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Firm News

SettlePou Celebrates 30 Years

SettlePou is excited to be celebrating its 30th anniversary this year. What started out as a casual discussion between two boyhood friends during their final year of law school, ultimately led to the formation of a law firm that has withstood the test of both time and the many fluctuations in our local and national economies. Over the past thirty years, there has been a lot of change worldwide — the introduction and growth of personal computers, the tearing down of the Berlin Wall and the proliferation and use of the Internet, to name a few. Within this same time period, there
have also been many changes at SettlePou.

Thirty years ago, the Firm focused solely on commercial lending and real estate transactions. Its first location was a three room office located at the corner of Mockingbird and Central, right next to what is now Mockingbird Station. Co-founders Jay Settle and Robert Pou remember Brookhollow Bank as one of the Firm’s very first clients. “Brookhollow was acquired by Regions Bank,” said Pou, “and they are still a client of our firm.” Now with over thirty attorneys covering six major practice areas and a variety of sub specialties, SettlePou has outlived many of the firms that were in existence when the doors first opened in 1978. Despite the Firm’s tremendous growth, and the expansion of its practice areas and client base, those within the Firm have never lost sight of the values and principles which led to the Firm’s success.

Allen Smith, President of the Firm and Chairman of its litigation practice group, attributes the growth and success of the Firm to its people. “We hire quality people,” commented Smith. “As a firm, we have a very clear understanding of who we are and where we are going, and we hire and retain the people who believe in our mission and who exhibit the qualities outlined in our Firm’s core values.”

Each employee at Settle- Pou embraces the Firm’s humble beginnings and recognizes that the growth of the Firm, and its client base, is a direct result of the Firm’s clientoriented mindset. The Firm’s motto, “Big Firm Expertise, Coupled With Small-Firm Attention,” acknowledges SettlePou’s expanded client base, national reputation, and diverse practice areas, while highlighting the quality of which it is the most proud – each employee’s unwavering commitment to provide superior service and product excellence. “That’s what distinguishes SettlePou from other firms”, commented Smith. “That’s who we are; that’s our DNA.”

Smith also pointed to the Firm’s clerkship program as helping to improve the Firm’s measured growth over the years. “In the mid-90’s, the firm began a structured clerkship program, formally recruiting top law students as clerks to work at the Firm during their law school summer breaks,” said Smith. “The goal of this program was, and is, to discover and hire the best young talent, and it has worked out very well for us.” SettlePou has doubled in size since implementing the clerkship program, and today this program is the backbone of the Firm’s hiring process. Thirteen of the attorneys within the Firm are a product of that clerkship program.

As SettlePou reflects on its past, it also looks forward to the future. “We have obviously learned a lot over the past 30 years,” said Smith, “and we are constantly looking for ways to better ourselves and improve every aspect of the services we provide to our clients. We are a great firm, with a lot of exceptionally talented people, and we are getting better and better every day. I am excited to think about where this Firm will be thirty years from now.”

Categories
Insurance Defense

Insurance Update

Over the past several months, the Texas Supreme Court has handed down several important decisions pertaining to the insurance industry.

Insurer Must Show Prejudice in Late Notice Cases: In PAJ, Inc. v. The Hanover Insurance Co., 05-0849 (Tex., Jan 11, 2008), the Supreme Court dealt with whether an insured’s failure to timely notify its insurer of a copyright infringement claim defeated coverage under a CGL policy providing coverage for “advertising injury.” The insured failed to notify the insurer until four to six months after litigation commenced. Noting that “an immaterial breach does not deprive the insurer of the benefit of the bargain and thus cannot relieve the insurer of the contractual coverage obligation,”the Court held that an insured’s failure to timely notify the insurer of an alleged “occurrence” or “offense” as soon as practicable” as required by the Policy did not defeat coverage in the absence of prejudice to the insurer. Thus, the Supreme Court has arguably overruled, in broad fashion, long standing precedent in Texas, and held that insurance policies which are subject to Texas law require prejudice to the insurer before the insured’s breach of policy terms and/or conditions will preclude coverage.

