an agreed case, they are disregarded by the appellate court. Davis v. State, 904 S.W.2d 946, 950 (Tex.App.-Austin 1995, no writ). The Attorney General thus urges us to disregard the district court's findings of fact.

Blue Cross/Texas asserts that although there were numerous stipulations, this is not an agreed case and the district court considered disputed fact issues in making its decision. Thus, it was appropriate for the district court to file findings of fact and those findings should be considered by this Court.

Rule 263 provides in its entirety:

Parties may submit matters in controversy to the court upon an agreed statement of facts filed with the clerk, upon which judgment shall be rendered as in other cases; and such agreed statement signed and certified by the court to be correct and the judgment rendered thereon shall constitute the record of the cause.

Tex.R. Civ. P. 263. Although the record does not contain an "agreed statement signed and certified by the [district] court to be correct," this Court has held that strict compliance with rule 263 is not a prerequisite for an agreed case. See Lambda Constr. Co. v. Chamberlin Waterproofing & Roofing Sys., Inc., 784 S.W.2d 122, 125 (Tex.App.-Austin 1990, writ denied) (citing Reed v. Valley Fed. Sav. & Loan Co., 655 S.W.2d 259, 264 (Tex.App.-Corpus Christi 1983, writ ref'd n.r.e.); Henry S. Miller Co. v. Wood, 584 S.W.2d 302, 303 (Tex.Civ.App.-Texarkana 1979), aff'd, 597 S.W.2d 332 (Tex.1980)); see also Kessler, 932 S.W.2d at 735 ("an appellate court may treat the case as a case involving an agreed statement of facts under rule 263 if the record indicates that the trial court heard the case on stipulated facts") (citing Lambda Constr. Co., 784 S.W.2d at 125).

An examination of the record from the district court reveals that although a large part of the evidence before the district court consisted of the parties' stipulations, the court was correct in not treating the case as agreed. The parties initially filed what they termed a "Stipulation of Facts," consisting of 397 written stipulations and 126 exhibits. The stipulation was twice supplemented, adding 51 written provisions and 33 exhibits. Each of the filings was signed by the attorneys for the parties and prefaced with the following agreement:

[The parties] hereby file the following... as evidence in this cause, and in order to expedite the conclusion of this Litigation and to prevent the unnecessary expenditure of resources of [the parties], [the parties] agree and stipulate that the following facts, exhibits and affidavits (including any attachments to such affidavits) attached hereto, and all facts recited in the exhibits, except as specifically set forth in [certain identified stipulations] and affidavits (including any attachments to such affidavits), are true and correct for all purposes of this Litigation and only for purposes of this Litigation and may be considered by [the district court] as evidence in this Litigation with the same dignity, force and effect as if such facts, exhibits, and testimony in such affidavits (and attachments to such affidavits) were offered in evidence at a trial on the merits, through competent witnesses testifying at a trial, and such facts, exhibits, testimony and attachments were admitted into evidence in this Litigation.⁸

It is significant that the agreement does not reflect an agreement that the stipulations are complete or accurate, does not state that it was the parties' intention that this be an agreed case, and does not reference rule 263. Before trial, the parties corresponded, apparently unsuccessfully, about "correcting" certain of the stipulations, and the attorney general moved to "correct" others. Blue Cross/Texas objected to the motion, urging that it was "a last minute attempt to change the stipulations." The district court observed that he could not...