First Title Co. of Waco v. Garrett

OPINION

SPECTOR, Justice.

In this cause we consider the circumstances in which a non-settling defendant, faced with an adverse judgment, may claim a credit for amounts received by the plaintiff in settlement of a separate lawsuit. Applying the “one satisfaction” rule, this court has held that a non-settling defendant may reduce its liability by the amount of a settlement entered into by a settling defendant in the same lawsuit. Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 8 (Tex.1991). Here, the court of appeals affirmed a trial court judgment which (1) found two title companies liable under the Texas Deceptive Trade Practices — -Consumer Protection Act (“DTPA”), Tex.Bus. & Com.Code §§ 17.41-.63, and (2) disallowed a settlement credit because these non-settling defendants had not supplied any evidence that the settling parties in a separate lawsuit were joint tort-feasors. 802 S.W.2d 254, 263. We agree that the defendants were properly found liable under the DTPA. However, we also conclude that the record establishes, as a matter of law, that the settlement payments compensated a common indivisible injury. Accordingly, we reverse the judgment of the court of appeals and remand this cause to the trial court for proceedings consistent with this opinion.

I.

In September of 1986, Charles and Dorin-da Garrett contracted to purchase nine acres of land from Raymond Jenkins and James Dameron for use as an automobile salvage yard. Just over one year earlier, Jenkins and Dameron had obtained the land by a deed containing a restrictive covenant; the covenant provided that the land could not be used for any “noxious or offensive activity, which by example only, would include junk yard or auto salvage yard and all similar activities.... ”

The Garretts were never told of this covenant, which clearly prohibited the use for which they intended the property. The Gar-retts relied on the representations of First Title Company of Waco and Alamo Title Insurance of Texas in finalizing the purchase. First Title Co. conducted a title search, but failed to discover the restrictive covenant that was actually listed within their files; Alamo Title issued a title commitment affirmatively representing that no restrictive covenants appeared in the county deed records.

The Garretts finalized the purchase, and began to prepare the property for use as an auto salvage yard. Alice Faye Heitkamp Landry, who sold the tract to Jenkins and Dameron, and out of whose larger holdings the tract was carved, objected and successfully obtained an injunction prohibiting the *76Garretts from using the land as an auto salvage yard in violation of the restrictive covenant.

The Garretts then sued Jenkins and Dam-eron for them misrepresentations, and subsequently received $69,000 in settlement of the claims.1 On July 19, 1988, the Garretts filed a separate lawsuit, the one that is the basis of this appeal, charging First Title Co. and Alamo Title with negligence and breach of the DTPA. The jury found that First Title Co. and Alamo Title proximately caused injuries to the Garretts, and returned a verdict in favor of the Garretts for $85,500; the jury was never asked to make any findings with regard to Jenkins and Dameron, or to make any apportionment of comparative negligence. In a motion for judgment notwithstanding the verdict, First Title Co. and Alamo Title requested that the $69,000 settlement with Jenkins and Dameron be credited against the amount of the judgment. The trial court overruled the motion.

After calculating prejudgment interest, the trial court rendered judgment against First Title Co. and Alamo Title for $101,952.84 plus attorney’s fees; there was an additional award of $18,460.85 rendered against Alamo Title only. The court of appeals affirmed the trial court’s decisions in all respects. 802 S.W.2d 254. On motion for rehearing, the court of appeals issued a supplemental opinion holding that First Title Co. and Alamo Title were not entitled to a credit based on the collateral settlement, because they had not met their burden of establishing that Jenkins and Dameron were joint tortfeasors. 802 S.W.2d at 262-68.

II.

Initially, apart from the settlement credit issue, the title companies contest the jury’s underlying finding of DTPA liability. The title companies argue that the contract entered into with the Garretts was one of indemnity, not of guaranty; so, any incorrect representation as to the status of the property should subject them to liquidated damages under the insurance policy, not damages for misrepresentation under the DTPA. We disagree.

Under Texas law, when a seller makes an affirmative representation, the law imposes a duty to know whether that statement is true. See, e.g., Robinson v. Preston Chrysler-Plymouth, Inc., 633 S.W.2d 500, 502 (Tex.1982) (discussing the relationship of seller and buyer). In the context of title insurance, this principle requires that a title insurer be held responsible for an affirmative representation that is the “producing cause” of damages to the party purchasing the insurance. Tex.Bus. & Com.Code § 17.50(a); see also Weitzel v. Barnes, 691 S.W.2d 598, 600 (Tex.1985).

The title commitment contains the following representation as to the state of the title:

THE POLICY WILL BE SUBJECT TO ... THE FOLLOWING MATTERS WHICH WILL BE ADDITIONAL EXCEPTIONS FROM THE COVERAGE OF THE POLICY:
THE FOLLOWING RESTRICTIVE COVENANTS OF RECORD ITEMIZED BELOW ... (INSERT SPECIFIC RECORDING DATA OR STATE “NONE OF RECORD”): NONE OF RECORD.

