Perez v. Todd Shipyards Corp. (1999)

Our plain-English summary of Perez v. Todd Shipyards Corp. (Texas Court of Appeals, June 24, 1999).

The children of Guadalupe G. Garcia sued his former employer, Todd Shipyards Corporation, for gross negligence after his death. Garcia worked as a laborer for Todd from 1954 to 1974. He learned in 1988 that he had a benign asbestos-related pleural disease, and in 1992 he was diagnosed with metastatic mesothelioma and died three months later. Todd had filed for bankruptcy in 1987, and its reorganization plan was confirmed in 1990. The trial court granted summary judgment for Todd, ruling that the bankruptcy discharge barred the claim. The court of appeals reversed. It held that the children's claim for exemplary damages under the Texas Constitution and the Labor Code belongs to them and is not derived from any claim Garcia had. Applying the Fifth Circuit's Lemelle decision, it also held that the children had no bankruptcy "claim" before the plan was confirmed, because nothing showed any earlier relationship between them and Todd. The case was sent back to the trial court.

We wrote this summary from the court's opinion with the help of AI. It is not the court's wording, and it is not legal advice. The full opinion is below.

The decision

• Court: Texas Court of Appeals
• Decided: June 24, 1999
• Citation: 999 S.W.2d 31
• Docket: No. 14-97-01382-CV
• Stage: Appeal from summary judgment
• State: Texas

Outcome. The court of appeals reversed the summary judgment for Todd Shipyards, which had been based on its bankruptcy discharge, and remanded to the trial court for further proceedings in favor of the decedent's children.

What the court held. A surviving family's gross negligence claim for exemplary damages under the Texas Constitution and Labor Code is not derivative of the decedent's rights. Because the children had no pre-petition relationship with the debtor, they held no bankruptcy 'claim' that was discharged before the plan was confirmed.

Issues decided: Asbestos Bankruptcies, Wrongful Death and Survival, Employer and Contractor Liability, and Workers' Compensation.

The people and their exposure

• Guadalupe G. Garcia: mesothelioma, pleural plaques and thickening; died

Who	Work	Where	When	Products
Guadalupe G. Garcia	laborer (shipyards and maritime work)	Todd Shipyards Corporation	1954-1974

The defendants

• Todd Shipyards Corporation (employer)

Later decisions citing this one

3 later decisions in our library cite this one:

• Todd Shipyards Corporation v. Perez (Texas Supreme Court, 2000). The Texas Supreme Court denied Todd Shipyards' petition for review, leaving in place the court of appeals' reversal of summary judgment for Todd and in favor of Garcia's daughters; Justices Hecht and Owen dissented from the denial.
• Darden v. Union Carbide Corporation (Texas Court of Appeals, 14th District, 2010). The court of appeals affirmed summary judgment for Union Carbide, holding the Dardens' 1990 release barred the family's gross negligence and exemplary damages claims and supported Union Carbide's indemnity counterclaim; the Darden family lost.
• Ross v. Union Carbide Corporation (Texas Court of Appeals, 14th District, 2009). The en banc court affirmed summary judgment for Union Carbide, holding that the 1993 release signed by Homer and Marjorie Ross barred the survivors' exemplary-damages and loss-of-consortium claims, and it overruled Perez v. Todd Shipyards.

The court's opinion

The text below is Google Scholar's copy of the court's opinion, a public record. Numbers in brackets, such as [*921], mark where each page of the printed reporter begins.

999 S.W.2d 31 (1999)

Janie PEREZ, Individually and as Representative of the Estate of Guadalupe G.

Garcia, Decedent, Elisa G. Herrera, Mary G. Alcorta, Esther G. Baxley, Modesta

Garcia, Sylvia G. O'Steen, Maria G. Aiken, and Sylvia P. Martin, Appellants,

v.

TODD SHIPYARDS CORPORATION, Appellee.

No. 14-97-01382-CV.

June 24, 1999.

Court of Appeals of Texas, Houston (14th Dist.).

Richard N. Countiss, Houston, for appellants.

