Court of Appeals of Texas, Dallas.
ARGONAUT INSURANCE COMPANY, Appellant,
Adolphus BARRON, Appellee.
Jan. 30, 1998.
On Appeal from the County Court at Law Number Four Dallas County, Texas Trial Court Cause No. CC-952812-D
Before Justices WHITTINGTON, and MOSELEY.
JOHN OVARD, Justice.
*1 Appellee Adolphus Barron was injured on the job in an automobile accident. Through his employer, he was covered by workers’ compensation insurance and received benefits. Barron later filed suit against Ruth S. Estrada for his injuries and they settled. The workers’ compensation carrier, appellant Argonaut Insurance Company, claimed it was subrogated to Barron’s claim against Estrada to the extent of compensation benefits paid, and asserted a lien against the settlement funds. Barron, however, claimed up to one-third of the subrogated amount as attorney’s fees. Barron then filed an interpleader action against Argonaut and requested the court apportion between Barron’s attorneys and Argonaut’s attorneys one-third of the subrogated amount.
Following a bench trial, the trial court awarded one-third of Argonaut’s subrogation recovery to Barron’s attorneys, plus additional attorney’s fees of $1,500. The court also awarded Barron’s attorneys $500 in discovery sanctions against Argonaut’s attorneys.
In six points of error, Argonaut generally complains that the award of attorney’s fees exceeded the maximum award permitted by the Texas Labor Code, Barron wrongfully pursued an interpleader action for attorney’s fees, and the court erred in awarding sanctions. We reverse the trial court’s award of $1,500 in additional attorney’s fees and reform the judgment to delete that award. As modified, we affirm the trial court’s judgment.
PROCEDURAL AND FACTUAL BACKGROUND
Barron was employed as a waste disposal pick-up man by Tos-It Service Company. Barron was injured when Estrada stuck Barron’s truck from behind. Tos-It was a subscriber under the Texas Workers’ Compensation Act and was insured by Argonaut. Barron retained the services of Wasoff & Bargmann, P.C., to represent him in claims arising from the accident. The law firm of Kern & Wooley represented Argonaut.
Because of Barron’s injuries, Argonaut paid Barron $6,119.17 in compensation benefits and asserted a lien for this amount against any recovery obtained by Barron from Estrada. On behalf of Barron, Wasoff & Bargmann made a third-party claim against Estrada’s insurance carrier and then attempted to settle the claim. Unable to reach a settlement with Estrada, Wasoff & Bargmann filed suit against Estrada. Shortly thereafter, Wasoff & Bargmann reached a settlement with Estrada. Estrada’s insurance carrier agreed to pay $18,000 in return for both Barron and Argonaut releasing Estrada and her insurance carrier from further liability.
Pursuant to the settlement, Estrada’s insurance carrier delivered two checks to Wasoff & Bargmann. One check was for $6,119.17, representing the amount of Argonaut’s subrogation lien, made payable jointly to Barron, his attorney, and Argonaut. The second check was for the balance of the $18,000 settlement.
Argonaut claimed it was entitled to all the proceeds from the $6,119.17 check as its subrogation recovery in satisfaction of its lien. Wasoff & Bargmann claimed that up to one-third of Argonaut’s subrogation recovery should be paid to Wasoff & Bargmann for attorney’s fees. Argonaut, however, was unwilling to discount its lien. On behalf of Barron, Wasoff & Bargmann then filed a petition in interpleader and supplemental petition in the pending action against Estrada and named Argonaut as an additional defendant. Through the interpleader action, Wasoff & Bargmann sought to have the trial court allocate the disputed portion of the subrogation recovery between it and Argonaut’s attorneys, Kern & Wooley.
*2 On behalf of Argonaut, Kern & Wooley answered the interpleader action and filed a counterclaim against Barron. Both sides served written discovery requests and responses. Wasoff & Bargmann later filed a motion to compel discovery from Argonaut and sought sanctions against Argonaut and its attorneys.
Following a bench trial, the court awarded one-third of the subrogation recovery, $2,039.72, to Wasoff & Bargmann. The court also awarded Wasoff & Bargmann additional attorney’s fees of $1,500 and assessed $500 in discovery sanctions against Kern & Wooley in favor of Wasoff & Bargmann. This appeal followed.
