Court Opinion

ID: 5109873
Source: CourtListenerOpinion
Date Created: 2021-10-02 13:23:38.777677+00
Date Added: 2024-06-11T08:21:28.232662
License: Public Domain

CHRISTOPHER ANTCLIFF, Justice,
dissenting.
In 2003, the San Antonio Court of Appeals held, as a matter of law, that “Gotham is entitled to restitution of the benefits paid to Pedeco.” See Gotham Ins. Co. v. Petroleum Dev. Corp., No. 04-01-00375-CV, 2003 WL 21696625, at *7 (Tex.App.-San Antonio July 23, 2003, pet. denied) (mem. op.) (hereafter “Gotham I”). The court also held that Gotham is entitled to restitution from WRI and the Fund. Id. In 2006, the San Antonio Court re-affirmed these holdings to be the law of the case. Warren E & P, Inc. v. Gotham Ins. Co., No. 04-05-00186-CV, 2006 WL 1080246, at *2 (Tex.App.-San Antonio April 26, 2006, pet. denied) (mem. op.) (hereafter Gotham II) (“Gotham I unequivocally held Gotham was entitled to restitution making it the law of the case.... ”).
“Under the law of the case doctrine, a question of law previously decided on appeal governs a case throughout its subsequent stages.” Jones & Gonzalez, P.C. v. Trinh, 340 S.W.3d 830, 836 (Tex.App.-San Antonio 2011, no pet.). The doctrine applies even when a case is transferred to us from another court of appeals. See, e.g., Caplinger v. Allstate Ins. Co., 140 S.W.3d 927, 929-30 (Tex.App.-Dallas 2004, pet. denied); see also Thomas v. Collins, 860 S.W.2d 500, 502 (Tex.App.-Houston [1st Dist.] 1993, writ denied) (treating prior decision of this Court as law of the case). We are required to decide a transferred case in accordance with the precedent of the transferor court, regardless of whether we might have decided the case differently if it had arisen in our own district. See Tex.R.App. P. 41.3. We must follow the transferor court’s precedent “unless it appears that the transferor court itself would not be bound by that precedent.” Id. cmt.
Therefore, the issue before us is whether there is any basis for departing from the San Antonio Court’s ruling. My colleagues have concluded that we need not follow Gotham I because an intervening decision by the Texas Supreme Court changed the law. Because I disagree with this conclusion, I respectfully dissent.
In Matagorda, Matagorda County demanded that its insurer defend and indemnify it against a third-party claim. Tex. Ass’n of Counties County Gov’t Risk Mgmt. Pool v. Matagorda County, 52 S.W.3d 128, 129 (Tex.2000). Believing that the claim fell within a policy exclusion, the insurer filed a declaratory judgment action to determine whether the claim was covered. Id. The plaintiffs in the underlying suit offered to settle within policy limits, and the County’s lawyer determined that *640the proposed settlement was reasonable and prudent. Id. The County, however, refused to contribute any money to the settlement, asserting that the claim was not excluded from coverage and therefore the insurer should pay. Id. at 130.
The policy allowed the insurer to settle claims at its own discretion without the County’s consent. Id. Accordingly, the insurer went forward with the settlement and paid the entire settlement amount. Id. But the insurer sent the County a letter in which it reserved its rights to deny coverage and to seek reimbursement of the settlement funds if it prevailed on the coverage issue in the declaratory judgment action. The County did not respond to the letter. Id. The insurer then amended its declaratory judgment petition to seek reimbursement of the settlement funds. Id. The insurer prevailed on the coverage issue and obtained a judgment for the full amount of the settlement. Id.
The Texas Supreme Court concluded that the County’s silence in response to the reservation-of-rights letter, combined with its acknowledgement that the settlement was reasonable, did not create an implied contractual reimbursement obligation. Id. at 131. The court reached this conclusion by applying ordinary, black-letter contract principles. See id. at 131-33.
The court then considered whether the insurer had an equitable right to reimbursement under the quasi-contractual theories of quantum meruit and unjust enrichment. The court held that these theories did not apply “in the circumstances presented.” Id. at 134. In reaching this conclusion, the court focused on the potential for unfairness to the insured. If the insurer could seek reimbursement under the circumstances presented in the case, the insured would be “forced to choose between rejecting a settlement within policy limits or accepting a possible financial obligation to pay an amount that may be beyond its means, at a time when the insured is most vulnerable.” Id. at 135. Moreover, the insurer is in the best position to determine whether coverage exists. Id. The Supreme Court thus held “that, when coverage is disputed and the insurer is presented with a reasonable settlement demand within policy limits, the insurer may fund the settlement and seek reimbursement only if it obtains the insured’s clear and unequivocal consent to the settlement and the insurer’s right to seek reimbursement.” Id.
