TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-01-00084-CV
John W. Berkel and John W. Berkel, P.C./Texas Property and Casualty Insurance Guaranty Association, Appellants
v.
Texas Property and Casualty Insurance Guaranty Association/John W. Berkel and John W. Berkel, P.C., Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT NO. 479,513, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING
John W. Berkel, P.C. (ABerkel@) sued the Texas Property and Casualty Insurance Guaranty
Association (AAssociation@) and Stephen S. Durish (AReceiver@) in his capacity as receiver for National
County Mutual Fire Insurance Company (ANational@).1 On competing motions for summary judgment, the
trial court awarded Berkel judgment against the association in the amount of $6,306 on Berkel=s cause of
action to enforce a contract.2 The judgment denied, however, Berkel=s related claims for statutory
attorney=s fees, statutory postjudgment interest, and prejudgment interest.
1 It is undisputed in the summary judgment record that John W. Berkel is the president and sole shareholder of John W. Berkel, P.C. John W. Berkel appeared in the cause as a plaintiff; the trial-court judgment orders that he take nothing in his individual capacity. We will affirm that order. He appears as an appellee only in the event a dispute arises concerning the standing of the professional corporation. None has arisen. The Association appeals from that part of the judgment awarding Berkel a recovery of
$6,306. We will affirm that part of the judgment. Berkel appeals from that part of the judgment denying its
claims for attorney=s fees, prejudgment interest, and postjudgment interest. We will reverse that part of the
judgment, sever it from the remainder, and remand to the trial court the part reversed.
THE CONTROVERSY
Leonard Jiminez purchased from National a policy of automobile-liability insurance. In
1986, during the policy term, Jane T. Winnow sued Jiminez in Harris County to recover for personal injuries
Early in the litigation, Berkel recovered a Apartial@ summary judgment against the Receiver in the amount of $842. The Receiver paid the judgment. As a result, the final judgment we now review orders that Berkel take nothing by his claim against the Receiver. We will affirm that part of the judgment. No party has appealed from that part; the Receiver is not a party to the appeal. 2 Berkel=s live petition at the time of the summary judgment proceeding alleged alternative causes of action, namely: (a) an action to enforce a contract under which he was owed $6,306; (b) an action for damages in that amount for breach of contract, and (c) an action on sworn account arising from dealings between the parties. Berkel=s motion for summary judgment, liberally construed in favor of the Association, requested judgment on all three actions. We will affirm the judgment on the basis of (a) and need not consider the remaining two actions.
2 she allegedly sustained in an automobile collision with Jiminez. National engaged Berkel to defend Jiminez.
Following a jury trial in March 1989, the trial court ordered that Winnow take nothing by her suit against
Jiminez.
In Cause Number 453,041, the 201st Judicial District Court of Travis County, by an order
dated October 24, 1988, placed National in receivership. The receivership proceeding was governed by
article 21.28 of the Texas Insurance Code. See Tex. Ins. Code Ann. art. 21.28 (West Supp. 2002). On
February 9, 1989, the Commissioner of Insurance designated National an Aimpaired insurer@ as defined in
article 21.28-C of the code. See Tex. Ins. Code Ann. art. 21.28-C, ' 5(9) (West Supp. 2002). Berkel
thereafter filed in Cause Number 453,041 an updated proof of claim for services provided and expenses
incurred in defending Jiminez.
In a letter dated November 14, 1989, the Receiver notified Berkel as follows:
[Your claim] has been approved as a covered claim in the amount of $6,306.00 under the provisions of Article[s] 21.28 and 21.28-C of the Texas Insurance Code. A check in the amount of $6,306.00 will be forwarded to you when we receive a properly executed release. Please execute the enclosed release and have it properly notarized [sic] before a notary public before returning it to us.
(Emphasis added.) Berkel signed the sworn release before a notary public on November 28, 1989, and
returned it to the Receiver. Thereafter the Receiver gave Berkel a bank check in the amount of $6,306
dated January 4, 1990. It was, however, made payable to Berkel and Jiminez jointly. Berkel was unable
to locate Jiminez to obtain his endorsement. As a result, Berkel could not negotiate the check for payment.
3 The Receiver refused to issue a check payable solely to Berkel. Berkel=s written demand for payment was
unsuccessful.
