Court Opinion

ID: 9647001
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:20:23.315403+00
Date Added: 2024-06-11T18:11:44.697284
License: Public Domain

PEEPLES, Justice,
dissenting.
In this Stowers1 case the majority has forgotten that actual damages are to com*37pensate, and that a Stowers suit lies to redress harm to the insured alone. I dissent from the majority’s holdings that (1) the covenant not to execute did not extinguish the Stowers cause of action, (2) APIE was not entitled to either a percentage reduction or a dollar offset for a co-defendant’s settlement, and (3) the covenant not to execute and the co-defendant’s payment of $2.0 million were properly excluded from evidence and kept hidden from the jury.
The insured, plaintiff Garcia, has no damages to recover because Cardenas, the original plaintiff, gave him a covenant not to execute on his assets. A Stowers case lies to repair harm to the insured alone — not the original plaintiff — and the covenant not to execute removes the threat that the underlying judgment posed to Garcia.
Apart from the covenant not to execute — which eliminates the insured’s damages — the real plaintiffs have been compensated for most of the original judgment, which should reduce their recovery. In the underlying malpractice case the plaintiffs were awarded $2,235 million in damages. After they filed their Stowers case but before it was tried a co-defendant (ICA) paid them $2.0 million. The trial court in the Stowers case awarded them another $1,331 million. The majority now holds that the trial court’s figure was wrong, and that the plaintiffs are entitled to an additional $2.0 million instead of $1,331 million. If the plaintiffs had not agreed to a liability cap, says the majority, they would be entitled to $3,167 million above and beyond the $2.0 million that they have already received — a total recovery of $5,167 million even though the trier of fact in the underlying malpractice case found that their damages were $2,235 million. Plaintiffs ask this court to render judgment for additional damages amounting to $7,682,856.30.
As if all this were not enough, the majority affirms the trial court’s refusal to let APIE tell the jury about either the $2.0 million payment or the covenant not to execute. Both kinds of evidence bore directly upon the issue of how much damage Garcia had really sustained. But the trial court kept the jury from knowing about this evidence. Thus blindfolded, the jury awarded $2,235 million in damages, the exact amount of the underlying judgment, most ($2.0 million) of which had been paid in cash and which does not damage Garcia or threaten his assets.
I. FACTS
The malpractice case. The details of this case are found in the majority opinion, and I highlight only the salient facts that pertain to the issues herein. Cardenas brought a malpractice suit against Dr. Garcia in 1984. Because Garcia’s treatment of Cardenas spanned more than one policy period, Garcia had insurance coverage with two carriers — ICA and APIE — which had a combined liability coverage of $1.6 million. The two carriers hired attorney Ross Crossland to defend Garcia. Shortly before trial — on July 24, 1985 — APIE announced that Cardenas’ live pleading did not allege negligence during a period that APIE had coverage, and that it would therefore no longer defend him. Crossland continued to represent Garcia.2 Cardenas promptly amended and alleged negligence during APIE’s coverage, but APIE nevertheless did not reenter the defense.3
*38On July 29, 1985 two significant events occurred: (1) Garcia assigned all his rights against both of his insurance companies (ICA and APIE) to Cardenas, and Cardenas covenanted not to execute against any of Garcia’s assets, with the exception of his insurance policies,4 and (2) the parties waived a jury and proceeded to trial of the malpractice case. The case was not settled within the combined insurance coverage of $1.6 million, and the trial resulted in a judgment (signed on August 30, 1985) against Garcia for $2,235 million.
The Stowers case. On August 8, 1985, Garcia brought a Stowers suit against APIE and ICA that included claims under the DTPA and article 21.21 of the insurance code. In June 1986 ICA settled with Cardenas for $2.0 million. In April-May 1987 APIE paid Cardenas $500,000 in return for a six-month continuance, an agreement that the plaintiffs would oppose a separate trial or severance sought by any of the defense attorneys who had been sued, and a liability cap of $2.0 million in the Stowers case. The jury answered the liability issues in favor of Garcia and assessed damages at $2,235 million. The jury found that 16% of Garcia’s damages occurred during APIE’s coverage and 84% during ICA’s coverage. The court rendered judgment for $1,331 million. Garcia seeks to have that amount increased to $7,682 million, and APIE seeks to have it eliminated or reduced.
