Opinion ID: 2451249
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Heading: the suit as to the unpaid portion of the former judgment

Text: Since the case is being remanded to the trial court and the plaintiff Hernandez is seeking a declaratory judgment with respect to the liability of Great American on that portion of the judgment against Hernandez which has not been paid, we think it proper to consider whether the prepayment rule prohibits that relief. Since we consider the tort complete when liability is fixed and find no justification for continuing the loss indemnity limitation on suits under Stowers, the holding of Universal Automobile Ins. Co. v. Culberson, supra, is overruled. We need make no decision as to whether a declaratory judgment would be available to Hernandez if other relief were unavailable. The particular terms of the insurance policy which Universal Automobile Ins. Co. issued to Culberson were held by the court to create an indemnity rather than a liability contract. 86 S.W.2d 730. It followed that as to the amount of the Witt judgment within the policy limits, the insured Culberson could not sue Universal on the policy without first paying the Witt judgment. This may bear on the explanation of why the court applied the same prepayment rule when it came to the tort liability of Universal to Culberson. The traditional rule of strict indemnity requires the indemnitor to reimburse only actual loss and not to discharge the liability of the indemnitee. 41 Am. Jur.2d Indemnity §§ 28 et seq. Chief Justice Hemphill criticized this rule in 1857 in Pope v. Hays, 19 Tex. 375, but it is a firmly established part of the law of indemnity contracts. It is consistent with the favoritism of the law for guarantors and indemnitors. McKnight v. Virginia Mirror Co., 463 S.W.2d 428 (Tex.1971). It has been said to follow the maxim: As a man binds himself, so shall he be bound; and thus one who agrees to indemnify against loss should not be required to pay more than what is actually lost. Russell v. Lemons, 205 S.W.2d 629, 631 (Tex.Civ.App. 1947, writ ref'd, n.r.e.). This strict indemnity limitation is inconsistent with the law of tort liability where the injured party is entitled to recover, as nearly as possible, compensation for the damages he suffers. This includes his expenses, past and future, paid or unpaid, to which he has been or will be put as a consequence of the tort. He need not prove payment of his medical bills, for example, to include them within his damages for which the tortfeasor is liable. A tortfeasor is given more relief against his joint tortfeasor than the damaged insured is given against his tortfeasor under the Culberson rule. One tortfeasor may sue the other for indemnity or contribution so as to obtain a determination of liability and a judgment over against the other for all or a portion of what the first one is forced to pay. Renfro Drug Co. v. Lewis, 149 Tex. 507, 235 S.W.2d 609 (1951); Union Bus Lines v. Byrd, 142 Tex. 257, 177 S.W.2d 774 (1944); Dallas Ry. & Terminal Co. v. Harmon, 200 S.W. 2d 854 (Tex.Civ.App.1947, writ ref'd); Lottman v. Cuilla, 288 S.W. 123 (Tex. Com.App.1926); Barton v. Farmers' State Bank, 276 S.W. 177 (Tex.Com.App.1925). In the case of Atkins v. Crosland, 417 S.W.2d 150 (Tex.1967), the plaintiff sued an accountant alleging negligence in the preparation of plaintiff's income tax returns which resulted in a larger tax liability. The trial court granted a summary judgment for the defendant accountant on the ground that the acts of negligence occurred more than two years prior to commencement of the suit. In this court the plaintiff contended that limitations did not begin to run until he paid the excess taxes; in the alternative he argued that limitations began at the time the excess tax was assessed against plaintiff by the Commissioner of Internal Revenue. This court agreed with the plaintiff that the tort was completed, the cause of action accrued, and limitations began to run when the tax deficiency was assessed. The payment of the taxes was not discussed. There should be no difference between the rule as to recoverable damages for Atkins and for Hernandez. They both alleged tort actions grounded on negligence. In the present suit, the insurance policy is relevant only in that it is the source of Great American's duty to use care in the defense of Hernandez against any judgment for any amount. As to Baucum, Hernandez was a tortfeasor. In the present suit Hernandez is not a tortfeasor; he contends that he has suffered a judgment in the amount of $56,636 because of the negligence of Great American. The judgment injures Hernandez while it remains unpaid. His credit is affected. A lien attaches to his land. His non-exempt property is constantly subject to sudden execution and forced sale. He is entitled to relief from the harm if it is the fault of the tortfeasor. It is suggested that we should avoid a rule that permits the insured to collect his judgment against the insurer without then paying the injured person. We assume that the holder of the former judgment would ordinarily be a party in the second suit or move to protect his interests prior to payment of the second judgment to the insured. If the judgment rule permits the possibility of the injured person not receiving full payment of the first judgment, so does the prepayment rule. The possibility of windfall to the insured under the judgment rule should be weighed alongside the windfall to the insurer under the prepayment rule. If the insured is too poor to pay the first judgment, it is the insurer responsible for the judgment who escapes with what he should pay. Furthermore, the Stowers action lies to repair the harm to the insured. The tort of the insurer in mismanaging the defense of the insured in the first case is harmful to the insured alone. The holder of the former judgment benefitted from the tort to the extent of the harm to the insured. When we decide the time the cause of action accrues, we also decide the period of limitations. Assuming no concealment of the act of negligence and no tolling of the statute, limitations will bar the suit two years after the excess judgment becomes final. The insured who knows of the rejected offer, for example, but who relies on the attorney retained by the insurer, may let two years go by before he hears of what we call the Stowers rule. This is a possibility, although the word ordinarily reaches the insured from the holder of the excess judgment. In any event, it is preferable to put a limit on the time within which an action for tort may be commenced. Under the prepayment rule, so long as the insured avoids execution on the former judgment, he controls the time of his Stowers suit. If it serves him to await the absence of a particular witness, he simply delays making a payment until he has his advantage. Again, we think the consequences of the judgment rule to be preferable. Virtually everything that has been written on this subject in the past fifteen years has favored the judgment rule over the prepayment rule. E.g., Ammerman v. Farmer's Insurance Exchange, 22 Utah 2d 187, 450 P.2d 460 (1969); Henegan v. Merchants Mutual Insurance Co., 31 A.D. 2d 12, 294 N.Y.S.2d 547 (1968); Gray v. Nationwide Mutual Ins. Co., 422 Pa. 500, 223 A.2d 8 (1966); Southern Farm Bureau Casualty Insurance Company v. Mitchell, 312 F.2d 485 (8th Cir. 1963); Sweeten v. National Mutual Insurance Company of D.C., 233 Md. 52, 194 A.2d 817 (1963); Alabama Farm Bureau Mutual Casualty Insurance Company v. Dalrymple, 270 Ala. 119, 116 So.2d 924 (1959); Comment, Prepayment and Assignment Under the Texas Stowers Doctrine, 2 Texas Tech.L.Rev. 69 (1970); Howell, Stowers Doctrine in Texas, 32 Tex.B.J. 376 (1969). We hold that Hernandez is entitled to sue for relief as to the unpaid portion of the former judgment as well as for the $10,500 which has been paid. It also follows that the right of action for the unpaid judgment debt of one in the position of Hernandez now exists, and limitations commences to run on the date of the delivery of this opinion. Any cause of action by one so situated arising in the future will have limitations commence with the date of the final judgment against the insured. The judgment of the lower courts is reversed and the case is remanded to the trial court.