Sky View at Las Palmas, LLC and Ilan Israely v. Roman Geronimo Martinez Mendez and San Jacinto Title Services of Rio Grande Valley, Llc ( 2018 )

IN THE SUPREME COURT OF TEXAS
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NO. 17-0140
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SKY VIEW AT LAS PALMAS, LLC AND ILAN ISRAELY, PETITIONERS,
v.
ROMAN GERONIMO MARTINEZ MENDEZ AND SAN JACINTO TITLE SERVICES
OF RIO GRANDE VALLEY, LLC, RESPONDENTS
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ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE THIRTEENTH DISTRICT OF TEXAS
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Argued March 20, 2018
JUSTICE GREEN delivered the opinion of the Court.
In this case, we consider whether the trial court erred in failing to apply the one-satisfaction
rule and award a nonsettling defendant settlement credits. We hold that the one-satisfaction rule
applies to this case, and the trial court therefore erred in denying the nonsettling defendant the
settlement credits. We reverse the judgment of the court of appeals and remand the case to that court
for proceedings consistent with this opinion.
I. Background
In 2007, Ilan Israely and Abraham Gottlieb formed Sky View at Las Palmas, L.L.C. for the
purpose of purchasing and developing land in Hidalgo County. In March 2008, Sky View acquired
a tract of land containing 38.416 acres in Hidalgo County (the Property), from M Construction, Ltd.,
the president of which was Hugo Martinez (Hugo). Sky View purchased the Property for
$6.5 million, and it financed $4 million of the purchase price through a Promissory Note and Deed
of Trust with Compass Bank1 (the purchase loan). Sky View and M Construction also entered into
a construction agreement in which M Construction would serve as the project’s general contractor.
After obtaining the purchase loan, Sky View, through Israely and Gottlieb, sought a
construction loan with Compass Bank for $9 million, but the bank said it would take months to
complete the due diligence for this loan. To keep the project moving while it waited for this loan,
Sky View sought a second construction loan for approximately $1.5 million. Israely, through a
connection made by Hugo, approached Romano Geronimo Martinez Mendez (Martinez) about
providing the financing for this second construction loan. There is evidence that Martinez was
provided with Israely’s personal financial statements indicating Israely’s net worth to be
approximately $35 million.
To help facilitate this loan agreement with Sky View and Israely, Martinez retained the law
firm of Kittleman, Thomas & Gonzales, LLP (Kittleman) to draft the loan documents. Martinez also
retained San Jacinto Title Services of Rio Grande Valley, LLC (San Jacinto) to close the transaction
and serve as the title company. San Jacinto was an agent authorized to issue title insurance policies
for Fidelity National Title Insurance Company (Fidelity). Martinez agreed to make this second
construction loan to Sky View (the Martinez loan), which consisted of Martinez’s loan of
$1.275 million to Sky View and Sky View’s promise to repay the loan within six months at 18%
1
At the time, Compass Bank was known as “Texas State Bank,” and it is referred to interchangeably throughout
the record. We refer to it as “Compass Bank.”
2
interest (the Note), secured by a lien on the Property. This was the second lien on the Property
behind Compass Bank’s lien. Israely and Gottlieb also agreed to each provide a personal guaranty
of the Martinez loan.
Part of this lawsuit arises out of the closing transaction of the Martinez loan. Kittleman
drafted the loan documents but allowed Carmen Solis, an escrow officer with San Jacinto, to oversee
the loan closing entirely. To finalize the loan, Solis sent the loan documents to Gottlieb by
overnight mail, including both Gottlieb’s and Israely’s personal guaranty agreements. These
documents were sent back to Solis fully executed, and Solis notarized them, falsely stating that they
were signed in her presence.
In October 2008, Sky View defaulted on the Note and the parties began informal negotiations
regarding its repayment. Over a year later, the dispute had not been resolved, and Martinez retained
the law firm of Walker & Twenhafel, L.L.P (Walker) to assist in recovering on the Note. In May
2010, Martinez filed suit against Sky View, Israely, and Gottlieb (the Sky View defendants), seeking
damages for “the outstanding balance of the Note and Guaranty Agreements” and attorney’s fees.
Martinez claims Walker never advised him during this time that the first lienholder—Compass
Bank—could foreclose on the Property, which would adversely affect his lien interest and a claim
under his title insurance policy with Fidelity. In October 2011, after Sky View had stopped making
payments to Compass Bank on the purchase loan, Compass Bank foreclosed on the Property, which
Martinez claims “effectively wip[ed] out” his secondary interest. Three months after the
foreclosure, Fidelity denied Martinez’s claim under his title insurance policy.
3
Over a nearly four-year period of litigation, Martinez added Kittleman, San Jacinto, and
Fidelity as defendants in his suit against the Sky View defendants, alleging various causes of action
based on the closing transaction on the Martinez loan.2 Martinez also later added Walker as a
defendant, alleging several causes of action based on its representation during the litigation with Sky
View.3 Martinez eventually settled with each of these four added defendants.4
In April 2014, Martinez proceeded to trial against the Sky View defendants based on the
following causes of action: breach of the Martinez loan Note and guaranty agreements, fraud,
promissory estoppel, quantum meruit, ratification/adoption, and conspiracy. The only questions
submitted to the jury related to the breach-of-contract and fraud claims, and Martinez submitted only
one damages question:
What sum of money, if any, if paid now in cash, would fairly and reasonably
compensate Martinez for his damages, if any, that resulted from either (1) Sky
View’s failure to comply with the Note; (2) Gottlieb’s failure to comply with the
guaranty agreement; (3) Israely’s failure to comply with the guaranty agreement; or
(4) Israely’s fraud?
