### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

444 444 444 444 444 444 444 444 444 444 444 ON MOTION F OR REHEARING EN BANC

444 444 444 444 444 444 444 444 444 444 444

NO. 03-0 4 -00 813 -CV

App e lla nt s , D r . P hill ip Os bor ne and D e bor ah O sbo r ne //

Cr os s- App e lla nt , St at e F ar m Llo yds

v. App e lle e , J aur e gui , I nc . // Cr os s- App e lle e s, Dr . P hill ip Os bor ne and D e bor ah O sbo r ne

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 353RD JUDICIAL DISTRICT NO. 99- 0872 7 , HO NORAB LE SUZ ANNE COVINGTO N , JUDGE PRESIDI NG

O P I N I O N Appellee J aure g ui, Inc. has f iled a motion f

or rehe aring en banc , and cr oss-appe llant State Fa rm L loy ds has filed motions for rehea ring and for rehe aringen banc . We gr ant J aure g ui’s

and State F arm ’s mot ion s f

or re he ari ng en banc. We w ith dr aw o ur e arl ie r o pin ion

and jud g me nt, dated August 29, 2007, and substitut e this opinion.

This appea l arises fr om a dispute betwe en appe llants and cross-ap p el lees Dr. Phillip Osborne and De borah Osborne and appellee J aure g ui, I nc. J aure g ui was the a

rchitec t and builder of the house the Osborne s boug ht, and State Farm provided the O sbornes’ home -owne rs insurance policy

. After mold wa s discovere d in the house, State Fa rm paid $1,874,687 in mold-State F arm pa id a tot a l of $1 ,8 74 ,6 87 fo r t

he Os bo rn e s’ c la ims . M os t of tha t w a s pa id t o 1 the Osborne s, including policy limit s of $1,071,600 for da mag e to the structur e, but about $500,000 wa s pa id t o th ir d p art ie s f

or a lte rn a te liv inge xpe ns e s and mov ing/st or a g e c os ts. State F arm a lso pa id mor e tha n $ 15 0, 00 0 f

or e xpe rt s to e xami ne the ho us e and te sti fy a t tr ia l. 2 re late d c la ims

. Despite re ceivingthose pay ment s , t h e Osbornes sued Jauregui and numerous 1 subcontrac tors, settling with the subcontrac tors befor e trial for more than $1,000,000. A fter the jury returne d a verdict finding that the Osborne s had suffe red a pproxi mately

$835,000 in damag es, the tri a l c o u rt a

p p li e d a s e tt le me n t c r e d it

in Jau r e gu i’ s f

a v o r an d e n te r e d ju d g me n t t

h a t t h e O s b o rnes should take nothing on their claims. The trial court dec lined to awar d attorney ’s fe es to the Osborne s or to g rant State F arm subrog atio n rig hts in the procee ds from the Osbor nes’ se ttlement with the subcontrac tors. The Osbor nes and State F arm both appe aled. We af firm t he denia l of attorney ’s fe es bu t r e ve rs e the c ourt ’s re fu sa l to a llo w State F arm su br og a tio n ri g hts a g a ins t the se ttl e me nt p ro c e e ds

.
F ac tu al a nd P r oc e dur al B ac kgr ound I n 1997, the Osborne s boug ht a h o u s e f rom J aure g ui for slig htly

more than $1 million. Shortly afte r moving in, the Osbornes noticed flaws in the construction. The y later le arne d that the house had se rious mold pr oblems due to va rious construction er

rors. The Osbornes a lso claimed that beca use the house w as built al o n g a g olf course , g olf balls fre quently hit and damag ed the house , althoug h J aure g ui and its realtor ha d assure d them there would be no “g olf ball problem.” B efor e filing suit, the Osborne s sent J aure g ui a demand letter offering to settle their claims for $866,000, and Jauregui countere d with an offer for $12,810. The O sbornes de clined Jauregui’s counter -off er and in J uly

1998, they

sued Jaureg ui and its owner, Jose Luis J aure g ui, assertingcause s of ac tion under the Texas Dece ptive Trad e P ra ct i ces A ct (“ DTPA”) a nd for br eac h of contra ct, neg lige nce,Th e Os bo rn e s a lso su e d Jau re g ui’ s r e a lto r, bu t th os e c la ims are no t pa rt of thi s a pp e a l. 2 The jury

also found that Phillip Osborne was e ntitled to $50,000 for menta l ang uish, but 3 the trial cour

t concluded that, “[a]bs ent phy sic al i n j u ry , Dr. Osbor

ne is not entitled to recove r damag es for

mental anguish.” 3 brea ch of war

ranty , rea l estate f

raud, a nd neg lige nt misreprese ntation. See Tex. B us. & Comm. Code Ann. §§ 17.41-.63 (West 2002 & Supp. 2007). The Osborne s also sued a numbe r of J aure g ui’s
s u b c o n t r a c t o r s an d s u p p l i e r s o f c o n s t r u c t i o nm at e r i a l s , a l l e g i n g n e g l i g e n c e , b r e a c h o f w ar r an t y, D T P A v i o l a t i o n s , an d

