Patrick Corey Sullivan v. Lemonade Insurance Company ( 2024 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-24-00211-CV
__________________
PATRICK COREY SULLIVAN, Appellant
V.
LEMONADE INSURANCE COMPANY, Appellee
__________________________________________________________________
On Appeal from the County Court at Law
Polk County, Texas
Trial Cause No. 23-CC-CV-0065
__________________________________________________________________
MEMORANDUM OPINION
Pro se Appellant Patrick Corey Sullivan (“Appellant” or “Sullivan”) appeals
from a final order, wherein the trial court found that a Receiver was duly appointed
to act for Sullivan and authorized to execute a Settlement Agreement, granted the
entry of the settlement agreement, and the trial court dismissed all claims and
controversies. We affirm.
1
Background
In June of 2023, Sullivan filed a Small Claims Court petition against his
renter’s insurer Lemonade Insurance Company (“Lemonade”) in the Justice Court
for Polk County, Texas. Therein, Sullivan alleged a bad-faith claim against
Lemonade, claiming that Lemonade had refused to pay his property damage claim
under his renter’s insurance policy for fire damage to his personal property, and he
sought damages in the amount of $40,000. Thereafter, the case was transferred to
the Polk County Court at Law and assigned trial cause number 23-CC-CV-0065.
Lemonade filed an Answer asserting a general denial and affirmative defenses
alleging that Sullivan’s claim was barred by various policy exclusions. Lemonade
alleged the fire marshal had determined that Sullivan should be arrested for felony
arson because Sullivan intentionally set the fire. Lemonade also claimed that
Sullivan had submitted fake and fictitious receipts to defraud the insurer; he had
removed items from the property before investigators arrived; he intentionally
concealed or misrepresented material facts; he failed to cooperate with Lemonade’s
investigation; and he made a false statement relating to his loss and his insurance.
The record includes Sullivan’s Initial Disclosures, which include a copy of a
police report that states, in part, that warrants for Sullivan’s arrest for arson and
criminal mischief were issued and that Sullivan was arrested on July 10, 2023. The
record also includes a copy of a Fire Investigation Report prepared by Donan
2
Engineering who was hired by Lemonade. The Donan report states, in part, that
“[t]he cause of the fire is not determined to a reasonable degree of scientific
certainty; however, a human act, error, or omission cannot be ruled out as the cause
of the fire.”
On March 15, 2024, Paula Elliott, Carole Elliott-Futch, and Elliott Family
Holdings, d/b/a Elliott Land Co. (collectively “Intervenors”) filed Intervenors’
Original Plea in Intervention. Therein, the Intervenors stated that Sullivan had filed
three claims against the Intervenors, all the claims were dismissed, and the trial court
had awarded attorney’s fees to the Intervenors, which Sullivan had not paid. 1 The
Intervenors asserted that the trial court had appointed a receiver (hereinafter,
“Receiver”) to collect the outstanding debt owed to Intervenors, including the
attorney’s fees, and they asked that, if Sullivan was awarded any monetary damages
in the suit against Lemonade, that the money should be held in the trial court’s
registry until the Receiver could file the appropriate motions to convert the funds to
be awarded to the Intervenors in satisfaction of Sullivan’s outstanding debt. The
record also includes a copy of an Order Appointing Receiver and Compelling
Discovery signed by the trial court on February 6, 2024, naming Sullivan as the
Judgment Debtor, and stating, in relevant part, that the Receiver was appointed
1
Our appellate record does not include a description of Sullivan’s claims
against the Intervenors nor any additional information in that lawsuit.
3
pursuant to the Texas Turnover Statute, and that the Receiver shall have the right
and power to collect all accounts receivable of Judgment Debtor, to endorse and cash
all checks and negotiable instruments payable to Judgment Debtor, and to take
possession of non-exempt property, including “causes of action or choses of
action[.]” The record does not contain any objection or challenge by Sullivan to the
Order Appointing Receiver and Compelling Discovery.