The jury found that: (1) Israely and Gottlieb authorized Sky View’s execution of the Martinez loan
Note; (2) Israely and Gottlieb both ratified Sky View’s execution of the Note; (3) Sky View failed
to comply with the terms of the Note; (4) Gottlieb failed to comply with his guaranty agreement;
2
Martinez brought causes of action against Kittleman for legal malpractice, breach of fiduciary duty,
negligence, vicarious liability, Texas Deceptive Trade Practices Act (DTPA) violations, and breach of contract; against
San Jacinto for negligence, fraud, and conspiracy; and against Fidelity for breach of contract, unfair settlement practices,
and negligence.
3
Martinez brought causes of action against Walker for negligence, professional malpractice, and breach of
fiduciary duty.
4
Before trial, Martinez settled with Kittleman for $175,000, with San Jacinto for $1.275 million, and with
Fidelity for $300,000. After trial but before judgment was entered, Martinez settled with Walker for $550,000.
4
(5) Israely authorized another to execute the guaranty agreement on his behalf and ratified the
guaranty agreement; (6) Israely failed to comply with the guaranty agreement; (7) Israely committed
fraud on Martinez; and (8) Martinez incurred damages of $2,665,832.72—the same amount
Martinez claimed was due on the Note. The jury also awarded Martinez attorney’s fees related to
trial, appeals, and any post-judgment efforts to collect the judgment. Martinez elected to recover
on the breach-of-contract claim.
In response to Martinez’s motion for judgment, Sky View and Israely together asserted that
under the one-satisfaction rule, they were entitled to offset the final judgment by the amounts the
four settling defendants paid to Martinez, plus applicable interest.5 However, the trial court rendered
judgment against the Sky View defendants, jointly and severally, for the full jury award—
$2,665,832.72—in damages and prejudgment interest, plus trial attorney’s fees of $574,062 and
contingent appellate attorney’s fees of $200,000. Sky View and Israely again argued in post-
judgment motions that they were entitled to settlement credits, and they requested that Martinez
produce those settlement documents.6 Sky View and Israely eventually introduced an affidavit from
their counsel as to the amount and timing of each of Martinez’s settlements, and Martinez’s counsel
admitted those same amounts to the trial court in a hearing on the motions. Martinez did not file any
responses or offer evidence that the Sky View defendants were not entitled to settlement credits.
The trial court never ruled on any of Sky View and Israely’s post-judgment motions, so their request
5
Gottlieb did not appear for trial, testify, or file an appeal.
6
Sky View and Israely together filed a motion for judgment notwithstanding the verdict, a motion for
modification of the judgment, and a motion for a new trial.
5
for settlement credits was denied by operation of law. See TEX. R. CIV. P. 329b(e), (g). Sky View
and Israely appealed.
The court of appeals affirmed the trial court’s denial of settlement credits. ___ S.W.3d ___,
___ (Tex. App.—Corpus Christi–Edinburg 2017, pet. granted). After purportedly examining
“Martinez’s causes of action, allegations, and the injuries he claimed” against each of the settling
defendants, the court of appeals held that Martinez’s claims against Sky View and Israely were
“independent of the other injuries Martinez alleged against the settling defendants.” Id. at ___. It
stated:
Although Martinez’s claims against each of the seven defendants in this case arise
out of a common set of underlying facts and sequence of events, . . . the damages for
which the jury found Sky View and Israely liable are not part of a “single, indivisible
injury,” as [Sky View and Israely] contend.
Id. at ___. The court of appeals also held that there was factually sufficient evidence to support the
amount of Martinez’s attorney’s fees. Id. at ___. Sky View and Israely appealed, and we granted
their petition for review. 61 Tex. Sup. Ct. J. 332 (Feb. 16, 2018). For ease of reference, we refer
to Sky View and Israely together as “Sky View.”
II. Analysis
A. The One-Satisfaction Rule
This case concerns the availability of settlement credits under the one-satisfaction rule.
“Under the one satisfaction rule, a plaintiff is entitled to only one recovery for any damages
suffered.” Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000); see also Stewart Title
Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991) (“The one satisfaction rule applies to prevent a
6
plaintiff from obtaining more than one recovery for the same injury.”). This Court first articulated
the one-satisfaction principle in Bradshaw v. Baylor University:
It is a rule of general acceptation that an injured party is entitled to but one
satisfaction for the injuries sustained by him. That rule is in no sense modified by
the circumstance that more than one wrongdoer contributed to bring about his
injuries. There being but one injury, there can, in justice, be but one satisfaction for
that injury.