While the receivership remained pending in Cause Number 453,041, Berkel filed in the
same court a petition initiating Cause Number 479,513, the litigation now before us on appeal. The original
petition, afterward amended, fairly set forth alternative causes of action, namely: (1) an action to enforce an
express contract allegedly evidenced by Berkel=s proof of claim, the Receiver=s letter of November 14,
1989, Berkel=s execution and delivery of the release, and the $6,306 bank check; (2) an action for breach
of that alleged contract; and, (3) an action on sworn account. Because we conclude the summary judgment
record established as a matter of law Berkel=s right to recover on the first cause of action, we need not
discuss the others.
The cause now before us remained unadjudicated when the judge in the receivership
proceeding signed on August 5, 1994, an AAgreed Order in Connection with Guaranty Association=s
Election.@ Among other provisions, the agreed order directed the Receiver to notify Aall persons and entities
with pending unresolved >covered claims= in this receivership@ that the Association had elected to assume the
payment of Acovered claims@ under articles 21.28 and 21.28-C. Under the heading AFindings,@ the
receivership court determined as follows in the agreed order: (1) the Association is the receiver=s Astatutory
successor . . . with respect to the obligation to handle and pay all >covered claims= on policies issued by
National County@; (2) the Association, in electing to assume payment of covered claims Adoes not succeed
to or assume any liabilities . . . which have been asserted against the Receiver . . . which are not >covered
4 claims= as defined in Tex. Ins. Code Ann. art. 21.28-C@; and, (3) the Association Ahas no obligations in
connection with any other claims except those that are >covered claims.=@
In a verified answer filed in the present cause after the date of the agreed order, the
Association interposed against Berkel=s actions the following: (1) a general denial and a denial of the
particulars of Berkel=s sworn account; (2) a denial that the Association was a party to any contract alleged
by Berkel as a basis for a contract action; and, (3) a denial that Berkel=s claim was a Acovered claim,@ the
only kind of claim for which the Association is liable under the Code. The Association alleged Berkel=s
claim was not a covered claim under the Code because Berkel=s proof of claim was defective; and,
moreover, neither the Receiver nor the Association was obliged to defend Jiminez for whom Berkel
conducted a defense. Construing this last-named allegation most favorably to the Association, we interpret
it to be an allegation that Berkel=s claim was not a covered claim because it did not arise out of the Jiminez
policy and was not within its coverage, a matter we will explain below.
The parties filed competing motions for summary judgment consistent with their theories of
action and defense. Without stating a basis therefor, the trial court awarded Berkel summary judgment for
$6,306 but denied Berkel=s related claims for statutory attorney=s fees, prejudgment interest, and
postjudgment interest. These appeals ensued.
THE STATUTES
The material facts are undisputed. The appeals depend upon the construction and
application of articles 21.28 and 21.28-C of the Texas Insurance Code, as those statutes existed at the
relevant times. The two statutes govern receivership proceedings applicable to certain kinds of insurance
5 companies. We believe it will be convenient and useful to summarize the relevant statutory provisions
before turning to the parties= respective assignments of error. In our summary, unless otherwise indicated,
citations refer to the Texas Insurance Code as it existed in 1999.3
Article 21.28
Article 21.28, insofar as it applies here, establishes procedures that govern the receivership
of insurers domiciled in Texas. When a district court finds it necessary to do so, it appoints a receiver
designated by the State Board of Insurance. Title to the insurer=s property and other assets ordinarily vests
in the receiver on the date the proceeding commenced; and, the rights and liabilities of the insurer, policy
holders, creditors, and others interested in the estate are ordinarily fixed on the same date, save for the
rights of claimants holding unliquidated or undetermined claims. Tex. Ins. Code Ann. art. 21.28, ' 2(a)-(c)
(West Supp. 2002).
On taking possession of an insurer=s assets, the receiver conducts the insurer=s business
thereafter subject to the direction of the court. The receiver is not, however, required to defend any action
brought against the insurer=s insured. The receiver=s obligations, in relation to the insurer=s assets, are
secured by the receiver=s bond. Id. ' 2(d), (e).
3 Unless a material change occurred after 1999, the current code is cited for convenience. As part of the statutory recodification program, articles one through twenty-seven of the existing insurance code were recodified as Title One of the current code, now with the short title, AThe Insurance Code of 1951.@ See Act of April 30, 1999, 76th Leg., R.S., ch. 104, ' 2, 1999 Tex. Gen. Laws 534.
