Court Opinion

ID: 9775806
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:09:28.314001+00
Date Added: 2024-06-11T08:59:32.007891
License: Public Domain

BIERY, Justice,
concurring.
The opinion of July 22, 1992, is withdrawn and the following is substituted.
To say that this case has caused reasonable minds to differ during the many months of its pendency is a classic understatement. In this intermediate appeal, the case is now in the following posture:
(a) I concur with the result affirming the actual damage judgment and disagree with the dissent’s analysis of the elements of the cause of action for the reasons stated below.
(b) I agree the judgment should be reformed to delete double recovery of pre-judgment interest.
(c) I agree that a remittitur of a portion of the exemplary damage judgment should be suggested; however, I would suggest that $4,750,000 of the $5,000,000 exemplary damage award is a reasonable remittitur, leaving $250,000 in exemplary damages.
With reference to the threshold question of preservation of error, I agree that Rule 279 of the Texas Rules of Civil Procedure *832provides for preservation of a no evidence point by motion for judgment not withstanding the verdict. Thus, while alleged error on the no evidence point may have been preserved, the argument, analysis and out of state authorities utilized by the dissent emerged for the first time in this case on appeal. The trial judge had no opportunity to consider, respond, and rule on the theory utilized by the dissent. It would seem axiomatic that, before a trial judge is said to have committed reversible error in the handling of a case, the trial judge ought to have the opportunity to correct any error by being privy to the same arguments, analysis, and authorities used by an appellate court to support its finding of reversible error. See Cecil v. Smith, 790 S.W.2d 709, 715 (Tex.App.—Tyler 1990), rev’d on other grounds, 804 S.W.2d 509, 510 (Tex.1991); Intermarket U.S.A. v. C-E Natco, 749 S.W.2d 603, 606 (Tex.App.—Houston [1st Dist.] 1988, writ denied); W.H. McCrory & Co. v. Contractors Equip. & Supply Co., 691 S.W.2d 717, 721 (Tex.App.—Austin 1985, writ ref'd n.r.e.); see also Tex.R.App.P. 52(a).
I. ELEMENTS OF CAUSE OF ACTION IN UNDERINSURANCE CASE.
Given the hard facts of Farmers predicament of too many serious claims and not enough coverage, and conflicting evidence about what offers and counter-offers were communicated among the various attorneys and parties, I may not have reached the same conclusion as did the fact finding jury.1 The granting of a new trial also may have been a preferable option but that power and discretion is vested in the trial judge who has viewed the live proceedings, not in appellate judges who review a cold, one-dimensional record. As accurately stated by the majority, we are not at liberty to substitute our opinion about the facts if there is legally and factually sufficient evidence to support the verdict.
The dissent contends the no evidence point should be sustained because Soriano did not prove the Lopez settlement was made in bad faith. While the legal analysis of the dissent is seductive in extricating Farmers from this particular judgment, I cannot agree with the breadth of the proposed holding which would have the jury focus only on the tree (the settlement of the Lopez claim) and not look at the forest (the reasonableness or unreasonableness of Farmers handling of the entire claims process). As I understand Texas law, the duty of good faith and fair dealing is owed by the carrier (Farmers) to the insured (Sori-ano). In order for the factfinder to weigh whether there was a breach of the duty to the insured, it necessarily must be allowed to take into account all relevant factors and relationships.2
As conceded by the dissent, there is no Texas authority directly on point in this type of underinsurance case. Further, the out of state authorities relied upon may or may not be factually on point. On the other hand, it appears that the trial judge was following the closest law available in submitting the case similarly to the submission in Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656 (Tex.1987). In compliance with Tex.R.Civ.P. 277, the trial judge broadly asked whether a breach of the duty of good faith and fair dealing occurred. As stated previously, the trial judge did not have the benefit, either at the issue submission stage, or the judgment n.o.v. stage, of the new law proposed by the dissent. While I agree that there are distinguishing factors between the usual Stowers case and an underinsurance case, *833the ultimate issue still remains whether the carrier breached its duty to the insured. I believe the law to be better served if the factfinder looks at all the relevant evidence surrounding the insurer/insured relationship and not focus only on one isolated part of the relationship.