84 S.W.2d 703, 705 (Tex. 1935), overruled in part by Duncan v. Cessna Aircraft Co., 665 S.W.2d
414, 432 (Tex. 1984).7 In Stewart Title, we clarified that the fundamental consideration in applying
the one-satisfaction rule is whether the plaintiff has suffered a single, indivisible injury—not the
causes of action the plaintiff asserts: “There can be but one recovery for one injury, and the fact that
more than one defendant may have caused the injury or that there may be more than one theory of
liability, does not modify this rule.” 822 S.W.2d at 8. Thus, the rule applies both “when the
defendants commit the same act as well as when defendants commit technically differing acts which
result in a single injury.” Id. at 7. In First Title Co. of Waco v. Garrett, we explained the rule’s
rationale as it applies to settlement credits for nonsettling defendants:
7
As we noted in Stewart Title, “Duncan did not abolish the one satisfaction rule but merely modified the
method in which the rule would apply to specific cases.” 822 S.W.2d at 5–6. “The Duncan comparative causation
scheme applied only to products cases involving strict liability, breach of warranty, and mixed theories of strict liability
and negligence . . . .” Id. Both the Duncan comparative-causation scheme and the former comparative-negligence
statute, see former TEX. CIV. PRAC. & REM. CODE §§ 33.001–.003 (1986), were displaced by the former comparative-
responsibility statute in September 1987, Act of June 3, 1987, 70th Leg., 1st C.S., ch. 2, §§ 2.03–.06, 1987 Tex. Gen.
Laws 37, 40 (amended 1995) (current version at TEX. CIV. PRAC. & REM. CODE §§ 33.001–.004); see also Stewart Title,
822 S.W.2d at 5 (discussing Texas’s contribution schemes at that time).
7
[T]he plaintiff should not receive a windfall by recovering an amount in court that
covers the plaintiff’s entire damages, but to which a settling defendant has already
partially contributed. The plaintiff would otherwise be recovering an amount greater
than the trier of fact has determined would fully compensate for the injury.
860 S.W.2d 74, 78 (Tex. 1993).
A nonsettling defendant seeking a settlement credit under the one-satisfaction rule has the
burden to prove its right to such a credit. Utts v. Short, 81 S.W.3d 822, 828 (Tex. 2002); Mobil Oil
Corp. v. Ellender, 968 S.W.2d 917, 927 (Tex. 1998). In Ellender, we held that a nonsettling
defendant meets this burden by introducing into the record either the settlement agreement or some
other evidence of the settlement amount. 968 S.W.2d at 927; see also Utts, 81 S.W.3d at 828.
“Once the nonsettling defendant demonstrates a right to a settlement credit, the burden shifts to the
plaintiff to show that certain amounts should not be credited because of the settlement agreement’s
allocation.” Utts, 81 S.W.3d at 828. The plaintiff can rebut the presumption that the nonsettling
defendant is entitled to settlement credits by presenting evidence showing that the settlement
proceeds are allocated among defendants, injuries, or damages such that entering judgment on the
jury’s award would not provide for the plaintiff’s double recovery. See id. at 828–29 (requiring the
nonsettling plaintiff to show that it did not benefit from the settlement); Casteel, 22 S.W.3d at
391–92 (requiring a showing of an allocation between joint and separate damages); Ellender, 968
S.W.2d at 928 (requiring a showing of an allocation between actual and punitive damages); First
Title, 860 S.W.2d at 79 (applying the one-satisfaction rule when the plaintiff did not show it settled
for a separate injury). A written settlement agreement that specifically allocates damages to each
8
cause of action will satisfy this burden. Ellender, 968 S.W.2d at 928; see also First Title, 860
S.W.2d at 79 (examining contents of settlement agreement).
For example, in First Title Co. of Waco v. Garrett, we examined the contents of a settlement
agreement and held that the nonsettling defendants were entitled to a settlement credit because it
covered the same injury for which the jury found the nonsettling defendants liable. See 860 S.W.2d
at 78–79. The plaintiffs, the Garretts, purchased land for use as an automobile salvage yard but later
learned the land was covered by a restrictive covenant prohibiting such use. Id. at 75. The Garretts
sued the sellers for misrepresentations, and in a separate suit, sued two title companies for
negligence and DTPA violations. Id. at 76. The Garretts settled with the sellers, and though the title
companies placed the settling defendants’ settlement agreement into the record, the trial court denied
the title companies’ request for settlement credits. Id. The court of appeals affirmed, holding that
the title companies had not proved that they and the sellers were joint tortfeasors. Id. This Court
reversed. Id. at 79. We observed that “[t]he settlement agreement shows that all parties denied any
liability, but there are other statements addressing the merits of that lawsuit and what the settlement
was intended to remedy.” Id. We then noted that the settlement agreement established that the
Garretts’ claims were based on the sellers’ alleged misrepresentations and that they sought to
recover “money, rescission of the sale of land . . . and attorney’s fees.” Id. We held that the title
companies were entitled to a credit against the judgment equal to the full amount of this settlement
because “[b]y its terms, the settlement agreement covers the same injury for which the title
companies were found liable in the present lawsuit.” Id. Further, “[a]lthough not adjudicated to be
9
joint tortfeasors, the title companies and the sellers cannot reasonably be said to have caused
separate injuries.” Id.
“[A] nonsettling party should not be penalized for events over which it has no control.” Utts,
81 S.W.3d at 829 (citing Ellender, 968 S.W.2d at 927). Thus, this burden-shifting framework, based
on the presumption that the nonsettling defendant is entitled to a settlement credit after it introduces
evidence of the plaintiff’s settlement, is appropriate because the plaintiff is “in the best position” to
demonstrate why rendering judgment based on the jury’s damages award would not amount to the
plaintiff’s double recovery. See id. If the plaintiff fails to satisfy this burden, then the defendant is
entitled to a credit equal to the entire settlement amount. See id.; Ellender, 968 S.W.2d at 928. We
review the trial court’s application of the one-satisfaction rule de novo.8 See First Title, 860 S.W.2d
at 78–79; Stewart Title, 822 S.W.2d at 7–8.