Thus, in the malpractice case Garcia suffered a judgment for $2,235 million, which was $.635 million in excess of his coverage. Cardenas has been paid $2.0 million. The holder of the judgment, Cardenas, has agreed never to execute against any of his assets. Yet the majority holds that Cardenas (by assignment, asserting Garcia’s rights) is entitled to an additional $2.0 million.
II. THE EFFECT OF THE COVENANT NOT TO EXECUTE
Did the covenant not to execute eliminate damages to the insured under Stowers? I think that it did. The majority does not come to grips with a fundamental principle of Stowers litigation: the cause of action lies not to fund the malpractice judgment but to Repair the harm that the excess judgment causes the insured. Of course a Stowers recovery does end up satisfying the underlying judgment because the insured pays the money to the original plaintiff. But the reason for the Stowers action is to eliminate the harm that the insured *39suffers because of his insurer’s failure to settle the case. In this case the covenant not to execute has removed $2,235 million worth of harm to Garcia. The agreement protects Garcia and his assets from the malpractice judgment.
Under these circumstances I would hold that Garcia cannot recover the excess of the malpractice judgment over his insurance coverage. The plaintiff in the original case cannot collect the excess judgment directly from the insured's insurer. Whatley v. City of Dallas, 758 S.W.2d 301, 307, 310 (Tex.App.—Dallas 1988, writ denied); Becker v. Allstate Ins. Co., 678 S.W.2d 561, 561 (Tex.App.—Houston [14th Dist.] 1984, writ ref'd, n.r.e.); Samford v. Allstate Ins. Co., 529 S.W.2d 84, 85-87 (Tex.Civ.App.—Corpus Christi 1975, writ ref’d n.r.e.); Cook v. Superior Ins. Co., 476 S.W.2d 363, 364-65 (Tex.Civ.App.—Beaumont 1972, writ ref’d n.r.e.). In other words, Cardenas had no right to collect the excess part of the malpractice judgment directly from APIE or ICA. She could collect the judgment up to the policy limits of $1.6 million from the insurers. But she had no right to sue APIE or ICA for the excess. Otherwise she would have sued APIE directly and would not have bothered to get an assignment from Garcia. If Garcia had refused to assign her his Stowers rights from his insurance companies, she would have been limited to collecting the judgment excess ($.635 million) against his nonexempt assets.
The only person who can bring suit against the insurance company and collect on the excess judgment is Garcia, because the Stowers suit lies to redress the harm that the judgment causes him. It does not lie to fund the underlying judgment. A Stowers suit is a suit by the insured for damages caused him by an excess judgment. In Stowers the insured (Stowers Furniture Company) had a $5000 liability policy. A tort suit against it could have been settled for $4000, but the carrier would not settle the case for that amount. The jury returned a verdict for $14,000. In effect the insured (Stowers) said, “My insurance company could have settled the case against me within my policy limits, but it was negligent and did not settle. I am injured by the $14,000 judgment against me, which I have paid. My insurance company should compensate me for the excess judgment I have suffered.” The commission of appeals held that the insured had a negligence cause of action against its insurance company for the damages caused by the excess judgment. 15 S.W.2d at 546-48.5
Six years later the supreme court in Universal Automobile Ins. Co. v. Culberson, 126 Tex. 282, 86 S.W.2d 727, 730 (1935), adopted the “prepayment” rule and said the insured had to pay the judgment before it could collect from its insurance company. In effect the court said that the insured does not suffer injury until it has paid all or part of the judgment.
In Hernandez v. Great Am. Ins. Co., 464 5.W.2d 91 (Tex.1971), the supreme court overruled Culberson, rejected the prepayment rule, and held that the mere existence of the excess judgment is enough to trigger the right to bring a Stowers suit. But the court did not eliminate the principle that the Stowers suit exists because the insured suffers damages. Hernandez (the insured), said the court, suffered an excess judgment in the amount of $56,636 because of the negligence of Great American.6 Id. at 94. The court continued:
*40The judgment injures Hernandez while it remains unpaid. His credit is affected. A lien attaches to his land. His nonexempt 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.
