Wade A. Guilbeau v. Betty Ramsay

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

03-1402

WADE A. GUILBEAU

VERSUS

BETTY RAMSAY, ET AL.

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. 2001-1214
HONORABLE GLENNON P. EVERETT, DISTRICT JUDGE

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ELIZABETH A. PICKETT
JUDGE

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Court composed of Sylvia R. Cooks, John D. Saunders, Marc T. Amy, Elizabeth A.
Pickett, and Billie H. Ezell, Judges.

Amy, J., dissents and assigns reasons.

REVERSED AND RENDERED.

Douglas William Truxillo
Joan L. Boudreaux
Onebane, Bernard, Torian
P. O. Box 3507
Lafayette, LA 70502-3507
(337) 237-2660
Counsel for Defendant/Appellee:
Betty Ramsay

Gina Marie Bradley Tuttle
Attorney at Law
P. O. Drawer 1329
Opelousas, LA 70571-1329
(337) 948-8201
Counsel for Defendant/Appellee:
Betty Ramsay

Elton Ford Duncan III
Kelley A. Sevin
Les Anthony Martin
Brandi Drouet Hilden
Thomas Allen French
Duncan, Courington & Rydberg
400 Poydras St., #1200
New Orleans, LA 70130
(504) 524-5566
Counsel for Defendant/Appellee:
St. Paul Fire & Marine Ins. Co.

J. Quentin Simon
J. Minos Simon, LTD
P. O. Box 52116
Lafayette, LA 70505-2116
(337) 233-4625
Counsel for Plaintiff/Appellant:
Allison Guilbeau
Shirley McMayon

Adrienne Thomas Bordelon
Attorney at Law
P.O. Box 3836
Baton Rouge, LA 70821-3836
(225) 342-5745
Counsel for Intervenor/Appellee:
Dept. of Health & Hospitals for the Medicaid Program

PICKETT, Judge

FACTS

This suit arises out of a motor vehicle accident that occurred on March 11,

2000, involving a vehicle being driven by Wade Guilbeau and a vehicle being driven

by Betty Ramsay in Lafayette, Louisiana. The vehicle being operated by Ms. Ramsay,

in the course and scope of her employment with Aries Marine Corporation, (Aries),

was insured by Reliance Insurance Company (Reliance).

On March 7, 2001, Mr. Guilbeau filed a Petition for Damages naming Ms.

Ramsay, Aries, and Reliance as defendants. He later supplemented his petition and

added St. Paul Insurance Company (St. Paul), the excess insurer of Aries, as a

defendant.

As a result of the bodily injuries that Mr. Guilbeau sustained in the accident, he

underwent surgery on October 16, 2001. Mr. Guilbeau experienced complications

which required him to remain hospitalized until his death on January 9, 2002.

Following his death, Shirley McMayon, the natural tutrix of Stephen Wade Guilbeau

and Garrett Michael Guilbeau, Mr. Guilbeau’s minor children, was substituted as

plaintiff.

This matter was set for trial on May 27, 2003. Prior to jury selection, however,

the parties entered settlement negotiations and were able to reach a settlement

agreement. The terms of the agreement were put on the record by the defense counsel

as follows:

My understanding of the terms of the settlement are $340,000.00 paid
cash in hand to all plaintiffs for release of all claims.

And on behalf of St. Paul we will pay to Medicaid the lien as represented
by Ms. Bordelon to me last week of $55,000.00. And we will also pay
plaintiffs’ court cost up to $5,000.00. And I think the actual court costs
are $72.00 beyond that, but we will pay the total of $5,000.00. So the
total cash out of St. Paul’s pocket is $400,000.00, if my math is correct.”

Defense counsel and the court noted for the record that a minor was involved

and approval of the minor’s settlement would have to be obtained.

Plaintiff’s counsel requested that the Medicaid payment be made payable to his

clients, to which defense counsel responded, “On behalf of St. Paul, I don’t care

whose name goes on the check, but I have to have Medicaid’s name on the check so

they won’t come after my client.”

The trial court reiterated the terms of the settlement agreement as follows:

As I understand what’s going to happen here is: They will tender
$340,000.00 directly to your clients. They will also tender to Medicaid
and your clients an additional $55,000.00 and $5,000.00 in court costs
for a release of all claims against them. If you are able to negotiate a
better deal with Medicaid or whatever, so be it.

