Texas Property and Casualty Insurance Guaranty Association v. Christopher P. Johnson

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-98-00475-CV

Texas Property and Casualty Insurance Guaranty Association, Appellant

v.

Christopher P. Johnson, Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT

NO. 97-07654, HONORABLE SUZANNE COVINGTON, JUDGE PRESIDING

The Texas Property and Casualty Insurance Guaranty Association (the

"Association") appeals from a summary judgment recovered by Christopher P. Johnson in his suit

against the Association arising out of the undisputed facts set forth below. We will affirm the

judgment.

THE CONTROVERSY

After sustaining personal injuries in the course and scope of his employment,

Johnson sued his employer's workers-compensation carrier, Rockwood Insurance Company, to

set aside an antecedent award of the Texas Industrial Accident Board and to recover amounts

allegedly owed him under the applicable workers-compensation statutes. Following a trial before

a jury, the district court rendered judgment on the verdict for Johnson in the principal amount of

$63,346.33, together with an order that Rockwood pay Johnson's past and future medical

expenses. The judgment became final for purposes of appeal on June 28, 1991. It is presently

a subsisting judgment. It has never been satisfied; it has never been attacked directly by appeal

or bill of review. It is not contended that the judgment was obtained by consent, agreement,

compromise, settlement, collusion, fraud, mistake, wrongful act, or accident.

A little over three months after the judgment became final for purposes of appeal,

the Commissioner of Insurance (in October 1991) designated Rockwood an "impaired insurer."

This designation activated the Association's authority and duties under article 21.28-C of the

Insurance Code, titled the Texas Property and Casualty Insurance Guaranty Act. See Tex. Ins.

Code Ann. art. 21.28-C (West Supp. 1999) (the "Act"). Respecting claims against impaired

insurers, the Act directs that the Association "pay covered claims that exist before the designation

of impairment," an obligation that "is satisfied by paying to the claimant the full amount of a

covered claim for benefits" owed by the impaired insurer. Act § 8(a).

A receivership proceeding was initiated against Rockwood in a Travis County

district court. Johnson filed in the proceeding a claim based on his judgment; the receivership

proceeding was closed without payment of his claim and he sued the Association in the present

cause to recover thereon. The parties stipulated that Johnson's claim was a "covered claim"

within the meaning of the Act. Cf. Lopez v. Texas Property & Casualty Ins. Guar. Ass'n , 990

S.W.2d 504 (Tex. App.--Austin 1999, no pet.). (1)

Johnson moved for summary judgment on the undisputed facts outlined above.

While the Association's response to the motion is not included in our appellate record (although

the Association requested its inclusion), it is evident from the record as a whole and the parties'

briefs that their dispute derives entirely from their contrary views on the question of statutory

construction discussed below.

The trial court sustained Johnson's motion for summary judgment and the

Association appeals now on a single issue: "The trial court erred in granting [Johnson's] motion

for summary judgment because Texas Insurance Code, Article 21.28-C, section 8(d), specifically

authorizes [the Association] to review and contest all pre-receivership judgments." (emphasis

added).

DISCUSSION AND HOLDINGS

The disputed statute provides as follows:

The association shall investigate and adjust, compromise, settle, and pay covered

claims to the extent of the association's obligation and deny all other claims. The

association may review settlements, releases, and judgments to which the impaired

insurer or its insureds were parties to determine the extent to which those

settlements, releases, and judgments may be properly contested. Any judgment

taken by default or consent against an insured or the impaired insurer, and any

settlement, release, or judgment entered into by the insured or the impaired

insurer, is not binding on the association . . .

Act § 8(d).

In contending that the statute authorizes the Association to review and contest all

pre-receivership judgments, the Association means that the statute empowers the Association to

contest, if it believes proper, the issues of fact or law that are ordinarily adjudicated and

concluded by a final judgment. For example, the Association contends it may now contest the

underlying issues of fact and law involved in Johnson's original workers-compensation claim

against Rockwood, even though that claim was tried and reduced to judgment before Rockwood

was designated an impaired insurer and before its property and affairs came within the control of

the receivership court. The Association contends its interpretation of section 8(d) is supported

by the statutory language and that any other interpretation would deprive section 8(d) of any force

and effect; moreover, the claimed statutory authority is necessary, in the Association's opinion,

because "insurers may have stopped fully defending claims prior to" their being designated

impaired. We believe the language of section 8(d) will not reasonably bear such an interpretation.

