RSL-3B-IL, Ltd. v. the Prudential Insurance Company of America, Prudential Property and Casualty Insurance Company of Holmdel, New Jersey N/K/A LM Property and Casualty Insurance Company and Settlement Capital Corporation

Opinion issued July 8, 2014.

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-13-00933-CV
———————————
RSL-3B-IL, LTD., Appellant
V.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
PRUDENTIAL PROPERTY AND CASUALTY INSURANCE
COMPANY OF HOLMDEL, NEW JERSEY N/K/A LM
PROPERTY AND CASUALTY INSURANCE COMPANY
AND SETTLEMENT CAPITAL CORPORATION, Appellees

On Appeal from the 269th District Court
Harris County, Texas
Trial Court Case No. 2012-12560

MEMORANDUM OPINION

This is an accelerated appeal of the trial court’s interlocutory order denying

a motion to stay pending litigation until the completed arbitration of a related
dispute. After RSL–3B–1L, Ltd. (RSL) filed its notice of appeal from the order

denying a stay of proceedings, the trial court entered a final judgment disposing of

all parties and claims in the suit before it. We dismiss the appeal as moot.

Background

The arbitration proceeding upon which the stay request was based is

between Olubumi Adegoke and RSL. The lawsuit underlying this appeal is a

breach of contract and interpleader action, arising out of two judicially-approved

factoring agreements. In the first factoring agreement, entered into in 1993 and

court-approved in January 2003, Adegoke’s mother, now deceased, agreed to

transfer to Settlement Capital Corporation (SCC) a portion of periodic payments

that she was entitled to receive under an annuity agreement with Prudential

Insurance Company of America and Prudential Property and Casualty Insurance

Company of Holmdel, New Jersey, now known as LM Property and Casualty

Insurance Company (collectively, Prudential).1 The trial court order approving the

agreement with SCC (the SCC order) included a servicing arrangement that

required Prudential “to deliver and make payable to [SCC]” the full amount of

each periodic payment. In the second factoring agreement, entered into in June

2004 and court approved in July 2004, Adegoke’s mother agreed to assign certain

1
The Structured Settlement Protection Act requires court approval for all direct or
indirect transfers of structured settlement payment rights in Texas. See TEX. CIV.
PRAC. & REM. CODE ANN. § 141.004 (West 2011).

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future payments from the same annuity to Rapid Settlements, Ltd. The second

approval order directs Prudential to make these annuity payments to Rapid

Settlement’s designated assignee, RSL.

Faced with inconsistent obligations under the orders, Prudential suspended

the periodic payments. When RSL did not receive the periodic payments

transferred to it by Adegoke’s mother, it sued Prudential for breach of contract in

state district court. Prudential appeared and filed an interpleader action to resolve

the inconsistencies between its obligations under the SCC order and those under

the Rapid order. Later, after her mother’s death, Adegoke intervened in this case

in the trial court, suing RSL–3B–1L for breach of contract and claiming, as sole

heir, her right to the funds that her mother purportedly had assigned to RSL.

RSL responded to Adegoke’s intervention by moving to compel arbitration

of the claims between them, whereupon Adegoke nonsuited her claims against

RSL without prejudice to their refiling. The trial court granted RSL’s motion to

compel arbitration, but refused its request to stay the suit pending the arbitration.

At trial, the trial court directed a verdict in favor of Prudential on RSL’s

breach of contract claim, and submitted Prudential’s request for attorney’s fees to a

jury. Based on the jury’s finding, the trial court awarded Prudential its attorney’s

fees, and, in a later ruling, ordered that RSL recover the interpleaded funds less the

attorney’s fees, costs, and post-judgment interest due to Prudential. That later

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ruling recites: “This judgment is final, disposes of all claims and all parties, and is

appealable. All other relief requested by any party not expressly granted herein . . .

is denied.”

Motion to Dismiss

Prudential has moved to dismiss RSL’s appeal based on two grounds:

untimeliness and mootness. We consider each ground in turn.

Untimeliness

We may extend the time to file a notice of appeal if, within fifteen days after

the deadline to file the notice of appeal, a party properly files a motion for

extension. See TEX. R. APP. P. 10.5(b), 26.3. A motion for extension of time is

necessarily implied when an appellant, acting in good faith, files a notice of appeal

beyond the time allowed by rule 26.1, but within the fifteen–day extension period

provided by Rule 26.3. See TEX. R. APP. P. 26.1, 26.3; Verburgt v. Dorner, 959

S.W.2d 615, 617–18 (Tex.1997).

A motion for extension to file a notice of appeal requires a reasonable

explanation. See TEX. R. APP. P. 10.5(b)(1)(C). A “reasonable explanation” is

“any plausible statement of circumstances indicating that failure to file within the

[specified] period was not deliberate or intentional, but was the result of

inadvertence, mistake or mischance.” Hone v. Hanafin, 104 S.W.3d 884, 886

(Tex. 2003) (quoting Meshwert v. Meshwert, 549 S.W.2d 383, 384 (Tex. 1977)).

