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

NO. 03-0 7 -00 404 -CV

P hili p W. Bar ne s , A ppe lla nt

v. Old Ame rican Mutual F ire Insurance Com pany , Appellee

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 261S T JUDICIAL DISTRICT NO. D-1- GN-05- 0044 02 , HO NORAB LE STEP HEN Y ELENOSK Y , JUDGE PRESIDI NG

M E M O R

A N D U M O P I N I O N Philip W. B ar

n e s a p p e a ls f r o m t h e tr ia l c o u rt’ s o r d e r

g r an ti n g th e mo ti o nof Old Americ an Mutual Fire I nsuranc e Company (“O ld America n”) f or direc ted ver dict and aw arding Ol d Am e ri c an dama g e s, pr e jud g me nt and po stj ud g me nt int e re st, and a tto rn e y s’ fe e s i n a d is pute arising from var ious nonstanda rd automobile insurance prog rams. We w ill af firm the trial cour

t’s order awa rding damag es, prejudgme nt interest, and attorney s’ fe es and w ill reverse that portion of the orde r aw a

r d in g p o s tj u d g me nt interest on the ar bitration-awa

rd amount of $899,652.85 a nd rende r jud g me nt t

hat O ld A me ri c an r e c ov e r n o p os tju dg me nt i nte re st o n th e arb itr a tio n- awa rd a mou nt.
F ACTUAL AND P ROCEDURAL BACK GR OUND The nonstanda

rd automobile insurance marke t provides insuranc e for motorists who have poor cre dit histories, poor driving rec ords, prior acc idents, or other unde rwriting conce rns that make it difficult for

those motorists to obt ain insuranc e throug h the traditional marke t. I n Texas, the2

nonstandard insura

nce market is structure d throug h a tripar tite relationship among a county mutual ins ur anc e c omp any , a mana g ingg e ne ra l a g e nc y (“ MG A” ), and

on e or mor e re ins ur anc e c omp a nie s. A county mutual insurance company (“c ounty mutual”) is an insurance car rier that is ex empt from most state insurance laws. See Te x. I ns . Code Ann. § 9 12 .0 02 (We st 2 00 9) . T he c ounty mut ua l a c ts as the insura

nce c arr ier and allows its policies to be is sued by its ag ents. I n exchang e for allowing policies to be issued pursuant to its authority to c onduct the business of insuranc e, the c ounty mutual
re c e ive s a “ fr on t f e e ,” that is , a

pe rc e nta g e of

the pr e miums w ri tte n in

a pa rt ic ula r p ro g ra m. Fr om an operational standpoint, almost all the func tions of administering a particula r insurance prog ram a

re de leg ated by a county mutual to its appointed MGA. The MGA conduc ts the
ma jor ity of the bu sin e ss o f the ins ur anc e pr og ra m and is g ra

nte d bro a d au tho ri ty un de r t he pa rt ie s’ MG A a g re e me nt t o a c t on be ha lf of the ins ur anc e c arr ie r. Am on g oth e r f un c tio ns , th e MG A a c c e pts i n s u r an c e a

p p l i c a t i o n s , u n d e r

w r i t e s a p p l i c a t i o n s , i s s u e s p o l i c i e s , c o l l e c t s p r e m i u m s , p a ys commissions t o reta il ag ents, and a djusts and pay s claims. Often, all or par t of the oblig ations the MGA owe s to the county mutual are supported by

some for m o f g uara

nty ag ree ment. Unlike the
c ounty mut ua l’ s c omp e ns a tio n that is se t out in the MG A a g re e me nt, the MG A’ s c omp e ns a tio n is de lin e a te d in

the re ins ur anc e a g re e me nt b e tw e e n the c ounty mut ua l and its re ins ur e r o r r e ins ur e rs . Reinsuranc e is a mea

ns where by

a compa ny that issues an insuranc e policy can
a llo c a te or

“ c e de ” a ll or a po rt ion of the ri sk it be a rs on that po lic y to ano the r ins ur anc e c omp a ny in
r e tu r nf o r a p o rti o n of t he premium. Gr e at A tl. LifeIn s. Co. v . H arris , 723 S.W .2d 329, 330 (Tex. App.—Austin 1987, writ dism’d). Traditionally , 100 perc ent of th e premiums written and l o s s e s i n c u r

r e d u n d e r a n o n s t an d ar d

i n s u r an c e p r o g r a m ar e a c c e p t e d b y o n e o r m o r e r e i n s u r e r s . In3

this contex t, the cou n t y mutual is refe rre d to as the “r einsured” or the “ cedingcar rier.” The
re la tio ns hip be tw e e n th e c e din g c arr ie r a nd its re ins ur e rs is g ov e rn e d b y a re ins ur anc e a g re e me nt. This case conce rns the extent to which a g uara nty ag ree ment signe d by

