In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-23-00403-CV __________________
IN RE GEICO INDEMNITY INSURANCE COMPANY
__________________________________________________________________
Original Proceeding 60th District Court of Jefferson County, Texas Trial Cause No. B-203,493 __________________________________________________________________
MEMORANDUM OPINION
In a petition for a writ of mandamus, Relator Geico Indemnity Insurance
Company (“GEICO”) complains that the trial court clearly abused its discretion by
“disgorging” GEICO of its settlement proceeds from a property damage claim and
ordering GEICO to deliver all but $1,500 of GEICO’s settlement proceeds to counsel
for the Real Parties in Interest, Adena Amber Guthrie and Cody Wayne Guthrie. We
stayed all further proceedings in the trial court while the Guthries responded to
GEICO’s mandamus petition. We conditionally grant mandamus relief.
1 Background
In July 2018, the Guthries leased a 2018 Jaguar from Barrett Jaguar. Barrett
Jaguar assigned its rights as lessor to JP Morgan Chase Bank NA (“Chase”). The
lease agreement required the Guthries to keep the vehicle insured, including at least
$50,000 for property damage coverage. The lease stated in part, “You authorize us
to settle any claim for loss or damage to the Vehicle, and to collect insurance
proceeds, directly with or from your insurer, as well as to endorse your name on and
negotiate any insurance check or draft.” Under the lease, the Guthries were
responsible for the risk of loss to the vehicle, and the lease required that they
promptly pay the adjusted lease balance should the vehicle be damaged beyond
repair. They agreed to indemnify the lessor for any damages that might occur to the
vehicle.
In connection with their obligation under the lease, the Guthries obtained an
auto insurance policy from GEICO to insure the Jaguar. The policy included a
statement, “3. LEGAL ACTION AGAINST US[,] a. No legal action may be brought
against us [GEICO] until there has been full compliance with all the terms of this
policy.” The policy expressly provided GEICO with the contractual right to seek
subrogation and reimbursement for any payments GEICO made on behalf of the
Guthries:
2 4. OUR RIGHT TO RECOVER PAYMENT
a. If we make a payment under this policy and the person to or for whom payment was made has a right to recover damages from another, we shall be subrogated to that right. That person shall do: 1. Whatever is necessary to enable us to exercise our rights; and 2. Nothing after loss to prejudice them. (A release of the insurer of an underinsured motor vehicle does not prejudice our rights.) .... b. If we make a payment under this policy and the person to or for whom payment is made recovers damages from another, that person shall: 1. Hold in trust for us the proceeds of the recovery; and 2. Reimburse us to the extent of our payment. (However, we may not claim the amount recovered from an insurer of any underinsured motor vehicle.)
After a multiple-vehicle accident occurred on Interstate 10 on January 25,
2019, the Guthries sued Denzel Danai Benjamin-Helaire and his employer, Tidus
Nadie Trucking LLC, for negligence. The trial court consolidated the Guthries’
lawsuit into a lawsuit filed by Christopher Dowden and Ashley Castrogiovanni, in
which they were seeking to recover damages from the same accident. Jennifer Perot
intervened into the suit and filed a negligence claim for bodily injury against the
defendants.
On January 24, 2020, National Liability & Fire Insurance Company
(“National”) notified the Guthries’ attorney and others, including several claimants
that had not joined in Trial Cause Number B203,493, that in connection with the
occurrence covered by a $1,000,000 policy it had already received demands in
excess of $1,125,191 for bodily injuries and property damages, including a January
3 31, 2019, property damage demand from GEICO’s attorney. The record indicates
that GEICO paid Chase (the lienholder for the Jaguar being leased by the Guthries
at the time of the accident) the total sum of $41,229.
According to the Guthries, National tendered its policy limits. On May 5,
2020, all parties, including the Guthries and GEICO, attended a mediation that
resulted in the Guthries and GEICO being allocated a reduced sum in settlement of
their claims.
On June 9, 2020, GEICO intervened in the consolidated lawsuit to recover
subrogation damages in an amount of at least $38,655.61. In June and August,
Dowden, Perot, and Castrogiovanni non-suited their claims.
On October 6, 2020, the Guthries filed a Motion to Seal Document. The
document referred to in the motion was a Motion for Apportionment, which the
Guthries asked the trial court to review in camera so that the award they received
from would remain confidential and so the allocations in the settlements could
remain confidential. A certificate of service indicated the instrument had been
delivered to all counsel of record and stated it was mailed to GEICO’s attorney,
Dowden’s attorney, and the attorney for the defendants. The cover letter for the
motion noted, “this delivery is made by mail in order for the Plaintiffs’ Motion for
Apportionment to be ‘sealed’ and reviewed by the Court in camera.”