(Emphasis added.) The italicized language clearly represents that there were no restrictive covenants in the county deed records. Significantly, this language was included as part of the title commitment, for the purpose of making some representation to the parties involved in the transaction. Indeed, the record includes testimony from officials in the title companies acknowledging that purchasers often rely on title companies’ assessments of the state of the title.2 There is *77further testimony from the Garretts indicating that they had expressed their interest in “something in writing” verifying clear title before purchasing the property. Based on the evidence in the record, we believe the jury could properly have found that the Gar-retts acted reasonably in viewing the quoted paragraph as a representation of the state of the property’s title, thereby causing the damages they suffered.3 The title companies’ argument that there is no evidence to support the jury’s findings is without merit.4

III.

The title companies also claim relief from liability because a clause in the title commitment allegedly protects them from claims such as the Garretts’. The language of the disclaimer is as follows:

The policy to be issued pursuant to this commitment does not guarantee that the insured property has adequate title to allow it to be used, sold, transferred, leased, or mortgaged for any purpose intended by the purchaser nor will it provide coverage for possible loss of opportunity or economic expectation.

In support of their argument, the title companies analogize the present case to Stewart Title Guaranty Co. v. Cheatham, 764 S.W.2d 315 (Tex.App. — Texarkana 1988, writ denied), a case also involving a title company and its ability to disclaim liability for any reliance by the consumer. We disagree that Cheatham can be read to relieve First Title Co. and Alamo Title from liability.

In Cheatham, the court of appeals focused on the fact that the title insurance policy contained specific language explaining the limited purpose for which the results of the title company’s search efforts could be used. A portion of the policy stated:

[I]t is to facilitate preparation of the necessary instruments, to point out curative requirements, if any, and to show the results of the Company’s title search (upon which only the Company may rely). None of the information contained herein, or the absence of other information, constitutes a representation to any party, other than the Company, as to the status of the title.

Cheatham, 764 S.W.2d at 320 (emphasis added). Given such clear language, the court of appeals concluded that the title report could not serve as the basis of an actionable representation. The court also noted that, irrespective of the contractual language, the evidence in the record established that the property purchasers had not even relied on the statements in the title report. Id. Unlike the title report in Cheatham, the title report in the present case contains misrepresentations actually causing the damages suffered; and neither First Title Co. nor Alamo Title defined the title reports as being for a limited purpose.

As implied by its name, the DTPA’s purpose is “to protect consumers against false, misleading, and deceptive business practices.” Tex.Bus. & Com.Code § 17.44. Although we decline to disapprove all contractual caveats against reliance, we agree with the court of appeals that when representations are made, a consumer cannot waive DTPA protection. See id. § 17.42(a) (stating *78that, absent affirmative proof by a defendant that a consumer is not in a significantly disparate bargaining position, “[a]ny waiver by a consumer of the provisions of this sub-chapter is contrary to public policy and is unenforceable and void”); see also Hycel, Inc. v. Wittstruck, 690 S.W.2d 914, 922 (Tex.App. — Waco 1985, writ dism’d by agr.) (noting that § 17.42 reflects “the legislature’s disapproval of efforts or ruses designed to avoid liability under the DTPA”). Accordingly, we hold that the clause purporting to waive the Garretts’ DTPA protection from affirmative misrepresentations is invalid.

Absent a valid disclaimer, the Garretts were entitled to seek damages based on the title companies’ affirmative misrepresentations. Because there is evidence supporting the jury’s findings that such representations proximately caused damages to the Garretts, we will not disturb the lower courts’ rulings on the title companies’ liability.

IV.

Having determined that the courts below properly imposed liability on the title companies, we now address the settlement credit issue. Texas has four different contribution schemes; the appropriate scheme is determined by referring to the theories of liability by which a tortfeasor has been found culpable. Sterling, 822 S.W.2d at 5 (citing Beech Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 20 (Tex.1987)). Because the petitioners were found to have been negligent and liable under the DTPA, this cause is governed by the basic statutory provisions for contribution, Texas Civil Practice and Remedies Code sections 32.001-.003, as expanded by the common law.5 The statutes alone do not address the effects of a partial settlement on the contribution rights between joint tortfea-sors.

As we noted in Sterling, a prevailing party is entitled to only “one satisfaction” for an injury. Sterling, 822 S.W.2d at 5 (quoting Bradshaw v. Baylor Univ., 126 Tex. 99, 84 S.W.2d 703, 705 (1935)). That is, when a plaintiff files suit alleging that multiple tort-feasors are responsible for the plaintiffs injury, any settlements are to be credited against the amount for which the liable parties as a whole are found responsible, but for which only the non-settling defendant remains in court. The rationale for this doctrine is that the plaintiff should not receive a windfall by recovering an amount in court that covers the plaintiffs 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. Bradshaw, 84 S.W.2d at 705.

