Court Opinion

ID: 2917091
Source: CourtListenerOpinion
Date Created: 2015-09-10 21:18:26.298476+00
Date Added: 2024-06-11T12:46:12.875082
License: Public Domain

WiiE SUPREME COURT OF TEXAS
                                              Wv
                       Post Office Box 12248
                       Austin, Texas 78711
                                                                                 (512) 463-1312

                                                                                        -*«#*
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                                        February 24, 2006                                         "<<&*.
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Mr. Shawn Malcolm McCaskill                          Mr. Douglas J. McCarver
Godwin Gruber, LLP                                   3548 N.E. Stallings Drive
1201 Elm Street, Suite 1700                          Nacogdoches, TX 75965
Dallas, TX 75270

RE:     Case Number: 05-0295
        Court of Appeals Number: 12-04-00084-CV
        Trial Court Number: CI9,776-2003

Style: FIDELITY AND GUARANTY INSURANCE COMPANY
        v.

        DREWERY CONSTRUCTION COMPANY, INC.

Dear Counsel:

        Pursuant to Texas Rule of Appellate Procedure 59.1, after granting the petition for review
and without hearing oral argument, the Court delivered the enclosed per curiam opinion and
judgment in the above-referenced cause.

                                                     Sincerely,

                                                     Andrew Weber, Clerk

                                                     by Claudia Jenks, Chief Deputy Clerk
Enclosures
cc:   Ms. Cathy S. Lusk
      Ms. Donna Phillips
4

                                 fo-CH-tOOSH-^
                    IN THE SUPREME COURT OF TEXAS UflT,

                                                 No. 05-0295                           MAR ,

                                                            CATH%E?.LUs«,
                        FIDELITY AND GUARANTY INSURANCE COMPANY,      TEXAS
                                                                          Cl^k ' ^
                                                PETITIONER,

                                                       v.

                            Drewery Construction Company, Inc.,
                                               respondent

                                 On Petition for Review from the
                        Court of Appeals for the Twelfth District of Texas

                                               PER CURIAM

           In this suit on a surety bond, DreweryConstructionCompany,Inc., a subcontractor,obtained

    a default judgment for $158,131.05 plus interest and attorney's fees against Fidelity and Guaranty

    Insurance Company, surety for the general contractor, JenCra, Inc. Fidelity filed a motion for new

    trial explaining that the service papers had been lost. The trial court denied the motion, and the court

    of appeals affirmed.      S.W.3d       . Fidelity asserts three grounds for reversal, the last of which

    is well-taken. Accordingly, we reverse.

           First, Fidelity complains of a minoromission in the citation. Rule99 requires (among other

    things) that citation be directed to the defendant and show the names of parties. TEX. R. Civ. P.

    99(b)(7)-(8). Citation herewascorrectly addressed to"Fidelity andGuaranty Ins. Co."butthe style
                                                                                                         t   y

ofthe case listed only "JenCra, Inc. & Fidelity and" due to space constraints, omitting the remainder

of Fidelity's title.

        The parties cite and rely on cases concerning restricted appeals (or before 1997, writs of

error). But this appeal is from a motion for new trial. A brief review of the differences in these

procedures shows why cases concerning one do not necessarily apply to the other.

        A restricted appeal is filed directly in an appellate court. See TEX. R. APP. P. 30. As in any

other appeal, the appellate court does not take testimony or receive evidence. Instead, the review is

limited to errors apparent on the face ofthe record. See Alexander v. Lynda's Boutique, 134S.W.3d

845, 848 (Tex. 2004). In such appeals, "[fjhere are no presumptions in favor of valid issuance,

service, and return of citation." Primate Const., Inc. v. Silver, 884 S.W.2d 151, 152 (Tex.

1994)(citations omitted). Circumstancesrequire this last rule, because presumptions can neitherbe

confirmed nor rebutted by evidencein an appellate court. Thus, for example, if the citation saysan

amended petition was attached (which named the defaulted party) and the return saysthe original

petition was served (which did not), an appellate court cannot tell from the record which is true. Id.

Similarly, ifthe petition says the registered agent for service is "Henry Bunting, Jr." but the citation

and return reflect service on "Henry Bunting," an appellate court cannot tell whether those persons

are different or the same. See Uvalde Country Club v. Martin LinenSupplyCo., Inc., 690 S.W.2d
884, 885 (Tex. 1985).