4 On October 20, 2020, the Guthries filed a Notice of Withdrawal of Motion to
Seal Document. In their notice, the Guthries stated that the Motion to Seal Document
was moot because “their claims have been filed and presented to the Court[,]” and
“The Court has reviewed the Plaintiff’s pleadings in camera.” A certificate of
service indicated the instrument had been delivered to counsel of record for GEICO,
among others. On January 11, 2021, the trial court signed an order granting the
Guthries’ Motion to Seal the Guthries’ Motion for Apportionment, ordered the
District Clerk to intake the Motion for Apportionment as “Confidential[,]” and stated
that the court would consider the document in camera.
On January 15, 2021, the Guthries gave notice of a remote access oral hearing
of the Motion for Apportionment on January 20, 2021, at 3:00 p.m. A certificate of
service indicated the instrument had been delivered to all counsel of record,
including GEICO’s counsel, the lawyer for Dowden, and the lawyer for the
On January 20, 2021, at 2:56 p.m., GEICO filed a Notice of Non-Suit with
Prejudice. The trial court signed a Final Order of Non-Suit with Prejudice the
following afternoon, on January 21, 2021. Before the trial court signed the Order of
Non-Suit, however, it signed an Order for Apportionment, which ordered “that the
entirety of the funds awarded to Adena Amber Guthrie and Cody Wayne Guthrie,
for personal injuries and to GEICO, for property damage, be tendered to the Court
5 pending the Court’s determination of apportionment, attorney fees and expenses.”
The trial court further ordered that “Adena Amber Guthrie is awarded the total sum
of $23,750.00 for personal injuries received in the incident subject of this suit;” that
“Cody Wayne Guthrie is awarded the total sum of $10,750.00 for personal injuries
received in the incident subject of this suit;” and “GEICO is awarded the total sum
of $1[,]500.00 for its claims alleged in this suit.”
On February 8, 2021, GEICO filed a Motion to Vacate Nonsuit and Reinstate
Claim and Motion to Vacate Orders to Seal and for Apportionment and Motion for
Rehearing on Plaintiff Guthries’ Motion for Apportionment. Along with these
motions, GEICO filed a brief with supporting exhibits. GEICO alleged that the
Motion for Apportionment had not been served on GEICO, and it argued that the
Motion for Apportionment contained information that wasn’t correct and that it was
actually seeking a “disgorgement of GEICO’s [settlement] funds” that were already
in GEICO’s possession from the settlement GEICO reached with the defendants
separately, an agreement over which the trial court lacked authority. GEICO
explained that GEICO’s counsel failed to attend the hearing on the Motion for
Apportionment because of misdeeds by opposing counsel, its own counsel’s
inadvertent error in calendaring the hearing, and because GEICO had resolved its
claims at the mediation, it believed its interests were not at issue in the January 20,
2021 hearing and GEICO was unaware the trial court had signed an order
6 “disgorging” GEICO of its settlement proceeds when GEICO had filed its notice of
nonsuit. GEICO further argued that the trial court’s order operated as a collateral
attack on GEICO’s mediated settlement agreement. GEICO complained that it had
no notice that the trial court would make a final adjudication in the case on January
20, 2021. GEICO complained that it had not been effectively or properly served with
the Motion for Apportionment and argued that the trial court lacked the authority to
divest GEICO of the funds it bargained for in a settlement agreement with the
defendants by taking them away and awarding them to another party.
GEICO complained that the Motion to Seal and the attached or
contemporaneously filed “Motion for Apportionment” had been manually filed but
later withdrawn by the Guthries, and as a result there was no motion to support either
the January 11, 2021 sealing order or the January 20, 2021 Order for Apportionment.
GEICO alleged it had not been served with the Motion for Apportionment at any
time before the January 20, 2021 hearing, that GEICO’s counsel first became aware
of the hearing about an hour before it was scheduled to start, that counsel already
had a conflicting calendar event and assumed the hearing did not affect GEICO’s
interest because the Motion to Seal had been withdrawn three months earlier and
GEICO’s counsel had never seen the Motion for Apportionment. GEICO alleged the
Motion for Apportionment was baseless because GEICO negotiated and received its
7 own settlement funds pursuant to its own separate contractual settlement agreement
with National.
GEICO attached supporting documentation to its Brief in Support of its
motions, including: (1) the January 11, 2021 Order granting the Motion to Seal; (2)
the Motion for Apportionment; (3) the January 21, 2021 Order for Apportionment;
(4) the Motor Vehicle Lease Agreement with Barrett Jaguar; (5) an email from the
Guthries’ lawyer to GEICO’s lawyer informing her that the trial court had
considered the motion for apportionment and that he anticipated the trial court would
sign an order; and (6) a copy of Gonzalez v. CIGNA Insurance Co. of Texas, 924
S.W.2d 183 (Tex. App.—San Antonio 1996, writ denied), a case that GEICO argued
the Guthries had cited to the court in a misleading manner.