James L. Ware, Richard A. Sheehy, Houston, for appellees.

Panel consists of Justices MAURICE E. AMIDEI, EDELMAN, and WITTIG.

[*32] OPINION

MAURICE E. AMIDEI, Justice.

This case was resolved in the trial court by summary judgment. Janie Perez, Individually and as

Representative of the Estate of Guadalupe G. Garcia, Decedent, Elisa G. Herrera, Mary G. Alcorta, Esther

G. Baxley, Modesta Garcia, Sylvia G. O'Steen, Maria G. Aiken, and Sylvia P. Martin (collectively as

"Plaintiffs") brought this action against Todd Shipyards Corporation (Defendant) for gross negligence.

Plaintiffs alleged that Defendant negligently caused the death of Guadalupe G. Garcia by exposing him to

asbestos products during the term of his employment by Defendant. The trial court granted Defendant's

motion for summary judgment on the ground that Plaintiffs' action was barred by Defendant's bankruptcy

discharge.

On appeal to this Court, Plaintiffs maintain that the trial court erred in granting summary judgment in

Defendant's favor because (1) their cause of action is not derivative of any cause of action possessed by

the decedent, and (2) their cause of action did not accrue until after Defendant was discharged in

bankruptcy. We reverse and remand.

I. BACKGROUND

From 1954 to 1974, the decedent was employed as a laborer by Defendant. In 1988, the decedent began

experiencing breathing problems and learned that he was suffering from a benign asbestos-related pleural

disease. In 1992, the decedent was diagnosed with metastatic mesothelioma. Three months after the

diagnosis was made, he died. Defendant filed its bankruptcy petition in 1987; its Chapter 11 bankruptcy

plan was confirmed by the bankruptcy court in 1990. Plaintiffs are the children of the decedent.

II. STANDARD OF REVIEW

The standards for reviewing a summary judgment are well-established. The movant for summary judgment

has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Property Mgmt. Co., Inc., 690 S.W.2d 546, 548-49 (Tex.1985). In deciding

whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the

non-movant will be taken as true. Id. Every reasonable inference must be indulged in favor of the non-

movant and any doubts resolved in its favor. Id.

III. DISCUSSION

Plaintiffs' Gross Negligence Action

In its motion for summary judgment, Defendant asserts that Plaintiffs' cause of action is derivative of any

action that the decedent may have possessed.[1] Therefore, Defendant argues that Plaintiffs' cause of

action is subject to any defenses available to Defendant that it could have raised against the decedent.

Specifically, Defendant argues that its "previously-obtained discharge in bankruptcy would have barred [the

decedent] from recovering on any claims which he may have had against [Defendant]."

Plaintiffs contend that their cause of action is not a derivative action. Relying on article 16, Section 26 of the Texas Constitution and section 408.001 of the Labor Code, Plaintiffs maintain that their action is wholly

independent of any action that the decedent may have possessed. See [*33] TEX. CONST. art. XVI, § 26;

Tex. Labor Code Ann. § 408.001(b) (Vernon 1996).

The Texas Constitution provides, in pertinent, the following:

Every person, corporation, or company, that may commit a homicide, through wilful act, or

omission, or gross neglect, shall be responsible, in exemplary damages, to the surviving

husband, widow, heirs of his or her body, or such of them as there may be, without regard to

any criminal proceeding that may or may not be had in relation to the homicide.

TEX. CONST. art. XVI, § 26; see also Smith v. Atlantic Richfield Co., 927 S.W.2d 85, 87 (Tex.App.-Houston

[1st Dist.] 1996, writ denied). To give effect to this constitutional provision, the Workers' Compensation Act includes the following clause:

This section [of the Workers' Compensation Act] does not prohibit the recovery of exemplary

damages by the surviving spouse or heirs of the body of a deceased employee whose death

was caused by an intentional act or omission of the employer or by the employer's gross

negligence.