Id. at 94. The supreme court quoted this passage with approval in Montfort v. Jeter, 567 S.W.2d 498, 500 (Tex.1978), and Street v. Second Court of Appeals, 756 S.W.2d 299, 301 (Tex.1988).
In Hernandez the supreme court said that “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." 464 S.W.2d at 94 (emphasis added). “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 [by Hernandez].” Id. at 95.
The supreme court’s recent opinion in Street v. Second Court of Appeals, 756 S.W.2d 299 (Tex.1988), reaffirms Hernandez and the principle that the essence of a Stowers suit is the harm to the insured and the threat to his assets and credit. Street held that the insured can bring a Stowers action on the excess judgment as soon as it becomes final and the trial court loses jurisdiction over it, unless the insurer supersedes it. The fact that the insurance company is appealing the judgment does not stall the Stowers suit. The court reasoned that the unsuperseded judgment poses a threat of collection even though it is being appealed:
A judgment which is not superseded can, of course, be executed upon regardless of its appellate status. TEX.R.APP.P. 40(a)(5). Thus, the insured remains at risk. The injustice is readily apparent if the insurer can leave the insured exposed to collection of the judgment during the pendency of an appeal....
756 S.W.2d at 301 (emphasis added). The court then discussed the economic impact of a judgment and quoted the passage from Hernandez that is quoted above.
These cases establish some bedrock principles: (1) the gist of the Stowers case is the damage to the insured caused by the judgment; (2) that damage occurs, regardless of whether the insured has paid the judgment, because his property is encumbered and is constantly subject to execution, lien, etc. and his credit is affected; and (3) the original plaintiff has no legal interest in the Stowers suit because the cause of action lies to repair damage to the insured, not to fund the judgment for the original plaintiff. In other words the essence of a Stowers suit is the harm to the insured’s property and credit caused by the threat that the excess judgment will be collected from the insured individually.
If the threat to the insured’s property is removed by a covenant not to execute, there is nothing left of the Stowers suit to recover the amount of the judgment. That is what the court held in Whatley:
To recover more than the policy limits from the insurer, the judgment creditor must assert the insured’s injury. If the judgment cannot be enforced against the insured, no such injury exists. The insured may assign to his judgment creditor any claim he has against his insurer for payment of the excess award, but such assigned claim is actionable only as long as the insured remains liable for the excess damages.
758 S.W.2d at 310 (emphasis added). The Fifth Circuit said the same thing in Foremost County Mut. Ins. Co. v. Home Indem. Co., 897 F.2d 754, 757 (5th Cir.1990): “[T]here must be not only negligent refusal to settle by the insurer but also subsequent harm to the insured.” The Fifth Circuit agreed with the Whatley court’s statement, “If the judgment cannot be enforced against the insured, no such injury exists,” and held that there must be injury to the *41insured even when the insurer is guilty of bad faith or negligence. Id. at 758 n. 4. A student commentator summarized the law in the same way:
[I]t should be noted that the Texas Supreme Court did not dispose of the need for injury in a Stowers suit when it abolished the prepayment rule [in Hernandez]. The court merely enlarged the scope of the injury to include the adverse effects an unpaid judgment has upon a judgment debtor. Consequently, an agreement that relieves the insured of his liability from the previous judgment would probably destroy the Stow-ers cause of action since the essential injury to the insured would no longer exist under the terms of the release.
Comment, An Insurer’s Failure to Settle: Standing Under the Stowers Doctrine, Texas Deceptive Trade Practices Act, and Article 21.21 of the Insurance Code, 34 BAYLOR L.REV. 441, 441 n. 2 (1982) (emphasis added).
Whatley was a failure-to-defend case, and in footnote six, the court said that it expressed no opinion on the application of the harm principle in a case of negligence or bad faith. 758 S.W.2d at 310. I am not sure exactly what that statement means because Street and Hernandez were Stow-ers negligence cases, not failure-to-defend cases, and the quoted passage from What-ley cites Hernandez and rests firmly on it. The cause of action for an excess judgment belongs to the insured in both failure-to-defend cases and failure-to-settle cases, and in each kind of case the cause of action lies only to repair harm or damage to the insured. Whatley certainly did not hold that in Stowers cases the excess judgment can be collected from the insurer even though the judgment has in effect been released and no longer threatens the insured’s assets and credit.
