Manuel Villegas v. Heidi Henke Morse--Appeal from County Court of Walker County

IN THE

TENTH COURT OF APPEALS

No. 10-06-00415-CV

Manuel Villegas,

Appellant

v.

Heidi Henke Morse,

Appellee

From the County Court

Walker County, Texas

Trial Court No. 8080CV

MEMORANDUM Opinion

Manuel Villegas challenges a default judgment entered in favor of Heidi Morse. Villegas asserts that the trial court erred in denying his second and revised second motion for new trial because of a mistake in determining whether he had been served. In three issues, Villegas argues that the trial court abused its discretion in entering the default judgment and awarding damages supported by insufficient evidence. We will reverse and remand for a new trial.

Background

Morse was involved in a vehicle accident with Villegas, an insured of Affirmative Insurance. After negotiations to resolve the dispute failed, Morse filed a personal injury suit against Villegas on November 18, 2005. That same day, Morse s attorney forwarded a copy of the petition to Affirmative Insurance, and shortly thereafter Affirmative Insurance forwarded the file to its outside defense counsel, Mark Burck of Burck, Lapidus & Lanza, P.C., to handle the case. Burck alleges that after receiving information about the case, he contacted the clerk s office to determine the status of service on Villegas and was told that Villegas had not been served. Janya Bishop, Burck s assistant, stated in her affidavit that she then began to check the status of service with the clerk s office every two weeks. Burck also sent a letter to Morse s counsel asking that he inform him when Villegas had been served. In a letter response, Morse s attorney refused to do so.

Villegas was served on December 28, 2005. Morse filed the return of service on January 9, 2006, and Villegas failed to timely file an answer. On January 31, 2006, Morse appeared at a default judgment hearing, offered evidence, and the trial court signed a no-answer default judgment in her favor for $167,733.86. Burck claims that, unaware of the default judgment, his firm continued to do routine service checks with the clerk s office, as well as negotiate Morse s settlement claim, but was repeatedly told that Villegas had not been served. Burck claims that on March 3, 2006, he discovered that service was achieved on Villegas; he immediately filed an answer and later filed a motion for new trial. The trial court declined to consider Villegas s first motion for new trial, believing that it had lost plenary power. Villegas filed a petition for writ of mandamus and a restricted appeal in this court, arguing that the default judgment was not a final judgment. We agreed and abated the appeal until the trial court signed the final judgment. The trial court subsequently held a hearing and entered a final no-answer default judgment. Villegas then brought this appeal anew, contending that the trial court abused its discretion in denying his second motion for new trial.

Motion for New Trial Default Judgment

In Villegas s first issue, he contends that the trial court abused its discretion in denying his second and revised second motion for new trial. Specifically, he argues that he satisfies the criteria for setting aside a default judgment and granting a new trial set out by the Supreme Court of Texas in Craddock because (1) his failure to answer was accidental, (2) he has a meritorious defense, and (3) Morse will not be unduly prejudiced by a new trial. See Craddock v. Sunshine Bus Lines, Inc., 134 Tex. 388, 133 S.W.2d 124, 126 (1939).

Applicable Law

A trial court s denial of a motion for new trial is reviewed for abuse of discretion. Director, State Employees Workers Comp. Div. v. Evans, 889 S.W.2d 266, 270 (Tex. 1994); Cliff v. Huggins, 724 S.W.2d 778, 778-79 (Tex. 1987). An abuse of discretion occurs when a trial court fails to correctly analyze or apply the law. Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992). In reviewing the judgment of the trial court where there are no findings of fact and conclusions of law filed, the judgment must be upheld on any legal theory that finds support in the evidence. Lassiter v. Bliss, 559 S.W.2d 353, 358 (Tex. 1977), overruled on other grounds, Cherne Indus., Inc. v. Magallanes, 763 S.W.2d 768 (Tex. 1989).

However, as stated in Craddock "[w]hile trial courts have some measure of discretion in the matter, as, in truth, they have in all cases governed by equitable principles, it is not an unbridled discretion to decide cases as they might deem proper, without reference to any guiding rule or principle." Craddock, 133 S.W.2d at 126. 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) 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. Evans, 889 S.W.2d at 268 (quoting Craddock, 133 S.W.2d at 126). Thus, a trial court abuses its discretion by not granting a new trial when all three elements of the Craddock test are met. Bank One, Texas, N.A. v. Moody, 830 S.W.2d 81, 85 (Tex. 1992).

We begin with whether Villegas s failure to appear at trial was the result of conscious indifference or was due to a mistake or an accident. Conscious indifference has been defined as the failure to take some action which would seem indicated to a person of reasonable sensibilities under the same or similar circumstances. Young v. Kirsch, 814 S.W.2d 77, 81 (Tex. App. San Antonio 1991, no writ). As for showing accident or mistake, a defaulting party must provide some excuse, though not necessarily a good excuse, for failing to timely file an answer or appear. Comanche Nation v. Fox, 128 S.W.3d 745, 750 (Tex. App. Austin 2004, no pet.).

Villegas argues that his failure to answer was accidental and the result of misinformation given to him by the Walker County clerk s office. Morse argues that Villegas s actions were consciously indifferent because the evidence established that Villegas knew he had been sued and his agents knew he had been sued, yet no action was taken.

