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In re Sensitive Care Inc.6/8/2000
Introduction
This original proceeding involves a state court judgment rendered after the automatic stay of the bankruptcy code was in effect. We must determine whether the bankruptcy court validated the judgment or whether the judgment is void. We hold the bankruptcy court did not validate the judgment. Therefore, the judgment is void, and we conditionally grant mandamus relief.
Background Facts and Procedural History
The underlying case is a wrongful death suit. Real party in interest Carol Rhodes sued relator Sensitive Care Inc., d/b/a H.E.B. Nursing Center, alleging that Sensitive Care's negligence caused the death of Woodrow Bryan Sellers, Rhodes's brother. Rhodes sued in her individual capacity and as administratrix of Sellers's estate. Trial began on October 5, 1998.
During trial, Sensitive Care and Rhodes entered into a high-low settlement agreement, which was dictated into the record. The low was $250,000, and the high was $750,000. On October 15, 1998, the jury returned a verdict in favor of Rhodes for $30,000 in compensatory damages and $250 million in punitive damages. Several months passed before Rhodes moved for judgment on the verdict. Meanwhile, in February 1999, Sensitive Care was placed in involuntary bankruptcy . On March 15, 1999 - apparently without knowledge of the bankruptcy proceeding - the trial court rendered judgment for Rhodes. The judgment was for the entire amount of the jury's verdict and did not include a damages cap.
The bankruptcy is ongoing. In September 1999, the bankruptcy court modified the automatic stay for the limited purpose of allowing Rhodes to proceed against Sensitive Care's insurance policies - but no other assets - in the underlying case. The bankruptcy court also allowed relator Credit General Indemnity Company, d/b/a Credit General Insurance Company of Texas to defend Sensitive Care against any action based on the insurance policies. The bankruptcy court required Credit General to file with the state district clerk a $1 million bond guaranteeing performance of any state court judgment.
Once the stay was modified, relators asked the state court to modify or disregard the March 1999 judgment because it is void. Relators also asked the court to enforce the high-low agreement. In response, Rhodes moved for a turnover order and argued that relators waived their right to enforce the high-low agreement by not complying with its terms in a timely manner. Rhodes contended relators were therefore liable for the full amount of the March 1999 judgment (in excess of $250 million). Rhodes asked the state court to order relators to immediately pay her $750,000 plus $245,500 in attorneys' fees and to appoint a receiver to take all necessary steps in the bankruptcy court to effect the turnover of Sensitive Care's assets to satisfy the remainder of the March 1999 judgment. The state court denied relators' motion, granted Rhodes's motion, and issued the requested turnover order on January 20, 2000. On January 25, 2000, we stayed the turnover order pending the disposition of this original proceeding.
Waiver
Rhodes contends that relators waived their right to complain of the March 1999 judgment -either on appeal or by mandamus - by entering into the high-low agreement and by not bringing Sensitive Care's involuntary bankruptcy to the trial court's attention. Waiver and estoppel do not apply, however, when a trial court renders a judgment it has no power to render. See Gem Vending, Inc. v. Walker, 918 S.W.2d 656, 658 (Tex. App.-Fort Worth 1996, orig. proceeding); see also Insurance Corp. v. Compagnie des Bauxites, 456 U.S. 694, 702, 102 S. Ct. 2099, 2104 (1982) (holding co
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