p r o d u c t s l i a b i l i t y. State Fa

rm intervene d as the Osbor nes’ subrog ee. Rather 2 than re pair the house, the Osbornes sold the house “as is” befor e trial for $750,000. Shortly befor e trial, the Osborne s settl ed wi t h al l of the de fenda nts ex cept f

or Jaureg ui for a total of

$1,260,500, $1,120,500 of which rema ined in the court’s reg istry afte r the pay ment of expert witness fee s. The Os bo rn e s p ro c e e de d to tr ia l a g a ins t Jaure g ui, a sse rt ingthat th ey had su ff e re d at le a st $2 ,4 18 ,0 00 in d a ma g e s.

The jury found that Jaureg ui was neg lige nt and bre ache d war rant i es m ad e to the Osbornes a

nd that J aure g ui was re sponsible for 48% of the Osborne s’ damage s; the subcontrac tors
wer e re sponsible for the rema ining 52%. The jury found that the Osbor

nes suffe red da

mag es totaling $835,158.78: $250,000 fo r re p ai rs to bring the house to the c ondition reasonably expected whe n they boug ht it; $220,000 for lost or damag ed clothing and non-fur niture personal eff

ects; $70,000 for non- clothing items c ondemned due to mold contamination; $28,000 for r epair s actua lly made by the Osborne s; $1,000 for damag ed furniture ; $95,158.78 in alternate living e x penses; and $171,000 fo r m ov ing , s tor a g e , a

nd c le anin g of

the ir be lon g ing s. T h e ju ry fo u n d t h at J au re gu i d i d n o ten gage 3 in unconscionable conduct, de ceptive pr actice s, fra ud, or neg lige nt misreprese ntation.Th e Os bo rn e s have sin c e re c e ive d $1 7, 60 6. 01 fr om o ne of the de fe nd ants and

state that if 4 the y pr e va il, the fe e s sh ou ld b e re du c e d to $1 ,1 32 ,0 35 .2 9. Th e y a lso se e k $ 50 ,0 00 in a

pp e llate fe e s. 4 J aure g ui e lected a dollar-f or-dollar cre dit of the settlement funds ag ainst the j u ry ’s dama g e s awa

rd , a nd the tr ia l court e nte re d judg me nt that the Os bo rn e s sh ou ld t a ke no thi nga g a ins t Jaur e g ui, re fu sin g t o award the m atto rn e y ’s fe e s a g a ins t Jaure g ui a nd de nyingState F arm ’s c la im that it was entitled to subr og ation ag ainst the settlement funds. The c ourt made f indings of f

act a nd conclusions of lawin which it found th at t h ere was e vidence that the Osborne s had incurr ed $1 ,1 49 ,6 41 .3 0 in

a tto rn e y ’s fe e s, bu t c on c lud e d th a t th e y we re no t e nti tle d to a tto rn e y ’s fe e s b e c a us e 4 they did not obtain a net rec overy from J aure g ui or segr eg ate the fee s among the var ious claims and parties. The court also found that beca use State Fa

rm did not pay

any of the Osbor

nes’ attorney ’s fee s, the fee s incurre d by the Osbornes wer e “a n uncompensated expense of c ollection.” The court further found that State F arm did not prese nt evidence showing what portions of the se ttlement funds
wer e “a llocated to the ite m s S t at e F arm pa id for . . ., as oppose d to other items of dama g e and expenses of collec tion alleg ed by [t he Osbornes] in their petit ions that State Fa rm had not paid for , su c h a s me nta l anguis h, bo dil y inj ur y , r e pa ir s and

a tto rn e y ’s fe e s. ” Th e c ourt c on c lud e d th a t be c a

us e State F arm

ha d n ot s ho wn

that the se ttl e me nt pr oc e e ds we re pa y me nts fo r l os se s it

ha d c ov e re d, it was not entitled to those funds.

On a pp e a l, the Os bo rn e s argue that the y we re “ pr e va ili ngpa rt ie s” un de r t

he DT PA
and we re no t r e qu ir e d to se g re g a te the ir a tto rn e y ’s fe e s be tw e e n the va ri ou s de fe nd ants and

c la ims

. I n its cross-appe al ag ainst the Osborne s, State Fa rm argues that t he trial court abused its discre tion in denying State F arm’s subrog ation claim beca use that denial g rants the Osborne s a double re cover y and violates the one -satisfac tion r ule. State Fa

rm also ar g ues that any

money rec eived f

rom J aure g ui5

would be subjec t to St ate F arm’s subr og ation rig hts and that the trial cour t properly denied the Os bo rn e s’ re qu e st f

or a tto rn e y ’s fe e s.

