Opinion
04-21-00096-CV
08-24-2022
Claudia MEDRANO, Appellant v. Jeff TAFOYA, Innovative Risk Management, Inc., and Acceptance Indemnity Insurance Co.,Appellees
From the 131st Judicial District Court, Bexar County, Texas Trial Court No. 2017-CI-23582 Honorable Aaron Haas, Judge Presiding
Sitting: Rebeca C. Martinez, Chief Justice Luz Elena D. Chapa, Justice Beth Watkins, Justice
MEMORANDUM OPINION
Luz Elena D. Chapa, Justice
Appellant Claudia Medrano appeals a trial court's order granting summary judgment in favor of appellees Jeff Tafoya, Innovative Risk Management, Inc., and Acceptance Indemnity Insurance Co. Medrano argues the trial court erred because she has standing to pursue her claim against appellees, her claim is ripe, and a justiciable controversy exists. We affirm the trial court's order.
Background
This case arose after Lora Vergott's dog bit Medrano; Medrano sued Vergott and appellees based on their association with an insurance policy, which Medrano believed covered the incident. At the time of the incident, Medrano and Vergott lived together in a house they rented from Richard Antonio Hichapa Gonzalez. Gonzalez had an insurance policy with Acceptance Indemnity Insurance Co. Innovative Risk Management, Inc. managed Acceptance's claims, and Jeff Tafoya worked for Innovative adjusting claims for Acceptance. Medrano filed a lawsuit against Vergott for negligence and strict liability. Medrano later added appellees seeking a declaratory judgment and attorney's fees. Specifically, Medrano sought a declaration regarding appellees' duty to defend Vergott under the insurance contract. Medrano never sued Gonzalez, the policy holder of the insurance policy.
Affinity Insurance Program Marketing, LLC was also a policy holder of the insurance policy and was never sued by Medrano.
Vergott did not file an answer to the lawsuit, and Medrano moved for a default judgment against her. The trial court then entered a default judgment against Vergott, and appellees moved for summary judgment claiming Medrano's declaratory judgment action against them should be dismissed for lack of subject matter jurisdiction based on no standing, ripeness, and justiciable controversy. The trial court agreed, granted appellees' motion, and dismissed with prejudice Medrano's claims against appellees.
Medrano now appeals arguing the trial court erred in granting summary judgment in favor of appellees because she has standing and her claim is ripe. Appellees respond by contending this case is now moot, and assuming it is not moot, the trial court did not err in granting summary judgment in their favor because Medrano does not have standing and her declaratory judgment claim against them is not ripe.
Jurisdiction
We begin by addressing appellees' mootness argument because it implicates our subject matter jurisdiction. See In re H & R Block Fin. Advisors, Inc., 262 S.W.3d 896, 899 (Tex. App.- Houston [14th Dist.] 2008, orig. proceeding). For the first time on appeal, appellees contend, even assuming they had a duty to defend Vergott in Medrano's negligence action, their duty terminated "because the default judgment against [Vergott] is final and beyond reversal." They explain Medrano's lawsuit against Vergott is over because Vergott did not pursue an appeal of her default judgment, and therefore, any court's decision on their duty to defend would not have any practical legal effect because there is no lawsuit to defend.
Under the mootness doctrine, we may only decide cases containing an actual controversy. FDIC v. Nueces County, 886 S.W.2d 766, 767 (Tex. 1994). "A case becomes moot if a controversy ceases to exist or the parties lack a legally cognizable interest in the outcome." Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 642 (Tex. 2005). In those instances, our decision "would be a mere academic exercise," and our judgment would not have any practical effect. Beltran v. Beltran, 324 S.W.3d 107, 110 (Tex. App.-El Paso 2010, no pet.). When a case is moot, we must dismiss it for want of jurisdiction. Tex. Dep't of Fam. & Protective Servs. v. N.J., 644 S.W.3d 189, 192 (Tex. 2022).
