## IN THE SUPREME COURT O F TEX AS

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### M IL E S T O N E 

### O P E R A T IN G 

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O N P E T I T I O N F O R R E V I E W F R O M T H E C O U R T O F A P P E A L S F O R T H E F O U R T E E N T H D I S T R I C T O F T E X A S

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P ER CURIAM

J U S T I C E L E H R M A N N did not participate in the de cision.

I n this case , we consider whether the defe ndants satisfied the first element of the Craddock
test for setting aside a no-answe r defa ult judgme nt. See Craddock v. Sunshine Bus Lines, Inc ., 133 S.W .2d 124, 126 (Tex. 1939) (re quiring a new trial if the defe ndant shows (1) that the defa ult wa s neither intentional nor the result of conscious indiffer ence , (2) a meritorious defe nse, and (3) that a

new trial would cause neither delay nor undue prejudic e)

. Be cause the evidenc e in this case established that the defe ndants’ failure to answe r was not intentional o r t h e result of conscious i n d i ff ere nce, the defe ndants’ motion for new trial could not be denied on the g round that t h ed ef

en dants failed to satisfy the first Craddock element. Acc ording ly , we reve rse the court o f appea ls’ judgme nt and re mand the ca se to that court. This appea l arises from a suit by Ex x onMob i l C o rporation ag ainst DSTJ , L .L .P. and Milestone Oper ating , I nc. (collec tively Milestone), alleg ing that Milest o n e brea ched the parties’ Fa rmout Ag ree ment by failing to notify Ex x onMobil that “pay out” had occur

red on a well that was subject to that ag ree ment. Under the Fa rmout Ag ree ment, “p a

y o u t” tr ig g e r e d E x x onMobil’s elec tion
to either esca late its overr iding roy alty interest or conver t to a working interest

. Af t er M i l estone failed to answe r, Ex x onMobil filed a motion for defa ult judgme nt. Ex x onMobil alleg ed that its pri v ate proce ss serve r, Thomas Ba rber , proper ly serve d Donald Har lan—DSTJ ’s partne r and M ilestone Oper ating , I nc.’s direc tor and reg istered ag ent—with citation and a copy of Ex x onMo b il ’ s p et i t i on. Ex x onMobil obtained a defa ult judgme nt that awa

rded it almost $1.8 milli on, which included unliquidated dama g es, pre judgme nt interest, attorne y ’s fe es, and c osts. Milestone filed a timely motion for new trial, arg uing that service on Har lan was defe ctive, and that Milestone established the nece ssary Craddock elements to set aside the defa ult judgme nt. The trial court denied the motion for new trial. The court of appea ls aff irmed the trial court’s denial of Milestone’s motion for new trial, holding th at M i lestone failed to meet its burden to satisfy Craddock ’s first element. 346 S.W .3d 101, 109. But the court of appea ls reve rsed the portion of the judgme nt awar ding unliquidated da mag es. Id. at 112. Milestone asser

ts two g rounds for re v er s al

. First, Milestone contends that the evidenc e established that the failure to answe r was not intentional or due to conscious indiffer ence . Second, Milestone arg

ues that service of proce ss was defe ctive beca use Har lan was not persona lly informed
2of the nature of the proce ss. When a defa u l t j u d gm en t i s attacke d by a motion for new trial, the critica l question is: “Why did the defe ndant not appea r? ” Sutherland v. Spence r , ___ S.W .3d ___,

___ (Tex. 2012) (quoting Fid. & Guar. Ins. Co. v. Drewery Constr. Co. , 186 S.W .3d 571, 574 (Tex. 2006) (per curia m)) (interna l quotation marks omitted). Milestone does not c halleng e whether the suit paper s wer e actua lly rec eived—only that service was defec tive

. There fore , our analy sis focuse s

on whether Milestone offe red sufficient evidence to meet it s burden under the f irst element of the Craddock test. See id. at ___ (“[I ]f the defe ndant rec eived the suit paper s and has some other rea son