The One -S at isfa c ti on R ule Both qu es t i o n s at i s s u e h er e—wh et h er at t o rn ey ’s fe es s h o u l d

b e awarde d and whe ther State Fa rm is en t i t l ed to s ubrog ation rig hts—involve the one-satisfaction rule, w hich is “the longsta nding pr oposition t hat a plaintiff should not be c ompensated twic e for the s ame injury .” CTTI Pr ie sm e y e r, In c . v . K &O Lt

d. P’ sh ip , 164 S.W .3d 675, 683 (Tex. App.—Austin 2005, n o pet.) (c i t i n g Stewart Ti tle Guar. Co. v. Sterling , 82 2 S.W. 2d 1, 7 (T e x. 19 91 )) ; see Crown Life Ins. Co. v. Casteel , 2 2 S. W.3 d 3 78 , 3 90 (T e x. 20 00 ). Th e ru le g ua rd s a g a ins t a

pla int if f r e c e ivi nga

wi nd fa ll “by rec overingan amount in court that cover s the pl aintiff’s entire damag es, but to which a se ttling defe ndant has alre ady partially contributed. The plainti ff would otherwise be recover ing an amount g reater than the t rier of

fac t has deter

mined would fully

compensate for the injury .” First T itle Co.

v . G arre tt , 860 S.W .2d 74, 78 (Tex. 1993). Th e o n e-satisfaction rule a pplies both when seve ral de fe nd ants c omm it the same a c t and wh e n mult ipl e de fe nd ants c omm it “ te c hn ic a lly dif fe re nt a c ts” th a t r e s u lt in th e s a me , s in g le in

ju r y . AMX Enters., I

nc. v. B ank One

, N.A. , 196 S.W .3d 202, 206 (T ex . Ap p . — Ho u s t o n[ 1 s tDi s t
. ] 2 0 0 6 , p et
. d en i ed ) ( ci t i n g Casteel , 22 S.W .3d at 3 9 0 ). The application of the rule is not limit ed to tort claims, and whe ther the r ule may be applied de pends not on the cause of action asserted but rathe r t he inj ury sustained. Id

. (c i t i n g El Paso Natural Gas Co. v. Be rryman , 8 58 S.W. 2d 36 2, 36 4 (Tex . 199 3) ; Ste war t Tit le , 822 S.W .2d at 8). Thus, if the plaintiff has suffe red only one injury , even if based on “over lapping and varie d theories of liability ,” the pla int if

f may on ly re c ov e r onc e ; “[t]hi s is e sp e c ia lly tr ue if the e vid e nc e su

pp or tin g e a c h c a

us e6

of ac tion is t he same .” Bu c c an e e r H om es of Al a. , Inc . v . P e lis , 43 S.W .3d 586, 590 (Tex. App.—Houston [1s t Dist.] 2001, no pet.).
Attor ney’s F ees On a pp e a l, t he Os bo rn e s argue tha

t the y we re “ pr e va ili ng pa rt ie s” un de r the DT PA and we re not re quired to seg reg ate their attorney ’s fe es bec ause those fee s wer e incurred due to the same fa cts and we re ine x tricably intertwined. They

contend they

are entitled to $1,132,035.29 for

a tto rn e y ’s fe e s inc ur

re d thr ou g h tri a l, plu s $ 50 ,0 00 fo r a pp e llate a tto rn e y ’s fe e s. Jaur e g ui a nd State Fa rm contend that the trial court proper ly denied the Osbornes’ reque st for attorne y ’s fe es, ar g uing that the Osborne s were not preva iling par ties under the D TPA. A party may not rec over attorney ’s fees from the oppos ing party unless an award of attorney ’s fees i s authorized by statute or contr act. Tony Gullo M otors I , L.P. v . Chapa , 212 S.W .3d 29 9, 31 1 ( Te x. 20 06 ). We r e vie w d e no vo a tr ia l c ourt ’s det erm in atio n o f whe the r a pla int if f i s entitled to attorney ’s fe es under a par ticular statute. Holland v. W al-Mart Stores, Inc. , 1 S.W .3d 91, 94 (Tex. 1999). Wh e th e r an d th e e xte n t t o w h ic h a tt o r n e y ’ s f e e s c anb e s e g r e g a te d

is a mi xed question of law a

nd fac t, and if seg regat i on is possibl e, re mand is require d. Ton yGu llo Mo tor

s , 212 S.W .3d at 313-14.

Under the DTPA, a pla intiff who “pr evails” is entitl ed to reasonable a nd nece ssary attorney ’s fe es. Tex. Bus. & Comm. C ode Ann. § 17.50(d) (West Supp. 2007). The supre me cour t has explained that to “pre vail” under the DTP A m eans “ to preva il in a claim under the Act, rather than to obta in a net rec overy on all claims joined in one lawsuit.” Mc Kin le yv . D ro zd , 685 S.W .2d 7, 9 (Tex. 1985). A pl aintiff may be considered a preva iling party and thus entitled to attorney ’s fe es7

even if his claim is “enti rely

offse t by a cla im of an opposing party .” Id .; Roberts v. Grande , 868 S.W .2d 956, 962 (Tex. App.—Houston [14t h Dist.] 1994, no writ).

