Court Opinion

ID: 9677504
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:53:52.492983+00
Date Added: 2024-06-11T18:16:56.373807
License: Public Domain

DUNCAN, Justice,
concurring and dissenting.
I agree with the majority’s judgment insofar as it denies Moctezuma a recovery of extracontractual damages. The absence of a finding that Viking violated the Texas Insurance Code or its duty of good faith and fair dealing is fatal to this claim. I disagree, however, with the majority’s judgment awarding Moctezema the policy limits and attorney’s fees. Moctezuma, as the assignee of Sanchez and Ocejo, is collaterally estopped from relitigating the fact that Sanchez gave Ocejo his car before the accident. This fact conclusively establishes that Moctezuma’s suit against Sanchez and Ocejo was outside the coverage of Sanchez’s policy. Since the jury’s waiver finding cannot create coverage when none exists under the policy, Viking cannot be held liable on the policy. I therefore respectfully dissent.
“An insurer is required to defend only those cases within the policy coverage.” Fidelity & Guar. Ins. Underwriters v. McManus, 633 S.W.2d 787, 788 (Tex.1982) (emphasis added). A duty to defend is therefore not owed if the plaintiffs petition only alleges facts excluded by the policy. Granite Constr. Co. v. Bituminous Ins. Co., 832 S.W.2d 427, 429 (Tex.App. — Amarillo 1992, no writ) (citing McManus, 633 S.W.2d at 788). Therefore, while it is true that the trial court may not properly render a declaratory judgment on the insurer’s duty to pay a judgment or settlement because it is an impermissible advisory opinion,1 it is not true that a judgment establishing the absence of a duty to defend cannot also establish the absence of coverage. Indeed, as the supreme court recognized in McManus, it is because there is no coverage that there is no duty to defend.
Whether a duty to defend is owed is a justiciable issue that may be determined in a declaratory judgment action. Burch, 442 S.W.2d at 332-33. Viking, therefore, properly sought a declaratory judgment to determine whether it owed a duty to defend either Sanchez or Ocejo. In its petition, Viking alleged that it did not owe a duty to defend Sanchez because he did not own and was not driving the ear at the time of the accident; rather, Sanchez had given the car to Ocejo before the accident. Viking also alleged that it did not owe a duty to defend Ocejo, both because he was not Viking’s insured and because Ocejo was the owner of the car at the time of the accident and therefore could *803not have been a “permissive user” of Sanchez’s car. If proved or deemed true, these factual assertions would conclusively establish not only that Viking owed neither Sanchez nor Ocejo a duty to defend, but also— necessarily — that Sanchez’s policy did not cover the accident.
Indisputably, these factual allegations were deemed admitted and therefore true when the default declaratory judgments were rendered. E.g., Holt Atherton Indus. v. Heine, 835 S.W.2d 80 (Tex.1992); Sunrizon Homes v. Fuller, 747 S.W.2d 530 (Tex.App.— San Antonio 1988, writ denied). Just as clearly they were not proved true, since there was no trial in the declaratory judgment action. The dispositive issue before this court, therefore, is whether to give collateral estoppel effect to a judgment that rests upon factual allegations that are deemed true as a result of a default judgment. Counsel has not cited,2 and I have been unable to find, a case deciding this issue in the duty to defend context. However, this court has previously decided the issue in a somewhat different context in Mendez v. Haynes Brinkley & Co., 705 S.W.2d 242 (Tex.App. — San Antonio 1986, writ refd n.r.e.).
In Mendez, the Mendezes filed suit against Zuniga, an insurance recording agent, as well as the two insurers he purported to represent, Underwriters at Lloyds and American Security. The Mendezes alleged that Zuniga had falsely represented to them that he was an agent with authority to bind Haynes Brinkley, an authorized agent for Underwriters and American Security. The Mendezes further alleged that Zuniga falsely represented that he had obtained insurance covering an apartment house the Mendezes owned. Finally, the Mendezes alleged that their apartment house was heavily damaged by fire and ordered razed by the city, but Haynes Brinkley had denied coverage individually and as general agent for Underwriters and American Security.
Zuniga failed to answer, and the Mendezes took a default judgment against him and non-suited Haynes Brinkley. The Mendezes then sued Haynes Brinkley, Underwriters, and American Security for breach of alleged insurance contracts. The defendants were granted a summary judgment on the ground that the factual allegations deemed true by virtue of, and actually incorporated in, the default judgment against Zuniga conclusively established that the Mendezes could not recover against any defendant for breach of contract.
The issue before this court in Zuniga, therefore, was whether the factual allegations deemed true by virtue of the default judgment would be given collateral estoppel effect in the Mendezes’ subsequent suit against the insurers. This court affirmed, holding that the insurers “produced sufficient summary judgment evidence sustaining their affirmative defense of collateral estoppel.” Mendez, 705 S.W.2d at 245-46.
Mendez was decided in 1986. Two years later the supreme court appeared to give it tacit approval by phrasing the collateral es-toppel test as whether “the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior suit.” Tarter v. Metropolitan Sav. & L. Ass’n, 744 S.W.2d 926, 927 (Tex. 1988) (emphasis added). Under this formulation of the test, collateral estoppel effect should be given to a default judgment rendered after proper service, since the defaulting party had a full and fair opportunity to litigate all issues involved in the suit.
More recently, however, the supreme court has stated that “[a] prior adjudication of an issue will be given estoppel effect only if it was adequately deliberated and firm. The *804factors to be considered in making this determination are (1) whether the parties were fully heard, (2) that the court supported its decision with a reasoned opinion, and (3) that the decision was subject to appeal or was in fact reviewed on appeal.” Mower v. Boyer, 811 S.W.2d 560, 562-63 (Tex.1991) (denying collateral estoppel effect to a partial interlocutory summary judgment because factual “issue was not expressly raised or decided, the decision was not supported by a reasoned opinion, and the judgment was not reviewable by appeal). Under this test, a default judgment may or may not be accorded collateral estoppel effect; the proper resolution of the issue would appear to depend upon how these factors are to be weighed.
In my view, the same policy reasons that support giving a default judgment legal effect in the action in which the default is taken also support giving collateral estoppel effect to a default judgment in a subsequent action between the parties or their privies. The non-answering or non-appearing party had a full and fair opportunity to litigate and did not do so. If the legal right to take a default judgment is to have any meaning at all, then a default judgment must be given legal effect to the extent — but only to the extent — of the factual allegations (other than damages) contained in the petition. Moreover, the defaulting party has vehicles for setting aside the default judgment.3 On this basis alone, Mower is distinguishable.
Why should a default judgment have legal effect in one case and not the other? Either it is legally effective or it is not. And what is the effect of denying collateral estoppel effect to a default declaratory judgment on the duty to defend, as the majority has done in this case?4 We effectively invalidate the insurer’s ability to obtain a binding determination of its duty to defend. The import of determining a duty to defend in a declaratory judgment action will depend solely upon whether the insured chooses to appear. Any insured would be well-advised to simply not appear and thus deprive the declaratory judgment of any real meaning. That is the result of the majority opinion in this case.
Finally, the situation the majority creates is simply fundamentally unfair. The insurer who refuses to defend cannot collaterally attack the insured’s agreed judgment,5 but the insured can collaterally attack the insurer’s declaratory judgment establishing that it has no duty to defend because there is no coverage.
For these reasons, I believe the default declaratory judgments in this case should be given collateral estoppel effect. Accordingly, for purposes of this suit, the following facts were conclusively established and not subject to being relitigated by Sanchez and Ocejo or their assignee, Moctezuma:6
• Sanchez gave the car to Ocejo before the accident;
• Ocejo was the owner of the car at the time of the accident; and
• Ocejo was not Viking’s insured.
Accordingly, the jury should not have been asked whether Sanchez gave the car to Ocejo before the accident. See Block, 744 S.W.2d at 944 (only disputed issues of fact should be submitted to jury). Since the question was erroneously submitted, and the jury made a finding contrary to the conclusively-established fact, the jury’s answer is immaterial and should be disregarded. C & R Transport v. Campbell, 406 S.W.2d 191 (Tex.1966).
The jury’s answer to Question 2 is likewise immaterial, because waiver does not establish coverage when none exists under the policy. E.g., Texas Farmers Ins. Co. v. McGwire, 744 S.W.2d 601, 603 (Tex.1988). Neither of the jury’s answers to these questions establishes coverage. The jury’s remaining an*805swers likewise do not establish an extraeon-tractual basis for a judgment against Viking. Accordingly, the trial court’s judgment should be reversed and judgment rendered in favor of Viking. See Tex.R.App.P. 81(c). I therefore dissent.