THE ATTORNEY’S FEE AWARDS
In its first two points of error, Argonaut complains the trial court erred in awarding Wasoff & Bargmann one-third of Argonaut’s subrogation recovery, plus an additional $1,500 in attorney’s fees. Argonaut claims the award is excessive and exceeds one-third of its subrogation recovery in derogation of section 417.003 of the Texas Labor Code. Argonaut’s points of error and related argument in its brief are ambiguous, however, as to whether the complaint is limited only to the trial court awarding $1,500 in addition to one-third of the subrogation recovery, or whether Argonaut contends the trial court also erred in failing to award some portion of the subrogation recovery to its attorneys, Kern & Wooley. In the interests of justice, we will assume the latter and consider both arguments.
1. The Award of $1,500 in Additional Attorney’s Fees
Chapter 417 of the Texas Labor Code governs third-party liability in workers’ compensation cases.1 Workers’ Compensation Ins. Fund, 912 S.W.2d at 897-98.
TEX. LAB.CODE ANN. § 417.003(c) (Vernon 1996). Again, however, the code limits the total attorney’s fees awarded to no more than one-third of the insurance carrier’s recovery. Id.
*3 Barron’s suit against Estrada is a third-party action under the labor code. Barron claimed Estrada caused the accident which gave rise to Barron receiving compensation benefits. In such cases, the code limits attorney’s fees to one-third of the amount of the insurance carrier’s subrogation recovery. TEX. LAB.CODE ANN. § 417.003 (Vernon 1996). Therefore, the additional $1,500 awarded to Wasoff & Bargmann as attorney’s fees is not authorized by the labor code.
While Wasoff & Bargmann recognizes the statutory limit in the labor code, it asserts that the award can be upheld under Ischy, 718 S.W.2d at 888. Argonaut argues that this line of cases is not applicable to the current version of the workers’ compensation act codified in the Texas Labor Code.
We need not decide whether the Ischy line of cases is correctly decided or is applicable to the current version the workers’ compensation act, for our review of the record discloses that Wasoff & Bargmann failed to plead for recovery of additional attorney’s fees.
An award of attorney’s fees must be supported by proper pleadings. See Birdwell v. Birdwell, 819 S.W.2d 223, 229 (Tex.App.-Fort Worth 1991, writ denied).
*4 Barron’s live pleading, Plaintiff’s Petition in Interpleader and First Supplement to Plaintiff’s Original Petition, is very clear that Barron sought to recover only one-third of the subrogation award, plus out-of-pocket expenses and court costs. It contains no request for additional attorney’s fees, either in the body of the pleading or in the prayer. Nor are there any allegations that demand was presented, or would be presented, thirty days in advance of judgment. In addition to seeking a portion of the subrogation award, Wasoff & Bargmann sought only court costs and out-of-pocket expenses, and prayed for general relief. Consequently, Wasoff & Bargmann’s pleadings do not support the award of additional attorney’s fees under section 38.001.2
Furthermore, at trial Wasoff & Bargmann specifically disclaimed any attempt to recover attorney’s fees in excess of one-third of the subrogation award. In his direct testimony, lead counsel for Barron, Mr. Wasoff, stated, “[W]e only make a claim today based upon the provisions in the statute that allows the Court to apportion attorney’s fees and costs under what is now the Labor Code.” Later, Mr. Wasoff objected to Kern & Wooley’s attempt to introduce evidence of work on the case after the settlement with Estrada. Mr. Wasoff argued, “[I]t is just up until the time that the recovery was made from Ruth S. Estrada, the attorney’s fees were appropriate. Since then it has just been an issue of apportionment of attorney’s fees.”