The question of mootness in an appeal from a declaratory judgment action concerning an insurer's duty to defend arose in Allstate Insurance Company v. Hallman. "In Hallman, the supreme court held that a declaratory judgment suit regarding an insurer's duty to defend did not become moot on appeal when the insurer provided the requested defense because there was still a live dispute over the insured's entitlement to attorney's fees under the Declaratory Judgments Act." Ward v. Lamar Univ., 484 S.W.3d 440, 452 (Tex. App.-Houston [14th Dist.] 2016, no pet.) (citing Hallman, 346 S.W.3d at 642-43). Since Hallman, several courts of appeal recognize Hallman as "stand[ing] for the proposition that a case under the Declaratory Judgments Act remains a live controversy, even if all requests for substantive declaratory relief become moot during the action's pendency, as long as a claim for attorneys' fees under the Act remains pending." Hansen v. JP Morgan Chase Bank, N.A., 346 S.W.3d 769, 774-75 (Tex. App.-Dallas 2011, no pet.) (citing Tex. Dep't of Transp. v. Tex. Weekly Advocate, No. 03-09-00159-CV, 2010 WL 323075, at *3 (Tex. App.-Austin Jan. 29, 2010, no pet.) (mem. op.)); see Ward, 484 S.W.3d at 451-52; see also Labrado v. County of El Paso, 132 S.W.3d 581, 589-91 (Tex. App.-El Paso 2004, no pet.).
We are persuaded by our sister courts' position. Here, Medrano sought a declaration regarding appellees' duty to defend and attorney's fees in her declaratory judgment action against appellees. The trial court then granted summary judgment in favor of appellees and dismissed Medrano's declaratory judgment action. On appeal, Medrano asks us to reverse the trial court's order and remand the case "to the trial court where rights under [her] UDJA action can be determined." As pointed out in Hallman, an affirmative answer on our part "would necessitate a remand to the trial court to consider whether an award of attorney's fees is appropriate in light of the changed status of the prevailing parties." 159 S.W.3d at 643. Accordingly, without determining the merits of the substantive declaratory relief sought, we conclude this case is not moot because a live controversy remains regarding the question of attorney's fees. See id.; see also Hansen, 346 S.W.3d at 774 (emphasizing Hallman confirms claim for attorneys' fees under Declaratory Judgments Act keeps case alive even if request for substantive declaratory relief becomes moot).
Summary Judgment
On appeal, Medrano argues the trial court erred in granting summary judgment in favor of appellees because they failed to establish the trial court lacked subject matter jurisdiction as a matter of law. Specifically, she argues the final judgment she obtained against Vergott implicates appellees' obligations under the insurance policy, and therefore, she has standing to enforce Gonzalez's insurance policy, and her claim is ripe. She further contends a fact issue exists as to the parties' rights under the insurance contract.
In response, appellees argue the trial court's action was proper because Medrano's claim against them is precluded by Texas's no-direct-action rule as a matter of law. Appellees argue under the no-direct-action rule, Medrano has no direct action against appellees, who are associated with Gonzalez's insurance carrier because a determination of liability against Gonzales has not been made. According to appellees, Medrano's inability to bring an action against appellees constitutes a lack of standing and ripeness, and therefore, Medrano's declaratory judgment action must be dismissed for lack of subject matter jurisdiction.
Standard of Review
We review the trial court's summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). A party moving for traditional summary judgment has the burden to prove there is no genuine issue of material fact and it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Salas v. Allen Keller Co. I, No. 04-14-00622-CV, 2015 WL 4932682, at *2 (Tex. App-San Antonio Aug. 19, 2015, no pet.) (mem. op.). "In reviewing the grant of a summary judgment, we must indulge every reasonable inference and resolve any doubts in favor of the respondent." Salas, 2015 WL 4932682, at *2. We also "must assume all evidence favorable to the respondent is true." Id. "A defendant is entitled to summary judgment if the evidence disproves as a matter of law at least one element of the plaintiff's cause of action." Id. Once the movant establishes its right to summary judgment as a matter of law, the burden shifts to the non-movant to present evidence raising a genuine issue of material fact, precluding summary judgment. Id. Finally, in cases like this one, where the trial court's order granting summary judgment does not specify the ground relied on for its ruling, we will affirm the summary judgment if any of the theories advanced by the movant are meritorious. Midwest Emps. Cas. Co. ex rel. Eng. v. Harpole, 293 S.W.3d 770, 775 (Tex. App.-San Antonio 2009, no pet.).