B a r n e s applies to various nonstandar d automobile insurance prog rams. In 19 9 3, Ba rnes f ormed the H ear

tland L loy ds I nsuranc e Company (“H ear tland”) a nd serve d as its presiden t
. I n Fe bruar y 2002, Ba rnes formed a n MGA ca lled L eg acy

Manag ing G ener al Ag ency (“L eg acy”). O n April 30, 2002, L eg acy enter ed into an MGA ag ree ment (“MGAAg ree ment”) w ith Old America n, and He artland a g ree d, eff ective Ma y 1, 2002, to reinsure all the nonstandar d automobile insurance business produce d by L eg acy for Old Ame rica

n. I n addition, Ba

rne s, as pre sident of Hea rtland, sig ned a guara

nty of perf ormanc e of L eg acy , eff

ective May 1 , 2 0 0 2 . On J uly 31, 2002, Ba

rnes r esig ned as pr esident of He art land , a

nd on Au g us t 12 , 2 00 2, He art land te rm inate d it s r e insu ranc e agr e e me nt w ith Old Americ an, ef

fec tive September 30, 2002. On Dec ember

10, 2002, Old Americ an si g n e d a r e in s u r a n c e a gr e e me nt w it

h Un iversal Reinsuranc e Company

(“U niversal Re” ). Article 5.1 of the ag ree ment broug ht about a novation; that is, Universal Re wa s substit uted for H ear tland, ef fe ct i v e re t roactively

as of Ma

y 1, 2002. On Dec ember

12, 2002, Ba

rnes e x ecute d an “a

bsolute and unconditional” pe rsonal g uara nty of L e g a cy ’s perf ormanc e u

n d e r th e M G A A gr e e me nt w it

h O ld A merica

n (“G uara nty Ag ree ment”), a lso effe ctive retroa ctively

as of Ma

y 1, 2002. On Dec ember 24, 2002, Old Amer i ca n released He artland
as re insurer a

nd g uara ntor of L eg acy

throug h an ag ree ment and re leas e, ef fe ctive re troac tively

as of May 1, 2002. During 2002 and 2003, B arne s took profit di stributions from L eg acy in the amount of $228,663.21. Then, in 2004, he formed Austin I ndemnity L loy ds Insuranc e CompanyThe loss r atio is the ratio of losses paid to premium ear ned. The lower the loss ratio, the 1 m o r e p r o f i t a b l e t h e b u s i n e s s i s t o t h e i n s u r an c e c o mp an y. 4 (” Au sti n I nd e mni ty ” ), ano the r re ins ur anc e c omp any . B arn e s su g g e ste d to Ol d A me ri c an th a t A us tin I ndemnity

repla ce U niversal Re a s the reinsure r. He also prop o s ed a commission adjustment ag ree ment (“Commission Adjust ment Ag ree ment”) to modify commission am o u n t s ear ned by L e g a c y on a ll b us ine ss p ro du c e d f

or Ol d A me ri c an. On

Se pte mbe r 2 , 2 00 4, Ol d A me ri c an, Au sti n I ndemnity , and Universa l Re executed a novation ag ree ment that substitut ed Austin I ndemnity for Universa l Re as the re insurer of the L eg acy

prog ram, e ffe cti v e re t ro ac t i vely as of Ma y 1, 2002. Ba rnes now co n t rol led both the produc er ( L eg acy ) and the reinsure r (Austin Indemnity) of the L eg acy book of business. On Oc tober 1, 2004, Old Ame rica n and L eg acy

signe d the Commiss ion Adjustment Ag ree ment. I f L eg acy produce d g ood business, t hat is, insurance business with a favor able loss ratio, L e g a c y ’s c omm iss ion wo uld inc re a se . I f L e g a c y

pr od uc e d “ ba d” bu sin e ss, its 1 commission rate would be a djusted downwar d.