The Guthries submitted a response opposing GEICO’s motions. The Guthries
argued GEICO had been notified of the hearing but its counsel chose not to appear
after being notified of the hearing on the motion to apportion, that the trial court “had
jurisdiction and authority to equitably divide the proceeds obtained by the Guthries
and apportion a fair amount to the property subrogation interest[,]” and that
GEICO’s failure to file a written response to the motion and appear for the hearing
“is fatal to Movant’s position.” The Guthries argued that their attorney served the
Notice of Hearing on GEICO’s attorney on January 15, 2021, through the e-file
system and that GEICO’s attorney received this service and chose to ignore the
8 proceedings. According to the Guthries, GEICO’s attorney had knowledge of the
Guthries’ claims under the Motion for Apportionment, the Motion to Seal, and the
proposed order since October 2020 when “[t]he documents were forwarded via U.S.
Mail to preserve confidentiality of the monies awarded during mediation.” They
argued their Motion to Withdraw Motion to Seal informed GEICO that the trial court
had reviewed their Motion for Apportionment in camera.
The trial court held a hearing on GEICO’s Motion for Reconsideration on
March 3, 2021. The trial court took judicial notice of the filings and pleadings in the
case. GEICO argued the trial court lacked the jurisdiction to disturb a settlement
agreement contract where no party to the agreement asked the trial court to enforce
it. The Guthries argued GEICO’s lawyer knew a motion had been filed in October
2020 and knew the trial court would hear the motion on January 11 before that
hearing occurred but decided not to attend. In response to that argument, GEICO’s
lawyer explained that she never received the Motion for Apportionment, and she
argued that the Guthries had not supplied proof that the motion had been mailed and
received. GEICO’s attorney explained that she had been dealing with defense
counsel and had already settled GEICO’s case against the trucking company and the
driver and that she thought she did not need to participate in the Guthries’ hearing
because she had already executed the settlement documents with the defendants. She
9 stated that the first time she saw the Motion for Apportionment was when the
Guthries’ lawyer e-mailed it to her the day after the hearing.
On March 9, 2021, stating that it had considered “the facts, exhibits and
pleadings[,]” the docket sheet, and the matters leading up to the filing of GEICO’s
motions, the trial court denied the motion to vacate the nonsuit and reinstate
GEICO’s claim, denied the motion to vacate the orders to seal and for
apportionment, and denied the motion for rehearing on the motion for
apportionment.
On March 31, 2021, the Guthries filed a Motion to Enforce Court Order and
Affirmative Claims. They asked the trial court to enforce its order of March 9, 2021,
by ordering GEICO “to perform as ordered and to deliver the funds to the
undersigned within three days of the Court’s order.” The motion included an
allegation that “[t]he funds belong to the Plaintiffs” and that by refusing to tender
the funds to counsel for the Guthries, GEICO “has wrongfully exercised control over
the money[]” for which “Plaintiffs seek return of their property plus actual
damages[]” and interest. The motion alleged GEICO’s “failure to return funds, to
continue to convert those funds and to refuse to provide or follow the Court’s order
is a breach of fiduciary duty[]” created by the insurance contract for which the
Guthries “seek to recover actual damages, economic damages, mental anguish
10 damages, forfeiture and all other damages permitted by Texas law, and attorney
fees.”
On April 26, 2021, GEICO filed a Motion to Reconsider Order for
Apportionment and Objection to Plaintiff Guthries’ Motion to Enforce. GEICO
argued that the Guthries relied upon inapplicable workers’ compensation law to ask
the trial court to provide the Guthries with most of GEICO’s settlement proceeds
while ignoring the lawful contract of insurance and ignoring the fact that neither the
Guthries nor their lawyer were parties to the settlement agreement between GEICO
and the defendants’ insurance company. GEICO argued under the terms of the
insurance contract the Guthries agreed that GEICO retained a contractual right of
subrogation and a contractual right to reimbursement, in exchange for GEICO
assuming the risk of paying property damage on the Jaguar. GEICO argued that
following the accident the Guthries exercised their contractual right to ask GEICO
to handle their property damage claim and GEICO paid off the balance of the
Guthries’ lease with Barrett Jaguar and paid property damage to Chase, but when
GEICO sought to exercise its contractual right to subrogation, the Guthries
attempted to thwart GEICO’s contractual right by requesting the court to provide the
Guthries with GEICO’s settlement proceeds related to GEICO’s property
subrogation claim. GEICO argued any equitable argument relating to subrogation
must yield to GEICO’s contractual right of subrogation and any ruling to the
11 contrary constitutes an improper re-writing of the insurance policy’s subrogation and
reimbursement clauses. GEICO asked the trial court to withdraw the Order on
Guthries’ Motion for Apportionment, deny the Motion for Apportionment, and
dismiss with prejudice the Guthries’ affirmative claims for conversion and breach of
fiduciary duty. GEICO attached to the motion the Lease Agreement documents, the
Texas Personal Auto Policy, the rental reimbursement and property damage claim
receipts, a copy of GEICO’s Petition in Intervention, GEICO’s December 14, 2020
property damage release to the defendants and their insurance company, and a
declaration authenticating the documents attached to the motion.
