Texas Farmers Ins. Co. v. Hernandez

• Decision Date: 04 March 1983
• Docket Number: No. 07-81-0153-CV,07-81-0153-CV
• Citation: 649 S.W.2d 121
• Parties: TEXAS FARMERS INSURANCE COMPANY, Appellant, v. Guadalupe HERNANDEZ, Appellee.
• Court: Texas Court of Appeals

Page 121

649 S.W.2d 121

TEXAS FARMERS INSURANCE COMPANY, Appellant, v. Guadalupe HERNANDEZ, Appellee.

No. 07-81-0153-CV.

Court of Appeals of Texas Amarillo.

March 4, 1983.

Rehearing Denied April 12, 1983.

Gollaher & Hart, Larry L. Gollaher, Dallas, for appellant.

James M. Gerdeman, Marshall, Carr, Evans, Fouts & Hunt, Donald M. Hunt, Lubbock, for appellee.

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

COUNTISS, Justice.

This suit on a fire insurance policy requires us to decide whether (1) the loss was conclusively established; (2) the law permits, and the evidence legally and factually supports, an award of attorneys fees; (3) the insurer was entitled to either a continuance because of a missing witness or the admission into evidence of the witness' ex parte unsworn statement; and (4) prejudgment interest was correctly computed and properly awarded. We reform and affirm the judgment.

Appellee Guadalupe Hernandez purchased an old building and some surrounding land for $5,000 and insured the building with appellant Texas Farmers Insurance Company for $50,000. On April 17, 1978, approximately 10 months after Hernandez insured the building, it was heavily damaged in a fire. When the insurance company refused to pay the loss, this suit was filed.

On the day of trial, the insurance company asked for a continuance because it was unable to locate a witness who had given the company a statement saying Hernandez had asked the witness to burn the building. The continuance was denied, as was the company's later request to place the statement in evidence. When the case was submitted to the jury the trial court refused the company's request for an issue on the totality of the loss, submitting only issues on intentional burning and attorney's fees.

After the jury failed to find that Hernandez caused an intentional burning of the building and found that $16,000 was a reasonable attorney's fee, the trial court rendered judgment for Hernandez for $50,000 plus $16,000 attorneys' fees and 9% prejudgment interest from June 18, 1978. In this court, the insurance company, by six points of error, presents the questions stated above.

The first question to be resolved, raised by the company in point of error three, is whether the trial court erred in awarding recovery for a total loss without submitting that issue to the jury. After reviewing the evidence, we are satisfied the court did not err. The testimonial and photographic evidence depicts a building that suffered extensive damage in the fire. A large segment of the roof collapsed and the wood framework, electrical wiring, door and window frames, and the rest of the interior incurred heavy heat and smoke damage. The exterior of the building also incurred smoke and heat damage at numerous locations. A City of Lubbock official described the damage in detail and testified that over seventy-five percent of the building was completely gutted by the fire. The official also testified that the building was demolished because it was not suitable for repair and nothing of value was salvaged from the building when it was demolished. Mr. Hernandez, who also described the extensive damage, testified he was unable to find anyone who could repair or rebuild the building. He also testified that he permitted the city to demolish the building instead of hiring someone to demolish it because "[n]obody would attempt to do it. It was dangerous." Finally, he testified there was nothing in the building that could be used after the fire. The insurance company offered no controverting evidence on the extent of the loss.

The insurance company's argument is identical to the argument advanced and rejected in Aetna Cas. & Sur. Co. v. Shiflett, 593 S.W.2d 768, 771-772 (Tex.Civ.App.--Texarkana 1979, no writ), a case containing similar evidence. In Shiflett, the court first analyzed the test for establishing a total loss by fire, which is "whether a reasonably prudent owner, uninsured, desiring to rebuild, would have used the remnant for restoring the building." Glen Falls Insurance Company v. Peters, 386 S.W.2d 529, 531 (Tex.1965). The court then discussed the burdens on the parties in a fire loss case and pointed out that if an insured establishes a prima facie case of total loss by fire, the insurance company then has the burden of going forward with controverting evidence. Id. at 771. If the company does not controvert the evidence, then the fact is undisputed and conclusively established; thus there is nothing for a jury to resolve.

