In Re Geico Indemnity Insurance Company v. the State of Texas

In The

Court of Appeals

Ninth District of Texas at Beaumont

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NO. 09-23-00403-CV
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IN RE GEICO INDEMNITY INSURANCE COMPANY

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Original Proceeding
60th District Court of Jefferson County, Texas
Trial Cause No. B-203,493
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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.

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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:

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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

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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.”

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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

defendants.

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

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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

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“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

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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

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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

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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

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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

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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

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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

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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

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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
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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

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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

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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

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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

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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).

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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

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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

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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

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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

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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

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$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

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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

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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.

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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.

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