On September 28, 2021, the trial court held a remote access hearing on
GEICO’s Motion to Reconsider. The Guthries argued GEICO’s motion should be
denied because GEICO had failed to appear for the hearing on the Motion for
Apportionment. Counsel for the Guthries asked the trial court to order “the uninsured
motorist claim and this matter to a mediation for a half day to work it out because,
otherwise, you’ve heard this twice and ruled on it.” The trial court took the matter
under consideration.
On September 28, 2021, the trial court ordered the parties to mediation. On
November 18, 2021, GEICO notified the trial court by letter that the mediation had
been unsuccessful and requested a ruling on its motion to reconsider the order for
apportionment. On December 9, 2021, by letter to the trial court the Guthries again
12 reminded the trial court that GEICO’s attorney chose not to attend the January 20,
2021 hearing and attached copies of the January 21, 2021 Order For Apportionment
and the March 9, 2021 Order denying GEICO’s Motion to Vacate Nonsuit and
Reinstate Claim, Motion to Vacate Orders to Seal and for Apportionment, and
Motion for Rehearing on Guthries’ Motion for Apportionment.
On November 27, 2023, the Guthries gave notice of a December 11, 2023
status conference. At the December 11, 2023 status conference, the trial court noted
that it had not yet ruled on the motion for reconsideration, and stated the motion
would be denied. On December 21, 2023, the trial court signed an order denying
GEICO’s motion for reconsideration. The trial court affirmed the January 21, 2021,
Order for Apportionment and ordered GEICO to deliver the funds referenced in that
order to counsel for the Guthries within 30 days. GEICO filed its Petition for
Mandamus with this Court six days later, on December 27, 2023.
Mandamus Standard
We may issue a writ of mandamus to remedy a clear abuse of discretion by
the trial court when the relator lacks an adequate remedy by appeal. See In re
Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding);
Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding).
“A trial court clearly abuses its discretion if it reaches a decision so arbitrary
and unreasonable as to amount to a clear and prejudicial error of law.” Walker, 827
13 S.W.2d at 839 (internal quotations omitted). A trial court also abuses its discretion
if it fails to correctly analyze or apply the law, because “‘[a] trial court has no
‘discretion’ in determining what the law is or [in] applying the law to the facts[.]’”
See Prudential, 148 S.W.3d at 135 (quoting Walker, 827 S.W.2d at 840).
We determine the adequacy of an appellate remedy by balancing the benefits
of mandamus review against the detriments, considering whether extending
mandamus relief will preserve important substantive and procedural rights from
impairment or loss. In re Team Rocket, L.P., 256 S.W.3d 257, 262 (Tex. 2008) (orig.
proceeding). This balancing test is necessarily a fact-specific inquiry that “resists
categorization[.]” Prudential, 148 S.W.3d at 136. “The most frequent use we have
made of mandamus relief involves cases in which the very act of proceeding to
trial—regardless of the outcome—would defeat the substantive right involved.” In
re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 465 (Tex. 2008) (orig. proceeding).
Disputed Issues
GEICO contends the trial court abused its discretion by disgorging GEICO of
its settlement proceeds and then giving those proceeds to the Guthries on their bodily
injury plaintiffs who were not a party to GEICO’s settlement agreement. GEICO
also argues the trial court abused its discretion by ruling on the Guthries’ Motion for
Apportionment when a copy of the motion was not served on GEICO until after the
hearing and the hearing notice was ambiguous as to whether the hearing was relevant
14 to GEICO. GEICO argues it lacks an adequate remedy by appeal. We also note that,
at the time the trial court issued its order requiring GEICO to turn over its settlement
proceeds, the Guthries had not filed a suit or any claims against GEICO.
The Guthries’ Motion for Apportionment and the January 21, 2021 Order of Apportionment
First, we examine the legal and factual basis asserted by the Guthries to
support their Motion for Apportionment. The Guthries’ Motion for Apportionment
stated, “Movants do not ask for the Court to disturb the allocations [of the
distribution amounts awarded to each claimant], except for those funds allocated to
the Guthries and their property damage insurance carrier, Geico.” Citing Mantas v.
Fifth Court of Appeals, 925 S.W.2d 656, 659 (Tex. 1996) (orig. proceeding), they
argued that a claim to enforce a settlement agreement should, if possible, be asserted
in that court under the original cause number. They asserted the court had authority
to impose the sanctions and relief requested under Rules 13 and 215 of the Texas
Rules of Civil Procedure, Chapters 9 and 10 of the Civil Practice and Remedies
Code, and the cases cited in the Motion for Apportionment.
