Lead Opinion
OPINION
Appellee Jauregui, Inc. has filed a motion for rehearing en banc, and cross-appellant State Farm Lloyds has filed motions for rehearing and for rehearing en banc. We grant Jauregui’s and State Farm’s motions for rehearing en banc. We withdraw our earlier opinion and judgment, dated August 29, 2007, and substitute this opinion.
This appeal arises from a dispute between appellants and cross-appellees Dr. Phillip Osborne and Deborah Osborne and appellee Jauregui, Inc. Jauregui was the architect and builder of the house the Os-bornes bought, and State Farm provided the Osbornes’ home-owners insurance policy. After mold was discovered in the house, State Farm paid $1,874,687 in mold-related claims.
Factual and Procedural Background
In 1997, the Osbornes bought a house from Jauregui for slightly more than $1 million. Shortly after moving in, the Os-bornеs noticed flaws in the construction. They later learned that the house had serious mold problems due to various construction errors. The Osbornes also claimed that because the house was built along a golf course, golf balls frequently hit and damaged the house, although Jau-regui and its realtor had assured them there would be no “golf ball problem.” Before filing suit, the Osbornes sent Jau-regui a demand letter offering to settle
The jury found that Jauregui was negligent and breached warranties made to the Osbornes and that Jauregui was responsible for 48% of the Osbornes’ damages; the subcontractors were responsible for the remaining 52%. The jury found that the Osbornes suffered damages totaling $835,158.78: $250,000 for repairs to bring the house to the condition reasonably expected when they bought it; $220,000 for lost or damaged clothing and non-furniture personal effects; $70,000 for non-clothing items condemned due to mold contamination; $28,000 for repairs actually made by the Osbornes; $1,000 for damaged furniture; $95,158.78 in alternate living expenses; and $171,000 for moving, storage, and cleaning of their belongings.
Jauregui elected a dollar-for-dollar credit of the settlement funds against the jury’s damages award, and the trial court entered judgment that the Osbornes should take nothing against Jauregui, refusing to award them attorney’s fees against Jauregui and denying State Farm’s claim that it was entitled to subro-gation against the settlement funds. The court made findings of fact and conclusions of law in which it found that there was evidence that the Osbornes had incurred $1,149,641.30 in attorney’s fees,
On appeal, the Osbornes argue that they were “prevailing parties” under the DTPA and were not required to segregate their attorney’s fees between the various defendants and claims. In its cross-appeal against the Osbornеs, State Farm argues that the trial court abused its discretion in denying State Farm’s subrogation claim because that denial grants the Osbornes a double recovery and violates the one-satisfaction rule. State Farm also argues that any money received from Jauregui would be subject to State Farm’s subrogation rights and that the trial court properly denied the Osbornes’ request for attorney’s fees.
The One-Satisfaction Rule
Both questions at issue here— whether attorney’s fees should be awarded and whether State Farm is entitled to subrogation rights — involve the one-satisfaction rule, which is “the longstanding proposition that a plaintiff should not be compensated twice for the same injury.” CTTI Priesmeyer, Inc. v. K & O Ltd. P’ship,
Attorney’s Fees
On appeal, the Osbornes argue that they were “prevailing parties” under the DTPA and were not required to segregate their attorney’s fees because those fees were incurred due to the same facts and were inextricably intertwined. They contend they are entitled to $1,132,035.29 for attorney’s fees incurred through trial, plus $50,000 for appellate attorney’s fees. Jau-regui and State Farm contend that the trial court properly denied the Osbornes’ request for attorney’s fees, arguing that the Osbornes were not prevailing parties under the DTPA.
A party may not recover attorney’s fees from the opposing party unless an award of attorney’s fees is authorized by statute or contract. Tony Gullo Mo
Under the DTPA, a plaintiff who “prevails” is entitled to reasonable and necessary attorney’s fees. Tex. Bus. & Comm.Code Ann. § 17.50(d) (West Supp. 2007). The supreme court has explained that to “prevail” under the DTPA means “to prevail in a claim under the Act, rather than to obtain a net recovery on all claims joined in one lawsuit.” McKinley v. Drozd,
However, as discussed by our sister court in Hamra v. Gulden, the rule that a net recovery is not necessary for a plaintiff to be considered a prevailing party “does not apply in a case in which a consumer has already received payment of an amount equal to or greater than the damages found by the fact finder in the trial of the consumer’s case against the non-settling defendant.”
