McAllen Hospitals, L. P. D/B/A McAllen Medical Center and D/B/A Edinburg Regional Medical Center v. State Farm County Mutual Insurance Company of Texas

NUMBER 13-11-00330-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI – EDINBURG

MCALLEN HOSPITALS, L.P. D/B/A Appellants,
MCALLEN MEDICAL CENTER AND
D/B/A EDINBURG REGIONAL
MEDICAL CENTER,

v.

STATE FARM COUNTY MUTUAL INSURANCE
COMPANY OF TEXAS, Appellee.

On appeal from the 139th District Court
of Hidalgo County, Texas.

MEMORANDUM OPINION
Before Justices Rodriguez, Benavides and Perkes
Memorandum Opinion by Justice Benavides
In this appeal, we are asked to interpret the Texas Hospital and Emergency

Medical Services Lien statutes. See TEX. PROP. CODE ANN. §§ 55.001–.007 (West
Supp. 2011). By one issue, appellant, McAllen Hospitals, L.P. d/b/a McAllen Medical

Center and d/b/a Edinburg Regional Medical Center (“MMC”), contends that the trial

court erred in granting appellee’s, State Farm County Mutual Insurance Company of

Texas (“State Farm”), motion for summary judgment. We affirm.

I. BACKGROUND

The underlying facts of this appeal involve the recovery of costs for medical

services MMC rendered to Melinda Hernandez and Jose Gil related to injuries sustained

following a car wreck in Hidalgo County. The cost of treatment provided totaled

$1,281.00 and $53,564.00 for Hernandez and Gil, respectively. MMC secured liens

over these hospital bills by filing written notice of the liens with the Hidalgo County

Clerk’s Office to attach the proceeds of any possible settlement obtained by Hernandez

and Gil for personal injuries related to the car crash that caused their hospitalizations.

See TEX. PROP. CODE ANN. § 55.005 (West Supp. 2011).

Following their respective treatments at MMC, Hernandez and Gil filed bodily

injury claims with the responsible third-party’s insurance carrier, State Farm, and

eventually reached mutually agreeable settlements. The settlement amounts totaled

$2,100.00 and $5,200.00 for Hernandez and Gil, respectively. State Farm does not

dispute that it had notice of MMC’s liens at the time of the settlements. As a result,

State Farm issued the relevant settlement drafts in the following manner: (1) payable to

Hernandez and MMC, jointly, for the sum of $1,281.00; and (2) payable to Gil, Gil’s wife

Rafaela Balderas, and MMC, jointly, for the sum of $5,200.00.

Hernandez endorsed her check and deposited it at Texas State Bank without

MMC’s endorsement. Gil and Balderas endorsed his check and deposited it at Lone

2
Star National Bank without MMC’s endorsement. Despite the missing endorsements

from MMC on both checks, both banks negotiated the instruments and cashed them.

MMC subsequently filed suit against a number of defendants, including State Farm, and

alleged that State Farm violated the Texas Hospital and Emergency Medical Services

Lien statutes for settling Hernandez and Gil’s claims without resolving MMC’s liens.

State Farm filed a motion for summary judgment which sought a declaration as a

matter of law from the trial court that State Farm fulfilled its obligations under the

hospital lien statute by issuing and delivering co-payable settlement drafts to Hernandez

and MMC, as joint payees, and to Gil, Balderas and MMC, as joint payees. MMC filed a

cross-motion for summary judgment which sought a ruling from the trial court as a

matter of law finding that State Farm violated the Hospital and Emergency Medical

Services Lien statutes and should therefore pay MMC. The trial court granted State

Farm’s motion for summary judgment and found no genuine issue of material fact as to

whether State Farm fully discharged its obligation to protect MMC’s liens. Additionally,

the trial court denied MMC’s motion for summary judgment. MMC appealed.

II. STANDARD OF REVIEW

We review a trial court’s summary judgment de novo. See Provident Life & Acc.

Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). When reviewing a summary

judgment, we take as true all evidence favorable to the nonmovant, and we indulge

every reasonable inference and resolve any doubts in the nonmovant's favor. Sw. Elec.

Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). When both sides move for

summary judgment and the trial court grants one motion and denies the other, the

reviewing court should review both sides’ summary judgment evidence and determine

3
all questions presented. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 874

(Tex. 2000). The reviewing court should then render the judgment the trial court should

have rendered. Id. When a trial court does not specify the grounds relied upon, the

reviewing court must affirm summary judgment if any theories presented to the trial

court and preserved for appellate review are meritorious. See Provident Life & Acc. Ins.

Co., 128 S.W.3d at 215.

III. DISCUSSION

In its sole issue, MMC contends that the trial court erred when it determined that

naming MMC as a joint payee on a settlement draft issued and delivered to Hernandez

and Gil was sufficient to satisfy the hospital lien statutes. See TEX. PROP. CODE ANN. §

55.007 (West Supp. 2011).

A. Texas Hospital and Emergency Medical Service Liens Statutes

Under Chapter 55 of the Texas Property Code, a hospital may hold a lien on a

cause of action or claim of an individual who receives hospital services for injuries

caused by an accident that is attributed to the negligence of another so long as the

services were rendered no later than seventy-two hours after the accident. See id. §

55.002(a) (West Supp. 2011). A lien under this chapter may attach to, among other

things, “the proceeds of a settlement of a cause of action or a claim by the injured

individual or another person entitled to make the claim, arising from an injury for which

the injured individual is admitted to the hospital or receives emergency medical

services.” Id. § 55.003(a)(3). To perfect its lien, a hospital must: (1) provide necessary

statutory notice to the injured individual; and (2) file written notice of the lien with the

county clerk of the county in which the services were provided before any money is paid

4
to the entitled individual for the injuries. See id. § 55.005(a). Finally, a release of a

cause of action or judgment to which a lien may attach is not valid unless: (1) the

charges of the hospital or emergency medical services provider claiming the lien were

paid in full before the execution and delivery of the release; (2) the charges of the

hospital or emergency medical services provider claiming the lien were paid before the

execution and delivery of the release to the extent of any full and true consideration paid

to the injured individual by or on behalf of the other parties to the release; or (3) the

hospital or emergency medical services provider claiming the lien is a party to the

release. Id. § 55.007.