6 Included among the receiver=s responsibilities are a duty and discretionary power to
approve or reject claims against the insurer based upon a proof-of-claim procedure set out in the statute. If
the receiver approves a claim, an interested party may object. After notice and hearing, the receivership
court then determines the disputed claim in the receivership proceeding itself. If the receiver rejects a
claim, the claimant may have the issue re-determined in a trial de novo conducted in the receivership court
but in a separate cause that is governed by the rules of procedure and appeal applicable in civil cases
generally. Id. ' 3(a)-(h). Approved claims are paid from the insurer=s assets according to a schedule of
priorities prescribed in the statute. Id. ' 8.
The legislature intended that the foregoing provisions of article 21.28 operate in pari materia
with the provision of article 21.28-C. See, e.g., Tex. Ins. Code Ann. art. 21.28-C, '' 2, 8(a), 10(a), 17,
19 (West Supp. 2002).
Article 21.28-C
Article 21.28-C was enacted to provide funds that a receiver may draw upon to pay
covered claims (and protect in other ways the holders of such claims) when the assets of the receivership
estate are temporarily unavailable or prove insufficient for the purpose. Id. '' 2, 8. The statutory
apparatus for effectuating this purpose is set out in article 21.28-C operating in conjunction with article
21.28.
Article 21.28-C establishes the Association as a non-profit legal entity. As a condition
precedent to the authorized transaction of insurance in Texas, the statute requires compliance with its terms
7 by all insurers licensed to do business in the State save those expressly excluded. Id. ' 3(a). National
comes within the scope of the statute. See id. ' 6.
The Association operates under a plan approved by the Commissioner of Insurance and
undertakes generally to discharge the policy obligations of an impaired insurer in receivership. Id. '' 8(b),
9. To that end, the Association investigates, adjusts, compromises, settles, and pays claims against the
impaired insurer to the extent of the Association=s obligations under the statute. Id. ' 8(d).
The funds that article 21.28-C was designed to provide derive from a system of
proportional assessments made against Association members from time to time. The resulting funds
supplement those available to the receiver from marshalling and liquidating the insurer=s assets in the
receivership proceeding. Id. '' 8(c), 18-20.
In administering the provisions of article 21.28-C, the Association is obligated to pay
Acovered claims@ that exist before an insurer is designated an impaired insurer or that arise within certain
periods thereafter; and, A[t]he obligation is satisfied by paying to the claimant the full amount of a covered
claim for benefits.@ Id. ' 8(a).
ACovered claim,@ a key term for purposes of this appeal, is defined in article 21.28-C. In a
broad sense, the term encompasses claims made on insurance policies issued by an Aimpaired insurer.@ Id.
' 5(8). An impaired insurer is one Aplaced in temporary or permanent receivership under an order of a
court . . . based on a finding of insolvency and that has been designated an impaired insurer by the
[C]ommissioner@ of Insurance. Id. ' 5(9)(A). The term Acovered claim@ is limited, however, by the
following provisos: (1) the claim must be made by an insured or by a third-party liability claimant; (2) the
8 claim must arise out of and be within policy coverage, and may not exceed policy limits; (3) the policy must
be one issued or assumed by an insurer licensed to do business in Texas and the claimant must be a Texas
resident at the time of the insured event; (4) the claim is limited in amount to $300,000 save for worker=s
compensation claims; and (5) the term A>covered claim= shall not include supplementary payment obligations,
including adjustment fees and expenses, attorney=s fees and expenses, court costs, interest and penalties,
and interest and bond premiums incurred prior to the determination that an insurer is an impaired insurer
under this Act[,]@ nor shall the term Ainclude any prejudgment or postjudgment interest that accrues
subsequent to the determination that an insurer is an impaired insurer under this Act.@ Id. ' 5(8).
THE ASSOCIATION=S APPEAL
The Association contends the trial court erred in denying its motion for summary judgment
and sustaining Berkel=s motion. The Association reasons that Berkel=s claim is not a covered claim as a
matter of law under a proper construction and application of the statutory provisions outlined above; and,
because the Association is liable solely for covered claims, the judgment must be reversed. The Association
points out that neither the Receiver nor the Association was obliged to defend Jiminez; thus, Berkel=s claim
for defending Jiminez is not within the policy and could not arise out of it as article 21.28-C, section 5(8)
requires. See Memorial Med. Ctr. v. Howard, 975 S.W.2d 691, 693-694 (Tex. App.CAustin 1998, pet.
denied). Moreover, the Association argues, article 21.28-C, section 5(8) defines the term Acovered claim@
to mean Aan unpaid claim of an insured or third-party liability claimant,@ and Berkel is neither. He was,
instead, simply an attorney engaged by National to defend Jiminez. See Texas Prop. & Cas. Guar. Ass=n
v. Southwest Aggregates, Inc., 982 S.W.2d 600, 610 (Tex. App.CAustin 1998, no pet.).