B. Sky View’s Settlement Credits
Sky View argues that the courts below erred in failing to apply the one-satisfaction rule and
denying it settlement credits for the settlements Martinez entered into with Kittleman, San Jacinto,
Fidelity, and Walker. Sky View asserts that Martinez consistently pled, proved, and asked the jury
to compensate him for a single, indivisible injury from all seven defendants—nonpayment of the
8
The court of appeals here reviewed the trial court’s settlement-credit determination for an abuse of discretion,
___ S.W.3d at ___, and neither party has argued this was error. This Court has not explicitly articulated a standard of
review for applying the one-satisfaction rule, and courts of appeals have varied. Compare Galle, Inc. v. Pool, 262
S.W.3d 564, 570 n.3 (Tex. App.—Austin 2008, pet. denied) (de novo) with Oyster Creek Fin. Corp. v. Richwood Invs.
II, Inc., 176 S.W.3d 307, 326 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (abuse of discretion). However, our
decisions demonstrate that whether the plaintiff has complained of a single, indivisible injury, and whether the defendant
is entitled to credit one or more settlements against the judgment, are legal determinations that we review de novo. See
First Title, 860 S.W.2d at 78–79 (considering what injury a settlement agreement covered); Stewart Title, 822 S.W.2d
at 7–8 (determining that the plaintiff complained of a single, indivisible injury).
10
$1.275 million Note. Thus, Sky View argues, it was entitled to settlement credits to offset the jury’s
damages award against it and prevent Martinez’s double recovery. The court of appeals erred, Sky
View contends, when it examined the causes of action Martinez asserted against each defendant
rather than the injury he allegedly sustained. Sky View asks this Court to reduce the judgment “by
the $2.3 million settlement funds Martinez received and any applicable interest.”
Martinez asserted several claims against Kittleman arising out of Kittleman’s actions during
the Martinez loan closing—actions Martinez alleged resulted in his inability to recover the amount
due on the Note when Sky View later defaulted.9 Martinez also asserted causes of action against
San Jacinto based on Solis’s handling of the closing, and he alleged that this negligence resulted in
Israely’s later assertion that he did not sign the loan documents and therefore was not liable for the
Note’s repayment. Martinez sought damages from both Kittleman and San Jacinto equal to the
amount of lost principal and interest due on the Note and the attorney’s fees he incurred in seeking
its repayment.10 Thus, as a result of both Kittleman’s and San Jacinto’s alleged actions, Martinez
alleged to have suffered the same injury—nonpayment of the Note.
Similarly, the claims Martinez asserted against Fidelity arose from its role in the Martinez
loan transaction and Sky View’s default. Martinez alleged that Fidelity acted negligently in
9
For example, in his malpractice claim, Martinez alleged that “if the loan transaction would have been properly
closed by Kittleman . . . the contractual liability of Sky View, Israely, and Gottlieb to Martinez would have been clear.
. . . Instead, and as a direct result of the botched closing and failures to disclose, Martinez lacks the documents required
to protect his rights and enforce the loan documents.”
10
Martinez alleged that as a result of Kittleman’s malpractice, he “has had to vigorously litigate this case for
several years in order to try to establish liability against one or more of the Defendants in this case,” and asked to recover
“additional damages consisting of the additional attorneys fees and expenses he has incurred as a result of the legal
malpractice of Kittleman.” Similarly, he sought “the additional” attorney’s fees and expenses he incurred as a result of
San Jacinto’s allegedly fraudulent actions.
11
allowing San Jacinto—an agent authorized to issue insurance policies on its behalf—to operate as
it did, and that Fidelity breached the title insurance policy by denying Martinez’s claim and
engaging in unfair settlement practices. As to damages from Fidelity’s conduct, Martinez asserted
that “Fidelity should be responsible for covering Martinez’s loss under the title insurance policy.”
Finally, Martinez asserted claims against Walker based on Walker’s initial representation of
Martinez in its suit against Sky View seeking repayment of the Note—specifically, that Walker
failed to take any steps to protect Martinez’s lien interest in the Property before Compass Bank’s
foreclosure, and that this delay resulted in Fidelity’s denial of Martinez’s claim under the title
insurance policy. Martinez sought to recover “actual and special damages from Walker, including
the benefit of his mortgagee title insurance policy which was lost . . . [and] exemplary damages from
Walker due to its gross negligence and breach of fiduciary duty.”
Further, the only damages evidence Martinez provided at trial was based on his financial loss
after Sky View defaulted on the Note. Martinez’s damages evidence included the loan documents,
Martinez’s testimony about what was due on the Note—by his calculation, $2,665,832.72, which
included prejudgment interest up to the date of trial—and expert testimony as to Martinez’s
reasonable and necessary attorney’s fees. Martinez’s only damages question lumped together all
of his damages arising from the Note, the guaranties, and the alleged fraud. Accordingly, the jury
assessed Martinez’s damages under this question with one amount—$2,665,832.72, the amount
Martinez claimed was due on the Note. This is the same recovery Martinez sought against each
settling defendant.
