NO. 07-07-0351-CV

IN THE COURT OF APPEALS

FOR THE SEVENTH DISTRICT OF TEXAS

AT AMARILLO

PANEL D

MARCH 5, 2009

______________________________

GAILIA TATE, APPELLANT

V.

MIGUEL HERNANDEZ, APPELLEE

_________________________________

FROM THE 99 DISTRICT COURT OF LUBBOCK COUNTY; TH

NO. 2006-533,790; HONORABLE BILL SOWDER, JUDGE

_______________________________

Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.

Concurring Opinion

I agree with the Court’s rendition of judgment that appellee Miguel Hernandez take

nothing but find myself unable to join its opinion. I disagree with the Court’s disposition of

the first and second issues presented by appellant Gailia Tate. For the reasons

expressed, I would sustain Tate’s first issue and not reach the second issue. 

In its disposition of Tate’s first issue, the Court holds that a discharge in bankruptcy

of liability for medical expenses is a collateral benefit within the collateral source rule.

Hence, through discharge in bankruptcy a debtor may be relieved of liability for medical
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expenses caused by a tortfeasor and in an action against the tortfeasor seek a recovery

of the discharged expenses. I would hold a discharge in bankruptcy of personal liability for

medical expenses is not a collateral benefit for application of the collateral source rule.

Discussion

The one-satisfaction rule limits a plaintiff “to but one satisfaction for the injuries

sustained by him.” Bradshaw v. Baylor Univ., 126 Tex. 99, 84 S.W.2d 703, 705 (1935);

Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000). Thus allowing recovery

in a tort action of a compensatory damage element paid by a collateral source,

independent of the defendant, has the appearance of a forbidden double recovery. But

“if payment is within the collateral source rule, the principle forbidding more than one

recovery for the same loss is not applicable.” Brown v. American Transfer & Storage Co.,

601 S.W.2d 931, 936 (Tex. 1980); Triumph Trucking, Inc., v. Southern Corporate Ins.

Managers, Inc., 226 S.W.3d 466, 471 (Tex.App.–Houston [1st Dist.] 2006, pet. denied).

The collateral source rule provides:

[T]he fact that an injured person receives from a collateral source payments

which may have some tendency to mitigate the consequences of the injury

which he otherwise would have suffered may not be taken into consideration

in assessing the damages or other recovery to which the claimant may be

entitled.

Traders & General Ins. Co. v. Reed, 376 S.W.2d 591, 593 (Tex.Civ.App.–Corpus Christi

1964, writ ref’d n.r.e.); accord Sweep v. Lear Jet Corp., 412 F.2d 457, 459 (5th Cir. 1969)

(applying Texas law); City of Fort Worth v. Barlow, 313 S.W.2d 906, 911
 The dual nature of the collateral source rule may be explained: 1

The substantive component is a rule of damages. This component bars a

defendant from reducing the plaintiff’s compensatory award by the amount

the plaintiff received from the collateral source. The evidentiary component

bars admission of evidence of the existence of the collateral source or the

receipt of benefits. The concern here is that the trier of fact may use that

evidence improperly to deny the plaintiff the full recovery to which he is

entitled.

Arthur v. Catour, 833 N.E.2d 847, 852 (Ill. 2005) (quoting James M. Fischer, Understanding

Remedies § 12(a) (1999)).

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(Tex.Civ.App.–Fort Worth 1958, writ ref’d n.r.e.) (“[n]o abatement of damages on the

ground of partial compensation can properly be made where the evidence shows funds

have been received from a collateral source, independent of the defendant”). “The

collateral source rule is both a rule of evidence and damages.” Johnson v. Dallas County, 1

195 S.W.3d 853, 855 (Tex. App.–Dallas 2006, no pet.); Taylor v. American Fabritech, Inc.,

132 S.W.3d 613, 626 (Tex. App.–Houston [14th Dist.] 2004, pet. denied). Its focal point

is “whether a tort victim has received benefits from a collateral source that cannot be used

to reduce the amount of damages owed by a tortfeasor.” Acuar v. Letourneau, 260 Va.

180, 531 S.E.2d 316, 322 (Va. 2000). Underlying the collateral source rule is the equitable

notion that if there must be a windfall “the injured party is more justly entitled to it than the

wrongdoer.” Sweep, 412 F.2d at 459. 

The collateral source rule has historically been applied to situations in which a third

party acts for the benefit of the plaintiff. See, e.g., Brown, 601 S.W.2d at 934-36

(insurance); Twin City Fire Insurance Company v. Gibson, 488 S.W.2d 565, 571

(Tex.Civ.App.–Amarillo 1972, writ ref’d n.r.e.) (government benefits); Barlow, 313 S.W.2d
 Illustrating this precept are cases in which the tortfeasor is the victim’s employer 2

and has made payments under an employee benefit plan. If the benefit plan is

characterized a fringe benefit of the employee then it is classified a collateral source as to

the employer. Conversely, if the employer purchased the plan primarily for its protection,

then the plan is not a collateral source as to the employer. Taylor, 132 S.W.3d at 626 &

626 n.41. Cf. Johnson, 195 S.W.3d at 855-56 (noting no allegation that employer was the

tortfeasor for application of collateral source rule).

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at 911 (gratuitous healthcare services by Veterans Administration). See also Restatement

(Second) of Torts § 920A, cmt. c (“rule that collateral benefits are not subtracted from the

plaintiff’s recovery applies to the following types of benefits”: insurance policies,

employment benefits, gratuities, and social legislation benefits). Indeed, “collateral source”

speaks of an additional party. But it is not so much the source of funds but the character

of the benefits received that determines the application of the collateral source rule. LeeWright, Inc. v. Hall, 840 S.W.2d 572, 582 (Tex.App.–Houston [1st Dist.] 1992, no writ)

(citing Phillips v. Western Co. of N. Am., 953 F.2d 923, 929 (5th Cir. 1992)). 