In Gotham I, Pedeco argued that Mata-gorda abolished any extra-contractual right of restitution that an insurer might have had against its insured. See 2003 WL 21696625, at *6. The San Antonio Court of Appeals concluded that Matagor-da was distinguishable because it involved an insurer’s suit against its insured for reimbursement of settlement funds paid to a third-party claimant under a reservation of rights after the third party’s claim was adjudicated to be excluded from coverage under a comprehensive general liability policy. Id. By contrast, the issue presented in this case is “whether an insurer is entitled to restitution from its insured when, in reliance upon its insured’s representations, it pays an alleged loss that was in fact ‘no loss’ because it was ‘made good’ by a third party.” Id. (emphasis added). We should follow the San Antonio Court’s ruling in Gotham I unless it was clearly erroneous or a subsequent decision changed the law. Briscoe v. Goodmark Corp., 102 S.W.3d 714, 716 (Tex.2003); City of Dallas v. Jones, 331 S.W.3d 781, 785 (Tex.App.-Dallas 2010, pet. dism’d).
Although I have not found a case defining “clearly erroneous” for law-of-the-case purposes, I believe that it must refer to something more than a mere disagreement with the prior decision. We apply the law-*641of-the-case doctrine to narrow the issues in successive stages of litigation, to achieve uniformity, and to promote judicial economy and efficiency. Briscoe, 102 S.W.3d at 716. The doctrine is based on public policy and is aimed at putting an end to litigation. Id. It discourages parties from relitigating an issue in the hope of finding a more favorably disposed tribunal. See LeBlanc v. State, 826 S.W.2d 640, 644 (Tex.App.-Houston [14th Dist.] 1992, pet. ref'd) (“Without application of this doctrine, appellant would be able to gamble that between two court of appeals’ decisions he would have a better chance of obtaining a favorable ruling by one of them.”).
In my view, Gotham I drew a perfectly reasonable distinction between this case and Matagorda. Whereas Matagorda involved the settlement of a third-party claim, this case involves a first-party claim. The public policy rationales undergirding Matagorda do not apply outside the settlement context.
Moreover, the Texas Supreme Court denied review in both Gotham I and Gotham II. This demonstrates that, at least as of 2006, the San Antonio Court’s interpretation of Matagorda was not clearly erroneous.1 See Caplinger, 140 S.W.3d at 930 (“Where the supreme court declines an opportunity to review a court of appeals’s opinion, that opinion is not clearly erroneous.”); see also Hurd Enters. v. Bruni, 828 S.W.2d 101, 106 (Tex.App.-San Antonio 1992, writ denied); Am. Trading & Prod. Corp. v. Phillips Petroleum Co., 449 S.W.2d 794, 801 (Tex.Civ.App.-El Paso 1969, writ ref'd n.r.e.).
In 2008, the Texas Supreme Court issued its final decision in Frank’s Casing. Like Matagorda, Frank’s Casing again involved settlement of a third-party claim. See Excess Underwriters at Lloyd’s, London v. Frank’s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 43-45 (Tex.2008). The Supreme Court noted that, at least in some respects, the two cases had “indistinguishable facts.” Id. at 51; see also id. at 45 (noting that Matagorda involved “similar, though not identical, circumstances”).
The court reviewed its Matagorda holding and declined to overrule it. See id. at 45-48. In addition to the public policy rationales discussed in Matagorda, the court found other reasons to deny an implied right to reimbursement. As in Ma-tagorda, these reasons derive from the unique circumstances surrounding settlement of a third-party claim. If the insurer had a right to reimbursement, defense counsel might face a conflict of interest during settlement discussions. Id. at 47. A right to reimbursement would also weaken the insurer’s incentive to negotiate a settlement most favorable to the insured. The insurer might seek to limit its litigation expenses by negotiating a quick settlement, all the while knowing that its insured would likely bear the ultimate burden of paying the settlement. Id. These concerns “portend significant distrust in the insurer/insured relationship during the settlement process should an equitable reimbursement right be implied.” Id.