        By contrast, when a default judgment is attacked by motion for new trial or bill ofreview in

the trial court,the record is not so limited. In those proceedings,the parties may introduceaffidavits,

depositions, testimony, and exhibits to explain what happened. See Goldv. Gold, 145 S.W.3d212,
V

    214 (Tex. 2004) (per curiam). That being the case, these procedures focus on what has always been

    and always should be the critical question in any default judgment: "Why did the defendant not

    appear?"

             If the answer to this critical question is "Because I didn't get the suit papers," the default

    generally must besetaside.' See Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80,84 (1988) ("Failure

    to give notice violates the most rudimentary demands of due process of law."); Caldwell v. Barnes,

    154 S.W.3d 93,96-97 (Tex. 2004). Exceptions to this rule exist when nonreceipt is uncorroborated,

    see Primate Constr., 884 S.W.2d at 152, or was a bill-of-review claimant's own fault, see Campus

    Invs., Inc. v. Cullever, 144 S.W.3d 464, 466 (Tex. 2004).

             But if the answer to the critical question is "I got the suit papers but then ...," the default

    judgment should be set aside only ifthe defendant proves the three familiar Craddockelements. See

    Craddock v. Sunshine Bus Lines, 133 S.W.2d 124,126 (Tex. 1939) (requiring new trial if defendant

    shows (1) default was neither intentional nor conscious indifference, (2) meritorious defense, and

    (3) new trial would cause neither delay nor undue prejudice).

             In this case, undisputed evidence presented on the motion for new trial showed that Fidelity's

    registered agent received the suit papers. Thus, the only relevance of the partial omission of

    Fidelity's name is its possible role in the Craddock analysis. While errors in suit papers might

    mislead a defendant into failing to answer, Fidelity makes no such assertion here. Because Fidelity's

    failure to answer had nothing to do with this omission, it provides no ground for setting aside the

             1Receiving suit papers or actual notice through a procedure not authorized for service is the treated the same
    as never receiving them. See Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990).
                                                                                                                  (   t

default judgment by motion for new trial.

        Second, Fidelity argues that the default should be set aside because it was served with

Drewery's original petition, which was later amended before the default judgment. But the only

difference in the two petitions was an amendment to allow long-arm service on JenCra by serving

the Secretary of State. See generally TEX. Civ. Prac. & REM. CODE, Chapter 17. Service of an

amended petition on a party that has not appeared is necessary only when a plaintiff "seeks a more

onerous judgment than prayed for in the original pleading." Weaver v. HartfordAccident&Indem.

Co., 570 S.W.2d 367, 370 (Tex. 1978). That was not the case here.

        Fidelity's last argument finds better traction. Of the three Craddock elements needed to set

aside a default, Drewery argues, and the court of appeals held, that Fidelity failed to establish only

the first — whether the default was the result of accident or mistake.2

        Fidelity attached four affidavits to its motion for new trial that establish the following facts.

Fidelity's registered agent for service, Corporation Service Company (CSC), received Drewery's

petition and citation. Though in the ordinary course of business CSC would forward an electronic

scan of the documents to a Fidelity affiliate, computer records show this never occurred. As a

backup, in the ordinary course of business CSC would forward the service documents themselves

to the same affiliate, where they were compared with the electronic copy and then discarded after

90 days. As 90 days had passed before Fidelity learned ofthe default, all the records received during

that time had been discarded. Thus, neither CSC nor Fidelity could verify whether Drewery's suit

        2Fidelity asserted as a meritorious defense that Drewery did notfilea timelyclaimonthe suretybondandcould
not produce written change orders. Fidelity asserted and Drewerydid not deny that a new trial would not cause delay
or undue prejudice. See Mathis v. Lockwood, 166 S.W.3d 743, 744 (Tex. 2005) (per curiam).
papers were actually forwarded by CSC to Fidelity. CSC averred that an employee of Fidelity's

affiliate "acknowledged receipt of the Petition," but the Fidelity agent who should have received

them averred that she never did.

       The court of appeals refused relief on the ground that Fidelity's affidavits did not explain

what happened to the service documents:

       [TJhere is no affidavit from a person who actually handled the citation explaining
       how the citation was lost or where in the chain of communication a breakdown
       occurred that led to Fidelity's failure to answer the citation. In this case, none ofthe
       affidavits Fidelity submitted explain what happened to the citation. Each affidavit
       stated that Fidelity's failure to answer was not intentional. However, a trial court
       cannot vacate a default judgment based only upon general allegations or conclusions.

