Atchley v. Spurgeon

• Decision Date: 28 January 1998
• Docket Number: No. 04-96-00278-CV,04-96-00278-CV
• Citation: 964 S.W.2d 169
• Parties: R. Craig ATCHLEY and Deborah Atchley, Appellants, v. Thomas SPURGEON and Carolyn Spurgeon, For Use of United States Fidelity & Guaranty Co., and Guy Chipman Company, Appellees.
• Court: Texas Court of Appeals

Page 169

964 S.W.2d 169

R. Craig ATCHLEY and Deborah Atchley, Appellants, v. Thomas SPURGEON and Carolyn Spurgeon, For Use of United States Fidelity & Guaranty Co., and Guy Chipman Company, Appellees.

No. 04-96-00278-CV.

Court of Appeals of Texas San Antonio.

Jan. 28, 1998.

Daniel A. Bass, San Antonio, for Appellants.

James L. Drought, P. Jeffery Nanney, Drought & Pipkin, L.L.P., San Antonio, Michael H. Patterson, Douglas & Elms, Inc., San Antonio, Valinda J. Astoria, Douglas & Barnhill, P.C., San Antonio, for Appellees.

Before HARDBERGER, C.J., and STONE and ANTONIO G. CANTU, ¹ JJ.

OPINION

HARDBERGER, Chief Justice.

INTRODUCTION

This is an appeal from a decision to strike a plea in intervention. In one point of error, appellants, R. Craig and Deborah Atchley (Atchleys), claim that their motion to intervene was erroneously stricken under criteria established by this court in Metromedia Long Distance, Inc. v. Hughes, 810 S.W.2d 494 (Tex.App.--San Antonio 1991, writ denied). We believe Metromedia does not provide would-be intervenors the absolute right to disturb settlement agreements. Therefore, we affirm the judgment.

FACTS

In 1989 the Atchleys, through their real estate agent, Guy Chipman Company (Chipman), sold their home to Thomas and Carolyn Spurgeon (Spurgeons). A year later, a plumbing leak damaged the home's foundation, and the Spurgeons filed a claim under their homeowner's policy against United States Fidelity & Guaranty Company (USF & G). Upon paying the claim, USF & G, as subrogator of the Spurgeons, demanded reimbursement from Chipman and the Atchleys. The Atchleys responded shortly thereafter with a letter from their attorney demanding that they not be named as defendants.

On April 15, 1992, USF & G filed a lawsuit, in the Spurgeons' name, against Chipman. The lawsuit alleged violations of the Texas Deceptive Trade-Practices Act (DTPA) and fraud and sought damages of over $20,000. The bases of the claim were alleged misrepresentations made by Chipman that the pipes under the home had been new when the Spurgeons made the purchase. The Atchleys were not named in the suit.

Although the parties dispute the aggressiveness of Chipman's defense in the suit, it is clear that both parties engaged in some discovery. In addition, Chipman filed a motion for summary judgment in the case, although there is nothing in the record indicating that this motion was disposed of. There was also an early attempt at mediation between the parties. In the end, however, there was no trial. According to Chipman and Spurgeon, the parties agreed on a settlement in September and October 1994. Under this agreement, Chipman agreed to pay $5,000, and USF & G agreed to release the company from further liability. Although Chipman paid the $5,000, it failed to sign the actual settlement agreement until June 1995, after the Atchleys filed their first plea in intervention. In addition, the parties failed to file the settlement and have the case dismissed, although a dismissal order was apparently drawn up. Both the Spurgeons and Chipman assert that the Atchleys knew of the settlement, and the Atchleys have not contested this.

Shortly after entering the settlement agreement with USF & G, Chipman sued the Atchleys for indemnity under the Residential Listing Agreement signed by the parties. At that point, nearly three years after the original suit was filed, the Atchleys filed their first plea in intervention. This plea did not survive a Motion to Strike Plea in Intervention. However, a procedural error afforded the Atchleys another chance, and they filed their First Amended Plea in Intervention. The Spurgeons filed a second Motion to Strike, which, after a hearing, was granted. The Atchleys appeal this ruling, alleging that they have satisfied the criteria established by the Supreme Court of Texas and this court to establish a right to intervene in litigation that affects their interests.

DISCUSSION

Rule 60 of the Texas Rules of Civil Procedure sets out an applicant's right to intervene in litigation, "subject to being stricken out by the court for sufficient cause on the motion of the opposite party." TEX.R. CIV. P. 60. A trial court is given broad discretion in deciding on a motion to strike, and its decision will be reversed only if it has abused that discretion. Guaranty Federal Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 657 (Tex.1990).

