
140 S.W.3d 445 (2004)
Alma NICHOLSON, Appellant,
v.
Rodney T. TASHIRO, Appellee.
No. 13-03-177-CV.
Court of Appeals of Texas, Corpus Christi-Edinburg.
July 15, 2004.
*446 Karl B. Brock, Brock & Brock, San Antonio, for appellant.
Lamar G. Clemons, English, Clemons & Rodriguez, Corpus Christi, for appellee.
Before Chief Justice VALDEZ and Justices RODRIGUEZ and GARZA.

OPINION
Opinion by Justice RODRIGUEZ.
Appellant, Alma Nicholson, brought suit for personal injuries and property damages against appellee, Rodney Tashiro. Tashiro stipulated to liability but contested the damages sought. At trial, the jury awarded Nicholson $625.57 in damages. The trial court denied Nicholson's recovery of court costs. By two points of error, *447 Nicholson contends (1) that the trial court erred in finding that she was not a prevailing party, and (2) that no good cause existed for denying recovery of court costs. We reverse the trial court's denial of Nicholson's recovery of court costs and render those costs against Tashiro.

I. BACKGROUND
On September 29, 1999, Nicholson was involved in a motor vehicle accident with Tashiro. Nicholson sustained property damage to her automobile and suffered personal injuries as a result of the accident. Tashiro offered Nicholson $3000.00 to settle the claim. Nicholson rejected the offer and the case proceeded to trial where Tashiro conceded to liability but contested damages. The jury awarded Nicholson $625.57 in total damages. The trial judge denied Nicholson recovery of court costs on grounds that the settlement offer was greater than the jury award. Nicholson appeals.

II. COURT COSTS

A. Applicable Law
The Texas Rules of Civil Procedure provide that the successful party shall recover from the other party all costs incurred from the litigation, except as otherwise provided. Tex.R. Civ. P. 131. A "successful party" is defined as a party "who obtains a judgment of a competent court vindicating a civil claim of right." Univ. of Houston  Clear Lake v. Marsh, 981 S.W.2d 912, 914 (Tex.App.-Houston [1st Dist.] 1998, no pet.). A determination of whether a party is the prevailing or successful party "must be based upon success on the merits, and not on whether or not damages were awarded." City of Amarillo v. Glick, 991 S.W.2d 14, 17 (Tex.App.-Amarillo 1997, pet. denied).
The rules of civil procedure provide, however, that the trial court may, for good cause stated on the record, adjudge the costs otherwise than as provided by law. Tex.R. Civ. P. 141. Good cause "is a very elusive concept which can only be determined on a case-by-case basis." Rogers v. Walmart Stores, Inc., 686 S.W.2d 599, 601 (Tex.1985). Unless the record "demonstrates an abuse of discretion, the trial judge's assessment of costs for good cause" should not be reversed. Id. The test for an abuse of discretion is whether the court acted arbitrarily, unreasonably, or without reference to any guiding rules or principles. Yowell v. Piper Aircraft Corp., 703 S.W.2d 630, 635 (Tex.1986); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985). An appellate court will not substitute its judgment for that of the trial court, but will reverse only if the record clearly shows that the trial court disregarded the parties' rights. Yowell, 703 S.W.2d at 635.

B. Analysis

1. Prevailing Party
By her first point of error, Nicholson contends that the trial court erred in finding that she was not a prevailing party. In response, Tashiro argues that he was the prevailing party because the jury awarded Nicholson less than the settlement amount that he offered. However, the amount of damages awarded is irrelevant when determining the prevailing party. See City of Amarillo, 991 S.W.2d at 17. The issue is whether Nicholson succeeded on the merits of the case. Id. The record, in this case, shows Tashiro stipulated to liability and stipulated that Nicholson "was not negligent." Additionally, the jury found Tashiro caused Nicholson's damages. Nicholson, therefore, succeeded on the merits of the case. Thus, we conclude she was the prevailing party.


*448 2. Good Cause
By her second point of error, Nicholson contends that no good cause exists for denying her recovery of court costs under rule 131 of the Texas Rules of Civil Procedure. In general, the party who is successful at trial is entitled to recover all costs incurred in the action from the adverse party. Tex.R. Civ. P. 131; see Martinez v. Pierce, 759 S.W.2d 114, 114 (Tex.1988) (per curiam) (taxing costs against successful party in trial court contrary to rules of civil procedure). However, according to rule 141, the court may, for good cause stated on the record, adjudge the costs otherwise. Tex.R. Civ. P. 141.
The record shows that the trial judge relied on the fact that Nicholson failed to accept the settlement amount, an amount larger than the jury award, as the basis for finding good cause to deny recovery of court costs. However, a judge is not allowed to penalize a party for refusal to enter into settlement negotiations. See Gleason v. Lawson, 850 S.W.2d 714, 717-18 (Tex.App.-Corpus Christi 1993, no pet.) (finding assessment of court costs against party for exercising his right to jury trial encumbers that right and makes its assertion costly). By denying her recovery of court costs on this basis, the trial court unreasonably penalized Nicholson for exercising her right to a jury trial. See id. No guiding principles exist which would allow the trial judge to do so, and Nicholson's rights were clearly disregarded. See id.; Downer, 701 S.W.2d at 241-42. Determining good cause on a case-by-case basis, see Rogers, 686 S.W.2d at 601, we conclude, in this case, that the trial court abused its discretion when it refused Nicholson's recovery of court costs. The trial court failed to state a good cause for denying her recovery of court costs.
Nicholson's first and second points of error are sustained.

III. CONCLUSION
Accordingly, we reverse the trial court's denial of Nicholson's recovery of court costs and render those costs against Tashiro.