The Receiver filed a Notice of Appearance in Sullivan’s case against
Lemonade on April 2, 2024. On May 15, 2024, the Receiver filed a letter in the trial
court stating that Lemonade and the Receiver had reached a settlement in trial cause
number 23-CC-CV-0065. Sullivan filed three letters addressed to the court, each
dated May 15, 2024, arguing that the Receiver lacked the authority to settle his
lawsuit with Lemonade. The Receiver filed a letter with the trial court dated May
17, 2024, stating:
As you are aware, I am the Receiver you appointed for Mr. Sullivan in
Case No. CIV22-0361. The role of a Receiver is to take possession of
and liquidate the non-exempt assets of the judgment debtor, here Mr.
Sullivan, to the extent necessary to satisfy the Court’s judgment. In this
instance, the judgment to be satisfied is your judgment of September 1,
2022 in Case No. CIV22-0361 in favor of Ms. Carole Elliott-Futch, Ms.
Paula Elliott and Elliott Family Holdings dba Elliott Land Co.
As you may be aware, Mr. Sullivan files many letters and motions with
this court and with all attorneys involved. Among his communications,
he asserts that he suffers from mental illness. I am informed that the
apartment or house where Mr. Sullivan resided burned at some time in
the past, destroying all contents. I am also informed that Mr. Sullivan
was arrested for arson and is awaiting trial.
4
I have concluded that Mr. Sullivan does not possess any non-exempt
assets, except one. The one asset appears to be his claim against
Lemonade Insurance for the damage and loss of personal property. As
Receiver, Texas law allows me to resolve and settle claims by the
judgment debtor, here Mr. Sullivan, against third-parties, such as
Lemonade Insurance.
I have reached a settlement agreement with Lemonade Insurance for
$4,000. Separately, Lemonade Insurance will shortly file a motion to
approve the settlement agreement with a proposed order.
Mr. Sullivan objects to the settlement. He asserts that because the
property lost constitutes exempt personal property, insurance proceeds
to pay for personal property must also be exempt. It is my opinion that
the insurance proceeds constitute payment by an insurance company
pursuant to a non-exempt policy. Therefore, the proceeds would be
non-exempt, subject to my control as Receiver. For these reasons, I
respectfully ask you to overrule Mr. Sullivan’s objections, and grant the
motion to approve the settlement agreement. Once this is accomplished,
I will distribute the funds to the judgment creditors, less Receiver fees,
and then file a motion to close the receivership.
If you determine that the insurance proceeds should be treated as
exempt, then you should deny the motion to approve the settlement
agreement. I will then file a motion to close the receivership.
Also included in the record are letters to the trial court from Sullivan in which
he alleges: the Receiver was overstepping his boundaries; the Receiver did not have
power of attorney; the proposed settlement was far less than the “over 28k” Sullivan
lost in personal property as a result of the fire; and home furnishings are protected
as exempt property under section 42.001 of the Property Code.
On May 22, 2024, Lemonade filed a Motion to Enter Settlement Agreement.
The motion states that Lemonade and the Receiver had reached a settlement, which
5
was executed on behalf of Sullivan by the Receiver pursuant to the trial court’s Order
Appointing Receiver and Compelling Discovery. The motion further states under
section 31.002 of the Texas Civil Practice and Remedies Code (“the Texas Turnover
Statute”), the Receiver was authorized to and did enter the settlement agreement on
Sullivan’s behalf. Attached to the motion is a copy of a Confidential Settlement
Agreement and Release of All Claims, stating that Lemonade expressly disputes
Sullivan’s claims in the lawsuit and that Sullivan releases and discharges Lemonade
from any and all claims related to the lawsuit for the total consideration to be paid
in the amount of $4,000.
On May 31, 2024, the trial court signed an Order Granting Motion to Enter
Settlement Agreement, and the trial court dismissed all claims and controversies and
found that the Receiver was duly appointed to act as Receiver for Sullivan and
authorized to enter the Settlement Agreement. Sullivan appealed.
Issue
In a single issue, Appellant argues that because the contents of his home were
exempt property under the Texas Property Code, the proceeds paid by the insurance
company should also be exempt. Relying on Texas property exemptions, Appellant
argues that the proceeds at issue in the underlying lawsuit stem from a settlement
with his insurance company for its alleged failure to pay funds for damages to
personal property in his home that resulted from a fire. See Tex. Prop. Code Ann.