In Guaranty Federal, the supreme court held that it is an abuse of discretion to strike a plea in intervention if: (1) the intervenor can show that he could have brought the same action, or any part thereof, in his own name, or, if the action had been brought against him, he would be able to defeat recovery; (2) the intervention will not complicate the case by an excessive multiplication of the issues, and (3) the intervention is almost essential to effectively protect the intervener's interest. Id.

The parties do not dispute that the Atchleys have met the first prong of this test. They were the sellers of the home and were originally targeted for litigation by USF & G. In addition, the record suggests that the Atchleys had arguable grounds for defeating the DTPA and fraud causes of action. See Metromedia Long Distance, Inc., 810 S.W.2d at 497 (justiciable interest may be determined on the basis of the sufficiency of the petition in intervention). The Atchleys also allege that they would have had available to them counterclaims against USF & G, based on Texas Rule of Civil Procedure 13 and the DTPA. Clearly, they had a justiciable interest in the litigation.

The parties do dispute the second and third prongs of the Guaranty Federal criteria. The second prong allows a trial judge to strike a plea in intervention if the intervention will complicate the litigation with a multiplicity of issues. The Atchleys argue that no such complication will occur here. The issues raised by the plea in intervention, they point out, are basically the same as those that were litigated between USF & G and Chipman. However, Chipman and the Spurgeons argue that a settled case is inevitably "complicated" when it is revived by an intervention. While this is true, this is not the complication envisioned by the court in Guaranty Federal. What gives a trial court grounds to reject intervention under this criterion is the injection of new issues into litigation. We do not agree that this criterion is satisfied merely because the parties have reached a settlement. See Metromedia, 810 S.W.2d at 497 (allowing intervention after judge found for plaintiffs).

We do agree with Chipman, the Spurgeons, and the trial court, however, that the third criterion set out by Guaranty Federal, that the intervention be nearly essential to protect the would-be-intervener's rights, is not satisfied.

The Atchleys rely heavily on Metromedia to argue that intervention is essential to protect their interests. In Metromedia, plaintiffs sued several defendants, including Metromedia, for misrepresentations concerning the value of stock. Metromedia settled with the plaintiffs and was dismissed from the case. Metromedia, 810 S.W.2d at 495. Four years later, right before trial was scheduled to begin, the remaining defendants requested that Metromedia defend them under an indemnity agreement. Id. at 496. Metromedia then sought to intervene in the litigation to protect its interests. Id. at 496-7. The trial court struck its first plea and then struck a second plea that alleged collusion between the parties to the litigation. Id. After the plaintiffs, in a non-jury trial, won a $4.6-million judgment, Metromedia appealed, afraid it would be held liable for the payment and unable to assert defenses it had against the plaintiffs.

Metromedia is distinguished from the case before us. Metromedia's plea in intervention followed a trial on the issues. Id. After Metromedia settled out of the litigation, the remaining defendants dropped their defenses, relying, instead, on a general denial. Thus, intervention was indeed necessary to prevent the final disposition of viable claims and defenses that would have protected Metromedia's interests. However, the Atchleys' plea follows a settlement, reached after a discovery period and a mediation attempt. Chipman pursued its defenses and filed a motion for summary judgment during this period. We cannot say that the Atchleys' interests were not protected.

Moreover, the Atchleys admitted at the hearing on the Motion to Strike that, if not allowed to intervene, they can still argue in the litigation pending against them that Chipman's settlement with USF & G was unreasonable, given the various defenses they claim to have. If successful, the Atchleys admit, they will be relieved of indemnifying Chipman. But this is not enough for the Atchleys. As their attorney pointed out, they would still have to pay him "a considerable amount of money when they shouldn't have." In addition, they now wish to bring counterclaims against USF & G for violations of Texas Rule of Civil Procedure 13 and under the DTPA, claiming that the suit against Chipman was brought in bad faith. These claims, they correctly note, may only be brought in the original litigation.

A claim for Rule 13 sanctions fits within the definition of a compulsory counterclaim.

A counterclaim is compulsory if: (1) it is within the jurisdiction of the court; (2) it is not at the time of filing the answer the subject of a pending action; (3) the action is mature and owned by the pleader at the time of filing the answer; (4) it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim; (5) it is against an opposing party in the same capacity; and (6) it does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction.

Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 247 (Tex.1988). Rule 97 of the Texas Rules of Civil Procedure makes it mandatory that any...