In the present case the insured, Dr. Garcia, has obtained an agreement from the original plaintiff, Cardenas, that she will not seek to satisfy the underlying judgment against his assets and that she will look only to his insurance policies for satisfaction. Under these circumstances there is absolutely no harm to the insured, Dr. Garcia, in the sense of possibility of collection.7 There may be harm in the sense of liens and possible damage to credit, but clearly it cannot be said that Dr. Garcia’s “non-exempt property is constantly subject to sudden execution and forced sale.” Hernandez, 464 S.W.2d at 94. And, to use Street’s terminology, it cannot be said that the judgment can “be executed upon,” or that it “leave[s] the insured exposed to collection.” Street, 756 S.W.2d at 301. Since Cardenas no longer has any quarrel with Garcia, I am not sure who would want to record the judgment, and if anyone did record it, Garcia could certainly get a declaratory judgment that his assets are free of it. But in any event the Stowers judgment before us is not based on lien and injury-to-credit damages. It is based on the amount of the malpractice judgment,8 which because of the assignment and covenant not to execute does not threaten Garcia or his property any longer.
The majority relies exclusively on Allstate Ins. Co. v. Kelly, 680 S.W.2d 595 (Tex.App. — Tyler 1984, writ ref’d n.r.e.), which said that as a matter of law the insured’s damages equal the excess amount *42of the underlying judgment. Citing Kelly, the majority says that because damages were established as a matter of law, “the only issue in the second suit was causation.” But Kelly did not raise or answer the questions discussed here. The original plaintiff in Kelly had not entered a covenant not to execute,9 as Cardenas did in this case. Therefore Kelly cannot stand for the notion that damages are fixed as a matter of law in the amount of the underlying judgment when the insured has protected his assets by negotiating a covenant not to execute.
Garcia cites several cases that hold that a covenant not to execute does not extinguish the underlying judgment. See, e.g. Young Men’s Christian Ass’n v. Commercial Standard Ins. Co., 552 S.W.2d 497 (Tex.Civ.App.—Fort Worth 1977), writ refd n.r.e. per curiam, 563 S.W.2d 246 (Tex.1978); First Nat’l Indem. Co. v. Mercado, 511 S.W.2d 354 (Tex.Civ.App.— ustin 1974, no writ). But Y.M.C.A. and Mercado were not Stowers cases and they did not involve judgments in excess of policy limits; they held that when the insured enters into a covenant not to execute he does not thereby violate the terms of the insurance policy. In other words, by entering the covenant not to execute the plaintiff does not give up the right to collect the judgment from the insurance company up to the policy limits. As I have stated, the covenant not to execute does not affect Cardenas’s right to collect the judgment up to the $1.6 million policy limits, directly from the insurers, even though she signed the covenant not to execute.
For these reasons I would hold that the covenant not to execute removed the harm to Garcia and therefore an essential element of the Stowers cause of action — damage to the insured — is missing. The trial court should have granted APIE’s motion for judgment, which asserted this ground.
III. PERCENTAGE REDUCTION OF LIABILITY
This case also raises the question of what kind of offset or contribution a defendant gets when a co-defendant has settled and the plaintiff recovers under § 21.21 of the Insurance Code. The majority holds that the non-settling defendant (APIE) gets neither dollar offset nor percentage reduction. I disagree with that holding.
The malpractice judgment rested on findings that Dr. Garcia had committed negligence over a period of time when he had coverage with two successive insurance carriers — ICA and APIE. Dr. Garcia had treated Mr. Cardenas from late 1980 until early 1983. ICA provided Dr. Garcia’s liability insurance coverage from the beginning through January 7, 1983. APIE had coverage for one year, beginning January 8, 1983.
In the Stowers trial the jury found that 84% of the Cardenas injuries occurred during ICA’s coverage and 16% during APIE’s coverage. In two separate answers the jury found (1) that Dr. Garcia caused 16% of Cardenas’ damages after January 8, 1983 (the beginning of APIE’s coverage), *43and (2) that APIE had caused 16% of Garcia’s damages:
SPECIAL ISSUE NO. 33.
What percentage, if any, of the damages found by the Court in Cardenas v. Garcia were proximately caused by the acts or omissions of Dr. Garcia on or after 1/8/83?