As of June 26, 2003, thirty days after the parties had reached the settlement

agreement, the plaintiffs had not received the settlement funds. Allegedly, on June 27,

2003, the plaintiffs were advised via voicemail that the funds were in the trust account

of opposing counsel and would be forwarded to them on June 30, 2003. The funds

were not transferred on that date. On July 2, 2003, counsel for St. Paul engaged in a

telephone conversation with plaintiffs’ counsel wherein he attempted to convince

plaintiffs’ counsel to agree to a Receipt, Release and Indemnification Agreement

relative to third party indemnification of any future Medicaid claims. Allegedly,

plaintiffs’ counsel refused to discuss the language of the Receipt and Release and

demanded disbursement of the settlement funds. On that same day, the plaintiffs filed

a Motion to Enforce Settlement Agreement and Statutory Penalties pursuant to

La.R.S. 22:1220. On July 9, 2003, the defendant filed a Rule to Show Cause and a

Motion For Leave to Deposit the Settlement Funds in the Registry of the Court. Both

the plaintiffs’ motion and the defendant’s rule to show cause were set for hearing on

July 21, 2003.

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The court heard the parties’ arguments and took the matter under advisement.

At the conclusion of the hearing, the parties attempted to and were able to agree on

the release language and the funds were disbursed to the plaintiffs on that same day.

The trial court issued a written ruling on July 25, 2003 and denied the plaintiffs’

request for penalties. It is from this ruling the plaintiffs appeal.

DISCUSSION

The plaintiffs’ sole assignment of error is whether the district court erred in

failing to apply the penalty provisions of La.R.S. 22:1220 when the settlement funds

were tendered fifty-five (55) days after the settlement was perfected and in excess of

thirty-five (35) days from the filing of the order authorizing the minor’s settlement.

Louisiana Revised Statute 22:1220 provides, in pertinent part:

A. An insurer, including but not limited to a foreign line
and surplus live insurer, owes to his insured a duty of good
faith and fair dealing. The insurer has an affirmative duty
to adjust claims fairly and promptly and to make a
reasonable effort to settle claims with the insured or the
claimant, or both. Any insurer who breached these duties
shall be liable for any damages sustained as a result of the
breach.

B. Any one of the following acts, if knowingly committed
or performed by an insurer, constitutes a breach of the
insurer’s duties imposed in Subsection A:

....

(2) Failing to pay a settlement within thirty days after an
agreement is reduced to writing.

....

C. In addition to any general or special damages to which
a claimant is entitled for breach of the imposed duty, the
claimant may be awarded penalties assessed against the
insurer in an amount not to exceed two times the damages
sustained or five thousand dollars, whichever is greater.
Such penalties, if awarded, shall not be used by the insurer
in computing either past or prospective loss experience for
the purpose of setting rates or making rate filings.

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In his written ruling, the trial court discussed the allegations by both parties as

to who was at fault in the delay of the tendering of the funds, then ultimately

concluded as follows:

Unless the execution of the minors authority to settle began the 30
day period, the tender was untimely. In fact, even problems which arose
with the releases occurred more than thirty days from May 27 th, 2003,
and cannot be attributed to the plaintiff.

The court now must consider the effect of the necessity for court
approval to a settlement of the minors’ claim. (this occurred June 16,
2003). And while this issue has been dealt with as an afterthought by
counsel, the court considers it significant.

First, if this necessary prerequisite to settlement is ignored in
applying R.S. 22:1220, it is possible the 30 day period could lapse
through no fault of the defendant payor. On the other hand one could
argue that to consider it in tolling the 30 day period is to enlarge the time
period and avoid the clear legislative intent of the statute.

The movers in this action argue that the clear language of R.S.
22:1220 which requires the agreement be “reduced to writing” should be
ignored when a settlement is placed on the court record. They may have
a point. It would seem unnecessary to reduce the agreement to writing
when it has already become enforceable by placing it in the court record.
However, when minors are involved, further court involvement is
required. Court approval of the settlement is necessary, must be in
writing and also filed in a court record.

Under the circumstances I must interpret the 30 day period in R.S.
22:1220 to begin when the last necessary prerequisite to payment is
accomplished. Even if only mentioned on the record, all parties were
well aware of the need to prepare the documents for the minors’ interest
and submit same to the court for approval. I find that until that
prerequisite was completed, payment could not be made and the 30 day
period before penalties may be imposed did not begin to run.

When considering the June 16th, 2003 date as the 1st day payment
could have been made (and legally accepted) the defendant did tender the
settlement proceeds within 30 days.

In order to address the issue of penalties, we must first determine whether the

trial court erred in its determination that the defendants tendered payment timely.

