Opinions Released March 2, 2017

In this weekly blog, the Law Offices of Brandy Wingate Voss, PLLC will summarize recent decisions from the Thirteenth Court of Appeals and provide links to decisions on the court’s website.

Banker v. Banker, No. 13-15-00385-CV (Opinion by Justice Rodriguez; Panel Members: Chief Justice Valdez and Justice Benavides)

In this appeal from a final divorce decree, the Thirteenth Court of Appeals reviewed the trial court’s valuation of assets, its failure to award prejudgment interest, and its two-year delay in entering judgment.

Kay and John Banker married in 1990. Kay filed for divorce on the basis of adultery twenty years later, in September 2010. The case was tried to the bench in April 2013. The couple owned two businesses—Banker Crop Insurance Agency and El Campo Livestock, Inc. (“ECL”)—which were divided in the divorce. Kay called two expert witnesses: Jessica Putz and Stephen Gonsoulin. The trial court excluded Putz’s testimony as an alleged property-valuation expert, and later entered findings that Gonsoulin’s testimony was not credible. However, the trial court admitted Kay’s inventory of the estate and her exhibits valuing the couple’s assets.

John offered no expert testimony, and the trial court excluded John’s inventory of the estate and many of his valuation exhibits. However, John testified himself regarding the value of the community assets.

After the trial, the court ordered the couple to attend mediation. In April 2014, the court circulated a draft of its proposed divorce decree, and Kay filed a motion to reconsider. The court entered a final divorce decree in July 2014. The decree stated that John had committed adultery anddivided the estate 55% to Kay and 45% to John. John received full ownership of ECL, as well as multiple vehicles and all household goods in his possession. Kay received Banker Crop Insurance and two of the couple’s bank accounts, among other items.

Kay filed numerous post-judgment motions, including requests for findings, a motion for new trial, a motion to modify the judgment, and a motion for leave to amend her petition for divorce. In September 2014, Kay attempted to plead for prejudgment interest for the first time. The trial court granted Kay’s motion to modify and, in May 2015, entered a modified decree that did not include prejudgment interest.

The trial court did not enter findings of fact and conclusions of law until after an appeal had been filed and the court of appeals remanded the case with a request for findings. In the trial court’s findings, the court held that Kay was entitled to prejudgment interest and indicated that the judgment should be modified accordingly. However, no modified judgment was entered.

Kay challenged four issues on appeal: (1) valuation of particular community assets; (2) the trial court’s delay in rendering judgment and failure to grant a new trial accounting for updated property values; (3) the court’s failure to account for or divide some of the couple’s livestock; and (4) the court’s failure to grant prejudgment interest.

Held: The case was remanded in part to divide the horses in John’s possession, which were excluded from the trial court’s decree. The Thirteenth Court also suggested that John pay a remittitur to Kay to account for the trial court’s overvaluation of the couple’s bank accounts. The remainder of the judgment was affirmed.

Valuation

Kay first challenged the trial court’s valuation of ECL, ECL’s good will, several vehicles owned by Kay and John, and two bank accounts.

Regarding ECL, the trial court held that ECL had a market value of $1,439,412. This figure was taken from John’s inventory, but the inventory was not admitted into evidence. However, John did testify regarding the value of the property as its owner. John explained his background in the industry, management of day-to-day operations, and familiarity with the company’s finances, fees, and accounting. John then explained how he calculated the market value based on the purchase price of the company, its debt, taxes, and other financial measurements. John thus demonstrated a minimum level of knowledge to support his valuation of ECL under the property owner rule. The trial court did not abuse its discretion by relying on this evidence.

Next, Kay challenged the trial court’s refusal to consider and divide ECL’s good will in the divorce. The Thirteenth Court of Appeals agreed that good will should not have been disregarded as categorically unavailable, but nonetheless held that the value of ECL’s goodwill was not supported by any evidence. Although Kay offered expert testimony on the business’s good will, such testimony was rejected as baseless, and there was no other evidence to support a valuation. Thus, the trial court did not abuse its discretion in failing to value and divide ECL’s good will.

Regarding the couple’s vehicles, the court’s valuation of the twelve vehicles at approximately $118,000 was between Kay’s valuation of $178,000 and John’s valuation of $74,000. Moreover, Kay’s only evidence of the value was the testimony of her expert witness, Putz, which was excluded. Kay did not challenge the exclusion of Putz’s testimony on appeal, and thus could not demonstrate that the trial court abused its discretion in valuing the vehicles.

Finally, Kay challenged the court’s valuation of two bank accounts. The only evidence provided regarding the balance of the two accounts reflected $32,000 in the first account as of September 2010, and $1,212 in the second as of September 2012. No other documentation provided more recent figures. Yet, the trial court valued the two accounts at $44,133. The Thirteenth Court held that no evidence supported this figure, and suggested a remittitur in Kay’s favor based on the trial court’s overvaluation. The court directed John to remit $4,914—55% of the difference between the court’s $44,133 valuation and the $33,212 valuation supported by the record—to cure the reversible error.

Having evaluated each of Kay’s challenges regarding valuation, the court noted that the only valuation constituting an abuse of discretion—that of the couple’s bank accounts—deviated a mere $10,921 from the value supported by the evidence. The total estate however, was valued at more than $2 million. Thus, the trial court’s overall valuation of the estate was not manifestly unjust or unfair.