Insurer’s Subrogation Rights and the “Made Whole” Doctrine: In Fortis Benefits v. Cantu, 05-0791 (Tex. 2007), a case involving subrogation to recover medical benefits paid by an insurer, our Supreme Court discussed the “made whole” doctrine which is an equitable rule that an insurer is not entitled to subrogation unless the insured had been “made whole,” and held that the “made whole” doctrine does not prevail over an insurer’s contract-based right of  subrogation. The Court noted that there are three varieties of subrogation – equitable, contractual, and statutory – and held that, while related, these three theories are independent of each other, and not co-equal. The legal maxim that “equity follows the law” requires equitable doctrines to conform to contractual choices and statutory mandates, and not the other way around.

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. Neither subrogation nor reimbursement clauses violate Texas public policy, e.g., the Texas workers compensation statute specifically embraces an insurer’s firstmoney right of subrogation. Thus, replacing equitable protections with specific contract language is proper in Texas law, and parties are free to contractually negate the “made whole” doctrine and to do so before an event occurs that triggers medical benefits under a policy of insurance.

Third Party Administrators – Fiduciary Duties or Lack Thereof: In National Plan Administrators, Inc. v. National Health Insurance Company, 05-0006, (Tex. 2007), the Texas Supreme Court discussed the relationship between a third party administrator (“TPA”) and an insurer with whom the TPA had a contract to administer cancer insurance policies, and held that the Texas Insurance Code does not impose a general fiduciary duty upon insurance agents or upon third party administrators. Rather, the duty of an agent such as a third party administrator must be analyzed in conjunction with various factors to determine not only the scope of the TPA’s duties in general, but also as to the TPA’s fiduciary duties, if any, and such duties are defined by not only the nature and purpose of the agency relationship, but also by the contractual agreements in effect between the TPA and its principal insurer. Although some tasks, such as the holding of funds on behalf of insurance companies, are normally looked upon as a fiduciary relationship, other duties are not. In this particular case, where the TPA represented other insurers and its contract with the insurer specified that the TPA was to be an “independent contractor” whose activities in administering and marketing insurance products were not exclusive to the principal in question, the Court held that the TPA did not owe a fiduciary duty to the particular insurer.

Medical malpractice – Two year statute of limitations: In Yancy v. United Surgical Partners Internat’l, et al., 05-0925 (Tex. 2007), the Texas Supreme Court held that an adult incapacitated plaintiff who was represented by a guardian who timely filed suit against some defendants but not others, was barred from suing additional defendants by the absolute two year statute of limitations applicable to medical malpractice cases. The court left the door open for other cases involving other incapacitated plaintiffs under other circumstances, where the same result might not occur.

Co-Insurance Clauses – No Rights of Contribution Between Co-Insurers: In Mid-Continent Ins. Co. v. Liberty Mutual Ins. Co., 05-0261 (Tex. 2007), the Supreme Court dealt with two insurers which provided primary liability insurance coverage to the same insured under two CGL policies containing “other insurance” clauses providing for equal or “prorata” sharing between coinsurers. One of the two insurers also provided excess insurance through a separate excess policy. The claims of the injured plaintiffs against the common insured were settled by unequal payments from the two co- insurers. The co-insurer which paid the most (probably because of greater coverage at risk under its primary and excess policies), then sought contribution from the under-paying co-insurer which had issued only a primary policy, but which had refused to pay a full pro-rata share of the settlement.

The Supreme Court held that under these circumstances, the over-paying insurer was not entitled to recover from the under-paying co-insurer, because there was no actionable duty owed (either directly or by way of subrogation to the insured’s rights) by the underpaying insurer to the overpaying insurer which would require reimbursement of the latter by the former. The Court reaffirmed its earlier decision that there was no direct right of contribution available to the over-paying co-insurer because of the existence of the “pro-rata” clauses in the CGL policies. The Supreme Court then held that there was no right of subrogation available to the over-paying insurer because subrogation requires an insurer to stand in the shoes of the insured, and the joint settlement had made the insured whole. Therefore, the  insured had no claim remaining against the under-paying insurer, to which the over-paying insurer could be subrogated. Finally, the Supreme Court declined to expand the Texas Stowers doctrine to create a common law “duty to act reasonably when handling an insured’s defense – including reasonable negotiation and participation in settlement” which an over-paying insurer could utilize against a co-insurer which paid less than a pro-rata share.