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We apply a liberal standard of review, under which “any conduct short of

deliberate or intentional noncompliance qualifies as inadvertence, mistake or

mischance.” Id. at 886 (quoting Garcia v. Kastner Farms, Inc., 774 S.W.2d 668,

670 (Tex. 1989)).

The trial court denied RSL’s request to stay the proceedings on October 2,

2013. In its motion to extend time to file its notice of appeal, RSL explained that it

did not timely file its notice of appeal because the arbitration proceeding was

initially scheduled so that it would conclude before the trial in this case began,

obviating the need for pursuing the stay. However, the arbitrator postponed the

final arbitration hearing, which had been scheduled to take place the day before the

trial setting. On the first day of trial, RSL renewed its request to stay the

proceedings until issuance of the arbitration award, and when that request was

unavailing, RSL filed its notice of appeal the same day.

Prudential has moved to dismiss the appeal, contending that RSL

deliberately delayed appealing the ruling because it hoped to keep the trial setting

and use the results of the arbitration proceeding to its tactical advantage. It notes

that RSL filed a notice of extension of time to file its notice of appeal rather than

filing the notice itself, and that it was aware of the deadline for filing an

interlocutory appeal. However, viewing RSL’s explanation liberally, as we must,

RSL explained its delay based on the unforeseen delay caused by the arbitrator,

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who unexpectedly postponed the final hearing. We hold that RSL’s explanation

satisfies Rule 10.5(b). Because untimeliness does not warrant dismissal, we

consider Prudential’s contention that the appeal is moot.

Mootness

Prudential contends that, since RSL filed this appeal, the trial court entered

final judgment addressing the interpleaded funds and thereby disposed of the sole

remaining dispute among the parties. RSL responds that the judgment relied on by

Prudential is merely interlocutory. Relying on In re Gulf Exploration, LLC, RSL

claims that the trial court has not finally disposed of the trial court case because the

arbitration between RSL and Olumubi remains pending. See 289 S.W.3d 836,

840–41 (Tex. 2009) (orig. proceeding) (observing that, under Texas General

Arbitration Act, trial court may render various orders in furtherance of arbitration

when appropriate, including appointment of arbitrators and confirmation or vacatur

of award) (citing TEX. CIV. PRAC. & REM. CODE ANN. §§ 171.086 & 171.087).

RSL’s contention supposes that, despite her nonsuit, Olumubi remains a party

before the trial court. According to RSL, its motion to compel arbitration, as a

pending claim for affirmative relief, rendered Olumubi’s notice of nonsuit

ineffective.

RSL–3B–1L relies on our decision in Quanto International Co. v. Lloyd,

897 S.W.2d 482 (Tex. App.—Houston [1st Dist.] 1995, orig. proceeding), which

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held that a request to compel arbitration is an affirmative claim for relief under

Rule 162. Since we decided Quanto, the wisdom of that holding has been

questioned. See Gillman v. Davidson, 934 S.W.2d 803, 804–05 (Tex. App.—

Houston [1st Dist.] 1996, orig. proceeding) (en banc) (Hedges, J., joined by

Hutson-Dunn, O’Connor, and Andell, JJ., dissenting from decision to withdraw

leave to file for en banc rehearing as improvidently granted); see also In re Riggs,

315 S.W.3d 613, 615 n.2 (Tex. App.—Fort Worth 2010, orig. proceeding)

(disagreeing with Quanto). Assuming, however, that RSL’s motion to compel

arbitration constituted a claim for affirmative relief, it is not a live controversy in

the case: the trial court granted the requested relief before it entered its final

judgment. Further, Olumubi did not respond to RSL’s motion to compel

arbitration; she filed her notice nonsuiting her claims against RSL the day she

learned of the motion. See HARRIS CNTY. DIST. CT. LOC. R. 3.3.2 (“Failure to file a

response may be considered a representation of no opposition.”) The nonsuit

became effective, at the latest, upon Olumubi’s voluntary participation in the

arbitral process.

A nonsuit “renders the merits of the nonsuited case moot.” Travelers Ins.

Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). “Appellate courts are

prohibited from deciding moot controversies.” Nat’l Collegiate Athletic Ass’n v.

Jones, 1 S.W.3d 83, 86 (Tex. 1999). Mootness deprives this Court of jurisdiction.

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Vally Baptist Med. Ctr. v. Gonzalez, 33 S.W.3d 821, 822 (Tex. 2000). We hold

that we lack jurisdiction over RSL’s appeal.

Conclusion

We dismiss this appeal for lack of jurisdiction. TEX. R. APP. P. 42.3(a),

43.2(f).

Jane Bland
Justice

Panel consists of Justices Jennings, Bland, and Massengale.

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