V.

The title companies contend that the lower courts erred in not recognizing that the Gar-retts’ injury was “indivisible,” that is, an injury that may have been caused by distinct actors but is so singular in character as to render apportionment of fault impossible; each tortfeasor is said to have contributed to the whole. The significance that the title companies attach to such indivisibility is that if the settling parties are partially responsible for such an injury, then as a matter of law the judgment should be reduced by the amount of any settlements so as to prevent double recovery by the prevailing plaintiff. See Sterling, 822 S.W.2d at 7-8 (holding that a settlement credit was appropriate when the settling parties had contributed to a single indivisible injury suffered by the plaintiff).

Any party seeking the benefit of a settlement credit has the burden of establishing that it is entitled to such a reduction in *79the amount of the judgment. See, e.g., Howard v. General Cable Corp., 674 F.2d 351, 358 (5th Cir.1982); Hill v. Budget Fin. & Thrift Co., 383 S.W.2d 79, 82 (Tex.Civ.App. — Dallas 1964, no writ). Here, the title companies have placed into the record the settlement agreement from the lawsuit involving Jenkins and Dameron, and the order of dismissal from that case.

The 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. The agreement establishes that the Garretts made claims based on “alleged misrespresentations made by Jenkins and Dameron when they sold land to the Garretts,” whereby the Garretts sought to recover “money, rescission of the sale of land and ... attorney’s fees_”

By its terns, the settlement agreement covers the same injury for which the title companies were found liable in the present lawsuit: the Garretts obtained a parcel of land worth less than it was represented to be worth, and sustained both immediate and consequential damages stemming from this purchase. Although not adjudicated to be joint tortfeasors, the title companies and the sellers cannot reasonably be said to have caused separate injuries. Accordingly, because the present cause and the settlement of the related lawsuit both compensate an indivisible injury, the title companies are entitled to offset the final judgment by the amount of the settlement.

Today we reaffirm that the “one satisfaction” rule of Bradshaw and Sterling prohibits a plaintiff from recovering twice for a single injury. We therefore reverse the judgment of the court of appeals and hold that the title companies are entitled to a credit of $69,000 against the judgment. We remand this cause to the trial court for proceedings consistent with this opinion.

Dissenting opinion by Justice HECHT joined by Chief Justice PHILLIPS, Justice CORNYN, and Justice ENOCH.

. The terms of the settlement provided that the Garretts would receive $62,000 in cash plus forgiveness of a $7,000 promissory note which was executed by the Garretts and payable to Jenkins and Dameron.

. For example, the direct examination of John Hugh Johnson, President and Manager of First. Title Co., includes the following exchange:

Q: ... The commitment also serves to show the parties to the transaction what the status of the public record is with regard to that property, doesn’t it?
A: Yes, sir.
Q: And you know that at the time that you send it out, that people are going to rely on it?
*77A: We assume that they could or they couldn’t. You know, they can.
Q: But you know that it’s customary and usual for them to do so, don’t you?
A: Yes.

. The dissenting opinion argues that the policy language amounts to no more than a promise that "I will pay you damages if there is a restrictive covenant on your property." 860 S.W.2d at 79. Effectively, however, First Title’s assurance that there were “none of record” was tantamount to an additional promise: “And further, there are no restrictive covenants of record on your property.”

. Our decision today also comports with the factually similar case of Great Am. Mortgage Investors v. Louisville Title Ins. Co., 597 S.W.2d 425 (Tex.Civ.App. — Fort Worth 1980, writ ref’d n.r.e.). In that case, the title insurer erroneously wrote “none” in the space reserved for the listing of restrictive covenants in the county deed records. Id. at 428. The court of appeals noted that these were the appropriate circumstances for finding an actionable misrepresentation. However, there was evidence that the party alleging fraud had actual prior knowledge of the unrevealed restrictive covenant, and therefore was held not to be entitled to recovery based on any alleged reliance on the title insurer’s statements. Nevertheless, the court made clear that “under the proper circumstances the tort of negligent misrepresentation can apply to title insurers.” Id. at 430.

. The former comparative negligence statute, Tex.Civ.Prac. & Rem.Code §§ 33.001-.017 (Vernon 1986), amended by Acts 1987, 70th Leg., 1st C.S., ch. 2, § 2.04, applies only to "pure negligence” cases filed before September 2, 1987. The current comparative responsibility statute, Tex.Civ.Prac. & Rem.Code §§ 33.001-.016 (Vernon 1992), applies primarily to cases filed on or after September 2, 1987, that involve "pure negligence,” strict liability, and breach of warranty; the limited exceptions do not apply to the present case. The common-law comparative-causation scheme enunciated by this court in Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (Tex.1984), applies in cases of strict products liability and breach of warranty, and does not apply to DTPA cases. See Sterling, 822 S.W.2d at 6 & nn. 6, 7.