Marbury, Mandamus, and Default Judgments

writEchoing Justice Marshall’s classic head fake in Marbury v. Madison about jurisdiction, the case of In re Ralston Outdoor Advertising Ltd. offered a similar maneuver about Texas mandamus standards.  After first expanding the Fifth Court’s usual citation to In re: Prudential Ins. Co., 148 S.W.3d 124 (Tex. 2004) to include its discussion of balancing (“An appellate remedy is ‘adequate’ when any benefits to mandamus review are outweighed by the detriments.”), the Court then denied mandamus relief based on longstanding pre-Prudential precedent : “Texas courts have long held that a plaintiff denied a default judgment has an adequate appellate remedy.” (citing Jackson v. McKinsey, 12 S.W.2d 1044, 1045 (Tex. Civ. App.—Fort Worth 1928, no writ)).

 

New year, new Craddock case setting aside default judgment.

quikwayA business involved in the fuel purchases of a convenience store (right) obtained a $344,000 default judgment against an individual involved with the store’s operations. The Fifth Court set aside the judgment under the Craddock factors.  As to the first factor (conscious indifference), the Court reminded of the importance of evidence rulings: “Although Quik-Way objected to the affidavits and other evidence filed in support of the motion for new trial, it did not secure any rulings on its objections; thus, we consider all the evidence in support of the motion for new trial”  On the merits, the defendant “explained that her sister  . . . handled the financial and personnel matters in the business and was the day manager of the store. After they were sued, [the sister] said she would handle the lawsuit. According to [the defendant], [the sister] was more educated and did not have a full-time outside job. [The defendant] said she relied on her sister and believed a lawyer had been hired and that an answer had been filed.”  The sister filed a confirming affidavit.  This showing sufficed: “A party’s belief that she had taken the appropriate steps to hire counsel is not consciously indifferent conduct, nor does it show [the defendant] knew she was being sued but did not care.”  Khwaja v. Quik-Way Retail Associates II, Ltd., No. 05-14-01090-CV (Dec. 28, 2015) (mem. op.)

Restricted Appeal Sets Aside Damages for Backyard Debacle

Sylvester Davis sued TexPro Construction Group after the contractor failed to complete a backyard construction project. When TexPro failed to file an answer, Davis sought and obtained a partial default judgment on liability. TexPro then answered, but Davis moved forward with a hearing to establish damages. TexPro did not appear at the hearing, and the trial court awarded judgment for $117,230 in compensatory damages, treble damages under the DTPA and $350,000 in exemplary damages. After blowing through the deadlines for an ordinary appeal, TexPro hired new counsel and filed a restricted appeal. The Court of Appeals held that there was no error on the face of the record just because TexPro’s registered agent had been served at a location different from the address listed on the citation. The Court also held that there was no error in the trial court’s decision to move forward with the damages hearing, since the filing of TexPro’s answer did not negate the previously-signed default judgment on liability. However, Davis’ testimony on damages was the full amount of the money paid to TexPro, without accounting for the value of the work that TexPro had actually performed. Because his affidavit testimony was conclusory in alleging that the work done was valueless, the Court of Appeals reversed and remanded for a new trial on damages.

TexPro Constr. Group, LLC v. Davis, No. 05-14-00050-CV

Sometimes “Oops!” Is a Good Enough Excuse

A memorandum opinion setting aside a default judgment highlights one of the more forgiving standards for obtaining a new trial. FelCor/CSS Holdings sued Culinaire of Florida for failing to indemnify it in two personal injury suits. Culinaire received a courtesy copy of the lawsuit and put its insurer on notice. The insurer in turn hired defense counsel. But when the actual citation arrived, Culinaire’s CFO somehow forgot to forward it to the company’s insurance agent. Culinaire moved for a new trial under the familiar Craddock factors, but the trial court denied the motion. The Court of Appeals reversed and remanded, holding that losing paperwork is precisely the kind of “accident or mistake” that negates “conscious indifference” to the lawsuit.

