Court Opinion

ID: 2857670
Source: CourtListenerOpinion
Date Created: 2015-09-05 18:34:16.162172+00
Date Added: 2024-06-11T09:59:10.280971
License: Public Domain

bailey v. brodhead                                                  

IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,

AT AUSTIN

 

NO. 3-91-562-CV

BILLY BAILEY,

	APPELLANT

vs.

EUGENE A. BRODHEAD, RECEIVER FOR 
NATIONAL COUNTY MUTUAL FIRE INSURANCE COMPANY,

	APPELLEE

 

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT

NO. 91-0082, HONORABLE W. JEANNE MEURER, JUDGE 

 

NO. 3-91-546-CV

LEE MOSES, JR. AND TITAN PERFORATORS, INC.

	APPELLANTS
vs.

EUGENE A. BRODHEAD, RECEIVER FOR 
NATIONAL COUNTY MUTUAL FIRE INSURANCE COMPANY,

	APPELLEE

 

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT

NO. 491-290, HONORABLE JOHN K. DIETZ, JUDGE 

 

	Billy Bailey and Lee Moses, Jr. (1) separately appeal unfavorable summary
judgments.  Because these two unrelated cases present the same issue, we have consolidated their
appeals into one opinion.  Each, by a single point of error, complains that the trial court erred in
ruling that his suit against Eugene A. Brodhead, the Receiver for National County Mutual Fire
Insurance Company ("National"), was time-barred because suit against the insured tortfeasor was
time-barred.  Both Bailey and Moses contend that they preserved their actions against the Receiver
by complying with the timing provisions of Article 21.28 of the Insurance Code, which controls
procedures for suing receivers.  Tex. Ins. Code Ann. art. 21.28 (West Supp. 1992). (2)  The issue
we must decide is whether filing a timely suit against the insured of an insurer in receivership is
a necessary precondition to a third-party claimant's suit against a receiver.  We hold that the
timely filing of a claim with a receiver preserves the claimant's subsequent suit against the
receiver on a rejected claim, whether or not the claimant also sues the insured.

BACKGROUND

	The actions before us arose from automobile collisions involving National's
insureds.  Some date-specific facts are needed to clarify the relationship between the potential
causes of action against the insureds and the claims against the Receiver.  Bailey's cause of action
against National's insured accrued on October 14, 1988.  Less than a year later, National went
into receivership.  The Receiver notified Bailey of his right to file a claim, see § 3(a), and Bailey
timely filed with the Receiver on March 1, 1990.  On October 22, 1991, the Receiver rejected
Bailey's claim and informed him that, pursuant to section 3(h), Bailey could file suit on the claim
within three months of the notice of rejection.  On January 4, 1991, Bailey filed his suit against
the Receiver; by this time, however, the two-year statute of limitations barred his cause of action
against National's insured.
	The details of Moses's suit are similar.  Moses's claim against the Receiver stems
from an accident that occurred on August 16, 1988, involving another of National's insureds. 
Moses presented his claim in March 1990; the Receiver rejected it on August 8, 1990.  Moses
sued the Receiver on September 24, 1990, thereby complying with the three-month deadline
imposed by section 3(h).  Like Bailey, Moses never sued National's insured and the statute of
limitations for that cause had run before this suit was filed.  However, neither Bailey's nor
Moses's suit against the insured was time-barred when they filed their claims with the Receiver.
	The Receiver filed a motion for summary judgment in each of the two separate
suits, denying liability on the ground that neither Bailey nor Moses retained a viable cause of
action against National's insureds at the time suit was filed.  Each trial court granted the
Receiver's motion.  Bailey and Moses appealed to this Court.  The causes were consolidated for
oral argument and the basis for our decisions in both appeals is set forth in this single opinion.

