### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-05-00412- CV

K at in C or p., App e lla nt

v. Bea Loesch, Appellee

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 261ST JUDICI AL DISTRICT NO. GN-4007 73, H ONO RAB LE DARLENE B Y RNE, JUDGE P RESIDING

M E M O R

A N D U M O P I N I O N
B e a L oe sc h s ue d K a tin

Cor p. fo r ne g lig e nc e in a pr e mis e s lia bil ity c la im. Katin

did not answe r, and a def

ault judgme nt was ente red a war ding L oesch $100,000 in damag es. Katin filed a motion for new

trial, which the trial court de nied. Katin appe als, contendingthat the cour t abused its dis c re tio n in

de nyingKatin ’s mot ion

fo r n e w tri a l. We a ff

ir m th e de fa

ult jud g me nt.
F AC TS L oesch br oug ht a premises liability claim ag ainst Katin for persona l injurie s arising fr om h e r e mpl oy

me nt a t a re sta ur ant a lle g e dly

ow ne d by Katin
. She c la ime d tha t, w hil e in t he c ours e
and sc op e of he r e mpl oy

me nt, sh e inj ur e d h e r k

ne e , r e qu ir ingkn e e surg e ry . Sh e a lso c la ime d th a t, other than he r initial appointment, Katin di d not pay for her m edica l treatment and terminate d her
e mpl oy me nt be c a

us e sh e c ou ld no lon g e r wo rk a s a wa itr e ss. L oe sc h a lle g e d th a t th e wr on g fu l a c ts and omissions of Katin and its ag ents cause d her to suf fer lost wa g es, impaired ear ning c apac ity , and2

past and futur e phy sical pain a nd suffe ring , mental an guish, reasona ble and ne cessa

ry medical
e xpe ns e s, ph y sic a l im

pa ir me nt, and ph y sic a l di sf

igur e me nt. She so ug ht a c tua l da ma g e s, int e re st,
c os ts o f c ourt , a

nd me nta l anguis h d a ma g e s. L oesch a ttempted to serve c itation on Katin’s re g istered a g ent, Martin P. Adler, thre e tim e s in thr e e dif fe re nt wa y s. F ir st, on

Marc h 2 3, 20 04 , L oe sc h atte mpt e d s e rv ic e by c e rt if ie d ma il; on April 17, 2004, this certified ma il was retur ned and ma

rked “REFUSED,” and the proce ss server state d in his sw or n a ff ida vit that he be lie ve d K a tin

wa s atte mpt ingto e va de se rv ic e . N e xt, on Ap ri l 23 , 2 00 4, L oe sc h atte mpt ed to effect pe rs on a l se rv ic e , u sin g a dif fe re nt p ro c e ss s e rv e r. I n h is aff idavit, the second proce ss se rver stated that he left a business car d afte r beingtold Adler wa s not in. When Adler failed to respond, the proce ss serve r attempted service ag ain on May 21, 2004, when he wa s to ld t

hat A dle r wa s in b ut “ wo uld no t c ome ou t to a c c e pt t

he pr oc e ss t

hat [he ] wa s tr

y ingto deliver.” He a

verr ed that he be lieved Adler was avoiding se rvice of proc ess. F ina lly , o n Se pte mbe r 1 5, L oe sc h se rv e d Katin thr ou g h the Te xas S e c re tary of State pursuant to ar

ticle 2.11 of the Te x as B usiness Corporation Act. See Te x. B us . Co rp . A c t A nn . a rt
. 2.11, § B ( West S upp. 2006). Under article 2.11, if a c orporation’s reg istered a g ent ca nnot be found with rea sonable dilig ence , then an individual attempting s er v i ce on the corpor ation may serve citation with the Secr etar y of State. Id. Up on

re c e ipt of se rv ic e , th e Se c re tary

of State fo rw ard s a copy o f t he citation by

reg istered mail, addr essed to the c orporation at its reg istered of fice , to be returne d within thirty

day s. Id. To show that a c ourt may proper l y ex er ci s e jurisdiction over a de fe nd ant w ho has been s e rv e d thro ug h th e Se c re tary of State , p la int if

f m ay pr od uc e a c e rt if ic a te issued by the Secr etar

y stating that copies of the c itation and petition were forwa rded to the3

defe ndant. See W

hitney v. L &L Realty Corp. , 5 00 S.W. 2d 94 , 9 6 (T e x. 19 73 ). I n a c c or da nc e wi th his s t at u tory

duty , the Secr etar

y of State issued a c ertifica te stating that a copy

of the c itation and petition were forwa

rded to Adle r on September 20, 2004. The c ertificate states that on September 28, 2004, the proc ess was r eturne d to the Secre tary of State “be aringthe notation Refused.” After Katin failed to answe r, a default judg ment was e ntere d ag ainst it. Twenty -eig ht day s later, Ka