9 These contentions, however valid they may be in the abstract, come too late and in the
wrong proceeding. In Howard and Southwest Aggregates, Inc., the trial court was called upon to make
an original decision on the issue of whether a claim amounted to a Acovered claim@ under the statutory
provisions outlined above. In the present case, however, the trial court was governed in its decision by this
undisputed fact: the Receiver had previously determined, in an exercise of his statutory powers and
responsibilities, that Berkel=s claim was a covered claim in the amount of $6,306. And Berkel sued in the
present cause to enforce the contract of which the Receiver=s determination was an evidentiary part. See
generally 17B C.J.S. Contracts ' 600, 303-304; ' 732, 465 (1999).
The trial court was not free to disregard the Receiver=s determination. It was immaterial in
the trial court that the Receiver=s determination might be erroneous under Howard and Southwest
Aggregates, Inc. The trial court was not free to re-open the issue of whether Berkel=s claim was a covered
claim.
The legislature placed in the Receiver Adiscretion to approve or reject any claim filed
against the insurer.@ Tex. Ins. Code Ann. art. 21.28, ' 3(h) (West Supp. 2002). It cannot reasonably be
contended, therefore, that the Receiver acted outside his jurisdiction when he determined that Berkel=sclaim
was a covered claim. Whether that determination be legally right or wrong in the abstract, it was
nevertheless a valid exercise of the Receiver=s statutory authority. Article 21.28, section 3(h) explicitly
contemplates that the receiver might err, within the limits of his jurisdiction and discretion, in deciding
whether a claim is a covered claim. Yet his determination is final and binding unless set aside in the manner
10 authorized by the statutes themselves: that is the intent, meaning, and express effect of that part of article
28.28, section 3(h), providing for a judicial re-determination of whether a claim is a covered claim.
If the receiver rejects a claim, the claimant may within three months after receiving notice of
the rejection sue in a separate cause in the receivership court and have his claim heard and determined de
novo as in an ordinary civil case; Aotherwise, the action of the receiver shall be final and not subject to
review.@ Id. If the Receiver does not reject a claim, this is to say, if he approves a claim as the Receiver
did in Berkel=s case, Aany party interested@ may challenge the Receiver=s determination by filing Aobjections
with the receiver, who shall forthwith present them to the [receivership] court for determination after notice
and hearing.@ Id. This was the exclusive remedy and forum to challenge the Receiver=s covered-claim
determination.
The Receiver=s determination that Berkel=s claim was a covered claim was never objected
to, set aside, or revised in the only manner by which that may be done under the pertinent statutory
provisions. It is not contended that the Receiver=s determination was invalid because procured by fraud,
nor is it contended that he acted outside his jurisdiction. His determination is final and binding on Berkel and
the Association. Id. It is a subsisting determination by an officer having statutory authority and a duty to
make it. The trial judge was not free to disregard, revise, or set it aside in the present case outside the
receivership proceeding.
We reject the Association=s theory that Berkel=s live petition amounts to a suit for judicial
review of the Receiver=s determination by trial de novo. The Receiver did not reject Berkel=s claimCa
statutory prerequisite to Berkel=s right to judicial review. Instead, the Receiver approved his claim as a
11 covered claim. And Berkel does not seek to revise or set aside the Receiver=s decision; rather, Berkel=s
petition unmistakably requests enforcement of that decision as a valid unpaid obligation of the Association.
The Association also argues as follows: (1) its funds may not be used to pay Berkel=s claim
because the Association is not the Receiver; (2) the Association was not a party to any purported contract
between the Receiver and Berkel; and, (3) the agreed order of August 8, 1994, in the receivership
proceeding, expressly limited the Association=s obligations to the payment of Acovered claims.@ We will not
revisit the issue of whether Berkel=s claim is a covered claimCBerkel=s claim bears that character as a
matter of law for purposes of the present litigation and for the reasons given previously. And the fact that
the Association is not the same entity as the Receiver is immaterial, as is the fact that the Association was
not a party to any contract between Berkel and the Receiver. The Association=s liability on the contract
arises from the undisputed facts, the terms of the agreed order, and the statutory provisions invoked by that
order.