12
The court of appeals erred in examining only the causes of action Martinez asserted against
each of the settling defendants when our precedent makes clear that the causes of action pled are not
the proper inquiry in applying the one-satisfaction rule. See Stewart Title, 822 S.W.2d at 7–8. The
proper question is whether the plaintiff has suffered a single, indivisible injury. See id. Here,
although he asserted various causes of action against the seven defendants, all of Martinez’s
allegations were based on the same injury—nonpayment of the Note. In addition, other than the
exemplary damages he sought against Walker, which we address below, all of the damages Martinez
sought against each of these defendants was for an amount equivalent to his economic loss of the
loan’s principal and accumulated interest plus the attorney’s fees he incurred in pursuing the
litigation. Thus, although not adjudicated to be tortfeasors, Sky View and the settling defendants
cannot reasonably be said to have caused separate injuries. See First Title, 860 S.W.2d at 79.
In response to Martinez’s motion for judgment, Sky View alleged that Martinez benefitted
from settlement agreements with Kittleman, San Jacinto, Fidelity, and Walker based on the same
injury for which the jury awarded him damages, and thus, allowing Martinez to recover the full
amount of the jury’s award would result in his double recovery. This is a proper time and method
to raise the one-satisfaction rule. See Utts, 81 S.W.3d at 830 (holding that a nonsettling defendant
properly raised the settlement-credit issue in response to the plaintiff’s motion for judgment).
Additionally, after the trial court rendered judgment for Martinez, Sky View filed several motions,
again asserting the one-satisfaction rule. Sky View presented affidavit evidence as to the amount
of each settlement, and Martinez’s counsel stipulated to those amounts. Thus, Sky View
13
successfully raised a presumption that it was entitled to settlement credits equal to those amounts.
See id. at 829; Ellender, 968 S.W.2d at 927.
At this point, the burden shifted to Martinez to rebut this presumption by showing that the
settlement proceeds were allocated to an injury or damages different from the one for which he
recovered against Sky View, see Utts, 81 S.W.3d at 829, so that receiving the full jury award would
not amount to a double recovery or windfall. See First Title, 860 S.W.2d at 78. Martinez asserted
various arguments in response to Sky View’s request for application of the one-satisfaction rule, but
he never offered any evidence regarding any allocation of the settlement proceeds, as our precedent
requires.11 See Utts, 81 S.W.3d at 829 (requiring a plaintiff to provide evidence to rebut the
presumption of settlement credits); Casteel, 22 S.W.3d at 391–92; Ellender, 968 S.W.2d at 928;
First Title, 860 S.W.2d at 78–79.
Martinez’s settlement agreements with Kittleman and San Jacinto are both in the record.
Both agreements show that all parties denied any liability, but both agreements also establish that
Martinez sought recovery against these defendants for the same injury for which he recovered
against Sky View—his loss of the loan’s principal and accumulated interest after Sky View
defaulted on the Note.12 Both agreements provide that the parties will bear their own attorney’s fees
11
Martinez’s response to Sky View’s request for application of the one-satisfaction rule consisted of arguments
that the rule is limited to cases involving joint tortfeasors, there was no single injury because Martinez requested different
types of damages from different defendants, and Sky View waived this issue because it never pled or proved it was
entitled to such credits. We address each of these arguments in this opinion.
12
The Kittleman settlement agreement establishes that Martinez made claims based on Kittleman’s alleged
malpractice “in closing the [Martinez] loan” and Israely’s subsequent denial of liability on the Note. The San Jacinto
agreement establishes that Martinez made claims based on its “provision of title insurance, escrow services, notary
services and courtesy closing services” in the Martinez loan transaction, seeking various damages and attorney’s fees.
That settlement agreement states that Martinez “has been pursuing claims for . . . exemplary damages,” but Martinez’s
live pleading at the time of the parties’ settlement sought only his “economic out of pocket damages (the principal
14
and costs, thereby excluding the attorney’s fees Martinez incurred in those actions from the
settlement proceeds, and preventing Martinez’s double recovery of attorney’s fees under the trial
court’s judgment. The record does not contain the Fidelity and Walker settlement agreements, only
the affidavit evidence Sky View offered stating the amounts of those settlements. Because Martinez
did not offer any evidence allocating those settlement amounts, and the record does not reflect any
such allocation, Martinez failed to rebut the presumption that Sky View is entitled to settlement
credits equal to those amounts. See Utts, 81 S.W.3d at 828–29; Ellender, 968 S.W.2d at 927–28.
Though Martinez sought exemplary damages against Walker, Ellender made clear that the burden
is on the plaintiff to “tender a valid settlement agreement allocating between actual and punitive
damages to the trial court” in order to avoid a settlement credit. 968 S.W.2d at 928.
In sum, Martinez complained of a single injury against each defendant—nonpayment of the
$1.275 million Note—varying his causes of action and allegations according to each defendant’s
alleged role in causing Martinez to suffer the claimed damages. See Casteel, 22 S.W.3d at 390
(recognizing that the one-satisfaction rule applies “when defendants commit technically different
acts that result in a single injury”). Thus, when Sky View offered evidence of the settlement
amounts, it successfully raised a presumption that it was entitled to offset the judgment by those
amounts. See Utts, 81 S.W.3d at 828; Ellender, 968 S.W.2d at 927. When Martinez failed to rebut
this presumption, the trial court should have applied the settlement credits in order to prevent
Martinez’s double recovery on his single, indivisible injury of nonpayment of the Note.
amount lent to Sky View) and benefit of the bargain damages (18% interest under the loan documents)” and attorney’s
fees.