Finally, Argonaut properly preserved error once the trial court notified the parties that it intended to award additional attorney’s fees. Prior to the trial court’s notification, the award of additional attorney’s fees had not been at issue. After being notified of the trial court’s intended action, Argonaut promptly objected to any award of attorney’s fees in excess of one-third of Argonaut’s subrogation recovery and moved for reconsideration. In response to Argonaut’s motion for reconsideration, Wasoff & Bargmann attempted to justify the additional fees as discovery sanctions. Only in a subsequent letter brief submitted to the court following the hearing on Argonaut’s motion for reconsideration did Wasoff & Bargmann for the first time claim that additional fees were proper under section 38.001 of the civil practice and remedies code.
Because the award of $1,500 in additional attorney’s fees is in excess of the maximum amount allowed by the Texas Labor Code and is otherwise improper, we sustain points of error one and two to the extent Argonaut complains that the award of the $1,500 was error. We reform the judgment to delete that award.
2. The Allocation of the Subrogation Award
*5 We turn now to Argonaut’s complaint that the trial court erred by failing to award a portion of the subrogation recovery to its attorneys. The allocation of attorney’s fees from a carrier’s subrogation recovery is committed to the discretion of the trial court whose judgment is reviewed under an abuse of discretion standard. See Liquidation Div. of Bd. of Ins. v. Kronzer, 744 S.W.2d 146, 148 (Tex.App.-Houston [14th Dist.] 1987, no writ).
In this case, the carrier’s attorneys, Kern & Wooley, did not actively represent the carrier’s interest in the third-party action or actively participate in obtaining a recovery from Estrada. The most that Argonaut can say about Kern & Wooley’s involvement is that the firm “stood ready” to assist Wasoff & Bargmann. Apparently Wasoff & Bargmann did not avail itself of Kern & Wooley’s help. Standing ready to participate is not the same thing as active participation. See City of Austin, 825 S.W.2d at 790. While Argonaut may have been prudent in having legal counsel at the ready to advise it as necessary, and as a result incurred legal fees, this expense is not reimbursable from the portion of the carrier’s subrogation recovery allocable to attorney’s fees. Because Argonaut’s attorneys did not actively participate in obtaining recovery from Estrada, we cannot say that the trial court abused its discretion in allocating the entire one-third of the subrogation recovery to Wasoff & Bargmann. We overrule that portion of Argonaut’s first and second points of error complaining about allocation of the subrogation award.
THE INTERPLEADER ACTION
In its third and fourth points of error, Argonaut complains that the interpleader action Wasoff & Bargmann filed on behalf of Barron to sue Argonaut for attorney’s fees was improper. Argonaut contends that the court erred in failing to either abate the proceeding or dismiss it for want of jurisdiction. Wasoff & Bargmann responds that because Argonaut did not intervene in the pending action, it was necessary to bring some form of action against Argonaut before it could be bound by a judgment of the court. Wasoff & Bargmann contends the action was authorized by rule 43 of the Texas Rules of Civil Procedure as an action in the nature of interpleader. Additionally, Wasoff & Bargmann responds that Argonaut did not timely assert its plea to the jurisdiction and plea in abatement and thereby submitted to the jurisdiction of the court. We conclude the court did not err in failing to abate or dismiss the case.
1. Applicable Law
The purpose of an interpleader is to relieve an innocent stakeholder of the vexation and expense of multiple litigation and the risk of multiple liability. Dallas Bank & Trust Co. v. Commonwealth Dev. Corp., 686 S.W.2d 226, 230 (Tex.App.-Dallas 1984, writ ref’d n.r.e.). Interpleader is appropriate only when the stakeholder is or may be exposed to multiple liability. Id. Every reasonable doubt should be resolved in favor of the putative stakeholder’s right to interplead. Id.
Historically, a true bill of interpleader required the stakeholder to have no interest in the interpleaded money or property. See TEX.R. CIV. P. 43; see generally WILLIAM V. DORSANEO III, 5 TEXAS LITIGATION GUIDE § 81.03 (Aug. 1995).
A party who challenges the power of the court to adjudicate a controversy is required to file a plea to the jurisdiction. See Washington v. Fort Bend ISD, 892 S.W.2d 156, 159 (Tex.App.-Houston [14th Dist.] 1994, writ denied). It is not the purpose of a plea to the jurisdiction to challenge pleading defects that can be cured by amendment. If the claimed defect is a pleading defect that can be cured by amendment, it should be challenged by special exceptions or a plea in abatement. Id. In such cases, the suit should not be dismissed; instead, the plaintiff should be allowed to amend. Id.