The first sentence of section 8(d) deals with unliquidated claims against an impaired

insurer, and directs that the Association investigate, adjust, compromise, settle, and pay covered

claims to the extent of the Association's obligations under the Act, and to "deny all other claims."

In light of the succeeding sentences of section 8(d), it appears that the statutory directive to "deny

all other claims" refers to all other unliquidated claims against the impaired insurer. The first

sentence of section 8(d) is not directly applicable in the present case, of course, because Johnson's

claim is a liquidated claim in the form of a final judgment, a matter dealt with in the next two

sentences of section 8(d).

The second sentence of section 8(d) refers to claims that have culminated in

"settlements, releases, and judgments," and empowers the Association to review such claims "to

determine the extent to which [they] may be properly contested." We need discuss only the word

"judgments," found in this sentence, since the words "settlements" and "releases" are not in issue

here.

The sole textual basis for the Association's theory is that the word "judgments,"

found in the second sentence, is not there qualified expressly. One may not, however, assign

meaning to the word "judgments" in isolation from the remaining parts of the statute dealing with

the same matter. The very next, or third, sentence of section 8(d) declares that certain types of

judgments "are not binding on the association," namely judgments "taken by default or consent

against" an impaired insurer, and any "judgments entered into" by an impaired insurer. (2) We

construe the last named to mean "judgments entered into" by the impaired insurer's agreement

or its confession of judgment; we can imagine no other hypotheses under which a litigant can be

said to enter into a judgment.

Based on the legislature's express purposes (3) underlying the Act and the text of

section 8(d), we believe the Association's authority to review and contest pre-receivership

judgments extends to the following: (1) because the legislature has declared that default, consent,

and agreed judgments are not binding on the Association, it may review and contest such

judgments even though they antedate a designation of impairment and a receivership proceeding;

and (2) respecting any other pre-receivership judgment against an impaired insurer, the

Association may review such judgments and contest them as a party might do on legal or equitable

grounds in a motion for new trial, an appeal, a bill of review or other suit in equity to set aside

or enjoin the enforcement of a subsisting judgment based on extrinsic fraud, accident, wrongful

act of an opponent, or mistake. (4)

To say, however, that the Association is not bound by any pre-receivership

judgment whatever is not warranted by the statutory language employed in section 8(d). That

section does not declare that all judgments are without binding effect as to the Association. The

statute declares instead that only selected types of pre-receivership judgments--those resulting from

default, consent, and agreement -- are not binding on the Association; and it is only by force of the

legislative declaration that these selected types of judgments "may be properly contested" outside

the legal and equitable actions that are available generally to attack any subsisting judgment. If

no pre-receivership judgments whatever are binding on the Association, because the word

"judgments" is not qualified in the second sentence of section 8(d), then there would be no reason

for the legislature to declare, in the next sentence, that judgments resulting from default, consent,

and agreement are not binding on the Association.

The Association's contrary interpretation (1) denies any legal effect whatever to the

third sentence of section 8(d), (2) renders that sentence superfluous, (3) negates entirely the

legislature's clearly expressed intention to restrict its declarations of non-binding effect to

judgments resulting from default, consent, and agreement, and (4) defeats by so much the

legislative intention. (5)

We hold accordingly and affirm the trial-court judgment.

John E. Powers, Justice

Before Justices Jones, Yeakel and Powers *

Affirmed

Filed: September 23, 1999

Publish

* Before John E. Powers, Senior Justice (retired), Third Court of Appeals, sitting by

assignment. See Tex. Gov't Code Ann. § 74.003 (b) (West 1998).