. Firemen’s Ins. Co. of Newark, New Jersey v. Burch, 442 S.W.2d 331, 332 (Tex.1968).

. Counsel has referred us to Greater Houston Transp. Co. v. Wilson, 725 S.W.2d 427 (Tex.App. — Houston [14th Dist.] 1987, writ ref’d n.r.e.), in which the court held that, based upon a prior default judgment, the trial judge properly instructed the jury that the cab driver for whom the appellant cab company had worked had already been found negligent and that his negligence was a proximate cause of the accident. Id. at 429-30. However, the appellant in Wilson apparently did not raise, and the court did not decide, whether the default judgment should have been accorded collateral estoppel effect; the court merely held that instructing the jury as to the driver’s negligence was not error. Id. at 429 (citing Eagle Trucking Co. v. Texas Bitulithic Co., 612 S.W.2d 503, 507 (Tex. 1981)).

. See, e.g., Craddock v. Sunshine Bus Lines 134 Tex. 388, 133 S.W.2d 124 (1939) (motion for new trial); TexR.App.P. 45 (writ of error).

. In fact, the majority opinion does not rest upon the fact that the declaratory judgment in this case was taken by default. Rather, the majority’s reasoning would deny collateral estoppel effect to any declaratory judgment establishing the absence of a duty to defend — even if that judgment rested upon explicit jury findings.

. E.g., Employers Cas. Co. v. Block, 744 S.W.2d 940, 942-43 (Tex.1988).

. See, e.g., Nash v. Carolina Cas. Ins. Co., 741 S.W.2d 598, 602 (Tex.App. — Dallas 1987, writ denied) (assignee barred if assignor barred).