San Antonio Water System and City of San Antonio v. Sheila McKnight--Appeal from 45th Judicial District Court of Bexar County

MEMORANDUM OPINION

No. 04-02-00239-CV

SAN ANTONIO WATER SYSTEM and CITY OF SAN ANTONIO,

Appellants

v.

Sheila MCKNIGHT,

Appellee

From the 45th Judicial District Court, Bexar County, Texas
Trial Court No. 2001-CI-07124
Honorable Solomon Casseb, Jr., Judge Presiding

Opinion by: Catherine Stone, Justice

Sitting: Alma L. L pez, Chief Justice

Catherine Stone, Justice

Paul W. Green, Justice

Delivered and Filed: January 22, 2003

REVERSED AND REMANDED

Sheila McKnight sued defendants San Antonio Water Systems ("SAWS") and the City of San Antonio ("the City") for personal injuries and property damage sustained when she drove through water flowing over the road from a ruptured water main. Neither SAWS nor the City answered, and a default judgment was entered. The Honorable Solomon Casseb, Jr. denied the defendants' motion for new trial. Because the defendants' motion for new trial should have been granted, we reverse the judgment of the trial court and remand the cause for further proceedings.

Factual and Procedural Background

On May 16, 2001, the City Clerk of San Antonio was served with citation on behalf of the City and SAWS. The City Clerk forwarded the citation to the legal department, where it crossed the desk of Michael Hodge, the chief attorney of the City's litigation section. According to an affidavit filed by Hodge, the defendants had an oral agreement that if the City and SAWS were sued without an independent claim asserted against the City, SAWS would defend itself and the City. His affidavit states that no prior default judgments had been taken against either SAWS or the City under this system. He maintains that he forwarded the citation to Abigail Antuna, corporate counsel for SAWS. Unbeknownst to Hodge, Antuna was in the process of leaving her employment with SAWS and did not file an answer. Furthermore, SAWS' legal department has no records of receiving the citation or petition forwarded by Hodge.

The trial court entered a default judgment against the defendants on January 15, 2002. After the defendants received notice of the entry of that judgment, they filed a motion for new trial. On March 1, 2002, the trial court denied that motion.

Setting Aside a Default Judgment

More than sixty years ago, the Texas Supreme Court enunciated the standard that courts follow today in examining no answer default judgments. See Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124 (Tex. 1939). Craddock provides that a default judgment should be set aside and a new trial ordered in any case in which: [1] the failure of the defendant to answer before judgment was not intentional, or the result of conscious indifference on his part, but was due to a mistake or an accident; [2] provided the motion for a new trial sets up a meritorious defense and [3] is filed at a time when the granting thereof will occasion no delay or otherwise work an injury to the plaintiff. Dir., State Employees Workers' Comp. Div. v. Evans, 889 S.W.2d 266, 268 (Tex. 1994). A trial court abuses its discretion by not setting aside a default judgment when the defaulting party meets its burden of pleading and proving all three elements of the Craddock test. See In re K.C., 88 S.W.3d 277, 279 (Tex. App.--San Antonio 2002, pet. denied).

Failure to Answer

On appeal, McKnight claims the defendants have not met their burden of proving that the failure to answer was not intentional or the result of conscious indifference, but rather was due to a mistake or accident. McKnight contends the defendants' allegations are conclusory and fail to negate conscious indifference. See Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 83 (Tex. 1992). In Heine, the defaulting defendants presented affidavits which stated simply that "no answer was filed due to accident and mistake," without any explanation of why no answer was filed. Id. The affidavits submitted by SAWS and the City contained an explanation of the nature of the mistake. They explained that at the time the citation and petition would have likely reached SAWS' legal counsel, Antuna, the staff attorney responsible for the claim, was preparing to leave her job, marry, and move to a foreign country. This reason is sufficient to show that failure to file was not intentional or the result of conscious indifference on the part of SAWS and the City. See BancTEXAS McKinney, N.A. v. Desalination Sys., Inc., 847 S.W.2d 301, 302 (Tex. App.--Dallas 1992, no pet.).