To the extent that the dissent can be interpreted to say there ought to be some way for an insurer to protect itself from bad faith claims in this type of underinsu-rance situation, I agree. Even though in-terpleading of the funds would not discharge the carrier of its responsibility to provide a defense and otherwise remain involved until the disposition of the claims, it would certainly be per se evidence of good faith intentions and would negate any inference that the carrier was trying to increase its profits by not paying the full amount of coverage. This type of rule, it seems to this author, would be a far less radical change in Texas law than that proposed by the dissent, and would continue to allow the jury to look at the whole and not focus merely on some of the parts of the insurer/insured relationship.
Even if the concept of interpleader as a per se negation of bad faith was to evolve into a common law rule in Texas or become statutory law, the evidence is undisputed in this case that Farmers was advised by its counsel to do just that and steadfastly refused. Clearly, the jury seemed to understand this distinction when it made a negative finding of negligence on the part of attorney Auforth, who gave the advice to interplead to Farmers, versus the positive findings of breach of good faith and fair dealing as to Farmers, which refused to follow their own attorney’s advice.
The dissent also bases its proposed new law, in part, on the fear that a carrier might get “set up.” I would simply note that there is absolutely no evidence, nor even an allegation, of any conspiracy or attempt to “set up” in this case. See e.g., Metromedia Long Distance, Inc. v. Hughes, 810 S.W.2d 494, 495-98 (Tex. App.—San Antonio 1991, writ denied).
Finally, if Texas law was to revert to inquiry by the jury about narrow parts (e.g. the Lopez settlement) of the picture as proposed by the dissent, the case, at the very least, should be remanded so that the trial judge, counsel and parties could try the case under the new rules.
II. EXEMPLARY DAMAGES.
Concerning the issue of constitutional due process as it relates to the exemplary damage award, the dissent contends that Texas procedures do not comply with due process requirements; however, the United States Court of Appeals for the 5th Circuit has found that Texas post-trial review procedures do meet the procedural due process requirements established by Haslip. Glasscock v. Armstrong Cork Co., 946 F.2d 1085 (5th Cir.1991). The Texas Supreme Court has not addressed the constitutional due process issue since the United States Supreme Court’s pronouncement in Pacific Mut. Life Ins. Co. v. Haslip, — U.S. -, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991).3 Initially, I note that the Texas Supreme Court in Pennington v. Singleton, 606 S.W.2d 682 (Tex.1980), addressed the constitutional due process issue of excessive fines as it related to the Deceptive Trade Practices Act. Justice McGee, speaking for the Court, held that “the states possess a wide latitude of discretion in the matter of imposing fines, and ‘their enactments transcend the limitation only where the penalty prescribed is to severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable.’ ” Id. at 690, citing St. Louis, Iron Mountain & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67, 40 S.Ct. 71, 73, 64 L.Ed. 139 (1919). In 1986 and 1987, the Texas Supreme Court addressed the standard of review for remittitur in punitive damage cases, overruled the abuse of discretion standard of Flanigan v. Carswell, 159 Tex. 598, 324 S.W.2d 835, 839 (1959) and substi*834tuted the factual sufficiency standard of Larson v. Cactus Util. Co., 730 S.W.2d 640, 641-42 (Tex.1987) and Pope v. Moore, 711 S.W.2d 622, 623-24 (Tex.1986). Recently, several Texas intermediate appellate courts have addressed the issue of due process in relation to punitive damage awards and unanimously have found no constitutional violation. K-Mart Corp. v. Pearson ex rel. Ramos, 818 S.W.2d 410, 417 (Tex.App.—Houston [1st Dist.] 1991, no writ); Fibreboard Corp. v. Pool, 813 S.W.2d 658, 687 (Tex.App.—Texarkana 1991, no writ); Bard v. Charles R. Myers Ins. Agency, Inc., 811 S.W.2d 251, 253 (Tex.App.—San Antonio 1991, writ granted); State Farm Mut. Auto Ins. Co. v. Zubiate, 808 S.W.2d 590, 603-04 (Tex. App.—El Paso 1991, writ denied).4 I also note that, although not applicable to this case because it was pending before passage, the Texas legislature has addressed the question of standards for recovery of exemplary damages and limitations thereon in abrogation of common law concepts, in Tex.Civ.Prac. & Rem.Code Ann. §§ 41.001 et seq. (Vernon Supp.1992).
