Opinion
Civil Action No. 3:00-CV-0628-L
September 30, 2002
MEMORANDUM OPINION AND ORDER
Before the court is Plaintiff and Counter Defendant's Brief as to Court's Granting it Summary Judgment and the Dispositive Effect on Defendant and Counter Plaintiff's Counterclaims, filed December 26, 2001, and Defendant's Motion and Brief Regarding the Effect of the Court's December 4, 2001 Order, filed December 21, 2001. After careful consideration of the parties' briefs, the summary judgment record, and the applicable law, the court denies Defendant's Motion to Reconsider and with respect to the court's request that the parties submit briefs addressing whether its ruling of December 4, 2001 would defeat Defendant's counterclaims, the court also grants summary judgment in favor of Plaintiff on Defendant's counterclaims.
Judy Chaney requests the court to reconsider its order of December 4, 2001, and the motion hereafter is referred to as Defendant's Motion to Reconsider.
The factual background set forth in the court's order of December 4, 2001 is incorporated in this order as if repeated herein verbatim.
On December 4, 2001, the court issued an order granting Plaintiff's Motion for Summary Judgment and declaring that Plaintiff Nationwide Mutual Insurance Company ("Nationwide") had fully satisfied its obligations under David Haffley's automobile insurance policy as to the judgment entered in favor of Defendant Judy Mae Chaney ("Chaney") against David Haffley ("Haffley") in the case styled, Judy Chaney and Ray Chaney v. David Haffley, Cause Number 96-2192-B, the 124th District Court of Gregg County, Texas, and that it therefore had no duty to indemnify or pay Chaney. Because it appeared Nationwide contended that a judgment in its favor would defeat Chaney's counterclaims against Nationwide for conspiracy, tortious interference with prospective business relations, fraudulent transfer, and turnover, the court sua sponte raised the issue of whether summary judgment was appropriate with respect to Chaney's counterclaims and requested that the parties submit briefs addressing this issue by no later than December 26, 2001.
II. Summary Judgment Standard
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Ragas, 136 F.3d at 458.
Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513 U.S. 871 (1994). The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Ragas, 136 F.3d at 458. Rule 56 does not impose a duty on the court to "sift through the record in search of evidence" to support the nonmovant's opposition to the motion for summary judgment. Id.; see also Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 n. 7 (5th Cir.), cert. denied, 506 U.S. 832 (1992). "Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact issues which are "irrelevant and unnecessary" will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
III. Analysis
Chaney contends that none of the relief Nationwide sought in its motion for summary judgment disposed of her counterclaims, because the release entered into by Haffley and Nationwide served as the basis of her claims. Chancy therefore maintains that the court must conclude that the release is not a fraudulent transfer as a matter of law in order to dispose of her claims. If the court concludes the contrary, that the release is invalid, Chaney contends she is entitled to a turnover of Haffley's Stowers cause of action. The court disagrees.
G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929, holding approved) (holding that insurer has duty to settle in good faith claims made within policy limits.).
After judgment was entered in the Chaney suit, Nationwide tendered to Chaney $32,000, the amount remaining under Haffley's insurance policy, along with postjudgment interest due on the judgment as of the date of tender. In its motion for summary judgment, Nationwide argued that its obligation to pay on the judgment in the Chaney suit was limited to the terms of the policy ($32,000), which was satisfied when it paid Chaney this amount. It therefore contended it had no further liability and moved for summary judgment on the following grounds: (1) Nationwide has no liability under the Stowers doctrine, because Chaney's settlement offer did not include a full release of claims against Haffley; and (2) even if there was a Stowers claim against Nationwide for its handling or defense of Chaney's claims against Haffley, "Haffley released Nationwide from any and all claims (including, but not limited to those arising under the Stowers doctrine)." In her response, Chaney argued that there remained material issues of fact that precluded summary judgment with respect to: (1) whether the release entered into between Nationwide and Haffley was a fraudulent transfer as to a judgment creditor under section 24.005 of the Texas Business and Commerce Code; and (2) whether Nationwide violated the Stowers doctrine. The court concluded that Chaney's arguments were erroneous, because they were based on the assumption that she was entitled to a claim that belonged exclusively to Haffley and that absent assignment of the claim, of which there was none here, she had no standing to assert the claim. The court further determined that Chaney's argument regarding her prejudgment demands constituting an implied release of all claims against Haffley were irrelevant because she did not have a right to pursue a Stowers claims against Nationwide. Having further considered the issues raised in the parties' briefs, the summary judgment record, and the applicable law, the court clarifies its previous order by holding that Nationwide never had a Stowers duty to settle with Chaney. Thus, Haffley had no Stowers claim he could assert against Nationwide or assign to Chaney, voluntarily or involuntarily by way of a turnover order.