B. Motions for Summary Judgment

As a preliminary matter, it is undisputed that MMC held a valid hospital lien over

Hernandez and Gil’s respective personal injury claims. See id. § 55.005(a). Therefore,

the key inquiry in this case turns upon whether State Farm’s action of naming MMC as

co-payee on the Hernandez and Gil settlement drafts sufficiently complied with the

pertinent statutes.

1. MMC’s Argument

MMC argues that naming a hospital co-payee with an injured individual will

defeat the purpose of Chapter 55 and would make it unlikely that the hospital would

receive the payment as entitled. MMC further asserts that section 55.007(a) does not

permit an insurance company to include a hospital’s name on a settlement check after a

settlement is reached because payment was not made to the hospital prior to the

release of a cause of action or judgment being signed and delivered, as required. MMC

contends that sections 55.008(a)(1) and (3) require payment in full to the hospital prior

5
to the execution and delivery of the release of a cause of action or judgment in order for

it to be valid and effective. MMC argues that to recognize State Farm’s actions as

compliant with Chapter 55 would render the statutory scheme “meaningless.”

2. State Farm

State Farm contends that its duties under Chapter 55 were satisfied by naming

MMC and Hernandez and MMC and Gil as joint payees in the settlement check. In

support of its motion for summary judgment, State Farm directs this Court to two cases

which we find useful. The most recent case comes from our sister court in Beaumont,

which held that an insurance company’s action of naming a hospital lienholder as a

payee on a settlement check for injuries sustained from an automobile accident was not

a breach by the insurance company of its release with the injured party, but rather “an

effort to comply with [chapter 55 of the property code] and obtain a valid release.”

Richards v. Am. Nat. Prop. & Cas. Co., 195 S.W.3d 758, 761 (Tex. App.—Beaumont

2006, no pet.). The Richards Court further held that even if the settlement check was

made payable solely to the injured party, the injured party could not cash the check

without first paying the lien because the lien attaches to the settlement proceeds. Id.

State Farm also cites Benchmark Bank v. State Farm Lloyds, which involved a

property loss settlement from a homeowner’s insurance policy made jointly payable to

the homeowner and Benchmark Bank as mortgagee. 893 S.W.2d 649, 649–50 (Tex.

App.—Dallas 1994, no writ). In Benchmark, the question was whether Benchmark

Bank’s failure to endorse the settlement check, despite being cashed by the

homeowner, discharged State Farm’s obligations under the policy to pay Benchmark

Bank as mortgagee. Id. at 650. The Dallas Court held that State Farm discharged its

6
duties, despite the fact that Benchmark Bank never received payment from the loss

pursuant to the policy. Id. at 651. The Court held that “payment to and possession of a

draft by one joint payee is constructive possession by the other joint payee,” and that

State Farm’s obligations under the insurance policy were not affected. Id. We agree

with MMC’s argument that Benchmark Bank is distinguishable because this case

involves statutory duties rather than contractual ones. We do not agree, however, that

the case is not instructive to our analysis. To the contrary, we find it helpful.

3. Analysis

In this case, State Farm acknowledges that the automobile liability policy which

Hernandez and Gil asserted claims against was a $20,000 per person/$40,000 per

occurrence policy. As a result, after State Farm’s investigations and settlements with

other parties, mutually agreeable settlements were reached with Hernandez and Gil.

Hernandez’s settlement amount of $2,100.00 was within her MMC lien amount of

$1,281.00, while Gil’s settlement amount of $5,200.00 fell well below his MMC lien

amount of $53,564.00. Therefore, State Farm included MMC as a co-payee in an effort

to comply with the statutes and obtain a valid release.

At that point, State Farm’s statutory duty was discharged and the duty shifted to

Hernandez and Gil to obtain MMC’s endorsement on the settlement checks and then

satisfy the lien amounts, given that MMC was a listed co-payee on the settlement

checks and MMC’s lien had attached to the settlement proceeds. See TEX. PROP. CODE

ANN. § 55.003(a)(3); Richards, 195 S.W.3d at 761. We are not directed to—nor can we

find—any authority which expressly prohibits State Farm from naming MMC, as a joint

payee and hospital lienholder, on a settlement check with the injured claimants, or that

7
doing so did not comply with the hospital lien statutes. Furthermore, our interpretation

today does not render the hospital lien statutes “meaningless” as MMC contends

because obligations to hospital lienholders still exist and injured patients would still be

required to satisfy the outstanding liens by seeking out the hospital’s endorsement on

the settlement drafts. See TEX. PROP. CODE ANN. § 55.007(a)(2).

Accordingly, after reviewing both parties’ motions for summary judgment, we

conclude that the trial court did not err in finding that State Farm established its right to

summary judgment as a matter of law and denying MMC’s motion for summary

judgment. See FM Props., 22 S.W.3d at 874. MMC’s sole issue is overruled.1

IV. CONCLUSION

We affirm the trial court’s judgment.

GINA BENAVIDES
Justice

Delivered and filed the
25th day of October, 2012.

1
We express no opinion about MMC’s potential cause(s) of action, if any, against Texas State
Bank, Lone Star National Bank, Hernandez, or Gil.

8