Opinion ID: 1502547
Heading Depth: 1
Heading Rank: 4

Heading: attorney's fees under art. 2226

Text: As a basis for awarding attorney's fees to Childress, the court of appeals held that this suit was founded on an oral or written contract and that Childress, as the prevailing parties, were entitled to attorney's fees in the amount stipulated by the parties. Art. 2226 does not apply to contracts of certain insurors who are identified in those sections of the Insurance Code enumerated in Art. 2226. Dairyland is a county mutual insurance company and as such is not one of the insurors exempt from the provision of Art. 2226. See Tex.Ins.Code Ann. art. 17.22. Therefore, it is not exempt from a claim for attorney's fees pursuant to Art. 2226. Dairyland further contends that Childress' suit is one to enforce a judgment and therefore is not founded on an oral or written contract. It is true that Childress were required to obtain a judgment against Booth prior to bringing an action against Dairyland. This is necessary because the insurance contract provides that Dairyland would pay only such sums as the insured was legally obligated to pay; therefore, it was necessary for Childress to secure a judgment to show that the insuror was legally obligated to pay under its contract. The very basis of this suit was the obligation of Dairyland to pay Childress' damages as agreed by Dairyland in its insurance contract with Booth. Under the laws of Texas, a third person not a party to a contract will still have a cause of action to enforce the contract if the contract was made for that person's benefit. Quilter v. Wendland, 403 S.W.2d 335, 337 (Tex.1966); Knox v. Ball, 144 Tex. 402, 191 S.W.2d 17, 21 (1946). It would follow logically that only a third party beneficiary who could enforce a contract to which she is not a party would also be able to sue for attorney's fees under the contract provision of Art. 2226 so long as such a claim was not excluded by the named statutory exemptions. Thus the key to determining Childress' eligibility for an attorney's fee award here requires an analysis of their possible standing as third party beneficiaries to the Booth-Dairyland automobile liability insurance contract. There is no claim that either Dairyland or Booth contemplated that Childress would become claimants of the insurance policy in question. This fact might be determinative of the question but for the statutory scheme that made it incumbent upon Booth, as a driver, to have liability insurance in the first place. There is no question in our minds that the compulsory insurance requirement of the Texas motor vehicle safety laws implies that all potential claimants for damages resulting from automobile accidents are intended as beneficiaries of the statutorily required automobile liability coverage. See the Texas Motor Vehicle Safety-Responsibility Act, Tex.Rev.Civ. Stat.Ann. art. 6701h, §§ 1(10), 1A, 2(b), 5 and 32(f) (setting out the definitions and mandatory minimum liability requirements for automobile insurance as well as the fines and penal sanctions for failure to have general automobile liability coverage.) Art. 6701h states that all drivers must be able to show proof of sufficient financial responsibility to satisfy the minimum liability coverage specified by § 5 of the act. Proof of financial responsibility is defined by the statute as [p]roof of ability to respond to damages for liability on account of [automobile] accidents .... Art. 6701h, § 1(10). It is a matter of simple logic to infer that the statutory obligation holding an insured liable for damages in automobile accidents also makes claimants for such damages the intended beneficiaries of an insurance policy purchased to satisfy the statutory requirement. Art. 6701h in effect creates a class of legal beneficiaries whose members are implied into all automobile insurance contracts as intended beneficiaries by operation of law. For discussion of the incorporation of statutory mandates into contracts by operation of law, see Kierstead v. City of San Antonio, 643 S.W.2d 118, 121 (Tex.1982); Langever v. Miller, 124 Tex. 80, 76 S.W.2d 1025, 1026-1027 (1934). There is no question that Childress, as claimants for damages, are the legally intended beneficiaries of the Booth-Dairyland insurance contract. As such, they are entitled to bring an action on this contract for damages. Quilter, supra; Knox, supra. See also Appleman, Insurance Law and Practice, § 1091 (1981); Restatement (Second) of Contracts, § 302(1)(b) (1979). We thus conclude that the Childress' standing to enforce the Booth-Dairyland contract for redress of their damages also entitles them to seek attorney's fees under the Art. 2226 provision of fees for actions founded on contracts. Ibid. We hold that this action was based upon a written contract and therefore Childress, as the prevailing parties, were entitled to recover attorney's fees. The judgment of the court of appeals is affirmed. Dissenting opinion by ROBERTSON, J., in which BARROW and CAMPBELL, JJ., join.