Howeve r, as discusse d by our sister cour

t in Hamra v. G ulden , t h e rule that a net
re c ov e ry is n ot n e c e ssa

ry fo r a pla int if f t o be c on sid e re d a pr e va ili ng pa rt y “ do e s n ot a

pp ly in a c a se in which a consumer has alre ady rec eived pay ment of an amount equal to or g reater than the damag es found by the fa ct finder

in t h e t ri al of the c onsumer’s c ase a g ainst the non-settling defe ndant.” 8 9 8 S
. W
. 2 d

1 6 , 1 9 (T ex . Ap p . — Da l l as 1 9 9 5 , wr i td i s m ’dw. o . j

. ) ( ci t i n g Bl izz ar

d v . Natio nwi de Mu t. Fire Ins. Co. , 756 S.W .2d 801, 806 (Tex. App.—Dallas 1988, no wr it)). “It is one thing to allow a party an attorne y ’s fe es aw ard on a succe ssful claim notwithstanding a n opposing pa

rty ’s succ ess on
an o ff s et t i n g cl ai m . Ho we v er , i ti s an o t h er t o al l o w a t t o rn ey ’s fe es o na c l a i m t h a t , al t h o u gh
succe ssful, was paid in fu l l b ef o re trial.” Id

. (c i t i n g Bl izz ar d , 7 56 S.W. 2d

a t 80 6) ; se e als o Bucc aneer H

omes , 43 S.W .3d at 591 (consumer sued reta iler and manufa cture r, settling with retailer pr e -t ri a l, a nd jur y fo un d th a t ma

nu fa c tur e r b re a c he d w arr anty ; be c a us e dama g e s “ we re pa id i n f ull under the pre- trial settlemen t agr ee m ent with the re tailer,” consumer c ould not recove r attorne y ’s fee s from manufa ctur er) ; Bl izz ar d , 756 S.W .2d at 806-07 (insure r not liable for attorney ’s fe es beca use it had paid a ll damag es).

Although the supreme c ourt in McKinley held t h at u n d er t he DTPA “ the more
se ns ibl e me anin g of

the wo rd ‘p re va il’ is t o p re va il i n a c la im und e r t

he Ac t, r a the r tha

n to o bta in

a ne t r e c ov e ry

on a ll c la ims joi ne d in

on e laws uit ,” 68 5 S. W.2 d at 9, the cou rt di d n ot h old that a
c la im e nti re ly

of fs e t by the se ttl e me nt oftha t sa mec lai m b yoth e r d e fe nd an ts could support an a

war d of attorne y ’s fe es. McKinley c o n c e r n e d o n l y t h e qu e s t i o no f w h e t h e r a d a m a g e s aw ar d o f f s e tb y a8

de fe nd ant’ s c ounte rc la im, a c la im a lle g ing dif fe re nt inj ur ie s and dif

fe re nt the or ie s of re c ov e ry , c ou ld support attorney ’s fe es. Se e id . at 8-9.

Th e Os bo rn e s su e d Jau

re g ui f or br e a c h of c on tr a c t, ne g lig e nc e , b re a c h o f w arr anti e s, DTPA violations, fraud, r eal e state fr aud, and ne g lige nt misreprese ntation. The bre ach of contra ct claim complained that J aure g ui failed to make “all nec essar y repa irs” bef

ore c losin g an d t h at t he ho us e wa s “ fu ll o f c on str

uc tio n d e fe c ts. ” Th e ne g lig e nc e c la im c omp la ine d th a t Jaure g ui f a ile d to

a c t w it h th e s k il l a

n d c ar e o f a “ r e a s o n a b ly c o mp e te n t b u il d in g c o n tr a c to r . ” T h e O s b ornes
c omp la ine d th a t Jaure g ui he ld its e lf ou t a s on e of the top bu ild e rs in Aus tin and wa rr ante d th a t it s
c on str uc tio n p ro je c ts sh ow e d “ e xce lle nc e in a rc hit e c tur e and

qu a lity c on str uc tio n, ” it h a d e xpe rt ise in des ign and fi nis h- ou t of hig h- qu a lity

ho me s, a nd it “ le d a n e xten siv e te a m of

e xpe rt bu ild e rs , arc hit e c ts a

nd pr oje c t a dmi nis tr a tor s. ” Th e y fu rt he r al le g e d that J a

ur e g ui wa rr ante d that th e ho us e
wa s c on str

uc te d in a g oo d an d w or

kma nli ke mann e r, wa s su ita

ble fo r h uma n h a bit a tio n, ha d n o “ g olf ball problem,” a

nd had bee n repa ired in a g ood and workmanlike manner . They alleg ed that Jaureg ui
c omm itt e d f