TEX. LABOR CODE ANN. § 408.001(b) (Vernon 1996); see also Smith, 927 S.W.2d at 87.[2] Citing two

Texas Supreme Court cases, the court of appeals in Smith held that "as a matter of law the cause[s] of

action for exemplary damages provided for in section 408.001(b) of the Labor Code is still viable, and the

surviving family is entitled to see exemplary damages for the death of an employee caused by the

employer's gross negligence or intentional act." 927 S.W.2d at 88 (citing Universal Services Co. v. Ung, 904

S.W.2d 638, 639-40 (Tex.1995); Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 814 (Tex.1995)) (emphasis

added); see also Del Indus., Inc. v. Texas Workers' Comp. Ins. Fund, 973 S.W.2d 743, 746 n. 5 (Tex.App.-

Austin 1998, pet. granted).

The cause of action provided to the surviving family under the Texas Constitution and the Labor Code is not

an action that could have been brought by the deceased. Consequently, we hold that Plaintiffs' cause of

action for gross negligence against Defendant is not a derivative[3] action arising from any rights that may

have been possessed by the decedent. See id.; see also Wright v. Gifford-Hill & Co., Inc., 725 S.W.2d 712,

714 (Tex.1987); Robertson v. Magnolia Petroleum Co., 255 S.W. 223, 224-25 (Tex.Civ.App.-Beaumont

1923, no writ). To the extent that the trial court's decision to grant summary judgment was based on

Plaintiffs' action being derivative, we sustain Plaintiffs' first point of error.

Effect of Defendant's Bankruptcy Discharge on Plaintiffs' Action

In its motion for summary judgment, Defendant asserts that because no "claim" was made against it by

Plaintiffs prior to Defendant's bankruptcy confirmation, "any claims which [they] may have had against

[Defendant] were discharged." See 11 U.S.C.A. § 101(5)(A) (1993).[4] Plaintiffs respond by arguing that

they did not possess a "claim" to make against Defendant until more than one year after Defendant's

bankruptcy was confirmed.

The legislative history of Section 101(5) of the Bankruptcy Code indicates that Congress intended the term

"claim" to be given broad interpretation so that "all legal obligations of the debtor, no matter [*34] how remote or contingent will be able to be dealt with in the bankruptcy case."[5] Lemelle v. Universal Mfg. Corp., 18

F.3d 1268, 1275 (5th Cir.1994); see also Wheeler v. Magdovitz, 137 F.3d 299, 300-01 (5th Cir.1998). We

note that while state law determines the existence of a claim based upon a cause of action, federal law

determines when that claim arises for bankruptcy purposes.[6] Hassanally v. Republic Bank, 208 B.R. 46,

50 (B.A.P. 10th Cir. 1997) (citing Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S.Ct. 2150, 2153, 115

L.Ed.2d 66 (1991)). After analyzing several methods employed by other courts to determine when a cause

of action accrues, in Lemelle, the court held that "a claim arises at the time of the negligent conduct forming the basis for liability only if the actor had some type of specific relationship with the debtor at that time." 18 F.3d at 1277 (emphasis added); see also Wheeler, 137 F.3d at 300-01.

Specifically, in Lemelle, the court stated that where the injury occurred more than three years after the

debtor filed its petition and more than two years after the plan was confirmed, at a minimum, there must be

evidence that would permit the debtor to identify, during the course of the bankruptcy proceedings, potential victims. Id. The court held that "even the broad definition of `claim' cannot be extended to include

[claimants] whom the record indicates were completely unknown and unidentified at the time [the debtor]

filed its petition and whose rights depended entirely on the fortuity of future occurrences."[7] Id.

Similarly, here, the record shows that the injury giving rise to Plaintiffs' cause of action occurred more than five years after Defendant filed its bankruptcy petition and more than one year after the plan was confirmed. See id. Further, there is no discernable evidence in the record presented for our review to show that there

was any "pre-petition contact, privity, or other relationship" between these Plaintiffs and Defendant. See id. at 1277. The record indicates that Plaintiffs were completely unknown and unidentified at the time

Defendant filed its petition for bankruptcy.[8] See id. Consequently, we hold that these Plaintiffs did not

possess bankruptcy "claims," as that term is defined, before Defendant's bankruptcy plan [*35] was

confirmed. See Lemelle, 18 F.3d at 1277-78; Fairchild Aircraft Corp., 184 B.R. at 933-34. Their "right to

payment" did not arise until after Guadalupe Garcia died. By that time, Defendant's bankruptcy plan had

been confirmed approximately two years prior thereto. Plaintiffs' second point of error sustained.