Sho rt ly the re a ft e r, B arn e s’ s r e la tio ns hip wi th h is p art ne rs a t L e g a c y

be g a n to d et er i o ra t e. On M ar ch 1 4 , 2 0 0 5 , h e r es i gn edh i s m an age m en tp o s i t i o nwi t h t h e c o mp an y , al t h o u gh he re ta ine d h is 3 8- pe rc e nt own ers hi p inte re st i n L e g a c y and c on tin ue d to fu

nc tio n a s it s
re g ist e re d a g e nt. On Marc h 24 , 20 05 , Au sti n I nd e mni ty te rm inate d its re ins ur anc e a g re e me nt w ith Old Americ an re g ardingthe L eg acy b usiness. On April 1, 2005, Dorinc o Reinsuranc e Company (“ Do rinco” ) and A XA Re (“ AXA” ) ag ree d to equally reinsure the L eg acy

business (“Dor inco ag ree ment”).5 On Octobe r 10, 2005, Old Amer ican made demand t o L eg acy for c ommissi on adjustment amounts due under the Commiss ion Adjustment Ag ree ment, losses that Old America n calc u l ated were $1,404,901.22 as of June 30, 2005. L eg acy , howeve r, fa iled to pay . On November

1, 2005, Old American m ad e dema nd to Ba rnes unde r the Gua

ranty Ag ree ment for pay ment of the L eg acy commission adjustment amounts. When he fa iled to pay , Old Americ an filed suit on Dece mber 12, 2005, a lleg ing that Ba rnes ha d brea ched the Guar anty Ag ree ment. Ol d A me ri c an ins tit

ute d a n a rb itr a tio n a c tio n a g a ins t A us tin I nd e mni ty

in Marc h 2006, alleg ing brea ch of the re insurance ag ree ment. Ba sed on the Gua ranty Ag ree ment, the arbitration pa

nel found Ba

rnes liable to O ld A merica n for the amount of $914, 6 5 2
. 8 5
. He acknow ledg ed liability , and that amo u n t , reduc ed to $899,652.85 to ref lect his one pa

y ment of $15,000, was made part of the final judgme nt in this c ase. On Marc h 31, 2006, Ba rnes boug ht out the par tners in L eg acy , attaining 100-per cent owne rship interest in the company . The Dor inco and AXA r einsuranc e ag ree ment was ter minated ef

fec tive Apr i l 1 5 , 2006. On Dec ember 6, 2006, Old Americ an made demand to B arne s as g uara ntor to pa y the unpaid pre mium, fees, and ta x es of $6 38 ,5 88 .6 6 und e r t

he Do ri nc o a

nd AX A r e ins ur anc e a g re e me nt. After a jury trial in Marc h 2007, the t rial court g rante d Old Americ an’s moti on for dir e c te d v e rd ic t, d e te rm ini nga s a matt e r o f l aw that th e Gu ara nty Ag re e me nt a

pp lie d to a ll transac tions in question. Based on the jur y verdic t, the trial court a lso awar ded Old Amer ican attorney s’ fe es and postjudg ment interest, plus prejudg ment interest on the commission adjustment and unpaid pr emium portions of the judg ment. This appea l followed.6 DI SCU SSIO N Stand ard of Review

Construction of an unambig uous contra ct is a question of law. MCI Corp. v. Texas Utils. Elec. Co. , 995 S.W .2d 647, 650-51 (Te x . 1999). Ne ither B arne s nor Old Amer ican c ontended the Guar anty

Agr ee m en t was ambiguous, a nd the trial cour

t construed it as a

matter of la

w. The sta nd ard of re vie w i n th is c a se , th e re fo re , is de novo
. See id. at 651.
G uar ant y A gr e e m e nt

