Rodriquez v. Texas Farmers Ins. Co.

• Decision Date: 31 July 1995
• Docket Number: No. 07-94-0356-CV,07-94-0356-CV
• Citation: 903 S.W.2d 499
• Parties: Orlando RODRIQUEZ, Lydia Rodriquez, David A. Ortega and Rita Ortega, Appellants, v. TEXAS FARMERS INSURANCE COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 499

903 S.W.2d 499

Orlando RODRIQUEZ, Lydia Rodriquez, David A. Ortega and Rita Ortega, Appellants, v. TEXAS FARMERS INSURANCE COMPANY, Appellee.

No. 07-94-0356-CV.

Court of Appeals of Texas Amarillo.

July 31, 1995.

Rehearing Overruled Aug. 30, 1995.

Burwell, Enos & Baron, P.C., Gregory B. Enos, Texas City, for appellants.

McCleskey, Harriger, Brazill & Graf, Jim Hund, Lubbock, for appellee.

Before REYNOLDS, C.J., and BOYD and QUINN, JJ.

REYNOLDS, Chief Justice.

Texas Farmers Insurance Company secured declarations, via summary judgment, that it had no duty to defend Orlando Rodriquez and Lydia Rodriquez under its insurance policy issued to them, or to indemnify or pay on their behalf any sums they were obligated to pay David A. Ortega and Rita Ortega for claims resulting in a default judgment against the Rodriquezes. The Rodriquezes and the Ortegas contend, with five points of error, that questions of fact exist to vitiate the summary judgment. Based upon the rationale and authorities expressed, we will affirm the judgment.

The events underlying this appeal began on 5 May 1990, when the Rodriquezes' dog, Bozo, bit mailman David Ortega on the arm. ¹ Complicated procedural maneuvering followed when, after unsuccessful settlement negotiations, attorney Mark Fitzgerald filed, on 4 May 1992, in the 47th District Court of Potter County, a lawsuit on behalf of the Ortegas, seeking to recover from the Rodriquezes for David's injuries and Rita's loss of consortium (the Potter suit). Reciting the Rodriquezes' failure to appear and answer despite having been "duly and legally cited to appear and answer," the court entered a 4 June 1992 default judgment against them, awarding David $1,500,000 and Rita $150,000, with both awards bearing pre- and post-judgment interest at 10% per annum.

The Rodriquezes had a homeowners policy of insurance with Farmers (the policy), designed to indemnify them up to $100,000 from liability for, among other things, injuries resulting from Bozo's penchant for biting. Previously, Farmers had indemnified the Rodriquezes pursuant to the policy provisions for several other incidents involving Bozo's proclivity to bite mailmen and others, and Farmers, through its adjustor Henry Honea, had conducted settlement negotiations with Fitzgerald regarding the Ortegas' claims.

The policy provided that if a lawsuit, such as the Potter suit, was filed against the Rodriquezes, Farmers would provide an attorney to defend them against the claims, conditioned upon its receipt of proper notice of the lawsuit. However, in this instance, Farmers maintained that it did not receive proper notice of the Potter suit, and thus it failed to provide the Rodriquezes a defense before the default judgment was taken against them.

Upon learning of the default judgment, Farmers hired attorney Patrick Mosley to prepare an answer to the Potter suit, and a motion for new trial to have the default judgment set aside upon the assertion of defective service of citation on the Rodriquezes. Mosley filed an answer on 9 June 1992, but refused to file a motion for new trial, stating that it would not be in the Rodriquezes' best interest to do so.

Mosley believed this to be so because, on 18 June 1992, the Rodriquezes and the Ortegas executed an agreement, filed as part of the record in the Potter suit, whereby the Ortegas agreed not to execute the default judgment against the Rodriquezes in exchange for 90% of all sums owed to, and claims held by, the Rodriquezes pursuant to their policy of insurance with "Fire Insurance Exchange or any of the Farmers Insurance Group of Companies." Based upon this agreement, Mosley opined the Rodriquezes were protected from personal liability beyond the limits of the policy, and filing a motion for new trial would expose them to the possibility of personal liability if a new judgment were entered for an amount in excess of the policy limits.

