Court Opinion

ID: 9676238
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:19:00.47761+00
Date Added: 2024-06-11T18:16:46.114002
License: Public Domain

GONZALEZ, Justice,
joined by SPECTOR, Justice, dissenting.
Article 21.28 of the Texas Insurance Code implements a comprehensive plan for handling insolvent insurers. This scheme unquestionably furthers state interests. It does not follow, however, that the conservator and subsequent receiver of First Service Life Insurance Company (First Service) acted only, or even principally, on behalf of the state. The majority opinion recognizes the conflicting nature of the receiver as a private, judicial, and state executive actor, but the Court determines that the receiver’s executive-actor attributes are dominant and, for purposes of Chapter 105 of the Texas Civil Practice and Remedies Code, subject state coffers to liability for attorney’s fees and expenses. I conclude that the receiver acted primarily on behalf of First Service and its creditors and policyholders. Additionally, I disagree with the Court’s decision to remand this cause to the trial court without providing any guidance to that court and the parties as to how to proceed. For the reasons discussed below, and for the reasons stated in the court of appeals’ opinion, 903 S.W.2d 133, I would affirm the judgment of the court of appeals.
Chapter 105 mandates recovery of fees, expenses, and reasonable attorneys’ fees, subject to two qualifications: (1) the claimant must be a “party to a civil suit ... brought by or against a state agency in which the agency asserts a cause of action against the party”; and (2) a court must subsequently dismiss the action and find it “frivolous, unreasonable, or without foundation.” Tex.Civ. PRAC. & Rem.Code § 105.002. For purposes of a Chapter 105 claim, the Legislature has defined a “state agency” as any agency “in the executive branch of state government” that is “created by the constitution or statute of this state,” and that “has statewide jurisdiction.” Id. § 105.001(3). Admittedly, the receiver is appointed by the State Board of Insurance and can only be removed by tihe Board.1 See Tex.Ins.Code art. 21.28, § 2(a); see also State Bd. of Ins. v. Betts, 158 Tex. 612, 315 S.W.2d 279, 283 (1958). The Board also has the exclusive power to set the receiver’s compensation. See Tex.Ins.Code art. 21.28, § 2(a); State Bd. of Ins. v. Betts, *442158 Tex. 624, 315 S.W.2d 286, 287 (1958). Nevertheless, I reject the majority’s conclusion that the conduct of First Service’s conservator and subsequent receiver is sufficiently linked to the Board to confer to the receiver or conservator state-agency status under Chapter 105. The power to appoint or remove and set compensation is not coextensive with the power to control, especially when the receiver assumes a specific legal capacity distinct from the Board.
A point-by-point analysis of article 21.28 reveals the nature of this distinct legal capacity. For example, the receiver principally acts on behalf of the insurer when bringing and pursing legal claims in judicial proceedings. In other words, while in form the liquidator is a state employee, in substance the liquidator who acts as receiver “stands in the shoes of the insolvent insurer, not those of the Board of Insurance Commissioners.” Eagle Life Ins. Co. v. Hernandez, 743 S.W.2d 671, 671 (Tex.App.—El Paso 1987, writ denied), overruled on other grounds, Grand Prairie Indep. Sch. Dist. v. Southern Parts Imports, Inc., 813 S.W.2d 499, 500 n. 4 (Tex.1991). The state, whether it be through the Board or the Attorney General, has no independent right to bring suit in these matters. Article 21.28, section 2(b) provides that the “receiver and his successors in office shall be vested by operation of law with the title to all of the property, contracts, and rights of action of such insurer, wherever located, as of the date of entry of the order directing possession to be taken.” Tex.Ins.Code art. 21.28, § 2(b). This provision highlights the fact that judicial rights of action pursued by the receiver are originally, and ultimately, those of the insurer.
The receiver’s role is even clearer when managing assets. As article 21.28, section 2(a) states, the receiver “shall forthwith take possession of the assets of such insurer and deal with the same in his own name as receiver or in the name of the insurer as the court may direct.” Tex.Ins.Code art. 21.28, § 2(a). Though this scheme works through the structure of the Board, the statute precisely authorizes the receiver to act on behalf of the insurer in the fundamentally important area of asset management. Moreover, the plain language of the text provides that some measure of judicial authority is necessary to discharge the receiver’s statutory duties.
I concede that article 21.28 grants the receiver certain executive-agency characteristics. As the majority notes, these formalities in some respect link receivers closely with the Board. But even a mountain of formal provisions should not obscure the substance of the receiver’s capacity. It is true that the receiver and his agents “are employees of the State Board of Insurance” for the purposes of reporting payroll and submitting vouchers to the comptroller. Tex.Ins.Code art. 21.28 § 12A(b). However, it is more significant that receivers’ salaries always have been paid first and foremost out of the assets of the distressed insurer. Indeed, the statute expressly provides for “[t]he payment of such compensation and all expenses of liquidation ... out of funds or assets of the insurer.” Tex.Ins.Code art. 21.28 § 12(b).