6
§§ 41.001-002. Appellant argues that the trial court erred because it did not consider
that the proceeds from the insurance company are to replace exempt property and
that Appellant was not given the opportunity to explain to the trial court that the
Receiver did not consider the value of the contents lost.
Analysis
Appellant was pro se in the trial court, and he is pro se on appeal. Generally,
we construe an appellant’s pro se brief liberally. See Giddens v. Brooks, 92 S.W.3d
878, 880 (Tex. App.—Beaumont 2002, pet. denied) (“pro se pleadings and briefs are
to be liberally construed[]”). That said, a pro se litigant is held to the same standards
as licensed attorneys and must comply with applicable laws and rules of procedure.
Mansfield State Bank v. Cohn, 573 S.W.2d 181, 184-85 (Tex. 1978). The brief must
articulate the issues we are to decide, and a brief fails to comply with the rules if we
must speculate or guess about the appellant’s issues. Golden v. Milstead Towing &
Storage, Nos. 09-21-00043-CV, 09-21-00044-CV, & 09-21-00045-CV, 2022 Tex.
App. LEXIS 2988, at *4 (Tex. App.—Beaumont May 5, 2022, no pet.) (mem. op.)
(citing Lee v. Abbott, No. 05-18-01185-CV, 2019 Tex. App. LEXIS 3601, at *3
(Tex. App.—Dallas May 3, 2019, no pet.) (mem. op.)). We are not an advocate for
any of the parties, we do not search the record to identify possible or unassigned trial
court error, and we do not search for facts or legal authorities that may support a
party’s position. Id.; see also Valadez v. Avitia, 238 S.W.3d 843, 845 (Tex. App.—
7
El Paso 2007, no pet.) (explaining that in a civil matter an appellate court has no
duty nor right to perform an independent review of the record and applicable law to
determine if there was error).
In his brief on appeal, Appellant does not challenge the appointment of the
Receiver, nor does he challenge the right of a duly appointed Receiver to take
possession of a judgment debtor’s cause of action. Instead, the Appellant cites to
certain bankruptcy cases, fails to cite to the record in this case, and does not explain
how the cases he cites apply to the facts in this case. See Tex. R. App. P. 38.1(i)
(requiring an appellate brief to cite to applicable legal authority and to the record);
Broussard v. Vicknair, No. 09-21-00391-CV, 2023 Tex. App. LEXIS 9371, at *43
(Tex. App.—Beaumont Dec. 14, 2023, no pet.) (mem. op.); Golden, 2022 Tex. App.
LEXIS 2988, at *9. Failure to meet briefing requirements waives error for appeal.
Fredonia State Bank v. Gen. Am. Life Ins. Co., 881 S.W.2d 279, 284 (Tex. 1994) (“a
point may be waived due to inadequate briefing[]”); Broussard, 2023 Tex. App.
LEXIS 9371, at *43. Even so, appellate courts should “‘reach the merits of an appeal
whenever reasonably possible[.]’” Horton v. Stovall, 591 S.W.3d 567, 570 (Tex.
2019) (quoting Perry v. Cohen, 272 S.W.3d 585, 587 (Tex. 2008)).
Appellant relies heavily on In re Carlew, 469 B.R. 666 (Bankr. S.D. Tex.
2012). Carlew was a case in federal bankruptcy court and did not involve a turnover
proceeding. See generally id. Carlew filed a voluntary Chapter 7 petition in
8
Bankruptcy Court and listed as an asset the proceeds from a claim under his
insurance policy that he had for repairs to his home. Id. at 669. The proceeds listed
in his bankruptcy were connected to the settlement of a lawsuit that Carlew had filed
in state court before he filed his bankruptcy petition. Id. Carlew initially scheduled
the full amount of the insurance proceeds as exempt, pursuant to section 1108.051
of the Texas Insurance Code. Id.; see also Tex. Ins. Code Ann. § 1108.051. The
Bankruptcy Trustee filed an objection to the use of the Insurance Code exemption
for the settlement proceeds. Carlew, 469 B.R. at 669. Carlew later filed an amended
schedule that designated the exemption of the insurance proceeds as exempt
pursuant to the homestead exemption under the Texas Property Code. Id. at 669-70;
see also Tex. Prop. Code Ann. §§ 41.001-002. In its opinion, the bankruptcy court
explained that if the insurance proceeds were exempt, there would be less funds
available for distribution to creditors, but if the insurance proceeds were not exempt,
then the Trustee would have more funds to distribute to creditors. Carlew, 469 B.R.