I n h is f ir st i ssu e , B arnes argues th e tr ia l c ourt e rr e d w he n, a s a

ma tte r o f l a w, it construed the Guar anty

Ag ree ment to apply to e ach suc cessive r einsuranc e prog ram. He contends the scope of the Gua

ranty Ag ree ment is lim ited to L eg acy ’s obligations under the MGA A g ree ment betwee n Old Americ an and H ear tland. Old Americ an, howe ver, a sserts t h at , i n consideration of L eg acy ’s appointment as Old Americ an’s MGA under the MGA Ag ree ment, Ba rnes a bsolutely and unconditionally

g uara nt ee d t he per formanc e of a ny and all of L eg acy ’s obligations under the MG A A g re e me nt a

nd un de r a ny of its a me ndme nts
. I n p e rt ine nt p art , th e Gu ara nty Ag re e me nt r e a ds a s f

oll ow s: 2. Guar antor ag ree s to guara ntee the perf

ormanc e of

any and all obligat ions of the [ MGA] under the [MGA] Agree ment, includ i n g, wi t h o u tl i m i t at ion, the pay ment of all funds owed to [ Old Americ an] insureds, financ e companies, c laimants, or ag ents by the [MGA] and all [MGA’s] balances arising pursuant to such [MGA] ag re e me nt. This Guara

nty expressly

incl udes any rea sonable attorney s’ fee s and expenses incurred by [Old Am e ri c an] by

re a so n o f t

he [MG A’ s] f

a ilure to satisfy any such oblig ation.7 3. Th is G ua

ra nty sh a ll b e a

bs olute and

un c on dit io nal. [Old Am e ri c an] sh a ll hav e the ri g ht i n it s so le d is c r e ti o n to p r o c e e d a g a in s t G u ar an to r f o r any indebtedness within t h e scope of this Ag ree ment without first ex hausting i t s reme dies ag ainst the [M G A ]. 4. Guar antor he reby acknow ledg es the a dequac y and r e c e i p t o f [ O l d A m e r i c an ’ s ] a

p p o i n t m e n to f

[ L e g a c y] a s th e [MG A] p ur su ant t o the [MG A] A g re e me nt, any amendme nt to the [MGA] Agreem ent, and any subsequent agency agreem ents entere d into by the parties herein a s v a lua ble c on sid e ra

ti on fo r t

his Ag ree ment. (Emphasis adde d.) By g uara nteeing L e g a c y ’ s perf

ormanc e in exchang e for

Old Americ an’s a

ppointment
o f L ega cy as the MGA, pursua nt to the MGA Ag ree ment a n d a n ya m e n d m e n ts a n d

s u b s e q u e nt alt e ra tio ns of i ts t e rm s, Ba rnes pr ovided a c ontinuing g uara nty . A continuing g uara

nty is defined
a s f oll ow s: A c on tin uin g g ua ra nty is o ne wh ic h is no t li mit e d to a sing le transa ction, but which contemplate s a future c ours e of de a lin g , c ov e ri nga se ri e s o f t

ra ns a c tio ns , g e ne ra lly fo r an ind e fi nit e tim e or un til re vo ke d. I t is sim ply a div isi bl e of

fe r f or a se ri e s o f s e pa

rate unilatera l contracts, and contemplate s a ser ies of transac ti o n s b etwee n a debtor and a c reditor, r ather tha n a sin g le de bt. A c on tin uin gg ua ra nty is prospec tive in its operation and is g ener ally intended to provide secur ity with r espec t to future tra nsactions within certa in limi ts, and conte mp la te s a s u cce ssion of liabiliti es , for whic h, as they acc rue, the g uara

ntor become s liable.
38A C.J .S. Guara

nty , § 8, 583 (2008). See also 38 Am.J ur.2d, Guar anty , § 20, 887-88 (1999) (continuing g uara

nty can include subsequent indebtedness without ne w consideration be ing g iven).The f o u r r ei n s u re rs t h at fo l l o we d He ar t l an d

we re Un i v er s al R e, Au s t i nI n d em n i t y , Do ri n co, 2 and AXA
. 8

Ba rnes’ s g uara

nty applied not only

to the instant c o n t ra ctual re lationship between B arn e s and

Ol d A me ri c an b ut a lso to t he ir futur e e nd e a vo rs . H is gua ra nty a pp lie d to “ any

and a ll” of L eg acy ’s obl igations and “all [of L eg acy ’s] balance s” ar ising unde r the MGA A g ree ment, which ind ic a te d th e g ua

ranty cov ere d mu lti ple tr ans a c tio ns , w ithva ry inga mou nts du e , at va

ri ou s ti me s. The use of words or expressions g uara nteeing “any and all” oblig ations or indebtedne ss indicates the g uara nty is a continuing one. 38A C .J .S. Guar anty , § 63, 661-62 (1996). No time limit or duration is contained in either