Chapters 9 and 10 of the Texas Civil Practice and Remedies Code and Texas
Rule of Civil Procedure 13 concern sanctions for filing frivolous claims and Texas
Rule of Civil Procedure 215 concerns sanctions for discovery abuse. See generally
Tex. Civ. Prac. & Rem. Code Ann. §§ 9.012 (providing for a trial court to strike a
pleading, dismiss a party, or order the offending party to pay the incurred expenses 15 of opposing party as a sanction for filing a frivolous pleading); 10.004 (providing
that upon finding a person has signed a frivolous pleading or motion, the trial court
may direct the violator to perform or refrain from performing an act, pay a penalty
to the court, or pay the opposing party’s reasonable expenses incurred because of the
filing of the frivolous pleading or motion); Tex. R. Civ. P. 13 (the trial court may
impose a sanction for filing an instrument that is groundless or made in bad faith;
Tex. R. Civ. P. 215 (providing for sanctions for abuse of discovery). None of these
rules or statutes have any application to this situation, in which the plaintiffs sought
a trial court order requiring the intervenor to surrender most of the settlement the
intervenor had obtained through mediation with the defendants.
The cases cited in the Guthries’ Motion for Apportionment concern when and
how to deduct attorneys’ fees from a personal injury recovery before reimbursing
the workers’ compensation carrier for benefits paid under the workers’
compensation laws. See Ill. Nat’l Ins. Co. v. Perez, 794 S.W.2d 373, 377 (Tex.
App.—Corpus Christi 1990, writ denied); Bridges v. Tex. A&M Univ. Sys., 790
S.W.2d 831, 833 (Tex. App.—Houston [14th Dist.] 1990, no writ). The Guthries
relied on these cases and Labor Code section 417.002 as “guidelines” for calculating
the net amount recovered by a claimant in a third-party action to reimburse the
insurance carrier for benefits it provided to a claimant. Section 417.002 of the Texas
Labor Code concerns recovery in a third-party action in a workers’ compensation
16 case. See Tex. Lab. Code Ann. § 417.002. The Guthries’ Motion for Apportionment
asserted a right to apportionment provided by the Workers’ Compensation Act. The
Guthries’ arguments in support of their basis for their apportionment simply do not
apply to this case because GEICO’s settlement funds have absolutely nothing to do
with workers’ compensation.
In their response to GEICO’s mandamus petition, the Guthries argue they
were requesting an equitable redistribution of moneys disproportionately allocated
to the property insurance carrier. Citing Ortiz v. Great Southern Fire & Casualty
Insurance Company, the Guthries argue an insurer is not entitled to compensation
until after the insured is compensated for their loss. See 597 S.W.2d 342, 344 (Tex.
1980). But GEICO had a contractual right under its policy to seek reimbursement
for the amounts it paid under the insurance policy. There are three varieties of
subrogation—equitable, contractual, and statutory—each representing distinct rights
that are independent of each other. Fortis Benefits v. Cantu, 234 S.W.3d 642, 648
(Tex. 2007). “Where a valid contract prescribes particular remedies or imposes
particular obligations, equity generally must yield unless the contract violates
positive law or offends public policy.” Id. at 648-49. Parties are free to replace
equitable protections with specific contract language. Id. at 649. “[C]ontract-based
subrogation rights should be governed by the parties’ express agreement and not
invalidated by equitable considerations that might control by default in the absence
17 of an agreement.” Id. at 650. The Guthries provided the trial court with workers’
compensation cases and statutes that were completely inapplicable to this matter.
The Guthries completely ignored the provisions in the contract of insurance, and
wholly failed to articulate a valid legal basis for their Motion for Apportionment.
In addition to lacking a valid legal basis, the face of the record establishes that
the Guthries’ stated factual basis for the requested “reapportionment” is
demonstrably incorrect. The Guthries’ Motion for Apportionment claims that
GEICO’s counsel did not participate in the settlement of the matter, but the record
shows that allegation is not true. National provided notice to GEICO as subrogee of
Cody Guthrie through GEICO’s own lawyer, who thereafter filed GEICO’s Petition
in Intervention, who negotiated its own mediated settlement agreement with
National. And, then in accordance with the terms of the settlement agreement
between GEICO and National, the attorney who represented Geico filed a notice of
nonsuit on its subrogation claim.
GEICO contends the trial court abused its discretion in ordering GEICO to
disgorge its settlement proceeds and requiring GEICO to hand over those proceeds
to the Guthries, who were not a party to the Geico and National settlement
agreement. According to GEICO, under their insurance agreement with GEICO, the
Guthries have no right to the settlement proceeds GEICO recovered pursuant to its
settlement with National and the defendants. Additionally, GEICO argues the
18 Guthries lack standing to seek to modify the settlement agreement because they were
neither parties to the agreement nor third party beneficiaries to it. The Guthries argue
they have standing to “challenge the apportionment” because GEICO’s claim for
recovery against the defendants derives from the rights of the Guthries as GEICO’s
insured.