Although the supreme court in McKinley held that under the DTPA “the more sensible meaning of the word ‘prevail’ is to prevail in a claim under the Act, rather than to obtain a net recovery on all claims joined in one lawsuit,”
The Osbornes sued Jauregui for breach of contract, negligence, breach of warranties, DTPA violations, fraud, real estate fraud, and negligent misrepresentation. The breach of contract claim complained that Jauregui failed to make “all necessary repairs” before closing and that the house was “full of construction defects.” The negligence claim complained that Jauregui failed to act with the skill and care of a “reasonably competent building contractor.” The Osbornes complained that Jau-regui held itself out as one of the top builders in Austin and warranted that its construction projects showed “excellence in architecture and quality construction,” it had expertise in design and finish-оut of
The jury found that Jauregui was negligent and breached warranties that the house was fit for its intended purpose, built in a good and workmanlike manner, or fit for human habitation, but did not intentionally breach any warranties, commit fraud, or make negligent misrepresentations or engage in unconscionable, false, misleading, or deceptive acts. The trial court found that the Osbornes brought claims of breach of warranty, negligence, or DTPA violations against all of the defendants except the cleaning/storage company, which was sued for breach of contract and DTPA violations. Therefore, the settling defendants paid $1,260,500 to settle the same claims on which the Osbornes proceeded to trial against Jauregui. The Osbornes’ claims against Jauregui were not offset by a counterclaim, but rather by payments made by co-defendants to satisfy the same damages claims that were leveled against Jauregui as architect and builder of the house — negligence, breach of warranty, and DTPA violations.
Although the Osbornes claimed more than $2,000,000 in damages, the jury disagreed, and its unchallenged finding of $835,158.78 in damages, of which Jauregui was responsible for 48%, is a definitive determination binding on this Court. Consequently, they may not now receive from Jauregui more than $1,000,000 in attorney’s fees, including fees incurred after they settled with the other defendants.
Subrogation
Having decided that the Osbornes are not entitled to attornеy’s fees from Jauregui, we now turn to State Farm’s argument that it is entitled to the settlement proceeds because the Osbornes have already been “made whole” by State Farm’s insurance payments.
As we have stated, the one-satisfaction bars a plaintiff from being compensated twice for one injury. Crown Life Ins.,
Absent a contractual provision, subrogation is based on equitable principles and we will not disturb a trial court’s balancing of the equities unless “it would be inequitable to allow the judgment to stand.” Esparza v. Scott & White Health Plan,
Although the Osbornes sued numerous parties involved in the construction of their home, they suffered but one injury — the defective house. The Osbornes essentially concede this point by their argument that they cannot segregate their attorney’s fees between the various defendants because the claims were too interrelated to be separated from one another. The jury found that the Osbornes suffered $835,158.78 in damages from their one injury. That finding was a definitive assessment of the Os-bornes’ damages, and they do not attack the jury’s award on appeal. Therefore, the Osbornes were entitled to one recovery in the amount of $835,158.78 for their one injury. State Farm paid a total of $1,874,687 for the Osbornes’ claims. Even before filing suit, the Osbornes, therefore, had beеn made whole by State Farm’s insurance payments.
The trial court found that the Osbornes incurred $1,132,035.29 in attorney’s fees to pursue their claims against the various defendants. The court further found that although the Osbornes could have segregated their attorney’s fees incurred in pursuing their claims against the various settling defendants, they failed to do so. Although the trial court found that the Os-bornes’ attorney’s fees were uncompensated costs of collection, there is no showing in the record that the Osbornes asked State Farm to represent them to pursue these claims or that State Farm refused to represent them or othеrwise participate in the suit. Instead, State Farm intervened and participated in the suit; State Farm asserts, and the Osbornes do not dispute, that its participation was in support of the Osbornes and their claims against the defendants.