DISCUSSION

	Article 21.28 of the Texas Insurance Code governs claims and suits against
receivers appointed for impaired insurers.  Section 3(e) empowers any person with a cause of
action against an insured of an impaired insurer under a liability insurance policy to file a claim
with the receiver, even if the claim is unliquidated or undetermined.  Section 3(e) further provides
in pertinent part that "[S]uch [third-party] claim may be approved . . . if it may be reasonably
inferred from the proof presented upon such claim that such person would be able to obtain a
judgment upon such cause of action against such insured."  Id. (emphasis added).
	A receiver may approve a claim only if the proof reasonably suggests that the
claimant would be able to obtain a judgment against the insured.  We interpret this language to
mean that at the time the claimant files a claim against the receiver, the cause of action against the
insured must not be time-barred.  Should a receiver reject a claim despite the claimant's proof of
a viable cause of action against the insured, the claimant must bring suit against the receiver
within three months after service of the rejection notice; otherwise the rejection is final and
unreviewable.  § 3(h). 
	The Receiver contends that because his liability derives wholly from the insured's,
he may assert any affirmative defense that would be available to an insured at the time suit is
brought against a receiver.  We disagree. 
	From our reading of these sections, we believe that the timely filing of a claim with
a receiver guarantees the claimant's subsequent right to sue on the rejected claim within the three-month time limit.  We hold that the timely filing of a claim with a receiver fixes the relative rights
of the claimant and the receiver for purposes of any later judicial determination of whether the
claim, when presented, was time-barred.  Thus, the claimant's showing in court that his claim
was, when presented to the receiver, supported by a viable cause against the insured renders the
subsequent expiration of the statute of limitations against the insured irrelevant to whether the
claimant can prevail against the receiver.
	The filing of a claim with a receiver is a prerequisite to suing on a claim against
the insolvent insurer.  Pope v. Wheeler, 301 S.W.2d 678, 680 (Tex. Civ. App.--Galveston 1957,
writ dism'd).  However, nothing in Article 21.28 or the cases interpreting it requires a separate
action against an insured as a prerequisite to suit against the receiver.  The Receiver invites us to
impose a duty on claimants to file a separate suit against an insured solely to toll the statute of
limitations against a receiver.  This we decline to do.
	Though the statute does not prohibit dual suits, it certainly does not mandate them. 
We note that a claimant need not secure a judgment against the insured in order to prevail in a suit
against a receiver.  See Langdeau v. Pittman, 337 S.W.2d 343, 355 (Tex. Civ. App.--Austin 1960,
writ ref'd n.r.e.) (at time that appellate court affirmed judgment against receiver, claimants had
yet to secure judgment against insureds).  Furthermore, even were such a judgment against an
insured taken after commencement of the delinquency proceedings, it would be inadmissible in
a later suit as evidence of either the insured's liability or the amount of damages.  See § 3(e); see
also Langdeau, 337 S.W.2d at 347.  
	We find no justification for construing Article 21.28 to require a claimant to
perform the potentially useless act of suing an insured.  Since a claimant need not obtain a

judgment against the insured in order to prevail against a receiver, and since such a judgment
could not be evidence of liability in a suit against a receiver, only two reasons could exist for a
claimant to sue the insured:  (1) to preserve a right of action against an insured for damages
beyond the policy limits, and (2) to toll the statute of limitations so the claimant can proceed in
a wholly separate suit against a receiver.  Naturally, the law does not compel the former.  Nor
do we see any reason to demand the latter, the results of which would be useless clogging of
dockets and imposition of unnecessary expense for both claimants and insureds.
	In addition to his derivative liability argument, the Receiver asserts that the policies
underlying the statute of limitations support the summary judgments granted below.  Limitations
statutes protect defendants and the courts from having to deal with cases in which the search for
truth may be seriously impaired by the loss of evidence, whether by death or disappearance of
witnesses, fading memories, disappearance of documents or otherwise.  Murray v. San Jacinto
Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990).  The purpose of a statute of limitations is to
establish a point of repose and to terminate stale claims.  Id.  Our holding in no way undermines
these considerations.
	Requiring a claimant to file a claim with a receiver within the limitations period
governing the underlying cause of action insures the timeliness of claims.  The search for truth
begins when the claim is filed; a receiver then has every incentive to expeditiously gather and
consider all the facts needed to approve or reject the claim.  This same data will be available to
a receiver defending a suit on a rejected claim.
	Finally, because no Texas court has directly addressed this issue, the Receiver
offers as authority for his position two Florida cases that have considered the question now before
us.  We find these cases unpersuasive.  In the first, Peoples v. Florida Insurance Guaranty Ass'n,
Inc., 313 So. 2d 40 (Fla. Dist. Ct. App. 1975), cert. denied, 327 So. 2d 34 (Fla. 1976), the opinion
nowhere indicates whether the claimants actually filed their claim with the receiver while they still
retained a cause of action against the insured.  The second case, Troso v. Florida Insurance
Guaranty Ass'n, Inc., 538 So. 2d 103 (Fla. Dist. Ct. App. 1989), is distinguishable due to
significant differences between Texas and Florida procedure. (3)

CONCLUSION

	Based on our reading of Article 21.28, we find that Bailey and Moses properly
preserved their right to sue the Receiver on their rejected claims.  Therefore, we reverse the
judgments of the trial courts and remand the causes to those courts for trials on the merits.

  						Bea Ann Smith, Justice
[Before Justices Powers, Aboussie, and B. A. Smith]
Reversed and Remanded
Filed:   October 7, 1992
[Publish]
1.        Titan Perforators, Inc., the owner of the vehicle that Moses was driving, also
appeals.  For simplicity's sake we will use only the name "Moses" when referring to both
appellants.
2.        All further citations of statutory section numbers will refer to Tex. Ins. Code Ann.
art. 21.28 unless otherwise noted.
3.        The Troso court dismissed the claimants' suit against the receiver because they had
failed to timely implead the insurer in the claimants' action against the insured.  Texas law
generally prohibits joinder of a liability insurer in an action against the insured.  Tex. R. Civ.
P. 51(b); Langdeau v. Pittman, 337 S.W.2d at 355.