“A settlement agreement is a contract, and its construction is governed by
legal principles applicable to contracts generally.” Austin Tr. Co. as Tr. of Bob &
Elizabeth Lanier Descendants Trs. for Robert Clayton Lanier, Jr. v. Houren, 664
S.W.3d 35, 42 (Tex. 2023). The release signed by GEICO released National and its
insureds from property damage claims, and it does not purport to release anyone for
claims for bodily injuries. GEICO retains its rights as outlined in the insurance
contract. GEICO had the contractual right to seek a reimbursement from National
and then to negotiate and receive settlement proceeds from National. The contract
gave GEICO the right to recover the subrogated property damage claim from
National and the Defendants, and it required the Guthries to assist GEICO in its
recovery of the property damage payment. Nothing in the insurance contract grants
the Guthries the right to require GEICO to disgorge its settlement, nor does it grant
the Guthries the right to take possession of all or any portion of the property damage
settlement that GEICO obtained by its own efforts, or the right to ask that a trial
19 court compel GEICO to hand the proceeds of all or part of the settlement GEICO
made with a third-party to the Guthries or their attorney. .
A guiding principle here is that a court should not “judicially rewrite the
parties’ contract by engrafting extra-contractual standards that neither the
Legislature nor the Texas Department of Insurance has thus far decided to
promulgate.” Fortis Benefits, 234 S.W.3d at 649. We conclude the trial court abused
its discretion by failing to follow that principle.
March 9, 2021 Order Denying Motion to Vacate
GEICO also argues the trial court abused its discretion by denying GEICO’s
February 8, 2021 Motion to Vacate Nonsuit and Reinstate Claim, Motion to Vacate
Orders to Seal and for Apportionment, and Motion for Rehearing on Plaintiff
Guthries’ Motion for Apportionment. GEICO contends the Guthries failed to
comply with Texas Rule of Civil Procedure 21(a) when they submitted their Motion
to Seal and their Motion for Apportionment to the trial court on October 6, 2020.
Rule 21(a) provides:
Filing and Service Required. Every pleading, plea, motion, or application to the court for an order, whether in the form of a motion, plea, or other form of request, unless presented during a hearing or trial, must be filed with the clerk of the court in writing, must state the grounds therefor, must set forth the relief or order sought, and at the same time a true copy must be served on all other parties, and must be noted on the docket.
Tex. R. Civ. P. 21(a).
20 The defects in notice that GEICO contends resulted in a denial of due process
include: (1) the docket sheet indicates that the Guthries filed a Motion to Seal, but
the docket sheet has no indication that a motion for apportionment was ever filed;
(2) the Guthries failed to use the electronic filing and service system when they
submitted the Motion to Seal; (3) in the Motion to Seal, the Guthries requested that
the trial court seal their Motion for Apportionment and requested that the trial court
review their Motion for Apportionment in camera, but the Motion to Seal failed to
mention that the Guthries were seeking relief against GEICO (a party they had not
sued); (4) the Motion to Seal states that the Motion for Apportionment is attached
and is being filed contemporaneously, but nothing is attached or filed separately; and
(5) months later, and shortly before the scheduled hearing, the trial court signed an
order stating that the court would review the motion for apportionment in camera.
GEICO complains that the January 15, 2021, Notice of Hearing was
ambiguous. The notice stated that the trial court would consider the Guthries’
Motion for Apportionment, but it failed to mention GEICO or what the Guthries
sought to have apportioned. Although a link was sent to every lawyer who still had
a client in the case, nothing in the link or the motion stated that GEICO’s settlement
with National was the subject of the hearing. GEICO contends that the Guthries
failed to serve a copy of the Motion for Apportionment on GEICO until after the
hearing occurred. GEICO argues that the lack of service of the Motion for
21 Apportionment, together with the ambiguous hearing notice, violated GEICO’s right
to due process.
The Guthries argue GEICO was properly served and put on notice of the
Motion for Apportionment when the Guthries mailed a copy of the motion to counsel
for GEICO contemporaneously with the filing of their Motion to Seal on October 5,
2020. They argue GEICO was served a second time when the Guthries filed a Notice
of Withdrawal of the Motion to Seal the Motion for Apportionment. They contend
the trial court granted the motion on January 11, 2021, giving GEICO access to view
the apportionment. They argue the filings complied with Rule 21a because they were
filed with the clerk, stated the grounds of the claim as well as the relief sought, and
a true copy was sent to all parties and was noted on the docket.