Turning to the punitive damage award of $5,000,000 in this case, I am struck by the anomalous factual background which was the genesis of the litigation leading ultimately to the multi-million dollar award: an insured (Soriano) carrying minimum insurance coverage commits grossly negligent and reckless conduct causing great tragedy to the Medina and Lopez families; these circumstances were then laid in the lap of Farmers which, as found by the jury, was in breach of its duty of good faith and fair dealing to Soriano. Based on the jury verdict, Farmers is punished and Soriano benefits, from the catastrophe created by Soriano. But for the assignment of Sori-ano’s claim against Farmers to the Medi-nas, we would have an even more “Alice in Wonderland” result of Soriano becoming a multimillionaire notwithstanding his own recklessness. Distilled to its lowest monetary sum, a $5,000 dispute ($20,000 total insurance coverage minus $15,000, the amount remaining for the Medina claims after settling the Lopez claim) has now mushroomed to a $6,000,000 judgment, inclusive of interest.
In spite of Soriano’s calamitous conduct which began this litigation journey, our higher duty to the rule of law requires that we (a) remember this case does not involve Soriano’s conduct and (b) are bound to follow existing Texas precedent.
In applying the Kraus factors a number of Texas appellate courts have concluded that exemplary damage awards required remittitur. Ultimately, whether we apply Kraus or Haslip, the final decision on how much, if any, to remit involves judging the reasonableness of the exemplary damages. For example, in State Farm Mut. Auto. Ins. Co. v. Zubiate, 808 S.W.2d at 593-94, the insureds brought an action against their automobile insurer alleging breach of good faith and fair dealing. Following a jury trial, judgment was entered in favor of the plaintiffs for $165,000 for mental anguish, and $15 million as exemplary damages. Id. at 596. Finding the evidence was not sufficient to support the amount of the punitive damage award, the court of appeals ordered a remittitur in the amount of $14,340,000 stating:
[w]e therefore find that the award of $660,000.00 as punitive damages under the evidence of this case would be fair, proper and reasonable yet consistent with the intent of purposes of allowing recovery of such damages....
Id. at 606 (emphasis added).
In Plaza Nat’l Bank v. Walker, 767 S.W.2d 276, 277 (Tex. App.—Beaumont 1989, writ denied), several depositors brought an action against a bank, alleging breach of contract, fraud, conversion and violations of the Consumer Protection Deceptive Trade Practices Act. Following a jury trial, judgment was entered in favor of the plaintiffs for $400.00 for actual damages and $20,000 as exemplary damages. In ordering a remittitur of $10,000, the court of appeals found:
[a]t the request of Appellant, the court gave a thorough definition which includ*835ed the requirements of exemplary damages. Of course, exemplary damages must also be reasonably proportioned to the amount of actual damages. The reasonableness of any particular award is to be measured on a case by case basis. We think that the award of $20,000 is excessive by $10,000.
Id. at 278 (emphasis added) (citations omitted).
In Underwriters Life Ins. Co. v. Cobb, 746 S.W.2d 810, 817-18 (Tex.App.—Corpus Christi 1988, no writ), the court of appeals determined that:
[t]he amount of exemplary damages awarded must be rationally related to actual damages, and this relationship is a tool to aid the court in determining, depending on the facts of each case, whether the award was excessive. Other factors to be considered in determining the reasonableness of exemplary damages are the nature of the wrong, the character of the defendant’s conduct, the degree of the defendant’s culpability, the situation and sensibility of the parties, and the extent to which the conduct offends the public sense of justice and propriety.
(emphasis added) (citations omitted). After reviewing the evidence as it related to the criteria set forth above, the court restated the general rule that “exemplary damages must bear a reasonable relationship to the actual damages suffered,” and ordered a reduction of $500,000 in the plaintiffs’ $1 million exemplary damage award. Id. at 819, (emphasis added).
In Interfirst Bank Dallas, N.A. v. Risser, 739 S.W.2d 882, 886-87 (Tex.App.—Texarkana 1987, no writ), the beneficial owners of stock in a closely held corporation sued a bank trustee alleging a breach of trust in selling the stock below fair market value. A judgment was entered in favor of the plaintiffs for $1 million in actual damages and $10 million as exemplary damages. Id. at 887-88. The court of appeals noted:
[ejxemplary damages must be reasonably proportioned to actual damages, but there can be no set formula for the ratio between the amount of actual and exemplary damages. This determination must depend upon the facts of each particular case_ In the present case, the exemplary damages amount to approximately 7¾⅛ times the actual damages, which does not violate the reasonable relationship test.
