Continental Cas. Co. v. Huizar

• Decision Date: 25 November 1987
• Docket Number: No. C-4765,C-4765
• Parties: CONTINENTAL CASUALTY COMPANY, Petitioner, v. Jesus HUIZAR et al., Respondents.
• Court: Texas Supreme Court

Page 429

740 S.W.2d 429

CONTINENTAL CASUALTY COMPANY, Petitioner, v. Jesus HUIZAR et al., Respondents.

No. C-4765.

Supreme Court of Texas.

Nov. 25, 1987.

Stephen D. Susman, Evelyn Jo Wilson, Robert A. Rowland, III, Susman, Godfrey & McGowan, Houston, for petitioner.

Charles C. Frederiksen, Haynes & Boone, Dallas, Frank Herrera, Damon Ball, San Antonio, John E. Lewis, Lewis, Pettitt & Skaggs, McAllen, W. James Kronzer, Houston, for respondents.

WALLACE, Justice.

The issue in this case is whether an insurance carrier has the right to conduct further litigation of a suit brought by third parties against its insured, after the insured has entered into a covenant not to execute with the third parties and successfully moved for the dismissal of its appeal from a judgment in excess of policy limits. In an unpublished opinion, the court of appeals dismissed the appeal of the insured and thereby denied the purported right of the insurer to further pursue the appeal. On the facts of this case, we hold that the right, if any, of the insurance carrier was waived by the voluntary payment of policy limits to the third parties. Accordingly, we dismiss the cause as moot.

Seferina Huizar died as a result of a collision with a gate or barrier at Edinburg High School, and her heirs brought a wrongful death action against the school district and SHWC, Inc., an architectural firm. After a jury trial, the trial court rendered judgment in the amount of $5,063,141.75 in favor of the Huizars, and SHWC appealed. SHWC and the Huizars subsequently filed a joint motion in the court of appeals, requesting that the court dismiss SHWC's appeal "with prejudice". Continental Casualty Company (Continental), SHWC's liability insurance carrier, filed an opposition to this motion. The court of appeals granted the joint motion of SHWC and the Huizars, and dismissed the appeal.

Continental is not a formal party to this suit. Generally, only parties of record may exercise a right of appeal. Gunn v. Cavanaugh, 391 S.W.2d 723, 724 (Tex.1965). However, Continental alleges that as the liability insurance carrier of SHWC, Inc., it should be permitted to pursue the appeal because it is the real party in interest to the extent that it may ultimately become liable to pay under the policy. It argues that as a practical matter, the judgment rendered against SHWC, Inc. was a judgment rendered against Continental to the extent of policy limits, and that it is adversely affected by the judgment to that extent.

We need not decide whether, on this record, Continental has demonstrated a sufficient justiciable interest to entitle it to appellate review of the judgment. Continental's only claim is that it was adversely affected by the judgment to the extent of the policy limits. However, Continental has conceded that on September 20, 1985, it paid the Huizars the sum of $953,399.15, an amount equal to the policy limits plus interest at 10% from the date of the judgment to the date of payment. Continental attempts to downplay the importance of this fact by adding that the payment was made "under protest."

Even if we accepted Continental's premise that the judgment was in effect a judgment against it for policy limits, under these facts we must hold that dismissal of the appeal was appropriate. In Highland Church of Christ v. Powell, 640 S.W.2d 235 (Tex.1982), we stated as follows:

It is a settled rule of law that when a judgment debtor voluntarily pays and satisfies a judgment rendered against him, the cause becomes moot. Employees Finance Co. v. Lathram, 369 S.W.2d 927, 930 (Tex.1963). He thereby waives his right to appeal and the case must be dismissed. [citations omitted].

Id. at 236. The mere fact that a judgment is paid "under protest" will not prevent the case from becoming moot upon payment. Id. In Highland Church, we did recognize that a payment under duress during the pendency of an appeal would not render the appeal moot. Id. at 237. There is no evidence of duress here. The only indication that Continental was under pressure to pay is the fact that the Huizars had instituted a direct action against it for the amount of policy limits. A threat to institute a civil suit or even the actual institution of suit does not, as a matter of law, constitute duress. Eggleston v. Humble Pipe Line Co., 482 S.W.2d 909, 916 (Tex.Civ.App.--Houston [14th Dist.] 1972, writ ref'd n.r.e.); Kunkel v. Red River Nat'l Bank in Clarksville, 202 S.W.2d 962, 963 (Tex.Civ.App.--Texarkana 1947, writ ref'd). On these facts, we are unable to conclude that the payment of policy limits to the Huizars was anything but voluntary.

The cause is dismissed as moot.

KILGARLIN, J., files a concurring opinion.

GONZALEZ, J., files a dissenting opinion joined by HILL, C.J.