2

Application of the collateral source rule has historically benefitted those with

foresight to acquire insurance in advance of injury or at least in advance of treatment.

Brown, 601 S.W.2d at 934-35; Finger v. Southern Refrigeration Servs., Inc., 881 S.W.2d

890, 893-94 (Tex.App.–Houston [1st Dist.] 1994, writ denied); Payne v. Wyeth

Pharmaceuticals, Inc., No. 2:08cv119, 2008 WL 4890760, at *3, 2008 U.S. Dist. Lexis

91849, at *11, (E.D. Va. November 12, 2008). See generally 5 James B. Sales and J.

Hadley Edgar, Texas Torts and Remedies § 88.01[1] (2008) (where collateral source is an

insurer, it would be “particularly inappropriate” for a tortfeasor to benefit from the victim’s

foresight in procuring an insurance policy to which the tortfeasor was not a party). Even

gratuitous medical services delivered because, for example, a person is a veteran are
 From antiquity in this country the collateral source rule has concerned benefits, 3

such as insurance, acquired before the fact. Of English common law origin, the collateral

source rule entered American jurisprudence in The Propeller Monticello v. Mollison, 58

U.S. (17 How.) 152, 15 L.Ed. 68 (1854). 

“Monticello,” a steamship, and “Northwestern,” a schooner, collided on Lake

Huron, causing “Northwestern” to sink with its cargo of salt. Mollison, the

owner of “Northwestern,” was insured, and his insurer compensated him in

full for his loss. When Mollison sued the steamship, its owner raised as a

defense that Mollison had already been fully compensated. The United

States Supreme Court held that the insurance contract was “in the nature of

a wager between third parties, with which the trespasser has no concern.

The insurer does not stand in the relation of a joint trespasser, so that the

satisfaction accepted from him shall be a release of others.” Id. at 155. The

term “collateral source” derives from language used in Harding v. Town of

Townsend, 43 Vt. 536 [538] (1871) (“The policy of insurance is collateral to

the remedy against the defendant, and was procured solely by the plaintiff

and at his expense, and to the procurement of which the defendant was in

no way contributory”). 

Baptist Healthcare Sys. v. Miller, 177 S.W.3d 676, 687 (Ky. 2005). Harding found a place

in the early development of the collateral source rule in Texas. See Texas & Pacific Ry.

Co. v. Levi & Bro., 59 Tex. 674, 676 (1883) (quoting Harding, 43 Vt. at 538). 

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rendered based on status at the time of treatment. Walker v. Long, 57 Va. Cir. 419, 420

(Va. Cir. Ct. 1993). The collateral source rule furthers public policies like encouraging

insurance coverage and allowing employee and governmental benefits to reach their

intended beneficiaries in full. The rule thus may be said to reward a plaintiff’s foresight or

status prior to injury. Payne, 2008 WL 4890760, at *4, 2008 U.S. Dist. Lexis 91849, at 3

*12.

Bankruptcy fits neither of the historical circumstances. In bankruptcy, there is no

third party rendering a bargained-for or gratuitous benefit. Oliver v. Heritage Mut. Ins. Co.,

505 N.W.2d 452, 461 (Wis. Ct. App. 1993). Accord Olariu v. Marrero, 549 S.E.2d 121, 123

(Ga. Ct. App. 2001) (“[T]he effects of a bankruptcy do not constitute a ‘collateral source’
 A discharge in bankruptcy “operates as an injunction against the commencement 4

or continuation of an action, the employment of process, or an act, to collect, recover or

offset any such debt as a personal liability of the debtor, whether or not discharge of such

debt is waived....” 11 U.S.C.A. § 524(a)(2) (West 2004). 

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at all”). Rather bankruptcy functions to “relieve the honest debtor from the weight of

oppressive indebtedness and permit him to start afresh free from the obligations and

responsibilities consequent upon business misfortunes.” Williams v. United States Fidelity

& Guar. Co., 236 U.S. 549, 554-55, 35 S.Ct. 289, 290, 59 L.Ed. 713 (1915) (Bankruptcy

Act). Nor does bankruptcy reward the plaintiff’s foresight or favored status. If it may be

said that the fresh start of a voluntary bankruptcy discharge renders a windfall for the

debtor by permanently enjoining collection of certain creditor claims, the windfall exists 4

because of an express decision made by the debtor after incurring the discharged liability.

See Payne, 2008 WL 4890760, at *4, 2008 U.S. Dist. Lexis 91849, at *11-12. 

As the Wisconsin court stated in Oliver, the collateral source rule properly applies

in cases where “a ‘benefit’ is bestowed by a ‘third party’ and this third party benefit creates

the windfall.” Oliver, 505 N.W.2d at 461. The rule, however, properly has no application

where a plaintiff creates the windfall by obtaining a discharge in bankruptcy of medical

expenses caused by the injury-producing occurrence. See id.; see also Payne, 2008 WL

4890760, at *5, 2008 U.S. Dist Lexis 91849, at *14.

Additionally, recognizing discharge in bankruptcy as a collateral source benefit may

actually encourage bankruptcy by offering a post-treatment means of discharging personal

liability for expenses while leaving available a potential full recovery of damages. Oliver,
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505 N.W.2d at 461-62. Such a result cannot be favored by public policy. Olariu, 549

S.E.2d at 123-24.

For these reasons, I would find the collateral source rule inapplicable to the medical

expenses incurred by Hernandez but discharged in bankruptcy. I would, therefore, sustain

Tate’s first issue. It would be unnecessary to reach Tate’s remaining issues. Tex. R. App.

P. 47.1.

James T. Campbell

Justice