Article 21.28 likewise provides formal similarities and substantive differences between receivers and state executive-agency lawyers for purposes of statutory immunity. As the majority points out, the receiver has good-faith immunity from suit when pursuing the “performance of powers and duties under” article 21.28, including authorization of the Attorney General to represent the receiver in applicable lawsuits. 937 S.W.2d at 439-440. The Attorney General likewise represents many state executive-agency lawyers in similar good-faith immunity suits. However, the Attorney General’s mandate is specifically limited to issues involving the “applicability or effect of the judicial immunity” codified in article 21.28, insulating the Attorney General from legal representation of the liquidator in the underlying case. Tex.Ins.Code art. 21.28 § 2(j)-(k).
The legislative purpose behind Chapter 105 further supports my view. As this Court has stated before, the “purpose of chapter 105 is to afford an aggrieved citizen some remedy from a governmental agency for the misuse of governmental power.” Black v. Dallas County Child Welfare Unit, 835 S.W.2d 626, 629 n. 5 (Tex.1992). Keeping this purpose in mind, the present case is clearly distinguishable from the cases upon which the majority relies, Black v. Dallas *443County Child Welfare Unit, Attorney General of Texas v. Cartwright, 874 S.W.2d 210 (Tex.App.-Houston [14th Dist.] 1994, writ denied), and Attorney General of State of Texas v. Johnson, 791 S.W.2d 200 (Tex.App.—Fort Worth 1990, writ denied). Each of these cases involved allocation of state assets for the protection of children or for the prevention of fraudulent claims. In this case, assets to prosecute the allegedly frivolous claims came only from the insolvent insurer. Any cross-claim recovery of damages by the receiver in this case will clearly run to the insolvent insurer, not the state.
Analysis of the conservator’s role yields the same conclusion: Chapter 105 should not apply. Like the receiver, the conservator is appointed by the Board. See Tbx.Ins.Code art. 21.28-A, § 5. Conservators likewise have control of the insolvent insurer’s litigation and assets. See id. (stating that the conservator “shall be empowered to ... preserve, protect, and recover any assets or property of such insurance company, and to deal with the same in his own name as conservator, and shall be empowered to file, prosecute, and defend any suit or suits which have been filed or which thereafter may be filed by or against such insurance company”). The conservator, like the receiver, therefore acts in the capacity of the insurer’s legal representative. As with a receiver, Chapter 105 should not allow recovery of attorneys’ fees in this type of ease.
The Legislature must use clear and unambiguous language to waive sovereign immunity. Guillory v. Port of Houston Auth., 845 S.W.2d 812, 813-14 (Tex.), cert. denied, 510 U.S. 820, 114 S.Ct. 75,126 L.Ed.2d 43 (1993); Barr v. Bernhard, 562 S.W.2d 844, 846 (Tex.1978). Attorneys’ fees may not be awarded unless prescribed by statute for the particular kind of case. First City Bank v. Guex, 677 S.W.2d 25, 30 (Tex.1984); see Texas Employment Comm’n v. Camarena, 710 S.W.2d 665, 670 (Tex.App.—Austin 1986), rev’d on other grounds, 754 S.W.2d 149 (Tex.1988). Chapter 105 waives immunity for entities clearly recognizable as “state agencies.” However, as explained, the Legislature could not have imagined that a receiver or conservator acting primarily on behalf of a failed private insurer would be considered a state agency, thereby subjecting the state to claims for attorneys’ fees in frivolous lawsuits. The Court errs in concluding otherwise.
The Court also remands the case “for further proceedings” without further explanation of what it expects will occur on remand. If the Court wishes only to have the trial court rule on the merits of whether the counterclaim brought by the receiver in this case is frivolous, this is a question of law that we can and should decide, thereby saving the parties the expenses and time of another trip up the judicial pipeline. Whether a matter is groundless is a question of law, and these questions are within our jurisdiction to render final judgment. See Donwerth v. Preston II Chrysler-Dodge, Inc., 775 S.W.2d 634, 636 (Tex.1989) (concluding that issue of groundlessness in deceptive trade practices action was question of law, not fact, under statutory language authorizing recovery of attorneys’ fees “when the court finds the DTPA action was groundless”) (citing Tex. Bus. & Com.Code § 17.50(c)). There is no principled basis for concluding that “groundless” and “frivolous” have different meanings. Moreover, Chapter 105 expressly conditions an award of attorneys’ fees on a finding by the court. TexCiv.PRAc. & Rem. Code § 105.002. Because our Court is empowered to decide the question of frivolousness as a matter of law, there is no reason to remand this cause to the trial court.
By promoting form over substance, the Court erroneously concludes that the actions of a receiver or conservator acting primarily on behalf of a failed insurer can subject the state to liability under Chapter 105 of the Civil Practice and Remedies Code. Potentially, this case could cost the taxpayers of this state more than $12 million in attorneys’ fees, and it opens the door to countless other lawsuits of this nature. Conceivably, every time a receiver or conservator brings a claim, the state will be asked to pick up the tab for attorneys’ fees if the court determines that the claim is frivolous. For the foregoing reasons, and for the reasons stated in the court of appeals’ opinion, I believe that both *444the trial court and the court of appeals correctly decided this case.

. As the majority opinion notes, since this litigation began, the Legislature has replaced the Board of Insurance with the Department of Insurance and a Commissioner. 937 S.W.2d at 434 n. 2.