tin filed a motion for newtrial asser ting that its failure to answer was the r esult of
acc ident and mistake, attaching Adler’ s aff idavit, which disavowe d knowledg e of ref usal of ser vice:
I t i s not my

custom, prac tice, or intent to avoid ser vice of proce ss on behalf of

the c or po ratio ns fo r w hic h I

a m th e reg is tere d a g e nt. I t w a s n ot my int e nti on to a vo id service of proc ess in the above entitled and number ed ca use. . . . Idid no t re c e ive [the se c on d pro c e ss se rv e r’ s] busi ne ss ca rd
. . . . Ha d I

re c e ive d [hi s] business car d Iwould have c ontacted him as I have done on many occa sions in the past to arr ang e to re ceive the citation. Whil e I have no pe rsonnel [si c] know ledg e as to w ho may have ma de [the statement that I would not acc ept s ervic e], I can state without reser vation that Idid not direct or authorize anyone to tell [t he proc ess serve r] that I would not c ome out to a cce pt service of proc ess. I

was not told on May

21, 2004 that [t he proc ess serve r] was at my office attempting se rvice o f p ro ce s s. But, it is possibl e that I was e ither in a meeting or on the tele phone and ha d instructed by staff not to disturb or interr upt me. My office . . . is located in a b u i l d i ng which I share with an I HOP fra nchisee restaur ant. I n the past, we have had problems with cer tified mail being acc epted a nd signe d for by

restaur ant employ ees a

nd then misplaced or

mishandled and not being passed on to the pr oper r ecipient. As a result, it ha s become nece ssary to instruct the restaur ant cashie rs and wait staff not to acc ept cer tified mail on behalf of

Katin Corp. When we re ce i v e noti ce that there is ce rtified mail for K atin Corp. or the other corpor ations for which I am the reg istered ag ent, I g o to our Post Office to sig n for and re tr ie ve our ce rt if

ie d mai l. I did no t con sc iou sly dis re g ard or int e nti on a lly

re fu se rec eipt o f certified mail fr om a proc ess serve r of the T exas Secreta ry of State. I f I had re ceive d notice that there was cer tified mail f

or Katin Corp. at the time service wa s b e inga tte mpt e d b y

c e rt if ie d mail in thi s c a se , I

wo uld have se nt s ome on e to retrie ve the mail fr om the Post Office. . . .Katin does not ar gu e t h at t h e cit ation was de fec tive in any way , and the r ecor d 1 demonstrates that L oesch stric tly complied with the statutes g overningservice of proc ess. See T e x. R. Civ. P . 16 (re quiring proce ssor to endorse citation, descr ibe manner of ser vice, and g ive time and place serve d), 99 (requireme nts of citation), 105 (per son rec eiving proce ss require d to endorse a nd g ive time of rec eipt), 106(a) (2) (allowing service by reg istered or cer tified mail), 1 0 7 (go verning re tur n o f s e rv ic e ); G.F.S. Venture s , In c . v . H

arris , 9 34 S.W. 2d

81 3, 81 6 ( Te x. Ap p. —H ou sto n [1s t Dist.] 1996, no writ) (stric t compliance w ith rules must appear on fac e of r ecor d). 4 Th e tr ia l c ourt

de nie d K a tin ’s mot ion

fo r n e w tri a l, a

nd Katin fi le d it s n oti c e of

a pp e a l.
DI SCU SSIO N On appe al, Katin arg ues t hat t he trial court erre d in denying its motion for new trial
and that th e de fault ju dgmen t ord e r s ho uld be re ve rs e d. I n s up po rt of thi s a sse rt ion , it

c ite s to Craddock v. Sunshine Bus Lines, Inc. , 133 S.W .2d 124 (Tex. 1939). Under Craddock , a n a pp e llate
c ourt mus t se t a sid e a

de fa ult jud g me nt wh e n th e de fa ult ingpa rt y : ( 1) e sta

bli sh e s th a t th e fa ilure to
answ er was not intentional or as a result of c onscious indiffer ence , but was due to a mistake or
acc ident; (2) sets out a meritorious defe nse t o the pl aintiff’s claims; and (3) demonstrates that setting aside the de fault would not ca use dela y or otherw ise injure the plaintiff. Id . at 126. Specifica lly , Katin asser ts that any

ref usal of ser

vi ce was inadve rtent and not intentional or the re sult of conscious indifferen ce. I n addition, Katin asser ts that it had no actual kn ow le dg e of

the lit ig a tio n b e fo re the e ntr y of the de fa ult ju dgmen t, and, th e re fo re , it s f a ilure to
answe r wa s not intentional nor the result of conscious indiffe renc e. See id. at 126. Katin fur ther 1 claims that it has a meritorious defe nse because it neither employ ed L oesch nor owned or controlled the pre mises where she wa s injured. See id. F ina lly , K a tin a sse rts th at, bec a