Answer by stating the percentage found.
We, the Jury, Answer: 16 % SPECIAL ISSUE NO. 36.
For each party found by you to have caused damage to Dr. Garcia find the percentage caused by:
ICA 84 %
APIE 16 %
[Total] 100%
APIE says that under these two jury findings it owes only $357,600, which is 16% of Garcia’s damages (the judgment against him for $2,235 million), and that it paid more than its share of the liability when it paid the $500,000. Why doesn’t the majority hold simply that the $500,000 was not paid in settlement? Instead it holds that APIE is not entitled to either a 84% reduction of liability or to a dollar credit for the $2.0 million paid by ICA. In other words, under the majority’s reasoning, a plaintiff with an injury of $2,235 million could recover $2.0 million from one defendant (who was 84% responsible), and then recover an additional $3,167 million10 from a defendant that is only 16% responsible! The majority gives two reasons for this holding: (1) ICA’s failure to settle, and APIE’s failure to defend and settle, “constituted an indivisible injury to [Dr. Garcia] that cannot be apportioned on a pro rata basis,” and (2) “There is no statutory right to contribution or indemnity from other defendants for violations of article 21.21_ Therefore, APIE is not entitled to a credit for the $2,000,000.00 payment made by ICA” (emphasis added). I would hold that APIE is entitled to one or the other.
In Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 431 (Tex.1984), the supreme court rejected the notion that injuries are “indivisible” and that courts cannot establish percentage comparative causation in product liability cases. As I read Duncan, in the absence of a contribution statute, the courts will enforce the one-recovery (or one-satisfaction) rule unless they replace it with a court-created system of comparative responsibility. Duncan held that “in multiple defendant cases in which grounds of recovery other than negligence are established, the non-settling defendants’ liability and the plaintiff’s recovery shall be reduced by the percent share of causation assigned to the settling tortfeasor by the trier of fact.” Id. at 429.
Duncan’s comparative causation scheme applies to product liability cases, but on the issue of multi-party settlements and the one-recovery principle its reasoning applies to this case. The Duncan court said that because it was adopting comparative causation in strict liability cases, it would no longer follow the one-recovery rule of Bradshaw v. Baylor Univ., 126 Tex. 99, 84 S.W.2d 703 (1935). The court had reaffirmed that rule in T.L. James & Co. v. Statham, 558 S.W.2d 865, 868 (Tex.1977) (“We adhere to the rule ... that a claimant in no event will be entitled to recover more than the amount required for full satisfaction of his damages”), and McMillen v. Klingensmith, 467 S.W.2d 193, 196-97 (Tex.1971) (same). According to Duncan, the one-recovery rule had its roots in the outmoded idea that “the courts could not conceive of allocating liability. Injuries were considered indivisible....” Duncan v. Cessna, 665 S.W.2d at 431. That way of thinking, said the court, no longer applies. “The system of comparative causation we adopt allows allocation of liability between the parties, even when the injury itself is indivisible.” Id. The court then held that “the one recovery rule does not prevent our adopting a system that reduces the plaintiff’s recovery and the non-settling defendants’ liability by the percentage of causa*44tion assigned to any tortfeasor with whom plaintiff has settled. We hereby adopt a percent credit rule.... Accordingly, to the extent it conflicts with this opinion, we overrule Bradshaw v. Baylor University.” Id. at 432.
Duncan overruled Bradshaw only to the extent that it conflicted with the newly-adopted comparative causation system for product liability cases. In other words, Bradshaw’s one-recovery rule still exists in cases where it has not been replaced by a comparative causation scheme. The majority must take its pick and allow APIE either percentage reduction or dollar offset. If there is no comparative causation in multi-defendant Stowers cases, then the one-recovery rule still applies and APIE is entitled to reduce its liability by the amount already received by the plaintiffs. If there is to be comparative responsibility in multi-defendant Stowers cases, then APIE is entitled to a judgment that reflects the jury’s 84%-16% findings. Under the one-recovery, dollar-credit approach, APIE would owe $235,000 ($2,235 million minus the $2.0 million payment in settlement); under the percentage causation approach, the figure would be $357,600 (16 percent of $2,235 million).