Applicable Law
Texas is a no-direct-action state, meaning "a third[-]party claimant cannot enforce an insurance policy directly against an insurer until it has been established, by judgment or agreement, that the insured has a legal obligation to pay damages to the injured party." KLLM Transp. Servs. v. Hallmark Cnty. Mut. Ins. Co., No. 04-16-00066-CV, 2016 WL 4772349, at *2 (Tex. App.-San Antonio Sept. 14, 2016, no pet.) (mem. op.) (citing Angus Chem. Co. v. IMC Fertilizer, Inc., 939 S.W.2d 138, 138 (Tex.1997) (per curiam)). Texas courts have characterized this need for a determination of liability as a standing or ripeness issue. See Auzenne v. Great Lakes Reinsurance, PLC, 497 S.W.3d 35, 37-38 (Tex. App.-Houston [14th Dist.] 2016, no pet.). "Standing focuses on who may bring an action, while ripeness examines when that action may be brought." Id. at 38. "Whether the absence of a direct claim is characterized as a challenge to standing or ripeness, the absence of a direct claim implicates a trial court's subject matter jurisdiction." KLLM Transp., 2016 WL 4772349, at *2. And, "[r]egardless of the nature of the relief sought, a suit brought directly against an insurer before liability [of the insured] has been determined is subject to dismissal." Auzenne, 497 S.W.3d at 38 (citing In re Essex, 450 S.W.3d 524, 526-28 (Tex. 2014) (per curiam)).
Application
In this case, Medrano sought a declaratory judgment action against appellees on their duty to defend Vergott before the liability of the insured-here, Gonzalez-had been established. As indicated above, this type of situation subjects a case to dismissal. See id; see also Essex, 450 S.W.3d at 526-28 (holding plaintiff seeking declaratory relief is still subject to no-direct-action rule).
Medrano argues, however, she established a determination of Gonzalez's liability because the final judgment she obtained against Vergott implicates the appellees' obligations under the policy, and therefore she has standing as a third-party beneficiary to the insurance agreement to pursue her claim against appellees and her claim is ripe. For support, she relies on Auzenne v. Great Lakes Reinsurance, PLC, arguing her rights as a third-party beneficiary ripened into enforceable rights. We disagree.
In Auzenne, the plaintiff slipped in the restroom of a donut shop, and he sued the donut shop's insurance company for breach of contract after the insurance company refused to pay for his medical bills. 497 S.W.3d at 36-37. The plaintiff never sued or settled with the donut shop. Id. at 37. The insurance company filed a Rule 91a motion, arguing the plaintiff lacked standing to bring a breach of contract claim against it. Id. The trial court agreed, and on appeal, the Fourteenth Court of Appeals analyzed the issue for ripeness and held the plaintiff's claims against the insurance company were not ripe because the plaintiff had not established the donut shop's obligation to the plaintiff by final judgment or settlement. See id. at 39-40.
Whether analyzed as standing or ripeness, Texas law is clear: an insured's legal obligation to pay damages must be established by judgment or agreement, not by implication. KLLM Transp., 2016 WL 4772349, at *2. Here, there is no judgment or agreement setting out the legal obligation of the insured under the insurance policy; the only judgment Medrano obtained before pursing her declaratory judgment action against appellees is a default judgment against Vergott, who is not an insured under the policy. We therefore conclude Medrano did not have standing as a third-party beneficiary and her claim against appellees was not ripe because a judgment or agreement regarding the insured's liability had not been obtained. See id. As a result, we hold appellees established their entitlement to judgment as matter of law and a fact issue does not exist as to the issues of standing or ripeness. See Salas, 2015 WL 4932682, at *2.
Accordingly, the trial court did not err in granting summary judgment in favor of appellees and dismissing Medrano's declaratory judgment action against appellees for lack of subject matter jurisdiction. Based on our conclusion, we need not determine whether a justiciable controversy exists. See Harpole, 293 S.W.3d at 775.
Conclusion
We affirm the trial court's order.