ra ud and ne g lig e nt m i s r e p r e s e nt a

tio n a nd vio late d th e DT PA b y

br e a c hin g its wa

rr anti e s, making false r epre s en t at i o n s , fa i l i n g t o d i s cl o s e c o n s t ru ct i o nd ef ec t s , wi t h h o l d i n g or misrepre senting

mate ri a l f a c ts, and fa ili ng to co ns tr

uc t the ho us e pr op e rl y

or a de qu a te ly

re me dy c on str uc tio n d e fe c ts. Th e jur y fo un d th a t Jaure g ui w a s n e g lig e nt and bre a c he d w arr anti e s th a t th e ho us e was fit for its int ended pur

pose, built in a good and w orkmanlike manne r, or f it for human habitation, but did not intentionally brea ch any war ranties, commit f

raud, or make neg lige nt misreprese ntations or eng ag e in unconsc ionable, fa lse, misleading , or dec eptive ac ts. The t rial cour t found that the Osbornes br oug ht claims of bre ach of war ranty , neg lige nce, or

DTPA violations ag ainst all of theHavingheld that the Os b o rn es ar e n ot entitled to attorney ’s fe es, we need not c onsider 5 wh e the r t he y we re re qu ir e d to s egregate the ir fe e s. We n ote that th e Os bo rn e s d id n ot atte mpt to seg reg ate their attorney ’s fe es betwe en the va rious defe ndants or betwe en pre - and post-se ttlement work. See Tony Gullo Motors I, L.P. v. Chapa , 212 S.W .3d 299, 313-14 (Te x . 2006) (“ I ntertwined fac ts do not make tort fee s re co v er ab l e; i t is only when discr ete leg al servic es adva nce both a rec overa ble and unr ecove rable claim t hat t hey are so intertwined that they need not be seg reg ated.” ). 9 de fe nd ants e xce pt t

he c le anin g /st or a g e c omp any , w hic h w a s su e d f or br e a c h o f c on tr a c t and

DT PA violations. Theref

ore, the settling de fe n d an ts paid $1,260,500 to settle the same c laims on which the Osborne s proce eded to trial ag ainst J aure g ui. The Osbor nes’ c laims ag ainst J aure g ui were not offse t by a counte rcla im, but rather by pay ments made by co-de fenda nts to satisfy

the same da

mag es claims that wer e leve led ag ainst J aure g ui as arc hitect and builder of t he house—neg lige nce, br eac h of wa rra nty , and DTPA violations. Although the Osbornes cl ai m edm o re t h an $ 2 , 0 0 0 , 0 0 0 i nd am age s , t h e j u ry d i s agr eed, and its unchalleng ed findingof $835,158.78 in damag es, of whic h J aure gui was re sp onsible for 48%, is a definitive deter

mination binding on this Court. C onsequently , they may not now rec eive f

rom J aure g ui more than $1,000,000 in attorne y ’s fe es, i ncluding fee s incurre d afte r they settled with the oth e r d e fe nd ants
. The claims for which J aure g ui w as found liable we re the same a s those broug ht 5 ag ainst and settled pre -trial by the ot her defenda nts well i n excess of t he jury ’s awa rd; there fore , the Osbornes a

re not e ntitled to attorney ’s fe es fr om J aure g ui. See B uccane er Home s , 43 S.W .3d at 591; Ha mra , 8 98 S.W. 2d

a t 19 . We ov e rr

ule the Os bo rn e s’ iss ue on a pp e a l.
Sub rogation Ha vin g de c ide d th a t th e Os bo rn e s a re no t e nti tle d to a tto rn e y ’s fe e s fr om Ja ur e g ui, we now tur

n to State Far

m’s argument th at i t i s en titled to the settlement procee ds beca use theState F arm pa id $1 ,0 71 ,6 00 fo r the str uc tur e ; a tot a l of $2 10 ,3 68 .2 7 fo r th e Osbo rn e s’ 6 clothing a nd persona l effe cts; $190,319.57 for alternative livi ng expenses; $60,644.02 for f urniture and sim ila r i te ms; and

a tot a l of $3 41 ,7 55 .4 2 f

or va ri ou s mo vin g , s tor a g e , a

nd c le anin g e xpe ns e s. 10 Os bo rn e s have a lr e a dy be e n “ ma de wh ole ” by State F arm ’s ins ur anc e pa y me nts
. State Fa

rm argues 6 that a llo wi ngthe Os bo rn e s to ke e p the se ttl e me nt fu nd s g ive s th e m a

do ub le re c ov e ry

and that e qu ity and the one -satisfac tion rule demand that State Far m be awa r d ed the se ttlement funds without having to prove whic h settlements wer e for claims paid by

State Fa rm. As we have st ated, the one-satisfaction bars a plainti ff from being compensated twice for one injury