Cause Number 453,041, the National receivership proceeding, was initiated before January
1, 1992. In that cause, the Association elected to assume its responsibilities in the receivership under
articles 21.28 and 21.28-C as they existed at the time. See Act of Aug. 25, 1991, 72d Leg., 2d C.S., ch.
12, ' 1.27(b), 1991 Tex. Gen. Laws 310. Under those statutes, the Receiver was required to refer
covered claims to the Association Afor processing@ and the Association was directed to Apay covered
claims. . . . The obligation is satisfied by paying to the claimant the full amount of a covered claim for
benefits.@ Id. '' 1.03, 1.20, sec. 8(a) (emphasis added).4
4 Section 1.03 of the 1991 enactment amended section 3 of article 21.28 by adding subsection (i) to
12 read as follows:
(i) Notwithstanding any other provision of this article, if a claim is covered by a guaranty fund created under Article . . . 21.28-C . . . of this code, the receiver shall refer the claim to the . . . guaranty association for processing.
Act of Aug. 25, 1991, 72d Leg., 2d C.S., ch. 12, ' 1.03, 1999 Tex. Gen. Laws 253. Section 1.20 of the 1991 enactment amended article 21.28-C of the Insurance Code extensively. After the amendment, section 8 of article 21.28-C provided as follows:
Sec. 8. POWERS AND DUTIES OF ASSOCIATION. (a) The association shall pay covered claims that exist before the designation of impairment or that arise within 30 days after the date of the designation of impairment, before the policy expiration date if the policy expiration date is within 30 days after the date of the designation of impairment, or before the insured replaces the policy or causes its cancellation if the insured does so within 30 days after the date of the designation. The obligation is satisfied by paying to the claimant the full amount of a covered claim for benefits.
Id. ' 1.20, sec. 8(a), 1999 Tex. Gen. Laws 266 (emphasis added). Section 1.27(b) of the 1991 enactment authorized the Association to Aelect to assume its responsibilities under this Act in proceedings initiated before January 1, 1992,@ the effective date of the enactment. Id. ' 1.27(b), 1999 Tex. Gen. Laws 310.
13 In terms consistent with the statutory provisions, the agreed order spelled out the
Association=s obligations. Under the agreed order, Athe Receiver is required . . . to refer >covered claims= to
the Association@; Athe association is the statutory successor to the Receiver with respect to the obligation to
handle and pay all >covered claims=@; the Receiver=s Aduties and responsibilities as to the >covered claims= . .
. terminate as of the date of [the Association=s] election@; and, Athe Association is the proper party in any
cause of action related to the obligation to pay >covered claims= in this receivership.@
The terms of the agreed order and the relevant statutory provisions as they existed at the
time repel the Association=s theory that its funds may not be used to pay Berkel=s $6,306 claim and the
Association=s theory that it has no contract obligation respecting that claim. The theories are untenable for
the additional reason that they produce an absurd result the legislature could not have intended: under those
theories neither the Association nor the Receiver would be obliged to pay Berkel=s claim even though it has
subsisted as a covered claim since 1990 when the Receiver established its validity as such.
We hold the trial court did not err in awarding Berkel judgment for $6,306, the Afull
amount@ of his covered claim as determined by the Receiver.
14 BERKEL=S APPEAL
Berkel appeals from that part of the trial-court judgment that denies its claim for statutory
attorney=s fees, prejudgment interest, and postjudgment interest. The claim for prejudgment interest is
based on the common-law rule that such interest is an incident of a debt due and owing; the claim for
postjudgment interest is founded on section 304.001 of the Texas Finance Code. See Tex. Fin. Code Ann.
' 304.001 (West Supp. 2002). The claim for statutory attorney=s fees rests on section 38.001 of the Texas
Civil Practice and Remedies Code, authorizing such fees in suits founded on contract. See Tex. Civ. Prac.
& Rem. Code Ann. ' 38.001(8) (West 1997). The issue reduces to whether the provisions of articles
21.28 and 21.28-C, properly construed, allowed a recovery of such sums in cases like the present.