McKnight also claims that because Antuna was the agent of SAWS, the defendants must prove absence of Antuna's intent or conscious indifference in failing to answer. McKnight argues that because the defendants did not produce an affidavit from Antuna, they cannot meet the burden of proving that she failed to answer due to accident or mistake. Even if the defendants are required to show Antuna's lack of intent or conscious indifference in failing to answer, the affidavits of both Hodge and Kathleen Cahill, a staff attorney with SAWS, provide a sufficient excuse. Compare Estate of Pollack v. McMurrey, 858 S.W.2d 388, 391 (Tex. 1993) ("when a party relies on an agent or representative to file an answer, the party must establish that the failure to answer was not intentional or the result of conscious indifference of either the party or the agent.") (italics added), with Heine, 835 S.W.2d at 83 ("when a defendant relies on his agent to file an answer, he must demonstrate that both he and his agent were free of conscious indifference.").

Antuna's inaction is excused because an agent has a duty to answer a lawsuit only after the principal has been served. See McMurrey, 858 S.W.2d at 391. There is no record of the citation or petition ever reaching SAWS or anyone in SAWS' legal department. The record contains no evidence that any agent of SAWS was aware of this suit against the principal. The record does not support a finding that Antuna's failure to answer was intentional or the result of conscious indifference. Rather, it shows that the documents were lost or misplaced through an accident or mistake. This is a sufficient explanation for the failure of the defendants to answer. The defendants have met the first prong of the Craddock test.

Meritorious Defense

McKnight also argues that the defendants failed to set forth a meritorious defense to McKnight's allegations of negligence. To set up a meritorious defense, the defaulting party must allege facts supported by affidavits or other evidence which constitute a prima facie defense to the plaintiff's cause of action. Id. at 392. In the motion for new trial, the defendants argued that they presented a meritorious defense in that there is no evidence that the defendants possessed the actual knowledge of the dangerous condition required to support a finding of premises liability.

The defendants are governmental entities, and the subject of McKnight's claim involves the provision of water and sewer service and street maintenance, all of which are governmental functions. See Tex. Civ. Prac. & Rem. Code Ann. 101.0215 (Vernon 2001). Therefore, the defendants may be found liable only if the Texas Tort Claims Act so provides. See Tex. Civ. Prac. & Rem. Code Ann. 101.025 (Vernon 2001). The Texas Tort Claims Act waives sovereign immunity for injuries caused by a condition of real property for which the government would be liable if it were a private person. See Tex. Civ. Prac. & Rem. Code Ann. 101.021 (Vernon 2001). Under Texas law, the defendants owed McKnight a licensee standard of care, which is the duty not to injure the licensee by willful, wanton, or grossly negligent conduct. See Tex. Civ. Prac. & Rem. Code Ann. 101.021 (Vernon 2001), State Dep't of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235, 237 (Tex. 1992). The exception to that rule is that a landowner owes the licensee the duty to warn of a dangerous condition or to make that condition reasonably safe if the landowner has actual knowledge of the dangerous condition and the licensee does not. See State v. Tennison, 509 S.W.2d 560, 562 (Tex. 1974). Therefore, to recover damages under Texas law, McKnight must prove that the defendants had actual knowledge of the premises' condition. Id. In the motion for new trial, the defendants allege that they had no knowledge of the broken water main. This allegation finds support in the affidavit of Janie Guzman, a claims representative for SAWS. If this defense is proven, it will cause a different result upon retrial. See Norton v. Martinez, 935 S.W.2d 898 (Tex. App.--San Antonio 1996, no writ). Based solely on this affidavit, and without considering controverting evidence offered by McKnight, the allegation that the defendants lacked actual knowledge of the premises' condition presents a meritorious defense sufficient to satisfy the requirements of Craddock. See Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex. 1966).

Injury or Delay

Finally, in their motion for new trial, the defendants stated that they were prepared to proceed to trial after the completion of discovery, that a new trial would not prejudice McKnight, and that they would reimburse McKnight for the costs of obtaining the default judgment. This representation shifted the burden to McKnight to prove injury. See McMurrey, 858 S.W.2d at 393. McKnight alleges generally that vacating the default judgment would impair her ability to pay her medical bills. She claims to have submitted a verified response challenging the defendants' allegations that she would suffer no injury in submitting to a new trial. The record, however, contains no such response. The record contains one affidavit from McKnight, and it does not allege that she will be unable to pay for her medical expenses if the default judgment is reversed. The conclusory allegation in McKnight's brief that she will suffer economic and bodily harm is not supported by the record, and does not demonstrate that requiring her to proceed to trial would prejudice the status of her claim. Id. Therefore, we cannot see how granting a new trial would cause delay or injury to McKnight.

For these reasons, the judgment of the trial court is reversed and the cause is remanded for further proceedings.

Catherine Stone, Justice

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