Id. at 909. Chief Justice Cornelius, in a concurring opinion, went on to state:
[i]n judging the reasonableness of punitive damages, we consider the nature of the wrong, the character of the conduct involved, the degree of the wrongdoer’s culpability, the situation and sensibilities of the parties and the extent to which the conduct offends a public sense of justice and propriety.
Id. (citation omitted). After considering the five factors set forth above, as well as “the amount of exemplary damages which is necessary and proper to serve the purposes of punishment and deterrence” the court found the amount of $10 million exemplary damages to be excessive, ordered a remittitur of $7,321,250, and reformed the judgment of the trial court to $2,678,-750. Id.
In Preston Carter Co. v. Tatum, 708 S.W.2d 23, 23 (Tex.App.—Dallas 1986, writ ref’d n.r.e.), the potential buyer of real estate sued an agent for breach of an agency agreement and fiduciary duty. Following a jury trial, the court entered judgment for the plaintiffs for actual damages and exemplary damages. Id. at 23-24. The court of appeals affirmed as to the sum of actual damages and reversed and rendered as to other damages and ordered a remitti-tur to preserve the ratio between reduced actual damages and exemplary damages. The plaintiffs appealed. Id. at 24. The Texas Supreme Court remanded for recalculation of exemplary damages. On remand, the court of appeals held that exemplary damages of $300,000 was excessive and should have been reduced to $75,000, following the appellate reduction of compensatory damages from $165,000 to $40,-000. The court stated:
[a]n award of exemplary damages rests largely in the discretion of the jury and *836will not be set aside as excessive unless the amount is so large as to indicate that it is the result of passion, prejudice, or corruption, or that the evidence has been disregarded. The supreme court has declared, however, that verdicts are not always right and, if uncontrolled, will in some cases lead to oppression. Exces-siveness may be indicated when the jury has probably considered improper items of alleged compensatory damages in assessing exemplary damages. Here it is probable that in assessing exemplary damages of $300,000 the jury considered the improper and highly speculative conclusions presented by [plaintiff] in an effort to recover elements of damages now held to be improper. Accordingly, ... we conclude that a reasonable award of exemplary damages would be no more than $75,000 and that the award of $300,-000 is excessive by $225,000.
Id. at 25 (emphasis added) (citations omitted).
The amount of remittitur of exemplary damages was also addressed by the court of appeals in Ford Motor Co. v. Durrill, 714 S.W.2d 329, 333 (Tex.App.—Corpus Christi 1986), vacated upon agr., 754 S.W.2d 646 (Tex.1987), a wrongful death and survival action based on a products liability claim. The trial court reduced the jury’s award of $6,861,663 in actual damages to $2,300,000 and the jury’s award of $100 million in exemplary damages to $20 million. On appeal, the defendant complained of the lack of evidence to support the $20 million award as remitted by the trial court. Id. at 343. In deciding that a further remittitur was warranted, the court of appeals stated:
[i]t has been said that the ratio between the actual damages and the exemplary damages should be reasonably proportional. However, the rule of reasonable proportionality does not, by, itself, fix a particular ratio....
Id. at 346 (emphasis added) (citations omitted). After reviewing the defendant’s conduct, degree of culpability and the extent to which the defendant’s conduct offended a public sense of justice and propriety, the court determined that the verdict, even as remitted by the trial court still “shock[ed] [the] conscience;” and found that a reasonable remittitur was in order. Id. at 347.
In Texas Nat’l Bank v. Karnes, 711 S.W.2d 389, 391 (Tex.App.—Beaumont), rev’d in part, 717 S.W.2d 901 (Tex.1986), the cosigner of a note and her husband brought suit against a bank for removing money from their savings account after repossession of a vehicle securing the note. The trial court entered judgment for the plaintiffs in the amount of $3,474.41 for actual damages and $50,000 as exemplary damages. The court of appeals found that “some exemplary damages” were proper and reasonable, but reduced the $50,000 punitive damages award to $20,000. Id. at 396-97. The Texas Supreme Court subsequently reversed and vacated the exemplary damage award because no actual damages were found based on a tort cause of action. 717 S.W.2d at 902.
