City of McAllen v. Casso

CITY OF MCALLEN, Appellant,

v.DAHLILA GUERRA CASSO, Appellee.

NUMBER 13-11-00749-CV

COURT OF APPEALS THIRTEENTH DISTRICT OF TEXAS CORPUS CHRISTI - EDINBURG

Dated: March 28, 2013

On appeal from the 92nd District Court

of Hidalgo County, Texas.

MEMORANDUM OPINION

Before Chief Justice Valdez and Justices Rodriguez and Garza

Memorandum Opinion by Justice Garza

A Hidalgo County jury found appellant, the City of McAllen (the "City"), liable for breach of contract and fraud in a lawsuit filed by appellee, Dahlila Guerra Casso. The City was ordered to pay over $440,000 in damages and $150,000 in attorney's fees,and it was ordered to specifically perform its duties under the contract at issue. On appeal, the City contends by twelve issues that the trial court erred in rendering judgment on the jury's verdict. We will affirm the judgment as modified.

I. BACKGROUND

Casso was appointed by the City in 1990 to be the presiding judge of its municipal court. In 1991, she was diagnosed with systemic lupus erythematosus ("Lupus"), an autoimmune disorder with no known cure. Casso was reappointed as municipal judge several times, but decided to resign in 1999. At that time, she informed the City that she believed her health condition had been aggravated by unsanitary conditions at the building in which she worked. She indicated to City officials that she would be amenable to releasing whatever claims she had against the City in exchange for, among other things, continued health insurance coverage. Accordingly, Casso negotiated an agreement with the City in which she promised to release the City "from any type of claim, demand, and cause of action whatsoever arising out of her employment or that could have been brought by her, relating to her employment or her separation . . . ." The agreement further stated, in relevant part, as follows:

1. CONSIDERATION

In consideration for the promise made by Casso in this Agreement, the City agrees to the following payments and/or benefits referred herein as "Consideration": a lump sum payment equal to Fifty Thousand Dollars ($50,000.00) plus an amount equal to the City's total contributions to Casso's [Texas Municipal Retirement System] account as of the date of the execution of this Agreement. In addition, the City will continue to pay Casso's health insurance premiums for Health Insurance coverage with The City of McAllen throughout the period of time from the date of the execution of this Agreement through June 2002.

5. NATURE OF CONSIDERATION

Casso understands and acknowledges that the settlement payments hereunder are for the alleged mental anguish and physical sickness she has claimed, associated with the aggravation of her physical disability, Lupus. Casso understands that the City denies the claims she has asserted.

. . . .

16. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement, covenant, and consideration between the parties. There was no reliance upon any other representation, statement, consideration, covenant, promise, or agreement not contained in the Agreement for the covenant made in these documents.

17. REPRESENTATIONS BY CASSO

In return for the Consideration, Casso represents the following to the City: (1) I am legally competent to execute this Agreement; (2) in making this settlement and with respect to the Agreement, I have had the benefit of advise [sic] of counsel chosen by me; (3) no promise or representation of any kind has been made to me by the City, or by anyone acting for the City, except as is expressly stated in the Agreement; . . . (7) I understand that the Agreement represents and contains the entire agreement between the parties hereto . . . .

Casso, acting on her own behalf and without independent legal counsel, executed the release agreement along with the City's attorney on April 12, 1999.

In accordance with the agreement, the City paid Casso $128,000,¹ and it paid her health insurance premiums until June 1, 2002. At that time, Casso began making the monthly premium payments. The City believed, however, that it was not obligated under the agreement to keep Casso enrolled indefinitely on its insurance plan, even if Casso continued to make the premium payments. Instead, the City believed that Cassowould be eligible for 18 months of post-employment health insurance coverage through COBRA, beginning in June 2002.² In 2001, the City sent Casso a form entitled "Enrollment/Change/Cancellation Form" and it asked that Casso sign it. Casso testified:

I was asked to come by the insurance department and talk to Becky and another young lady that were there. I was told that I needed to sign that form. And I was—I said, why. And I joked with them about never signing a form that was blank. But I was told that was so that they could enroll me on the new—I think they went from TML [Texas Municipal League] to TASB [Texas Association of School Boards] or—there had been a change in their third party—in their carrier or whatever they were called.[³ ] And it seemed innocent enough to me. And then I did read the portion where I signed and even that was an innocent—I joked with them. I said you want me to sign so they can take money from my payroll—from my paycheck but I wasn't getting a paycheck from the City. So it really—you know, if I was going to continue my insurance it didn't make a difference to me whether I signed that or not. It had—in my opinion it had no value. They were asking me to sign something just so they could continue to process my insurance and keep me current. And they had me sign something that says I authorize the City of McAllen to take money from my paycheck or to make a payroll deduction.

Casso signed the blank form on a signature line underneath the following statement: "I authorize my employer to make the appropriate payroll deductions as a result of this enrollment and/or change." The City then forwarded the form to TASB, its third-party claims administrator, along with a letter from Rebecca Ramirez, the City's benefits coordinator, explaining that Casso was enrolling in COBRA health insurance coverage. The letter, which was admitted into evidence at trial, claimed that Casso is "eligible for C[OBRA] benefits effective July 1, 2002 through December 31, 2003." The form, assent to TASB, had the words "Cobra Coverage" handwritten on a line next to the words "Qualifying Event." Casso stated that she did not intend for the form to be used to enroll her in COBRA, because she believed she was still entitled, under the agreement, to be covered by the City's insurance plan as long as she paid the premiums.⁴

Despite the fact that Casso continued to make the premium payments, the City terminated her health insurance coverage at the end of December 2003. Casso later sued the City, claiming that the City was obligated under the release agreement to keep her on its health insurance plan until she turned 65, at which point she would be eligible for Medicare. The trial court initially granted a plea to the jurisdiction in favor of the City, but we reversed. Casso v. City of McAllen, No. 13-08-00618-CV, 2009 Tex. App. LEXIS 2049, at *22-23 (Tex. App.—Corpus Christi 2009, pet. denied) (mem. op.) (holding that "the City was performing a proprietary function in providing Casso with health insurance coverage; therefore, the City is not entitled to governmental immunity").

At trial, Casso testified that, after the City terminated her coverage, she applied for health insurance through the State Bar of Texas but was denied. She also made several other unsuccessful attempts to obtain health insurance coverage. Casso statedthat she has gone without health insurance coverage since December 2003. She identified evidence of several large medical bills she paid out-of-pocket since then.

Casso conceded on cross-examination that, if a City employee resigns, he or she would not ordinarily be entitled to continued health insurance coverage beyond access to COBRA. She also stated that she specifically negotiated certain terms of the settlement agreement. In particular, Casso demanded that the agreement state that she resigned her position and was not terminated; she demanded that the agreement state that the compensation was for "aggravation" of her Lupus condition; and she demanded that the agreement make no reference to her potential COBRA eligibility.

Casso agreed with the City's counsel that the City had complied with the release agreement's express requirements that it (1) pay her $50,000, (2) pay her an amount equal to the contributions made by the City to her retirement account, and (3) pay her health insurance premiums up until June 2002. Casso argued, however, that the agreement contained an additional implied term—namely, that the City was required to maintain her eligibility to buy into the health insurance plan until such time as she became eligible for Medicare—which the City violated by unilaterally terminating her coverage at the end of December 2003.

Casso's theory was that the agreement was ambiguous because, while it specified the date upon which the City would stop paying her insurance premiums, it did not specify the date upon which her ability to buy into the plan—that is, her ability to maintain enrollment in the plan while paying her own premiums—would be terminated. Casso urged that the ambiguity could be resolved by considering the circumstances surrounding the formation of the agreement; in particular, she noted that, at the time ofthe agreement, the City was fully aware of her medical condition and her need for continuous health insurance coverage.

Casso also argued that the ambiguity could be resolved by referring to the City's 2003 "Employee Benefit Plan" (the "Plan"). The Plan, which was entered into evidence, defines four different categories of "participant": (1) a regular full-time employee; (2) a spouse or child of a participant; (3) a retired employee "who meets the requirements set forth in this Plan"⁵ ; or (4) a COBRA participant. Casso reasoned...