“Notice is ‘[a]n elementary and fundamental requirement of due process.’” B.
Gregg Price, P.C. v. Series 1 - Virage Master LP, 661 S.W.3d 419, 422 (Tex. 2023)
(quoting Mullane v. Centr. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950). For
parties to a lawsuit, procedural due process requires notice of trial court proceedings.
Id. “Such notice must be ‘reasonably calculated, under all the circumstances, to
apprise interested parties of the pendency of the action and afford them an
opportunity to present their objections.’” Id. at 423 (quoting Mullane, 339 U.S. at
314). “When parties are not afforded a meaningful opportunity to be heard, ‘the
22 remedy for a denial of due process is due process.’” Id. (quoting Univ. of Tex. Med.
Sch. at Hous. v. Than, 901 S.W.2d 926, 933 (Tex. 1995)).
To the extent the failure to appear at the hearing in question was the basis for
the trial court’s ruling, GEICO contends this matter should be examined under
principles that apply to a default judgment. A trial court should set aside a default
judgment and grant a new trial when the defaulting party establishes that (1) the
failure to appear was not intentional or the result of conscious indifference, but was
the result of an accident or mistake, (2) the motion for new trial sets up a meritorious
defense, and (3) granting the motion will occasion no delay or otherwise injure the
plaintiff. Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (Tex. 1939).
The record establishes that the Guthries had no pending claims against GEICO
at the time the Guthries filed the Motion for Apportionment, or at the time GEICO
filed its Motion to Vacate, and by the time the Motion for Apportionment was filed,
GEICO had already settled its property damage reimbursement claim against the
defendants. GEICO’s attorney sufficiently explained that the failure to appear was
not intentional or the result of conscious indifference. GEICO established that its
attorney first read the motion on the day after the trial court signed both the order
for apportionment and the order on GEICO’s non-suit. The parties were required to
electronically file their documents. See Tex. R. Civ. P. 21(f). The Guthries did not
electronically file the Motion for Apportionment, evidently in reliance on an
23 exception for documents filed under seal or presented to the court for in camera
inspection. See Tex. R. Civ. P. 21(f)(4)(B). We note that there is a certificate of
service on the Guthries’ Motion for Apportionment. In the March 3, 2021, hearing
on GEICO’s Motion to Vacate, however, GEICO’s lawyer stated that she never
received the Motion for Apportionment through regular mail, and she noted that the
Guthries had not submitted any controverting proof that the Motion for
Apportionment was sent by U.S. mail and received by her.
The Guthries suggest that GEICO could have accessed the motion between
October 20, 2020, and January 11, 2021, but there is no evidence in the record that
it was available on e-file during that time. Although there is an indication in the
record that the motion to seal was withdrawn on October 20, 2020, there is nothing
in our record showing the contents of the motion to seal and the Motion for
Apportionment were available to GEICO ahead of the January 20, 2021 hearing.
Although GEICO’s lawyer learned of the scheduled Motion for Apportionment
hearing five days before the trial court held the hearing, GEICO sufficiently
explained the failure to attend the hearing had been inadvertent. GEICO believed it
had settled its claim on its own and filed a notice of non-suit of its claim. Therefore,
GEICO reasonably believed it would not be involved in any apportionment as to any
other funds. GEICO emphasized it had not received the Motion for Apportionment,
which was submitted to the trial court in camera. Consequently, GEICO was not
24 aware that the Guthries had asserted an invalid basis for ordering GEICO to disgorge
its settlement.
On the record before us, we conclude that GEICO established that it had a
meritorious defense to the Motion for Apportionment, and that the motion lacked a
valid legal basis. As a matter of law, the Guthries lacked any right or interest in
GEICO’s settlement proceeds, as the lease agreement and the insurance policy gave
GEICO the right to pay off the lease, pursue its subrogation claim itself, and settle
the property damage claim with the defendants without the Guthries’ participation.
It is the policy of the State of Texas to encourage the peaceable resolution of
disputes. See Tex. Civ. Prac. & Rem. Code Ann. § 154.002. The trial court is
responsible for carrying out the policy of peaceable resolution of disputes. Id.
§ 152.003. Rather than enforcing the GEICO settlement agreement with the
defendants and their insurance carrier according to its terms, the trial court
improperly employed equitable subrogation principles borrowed from workers’
compensation cases and eviscerated GEICO’s contractual rights. See Fortis Benefits,
234 S.W.3d at 650.
Granting a new hearing in March 2021 would not have occasioned a delay or
injury to the Guthries because the trial court lacked the authority to compel GEICO
to tender its settlement proceeds to the trial court or to award any part of GEICO’s
settlement proceeds to the Guthries, who held no claim to or interest in the
25 $21,763.34 that GEICO recovered on its $38,655.51 claim for the benefits the
Guthries had already realized under the insurance policy.