To impose a Stowers duty on an insurer, a settlement demand must propose to release the insured fully in exchange for a stated sum of money. American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848-49 (Tex. 1994); Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489, 491 (Tex. 1998). When a hospital lien exists, a release is not valid unless it complies with section 55.007(a) of the Texas Property Code. Id.; TEX. PROP. CODE ANN. § 55.007(a) (Vernon 1995). Chaney presented the following summary judgment evidence in response to Nationwide's contention she had not satisfied the release requirement:
1. On January 6, 1996, Chaney's counsel sent a letter of protection to Laird Memorial Hospital, which contractually obligated Chaney and her attorney to pay and forward to Laird Memorial Hospital "any amount owing to [Laird Memorial Hospital] for services rendered to [Chaney] to the extent that a sufficient judgment or settlement is obtained and collected regarding this matter.'"
2. On January 25, 1996, Laird Memorial Hospital filed a lien against Haffley to secure the payment of Chaney's medical expenses.
3. On June 14, 1996, Chaney sent Nationwide a letter offering to settle for $32,000. Chaney renewed this offer on October 9, 1996. In response, Nationwide limited its offer to $15,000, reasoning that "the information [Nationwide has] regarding Mrs. Chaney is incomplete and somewhat conflicting as to the extent of her injuries and her prior medical and psychological condition."
4. On January 29, 1997, Chaney paid the balance of Laird Memorial Hospital bill.
5. On February 4, 1997, Laird Memorial Hospital released and discharged its lien against Haffley, reserving any and all outstanding claims for payment against Chaney.
"`Letters of protection'" are sometimes used by attorneys in personal injury litigation to guarantee payment to healthcare providers out of the proceeds of any future recovery." Gibson v. Ellis, 58 S.W.3d 818, 821 (Tex.App.-Dallas 2001, no pet.)
In addition, Chaney points to other correspondence between the parties, arguing that "[during the course of the extensive written settlement negotiations, [she] never excluded payment of Laird Memorial Hospital's bill in her settlement proposals" and "Nationwide never expressed any doubt as to whether or not Judy was offering a full release" of the hospital lien. She further contends "Nationwide never refused to accept [Chaney's] $32,000 demand because the Laird Memorial Hospital bill was not going to be paid." According to Chaney, "Nationwide never even mentioned the lien." Chaney therefore maintains that "there is no evidence that [she] did not offer a full release" and requests this court to hold that "a settlement proposing final settlement includes an [implied] offer of a full release, including the payment of any hospital bills, unless otherwise specified." To this, Nationwide argues that any "implied" release suggested by Chaney's settlement offers does not meet the requirement that there be a full release that complies with section 55.007(a) of the Texas Property Code. The court agrees.
Chaney's initial June 14, 1996 settlement demand for $32,000 under Haffley's policy referred to her $25,245.90 in medical expenses, which included the Laird Memorial Hospital expenses; however, the demand did not explicitly offer to release the hospital lien or any other potential claims against Haffley, the insured. Chaney concedes that her settlement offer did not expressly release Haffley from any potential claims but, nevertheless, contends that an implied release is sufficient to satisfy the full release requirement. For support, she relies on Trinity Univiversal Ins. Co. v. Bleeker, 966 S.W.2d 489 (Tex. 1998). The court disagrees.
The court in Bleeker did not hold that an implied release satisfies the requirement that a Stowers demand must propose to release the insured fully in exchange for a stated sum of money. Instead, the court's holding focused on the validity of the release in light of section 55.007(a) of the Texas Property Code, stating that " [a]ssuming that an offer to release Bleeker can be inferred from such a [demand] letter, the release nevertheless could not have covered the nine claimants whom [the attorney] did not then represent." Id. at 490 (Emphasis added). Thus, the Bleeker court assumed, without deciding, that a release could be inferred from the demand letter.
The court, nevertheless, concludes that it cannot be inferred from the evidence presented that Chancy offered to fully release Haffley from any potential claims. Even if the court assumed that Chancy and her attorney intended the letter of protection sent to Laird Memorial Hospital to act as a full release, no reference was made to the hospital lien or the letter of protection in Chaney's demand letter, and Chaney's demand did not propose to be a "final settlement." The court therefore declines to speculate whether such a demand or settlement offer would satisfy the requirement that a Stowers demand include a full release in exchange for a stated sum of money. Because her demand did not expressly or impliedly offer to fully and completely release Haffley, the duty to settle under Stowers was never triggered. Consequently, Chaney's Stowers demand was ineffective. Bleeker, 966 S.W.2d at 491.