    S.W.3d at      (citations omitted).

       We disagree that Fidelity's four affidavits were general or conclusory. To the contrary, they

detail the procedures for handling service papers in general and what is known about Drewery's

papers in particular. In the case of the electronic records, they explain precisely where the

breakdown occurred — at data entry by CSC.

       We also disagree that to establish that papers were lost there must be an affidavit from the

person who lost them describing how it occurred. People often do not know where or how they lost

something — that is precisely why it remains "lost." This Court has often set aside default

judgments when papers were misplaced, though no one knew precisely how. See OldRepublic Ins.

Co. v. Scott, 873 S.W.2d 381,3 82 (Tex. 1994) (reversing default when investigator averred that she

believed suit papers were inadvertently included among files transferred to another adjustment

company); Estate ofPollackv. McMurrey, 858S.W.2d 388,391 (Tex.1993) (reversing defaultwhen
unidentified person signed for papers and never delivered them to executrix); Hanks v. Rosser, 378
S.W.2d 31, 32, 36 (Tex. 1964) (reversing default when druggist testified he placed suit papers "on

his prescription counter," that he "just lost them" and "never did find them").

           We agree that a conclusory statement that documents were "lost" must generally be supported

by some explanation from the person most likely to have seen them, or of the efforts made to find

them.3     But the Craddock standard is one of intentional or conscious indifference — that the

defendant knew it was sued but did not care. An excuse need not be a good one to suffice. See

Craddock, 133 S.W.2d at 125.

           The affidavits here show neither intent nor indifference. Instead, they detail Fidelity's efforts

to establish a system that would avoid precisely what happened. As Drewery did not controvert this

proof, the trial court was not at liberty to disregard it. See Dir., State Employees Workers' Comp.

Div. v. Evans, 889 S.W.2d 266, 269 (Tex. 1994).

           Accordingly, without hearing oral argument, we reverse the court of appeals' judgment and

remand the case to the trial court for further proceedings consistent with this opinion. TEX. R. App.

P. 59.1.

OPINION DELIVERED: February 24, 2006

         3Compare Freeman v. Pevehouse, 79 S.W.3d 637, 645 (Tex. App.-Waco 2002, no pet.) (affirming defaultin
absence of affidavit from any employee at insurer's address to which citation was faxed); BancTEXAS McKinney, N.A.
v. Desalination Sys., Inc., 847 S.W.2d 301, 302-03 (Tex. App.-Dallas 1992, no writ) (affirming default in absence of
affidavit from bank president upon whom citation was served); Motiograph, Inc. v. Matthews, 555 S.W.2d 196, 197
(Tex. Civ. App.-Dallas 1977, writ ref d n.r.e.) (affirming default as affidavit stated only that citation was "inadvertently
misplaced"by unnamed employee); with Gen. LifeandAccident Ins. Co. v. Higginbotham, 817 S.W.2d 830,832 (Tex.
App.-Fort Worth 1991, writ denied) (reversing default as proof showed citation was mistakenly filed rather than
forwarded to proper officials for answer, even though there was no explanation as to when or how misfiling occurred).
               IN THE SUPREME COURT OF TEXAS
                                                                                                        strict

                                              No. 05-0295

           Fidelity and Guaranty Insurance Company, PEfrfflfofeasW CLERK
                                                   v.

              Drewery Construction Company, Inc., Respondents

                            On Petition for Review from the
                   Court of Appeals for the Twelfth District of Texas

                                             JUDGMENT

       THE SUPREME COURT OF TEXAS, having heard this cause on petition for review from
the Court of Appeals for the Twelfth District, and having considered the appellate record and
counsels' briefs, but without hearing oral argument under Texas Rule of Appellate Procedure 59.1,
concludes that the court of appeals' judgment should be reversed.
       IT IS THEREFORE ORDERED, in accordance with the Court's opinion, that:

                                      1)        The court of appeals' judgment is reversed;

                                      2)        The cause is remanded to the trial court for further
                                                proceedings consistent with this Court's opinion; and

                                      3)        Fidelity and Guaranty Insurance Company shall
                                                recover, and Drewery Construction Company, Inc.
                                                shall pay, the costs incurred in this Court.

       Copies of this judgment and the Court's opinion are certified to the Court of Appeals for the
Twelfth District and to the District Court of Nacogdoches County, Texas, for observance.

                           Opinion of the Court delivered Per Curiam

                                           February 24, 2006