1. In Lopez , the Association did not assail the legal effect of the judgment against the impaired

insurer. Rather, the Association reviewed that judgment only to compare the identity of the

judgment defendant (Domingo Garcia, Jr.) to the identity of the policy insured (Domingo Garcia,

Sr.). Because the former was not an insured, it was undisputed that the claim was not a covered

claim. The claimants contended, however, that the Association was estopped from raising that

defense. See Lopez , 990 S.W.2d at 505.

2. A default judgment, defined broadly, is one rendered on the pleadings without the taking

of evidence; more specifically, it is one taken on a defendant's failure to file an answer by the

time the docket is called on appearance day. See Stoner v. Thompson , 578 S.W.2d 679, 683 (Tex.

1979); Tex. R. Civ. P. 239; 5 McDonald Texas Civil Practice § 27.51 at 106 (1992). An agreed

judgment results from the parties' agreement of settlement and compromise and their consent to

rendition of a judgment on agreed terms. Id. § 27.50 at 101-02. The terms "consent judgment"

and "agreed judgment" are essentially synonymous, but the latter term also includes confessions

of judgment governed by the rules of procedure. See Tex. R. Civ. P. 314; Id . §§ 27.49, .50 at

100-06.

3. The purposes of the Act are to:

(1) provide a mechanism for the payment of covered claims under certain insurance

policies and to avoid excessive delay in payment; (2) avoid financial loss to

claimants or policyholders because of the impairment of an insurer; (3) assist in the

detection and prevention of insurer insolvencies; and (4) provide an association to

assess the cost of that protection among insurers.

Act § 2 (West Supp. 1999).

4. A bill-of-review proceeding evidently may be founded on any recognized equitable basis for

setting aside a previous judgment. See, e.g. , Caldwell v. Barnes , 975 S.W.2d 535, 537 (Tex.

1998) (extrinsic "fraud, accident or wrongful act" of an opponent). Judgments resulting from

mistake are subject to being set aside or restrained in their enforcement, in equity, on the same

grounds as judgments resulting from accident. See 3 Pomeroy's Equity Jurisprudence § 836 at

276, § 871 at 392-95 (5th ed. 1941). Under the doctrine that some degree of finality must attach

to judgments, relief in equity is not easily obtained and the applicant must overcome various

procedural and substantive impediments to prevail. See Montgomery v. Kennedy , 669 S.W.2d

309, 312 (Tex. 1984); Alexander v. Hagedorn , 226 S.W.2d 996, 998 (Tex. 1950).

5. The applicable rules of statutory construction are familiar: We must give statutory language

a true and fair interpretation, and a meaning that is not forced, exaggerated, or strained; the

statutory words must fairly and clearly sustain the meaning assigned. See Railroad Comm'n v.

Miller , 434 S.W.2d 670, 672 (Tex. 1968). We must give effect, if reasonably possible, to every

part of a statute; and we may not adopt a construction that will render any part of the statute

inoperative, superfluous, or without legal effect. See Ex parte Pruitt , 551 S.W.2d 706, 709 (Tex.

1977); Perkins v. State , 367 S.W.2d 140, 146 (Tex. 1963); 2A Sutherland Statutory Construction

§ 46.06 at 119-20 (5th ed. 1993). Should there occur any repugnance between statutory

provisions, the matter must be adjusted so that each provision has a meaning that will permit both

to stand in harmony. See Commissioners Court v. Criminal District Attorney , 690 S.W.2d 932,

936 (Tex. App.--Austin 1985, writ ref'd n.r.e.). The rules of statutory construction aim, of

course, at giving effect to the legislative intention.

N STYLE="font-family: CG Times Regular">Publish

* Before John E. Powers, Senior Justice (retired), Third Court of Appeals, sitting by

assignment. See Tex. Gov't Code Ann. § 74.003 (b) (West 1998).

1. In Lopez , the Association did not assail the legal effect of the judgment against the impaired

insurer. Rather, the Association reviewed that judgment only to compare the identity of the

judgment defendant (Domingo Garcia, Jr.) to the identity of the policy insured (Domingo Garcia,

Sr.). Because the former was not an insured, it was undisputed that the claim was not a covered

claim. The claimants contended, however, that the Association was estopped from raising that

defense. See Lopez , 990 S.W