Under these facts, the Osbornes have already recovered insurance payments well in excess of the damages the jury determined they incurred. Whether State Farm underpaid on some subcategories of damages, such as clothing or personal effects, is rendered unimportant by the fact that State Farm overpaid the Osbornes by $793,600 for damage to the structure.
To refuse subrogation in this case would result in the Osbornes receiving a windfall well beyond the $835,000 in damages they suffered and State Farm being left without remedy to recover any of the nearly $2,000,000 it paid to the Osbornes for their claims related to the defective home.
Furthermore, if a contract provides for subrogation regardless of whether the insured is first made whole, “[t]he contraсt’s specific language controls ... and the equitable defense of the ‘made whole’ doctrine must give way.” Fortis Benefits v. Cantu,
The Osbornes’ policy included the following subrogation provision:
An insured may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights of recovery for a loss to the extent that payment is made by us.
If an assignment is sought, an insured must sign and deliver all related papers and cooperate with us.
Although this provision uses the word “may,” as opposed to the provision in Fortis Benefits, which read that the insurance company “will be subrogated to all rights of recovery,” see id. at 645 n. 11, the clause provides that State Farm had the right to require an assignment of rights and, if assignment was sought, the Osbornes were contractually required to cooperate. This contract provision establishes that State Farm had the contractual right to subro-gation against sums paid for losses that were covered and paid by State Farm. The record does not reflect whether State Farm presented the Osbornes with an explicit demand for subrogation, but State Farm’s actions throughout this case show an intention to obtain subrogation against sums paid to the Osbornes.
We sustain State Farm’s first and second issues and reverse the trial court’s judgment denying State Farm subrogation rights in the settlement funds.
Conclusion
We have held that the Osbornes are not prevailing parties so as to be entitled to attorney’s fees under the DTPA. We have further held that the Osbornes were made whole for their one injury and therefore that State Farm is entitled to subrogation interests in the settlement funds. We affirm the trial court’s judgment denying the Osbornes attorney’s fees from Jauregui. We reverse the judgment denying State Farm subrogation in the settlement and render judgment that State Farm is entitled to subrogation against the remaining settlement funds.
Dissenting Opinion by Justice HENSON, joined by Justice PATTERSON.
Notes
. State Farm paid a total of $1,874,687 for the Osbornes’ claims. Most of that was paid to the Osbornes, including policy limits of $1,071,600 for damage to the structure, but about $500,000 was paid to third parties for alternate living expenses and moving/storage costs. State Farm also paid more than $150,000 for experts to examine the house and testify at trial.
. The Osbornes also sued Jauregui’s realtor, but those claims are not part of this appeal.
. The jury also found that Phillip Osborne was entitled to $50,000 for mental anguish, but the trial court concluded that, "[ajbsent physical injury, Dr. Osborne is not entitled to recover damages for mental anguish.”
. The Osbornes have since received $17,606.01 from one of the defendants and state that if they prevail, the fees should be reduced to $1,132,035.29. They also seek $50,000 in appellate fees.
. Having held that the Osbornes are not entitled to attorney’s fees, we need not consider whether they were required to segregate their fees. We note that the Osbornes did not attempt to segregate their attorney’s fees between the various defendants or between рre- and post-settlement work. See Tony Gullo Motors I, L.P. v. Chapa,
. State Farm paid $1,071,600 for the structure; a total of $210,368.27 for the Osbornes’ clothing and personal effects; $190,319.57 for alternative living expenses; $60,644.02 for furniture and similar items; and a total of $341,755.42 for various moving, storage, and cleaning expenses.
. In Esparza v. Scott and White Health Plan, we noted that subrogation "is not easily detached from equitable principles” and held that "[cjontracts that give insurers the right to subrogation ‘confirm, but [do] not expand, the equitable subrogation rights of insurers.’ ”
. The public policy considerations at work here are similar to those that arise when examining whether a party is a prevailing party under the DTPA. See Blizzard v. Na
. State Farm paid policy limits of $1,071,600 for the structure, and the jury found that the Osbornes were entitled to $250,000 for repairs necessary to fix the structure.