15
C. Applying the One-Satisfaction Rule
Martinez asserts that the trial court was correct to deny settlement credits here because the
one-satisfaction rule is limited to tort cases of joint and several liability. He asserts that there is no
joint liability between the Sky View defendants and settling defendants because, though he argued
that the Sky View defendants were jointly liable for nonpayment of the Martinez loan, he pled
separate liability against each settling defendant and sought damages against each that he could
recover only if a jury first found that the Sky View defendants were not liable. Martinez relies
heavily on both our Casteel decision and on GE Capital Commercial, Inc. v. Worthington National
Bank, 754 F.3d 297 (5th Cir. 2014), a case in which the Fifth Circuit made an Eerie guess as to
whether this Court would apply the one-satisfaction rule to contract claims and without joint
liability. See 754 F.3d at 305–08. We address these cases in turn.
In Casteel, the Fergusons, policyholders, sued Crown Life Insurance Company and one of
its insurance agents, Casteel, alleging various causes of action. 22 S.W.3d at 381. The jury found
for the Fergusons against both Crown and Casteel, but the Fergusons settled with Crown after the
trial and assigned their claims against Casteel to Crown. Id. The trial court rendered judgment
against Casteel for more than $1.3 million, but the court of appeals remanded, holding that Casteel
was entitled to a credit against the judgment equal to the amount of the Fergusons’ settlement with
Crown. Id. at 382, 390. On Crown’s appeal, this Court noted that though Crown and Casteel
committed technically different acts, they caused the Fergusons “to suffer a single financial injury.”
Id. at 390–91. We then stated: “Under the one satisfaction rule, the nonsettling defendant may only
claim a credit based on the damages for which all tortfeasors are jointly liable.” Id. at 391. We held
16
that “the nonsettling defendant is entitled to offset any liability for joint and several damages by the
amount of common damages paid by the settling defendant, but not for any amount of separate or
punitive damages paid by the settling defendant,” and thus, “Casteel is entitled to a credit for any
settlement amount representing joint damages that Crown paid the Fergusons.” Id. at 391–92.
Martinez relies on our statement that “the nonsettling defendant may only claim a credit
based on the damages for which all tortfeasors are jointly liable,” to argue that the one-satisfaction
rule is limited to tort cases of joint and several liability. See id. at 391 (emphasis added). But in
Casteel, this Court determined what credit a joint tortfeasor could recover after the trial court had
already found him jointly liable and the tortfeasor did not challenge his joint liability. See id. at 390
n.8. We have never required a finding of joint liability before applying the one-satisfaction rule.
See, e.g., First Title, 860 S.W.2d at 76, 79 (applying the rule when the plaintiff filed two different
lawsuits against settling and nonsettling defendants but the plaintiff suffered a single injury); Stewart
Title, 822 S.W.2d at 8 (applying the rule without a finding that the settling and nonsettling
defendants were jointly liable). We reject Martinez’s argument that we should isolate the above
statement from Casteel, which was made in the context of the facts of that case, and refuse to apply
the one-satisfaction rule anywhere there has not been a finding of joint liability. Again, the rule is
intended to prevent a plaintiff’s double recovery based on a single injury, regardless of a legal
conclusion of joint liability. See First Title, 860 S.W.2d at 79 (“Although not adjudicated to be joint
tortfeasors, the title companies and the sellers cannot reasonably be said to have caused separate
injuries.”). If, as Martinez contends, the four settling defendants could only have been liable for
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Martinez’s injury if the Sky View defendants were not liable, that can be true for only one reason:
his injury was single and indivisible.
Martinez also relies on the Fifth Circuit’s decision in Worthington. See 754 F.3d at 305–09.
In that case, GE and related plaintiffs sued Worthington National Bank under the Texas Uniform
Fraudulent Transfer Act. Id. at 299. Worthington requested a settlement credit for proceeds the GE
plaintiffs received in settlement of a contract dispute with Citibank, a third party the GE plaintiffs
never actually sued. Id. at 304. The Fifth Circuit, making an Erie guess, predicted that this Court
would not apply the one-satisfaction rule to contract cases and that an allegation of joint tortfeasor
liability was required before applying the rule. Id. at 308 (“In sum, the one-satisfaction rule emerges
in Texas Supreme Court jurisprudence as a tort law contribution doctrine, and its application has
generally been limited to cases in which a plaintiff settles with an alleged joint tortfeasor.”).
First, it is true that the one-satisfaction rule developed at common law around Texas’s
original contribution statute, which applies only to tort actions. See Stewart Title, 822 S.W.2d at 5.