In reaching his decision about whether Berkel=s claim was a covered claim under the
statutes, the Receiver was expressly forbidden to include attorney=s fees in calculating the amount of the
covered claim.5 In the case before us now, that is not an issue; it is not even a consideration. We are
required instead to decide whether the trial court erred in denying Berkel=s claims for attorney=s fees for
work done in this lawsuit, and the interest claimed, when Berkel was forced to sue to recover the $6,306
that the Receiver determined he was owed as a covered claim.
5 See, e.g., Metry, Metry, Sanom & Ashare v. Michigan Prop. & Cas. Guar. Ass=n, 267 N.W.2d 695, 697-98 (Mich. 1978); Ohio Ins. Guar. Ass=n v. Simpson, 439 N.E.2d 1257, 1258-59 (Ohio Ct. App. 1981). Articles 21.28-C and 21.28 expressly exclude such sums from the category of covered claims. The Receiver presumably complied with the statutory provisions.
15 Berkel=s proof of claim and release, the Receiver=s award of $6,306 as a covered claim,
and his issuance of a bank check in that amount were undisputed in the summary-judgment Aevidence.@
They established as a matter of law a right to recover $6,306 on the express contract alleged by Berkel.
See generally 17B C.J.S. Contracts ' 600 at 303-304; ' 732 at 465 (1999). We believe Berkel was
entitled to attorney=s fees, postjudgment interest, and perhaps some part of his claim for prejudgment
interest that we cannot calculate from the record before us.
The Association was obligated to pay the Afull amount@ of Berkel=s claim. See Tex. Ins.
Code Ann. art. 21.28-C, ' 8(a) (West Supp. 2002). These provisions indicate, in our view, a legislative
intention that the Association shall place in the holder=s pocket the exact amount of a covered claim finally
fixed in the receivership proceeding in the manner indicated previously. Against this inference, however, we
must weigh other statutory provisions that might suggest a contrary intention on the legislature=s part.
Certain statutory provisions might permit a contrary inference. They must, however, be
understood in context. We refer to the express language of article 21.28-C, section 5(8), declaring that a
Acovered claim@ shall not include attorney=s fees and expenses or any prejudgment or postjudgment interest
that accrues subsequent to the determination that an insurer is an impaired insurer under the Act. Id. ' 5(8).
These provisions were intended to govern the Receiver=s decision-making process whereby a claim is
determined to be a covered claim or not, and if so, in what amount. That is the statutory context in which
they are found. We find in the statutes nothing that suggests the express prohibition against attorney=s fees,
postjudgment interest, and prejudgment interest was meant to apply after the receiver makes his covered-
claim decision and the time limit for judicial review of that decision has expired, as in the present case.
16 Article 21.28, section 8(d), declares explicitly that A[i]nterest shall not accrue on any claim
subsequent to the date of the commencement of delinquency proceedings.@ Tex. Ins. Code Ann. art. ' 8(d)
(West Supp. 2002). This provision is part of a schedule of relative priorities established by the legislature in
connection with the final distribution of receivership assets. It governs all valid claims, whether made by an
insured, a general creditor, a secured creditor, or any other. Section 8(d) of article 21.28 appears from its
statutory context to govern the entire period between the commencement and end of the receivership
proceeding. We therefore conclude that it prohibits recovery of prejudgment interest for the period
indicated. If a covered claim is approved but payment is withheld, however, we see nothing in the statutes
that precludes recovery of prejudgment interest, commencing with the date covered claims became due and
payable as a class in the regular course of the receivership proceeding as provided in article 21.28, sections
7A and 8.
Nothing in articles 21.28 and 21.28-C expressly purports to preclude attorney=s fees and
postjudgment interest in cases where payment is withheld after a receiver=s covered-claim determination has
become final and binding and the claimant is forced to sue to recover the amount of his contract debt. Were
such ancillary sums denied, we believe it would in practical effect negate the claimant=s statutory right to the
Afull amount@ of his covered claim, reducing the amount of the claim by the time value of the money involved
and the attorney=s fees required to collect it. Consequently, we believe Berkel was entitled to the statutory
attorney=s fees and statutory postjudgment interest for which he prayed, and the trial-court judgment
constitutes an abuse of discretion for denying those sums. The Association=s fundamental challenge to
Berkel=s claim was that it was not a Acovered claim@ within the pertinent statutes. The trial court properly
17 rejected that challenge. Berkel has prevailed on its action to enforce the contract alleged. No reason
appears in the record for denying Berkel=s claim for statutory attorney=s fees and postjudgment interest. We
hold accordingly.