*7 A party waives a plea in abatement by failing to timely assert it or obtain a ruling before trial. See Associated Indem. Corp., 704 S.W.2d at 477.
2. Application of Law to Facts
Clearly in order for the court to resolve the attorney’s fee dispute, it had to have personal jurisdiction over Argonaut. This problem is usually absent in workers’ compensation cases because the compensation carrier is already a party to the case when the trial court is called on to apportion attorney’s fees. Traditionally, the compensation carriers usually have intervened in the insured’s third-party action. See Garry L. Wickert, Apportioning Attorney’s Fees in Workers’ Compensation Third Party Actions: The Need for Legislative Reform, 53 TEX. B.J. 840 (1990). More recently, some carriers have taken the initiative and filed third-party actions themselves, requiring the insured worker to intervene. Id. As Argonaut correctly notes, however, the carrier is not required to intervene to preserve its lien. Therefore, in this case it was necessary for Wasoff & Bargmann to file some action against Argonaut to bring it before the court before Argonaut could be bound by a judgment.
We know of know authority, and neither party has provided us any, which holds that a declaratory judgment action is an appropriate procedural vehicle to utilize here. It is unclear how Wasoff & Bargmann’s client, Barron, in whose name the interpleader was filed, could be subjected to double or multiple liability. It appears in fact that Barron was not a stakeholder, but instead Wasoff & Bargmann held the disputed funds, to which it and Argonaut asserted claims.
Under these circumstances it appears that a declaratory judgment action would have been the more appropriate cause of action. Nevertheless, Argonaut initially did not object to the interpleader. Assuming the interpleader was an improper procedure for bringing Argonaut before the court, it was a mere pleading defect that Argonaut should have challenged prior to trial by special exceptions or a plea in abatement. Instead, Argonaut answered, filed a counterclaim, and served discovery requests. While Argonaut eventually filed a plea in abatement challenging the interpleader procedure, the plea in abatement was not filed until after the trial on attorney’s fees.3 Further, the record does not reveal that Argonaut ever set its plea in abatement for hearing or obtained a ruling. Nor did it challenge the interpleader action by special exceptions. Therefore, Argonaut waived its plea contesting the interpleader action.4 It is no excuse to claim, as Argonaut asserts, that it assumed its adversary had filed proper pleadings. In such circumstances, the trial court did not err in adjudicating the issues between the parties.
*8 In an analogous case decided by this Court, the plaintiff improperly filed an interpleader to resolve a dispute over the proceeds of a letter of credit. See Id. at 231. In such an instance, we held that the case could properly be treated as a declaratory judgment action and the trial court did not err in trying the case. Id.
Here, all parties were properly before the court as well. Accordingly, the trial court could properly treat the purported interpleader petition as a request for declaratory judgment and resolve the dispute.5 It is irrelevant that Wasoff & Bargmann sought to bring Argonaut into the pending action rather than file a new lawsuit. The joinder of additional claims and parties in a pending action is proper under 51 of the Texas Rules of Civil Procedure. We overrule points of error three and four.
THE SANCTIONS AWARD
In its fifth and sixth points of error, Argonaut complains the trial court erred in ordering it to answer discovery and in assessing $500 in sanctions against Kern & Wooley. Argonaut argues there was no need for Barron to file the interpleader action and, therefore, no reason to serve discovery. Because no discovery should have been served, Argonaut reasons, all the discovery requests were by definition unnecessary, unduly burdensome, and harassment, and the trial court should not have ordered Argonaut to answer them. Similarly, Argonaut argues that no sanctions should have been assessed against Kern & Wooley for providing incorrect discovery responses because Argonaut should never have been required to respond to any discovery.
1. Applicable Law
Absent a showing of good cause, a party waives any objection to written discovery requests by failing to assert the objection before the response is due. Hobson v. Moore, 734 S.W.2d 340, 341 (Tex.1987).