The trial court erred in granting summary judgment in favor of Defendant. See Nixon, 690 S.W.2d at 548-

49. This matter is reversed and remanded to the trial court for further proceedings not inconsistent with this opinion.

[1] In its brief, Defendant states that Plaintiffs' cause of action was brought under the Texas Wrongful Death Act. See Tex. Civ. Prac. & Rem.Code Ann. §§ 71.002-.003 (Vernon 1997). There is nothing in the record of this matter to support Defendant's contention. The only cause of action pled in Plaintiffs' first amended original petition is gross negligence, pursuant to article 16, Section 26 of the Texas Constitution and section 408.001 of the Labor Code. See Tex. Const. art. XVI, § 26; Tex. Labor Code Ann. § 408.001(b) (Vernon 1996). [2] See also Scoggins v. Southwestern Elec. Serv. Co., 434 S.W.2d 376, 378-79 (Tex.App.-Tyler 1968, writ ref'd n.r.e.). [3] A claim that is derivative is one "which has not its origin in itself, but owes its existence to something foregoing." BLACK'S LAW DICTIONARY 443 (6th Ed.1990); see also Fidelity & Deposit Co. of Maryland v. Conner, 973 F.2d 1236, 1240-41 (5th Cir.1992). [4] Pursuant to the United States Bankruptcy Code,

(5) "claim" means—

(A) right to payment, whether or not such right is reduced to judgment, liquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured....

11 U.S.C.A. § 101(5)(A) (1993).

[5] See also Fairchild Aircraft Corp. v. Cambell, 184 B.R. 910, 932-34 (Bankr.W.D.Texas 1995) (holding that aircraft manufacturer's pre-bankruptcy-petition conduct resulting in injuries which occurred post-petition were not dischargeable because of notions of dues process and fundamental fairness). The court found that the legislative history of Section 101(5) provides a decisional matrix. "On the one hand, bankruptcy claims encompass the `broadest' relief of the estate. On the other, bankruptcy claims can go no further that what is possible." Id. at 925. A "`[c]laim' ought not do what is `not possible' in a court of law-it may not authorize courts to ride roughshod over due process and notions of fundamental fairness...." Id. at 927.

[6] Under Texas law, a cause of action accrues when the plaintiff knew or in the exercise of reasonable diligence should have known of the wrongful act and resulting injury. Diaz v. Westphal, 941 S.W.2d 96, 99 (Tex.1997); Harrison County Finance Corp. v. KPMG Peat Marwick, LLP, 948 S.W.2d 941, 946 (Tex. App.-Texarkana 1997, no writ).

[7] Notably, in Lemelle, the court also stated that even if it found evidence of a pre-petition relationship between the debtor and the claimant, it might nonetheless conclude that the claimants did not possess a "claim" or that any such "claim" had not been discharged in bankruptcy. 18 F.3d at 1277-78; see also Fairchild Aircraft Corp., 184 B.R. at 931-32 n. 25.

[8] In its brief, Defendant does not contend that there was any pre-petition relationship between it and Plaintiffs; rather, in contending that Plaintiffs' claims were discharged, Defendant relies on the pre-petition relationship between it and the decedent. We are of the view, however, that the pre-petition relationship between the decedent and Defendant is immaterial in this case. This is because the remedy sought in this case is a personal remedy belonging to Plaintiffs that is not derivative of any cause of action possessed by the decedent. See Smith, 927 S.W.2d at 88; Scoggins, 434 S.W.2d at 379 (holding that the right to recover exemplary damages is personal).

Sources

• The opinion on Google Scholar
• Texas asbestos laws
• Texas asbestos exposure sites