REMAINING ASSIGNMENTS OF ERROR
The Association brings several additional assignments of error. These are directed at a trial-
court order that overruled the Association=s special exceptions levelled at Berkel=s motion for summary
judgment, a supporting affidavit that accompanied the motion, and Berkel=s affidavit opposing the
Association=s motion for summary judgment.
Berkel=s Motion for Summary Judgment
We believe we may, by analogy, appraise the sufficiency of Berkel=s motion for summary
judgment under the rules applicable to pleadings. Rule 45 requires Aa statement in plain and concise
language of the plaintiff=s cause of action or the defendant=s grounds of defense.@ Tex. R. Civ. P. 45(b).
Rule 47 demands Aa short statement of the cause of action sufficient to give fair notice of the claim
involved.@ Tex. R. Civ. P. 47(a) (emphasis added). AFair notice@ requires information sufficient to enable
the adverse party to prepare a responsive pleading and prepare for trial. (Only the first is applicable in the
summary judgment context where the adverse party may file a response to the motion for summary
judgment and no evidence is taken at the hearing in which the motion is determined.) The adverse party is
not, however, expected to place upon the movant=s language every construction that it will possibly bear: the
movant=s language must be understood in its ordinary meaning. In assessing the sufficiency of that language
18 to give fair notice, a court is guided by two competing factors: the intent of the rules to simplify pleadings
and eliminate technicalities; and, the fact that a fair trial is impossible unless both parties and the court
understand the basic controversy to be determined. 2 Texas Civil Practice ' 7:4, 129-131 (Diane M.
Allen et al. eds., 1992 ed.) (Roy W. McDonald, orig. ed.). AThe test should be whether an opposing
attorney of reasonable competence, perusing the pleadings, can ascertain the nature and the basic issues of
the controversy.@ Id. at 131; see, e.g., Garvey v. Vawter, 795 S.W.2d 741, 742 (Tex. 1990); Thomas
v. Cisneros, 596 S.W.2d 313, 316 (Tex. Civ. App.CAustin 1980, writ ref=d n.r.e.).
While the Association levelled numerous special exceptions at Berkel=s motion, it complains
on appeal that the trial judge abused her discretion in overruling only five, namely: that Berkel=s motion failed
to: (1) state the elements of a covered claim; (2) distinguish between the Receiver and the Association; (3)
distinguish between Berkel and John W. Berkel in his individual capacity; (4) identify the subsisting final
judgment upon which Berkel based a claim that he was entitled to prejudgment interest by reason of res
judicata; and, (5) state the grounds upon which Berkel claimed a right to summary judgment.
Items one and two are based on the Association=s erroneous premise that Berkel sued in
the present cause to establish a covered claim as an original matter. In its motion, Berkel spelled out the
relationship between the Receiver and the Association as we have summarized it previously. The
Association=s assumption of the Receiver=s obligations under the agreed order and relevant statutory
provisions is an undisputed fact in the summary judgment record.
Concerning item three above, we observe that Berkel=s motion is replete with references to
both Berkel and John W. Berkel in his individual capacity, but the two names are not, as the Association
19 contends, used Ainterchangeably@ in the sense that the motion averred a right to duplicate recoveries. We
believe the Association could not have been misled in this regard. The exact relationship between the two
plaintiffs is set out in the motion, John W. Berkel=s accompanying affidavit, and the balance of the summary
judgment record.
Item four does complain, we believe correctly, of a want of fair notice in the matter of res
judicata. Any error was harmless, however, because we have held that Berkel might be entitled to a part of
its claim to prejudgment interest on the independent ground that such a recovery is authorized under the
pertinent statutory provisions discussed previously.
We disagree with the contention in item five that Berkel=s motion failed to give fair notice of
the ground upon which it requested judgment as a matter of law. Following a lengthy recitation of the facts
surrounding and giving rise to the present litigation, Berkel=s motion recited as follows:
Accordingly, Plaintiffs seek judgment against Defendants for the amount of the previously approved covered claim and for [attorney=s fees] reasonably and necessarily occurred [sic] in this cause, pre- and post-judgment interest as may be allowed in law, costs of court and all other relief to which Plaintiffs may be entitled. ....
The issues in dispute in this cause relate to the legal liability, if any, of [the Association] for interest and attorney=s fees on a previously approved claim. ....