KILGARLIN, Justice, concurring.

I concur in the court's decision to deny Continental Casualty Company the right to maintain the appeal of the trial court's judgment against SHWC, Inc. My purpose in writing this concurring opinion is to take issue with the dissent's position that a right to pursue the appeal exists under the doctrine of virtual representation.

It has long been the law in this state that an appeal or a writ of error "can only issue at the instance of a party to the suit, or of one whose privity of estate, title or interest appears from the record of the cause in the court below, or who may be the legal representative of such party." Wood v. Yarbrough, 41 Tex. 540, 542 (1874), citing Smith v. Gerlach, 2 Tex. 424, 426 (1847).

A leading case, Gunn v. Cavanaugh, 391 S.W.2d 723 (Tex.1965), cites examples of situations in which the first Smith v. Gerlach exception exists. Those are principally cases in which rules or statutes confer some special status to a person not a party to a lawsuit, e.g., the power of an executor or administrator to represent the beneficiaries of a will in certain instances. See Specia v. Specia, 292 S.W.2d 818 (Tex.Civ.App.--San Antonio 1956, writ ref'd n.r.e.) (non-party to a will contest permitted right to appeal pursuant to Tex.R.Civ.P. 359); Allied Drug Products Co. v. Seale, 49 S.W.2d 704 (Tex.Comm'n App.1932, judgm't adopted) (legislature has adopted different policy in regards to probate appeals from those in ordinary civil cases).

In Mason v. Mason, 366 S.W.2d 552 (Tex.1963), while not expressly addressing the right of a non-party to appeal, this court held that a suit to cancel an instrument creating a trust could be brought against the trustee alone, without joining the beneficiaries of a trust. Again, statutory powers of the trustee served as a basis for concluding that beneficiaries of a trust, although not named in a lawsuit, could be bound by a judgment. But, in those cases allowing appeal by beneficiaries of trusts or wills who were not parties in the lawsuit below, their interest must be reflected in the record. Jernigan v. Jernigan, 677 S.W.2d 137 (Tex.App.--Dallas 1984, no writ) (beneficiaries not named as parties were entitled to appeal when trust assets were invaded, and their interest in the trust was reflected by the record of the case).

The second exception for allowing non-party appeals set forth in Smith v. Gerlach is that of legal representatives.

It is clear that, in any case in which the doctrine of representation is held to be applicable, the 'represented' individual is bound by a judgment rendered in a case to which he is not party. When a non-party is allowed to challenge a judgment, the decision to allow him the right to appeal is grounded on the fact that, because of the doctrine of representation, he is bound by the judgment.

Grohn v. Marquardt, 487 S.W.2d 214 (Tex.Civ.App.--San Antonio 1972, writ ref'd n.r.e.). In Grohn, a suit against an estate only did not bind heirs of the estate, because the statute required them to be named as parties. Similarly, in California and Hawaiian Sugar Co. v. Bunge Corp., 593 S.W.2d 739 (Tex.Civ.App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.), a wharf and grain elevator operator sued a steamship agent for wharfage fees. The sugar company, owner of a vessel for which fees were charged, sought to appeal, claiming it had been "represented" by its agent. The appeal was rejected because an agency agreement was insufficient to show that the sugar company would be bound by the judgment. California and Hawaiian Sugar Co. categorizes three exceptions to the general rule that only parties may appeal: (1) class actions; (2) will contests; and (3) suits wherein the parties come under the doctrine of virtual representation.

In its original sense, "representation," or as it is sometimes called, "virtual representation," was limited to situations involving class actions, where the class was represented by a named party in the lawsuit, and would be bound by a judgment in that suit. Lightle v. Kirby, 194 Ark. 535, 108 S.W.2d 896 (1937); 20 R.C.L. Parties § 9, p. 669. Also, Gunn v. Cavanaugh states "[a] person who is a party under the doctrine of virtual representation (Rule No. 42) may also appeal." 391 S.W.2d at 725. (Tex.R.Civ.P. 42 is our rule pertaining to class actions.) Gunn utilizes Robertson v. Blackwell Zinc Co., 390 S.W.2d 472 (Tex.1965), as an example of class actions constituting virtual representation. Obviously, the case at bar involves neither a class action nor a suit involving wills or trusts.

Therefore, if SHWC "represented" Continental Casualty, as the dissent contends, it must be under some theory other than class action or a statutorily imposed status such as a trust beneficiary or devisee of a decedent's estate. An affirmative answer to three questions is required for Continental Casualty to have the right to pursue the appeal.

First, is Continental Casualty bound by the judgment against SHWC? The answer, without further litigation, is clearly "no," as Continental Casualty openly asserts a policy defense of "non-cooperation." Additionally, other instances exist when insurance carriers are not...