us e it o ff e re d to reimburse L oesch’ s costs of obtaining a defa ult judgment, she w ould suffer no delay or pre judice by5

the cour t’s g ranting the motion f

or new trial. See id. Acc ording ly , Katin asser ts that it has satisfied the eleme nts of the Craddock test and is entitled to a new tr ial. We review a t ri al co u rt’s dec ision reg ardinga motion for new trial for a n abuse of discretion. Se e Strac k

be in v . P re witt , 6 7 1 S
. W .2d 37, 38 (Tex. 1984). The test for an abuse of discretion is not whether we believe the fac ts pr esent an appropr iate case for the tr i al co u rt’s decision, but r ather whether the trial court’ s ruling w as ar bitrary or unre asonable
. Cire v. Cummings , 13 4 S. W.3 d 8 35 , 8 38 -3 9 (T e x. 20 04 ). Ho we ve r, tr ia l c ourt s d o n ot h a ve “ un br idl e d d isc re tio n to decide case s as they

might dee m proper, w ithout refer ence to an y gu i d i ng rule or pr inciple.” Craddock , 133 S.W .2d at 126.

The supre me cour

t rec ently held that a de fault j udg ment ag ainst a par ty that never
rec eives c itation is t rea

ted diffe rently than a judgme nt enter ed aga inst a par ty that rec eives c itation but fails to appea

r. Fidelity & Guar. Ins. Co. v. Drewery Constr. Co. , 1 8 6 S. W. 3 d 5 7 1 , 5 7 4 ( T e x. 20 06 ). I f t

he pa rt y ne ve r r e c e ive s c itatio n, the de fa ult jud g me nt m

us t g e ne ra lly

be se t a sid e un le ss the nonrec eipt is unc orrobor ated or was the par ty ’s own fa

ult. Id. When the party

does not appe ar afte r re ceivingcitation, the def ault judgme nt should be set aside only if the def endant satisfies the three Craddock

elements. Id. at 574. Katin denies that the citation and petition wer e eve r receive d and arg ues t hat it never had ac tual knowledg e of the l aw s u i t u n t i l after the def ault judgme nt was ente red. A fter two
un su c c e ssf

ul atte mpt s to se rv e c itatio n, L oe sc h ser ve d Ka tin wi th ci ta tio n pur su ant to the B us ine ss Corporation Ac t. See Tex. Bus. Corp. Act An n . ar t
. 2 .11. Under the Act, if a

corpor ation’s reg istered a g ent ca

nnot “with rea sonable dilig ence be fo u n d at the re g istered of fice , then the6

Secre tary of State sh al l b e an ag ent of such c orporation upon whom any such proc ess, notice, or demand may

be ser ved.” Id
. art
. 2. 11 , § B
. On c e pr oc e ss i s se rv e d o n th e Se c re tary of State , h e is statutorily require d to immediately

forwa rd the documents by reg istered mail to the corporation at its reg istered of

fice
. Id
. “ Whe n sub sti tut e d ser vic e on a statut or y a g e nt i s a llo we d, the de sig ne e is not a n ag ent for se rving but for re c e iv ing pr oc ess o n th e de fe nd an t’ s b e ha lf .” Campus Invs., Inc . v. Cullever , 144 S.W .3d 464, 466 (Tex. 2004) (empha sis added). A cer tificate from the S ecr etar

y of State “ conclusive ly establishes that proc ess was s er v ed,” that there ha s been pr oper c itation and service
. Id
. Katin does not attac k the Secr etar y ’s ce rtificate or ar g ue that the Sec reta ry failed in a

ny of his statutory duties reg arding the handling of L oesch’ s petition upon r ece ipt, see Tex. Bus. Corp. Act Ann. a

rt. 2.1 1 , § § B, C , nor does Katin arg ue that L oesch f ailed to use re asonable diligenc e befor e turning to substit uted servic e throug h the Secr etar y of State. See Ingram Indus., Inc . v. U.S. Bolt Mfg., Inc. , 121 S.W .3d 31, 34-35 (Te x . App.—Houston [1st Dist.] 2003, no pet.).