The court next considered the insurers’ attempts to distinguish Matagorda. The insurers argued that Matagorda did not control because the insured sought a settlement demand from the plaintiff and then insisted that the insurers pay it. Id. *642at 50. The insurers further asserted that Matagorda was distinguishable because they were excess insurers with no duty to defend. Id. The Supreme Court held that these distinctions were irrelevant. Id. The court also stated: “There is an additional reason that the excess underwriters are not entitled to a reimbursement right. That is, ‘[w]hen a valid agreement already addresses the matter, recovery under an equitable theory is generally inconsistent with the express agreement.’ ” Id. (quoting Fortune Prod. Co. v. Conoco, 52 S.W.3d 671, 684 (Tex.2000)).
This review of the opinion demonstrates that Frank’s Casing did not change the law. Presented with virtually identical facts as in Matagorda, the court simply adhered to its prior decision. And, again as in Matagorda, the court’s reasoning demonstrates that it was concerned with potential unfairness to an insured who has an opportunity to settle a third-party claim. These concerns do not apply here. No conflict of interest has been suggested. Unlike the scenarios envisioned in Mata-gorda and Frank’s Casing, here Gotham was not in a position to take advantage of Pedeco or to settle a claim for an unreasonable amount, knowing that Pedeco would bear the ultimate responsibility. Instead, Pedeco was the party with superi- or knowledge and Pedeco made representations to Gotham, which were relied upon by Gotham, about its ownership interest and as to which entity was paying the blow-out costs. See Gotham I, No. 04-01-00375-CV, 2003 WL 21696625, at *2.
Although Frank’s Casing indicates that equitable remedies generally cannot supplant or add terms to a contract, it does not preclude all equitable remedies in every situation. The court cited Fortune Production, which held, “Generally speaking, when a valid, express contract covers the subject matter of the parties’ dispute, there can be no recovery under a quasi-contract theory, with certain exceptions not relevant here....” 52 S.W.3d at 684 (emphasis added & citations omitted). One well-recognized exception to this general rule is that a party may recover under the equitable theory of restitution for payments made due to a mistake of fact. “It is [a] settled rule of law that an insurance company which makes payment under a policy because of an erroneous belief induced by a mistake of fact that the terms of the insurance contract required such payment is entitled to restitution from the person receiving such payment, unless it has agreed to assume the risk of mistake, or unless there is some reason which makes it inequitable or inexpedient for restitution to be granted.”, Int’l Ins., Co. v. Jataine, 495 S.W.2d 309, 320-21 (Tex.Civ.App.-Corpus Christi 1973, writ ref'd n.r.e.); accord Community Mut. Ins. Co. v. Owen, 804 S.W.2d 602, 605 (Tex.App.-Houston [1st Dist.] 1991, writ denied); Singer v. St. Paul Mercury Ins. Co., 478 S.W.2d 579, 583 (Tex.Civ.App.-San Antonio 1972, writ ref' n.r.e.). The San Antonio Court of Appeals relied on this exception in Gotham I, and there is nothing in Frank’s Casing to suggest that the exception is no longer valid. See Gotham I, 2003 WL 21696625, at * 6.
As a result of Pedeco’s representations, Gotham erroneously believed that Pedeco’s claim was covered by the policy. Thus, Gotham made payments under a mistake of fact. By contrast, the insurers in Frank’s Casing and Matagorda made payments under a mistake of law. Unlike Gotham, they did not believe that the claims were covered, but they paid the claims under the assumption that they could obtain reimbursement if they ultimately prevailed on the coverage issues. See Owen, 804 S.W.2d at 605 (“A mistake of law means a mistake as to the legal consequences of an assumed state of *643facts.”); see also Pennell v. United Ins. Co., 150 Tex. 541, 243 S.W.2d 572, 576 (1951) (“There is no suggestion in the record that there was a mistake of fact as to the kind of automobile in which petitioner was riding when injured or any other mistake of fact. The question whether the double indemnity provision of the policy applied to the jeep, the answer to which determined respondent’s liability or nonlia-bility for double indemnity, was one of law.”).
Finally, even if Frank’s I Casing changed the law as to Gotham’s claim against Pedeco, it certainly does not foreclose Gotham’s claim for restitution from WRI and the Fund. Neither WRI nor the Fund were parties to the insurance policy. As discussed above, Frank’s Casing and Matagorda were based on the existence of an insurer/insured relationship and on the existence of a contract. Neither of these facts apply to WRI and the Fund.
Because Frank’s Casing did not change the law as announced in Matagorda, I would affirm the judgment of the trial court, and I respectfully dissent.

. Indeed, the San Antonio Court in Gotham I and Gotham II issued memorandum opinions pursuant to Rule 47.4 of the Texas Rules of Appellate Procedure, a clear indication that the Court considered the issues raised "settled” even in light of the Supreme Court’s holding in Matagorda.