the Guar anty

Ag ree ment or the MGA A g ree ment, and there is no evidenc e that Ba rnes e ver attempted to term i n at e the Guar anty Ag ree ment. The c ontinuing natur e of B arne s’s
a g re e me nt i mpl ie s h is gua ra nty e xten de d f

or wa rd to c ov e r a ll o f L e g a c y ’s futur e ob lig a tio ns wi thi n the sc op e of

the MG A A g re e me nt. Fur thermore , only

one MGA A g ree ment exis ted betwee n L eg acy and Old Amer ican. Ba rnes e x ecute d the Guar anty Ag ree ment when Unive rsal R e was about to take ove r re insurance of L eg acy ’s insuranc e business under a novation. B arne s not only knew a bout the novation, he helpe d dr a ft the do c ume nts to a c c omp lis h it . B arn e s si g ne d th e Gu ara nty Ag re e me nt a

nd , a s a re su lt o f h is
e ff or ts, the MG A A g re e me nt r e ma ine d in e ff e c t f or se ve ra l y e ars , w ithfo ur

dif fe re nt r e ins ur e rs . 2 The substitut ion of eac h new reinsure r simply worke d an amendment of the MGA A g ree ment, which continued in ef

fec t until i t was terminate d in April 2006. B a rnes al so ass ert s t hat th e Gu aran ty Agreem ent cou ldno t b e readto in clu de am ounts under the Commi ssion Adjustment Ag ree ment as t hat agr eeme nt was a separ ate a g ree ment intended9

to chang e the wa

y the reinsure r Austin I ndemnity paid commissions. That is, Bar nes conte nds the Com mis sio n A dju stm e nt A g re e me nt w a s n ot a n ame ndme nt o f t

he MG A A g re e me nt a

nd t hu s w ith in the scope of the guara

nty . Contrary

to Ba rnes’ s argument, howeve r, we find that the Commiss ion Adj u s t m en t Agreement wa s an ame ndment of the MGA A g ree ment rathe r than a n amendment of the Austin I ndemnity

reinsura nce a g ree ment. Article 3.7 of the M GA Agr ee m ent states that the commission may

be ame nded upon mutual ag ree ment of Ol d Americ an and L eg acy “without otherwise af

fe ct i ng the terms and c onditions of this Ag ree ment.” The first para g raph of the Commi ssion Adjustm ent Agre ement declare s that this adjustment of L eg acy ’s commission applies to commissions for policies unde rwritten by Old Americ an “unde r the [MGA] Agr eeme nt.” Fur thermore , the C ommissi on Adjustment Ag ree ment is signed by repr esentatives of Old Amer ican and L eg acy , not by

repr ese n t at i v es of Austin Indemnity . Be cause the commission adjustment amounts o w e d b y L e g a c y to O ld A me r ic an w e r e o b li g a ti o n s in c u r r e d b y L e g a c y u n d e r

the MGA Ag ree ment, they

wer e covere d by Ba

rnes’ s g uara

nty under the Guar anty Ag ree ment. Finding that the scope of the Gua

ranty Agr eement is not l imited to L eg acy ’s obligations under the MGA Ag ree ment betwee n Old Americ an and H ear tland, we ove rrule B arne s’s first issue.
Do r inc o R e insu r anc e Ag r e e m e nt

I n his second issue, B arne s argues the trial c ourt err ed whe n it held that the Dorinco
re ins ur anc e a g re e me nt w a s n ot a m a te ri a l a lte ra tio n to the ob lig a tio ns un de rl y ingthe Gu a ra nty Ag ree ment. A mater ial alteration of a contra ct betwe en a c reditor a nd principal de btor is one that ei ther a ctually

injures or e nhance s the risk of injury to the g uara

ntor. A u s ti n H

a rd wo o d s , I n c. v. Vande n Berghe , 917 S.W .2d 320, 326 (Tex. App.—El Paso 1995, writ denied) ; Fe de ra l D e po sit10