The majority cites Stewart Title Guar. Co. v. Sterling, 772 S.W.2d 242 (Tex.App.—Houston [14th Dist.] 1989, writ granted), but that case held only that “there is no statutory right to contribution or indemnity from other defendants for violations of article 21.21.” Id. at 248 (emphasis added). True enough, but neither is there a statutory prohibition, and therefore Bradshaw still applies in this field. Until the courts create a Duncan-style comparative contribution system, which the majority is obviously unwilling to do, we must apply Bradshaw's one-recovery rule.
The majority says that once a judgment is signed an offer to pay the entire excess judgment will not relieve the insurer of liability under article 21.21. Apparently under the majority’s analysis the insurer risks article 21.21 penalties if it does not pay the excess judgment before it is signed. Says the majority,
When the tort alleged is failure to settle, the insurance company’s breach occurs at the time of the rejection of a reasonable settlement offer_ When the allegation is failure to defend, the tort is complete at least by the time of the signing of the adverse judgment against its insured. In any case, liability under article 21.21 has attached by the time of the signing of the judgment in the first suit, and an offer to pay that judgment will not absolve the insurer of article 21.21 liability.
These statements are too broad. Payment of the entire judgment plus costs and attorneys fees removes every bit of the insured’s harm, and should resolve the case. Yet the majority would allow the plaintiff, acting under an assignment from the insured, to reject an offer to pay the entire excess judgment and related costs and attorney’s fees and sue the insurer for statutory and common-law penalties. I agree that a post-trial offer to pay the policy limits should not automatically resolve the Stowers case. But I think that an offer to pay the entire excess judgment plus costs and attorney fees should resolve the Stow-ers case because it erases the underlying judgment completely, and that is all that the insured can complain about. It is nonsense to suggest that my approach gives the insurer no incentive to settle. The insurer’s incentive is that if it settles it pays its limits or perhaps less; if it negligently fails to settle, it pays its limits plus the excess.
I am puzzled by another of the majority’s holdings. The majority says ICA’s payment of $2.0 million was payment for a release of ICA in the Stowers suit only. Does this mean that if parties recite that the payment is in the second suit it would not reduce the underlying excess judgment against the insured (and presumably would not even be admissible in evidence)? But if the $2.0 million payment has nothing to do with the underlying judgment, and the covenant not to execute does not erase the threat to Garcia’s assets, one wonders whether the majority would permit Cardenas to collect the judgment against Garcia. Obviously no one would let that happen, but I am not aware of any legal reason *45why not, if the majority is correct that there is still a full judgment for $2,235 million against Garcia notwithstanding the payment of $2.0 million and the covenant not to execute.
The majority cannot have it both ways by holding that in Stowers cases there is no comparative causation and no one-recovery rule. That holding cannot be squared with Duncan v. Cessna. The majority also errs in making broad and unjustified statements that the insurer cannot pay the entire excess judgment and end the case, and that the $2.0 million payment applies only to the Stowers case and not to the malpractice judgment.
IV. EXCLUSION FROM EVIDENCE OF COVENANT NOT TO EXECUTE AND RECEIPT OF $2.0 MILLION
Even if I am wrong about the effect of the covenant not to execute on the Stowers case and APIE’s right to percentage contribution or dollar offset, I find it incredible that the covenant not to execute was excluded from evidence along with all reference to the $2.0 million payment by ICA.11 We must remember that in the Stowers suit the plaintiff, Dr. Garcia, was saying, “I am injured by this malpractice judgment against me and I want compensation from APIE.” Concerning that contention, APIE sought to show that Garcia did not really suffer damages in the amount of the malpractice judgment ($2,235 million) because it could never cause that much damage to his assets, $2.0 million of it having been paid. I would therefore hold that the court erred in excluding from evidence the covenant not to execute and the fact that Cardenas had been compensated $2.0 million, both of which certainly were relevant to the jury’s decision about how much Garcia had really been injured.