at 672. Applying Texas homestead law, the bankruptcy court ruled that the insurance
proceeds for repairs to his home were exempt property. Id. at 676-77.
Appellant does not explain why the bankruptcy case applies to the facts of his
case, which unlike Carlew, involves a renter’s insurance policy and a settlement of
a bad faith claim. Generally, Sullivan argues the trial court in this case erred because
9
it “did not take into consideration that the proceeds from the insurance company are
to replace exempt property.”
The order appointing the Receiver states that the Receiver was appointed
under the Texas Turnover Statute and that the Receiver has the power and authority
to take possession of “causes of action or choses of action[.]” Sullivan did not object
to the Order appointing the Receiver, and he has not challenged that order on appeal.
Rather, Sullivan challenges the Order Granting Motion to Enter Settlement
Agreement, wherein the trial court approved the settlement, found that the Receiver
was duly appointed to act as Receiver for Sullivan and authorized to enter the
Settlement Agreement, and dismissed the case.
We review a trial court’s order pursuant to the Texas Turnover Statute under
an abuse of discretion standard. See Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223,
226 (Tex. 1991). Sullivan bore the burden of proof in the trial court to establish that
the proceeds from the settlement were exempt from turnover. Klinek v. LuxeYard,
Inc., 672 S.W.3d 830, 836 (Tex. App.—Houston [14th Dist.] 2023, no pet.).2 Based
on the record before us, the trial court could have concluded that the amount paid by
2
See also Pamplin v. Stephenson, No. 04-21-00208-CV, 2023 Tex. App.
LEXIS 2006, at *13 (Tex. App.—San Antonio Mar. 29, 2023, no pet.); Fleming v.
NASA Fed. Credit Union, No. 04-21-00555-CV, 2023 Tex. App. LEXIS 287, at *6
(Tex. App.—San Antonio Jan. 18, 2023, no pet.) (mem. op.); Stanley v. Reef Secs.,
Inc., 314 S.W.3d 659, 667 (Tex. App.—Dallas 2010, no pet.); Lozano v. Lozano, 975
S.W.2d 63, 67 (Tex. App.—Houston [14th Dist.] 1998, pet. denied).
10
Lemonade was non-exempt property because the payment was paid to obtain a
release and discharge of Lemonade from Sullivan’s bad-faith claim. A duly
appointed receiver may take possession over non-exempt assets to pay the proceeds
to a judgment creditor. See Tex. Civ. Prac. & Rem. Code Ann. § 31.002(b)(3) (under
the Texas Turnover Statute, a court may appoint a receiver to take possession of
nonexempt property to pay the proceeds to a judgment creditor to satisfy a
judgment); D&M Marine, Inc. v. Turner, 409 S.W.3d 853, 858 (Tex. App.—Fort
Worth 2013, no pet.) (concluding that an insured’s potential claims against insurer
for bad faith and failure to indemnify were proper subjects of a turnover order); Main
Place Custom Homes, Inc. v. Honaker, 192 S.W.3d 604, 627 (Tex. App.—Fort
Worth 2006, pet. denied) (“[A] cause of action is property to which the turnover
statute applies.”).
We cannot say the trial court abused its discretion in entering the order
approving the settlement and dismissing the claims, and we overrule Appellant’s
issue. See Buller, 806 S.W.2d at 226. Having overruled Appellant’s issue, we affirm
the trial court’s order dismissing the lawsuit.
11
AFFIRMED.
LEANNE JOHNSON
Justice
Submitted on September 17, 2024
Opinion Delivered September 26, 2024
Before Golemon, C.J., Johnson and Chambers, JJ.
12