Plaintiffs argue that payment was due on June 26, 2003, thirty (30) days after

the settlement was put on record, citing La.Civ.Code art. 3071, which provides:

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A transaction or compromise is an agreement between two or more
persons who, for preventing or putting an end to a lawsuit, adjust their
differences by mutual consent, in the manner which they agree on, and
which every one of them prefers to the hope of gaining, balanced by the
danger of losing.

This contract must be either reduced into writing or recited in open court
and capable of being transcribed from the record of the proceeding. The
agreement recited in open court confers upon each of them the right of
judicially enforcing its performance, although its substance may
thereafter be written in a more convenient form.

The clear intent of La.R. S. 22:1220(B)(2) is to impose a time limit upon an

insurer for the payment of a claim that has been settled. Louisiana Civil Code Article

3071 requires a settlement be “either reduced into writing or recited in open court and

capable of being transcribed from the record of the proceeding.” Article 3071

specifically provides for the judicial enforcement of a settlement recited in open court,

specifying, however, that the substance of such a settlement “ may thereafter be

written in a more convenient form.” (Emphasis ours). It is clear, under the provisions

of Article 3071, therefore, that a settlement agreement, such as the one before us,

recited in open court and capable of being transcribed from the record, is a settlement

in writing. Although the parties may agree to set forth its terms in a more convenient

form, it is not necessary they do so for the penalty provision in La.R.S. 22:1220(B)(2)

to apply.

The settlement was reached in this case on May 27, 2003. Under a strict

application of the provisions of La.R.S. 22:1220 the insurer was required to pay the

settlement on or before June 26, 2003. In order to perfect the settlement on behalf of

the minor, Shirley McMayon, as tutor, had to receive authority from the court in

accordance with La.Code Civ.P. art. 4271.

A Petition for Authority to Compromise Settlement on behalf of Stephen W.

Guilbeau (the minor) was filed with the trial court on June 6, 2003. The Order

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authorizing Ms. McMayon to act on behalf of the minor was signed on June 16, 2003.

All parties understood the necessity for court approval to settle the minor’s

claim. This requirement was, in fact, duly noted by both defense counsel and the

court when the settlement agreement was read into the record. We agree with the trial

court that the 30 day period in La.R.S. 22:1220 begins when the last necessary

prerequisite to payment is accomplished. Because this matter involved the

compromise of a minor’s claim, that date was June 16, 2003, when the order was

signed authorizing the tutor to compromise the claim.

We disagree with the trial court’s conclusion, however, that the defendant

tendered the settlement proceeds within 30 days of June 16, 2003. Payment was

actually made on July 21, 2003, more than thirty days after payment could have been

made and legally accepted by the tutor.

Because the defendants failed to tender payment of the settlement funds timely,

the penalty provision of La.R.S. 22:1220(B)(2) is applicable and we must determine

whether penalties are warranted.

The defendant argues that St. Paul was justified in delaying payment as it

“wished to have some type of written document confirming the terms in which this

matter was settled.” We find this argument to be without merit. The terms of the

settlement was clearly set forth in the record of the proceeding, including the terms

of the payment to Medicaid and the agreement that the defendant would not be

responsible for more than $55,000.00 for the Medicaid lien. That the defendant

requested the plaintiffs agree to additional indemnity language some thirty-six (36)

days later is of little moment.

There is no just cause for the defendant’s failure to pay the claim within thirty

(30) days of the order authorizing the minor’s settlement. There is no evidence that

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St.Paul’s breach of good faith and fair dealing resulted in damages to the plaintiffs,

therefore, the proper penalty to assess is a penalty of $5,000 per claimant, for a total

penalty of $15,000.00. Rogers v. Commercial Union Ins. Co., 01-443 (La.App. 3 Cir.

10/3/01), 796 So.2d 862.

DECREE

We reverse the trial court’s judgment and award penalty of $5,000.00 each to

Allison Guilbeau, Garrett Michael Guilbeau, and Shirley McMayon as natural tutrix

for Stephen Wade Guilbeau, for a total penalty of $15,000.00.

REVERSED AND RENDERED.

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NUMBER 03-1402

COURT OF APPEAL, THIRD CIRCUIT

STATE OF LOUISIANA

WADE A. GUILBEAU

VERSUS

BETTY RAMSAY, ET AL.

AMY, J., dissenting.

Reference to La.R.S. 22:1220 indicates that, under appropriate circumstances,

penalties “may” be awarded. It follows that the abuse of discretion standard of review

is applicable to this type of permissive language. While the imposition of penalties

may have been permissible in this case, under La.R.S. 22:1220, I do not conclude that

a reversal is warranted as I do not find that the trial court abused its discretion. I

respectfully dissent.