Culinaire of Florida, Inc. v. FelCor/CSS Holdings, LP, No. 05-14-00832-CV

Mandamus Granted to Overturn Vacatur of Default Judgment

Under Rule 329b of the Texas Rules of Civil Procedure, the trial court loses its plenary power over a default judgment thirty days after it is signed.  An exception to this 30 day rule is when a party fails to receive notice within 20 days of the signing of the judgment.  In this case, the defendant sought to have a default judgment set aside, alleging that he did not receive notice of the judgment until the 98th day after it was rendered.  The trial court granted his motion and vacated the default judgment.

The Court of Appeals, however, granted the defendant’s mandamus petition, because under Rule 306a(4), “a party who does not have actual knowledge of an order of dismissal within 90 days of the date it is signed cannot move for reinstatement.”

In re Intergas Capital Recovery LLC

Court Upholds Defamation Verdict and Default Judgment

In a case involving a dispute among members of the Obowu Union DFW, the plaintiff sued the other members for defamation after he was suspended.  The Union filed a plea in intervention but the plaintiff never filed an answer and the Union moved for default judgment, which the trial court granted.  The case went to trial and a jury returned a verdict in the plaintiff’s favor on his defamation claim for over $200,000.

The defendants appealed the defamation verdict, which the Court of Appeals affirmed, and the plaintiff also appealed the default judgment.  The Court affirmed the default judgment, rejecting the plaintiff’s argument that the trial court should have granted him a new trial because the intervenors failed to serve a copy of the motion for default judgment on him.  Specifically, the Court noted that “after a defendant has been served with citation and the petition, the plaintiff has no legal duty to notify the defendant before taking a default judgment . . . .”

Iroh v. Igwe

Mental Anguish Damages Award Reversed

In this restricted appeal, the defendant argued that the trial court erred in entering a default judgment against it in the absence of evidence establishing mental anguish damages.  Because the trial court received testimony of the plaintiffs physical injuries form a slip and fall, and no testimony on mental anguish, and because there was no way to distinguish between the award of mental anguish damages and those awarded for past physical pain, the judge’s award of $20,000 constitutes error on the face of the record.

Center Operating Co. v. Duncan

How to Lose a Default Judgment

In this breach of contract case, the defendant corporation filed an answer pro se. Because corporations must be represented by an attorney, the trial court entered an order giving the defendant notice that its pleading would be struck if it did not file a proper answer within 30 days. After it failed to do so, the plaintiffs moved to strike the pro se pleading and also filed a motion for default judgment. The trial court granted both motions, entering a default judgment in plaintiffs’ favor that included $78,000 in actual damages and over $10,000 in attorneys’ fees.

On appeal, the defendant argued that the trial court erred in striking its answer and entering a default judgment. The Court of Appeals rejected the defendant’s argument that the trial court’s action was overly harsh, but it agreed with the defendant that there was insufficient evidence in the record to enter the default judgment. The Court noted that, even if the facts in the plaintiffs’ petition were accepted as true, they had “failed to establish a breach of contract claim” against the defendant. Because the plaintiffs had not alleged sufficient facts to establish their claim, the Court set aside the default judgment and remanded the case back to the trial court.

GQ Enters. Corp. v. Rajani, No. 05-12-01353-CV

Default Judgment Set Aside in Restricted Appeal

Speed Boats of Texas brought suit against Fountain Powerboats and obtained a default judgment.  Fountain then filed a restricted appeal in which it sought to set aside the default judgment by arguing that the record did not establish that the secretary of state served Fountain with process.   The Court of Appeals agreed.  Because the record did not “affirmatively show that the secretary of state forwarded a copy of the process to the defendant,” the Court set aside the default judgment and remanded the case back to the trial court.

Fountain Powerboats v. Speed Boats of Texas, No. 05-13-006570-CV

The Answer’s Answer Precludes Default Judgment

Former NBA point guard Allen Iverson (aka “the answer“) was sued for breach of contract because he failed to show up to an all-star game party in Dallas at which he had allegedly agreed to make an appearance.  Iverson filed a pro se answer asserting a general denial and various affirmative defenses, but failed to show up for trial. The trial court rendered a default judgment.  On appeal, the Court made clear that, because Iverson had answered, the plaintiff had to prove each element of its claim.  The Court then found that the plaintiff failed to establish the existence of a contract because it did not produce an actual written contract or provide any substantive testimony about the contract’s formation.

Iverson v. Dolce Mktg. Group