By H. Norman Kinzy

Categories
Business Counsel Services

Judgment Liens vs. Texas Homesteads: Down for the Count?

Perhaps one of the most famous lines in American pugilism was Muhammad Ali’s: “Float like a butterfly, sting like a bee.” For decades, judgment creditors and judgment debtors have been trading punches in the post-judgment ring, either in an effort to collect judgments owed or to avoid paying the same. The ebb and flow of this fight has seen the exchange of heavy punches, sometimes staggering one or the other. Now, the Texas Legislature may have delivered a knock-out blow to judgment creditors.

The fight usually starts the same. In the first round, a creditor secures a judgment against a debtor and then files an abstract of the judgment in every county where the debtor possesses, or may possess, real property. The filing of the abstract creates a judgment lien on any real property in that county. TEX. PROP. CODE ANN. § 52.001 (West 2007). Usually, although not always, the judgment lien attaches to the debtor’s homestead property. This, in and of itself, is not an issue. The Texas Supreme Court has observed that a lien against a homestead is never valid (in the sense of being enforceable) unless it secures payment for certain debts provided for in the Texas Constitution. TEX. CONST. art. XVI, § 50; Benchmark Bank v. Crowder, 919 S.W.2d 657, 660 (Tex. 1996). This does not mean, however, that a lien that is not valid and enforceable is completely without effect. As one Texas Court of Appeals has observed: “Under [the Texas Property Code] statutory provisions, a judgment lien is ‘perfected,’ or brought into existence against a debtor’s property, by recording and indexing an abstract of judgment in the county where the property lies. The debtor’s homestead is not exempt from the perfected lien; rather, the homestead is exempt from any seizure attempting to enforce the perfected lien.” Exocet, Inc. v. Cordes, 815 S.W.2d 350, 352 (Tex. App. – Austin 1991, no writ).

This is true, because as a principle of Texas law, “a judgment lien attaches to the judgment debtor’s interest if he abandons the property as his homestead before he sells it.” Hoffman v. Love, 494 S.W.2d 591, 594 (Tex. Civ. App. – Dallas 1973, no writ). For example, where a debtor acquires a second homestead before selling the first homestead, the first homestead is deemed abandoned and is no longer exempt from seizure. England v. Federal Deposit Insurance Corp., 975 F.2d 1168, 1175 (5th Cir. 1992). Furthermore, if the debtor retains the property as his homestead until he sells it,unless the debtor reinvests the proceeds of the sale in another homestead within six months from the date of the sale, the proceeds are subject to seizure by creditors. TEX. PROP. CODE ANN. § 41.001(c) (West 2007); Sharman v. Schuble, 846 S.W.2d 574, 576 (Tex. App. – Houston [14th Dist.] 1993, no writ). Even during this six-month window, if the debtor purchases another homestead, any remaining proceeds from the sale of the first homestead are instantly rendered non-exempt. England, 975 F.2d at 1174. Thus, judgment lien holders have a significant interest in filing and maintaining their judgment liens, even against a debtor’s homestead property.

As the fight moves toward the middle rounds, the debtor who was attempting to sell his homestead property demands that a judgment lien creditor release the judgment lien so as to not interfere with the sale of his homestead. Although the abstract does not create a lien on the debtor’s homestead, it can still create a cloud on the title. Where a judgment lien creditor refuses to release the judgment lien in conjunction with the debtor’s sale of his homestead, when requested to do so by the debtor, the judgment creditor may be held liable for damages occasioned by the refusal. Tarrant Bank v. Miller, 833 S.W.2d 666, 667-68 (Tex. App. – Eastland 1992, writ denied). Notwithstanding the requirement that a judgment lien creditor release a judgment lien on homestead property when requested to so, the creditor is entitled to evidence that the property is, in fact, a debtor’s homestead.

