Stewart Title Guar. Co. v. Aiello

• Decision Date: 19 October 1995
• Docket Number: No. 08-93-00289-CV,08-93-00289-CV
• Citation: 911 S.W.2d 463
• Parties: STEWART TITLE GUARANTY CO., Appellant, v. Roger N. AIELLO and Evelyn S. Aiello, Appellees.
• Court: Texas Court of Appeals

Page 463

911 S.W.2d 463

STEWART TITLE GUARANTY CO., Appellant, v. Roger N. AIELLO and Evelyn S. Aiello, Appellees.

No. 08-93-00289-CV.

Court of Appeals of Texas El Paso.

Oct. 19, 1995.

Rehearing Overruled Dec. 14, 1995.

S. Bradley Todes, Ben A. Baring, Jr., Charles E. Fitch, De Lange, Hudspeth & Pitman, L.L.P., Houston, John S. Birkelbach, Mounce & Galatzan, El Paso, for Appellant.

I. Nelson Heggen, Leslie Werner de Soliz, Houston, for Appellees.

Before LARSEN, McCLURE and CHEW, JJ.

OPINION

LARSEN, Justice.

We withdraw our original opinion of December 22, 1994 and substitute this opinion in its place.

This appeal stems from a lawsuit against a title insurer by its insured, following the insurer's delayed payment under an agreed judgment. The primary issue in this case is whether an insurer's duty of good faith and fair dealing survives entry of an agreed judgment. We find that here the duty did survive. We affirm in part and reverse in part.

PROCEDURAL BACKGROUND

Roger and Evelyn Aiello sued Stewart Title Guaranty Company and others claiming that Stewart delayed in paying an agreed judgment. The basis of the underlying judgment was a cloud on the title of the Aiello's home, insured by Stewart Title. The title company had been recalcitrant in the underlying litigation, the trial court finally striking its pleadings as a discovery sanction. ¹ On the courthouse steps, the parties reached an agreement settling their dispute. The subject of this appeal is the breach of the agreed judgment stemming from that settlement.

The Aiellos alleged several causes of action in their second suit against several defendants: breach of the duty of good faith and fair dealing, violations of the Texas Deceptive Trade Practices Act (DTPA) and Article 21.21 of the Texas Insurance Code (Article 21.21), breach of contract, negligence, and gross negligence. Stewart counterclaimed for breach of contract and attorney's fees based on the same agreed judgment, alleging the Aiellos had breached by refusing to deliver a deed for some fourteen months after it had paid the principal amount of the judgment. The trial court granted final summary judgment in favor of all defendants except Stewart, and granted Stewart partial summary judgment on all but the breach of the good faith duty and breach of contract claims for acts occurring after signing of the agreed judgment. These claims were tried to a jury which found for the Aiellos on the breach of the good faith duty and breach of contract and for Stewart on its breach of contract counterclaim.

The trial court awarded the Aiellos $26,847 as the amounts due under the agreed judgment, $23,734.60 as actual damages in this cause, $200,000 as exemplary damages, and attorney's fees. Although it gave Stewart a credit for $10,000 damages for Aiellos' breach, the trial court refused to award Stewart any amount for attorney's fees. Stewart appeals the trial court's ruling on ten points of error alleging, among other things, that the trial court's application of the duty of good faith and fair dealing to this agreed judgment was incorrect as a matter of law. The Aiellos cross-appeal on seven points of error.

FACTS

The dispute between the Aiellos and Stewart Title began when the Aiellos discovered a municipal utility easement on their property upon which their house encroached two feet. The title policy issued by Stewart failed to describe this defect. Nevertheless, Stewart refused to pay the Aiello's claim for the diminished value of their land. In October 1986, the Aiellos brought suit against Stewart alleging that the insurance company had breached a title insurance policy issued to the Aiellos and also alleging various violations of the Texas Insurance Code. On the day the first suit was set for trial, February 29, 1988, the parties settled. Their agreement was dictated into the record, and an agreed judgment signed by the court on April 11, 1988. That judgment, which incorporated the oral recitation of the parties' agreement, read:

On the 29th day of February, 1988, came on to be heard the above-styled and -numbered civil action, and EVELYN S. AIELLO, Plaintiff, appeared in person and by attorney of record and announced ready for trial and Defendant, STEWART TITLE GUARANTY COMPANY, appeared through its attorney of record and announced ready for trial and the case proceeded to trial.

After lengthy negotiations, on March 1, 1988, the following Compromise Settlement was announced in open Court:

MR. MITCHELL: 'Stewart Title Guaranty Company has agreed to purchase the residence owned by the plaintiffs. I believe the correct property description is Lot 7, Block 12 of Virginia Court, a subdivision in West University--the City of West University in Harris County, Texas.'