We conclude that the trial court abused its discretion by signing the March 9,
2021 Order denying Geico Indemnity Insurance Company’s Motion to Vacate
Nonsuit and Reinstate Claim; Motion to Vacate Orders to Seal and for
Apportionment; and Motion for Rehearing on Plaintiff Guthries’ Motion for
Apportionment and Motion to Deny Same. GEICO established that GEICO’s failure
to attend the hearing had been inadvertent, showed it had a meritorious defense to
the Motion for Apportionment, and established that granting the motion would not
have delayed the proceedings.
December 21, 2023 Order Enforcing Order for Apportionment
The Guthries also moved to enforce the Order for Apportionment a few weeks
after the trial court denied GEICO’s Motion to Vacate. Their motion argued
GEICO’s failure to tender all but $1,500 of the property subrogation settlement
funds was tortious because the Guthries owned the funds and GEICO was violating
a fiduciary duty by withholding them. In response to the Guthries’ Motion to
Enforce, GEICO reminded the trial court that the Guthries had relied on inapplicable
workers’ compensation law and that awarding GEICO’s settlement funds to the
Guthries violated applicable Texas Supreme Court precedent because the order was
contrary to both the insurance policy and the settlement agreement. Rather than rule
26 on the motions that were before the trial court, the trial court accepted the Guthries’
suggestion to order the parties to mediate. Approximately two years later, the trial
court then denied GEICO’s Motion to Reconsider without expressly ruling on the
Guthries’ Motion to Enforce and for the first time ordered GEICO to deliver the
funds, not to the trial court, but directly to the Guthries’ attorney.
Citing Rivercenter Associates v. Rivera, the Guthries argue in this mandamus
proceeding that GEICO inexcusably delayed seeking mandamus relief from the
appellate court. See 858 S.W.2d 366, 367 (Tex. 1993) (orig. proceeding). We
disagree. The record indicates that GEICO promptly notified the trial court that the
mediation had been unsuccessful and requested a ruling on its Motion to Reconsider.
The trial court left the Guthries’ Motion to Enforce and GEICO’s Motion to
Reconsider pending for two years. GEICO promptly sought mandamus relief after
the trial court ruled on GEICO’s Motion to Reconsider and ordered GEICO to
deliver the settlement funds directly to the Guthries’ lawyer.
We conclude that the trial court abused its discretion by denying GEICO’s
Motion to Reconsider and entering its Order of December 21, 2023. The Order for
Apportionment was interlocutory and the Motion to Reconsider was based on
controlling precedent and was filed in response to the Guthries’ Motion to Enforce.
Therefore, GEICO correctly argued the trial court lacked authority to grant the
Motion for Apportionment and to order GEICO to surrender its subrogation
27 settlement to the insured. GEICO established that its failure to appear for the hearing
on the Motion for Apportionment was not due to conscious indifference, that the
Motion for Apportionment lacked a valid basis in law and in fact, and that the trial
court’s orders were contrary to Fortis Benefits. See 234 S.W.3d at 650.
When we balance the benefits of mandamus review against the detriments, we
conclude mandamus relief is necessary to preserve GEICO’s substantive and
procedural rights from impairment or loss. See Team Rocket, 256 S.W.3d at 262.
The trial court’s orders deprive GEICO of its contractual right to recover its property
damage claim from the responsible parties without a trial and interfere with
GEICO’s settlement agreement with the responsible parties’ insurer. Not only has
GEICO been unjustly deprived of its contractual rights under the insurance policy to
recover, but also in their motion to enforce the trial court’s orders of January 21,
2021 and March 9, 2021, the Guthries have also asserted additional claims against
GEICO for allegedly converting the $21,763.34 settlement that GEICO made with
the defendants and for breach of fiduciary duty for failing to obey the trial court’s
order. Allowing the trial court’s orders to stand until GEICO can challenge them on
appeal will expose all parties to litigation expense and liability exposure for
conversion and breach of fiduciary duty for failing to comply with the trial court’s
improper orders. GEICO lacks an adequate remedy by appeal.
28 Conclusion
We conclude that the trial court abused its discretion by granting the Motion
for Apportionment, by denying the Motion to Vacate, by denying the Motion to
Reconsider, and by ordering GEICO to surrender to another the funds it received in
its settlement for its release of the property damage claim. We further conclude that
GEICO lacks an adequate remedy by appeal. We lift our stay order and conditionally
grant mandamus relief. We are confident that the trial court will vacate its orders of
January 21, 2021, March 9, 2021, and December 21, 2023, and that it will sign an
order denying the Motion for Apportionment. The writ shall issue only if trial court
fails to comply.
PETITION CONDITIONALLY GRANTED.
PER CURIAM
Submitted on February 7, 2024 Opinion Delivered June 13, 2024
Before Golemon, C.J., Johnson and Wright, JJ.