Delay

Kay next challenged the trial court’s delay in entering judgment and denial of her motion for new trial. Kay argued that the property values changed between trial in April 2013 and the entry of judgment in May 2015, and that the failure to render a timely judgment or grant a new trial was an abuse of discretion. The Thirteenth Court of Appeals rejected this argument, noting that the trial court had the discretion to control the disposition of its cases, and there was no authority supporting Kay’s position. The court of appeals also held that much of the delay resulted from Kay’s own post-trial motions, and she could not now assert that such delay was unreasonable. Moreover, the property values would have changed in the same fashion even if the trial court had entered judgment back in 2013. Finally, the Thirteenth Court noted that several sister courts of appeals had held that new evidence that was not in existence at the time of the trial cannot support a motion for new trial; only newly discovered evidence justifies a new trial. Yet, the Thirteenth Court declined to adopt this rule and instead held that Kay’s evidence would have been cumulative of the property valuations and projections the parties presented at trial. Thus, the trial court did not abuse its discretion in delaying entry of the judgment and denying Kay’s motion for new trial.

Failure to Consider or Divide Livestock

Kay next argued that the trial court failed to account for and divide $90,500 in secret livestock sales made by John. The Thirteenth Court of Appeals however, noted that the trial court rejected Kay’s evidence of alleged secret sales and was within its discretion to do so as the sole judge of credibility.

Relatedly, Kay argued that the trial court did not consider six horses in John’s possession. John in turn, argued that the horses were included in the language granting him all household goods in his possession. The Thirteenth Court rejected John’s interpretation of the decree, noting that Kay was awarded both household goods and “any other livestock” in her possession, indicating that livestock were not intended to be included in the phrase “household goods” The trial court thus erroneously failed to account for the horses in the division of property.

Prejudgment Interest

Finally, Kay argued that the trial court erred by failing to award prejudgment interest, and denying her motion to amend her pleadings to request such interest. The Thirteenth Court noted that Kay did not move to amend her petition to seek prejudgment interest until September 2014—more than four years after the divorce was filed, a year after trial, and two months after the final divorce decree was entered. The trial court then entered a modified judgment in May 2015, with no award of prejudgment interest. However, when the trial court entered findings of fact and conclusions of law in December 2015, it held that Kay could recover $626,733 in prejudgment interest and stated that the judgment should be modified accordingly. The Thirteenth Court held that such a finding had no effect, since the judgment itself was not modified.

Moreover, Kay was required to plead for any common-law prejudgment interest sought. Yet, Kay did not move to amend her petition until after the judgment. Thus, the trial court did not abuse its discretion by denying her motion for leave to amend.

In summary, the Thirteenth Court reversed the judgment to the extent that it did not account for John’s six horses, and suggested a remittitur of $4,941 to account for the trial court’s overvaluation of the couple’s two bank accounts. The remainder of the judgment was affirmed.

Read the Full Opinion Here

Housing & Community Services, Inc. v. Texas Windstorm Insurance Association, No. 13-15-00560-CV (Opinion by Justice Benavides; Panel Members: Chief Justice Valdez and Justice Rodriguez)

In this appeal from a summary judgment, the Thirteenth Court of Appeals examined a matter of first impression: whether the Texas Windstorm Insurance Association could deny coverage of a claim simply because the claim was filed after the deadline established in the Insurance Code, without a showing of prejudice.

Housing and Community Services (“HCS”) owned the Lantana Square Apartments, which were insured by Texas Windstorm Insurance Association (“TWIA”) through December 2012. On May 15, 2012, the Lantana property was damaged by a hail storm. More than one year later, on May 28, 2013, HCS filed 2 claims with TWIA for the hail damage. TWIA denied both claims because they were not filed within a year of the incident. HCS requested an extension of the deadline from the Texas Commissioner of Insurance, but the extension was denied.

On March 24, 2014, HCS sued TWIA for wrongful denial. HCS also sought a declaratory judgment that its 13-day lapse was insufficient to justify denial of the claim and did not prejudice TWIA. The parties filed competing motions for summary judgment. TWIA in particular, argued that its insurance policies were exclusively regulated by chapter 2210 of the Texas Insurance Code, and that the Code did not require a showing of prejudice to deny a claim not filed within the required one-year time period. The trial court granted TWIA’s motion and ordered that HCS take nothing.

HCS appealed.

Held: The TWIA could deny HCS’s untimely insurance claim even though it was not prejudiced by the delay. The trial court’s judgment was affirmed.

The Thirteenth Court of Appeals began by noting that the parties stipulated to the (a) date of the storm, (b) the date HCS filed its claims, (c) that TWIA denied the claims because they were untimely, and (4) that TWIA was not prejudiced by the 13-day lapse. The court thus focused only on the question of whether TWIA may deny coverage for an untimely claim even if thought it was not prejudiced by the delay.

Texas Insurance Code section 2210.573 states that an insured must file a claim with TWIA not later than the first anniversary of the damage-causing event. However, the insured may seek a one-time, 180-day extension from the Texas Commissioner of Insurance upon a showing of “good cause.”

The Thirteenth Court acknowledged that there is a line of cases holding that an insured’s failure to timely file a claim does not defeat coverage in the absence of prejudice. Usually then, the insurer must show prejudice to deny an untimely claim. Nonetheless, the Thirteenth Court held that the plain language of the Texas Insurance Code controlled. Since the Legislature created a statutory cause of action to ensure that insurance was available in high-risk areas, the statutory provisions were required to be interpreted as mandatory and exclusive. The purposes behind the Texas Windstorm Insurance Association Act and the TWIA supported such an interpretation, as well as the language in the Texas Windstorm Insurance Association Act which stated that the Act controlled over conflicting law. Consequently, the TWIA could deny the untimely claims filed by HCS; whether TWIA was prejudiced by the delay was irrelevant.

Read the Full Opinion Here