. Cro wn Li

fe In s. , 2 2 S. W.3 d at 39 0; CTT I Priesme yer , 164 S.W .3d at 683. I n the
same ve in, the pr inc ipl e of subr og a tio n p ro vid e s th a t on c e an in sure d is ma de wh ole fr om h is dama g e s, the ins ur e r t

hat ha s p a id f

or the ins ur e d’ s c ov e re d lo sse s is e nti tle d to th e ins ur e d’ s r ig hts and re medies ag ainst a third par ty for the c overe d losses. Har r i s v. A me r ican Prot. Ins. Co. , 15 8 S. W.3 d 6 14 , 6 22 (T ex . App .— For t Wor th 2 00 5, no pe t.) . T e xas c ourt s are “ pa rt ic ula rl y hospitable” to t he conc ept. Id

. (q u o t i n g In te rfi rst Ba nk Da lla s, N.A . v . U

nite d S tates F id. & Gu ar . Co. , 774 S.W. 2d 39 1, 39 7 ( Te x. Ap p. —D a lla s 1 98 9, wr it d e nie d) ); se e Ro wla nd & Ro wla nd

, P .C. v. Texas Employe rs I

ndem. Co. , 9 73 S.W. 2d

43 2, 43 6 ( Te x. Ap p. —Aus tin 19 98 , n o p e t.) (“ the re is an abunda

nce of case law in which Te x as cour ts have manife sted their intere st in ex amining settlements in third-party

actions to ensure an insuranc e ca rrier ’s rig ht to subrogation”). Absent a c ontrac tual provision, subrog ation is based on equitable principles and w e will not dis turb a trial c ourt’s bala ncing of the e quities unless “it would be inequitable to a llow the j u d gm ent t o stand.” Esparza v. Scott &W hite Health Plan , 909 S.W .2d 548, 552I n Esparza v. Scott & W hite Health Plans , we noted that subrog ation “is not easily detac hed 7 from equitable principles” a nd held that “[c]ontracts that g ive insurer s the rig ht to subrogation ‘conf irm, but [ do] not expand, the equitable subrog ation rig hts of insurers.’ ” 909 S.W .2d 548, 552 (T ex . Ap p . —

Au s t i n 1 9 9 5 , wr i td en i ed ) ( qu o t i n g Oss v. United Se rvs. Auto. Ass’n , 807 F.2d 457, 460 (5th Cir. 1987)). How ever , in Fo rti s Be nef it s v. Ca ntu , th e su

pr e me c ourt

sta te d, “ We g e ne ra lly a dh e re to t

he ma xim th a t ‘ e qu ity fo llo ws the law, ’ wh ic h r e qu ir e s e qu ita ble do c tr ine s to c on fo rm

to contra ctual and statutory mandates, not the other way around. Where a valid contra ct p resc ribes particula r re medies or imposes par

ticular oblig ations, equity g ener ally must yield unless the contra ct violates positive law or off ends public policy .” 234 S.W.3d 642, 648-49 (Tex. 2007). The public policy

cons i d er ations at work he re a re similar to those that ar ise when 8 examining whethe r a pa

rty is a preva iling par

ty under the DTPA. Se e Bl izz ar d v . Na tio nwi de Mu t. 11 (Tex. App.—Austin 1995, writ denied). I f ei t h er an i n s u re d o r a ni n s u re r “ m u s tt o s o m e e x t en tgo 7 unpaid, the loss should be borne by the insurer for that is a r isk the insured has pa id it to assume.” Ortiz v. Great S. Fire & Cas. Ins. Co. , 5 9 7 S
. W
. 2 d 3 4 2 , 3 4 4 (T ex . 1 9 8 0 ) ( qu o t i n g Garrity v. Rural Mut. Ins. Co. , 253 N.W.2d 512, 514 (Wi s. 1977)). An insure r is not entitled to equitable subrog ation

u ntil the insured is “made w hole” f or his loss. Es

pa rza , 9 0 9 S
. W
. 2 d

a t55 2; Or tiz , 597 S.W .3d at 343.

Al tho ug h th e Os bo rn e s su e d nume ro us pa rt ie s inv olv e d in

the c on str

uc tio n o f t

he ir ho me , th e y

su ffered bu t on e inj ur

y —th e de fe c tiv e ho us e . T he Os bo rn e s e sse nti a lly c on c e de thi s point by their ar g ument that they canno t s egreg ate their

attorney ’s fe es betwe en the va rious defe ndants bec ause the claims wer e too interre lated to be se parated from on e an o ther. The jury found that the Osbor

nes suffe red $835,158.78 in damag es fr om their one injury . That finding was
a de fi nit ive a sse ssm e nt o f the Os bo rn e s’ dama g e s, and the y do no t atta c k the jur y ’s awa rd on a pp e a l. There fore , the Osborne s were entitled to one re cover y in the amount of $835 , 1 5 8
. 7 8 for their one injury . State Fa

rm paid a total of $1,874,687 for the O sbornes’ c laims. Even bef ore f iling suit, the Os bo rn e s, the re fo re , h a d b e e n ma de wh ole by State F arm ’s ins ur anc e pa y me nts
. Se e Bl izz ar