. The Osbornes argue we should not apply overpayments to areas of shortfall. However, subrogation involves matters of equity, and it would be inequitable to hold State Farm responsible for underpaying on certain areas of damage while ignoring its large overpayment as to the structural damage. Nor are we persuaded by the Osbornes’ argument that State Farm is estopped from claiming that the Osbornes have been made whole by State Farm's statements in their briefs in support of the Osbornes' claims that the insurance payments covered "a portion of” the Osbornes’ damages. An allegation such as this, made in support of the Osbornes’ suit, does not amount to a judicial admission and cannot be held against State Farm in the face of a jury verdict making a definitive determination of the Osbornes' damages.
. We note that, subtracting the Osbornes' damages from the payments they received from State Farm, the Osbornes have already received an excess of $1,039,528.42, which nearly covers the $1,149,641.30 they seek for their attorney’s fees through trial.
Dissenting Opinion
dissenting.
Because I would hold that the Osbornes are entitled to attorney’s fees as prevailing parties under the DTPA and that State Farm’s claim for subrogation rights should be remanded to the trial court for reconsideration in light of Fortis Benefits v.
Attorney’s Fees
The majority сorrectly states that a plaintiff “who is awarded actual damages under the DTPA should also be awarded attorney’s fees, even though the damage award is entirely offset by an opposing claim.” See McKinley v. Drozd,
The Texas Supreme Court has not, however, ruled on whether the reasoning in McKinley would apply in a situation where the damages owed by one defendant werе entirely offset by settlement amounts from other defendants. The appellate courts have been split in determining whether a plaintiff “prevails” under the DTPA where settlement amounts from other defendants exceed the judgment. The majority relies primarily on Hamra v. Gulden,
The payments made to the plaintiff prior to trial in Blizzard, however, constituted insurance payments from her insurer. Id. at 806-07. The plaintiff sued her insurance company, but the amount of damages found by the jury at trial did not exceed the total amount of insurance payments paid to the plaintiff by the defendant prior to trial. These pretrial payments, made by thе defendant subject to the judgment rather than a settling party, resemble the insurance benefits paid prior to trial by the defendant in Allstate Insurance Co. v. Bonner,
In the present case, however, the jury did not find that Jauregui owed less in damages than some amount that Jauregui had already paid to the Osbornes. Instead, the jury found Jauregui responsible for $835,000 in damages, while Jauregui reaped the benefits of its refusal to settle by offsetting the entire judgment with settlement funds paid by other defendants.
I find the facts in the instant case to more closely resemble those in Roberts v. Grande,
The majority’s holding that the Os-bornes are not prevailing parties under the DTPA essentially rewards Jauregui for refusing to negotiate a settlement. The Os-bornes made a settlement offer to Jaure-gui prior to filing suit in the amount of $866,000, which proved to be a reasonable demand in light of the subsequent jury award, at a time when the Osbornes’ attorney’s fees had only reached $22,000. Jau-regui refused to make an offer of settlement within a reasonable range of that demand and responded with a counteroffer of only $12,810, forcing the Osbornes to incur an additional $1,127,641.30 in attorney’s fees.
Awarding attorney’s fees to the Os-bornes before applying the settlement credit would be consistent with the reasoning in McKinley and the purpose of the DTPA. The Texas legislature determined that the DTPA “shаll be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection.” Tex. Bus. & Com. Code Ann. § 17.44(a) (West 2002). Because I would hold that the Osbornes are prevailing parties under the DTPA, I dissent from the majority’s holding that the Osbornes are not entitled to attorney’s fees.
Subrogation
The majority holds that State Farm’s contractual right of subrogation displaces any equitable considerations regarding whether the Osbornes have been “made whole” for their damages, and further holds that even under an equitаble determination of subrogation rights, State Farm is entitled to the settlement proceeds because the Osbornes have already been “made whole” by insurance payments totaling $1,874,687.28.