At Farmers's request, Wyatt Brooks entered his appearance as attorney for the Rodriquezes and filed a motion for new trial, purportedly on their behalf, based upon assertions that the failure to answer was not a result of conscious indifference, but of accident or mistake, and that the Rodriquezes had a meritorious defense to the Ortegas' claims. Believing the motion for new trial to be a violation of their agreement with the Ortegas, the Rodriquezes furnished affidavits to the Ortegas' attorney stating that Brooks was not authorized to file the motion on their behalf. ²

Attorney Greg Enos, after filing his appearance as "attorney in charge" on behalf of the Ortegas, moved to require Brooks to show by what authority he filed pleadings on behalf of the Rodriquezes. Resultantly, the motion for new trial, and all filings signed by Brooks, including the cost bond for an appeal, were stricken upon the trial court's determination that he had no authority to act on behalf of the Rodriquezes. ³

The action from which this appeal arose was initiated by Farmers's petition for declaratory relief filed on 6 August 1992 in the 237th District Court of Lubbock County (the underlying suit). Naming the Rodriquezes and the Ortegas as defendants, Farmers asserted that the Rodriquezes failed to provide notice of the Ortegas' suit against them, and sought a declaration of the rights of the parties under the terms of the policy.

On 18 September 1992, the Rodriquezes and the Ortegas moved to have the venue of the underlying suit moved to Starr County. The motion was founded upon allegations that a prior suit between the same parties and involving the same issues was filed in Starr County on 10 July 1992 (the Starr suit), and the two should be consolidated. In support of the allegation, they attached a copy of an uncertified document entitled "Plaintiff's Second Amended Original Petition," whose style included a Starr County heading, but which bore no file-stamp by the clerk of the court, no original signature of an attorney, no date on the certificate of service, and no reference to the date of filing of the original petition.

Subject to their efforts to have the venue of the underlying suit moved to Starr County, the Rodriquezes and the Ortegas filed a counterclaim contending Henry Honea, an adjustor for Farmers, had negotiated with Fitzgerald and had notice of his intention to file suit if no settlement could be reached. ⁴ Alleging Honea had the opportunity to settle the claim for $25,000, but failed to do so, the Rodriquezes and the Ortegas sought damages for Farmers's negligence and gross negligence in failing to properly investigate, defend, and settle the claim against their insured as required by G.A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex.Comm'n App.1929, holding approved), and Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656 (Tex.1987).

Additionally, the Rodriquezes and the Ortegas moved to either dismiss or abate the underlying suit pending the outcome of the Starr suit. They did not request a hearing of this motion upon its filing, and a hearing was not requested until five months later.

On 28 September 1992, the trial court ordered the underlying suit transferred to Starr County. However, on 25 February 1993, the parties agreed to the return of the suit to the Lubbock court, because the "cause was mistakenly transferred to Starr County since the requisite hearing and notice were not provided." See Tex.R.Civ.P. 87. Two hours before the filing of the agreement, the Rodriquezes and the Ortegas requested a hearing on their motion to dismiss or abate the underlying suit, but no setting was then made, and the underlying suit remained dormant until 30 June 1994.

Alleging the Rodriquezes were not legally obligated to pay the default judgment, Farmers filed its first amended original petition for declaratory relief. Attached as an exhibit to the petition was an agreement between the Rodriquezes and the Ortegas, by which they declared their prior agreement null and void, and provided that the Rodriquezes assigned to the Ortegas 80% "of any claims and causes of action" they might have against Farmers or any of its affiliates. Farmers reasserted that the Rodriquezes failed to notify it of the Potter suit, and asserted that Farmers had no liability under the policy because the Rodriquezes were not properly served with citation of the Potter suit. Farmers concluded its duty to defend was not invoked, and that the Rodriquezes had failed to cooperate as required by the policy, which precluded coverage under the policy.

Farmers moved for summary judgment on the grounds that (1) the Rodriquezes were not properly served and, therefore, the default judgment was illegitimate; (2) the Rodriquezes failed to cooperate with their insurer and were in collusion with the Ortegas, by which they violated conditions of coverage; and (3) Farmers was under no duty to pay the default judgment. Farmers provided over 480 pages of documented summary judgment proof in support of its contention of entitlement to judgment as a matter of law.

In response, the Rodriquezes and the Ortegas represented there were questions of fact concerning whether (1) Farmers breached the insurance contract first, which in turn excused the Rodriquezes' cooperation; (2) the Rodriquezes in fact breached the cooperation clause; (3) the default judgment was void; (4) Farmers waived any policy defenses and was estopped from asserting them; and (5) the agreement between the Ortegas and the Rodriquezes precluded any duty by Farmers to pay the default judgment. Further, they pleaded that Farmers's motion ignored their counterclaim, and that venue was not proper in Lubbock because the underlying suit involved the same issues "now pending in Potter county." ⁵ As support, they offered the affidavits of attorneys John Judge, Fitzgerald and Enos, and excerpts from the depositions of Honea and Mosley.

On 5 August 1994, the Rodriquezes and the Ortegas filed an amended motion to dismiss o...