d , 8Fire Ins. Co. , 75 6 S.W. 2d 80 1, 80 6- 07 (T e x. Ap p. —D a lla s 1 98 8, no wr it) (par ty may be conside red pr e va ili ngpa

rt y un de r DT PA e ve n if

dama g e s r e c ov e re d a

re e nti re ly

of fs e t by dama g e s awa

rd e d to opposing pa

rty in counterc laim; “Howeve r, that rule does not a pply in a case like this one in which the damag es found ha

ve alr eady

been pa id. I t is one thi ng to allow a party an aw ard of attorney fee s on a su c c e ssf ul c la im n otw ith sta

nd ingan o pp os ing pa

rt y ’s su c c e ss on an of

fs e tti ng c la im. I t is qu ite another to allow attorney

fee s on a claim which, although successful, was paid in full befor e trial.” ). I n th is c a se , the Os bo rn e s fi le d su it a ft e r havin g be e n ma de wh ole un de r t he jur y ’s va luatio n o f t

he ir damag es, settled with t he subcontractors for an amount well bey ond the damag es they suffe red a

nd fo r whic h th e y ha d a lr e a dy be e n c omp e ns a te d, and the n c on tin ue d w iththe laws uit

a g a ins t Jaure g ui. Havingbeen ma de more than whole for the damag es that the jury deter mined they had incurre d, the Os bo rn e s h a ve c on tin

ue d to pur su e c la ims a g a ins t J a ur e g ui an d othe rs , u sin g jud ic ia l r e so ur c e s to pursue r ecove ry

bey ond that to which they are entitled. 12 756 S.W .2d at 806 (“the evidenc e is undisputed that Nationwide ha d alre ady paid more tha

n the sum found by the jury and wa s entitled to a cre dit for those pay ments”). Th e tr ia l c ourt

fo un d that the Os bo rn e s in c ur re d $ 1, 13 2, 03 5. 29 in atto rn e y ’s fe e s to pursue thei r claims ag ainst the various de fenda nts. The cour

t further found that althoug h the Osbornes c ould have se g reg ated their attorney ’s fe es incurr ed i n pursuing their cla ims ag ainst the
va ri ou s se ttl ingde fe nd ants , the y fa ile d to do so . A lth ou g h th e tr ia l c ourt fo un d th a t th e Os bo rn e s’ attorney ’s fe es we re unc ompensated c osts o f co l l ection, there is no showing in the rec ord that the Os bo rn e s a sk e d St a te F arm to r e pr e se nt t

he m to purs ue the se c la ims or that State F arm

re fu se d to repr esent them or otherwise participate in the s uit. I nstead, State F arm interve ned and pa rticipated in the suit; S tate F arm a sserts, and the Osbornes do not dispute, that its participation was in support of the Os bo rn e s and

the ir c la ims a g a ins t th e de fe nd ants
. Un de r t he se fa c ts, the Os bo rn e s h a ve a lr e a dy re c ov e re d in sura

nc e pa y me nts we ll i n
e xce ss o f the dama g e s the jur y de te rm ine d the y inc ur

re d. Whe the r S tate F arm un de rp a id o n s ome subcate g ories of da

mag es, such a s clothing or persona l effe cts, is rende red unimportant by the fa ctState Fa rm paid policy

limit s of $1,071,600 for the structure , and the jury found that the 9 Osbornes w ere entitled to $250,000 for re pairs nec essar y to fix the structure

. The Osbor

nes ar g ue we should not apply overpa y ments to area s of shortfa ll. However , 10 su br og a tio n inv olv e s matte rs of e qu ity , a nd it w ou ld b e ine qu ita

ble to h old

State F arm

re sp on sib le for unde rpay

ing on c erta in are as of damag e while ignor ing its larg e overpay ment as t o the structura l da ma g e . N o r

ar e w e p e r s u a d e d

b y th e O s b o r

n e s ’ ar g u me n t t

h a t S tate F ar

m i s e s to p p e d

from cla imingthat th e Os bo rn e s h a ve be e n ma de wh ole by State F arm ’s state me nts in t he ir br ie fs in su pp or t of the Os bo rn e s’ c la ims that th e ins ur anc e pa y me nts c ov e re d “a

po rt ion of ” the Os bo rn e s’ damag es. An a lleg ation such as this, made in support of the Osbornes’ suit, doe s not amount to a j u d i ci al ad m i s s i o nan d

ca n n o tb e h el d

aga i n s tS t a t e F a r m i n t h e f ac e o f aj u ry

v er d i ct m ak i n g a de fi nit ive de te rm inatio n o f t he Os bo rn e s’ dama g e s. We note that, subtractingthe Osborne s’ damag es from the pa y ments they

rec eived f

rom 11 State Fa rm, the Osbornes have alre ady rec eived an excess of $1,039,528.42, which nea rly cover s the $1 ,1 49 ,6 41 .3 0 th e y

se e k f or the ir a tto rn e y ’s fe e s thro ug h tr ia l.