Katin was serve d with citation. See Te x. B us . Co rp . A c t A nn . a rt . 2 .1 1, § B ; Campus In v s. , 144 S.W .3d at 466, BLS Limousine Serv., I nc. v. B uslease, Inc

. , 6 8 0 S. W. 2 d 5 4 3 , 5 4 6 ( T e x. App.—Dallas 1984, w rit n.r.e.) (“[a]lthough the citations wer e returne d to the Secre tary bear ing the notation ‘ref

used,’ a ppellants wer e served in ac corda nce w ith the require ments” of a rticle 2.11’s p re d ec es sor). The ref

ore, the defa

ult judgment will stand unless Katin ca n satisfy the Cra ddock require ments. See Craddock , 1 33 S.W. 2d a t 12 6; se e als o F

ide lit y& Gu ar . I

ns . , 186 S.W .3d at 574- 7 5 (ap p l y i n g Craddock

wher e re g istered a g ent re ceive d citation but failed to for war d it to party). Katin asse rt s t h at i t did not own the restaur ant at which L oesch w orked, the reby descr ibing a

meritorious defe nse, and it has offer ed to pay L oesch’ s expenses, thus setting aside the7

judgme nt arguably

would not harm L oesch othe r than de laying he r possible rec overy . See Craddock , 133 S.W .2d at 126. Thus, the only question is w hether Katin showed that its failure to answe r wa s not intentional or the result of c onscious indiffer ence , but rather due to mistake or ac cident. Se e id
.

Katin pr e se nte d A dle r’ s a ff

ida vit a s it s e vid e nce of

a c c ide nt o r m ist a ke . In h is aff idavit, Adler states that Katin had in the past had trouble re ceivingmail due to confusion at the
near by restaur ant, g oing so f

ar a s to instruct employ ees “ not to acce pt cer ti fi ed mail” f

or Katin. Despite that history , Katin continued to use that office for its reg istered a g ent, who has a statutory du ty to a c c e pt s e rv ic e of

pr oc e ss, and

Ad le r d oe s n ot d e sc ri be a re lia ble pr oc e ss t

hat w a s p ut i nto p l ac e t o en s u re t h at h e w o u l d re ce i v e n o t i ce o f d el i v ery at t em p t s . He av er s t h at h e h adn o kn o wl ed ge of any ref usal, but admits that he mi gh t have told his staff not to disturb him, and he does not ave r that he investig ated a

nd lear ned that no one in his off

ice r efuse d any

mail or said that he “ would not
c ome ou t t o ac c e pt t

he pr oc e ss. ” I n o the r w or ds , b e y on d s ta tin g that he did no t pe rs on a lly

te ll any one to re fuse se rvice and that he did not know of t h e at tempts to serve Katin, Adler does not explain why

cer tified mail addre ssed to Katin and co n t ai n i n g the citation was twic e re turned a s “Refuse d” or w hy

one proc ess serve r wa s told that Adler would not acc ept servic e. Taking as true e very

fac t se t out in A dler’s aff

idavit, K atin still has not neg ated intent
or consc ious indiffere nce. Se e Ol d Repu bl ic Ins. Co . v . S

c ott , 873 S.W .2d 381, 382 (Tex. 1994). A re g istered a g ent is require d to “ac cept service of proce ss and otherwise per form the f unctions of
a re g istered a g ent” dur ing nor mal business hours. Tex. Bus. Corp. Act Ann. ar t. 2.09(2) (West Supp. 20 05 ). De sp ite Ad le r’ s d isa vo wa l of any kn ow le dg e of re fu sa l, the Se c re tary of State ’s c e rt if

ic a te and an a ffidavit by

one of the first two proce ss se rver s state that cer tified mail to Katin was re turned8

“re fused,” and the ot h er process se rver aver red that Adler see med to be “a voiding” service . An of fi c e r’ s r e c itatio ns in a

re tur n o f s e rv ic e are g ive n g re a t w e ight as pro of of se rv ic e and

“ c arr y so much weig ht that t h ey ca n n o t be re butted by the uncor

roborated proof” of the de faulting party
. P r i ma te Constr., Inc. v. Silve r , 8 84 S.W. 2d 15 1, 15 2 ( Te x. 19 94 ); s e e G

. F

. S

. V e n tu r es, Inc. v

. Ha rri s , 934 S.W .2d 813, 816 (Tex. App.—Houston [1s t Dist.] 1996, no writ). Katin has not cited and we have not f

ound an y ca s es wh er e a de fault judg ment was set a side afte r ser vice ha s been

“ re fu se d. ” Un de r t

he se fa c ts, Katin

ha s n ot s ho wn

that it s f a ilure to a c c e pt ser vi ce wa s d ue to mistake and not intent or consc ious indiffere nce, and we cannot conclude that the trial court’ s abused its discretion in denying K atin’s motion for new tr ial. We overrule Katin’s sole issue on a ppeal.
CO NC LU SION Ha vin g ov e rr

ule d K a tin ’s so le iss ue on a pp e a l, we a ff

ir m the tr ia l c ourt ’s jud g me nt.

__________________________________________ David Pury ear , J ustice Be fore : J ustices B . A. Smith, P ury ear and Pember

ton Affir med Filed: August 24, 2006