Here, as in Shiflett, the insured established a prima facie case and the insurance company did not present controverting evidence. Therefore, the loss was conclusively established and the court correctly refused the company's requested issue. Point of error three is overruled.

By points of error one and two the insurance company attacks the award of $16,000 in attorney's fees. It contends, first, that the law does not permit recovery of attorney's fees in this case and, second, if it does, the evidence is factually and legally insufficient to support the award.

Because attorney's fees are not recoverable at common law, New Amsterdam Casualty Co. v. Texas Industries, Inc., 414 S.W.2d 914 (Tex.1967), and were not agreed to in the insurance contract in question here, Hernandez is entitled to recover attorney's fees only if the statutes of this state permit a recovery. The general attorney's fees statute, upon which he relies, art. 2226, Tex.Rev.Civ.Stat.Ann. (Vernon 1982), as pertinent here, provides as follows:

Any person, having a valid claim against a corporation founded on written contracts, may present the same to such corporation or to any duly authorized agent thereof; and if, at the expiration of 30 days thereafter, payment for the just amount owing has not been tendered, the claimant may, if represented by an attorney, also recover, in addition to his claim and costs, a reasonable amount as attorney's fees. The usual and customary fees in such cases shall be presumed to be reasonable, but such presumption may be rebutted by competent evidence. The provisions hereof shall not apply to contracts of insurers issued by insurers subject to the provisions of the Unfair Claim Settlement Practices Act (Article 21.21-2, Insurance Code), nor shall it apply to contracts of any insurer subject to the provisions of Article 3.62, Insurance Code, or to Chapter 387, Acts of the 55th Legislature, Regular Session, 1957, as amended (Article 3.62-1, Vernon's Texas Insurance Code), or to Article 21.21, Insurance Code, as amended, or to Chapter 9, Insurance Code, as amended, and each such article or chapter shall be and remain in full force and effect. This Act shall be liberally construed to promote its underlying purposes.

Because it is undisputed that the company is a corporation and the contract is written, the initial provisions of the statute permit Hernandez to recover attorney's fees. The insurance company argues, however, that the statute is inapplicable because the latter provisions of the statute exempt insurance contracts that are subject to various provisions of the Insurance Code. Because all insurance contracts are subject to the Insurance Code, says the company, Hernandez cannot recover attorney's fees under the article.

The same argument was rejected in Prudential Ins. Co. of America v. Burke, 614 S.W.2d 847, 850 (Tex.Civ.App.--Texarkana 1981) writ ref'd n.r.e., 621 S.W.2d 597 (Tex.1981). In that case, the court of civil appeals pointed out that, in excluding various insurance contracts from the statute, "the purpose of Article 2226 was to exclude only those claims against insurance companies where attorney's fees were already available by virtue of other specific statutes, as they are in those which Article 2226 specifically mentions." In refusing the writ, n.r.e., the Supreme Court stated that the Court of Civil Appeals correctly decided the case. Id.

The effect of art. 2226, as construed by the Burke case, is that attorney's fees can be recovered in all suits on insurance contracts. If the suit is brought under one of the provisions of the Insurance Code specifically mentioned in the latter part of the statute, the attorney's fees statute applicable to that specific provision will control the award; otherwise, recovery is permitted under the initial and general provisions of the statute. We agree with and adopt the construction of the statute as stated in Burke. Accord, Aetna Fire, Etc. v. Southwestern, Etc., 626 S.W.2d 99, 103 (Tex.Civ.App.--Beaumont 1981, writ ref'd n.r.e.).

Having concluded that Hernandez is permitted to recover attorney's fees in this case, we must next decide whether he evidentiarily established his entitlement to them.

An attorney testified, in response to a hypothetical question, that a contingent fee of one-third of the total recovery would be the normal, standard and reasonable fee for representing the claimant in this kind of case. He also testified that "I would assume that there was quite a bit of work here and that, certainly, would make the third very reasonable." He further testified that $25,000 would be a reasonable attorney's fee for the work done. The latter statement apparently referred to an earlier portion of the witness' testimony, which concerned the method of computing the contingent fee.

Art. 2226 permits recovery of "a reasonable amount as attorney's fees" and states that the "usual and customary fees in such cases shall be presumed to be reasonable...." In the record before us, there is unrebutted testimony that a fee of one-third of the amount recovered...