This development was necessary because the statute did not address the contribution implications
of a partial settlement. Id. However, our precedent makes clear that the question of whether the
one-satisfaction rule applies relies not on the cause of action asserted by the plaintiff, but on whether
the plaintiff has suffered a single, indivisible injury. Id. at 7–8 (“[T]he fact that more than one
defendant may have caused the injury or that there may be more than one theory of liability, does
not modify this rule.”). And, as one court of appeals reasoned, “[t]he one satisfaction rule is
consistent with principles of contract law, which preclude a non-breaching party from recovering
damages for breach of contract that would put the non-breaching party in a better position than if
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the contract had been performed.” Metal Bldg. Components, LP v. Raley, No. 03-05-00823-CV,
2007 WL 74316, *19 n.22 (Tex. App.—Austin Jan. 10, 2007, no pet.) (memo op.). Thus, most
courts of appeals have concluded—as the court of appeals in this case did—that the common law
one-satisfaction rule is not limited to tort claims, because whether it applies depends not on the
cause of action asserted, but on the injury sustained. See e.g., ___ S.W.3d at ___ (“The application
of the rule is not limited to tort claims . . . .”); Allan v. Nersesova, 307 S.W.3d 564, 574 (Tex.
App.—Dallas 2010, no pet.) (applying the rule when the plaintiff elected to recover on her breach-
of-contract claim); Galle, Inc. v. Pool, 262 S.W.3d 564, 573–74 (Tex. App.—Austin 2008, pet.
denied) (same); Oyster Creek Fin. Corp. v. Richwood Invs. II, Inc., 176 S.W.3d 307, 327 (Tex.
App.—Houston [1st Dist.] 2004, pet. denied) (“[T]he absence of tort liability does not preclude the
application of the one satisfaction rule.”). Additionally, we have applied the rule in order to prevent
double recovery in a case in which the jury made findings on both contract and tort damages. See
Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182, 185 (Tex. 1998) (per
curiam) (holding it was error for the trial court to refuse an election-of-remedy request when the jury
awarded “contract, as well as tort damages, and the jury awarded the identical amount in response
to both damages questions”). The Fifth Circuit relied on CTTI Priesmeyer, Inc. v. K & O Ltd.
Partnership, 164 S.W.3d 675 (Tex. App.—Austin 2005, no pet.), to predict that this Court would
not apply the rule outside of tort claims, see Worthington, 754 F.3d at 306–07, but the Third Court
of Appeals has since overruled that decision on this point. See Elness Swenson Graham Architects,
Inc. v. RLJ II-C Austin Air, LP, 520 S.W.3d 145, 165 (Tex. App.—Austin 2017, pet. pending).
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Though Worthington ultimately concluded that the one-satisfaction rule does not apply to
contract claims, the opinion notes that this Court has permitted “at most, application of the one-
satisfaction rule where defendants are jointly liable, even when their common liability is not based
in tort.” 754 F.3d at 307 n.9 (discussing El Paso Nat. Gas Co. v. Berryman, 858 S.W.2d 362, 364
(Tex. 1993) (per curiam), in which this Court applied the rule in a case involving alter ego liability
for usury when the two defendants were jointly and severally liable for damages assessed against
the settling defendant). Martinez relies on this to argue that even if the one-satisfaction rule applies
in contract cases, it should be limited to situations in which the plaintiff asserts that two or more
defendants are jointly liable under the same contract because they have promised the same
performance. But, as discussed above, a legal conclusion of joint liability is not required for
application of the one-satisfaction rule. Though Martinez contracted separately with each settling
defendant, the injury he complained of was the same—nonpayment of the Note.
Finally, Martinez asserts that the collateral-source rule should apply to prevent Sky View’s
settlement credits. “The collateral source rule bars a wrongdoer from offsetting his liability by
insurance benefits independently procured by the injured party.” Mid-Century Ins. Co. of Tex. v.
Kidd, 997 S.W.2d 265, 274 (Tex. 1999). The theory behind the rule is that “a wrongdoer should not
have the benefit of insurance independently procured by the injured party, and to which the
wrongdoer was not privy.” Brown v. Am. Transfer & Storage Co., 601 S.W.2d 931, 934 (Tex.
1980). In Brown, we noted that if a payment is within the collateral-source rule, “the principle
forbidding more than one recovery for the same loss is not applicable.” Id. at 936. Martinez argues
that because he was the named insured under Fidelity’s title policy and Fidelity paid a $300,000
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settlement, this payment from a collateral source prohibits that settlement credit. Further, citing a
concurring opinion, Martinez argues that Kittleman and Walker were third parties acting for the
benefit of Martinez, and therefore the collateral-source rule also bars settlement credits for those
amounts. See Tate v. Hernandez, 280 S.W.3d 534, 543 (Tex. App.—Amarillo 2009, no pet.)
(Campbell, J., concurring) (“The collateral source rule has historically been applied to situations in
which a third party acts for the benefit of the plaintiff.”).
Martinez stretches the bounds of the collateral-source rule too far. With regards to the
Fidelity payment, Sky View correctly points out that the title policy was procured by Sky View,
rather than Martinez.13 This Court has held that in cases where the defendant procures insurance for
the benefit of the plaintiff, the plaintiff cannot then rely on the collateral-source rule for a double
recovery. See Publix Theatres Corp. v. Powell, 71 S.W.2d 237, 241–42 (Tex. 1934) (holding that
a lessor could not recover from its lessee for lost property after collecting payment on an insurance
policy that the lessee had purchased for the benefit of the lessor). Additionally, there is no evidence
that the $300,000 payment from Fidelity constituted an insurance policy payment under the title
policy; the only evidence of the payment in the record is the affidavit evidence Sky View presented
as to the amount transferred and to which Martinez stipulated. As to the law firms, the only Texas
case Martinez cites for this proposition is a concurrence to the court of appeals’ opinion in Tate. See
generally 280 S.W.3d at 541–44 (Campbell, J., concurring). But the concurrence, contrary to
Martinez’s argument, would have concluded that the collateral-source rule did not apply to the
13
According to the HUD Settlement Statement for the Martinez loan, the payment for title insurance was under
the column “Paid from Borrower’s Funds at Settlement,” and Sky View was the borrower.