Ins. Corp. v. Attayi , 745 S.W .2d 939, 944 (Tex. Ap p . — Ho u s ton [ 1st Dist.] 1988, no writ). See United Concrete P ipe Corp. v. Spin-Line Co. , 430 S.W .2d 360, 366 (Tex. 1968)
. Be cause a mater ial alteration is an affirmative defe nse, the burde n is on the g uara ntor to prove that a mater ial alteration
occur red. Frost Nat’l Bank v. Burge , 29 S.W .3d 580, 588 (Tex. App.—Houston [14t h Dist.] 2000, no pet.). The g uara

ntor asser ting the defe nse must demonstrate the f ollowing: (1) the exist ence of a mater ial alteration to the unde rly ing contra ct; (2) made without the gua rantor’ s consent; (3) that is to the gua

rantor’ s detriment (that is, pre judicial to the g uara

ntor’s intere st). Id. Ba rnes maintains t h at the “una ffiliated r einsuranc e tra nsaction” w ith Dorinco
c on sti tut e d a

ma te ri a l alte ratio n to the pr ior re ins ur anc e pr og ra ms an d wa s not a

ri sk he or ig ina lly undertook. He contends the c hang e in commission rates enha nced his risk o f i n

j u ry and had a neg ative impact on L eg acy ’s perf ormanc e. He asser

ts that the 17-per cent pr ovisional commissi on rat e u n d e r th e D o r in c o a g r e e me n t r e s u lt e d in a c a s h

- f lo w c r is is a t L e g a c y , le d to imprope r commission advance s and, ult imately , cause d a default on pay ments to Dorinco. Moreove r, B arne s contends that, not only

did he not consent to the Dor inco transa ction, he had r esig ned fr om L eg acy
a tt h e t i m e an d

w a s n e i t h e r

p arto f t h e n e g o t i a t i o n s n o r

kn e w o f i t s t e r m s . H e t h u s ar g u e s tha t, beca use the Dor inco ag ree ment prejudice d and har med him, he wa s relieve d of liability for the Do ri nc o b a lanc e s und e r t

he Gu ara nty Ag re e me nt. We f ind the trial court corr ectly held that Ba rnes’ s material- alteration defense failed
as a matter of law . I n consideration of Old Americ an’s appointment of L eg acy as the MGA unde r the MGA Ag ree ment an d any of its subsequent amendme nts, Bar nes g ave his a

bsolute,
un c on dit ion a l, a

nd c on tin uin g g ua ra nty of a ll of L e g a c y ’s ob lig a tio ns un de r t he MG A A g re e me nt.11

The MGA A g ree ment all o wed L eg acy to issue policies, collect pre miums and commissi ons, and
a dju st and pa

y c la ims re la te d to a

uto mob ile ins ur anc e po lic ie s o n O ld A me ri c an p oli c y fo rm s. Th e se
a c tiv iti e s are wh a t th e MG A A g re e me nt g ov e rn e d in 20 02 wh e n H e art land

and la te r U niv e rs a l Re
wer e the r einsurer s; what it gove rned in 2004 when Austin I ndemnity was the reinsurer ; and what it gove rne d i n 2005 when Dor inco and AX A bec ame the r einsurer s. Although the Dorinco ag ree ment chang ed the identity of t he reinsurers of the business produce d by L eg acy and modified the provisional commission rate e arne d by L eg acy , the essential c hara cte ri s t i cs of the MG A Ag re em en t re m ained the sa me under the Dorinc o ag ree ment. There fore , rathe r than a materia l alteration to the underly ing contrac t, the Dorinco ag ree ment was only an amendment to the MGA Ag ree ment. Ba

rnes’ s second issue is over ruled.
G uar ant y A gr e e m e nt Sup ported by Consid erat ion

I n his third issue, Bar

nes a s s er t s the Guar anty Ag ree ment was not supported by consideration. Where parties enter into a g uara nty independe nt of the transac tion that initially cause s an oblig ation, consideration independent of the obligation must support t h e gu aranty
. Material P’ sh ips , I nc . v . V e ntu ra , 102 S.W .3d 252, 262 (Tex. App.—Houston [14t h Dist.] 2003, pet. denied) ; Gooch v . American Sling Co. , 902 S.W .2d 181, 185 (Tex. A pp.—For t Worth 1995, no writ). B arne s
c on te nd s th e Gu ara

nty Ag re e me nt i s une nforc e a ble fo r l a c k o f n e w c on sid e ratio n to su pp or t hi s independe nt gua