It is within the trial court’s discretion to impose discovery sanctions. Hanley v. Hanley, 813 S.W.2d 511, 522 (Tex.App.-Dallas 1991, no writ).
2. Application of Law to Facts
*9 Kern & Wooley prepared Argonaut’s discovery responses. In response to Barron’s interrogatories requesting the name and address of all persons with knowledge of relevant facts, Kern & Wooley listed Cindy Briscoe. Briscoe was the claims adjuster for Argonaut that handled Barron’s claim. For Briscoe’s address, Kern & Wooley provided Argonaut’s address, which was incorrect because Briscoe had left Argonaut’s employ. Supplemental interrogatory responses repeated the same incorrect address.
Wasoff & Bargmann later attempted to subpoena Briscoe for the trial on attorney’s fees. According to Wasoff & Bargmann, the firm wasted considerable time and effort due to the incorrect information Kern & Wooley provided. When Wasoff & Bargmann’s process server attempted to serve the subpoena at Argonaut’s office, the process server was referred to an attorney at Kern & Wooley. Even then, Kern & Wooley waited several days before advising Wasoff & Bargmann of the correct address.
Argonaut knew or should have known the address given for Briscoe was incorrect at the time the interrogatory responses were served. No attempt is made to explain Kern & Wooley’s failure to provide Briscoe’s correct address or the failure to seasonably supplement the incorrect answer. Argonaut asserts only that its lawyers should not have been sanctioned because Argonaut should never have been required to respond to any discovery in the case. Even if this objection had merit, it was not raised in response to Barron’s interrogatories requesting identification of persons with knowledge of relevant facts. Accordingly, Argonaut waived this objection.
Argonaut does not contest that the sanctions were reasonably related to the expenses incurred by Wasoff & Bargmann in serving the subpoena on Briscoe. We conclude that the sanctions awarded were well within the discretion of the trial court. We overrule points of error five and six.
We reverse that portion of the trial court’s judgment awarding an additional $1,500 in attorney’s fees and reform the trial court’s judgment to delete that award. As modified, we affirm the trial court’s judgment.
J. WHITTINGTON concurs in the result only.
By the term “third-party liability,” the labor code refers to the liability of a third-party tort-feasor who is responsible for the damages giving rise to the payment of compensation benefits. See TEX. LAB.CODE ANN. § 417.002 (Vernon 1996).
Parenthetically, we note that in its Findings of Facts and Conclusions of Law the trial court did not base the additional award of attorney’s fees on section 38.001 of the civil practice and remedies code. Instead, the trial court stated that “[a]dditional attorney’s fees are appropriate in this case for Wasoff & Bargmann, P.C. for an appropriate action brought under the Texas Workers’ Compensation Act on behalf of the claimant for recovery of attorney’s fees....” (Emphasis added). As noted above, attorney’s fees in an action brought under the Texas Workers’ Compensation Act are limited to one-third of the subrogation recovery.
In its brief, Argonaut incorrectly refers to the trial held on November 14, 1995, as a “hearing.” The record reflects that the trial in the case was set for November 14, 1995. The court called the case to trial on that date. The parties announced ready and waived a jury, and the court proceeded to try the attorney’s fee dispute. There is no question that the proceeding which occurred on that date was a nonjury trial, not a hearing.
As part of its post-trial pleading challenging the interpleader action, Argonaut also filed a plea to the jurisdiction. There is no question that the trial court had subject matter jurisdiction to resolve the attorney’s fee dispute. See TEX. GOV’T CODE ANN. § 25.0592(a) (Vernon Supp. 1998). Accordingly, Argonaut’s plea to the jurisdiction was inappropriate. Further, by answering the interpleader action and filing its own counterclaim, Argonaut consented to personal jurisdiction.
Although attorney’s fees may be awarded under the Declaratory Judgment Act, attorney’s fees are not proper when no party has invoked the act in the pleadings. See Olmos v. Pecan Grove Mun. Util. Dist., 857 S.W.2d 734, 741 (Tex.App.-Houston [14th Dist.] 1993, no writ). Therefore, the additional $1,500 of attorney’s fees awarded by the trial court cannot be justified under the Declaratory Judgment Act.