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payment at issue in that case—a discharge in bankruptcy of liability for medical expenses—in part
because “[a]pplication of the collateral source rule has historically benefitted those with foresight
to acquire insurance in advance of injury or at least in advance of treatment.” See id. at 543
(citations omitted). Similarly, here, we conclude that lawsuits against former legal representatives
for negligence and malpractice do not fall within that reasoning.
III. Appellate Attorney’s Fees
The only remaining issue is whether Martinez is entitled to the conditional attorney’s fees
that the trial court awarded in the event of Sky View’s unsuccessful appeals. The trial court’s
judgment states:
It is further ORDERED, ADJUDGED, AND DECREED that if [the Sky
View defendants] unsuccessfully appeal this Final Judgment to an intermediate court
of appeals, [Martinez] shall have and recover jointly and severally from [the Sky
View defendants] an additional One Hundred Thousand Dollars . . . for reasonable
and necessary attorney’s fees in defending the appeal.
It is further ORDERED, ADJUDGED, AND DECREED that if [the Sky
View defendants] unsuccessfully appeal this Final Judgment to the Texas Supreme
Court, [Martinez] shall have and recover jointly and severally from [the Sky View
defendants] the following amounts: Ten Thousand Dollars . . . for representation at
the petition for review stage; Fifty Thousand Dollars . . . for representation at the
merits briefing stage; and Forty Thousand Dollars . . . for representation at the oral
argument stage.
Although Sky View challenged the trial court’s award of attorney’s fees in the court of
appeals, it has not raised a legal challenge to these attorney’s fee awards in this Court. Rather, Sky
View raises only the application of these fee awards to our disposition, arguing that if we hold that
the Sky View defendants are entitled to settlement credits under the one-satisfaction rule, Martinez
is not entitled to any of the conditional appellate attorney’s fees awarded by the trial court and
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affirmed by the court of appeals. See ___ S.W.3d at ___. Martinez disagrees, arguing that even if
we were to hold that the Sky View defendants are entitled to the settlement credits, he is entitled to
these fees because he was successful in the court of appeals as to the settlement-credits issue and
Sky View’s factual sufficiency challenge to the awarded attorney’s fees.
A party should not be penalized for pursuing a meritorious appeal. E.g., Hoefker v.
Elgohary, 248 S.W.3d 326, 332 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (holding that an
award of appellate attorney’s fees must be conditioned upon the appellant’s unsuccessful appeal);
Weynand v. Weynand, 990 S.W.2d 843, 847 (Tex. App.—Dallas 1999, pet. denied) (same); see also
Ventling v. Johnson, 466 S.W.3d 143, 155 (Tex. 2015) (noting that the underlying purpose of
chapter 38 of the Texas Civil Practice and Remedies Code, which authorizes recovery of attorney’s
fees in breach-of-contract claims, is to “avoid penalizing a party for prosecuting a meritorious appeal
and to discourage vexatious, time-consuming and unnecessary litigation”) (internal quotations
omitted). An award of conditional appellate attorney’s fees “is essentially an award of fees that have
not yet been incurred,” and the party awarded such fees “is not entitled to recover [these fees] unless
and until the appeal is resolved in that party’s favor.” Ventling, 466 S.W.3d at 156. Thus, “because
an award of appellate attorney’s fees depends on the outcome of the appeal, it is not a final award
until the appeal is concluded and the appellate court issues its final judgment.” Id. (quoting Watts
v. Oliver, 396 S.W.3d 124, 134–35 (Tex. App.—Houston [14th Dist.] 2013, no pet.)).
As shown above, the trial court’s judgment here provides for two separate conditional
appellate attorney’s fee awards—one dependent on the outcome in the court of appeals and one
dependent on the outcome in this Court. As we explained in Ventling, this award is not final until
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the last appellate court to review the case issues its final judgment. See id. Because we hold that
the courts below erred in refusing to apply the one-satisfaction rule and failing to award the Sky
View defendants settlement credits, this appeal has not been “resolved in [Martinez’s] favor,” and
thus, Martinez is not entitled to recover any of the conditional appellate attorney’s fees awarded by
the trial court. See id.
IV. Conclusion
For the reasons above, we hold that the Sky View defendants are entitled to reduce the
judgment by the total amount of the four settlements Martinez received and any applicable interest.
Accordingly, we reverse the court of appeals’ judgment and remand the case to that court for
calculation of the reduced judgment with appropriate interest, an issue the parties disputed in that
court but was not raised in this Court. We also render judgment that Martinez is not entitled to any
of the conditional appellate attorney’s fees the trial court awarded because Sky View has
successfully appealed the settlement-credits issue.
_________________________________
Paul W. Green
Justice
OPINION DELIVERED: June 1, 2018
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