The majority cites the Texas Supreme Court’s recent holding in Fortis Benefits,
However, the subrogation provision in the Osbornes’ homeowners’ insurance policy with State Farm does not contain the type of precise and unambiguous language found in the Fortis subrogation provision. The subrogation provision found in the Osbornes’ policy reads in its entirety:
Subrogation. An insured may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rightsof recovery for a loss to the extent that payment is made by us.
If an assignment is sought, an insured must sign and deliver all related papers and cooperate with us.
This provision, which merely states that State Farm “may” require an assignment of rights, is significantly more ambiguous than the provision at issue in Fortis, which states that the insurer “will be subrogated to all rights of recovery,” including “the proceeds of any settlement or judgment.” Id. at 645 n. 11 (original emphasis removed, emphases added).
Because the trial court’s order denying subrogation rights to State Farm was issued prior to Fortis and thus before specific contractual subrogation rights were deemed controlling over equitable principles, the trial court never had an opportunity to evaluate and interpret the subrogation clause in the Osbornes’ homeowners’ policy. Therefore, the appropriate remedy would be to remand to the trial court for a review of the subrogation provision in order to determine whether the language is sufficiently precise and unambiguous to control over equitable subrogation principles, in light of the Texas Suрreme Court’s holding in Fortis.
If the Osbornes’ contractual subrogation provision was found to be too vague and ambiguous to displace equitable considerations, I would point out that the trial court did not abuse its discretion in denying subrogation rights to State Farm, in light of the deference afforded to a trial court’s equitable determination. In a determination of subrogation based purely on equitable factors, “[a] trial court’s balancing of the equities should not be disturbed on appeal unless a showing is made that it would be inequitable to allow the judgment to stand.” Esparza v. Scott & White Health Plan,
The trial court may have considered, for example, that State Farm, by arguing at trial and on appeal that the Osbornes are not entitled to attorney’s fees under the DTP A, asserted a position that was adverse to the very parties whose interests State Farm, as an insurer, was expected to protect. The fact that State Farm attempts to compromise the Osbornes’ efforts to achieve the fullest possible recovery suggests that equity should not favor State Farm in a determination of subrogation rights.
Furthermore, State Farm’s statements at trial directly conflict with its argument on appeal that the Osbornes were “made whole” because the jury returned a judgment of $835,158.78 in damages, and the total insurance payments received by the Osbornes exceed this amount. For example, State Farm stated in its third amended petition in intervention that the Os-bornes suffered damages at least in the amount of $1,902,247.44. A judicial admission is conclusive upon the party making it, reheves the opposing party’s burden of proving the admitted facts, and bars the admitting party from disputing it. Mendoza v. Fidelity & Guar. Ins. Underwriters, Inc.,
Even in light of the majority’s holding that State Farm’s contractual right to sub-rogation controls over equitable considerations, the fact remains that State Farm failed to allocate the settlement funds to covered versus uncovered losses. The subrogation provision in the Osbornes’ policy states that an assignment of rights may be required “to the extent that payment is made by [State Farm].” In a claim for subrogation where settlement amounts are at issue, an insurer bears the burden of showing what amount, if any, of the settlement amounts correspond to amounts paid by it. Ortiz v. Great S. Fire & Cas. Ins. Co.,
While State Farm failed to allocate the settlement funds to covered versus uncovered losses, we can assume that there was ample opportunity to make such an allocation because State Farm asserts in its brief that it assisted “vigorously” in securing the settlements. There is no evidence that the remaining settlement amounts are allocable to covered damages, rather than uncovered damages such as mental anguish or attorney’s fees. State Farm’s failure to allocate settlement funds is another issue that should be reviewed by the trial court on remand to determine whether the settlement funds at issue actually reflect payments made by State Farm, as necessary to qualify for assignment under the contractual subrogation provision.
Because I would reverse the trial court’s denial of attorney’s fees to the Osbornes and remand State Farm’s claim for subro-gation rights to the trial court for reconsideration in light of Fortis, I respectfully dissent.
. It is not uncommon for an attorney’s fee award to exceed the damages recovered. Hoover Slovacek L.L.P. v. Walton,