Ranger Ins. Co. v. Rogers, 12297

Citation530 S.W.2d 162
Decision Date12 November 1975
Docket NumberNo. 12297,12297
PartiesRANGER INSURANCE COMPANY, Appellant, v. Sara ROGERS et al., Appellees.
CourtCourt of Appeals of Texas. Court of Civil Appeals of Texas

L. W. Anderson, Dallas, for appellant.

Tom H. Davis, Byrd, Davis, Eisenberg & Clark, Austin, for appellees.

SHANNON, Justice.

Appellees, Sara Rogers, the administratrix of the estate of John D. Rogers, deceased, and Billie L. Arnold, individually and as next friend for William Allen Arnold, a minor, sued appellant, Ranger Insurance Company in the district court of Travis County. After a trial to a jury and upon appellees' motion, the district court entered judgment Non obstante veredicto for Billie L. Arnold and the minor child for a total of $450,000.00.

The event made the basis for this appeal was the crash of a Piper aircraft in West Texas on April 13, 1972. At the time of the crash John D. Rogers was the pilot of the aircraft and Billy J. Arnold was a passenger. Rogers was president of and a major stockholder in United Housing Corporation. Rogers had used the airplane for trips about the area in the furtherance of his business interests. On the occasion of the crash he and Arnold had flown to Lubbock in connection with the commencement of a new business venture for United Housing Corporation. Both Rogers and Arnold were killed in the crash.

Appellant had written a liability insurance policy pertaining to the involved airplane with $500,000.00 limits for each occurrence. Early in the course of events appellant took the position that its policy offered no coverage at the time of the crash for the reason that the pilot was flying the aircraft in violation of the terms of the policy. In an effort to resolve the coverage problem appellant filed a declaratory judgment proceeding in the United States district court for the Northern District of Texas seeking a judgment that it was not liable for the claims arising from the crash. The jurisdictional basis for filing suit in the United States district court was diversity. In order to preserve diversity the insurance company did not join certain of the interested parties who were residents of Texas. The United States district court dismissed the suit upon the basis that the estate of Billy J. Arnold was a necessary party and if the estate wre joined, there would not be complete diversity of citizenship. Ranger Ins. Co. v. United Housing of New Mexico, Inc., 488 F.2d 682 (5th Cir. 1974).

Billie L. Arnold, wife of the deceased passenger, filed a death action in the United States district court for the Western District in El Paso against the administrator of the estate of the pilot and United Housing Corporation. Counsel for the administrator of the estate of Rogers tendered the defense of the suit in the United States district court to the insurance company. The insurance company took the position that there was no coverage of the crash by the terms of its policy and refused to defend the suit without a 'reservation-of-rights' agreement. The administrator of the estate refused to permit the company to defend the suit with such an agreement.

In September, 1973, a consent judgment was entered by the United States district court approving the settlement made by the parties. The approval of the court was necessary inasmuch as a minor child was one of the beneficiaries of the death benefits. By the terms of that judgment Billie L. Arnold recovered $425,000.00 from the estate of John D. Rogers and the minor child recovered $25,000.00 from the said estate.

In March, 1974, appellees filed suit in the district court of Travis County on the judgment obtained in the United States district court. In their trial petition the appellees averred that at the time of the crash, the appellant insurance company had in force a liability insurance policy which protected John D. Rogers against liability for injury or death to passengers in the plane. Although requested to do so, the insurance company refused to defend the estate of John D. Rogers and, likewise, the insurance company refused to pay the judgment entered in the United States district court. Appellee pleaded further that by the terms of its liability policy the insurance company was responsible to them for the amount of the judgment entered in the United States district court in addition to reasonable attorneys' fees for the defense of that suit.

In its trial pleading, appellant pleaded (1) that the judgment obtained in the United States district court '. . . amounted to a fraud on the Court and was procured through collusion between the parties, and not in good faith, and accordingly does not constitute a proper judgment which can be sued upon'; (2) that the amount of the judgment obtained in the United States district court was unreasonable, and that the appellees had the burden to prove the reasonableness of that judgment; and (3) that at the time of the crash, the pilot was operating the airplane in an area where there was not proper visibility, all in violation of the terms of the insurance policy and, therefore, there was no coverage under that policy for claims arising from the crash.