13 that State F arm ov e rp aid t h e Osbornes by

$793,600 for damag e to the structur e. Any sh or tf a ll 9 betwee n a particula

r insurance pay

ment and an amount of da mag es aw arde d by

the jury is covere d when the ove rpay

men t fo r t h e structure is applied. The settlement f unds, which we re pa id by 10 d e f e n d an t s a g a i n s t w h o m t h e O s b o r n e s a s s e rt e d t h e s a m e d a m a g e s c l a i m s d e t e r m i n e d b y t h e j u r

y, pa id f or the pr op e rt

y dama g e su ff

e re d b y the Os bo rn e s, wh ich wa s th e same inj ur y pa id b y State Fa rm’s pay ments. There wer e no uncover ed damag es suffere d in this case , and thus there is no issue of State F arm re cover ing policy pay ments from settlement sums intended to pay for
uncover ed injuries.

To re fu se su

br og a tio n in

thi s c a se wo uld

re su lt in t he Os bo rn e s r e c e ivi nga

wi nd fa ll
we ll b e y on d th e $8 35 ,0 00 in d a ma g e s th e y su ff e re d a nd S tat e Farm be ingle ft

wi tho ut r e me dy

to
rec over a ny of the ne arly

$2,000,000 it paid to th e Os bornes f or their c laims related to the defe ctive home. 1114 Fur thermore , if a c ontrac t provides for subrog ation reg ardle ss of whethe r the insure d is first made whole, “ [t ]he contrac t’s specific lang uag e controls

. . . and the e quitable def ense of the ‘made whole’ doc trine must give way .” Fo rti s B e ne fit s v . Ca ntu , 234 S.W .3d 642, 651 (Tex. 2007). “[C] ontrac t-based subr og ation rig hts should be gove rned by the parties’ express ag ree ment and not invalidated by

equitable c onsiderations that mig ht control by defa ult in th e a b s e nce of an ag ree ment.” Id. at 650. The Osbor nes’ policy

included the f

ollowing subrog ation provision:
A n insu red may

waive in wr iting bef

ore a loss all rights of r ecove ry ag ainst any pe rs on . I f n ot wa ive d, we may re qu ir e an a ssi g nme nt o f r ig hts of re c ov e ry fo r a los s to t he e xten t th a t pa

y me nt i s ma de by

us . I f an a ssignment is soug ht, an insu r e d must sig n and deliver all related pape rs and c oo pe rate wi th u s. Although this provision uses the wor d “may ,” as opposed to the provision in Fo rti s B e ne fit s , which
rea d that the insuranc e compa ny “will be subrogated to all rig hts of rec overy ,” see id. at 645 n.11, the clause provides that State Fa rm had the rig ht to require an assig nment of rig hts and, if assig nment was soug ht, the Osbornes w ere contra ctually require d to cooper ate
. This contrac t provision establishes that State F arm ha d the contra ctual rig ht to subrog ation ag ainst sums paid for losses that
wer e cove red a

nd paid by State Fa

rm. The recor d does not ref lect whether S tate F arm pre sented the Os bo rn e s w i t h an e xp l i c i t d e m an d f o r s u b r o g a t i o n , b u t S t a t e F ar

m ’ s a c t i o n s t h r o u g h o u t t h is c a se sh owan in te nti on

to o bta in s ub ro g a tio n a g a ins t sums p a id t o th e Os bo rn e s. We sustain St ate F arm’s f

irst and second issues and re verse the trial cour t’s judgme nt denying State F arm subrog ation rig hts in the settlement funds.15 Conclusion We h a ve he ld t

hat th e Os bo rn e s are no t pr e va ili ngpa rt ie s so a s to be e nti tle d to

a tto rn e y ’s fe e s und e r t

he DT PA. We have fu

rt he r h e ld t hat th e Os bo rn e s w e re ma de wh ole fo r t he ir
on e inj ur y and the re fo re that Stat e F arm is e nti tle d to su br og a tio n in te re sts in t

he se ttl e me nt f

un ds

. We a f f ir m t h e tr ia l c o u rt’ s ju d g me n t d e n yin g th e O s b o r n e s a tt o r n e y ’ s f e e s f r o m Ja u r e g u i. We
reve rse the j udg ment denying State F arm subrog ation in the settlement and re nder judg ment that State F arm

is e nti tle d to su

br og a tio n a g a ins t th e re ma ini ngse ttl e me nt f un ds

.

__________________________________________ David Pury ear , J ustice Be fore Chief J ustice L aw, Justi ces Patter son, Pury ear , Pemberton, Waldrop and He nson; Dissenting O pinion by

J ustice He nson, joined by J ustice Patterson Affir med in part; Rever sed and Rende red in pa rt on Motion for Rehea

ring En Ba

nc Filed: Apr il 17, 2008