1 for not appea

ring , then the defa

ult judgme nt must be set aside if the defe ndant p ro v es t h e three elements of the Craddock test.”). Under Craddock , a trial court m u s t s et aside a defa ult judgme nt if (1) “the failure of the defe ndant to answe r befor e judgme nt was not intentional, or the result of conscious indiffer ence on his par t , b u t wa s d u e to a mistake or an acc ident”; (2) “the motion for a new trial sets up a meritorious defe nse”; and (3) g ranting the motion “will occa sion no delay or otherwise work an injury to the plaintiff.” 133 S.W .2d at 126. We must look to the knowledg e and acts of the defe ndant to deter

mine whether the defe ndant satisfied its burden as to the first Craddock element. Dir., State Emp. W

orkers’ Comp. Div. v. Evans , 889 S.W .2d 266, 269 (Tex. 1994). The absenc e of an int entional failure t o answe r rather than a real excuse for not answer ing is the c ontrolling fact. Craddock , 133 S.W .2d at 125. A defe ndant satisfies its burden under this element when its fac tual

ass er t i o n s , if true, neg ate intentional or consciously indiffer ent conduct by the defe ndant and the

B e c a u s e t h e c o u r t o f a p p e a l s a d d r e s s e d o n l y C r a d d o c k ’ s f i r s t e l e m e n t , w e l i m i t o u r r e v i e w t o t h a t 1 d e t e r m i n a t i o n . S e e 3 4 6 S

. W

. 3 d a t 1 0 9 ; S u t h e r l a n d ,

_ _ _ S

. W

. 3 d a t

_ _ _ . 3fac tual asser tions are not controve rted by the plaintiff. Sutherland , ___ S.W .3d at ___. Consciously indiffer ent conduct occur s when “the def endant kne w i t was sued but did not car e.” Fidelity , 186 S.W .3d at 576. “An excuse need not be a g ood one to suffice .” Id. As in Sutherland , Milestone offe red an

excuse that was not controve rted and, if true, neg ated intentional or consciously indiffer ent conduct

on its part. See Sutherland , ___ S.W .3d at ___. Specifica lly , Milestone alleg ed that Har lan did not

rec all being serve d with Ex x onMobil’s petition on Marc h 19, 2009, even afte r revie wing his office
notes and speaking to the people with whom he works about that day ’s events. Har lan testified that Milestone had been sued at least four times prior to Ex x onMobil’s suit, he was serve d with proce ss in eac h of those suits, and it was his routine to turn over the suit paper s to Milestone’s leg al counsel. Yet Har lan testified that he did not reme mber bein g s er v ed o r turning over any suit paper s to Milestone’s leg al counsel in this case . Although Ex x onMobil offe red the testimony of L y nn Tatar , Ba rber ’s fianc ée, who maintained that she saw Ba rber hand Har lan the suit paper s, Ex x onMobil did
not controve rt Har lan’s testimony that he does not rec all being s er v ed. Nor did Ex x onMobil 2
controve rt Milestone’s evidenc e that detailed Har la n ’ s f a mi li a r it y w it h b e in g serve d with proce ss and his procedur e for

responding to such servic e. We conclude that the evidenc e here shows that Milestone’s failure to answe r was neither intentional nor the result of consciously indiffer ent conduct. See Fidelity , 1 8 6 S

. W

. 3 d at 576. Milestone there fore provided a s u f f ic ie nt excuse to satisfy Craddock ’s first element. See Sutherland ,

B a r b e r p a s s e d a w a y p r i o r t o t h e h e a r i n g o n M i l e s t o n e ’ s m o t i o n f o r n e w t r i a l

. T a t a r t e s t i f i e d t h a t s h e 2 a c c o m p a n i e d B a r b e r t o H a r l a n ’ s o f f i c e o n t h e d a t e t h a t B a r b e r s e r v e d H a r l a n .

4___ S.W .3d at ___. The trial court’s denial of Milestone’s motion for new t ri al t h u s cannot be

aff irmed on the g round that its excuse for not answe ring was insufficient. The court of appea ls err ed when it held otherwise. This holding comports with the policy that “an adjudication on the merits is pref err ed in Texas.” Holt Atherton Indus., Inc. v. Heine , 835 S.W .2 d 8 0 , 86 (Tex. 1992). Acc ording ly , we g rant the petition for revie w, an d wi t h out hear ing oral arg ument, we reve rse the
court of appea ls’ judgme nt and rema nd the case to that court for consideration of the s ec o n d and third Craddock elements. See T E X . R. A P P . P. 59.1.

OPI NI ON DEL I VERED: Octobe r 26, 2012

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