ranty beca use the Gua

ranty Ag ree ment was e x ecute d long a fter the transac tion that
cre ated the unde rly ing oblig ation had bee n consummated; that is, the Guar anty Agre em ent was neither contemplated nor executed at the time the MGA Ag ree ment was ne g otiated and L eg acy was appointed Old Amer ican’ s MGA.12 A written contra ct is presumed to be supported by consideration. Gooch v . American Sling Co. , 902 S.W .2d at 185. The burden is on Ba rnes to prove there was a

failure of consider ation. See id. Old Americ an, a c ounty mutual, require s reinsura nce to wor

k with an appoint ed MGA. See Tex
. I ns. Code Ann. § 4053.102 (West 2009). Old Amer ican a lso demands its MGA provide a g uaran t y o f the a g ency ’s per formanc e. When Hea rtland terminate d its reinsuranc e ag ree ment with Old America n and wa s relea sed fr om its guar anty of the bu s i ness produc ed by L eg acy under the MGA Ag ree ment, Ba rnes a nd the other co-ow ners of L eg acy wer e fa ced w ith the end of L eg acy ’s ability to produce new business. Old Ame rica n made the of

fer that, if L eg acy

found
a ne w re ins ur e r t o a ssume the re ins ur anc e ri sk s from inception and if it obtained per sonal g uara nties of the bu sin e ss t o r e pla c e the g ua ra nty g ive n by He art land , O ld A me ri c an w ou ld a llo w L e g a c y to continue wr iting new

business. Ba

rnes f ound a new reinsure r, Universa l Re , that was willing to enter into a reinsura

nce a g ree ment under w hich it ass u m ed t h e ri sks associated w ith the prog ram from inception. He a lso ex ecute d a g uara nty of L eg acy ’s per formanc e that applied r etroa ctively to the i n c e p t i o no f

t h e M G A A g r e e m e n tt o r e p l a c e t h e H e art l an d g u ar an t y. Parag raph F our o f the Gua ranty Ag ree ment (quoted a

bove) se ts forth the
con side ratio n B arn e s r e c e ive d in re tur n f or his g ua ra nty : th e a

pp oin tme nt o f L e g a c y

a s O ld Americ an’s MGA : (1) under the M GA Agreement, (2) under a ny amendments of the MGA Ag ree ment with Old America n, and (3) under a

ny subsequent ag ency ag ree ments of any ty pe. That is, in exchang e for Ba

rnes’ s g uara

nty , Old Americ an maintained and c ontinued its appointment of L e g a c y a s it s MG A und e r t

he MG A A g re e me nt a

nd un de r a ny futur e a me ndme nts to that A g re e me nt.13

L eg acy thus continued writing policies for O ld America n and ea rning commission d o l l ar s , and B ar n e s , a s a n o w n e r

o f L e g a c y , k e p t p ay in g h im s e lf p r o f it d is tr ib u ti o n s f

r o m t h e c o mm is s io n s . We find that, contra

ry to Ba rnes’ s contention, t he Guaranty Ag ree ment was supporte d by consideration. Ba rnes’ s third issue is overruled.
P r e ju dgm e nt Int e r e st

Ba rne s i n h is fourth issue argues the trial c ourt abused its discre tion in awarding common-law pr ejudg ment interest on the non- ar b itration contrac t damag es. He contends the Gu ara nty Ag re e me nt d oe s n ot p ro vid e fo r p re jud g me nt i nte re st a

nd that O ld A me ri c an f

a iled to
re qu e st an awa

rd of pr e jud g me nt i nte re st i n it s p e tit ion . H e fu rt he r a sse rt s p re

jud g me nt i nte re st i s
no t a uth or ize d b y

c ha pte r 3 04 of the Te xas F ina nc e Cod e a s th os e pr ov isi on s a pp ly on ly to p ro pe rt

y damag e, wrong ful death, a nd persona l injury

case s. See Tex. Fin. Code Ann. § 304.102 (West 2006). We a pply an abuse -of- discretion standa rd whe n revie wingthe trial cour t’s awa rd of prejudg ment interest. Morales v. M orales , 98 S.W .3d 343, 348 (Tex. App.—Corpus Christi 2003, pet. denied) . The standa rd of r eview f

or an a buse of discr etion is whet h er the trial cour t acted without refe renc e to any g uiding r

ules and princ iples, such that its ruling wa s arbitrary or
unrea sonable. Low v . H

e nr y , 221 S.W .3d 609, 614 (Tex. 2007); Cire v. Cummings , 134 S.W .3d 835, 838-39 (Te x . 2004).