The majority reasons that Allstate v. Kelly, 680 S.W.2d at 606, held that the insured’s damages are fixed as a matter of law by the excess amount of the underlying judgment. Kelly does make that statement, but it cannot be true where, in contrast to Kelly, there is a covenant not to execute and a partial payment on the judgment by a co-defendant. Kelly was cited but not followed on this point in William M. Mercer, Inc. v. Woods, 717 S.W.2d 391 (Tex.App.—Texarkana 1986), affirmed in part and reversed in part on other grounds, 769 S.W.2d 515 (Tex.1988). In Mercer the court of appeals reasoned that the underlying judgment is some evidence of damages but it does not establish damages as a matter of law. 717 S.W.2d at 398-401. The court cited Moritfort v. Jeter, 567 S.W.2d 498, 500 (Tex.1978), which said that the existing excess judgment “is some evidence of actual damages.” 717 S.W.2d at 399.
Perhaps Garcia still suffers damages in the form of mental anguish from a judgment that could never threaten his assets but which nevertheless still exists on the books. But the fact remains that his assets are not threatened by the judgment and no evidence of mental anguish was presented. Certainly any threat from the malpractice judgment is reduced by the $2.0 million payment. The jury should at least have been told about the covenant not to execute and the $2.0 million payment, for whatever weight the jury thought appropriate. Because the verdict and judgment before us are obviously based on the theory that the judgment causes Garcia $2,235 million in damages without taking into account the covenant not to execute and the $2.0 million payment, I would at the least reverse and remand for a new trial.

. G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex.Comm’n App.1929, holding approved).

. The majority is wrong to suggest that the insured, Garcia, was left undefended and unrepresented at trial. He was represented throughout by Ross Crossland, who was hired initially by ICA and APIE. When APIE withdrew coverage, Crossland kept representing Garcia, to whom he owed his undivided loyalty. See Employers Cos. Co. v. Tilley, 496 S.W.2d 552, 558-59 (Tex.1973).

.In the malpractice case Plaintiff’s Fifth Amended Original Petition alleged that Dr. Garcia treated Mr. Cardenas from "about October 3, 1980 up until about April 12, 1982." When APIE withdrew its defense on the ground that the petition did not allege an act of negligence during its coverage period (which began on January 8, 1983), plaintiffs filed their Sixth Amended Original Petition, which alleged that Dr. Garcia treated Mr. Cardenas from "about September 19, 1980 up until about February or March, 1983.”

. The instrument is entitled, "Assignment of Interest in Cause of Action and Agreement Designating Assets Subject to Execution.” Its pertinent provisions are as follows:
ARAMINTA CARDENAS, Individually and as Guardian of the ESTATE OF GUSTAVO CARDENAS [Cardenas] and LAW OFFICES OF PAT MALONEY, P.C. hereby agree and covenant that should judgment against DR. RAYMOND A. GARCIA [Garcia] be obtained in the above-referenced cause [the malpractice case], they shall not levy or issue execution, garnishment or any other process, including abstract of judgment against any assets, or property, of any kind or description, of [Garcia] with the sole exception of the liability insurance policy or policies which the Defendant, [Garcia], as insured thereunder may have with ICA and/or API.
[[Image here]]
It is further agreed that [Cardenas] will indemnify [Garcia] to the extent of any amount of judgment which might be rendered in favor of [Cardenas] against [Garcia] in excess of what is actually collected from the insurance carrier.
[[Image here]]
For and in consideration of the foregoing promise to look only to the proceeds of the liability insurance policies described above in satisfaction of any judgment these Plaintiffs may be entitled to against [Garcia, Garcia] sells, assigns, transfers, sets over and delivers to [Cardenas] and LAW OFFICES OF PAT MALONEY, P.C., their executors, administrators, and assigns, for their use and benefit, any and all sum or sums of money now due or owing [Garcia] and all claims, demands, and cause or causes of action of whatsoever kind and nature, which Defendant, [Garcia], has had or now has, or may have against Defense Attorneys or ICA or API, or any other person or persons, and each and any of them, whether jointly or severally, arising out of, or for any loss, injury or damage sustained by him, or cause or causes of action arising, growing out of, or relating to, or connected with the handling of the claims of [Cardenas] against [Garcia].
The instrument, dated July 29, 1985, is signed by Mrs. Cardenas, Dr. Garcia, Clem Lyons [his individual attorney], Thomas D. Jones [for Law Offices of Pat Maloney, P.C.], and James A. Kosub [attorney ad litem].