To this end, most judgment lien creditors require that the debtor(s) sign and file in the appropriate county real property records, an affidavit designating the property at issue as their homestead.

This practice finds support in the Texas Property Code, which provides for the filing of such a voluntary designation of homestead. TEX. PROP. CODE ANN. § 41.105 (West 2007). Indeed, under Chapter 41, Subchapter B entitled “Designation
of a Homestead in Aid of Enforcement of a Judgment Debt,” the judgment creditor may force the judgment debtor to elect his homestead and file such a designation. TEX. PROP. CODE ANN. § 41.021 et seq. (West 2007).

That procedure has now been amended by the Texas Legislature, effective September 1, 2007. A new section to Chapter 52, Subchapter A of the Texas Property Code was enacted to address homestead property interests and the release of judgment liens. TEX. PROP. CODE ANN. § 52.0012 (West 2007). Under this new provision, entitled “Release of Record of Lien on Homestead Property,” a judgment debtor may now avoid and remove an abstracted judgment lien without the judgment creditor signing a release of that lien. The judgment debtor does so by first preparing and then later filing a prescribed form of an affidavit in the real property records of the county in which the homestead is located. TEX. PROP. CODE ANN. § 52.0012(b(West 2007). Once filed, if a judgment creditor does not respond to the filing, the affidavit “serves as a release of a judgment lien,” upon which a bona fide purchaser or a mortgagee for value (including successors and assigns) “may rely conclusively,” so long as the affidavit complies with the statutory requirements. TEX. PROP. CODE ANN. § 52.0012(c) & (d) (West 2007).

The affidavit must state that the judgment debtor: (1) sent a letter and a copy of the affidavit (without attachments and before execution of the affidavit), notifying the judgment creditor of the affidavit and the judgment debtor’s intent to file it of record; and (2) the letter and affidavit were sent by registered or certified mail, return receipt requested, at least thirty days before the affidavit was filed, (a) to the judgment creditor’s last known address; (b) to the address appearing in the judgment creditor’s pleadings in the underlying lawsuit (if different from the last known address); (c) to the address of the judgment creditor’s last known attorney as shown in those pleadings; and (d) to the address of the judgment creditor’s last known attorney as shown in the records of the State of Bar of Texas. TEX. PROP. CODE ANN. § 52.0012 (d) (1) & (2) (West 2007).

However, the affidavit will not result in a release of the judgment lien if the judgment lien creditor files a contradicting affidavit in the real property records of the county in which the property is located asserting that: (1) the affidavit filed by the judgment lien debtor is untrue; or (2) “another reason exists as to why the judgment lien attaches to the judgment debtor’s property.” TEX. PROP. CODE ANN. § 52.0012(e) (West 2007).  The new statutory provision does not address two very important issues. First, the new statute does not set a deadline or a timeframe for a judgment creditor to file its contradicting affidavit. Because the new statute provides that a bona fide purchaser or mortgagee may rely upon the judgment debtor’s filed affidavit “conclusively,” a judgment lien creditor will necessarily have to file its contradicting affidavit almost immediately upon the expiration of the thirty-day notice. Second, assuming that such a contradicting affidavit is filed, the new statute does not provide a procedure or mechanism for resolving the dispute. Presumably, the parties will be left to pursue litigation to resolve the dispute, with the attendant risk that if the judgment creditor is wrong, it may be held liable for damages. It appears that the Texas Legislature has now added a haymaker punch to the homestead judgment debtor’s arsenal of punches. If a judgment creditor is not careful, it may find itself on the canvas only to learn that it has been counted out of the fight. As George Foreman quipped: “There’s more to boxing than hitting. There’s not getting hit, for instance.”

By David M. O’ Dens