The record reveals evidence that Villegas s failure to respond was the result of accident or mistake. In his affidavit, Villegas alleges that after being served, he took the lawsuit papers to the attorney he had hired to handle his traffic ticket issued in the accident with Morse. That attorney told him that he was unable to help him with the civil suit. Villegas then alleges that he spoke with someone at Affirmative Insurance and acquired an understanding that his case was under investigation. He believed that his insurance company would handle the case because they had already been in contact with Morse and had notified him of their involvement in investigating Morse s claim. Additionally, he had received a representation letter from the assigned defense counsel.[1]

Morse s claim was assigned to Affirmative Insurance litigation specialist Willie Winters. Winters s affidavit states that he assigned Morse s claim to outside defense counsel to be monitored for service and, if service was accomplished for an answer to be filed. Winters did not receive notice from Morse s attorney that service had been achieved on Villegas until after the default judgment had been entered.

Burck, defense counsel for Villegas, also took steps in handling Villegas s case that do not reflect consciously indifferent behavior. Burck claims that his office checked the status of service with the Walker County clerk s office, who reported no service had been achieved. Burck s office then allegedly began to investigate the status of service once every two weeks, and each time the clerk s office reported no service. Although Morse challenges whether Burck s office actually attempted to check the status of service, it is obvious from Morse s attorney s letter, included in her response to the motion for new trial that Burck s office was inquiring about the status of service. In the letter, dated December 16, 2005, Morse s counsel responds

In response to your recent correspondence in this case, I am under no duty to notify you when Manuel Villegas is served with process. I value our professional relationship as well as our friendship but the staff of Affirmative Insurance Services has used up all of our good will.

This letter is uncontroverted evidence that attempts were made on Villegas s behalf to verify service of process and to thereby file a timely answer. In Freeman, we upheld a default judgment when the appellant was unable to explain the nature of the mistake or accident that caused the failure to timely answer. Freeman v. Pevehouse, 79 S.W.3d 637, 645 (Tex. App. Waco 2002, no pet.). Here, we have evidence from both Morse and Villegas that Affirmative Insurance and Burck actively tried to find out when Villegas was served. The affidavits here show neither intent nor indifference and satisfy the first prong of Craddock.

Meritorious Defense

A motion for new trial should be granted if it "sets up" a meritorious defense. Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex. 1966). It is of no regard whether the alleged facts, which set up the defense, are controverted. Evans, 889 S.W.2d at 270.

In his answer, Villegas alleged that he was not the sole proximate cause of the accident. He alleges that Morse s injuries and damages were proximately caused by a third-party, were proximately caused by her, or were proximately caused by pre-existing conditions. Villegas supported these allegations by arguing that (1) Morse was not driving as an ordinarily prudent driver would have been driving under the same or similar circumstances, and her actions contributed to the accident; (2) Morse failed to timely apply her brakes and failed to keep a proper look-out; and (3) Morse did not appear to be and denied being injured at the scene of the accident. Morse contends that Villegas s allegations are not supported by facts and are only supported by Villegas s affidavit. That is of no consequence in setting up a meritorious defense for the Craddock test. Under Craddock, a meritorious defense has been set up if the facts alleged in the motion for new trial and supporting affidavits set forth facts, which in law constitute a meritorious defense, regardless of whether they are controverted. Id. Villegas set up a meritorious defense and, therefore, met the second element of Craddock.

Injury or Delay

It is often necessary for the movant to offer to reimburse the non-movant for the costs involved in obtaining the default judgment to avoid an injury to the non-movant. Angelo v. Champion Restaurant Equip. Co., 713 S.W.2d 96, 98 (Tex. 1986). The courts have also looked more favorably on movants who are ready, willing, and able to go to trial almost immediately. Id. Once the movant alleges that the granting of a new trial would not injure the non-movant, the burden of going forward with proof of injury shifts to the non-movant. Evans, 889 S.W.2d at 270.

Villegas alleged that granting a new trial would not injure or delay Morse, as he offered to reimburse Morse for the costs incurred in obtaining the default judgment and claimed that he was ready to proceed with trial preparation. Morse argued that she would be prejudiced by having to incur trial preparation expenses for depositions and other pretrial matters. Trial preparation expenses will not injure Morse in the manner contemplated by the Craddock test. The case law is clear that only proof of specific prejudices such as lost witnesses or evidence constitute prejudice. See Jackson v. Mares, 802 S.W.2d 48, 52 (Tex. App. Corpus Christi 1991, writ denied). Although Morse argues that, because Villegas claimed he was willing to proceed with trial preparation immediately, and not trial, he has not met his burden under Craddock. Courts look favorably on defendants ready, willing, and able to go to trial almost immediately. Angelo, 713 S.W.2d at 98. We hold that Morse has failed to show an injury that would negate Villegas s prima facie showing of no undue delay or injury. Having found that Villegas proved all elements of the Craddock test, we sustain his first issue.[2]

Conclusion

Because Villegas meets the three elements of Craddock requiring a new trial in a default judgment case, the trial court abused its discretion in denying Villegas's second and revised second motion for new trial. Thus, the judgment is reversed and the cause is remanded for further proceedings.

BILL VANCE

Justice

Before Chief Justice Gray,

Justice Vance, and

Justice Reyna

Reversed and remanded

Opinion delivered and filed June 18, 2008

[CV06]

[1] 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. Holt Atherton Indus, Inc. v. Heine, 835 S.W.2d 80, 83 (Tex. 1992).

[2] Villegas argues two additional points of error. Because our resolution of Villegas s first issue is dispositive of this appeal, we do not address his remaining issues. Tex. R. App. P. 47.1.