Contrary to Ba rnes’ s assertion, Old Am erican re quested a n awa rd of pr ejudg ment interest in its p et i t i o n . The trial c ourt awa rded $21,721.45 in pre

judgme nt interest on the
co m m i s s i o nad

j u s t m en tam o u n t s fr o m De ce mb er 1 2 , 2 0 0 5 , t h e d at e t h e l aw s u i t wa s fi l ed , t h ro u gh the date judg ment was sig ned. The trial court also awa rded $30,599.76 in prejudg ment interest on14

the damag es under

the Dorinc o ag ree men t fr o m S eptember 19, 2006, the date Old Americ an’s third amende d petition c ontaining a claim for mone y owned by L eg acy under the Dorinco a g ree ment
wa s f ile d, un til the date jud g me nt w a s si g ne d. Th e se c a lc ulatio ns are c on sis te nt w iththe su pr e me
c ourt ’s ho ldi ngin Johnson & Huggins of Tex as, Inc. v . Kennec o Energy that, under c ommon law, prejudg ment in tere st beg ins to accr ue on the e arlier

of (1) 180 day s after

the date a

defe ndant
rec eives written notice of a claim or (2) the date su i t i s fi led

. 962 S.W .2d 507, 531 (Tex. 1998). Finding that t h e t ri al court’s or der in a war ding pr ejudg ment interest wa s neither a rbitrar y nor
unrea sonable, we overr

ule B arne s’s fourth issue.
P os tj udgm e nt Int e r e st

Ba rnes a lso arg ues th e t ri al cour t erre d by awa rding Old Americ an postjudg ment interest on the arbitration a war d. Prior to tr ial, an arbitration hearingwas he ld for cla ims between Old Americ an and Austin I ndemni t y . After the ar bitration panel issued its finding s and aw ard of $914.652.85, Ba

rnes a cknowledg ed his pe rsonal responsibility to r epay the claims. Old Americ an obtained an inter locutory partial-summar

y -judg ment order

in the amount of $899,625.85, which ref lected the amount of the awa rd, less $15,000 previously paid by Ba rnes. In the trial cour

t’s final order , it included postjudgment intere st on the $899,625.85 arbitration-awa rd amount, as we ll as on the commission adjustment damag es and the damag es under the Dorinc o ag ree ment. Arguing the trial court’ s awa

rd of postjudg ment interest on the ar bitration-awa

rd amount cha

ng ed the a rbitration
awa rd, Ba rnes asser ts the trial court e rre d in awar ding postjudg ment interest on the a war d amount of $899,625.85. This Court has held that courts are not fre e to simply chang e an a

rbitrator’ s awa

rd. Cooper v. Bushong , 1 0 S. W.3 d 2 0, 26 (T e x. Ap p. —A us tin 19 99 , p e t. d e nie d) . A t or a l argume nt,15

Old Americ an conc eded the trial court e rre d by awa rding postjudgment intere st on the arbitrationawa rd amount. F inding that the tr ial court wa s p re cluded f rom interfe ring with the arbitrator’s jurisd ic ti o n an d im

p e r mi s s ib ly mo d if

ie d th e ar b it r a to r ’ s d e c is io n , w e r e v e r s e th e p o rti o n o f the trial court’ s order awa

rding postjudgment int ere st on the ar bitration-awa

rd amount of $899,652.85 and r e n d e r

ju d g me n t t

h a t O ld A me r ic anta

k e n o p o s tj u d g me n t i n te r e s t o nth e ar b it r a ti o n - a war d amount of $899,652.85.
CO NC LU SION

We a ff ir m in pa rt the dis tr ic t c ourt ’s or de r a wa rd ingdama g e s, pr e

jud g me nt i nte re st,
and a tto rn e y s’ fe e s and re ve rs e that por tio n o f t he tr ia l c ourt ’s or de r a

wa rd ingpo stj ud g me nt i nte re st on the ar bitration-awa

rd amount of $899,652.85 and render judg ment that Old Americ an re cover no postjudgment intere st on the arbitration-awa rd amount of $899,652.85.

__________________________________________ David Pury ear , J ustice Be fore J ustices Patterson, Pury ear and He nson Affir med in part; Rever sed and Rende red in pa rt Filed: F ebrua

ry 26, 2010