The charge of the court contained five special issues. Special issue number one asked, 'Do you find from a preponderance of the evidence that on the occasion of the crash, John Rogers was flying his aircraft in an area where the visibility was one mile or more?' The jury answered 'He was.' Special issue number two queried, 'Do you find from a preponderance of the evidence that on the occasion of the crash, John Rogers was flying his aircraft in an area where the visibility was less than one mile?' The jury answered 'He was not.' Special issue number four inquired, 'Were the terms and provisions of the judgment which was agreed to by United Housing and the Rogers Estate and entered by the United States District Court in El Paso entered into in good faith?' The jury was instructed that the term 'good faith' as used in the charge meant not only honesty in fact in the conduct of the transaction concerned, but also meant conduct within the bounds of reason or with a reasonable basis when viewed under the facts and circumstances which existed at that time. The jury was further instructed that if an insurer refused 'to defend its insured pursuant to the terms of the policy in question, the insured may in good faith enter agreements to limit his liability and expenses.' The jury answered 'no' in response to special issue number four. The jury answered special issue number five that $250,000.00 for Billie L. Arnold and $35,000.00 for the minor child would have been a reasonable settlement for United Housing and the estate of John D. Rogers to have made with appellees.

The insurance company filed a motion for judgment to the effect that judgment be entered based upon the answers of the jury, awarding Billie L. Arnold $250,000.00 and the minor child $25,000.00.

Appellees filed a motion for judgment Non obstante veredicto asking the jury to disregard the answer of the jury to special issue number four and to enter judgment for them for the full amount of the judgment obtained in the United States district court. Appellees' motion for judgment Non obstante veredicto stated no grounds, other than that appellees were entitled to such judgment 'as a matter of law.'

As stated above, the district court granted appellees' motion for judgment Non obstante veredicto and entered judgment for Billie L. Arnold in the sum of $425,000.00 and for the minor child in the sum of $25,000.00.

Points of error one and two constitute appellant's primary attack upon the judgment Non obstante veredicto. Point one is that the court erred in failing to grant appellant's motion for judgment since the jury found that the '. . . terms and provisions of the Settlement agreed upon by United Housing and the Rogers Estate, and the judgment entered pursuant thereto by the United (sic) District Court of El Paso, were not reasonable and made in good faith. . . .' (Emphasis added) Point of error two is that the court erred in entering judgment Non obstante veredicto for the reason that the evidence '. . . in connection with the reasonableness and good faith of the Settlement involving the entrance into the agreed judgment .. .' was contested, that counsel for appellees did not object to the submission of special issue number four, and as a matter of law '. . . reasonableness and good faith are necessary elements for the appellees to prove to recover on any judgment where there was no evidence offered and no trial of any issues made to the court.' (Emphasis added)

Appellees defend the judgment Non obstante veredicto upon three grounds: (1) that the consent judgment is not subject to collateral attack by appellant, (2) that the burden was upon the insurance company to prove that the amount of the settlement was unreasonable, and (3) that appellees established the reasonableness of the settlement as a matter of law.

In the beginning, it should be stated that although appellant's points of error refer to the Settlement between the parties, it is the consent Judgment of the United States district court which is the subject here under consideration.

The consent judgment provides in part: '. . . Plaintiff and defendant announced in open Court that a settlement of all claims asserted herein had been agreed upon by and between the parties subject to the approval of the Court, requested the Court to consider the terms and provisions of the proposed settlement agreement and enter judgment accordingly. The Court, having considered the facts and circumstances of this case, and the proposed settlement agreement, approves the terms and provisions thereof and finds that the amount of the settlements to the plaintiff is in all things reasonable.'

A consent judgment has the same degree of finality and binding force as does one entered by the court at the conclusion of an adversary...

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