. Two recent cases have made the following statement in dictum (emphasis added): "In Stowers [citation omitted] the court allowed a third-party claimant to sue the tortfeasor's insurance company for the portion of a judgment in excess of the policy limits when the insurance company unreasonably failed to settle a claim within the tortfeasor’s policy limits.” See Bowman v. Charter General Agency, Inc., 799 S.W.2d 377, 380-81 n. 1 (Tex.App. — Corpus Christi 1990, no writ); Caserotti v. State Farm Ins. Co., 791 S.W.2d 561, 566 n. 2 (Tex.App. — Dallas 1990, writ denied).
The briefest reading of Stowers shows that this statement is utterly wrong. In the Stowers litigation the original plaintiff, named Bichon, sued the original defendant, the G.A. Stowers Furniture Company. Stowers, the insured tort-feasor, paid the excess judgment and sued its liability carrier, American Indemnity Company.

. The underlying judgment for $81,636 had been affirmed on appeal. See Hernandez v. *40Baucum, 344 S.W.2d 498 (Tex.Civ.App.—San Antonio 1961, writ ref'd n.r.e.). The policy limits were $25,000. The insurer paid the policy limits, leaving Hernandez liable for an excess judgment of $56,636. The judgment had been further reduced by $10,500 when the original plaintiff levied execution on a parcel of Hernandez’s land. See Hernandez v. Great Am. Ins. Co., 464 S.W.2d at 92.

. The majority makes the curious argument that because the covenant not to execute does not blot out the underlying malpractice judgment, that judgment still damages Garcia. I agree that in theory there is a possibility that Cardenas would breach the agreement and try to collect individually from Garcia by levying on his assets. But this case was not tried on that theory, and it is hard to imagine any attorney arguing to a jury in the Stowers case that his present client (Garcia) is damaged by the possibility that his former client (Cardenas) might breach the covenant not to execute and pursue his present client’s assets.

. Plaintiffs counsel made this clear in jury argument (emphasis added):
You see the first trial was for determination of the verdict on the judgment. This trial is for funding of the judgment.... This actual damage issue should be the same amount as the judgment, that is roughly two and a quarter million with a prejudgment interest that Judge Chapa found. You see this is issue— because you see that this is the actual damages that is inflicted against Dr. Garcia, and a Dr. Garcia assigned those rights over to Mr. Cardenas. So that is the appropriate answer. Two point two three five million.

. In Kelly after the excess judgment had been rendered, the original plaintiff and Allstate’s insured agreed to join forces against Allstate and split the expenses and recovery on stated terms. Their agreement is printed in full at 680 S.W.2d at 609. It does not say one word about non-execution against the insured's assets.
Concerning this agreement, Allstate made two arguments. First, it contended that since its insured would recover one-third of any Stowers judgment against Allstate, the insured was to that extent his own creditor and this extinguished one-third of Allstate’s liability. The court summarized Allstate’s second contention as follows:
Allstate further contends that the terms of the agreement give rise to a necessary implication that Kelly [the original plaintiff and judgment creditor] will never attempt to satisfy the judgment by the levy of execution against Alves' [Allstate’s insured and the excess judgment debtor] properties.
680 S.W.2d at 610. The court then rejected both arguments:
Both contentions lack merit. The agreement is simple and unambiguous. Under its provision, Alves assigned two-thirds of her cause of action [under Stowers ] against Allstate to her judgment creditor, Kelly, with an agreement to share certain expenses. This she had a right to do.
Id. In view of these facts, Kelly cannot govern this case, which involves an express and tightly written covenant not to execute.

. In this case plaintiffs do not benefit fully from the majority’s legal rule because they agreed to a $2.0 million ceiling on liability.

. I do not agree with APIE that the court abused its discretion in excluding evidence of its payment of $500,000 to the plaintiffs. In view of the consideration for that payment — a six-month continuance, an agreement that the plaintiffs would oppose a separate trial or severance sought by any of the defense attorneys who had been sued, and a liability cap of $2.0 million in the Stowers case — it was not clearly a payment on the underlying judgment.
The $2.0 million payment by ICA is another matter. APIE offered evidence of that payment separately from the evidence of its own payment of $500,000. The court should have admitted evidence of ICA’s payment of $2.0 million on the underlying judgment.