That Nationwide never affirmatively demanded or required a settlement offer that included a full release does not change the result, because Nationwide, as the insurer, did not have the burden of making a valid Stowers settlement offer. Garcia, 876 S.W.2d at 851 (court concluded that public interest favoring early dispute resolution supported its decision not to shift the burden of making settlement offers under Stowers onto insurers). Moreover, once Nationwide came forward with summary judgment evidence that Chaney had not made an effective Stowers demand, the burden shifted to Chaney to prove otherwise. Matsushita, 475 U.S. at 586. Chaney's mere assertion that there is no evidence she did not offer a full release in her settlement offer is insufficient to meet this burden. Eason, 73 F.3d at 1325 (5th Cir. 1996). Thus, in the absence of evidence Chaney sent Nationwide a Stowers demand that included a full release of all claims, the court cannot conclude that Nationwide had a Stowers obligation to Haffley. It therefore follows that Haffley had no Stowers claim against Nationwide he could assert, release, or assign to Chaney. Having determined that Nationwide had no Stowers obligation and Haffley had no Stowers claim, the court need not address the validity of Haffley's release or Chaney's counterclaims since these claims are not independent, but wholly dependent on Haffley's claim. See Vera v. North Star Dodge Sales, Inc., 989 S.W.2d 13, 19 (Tex.App.-San Antonio 1999, no pet.).
The court notes that even if Haffley had a viable Stowers claim, it would not be subject to turnover, because Haffley never attempted to assert the claim and, more importantly, his testimony establishes he refused to pursue or assign any claim he might have against Nationwide, because he was satisfied with Nationwide's handling of Chaney's claim despite the fact he remained exposed to Chaney's judgment. See Charles v. Tamez, 878 S.W.2d 201, 208 (Tex.App.-Corpus Christi 1994, writ denied) (holding that insured's right to sue insurer for failure to settle under the Stowers doctrine is subject to equitable subrogation and assignment; however, due to public policy concerns about the relationship between insurers and insureds, the court affirmed the judgment denying turnover of the Stowers claim, because the insured refused to assert the claim and denied dissatisfaction with his insurer.). It appears from Haffley's testimony that he believed he would be better off without an assignment of the claim and continued representation by Nationwide in this matter and any bankruptcy proceedings than he would have been with an assignment to Chaney and no representation. Id. Thus, a court ordered turnover forcing Haffley to involuntarily assert or assign any Stowers claim he might have would be inappropriate under the circumstances, and the cases cited by Chaney for support that turnover is appropriate are distinguishable. The alignment of party interests distinguishes this case from American Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d 480 (Tex. 1992), and Haffley's satisfaction and his refusal to assert a Stowers claim against his insurer distinguishes this case from Garcia, 876 S.W.2d 842. See Tamez, 878 S.W.2d at 208. Similarly, in both Southern Co. Mut. Ins. Co. v. Ochoa, 19 S.W.3d 452 (Tex.App.-Corpus Christi 2000, no pet.) and Hernandez v. Great American Ins. Co., 464 S.W.2d 91 (Tex. 1971), the insureds voluntarily asserted their Stowers actions against their insurers for failure to settle. More importantly, the Hernandez court reaffirmed the rule that the purpose of a " Stowers action lies to repair the harm to the insured" and that "[t]he tort of the insurer in mismanaging the defense of the insured in the first case is harmful to the insured alone." Id. at 94.
IV. Conclusion
The court concludes that Nationwide had no Stowers obligation to settle with Chaney, and its liability to Chaney was limited to the amount provided under Haffley's insurance policy. Because Chaney has failed to raise a genuine issue of material fact regarding Nationwide's contractual or extra-contractual obligations to perform under the insurance policy, Nationwide was entitled to judgment as a matter of law on its claim for declaratory relief. Accordingly, the declaratory relief requested by Nationwide is hereby granted; summary judgment in favor of Nationwide on Chaney's counterclaims is granted; Chaney's Motion to Reconsider is denied; and Chaney's counterclaims against Nationwide are dismissed with prejudice. For the reasons stated herein and in the court's December 4, 2001 order, the court further declares that Nationwide has fully satisfied its contractual and extra-contractual obligations under David Haffley's automobile insurance policy as to the judgment entered in favor of Defendant Judy Mae Chaney ("Chaney") against David Haffley ("Haffley") in the case styled, Judy Chaney and Ray Chaney v. David Haffley, Cause Number 96-2192-B, the 124th District Court of Gregg County, Texas, and that it therefore has no further duty to indemnify or pay Chaney on such judgment. A judgment will issue by separate document as required by Fed.R.Civ.P. 58.