Accordingly, Plaintiffs move the Court to make a legal determination on whether or not the Guaranty Fund is liable for interest and attorney=s fees incurred in the prosecution of the instant suit to collect an approved claim. These are legal questions and not factual questions.
20 We believe the foregoing is plainly sufficient to give fair notice, in the requisite sense of that term, regarding
the ground upon which Berkel asked for summary judgment.
We hold the trial judge did not abuse her discretion in overruling the special exceptions
made by the Association against Berkel=s motion for summary judgment.
Berkel=s Affidavits
The Association objected to an affidavit filed by Berkel in support of its motion for summary
judgment and another affidavit, almost identical, filed in opposition to the Association=s motion for summary
judgment. The Association urged the following objections against the affidavits:
The affidavits set forth unfounded legal conclusions unsupported by facts. Berkel
requested summary judgment on its cause of action to recover the principal amount of the covered claim as
a debt owing under a contract evidenced by the various documents mentioned previously. The execution
and delivery of those documents are not disputed in the summary judgment record. Similarly, Berkel=s
motion requested summary judgment on its related claims for attorney=s fees and interest, averring that
A[t]hese are legal questions and not factual questions@ under the relevant statutory provisions. Given the
averments in the motion, it appears that the Alegal conclusions@ made by Berkel in the affidavits were at best
redundant as being no more than legal argument. They were irrelevant to the trial judge=s decision, which
merely required applying the relevant statutory provisions to the undisputed facts in the record. Any error
was therefore harmless.
The affidavits were ambiguous in failing to distinguish between Berkel and John W.
Berkel in his individual capacity and between the Association and the Receiver. The Association cites
21 as an example of the first defect the fact that the Aproof of claim filed by Plaintiffs herein is attached@ to the
affidavit but on its face the proof of claim is one filed by John W. Berkel, P.C., and not by Berkel in his
individual capacity. Continuing, the Association points to the ambiguity raised by the statement that
APlaintiffs@ had performed all their obligations under the contract while elsewhere the affidavit implies that the
professional corporation alone owned the claim; and, the Association makes the same charge of ambiguity
against statements in the affidavit that the APlaintiffs@ executed the release, made demand for payment, and
claimed the contract debt. We believe that a reasonably competent attorney could have understood
whatever distinctions were necessary to ascertain the nature of the controversy and the ground upon which
Berkel requested judgment as a matter of law.
In the Association=s complaint of ambiguity in Berkel=s failure to distinguish between the
Association and the Receiver, the Association complains, for example, that AMr. Berkel stated in both
Affidavits that >a true and correct copy of the approval and decision of the receiver and [the Association] is
attached hereto as Exhibit C,=@ but the document referred to is signed by the Receiver alone. The
Association makes similar complaints against Berkel=s statement that both the Association and the Receiver
issued the $6,306 check and that a demand was made upon both the Association and the Receiver. The
remaining complaints are of the same character.
We believe it is abundantly clear from Berkel=s motion and response, and the affidavit that
accompanied each, that Berkel=s claim against the Association derived from the statutory provisions and
agreed order wherein the Association assumed the Receiver=s obligations regarding covered claims.
Moreover, we believe the Association was not misled; it filed its special exceptions more than three years
22 after the Apartial@ summary judgment reached by agreement of the parties as to Berkel=s claims against the
Receiver. We conclude the affidavits are not defective for failing to give fair notice sufficient for the
Association to understand the nature of the controversy and to respond to Berkel=s affidavits.
We overrule the Association=s remaining points of error.
For the reasons stated above, we reverse that part of the judgment denying Berkel=s claim
for attorney=s fees, prejudgment interest, and postjudgment interest. We sever those claims from the
remainder of the judgment and remand them to the trial court for further proceedings not inconsistent with
our opinion and with an instruction that Berkel=s entitlement to prejudgment interest, if any, be determined in
accordance with the limitation we have placed on that claim, namely: it may be recovered only for the period
beginning with the date covered claims became due and payable in the regular course of the receivership
proceeding and ending with the trial-court judgment. We affirm the balance of the judgment.
John E. Powers, Justice
Before Justices Yeakel, Patterson and Powers*
Affirmed in Part; Reversed and Remanded in Part
Filed: November 7, 2002
Publish
23 * Before John E. Powers, Senior Justice (retired), Third Court of Appeals, sitting by assignment. See Tex. Gov=t Code Ann. ' 74.003(b) (West 1998).