MR. STEIN: '2627 Amherst Street.'

MR. MITCHELL: 'The purchase price of the property is going to be $280,000.00. Stewart Title Guaranty Company will receive a $1,000 credit at the closing and the net proceeds to be paid to the Plaintiffs in this action is $279,000.00. Stewart Title Guaranty Company will take title in the name of a nominee at Stewart Title Guaranty Company's choice because title will not vest as a result of the closing in Stewart Title Guaranty Company itself.' [Emphasis added.]

'The plaintiffs are to receive an additional $40,000.00 from Stewart Title Guaranty Company, payable by check to be received at the closing but not to be transferred to the plaintiffs in the closing itself.'

MR. STEIN: 'Is it agreeable that that could be a cashier's check.'

MR. MITCHELL: 'Well, do you have a problem with Stewart's check?'

MR. STEIN: 'Well, I may. Let's just do it by cashier's check since most closings have that as a consideration.'

MR. MITCHELL: 'Well, that's why I said $40,000.00 will be paid to you at closing but out of the closing. In other words, the $40,000.00 is not going to flow through the escrow account of the title company.'

MR. STEIN: 'We don't necessarily have to put all of this on the record but considering the fact that my clients are presently residing in Singapore, they will have to wait here for the closing. I would appreciate the opportunity of transferring funds immediately by cashier's check rather than waiting for some type of bank draft or other legal instrument to clear an account. That's why I'm requesting that it be done by cashier's check.'

MR. MITCHELL: 'Well, that's acceptable.'

It appearing to the Court that judgment should be rendered upon this Compromise Settlement in favor of the Plaintiffs and against the Defendant, it is, therefore,

ORDERED, ADJUDGED and DECREED by the Court that Plaintiffs, ROGER N. and EVELYN S. AIELLO, recover from Defendant STEWART TITLE GUARANTY COMPANY $319,000.00. Upon payment of such sum by cashier's check, Plaintiffs will deed over to the nominee of Stewart Title Guaranty Company's choice certain property described as Lot 7, Block 12 of Virginia Court a subdivision in the City of West University in Harris County, Texas, further described as 2627 Amherst Street.

All costs of Court expended or incurred in this cause are hereby adjudged against Defendant STEWART TITLE GUARANTY COMPANY. All writs and processes for the enforcement and collection of this Judgment or the costs of Court may issue as necessary.

SIGNED this the 11 [sic] day of April, 1988.

Such cost to include costs of 100.00 per day from March 20, 1988 until closing papers are signed and funds received by Plaintiffs. ²

--------------------Richard Millard

--------------------JUDGE PRESIDING

After the agreed judgment was entered, Stewart's attorney ignored repeated letters and telephone calls from the Aiellos' attorney attempting to complete the settlement. Officers of the title company, subpoenaed for depositions to aid in collecting the judgment, failed to appear without explanation. Although both sides had anticipated that Stewart would arrange a closing to transfer the property, and indeed received $1,000 credit in the judgment for this service, it never took steps to do so. It was not until June 3, 1988, after the Aiellos obtained a writ of execution and a constable arrived at Stewart's offices to enforce it, that Stewart's attorney delivered a proposed deed to the Aiellos' then attorney, Jerry Sadler, to be signed by them as required by the judgment. On June 30, 1988, Stewart paid the Aiellos $319,000, ³ requesting that the Aiellos deliver the deed. The Aiellos refused, claiming Stewart still owed money under the judgment, but finally delivered a deed on September 11, 1989. Stewart never paid the additional amounts due under the judgment for $100 per day delay damages, nor for post-judgment interest. The Aiellos finally brought a second suit alleging various violations of the insurance code, DTPA, and breach of the duty of good faith and fair dealing for acts after entry of the judgment. They have obtained judgment against Stewart for its breach of the duty of good faith and fair dealing for its acts and omissions after entry of the agreed judgment.

GOOD FAITH AND FAIR DEALING

Texas law recognizes several degrees of relationship giving rise to duties greater than those owed to society at large. Crim Truck & Tractor Co. v. Navistar Internat'l Transp. Corp., 823 S.W.2d 591, 593-94 (Tex.1992). Fiduciary duties are those that impose the highest duties in law, and are generally imposed upon certain formal legal relationships as a matter of law. Id.; Kinzbach Tool Co., Inc. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509, 513 (1942) (principal/agent); Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786, 787 (1938) (partners); Perfect Union Lodge No. 10 v. Interfirst Bank of San Antonio, N.A., 748 S.W.2d 218, 220 (Tex.1988) (trustee/beneficiary). "Confidential relationships" may impose fiduciary duties, but are created not by formal legal relationships but by informal relationships "where one person trusts in and relies upon another, whether the relation is a moral, social, domestic or merely...