Moreover, in Jim Walters Homes, Inc. v. Reed, 703 S.W.2d 701, 703 (Tex.App.—Corpus Christi 1985), aff'd in part, rev’d in part, 711 S.W.2d 617 (Tex.1986), homeowners brought an action against a housing contractor for violations of the Texas Deceptive Trade Practices Act, breach of contract, breach of express and implied warranties and gross negligence. The trial court entered judgment for the plaintiffs in the amount of $11,884 in actual damages and $500,000 exemplary damages. Id. at 704. The exemplary damages were reduced by the trial court to $450,000. The court of appeals reduced this amount to $225,000, stating “although this conduct is reprehensible, we do not believe that it is of a character that warrants an award of exemplary damages in this amount.” Id. at 707. The Supreme Court of Texas later reversed the award of exemplary damages, as no actual damages were found based upon a tort cause of action. 711 S.W.2d at 618.
Finally, in Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768, 784 (Tex.App.—Houston [1st Dist.] 1987, writ ref’d n.r.e.), cert. dism’d, 485 U.S. 994, 108 S.Ct. 1305, 99 L.Ed.2d 686 (1988), a prospective stock buyer brought suit alleging tortious interfer*837ence with a contract for stock purchase-merger. The court of appeals found that punitive damages of $3 billion were excessive and, under New York state court decisions, ordered a remittitur of $2 billion dollars. The court found:
[considering the type of action, the conduct involved, and the need for deterrence, we are of the opinion that the punitive damages are excessive and that the trial court abused its discretion in not suggesting a remittitur.... There is a point where punitive damages may overstate their purpose and serve to confiscate rather than to deter or punish. In this case, punitive damages of one billion dollars are sufficient to satisfy any reason for their being awarded....
Id. at 866.
Whether applying Kraus, Haslip, or the language from the appellate court opinions cited above, the final decision of whether to order a remittitur and in what amount ultimately involves the essence of judging: coming to a reasonable conclusion based upon careful consideration of the law and facts in a particular case.
Applying these standards to the specific facts here, I agree with the dissent that there is no evidence in the record that Farmers profited from its settlement with Lopez for $5,000. There is evidence of $53,000,000 in premiums earned by Farmers during a given year; however, there is apparently no evidence of its profit margin and, indeed, Farmers quickly offered its entire $20,000 policy limits, for which very little premium likely was paid, soon after the accident. There is no evidence that the conduct complained of was concealed or that Farmers had engaged in similar conduct in the past. Further, concerning the situation and sensibilities of the parties, as pointed out above, it was Soriano, not Farmers, whose conduct created the tragedy in the first instance. Finally, my sense of justice and propriety is simply not offended to the extent of $5,000,000 by Farmers’ conduct. While I am not prepared to say that there is no evidence which would justify exemplary damages, I do note the deposition testimony of Farmers representative read into the record can be interpreted in two ways. On the one hand, the jury could have interpreted it as an expression of contempt and defiance of a jury award of exemplary damages, i.e. “We don’t care what the jury says, we will behave as we please.” On the other hand, it could be interpreted as a good faith opinion that “we didn’t do anything wrong.” Even giving deference to the apparent negative interpretation by the jury, I cannot agree that Farmers conduct, taken as a whole, necessitates $5,000,000 in punishment.
Accordingly, I concur in the result affirming the actual damage award, reforming the judgment to delete a double recovery of pre-judgment interest and would suggest a remittitur of the exemplary damage award in the amount of $4,750,000.

. I note also the conflicting expert opinion evidence, e.g. Guy Allison’s testimony that Farmers was not negligent and David Hockema’s testimony that Farmers was negligent.

. Since our original opinion of July 22, 1992, a relatively new concept has been proposed which, had it been applied here, may have ameliorated some of the "hard facts make bad law” aspects of this case. Although not argued by Farmers, and therefore not applicable, the emerging idea of "comparative bad faith" is a logical extension of the notion that the factfin-der, in its search for truth, should be able to look at the whole forest and not just a few of the trees. This should include a view of the insured’s conduct as well as the insurer’s cause of action. See James Wm. Walker, Comparative Bad Faith — Its Time Has Come in Texas, 55 Tex.B.J. 792 (1992).

. We are mindful, however, of Transportation Ins. Co. v. Moriel, 814 S.W.2d 144 (Tex.App.—El Paso 1991, writ granted).

. See also, Jane Webre, Due Process Constraints on Punitive Damage Awards: Are There Any?, 55 Tex.B.J. 14 (1992), an excellent review of the current state of punitive damage law.