Opinion
01-20-00413-CV
09-09-2021
COMPOSITE SOLUTIONS, LLC, Appellant v. COMPOSITE ADVANCED TECHNOLOGIES LLC, Appellee
On Appeal from County Civil Court at Law No. 3 Harris County, Texas Trial Court Case No. 1141688
Panel consists of Justices Goodman, Hightower, and Rivas-Molloy.
MEMORANDUM OPINION
Richard Hightower, Justice
Appellant Composite Solutions, LLC obtained a no-answer default judgment against appellee Composite Advanced Technologies LLC (CAT) on a breach-of-contract claim. In addition to actual damages, the trial court awarded Composite Solutions attorney's fees from CAT. While the trial court still had plenary power, CAT filed a post-judgment answer and motion to modify the judgment, arguing that the award of attorney's fees was improper. The trial court amended the judgment to remove the award of attorney's fees. Composite Solutions now argues in its single appellate issue that the trial court erred in rendering the amended default judgment because CAT failed to satisfy the test set out in Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124 (Tex. 1939) for obtaining a new trial following default judgment. Because we conclude that the Craddock test is not applicable here and that the trial court did not err in amending the default judgment, we affirm.
Background
Composite Solutions alleged that it invoiced CAT for consulting and engineering services it performed at CAT's request. CAT failed to pay those invoices, and, accordingly, on September 18, 2019, Composite Solutions sued CAT for breach of contract. Composite Solutions also sought attorney's fees pursuant to Civil Practice and Remedies Code chapter 38. In its original petition, Composite Solutions alleged that CAT is a limited liability company that does business in the State of Texas.
With its petition, Composite Solutions provided copies of the unpaid invoices, demonstrating unpaid amounts totaling $7, 250. It also provided an affidavit from counsel setting out the amount of attorney's fees incurred in pursuing the unpaid invoices. CAT failed to answer, and on December 13, 2019, Composite Solutions moved for default judgment. Composite Solutions sought damages of $7, 250 and $6, 904.42 in attorney's fees, as established by counsel's affidavit.
On December 31, 2019, the trial court rendered default judgment against CAT, awarding the requested damages and attorney's fees. On January 30, 2020, CAT filed its original answer and a "Motion for a New Trial or Reformation of Judgment." In this motion, CAT argued that "[t]here is error on the face of the [default] judgment granted 12/31/2019" because the trial court "granted attorney's fees against a Defendant LLC" even though Civil Practice and Remedies Code chapter 38 "does not authorize attorney's fees to be awarded against an LLC." CAT asked that the trial court either (1) "vacate the judgment [to] allow [CAT] to file an answer in the matter" or (2) "modify the judgment by removing all awards of attorney's fees through trial and upon appeal."
On February 17, 2020, the trial court rendered its amended default judgment, awarding Composite Solutions $7, 250 in actual damages but omitting the award of attorney's fees. Composite Solutions appealed.
Analysis
Composite Solutions argues that CAT had failed to satisfy the Craddock test and, thus, the trial court erred in setting aside the default judgment and rendering the amended default judgment. Composite Solutions asserts that CAT's default waived its right to challenge the award of attorney's fees and, because CAT failed to satisfy the Craddock factors to obtain a new trial, it could not raise its challenge to the imposition of attorney's fees. These arguments, however, ignore the nature of the proceedings here and of default judgments generally.
A no-answer default judgment is properly granted if (1) the plaintiff files a petition that states a cause of action; (2) the petition invokes the trial court's jurisdiction; (3) the petition gives fair notice to the defendant of the claim asserted; and (4) the petition does not disclose any invalidity of the claim on its face. Pinter v. Asafi Law Firm, No. 01-12-00048-CV, 2012 WL 5458426, at *2 (Tex. App.- Houston [1st Dist.] Nov. 8, 2012, no pet.) (mem. op.); see Paramount Pipe & Supply Co. v. Muhr, 749 S.W.2d 491, 494 (Tex. 1988). The defendant's failure to file an answer operates as an admission of the facts alleged in the plaintiff's petition. See Morgan v. Compugraphic Corp., 675 S.W.2d 729, 731 (Tex. 1984); Pinter, 2012 WL 5458426, at *2 ("In cases where a no-answer default judgment is rendered, all facts properly pleaded in the plaintiff's petition are deemed admitted, except the amount of unliquidated damages, and the defendant's liability for all causes of action pleaded is conclusively established.") (citing Lucas v. Clark, 347 S.W.3d 800, 803 (Tex. App.-Austin 2011, pet. denied), and Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 930 (Tex. 2009)).
If, however, the facts alleged in the plaintiff's petition do not state a cause of action, or if the facts alleged affirmatively disclose the invalidity of its cause of action, then there is error on the face of the record. See Quality Hardwoods, Inc. v. Midwest Hardwood Corp., No. 2-05-311-CV, 2007 WL 1879797, at *2-3 (Tex. App.-Fort Worth June 28, 2007, no pet.) (mem. op.); Davis v. Ross, 678 S.W.2d 636, 637 (Tex. App.-Houston [14th Dist.] 1984, no writ). Furthermore, "'the fact that [a defendant] has defaulted by failing to file an answer cannot create liability' when he is not liable as a matter of law on the facts alleged by the plaintiff." Pinter, 2012 WL 5458426, at *2 (quoting Doubletree Hotels Corp. v. Person, 122 S.W.3d 917, 919 (Tex. App.-Corpus Christi 2003, no pet.)).
In its original petition, Composite Solutions sought attorney's fees against CAT-accurately identified in the petition as a limited liability company-pursuant to Civil Practice and Remedies Code section 38.001. Section 38.001, however, does not authorize the recovery of attorney's fees in a breach-of-contract action against a limited liability company. See Tex. Civ. Prac. & Rem. Code § 38.001; Alta Mesa Holdings, L.P. v. Ives, 488 S.W.3d 438, 455 (Tex. App.-Houston [14th Dist.] 2016, pet. denied). As a matter of law, the facts pled by Composite Solutions did not support the award of attorney's fees against CAT, and CAT's failure to answer cannot create such liability. See Pinter, 2012 WL 5458426, at *2. Thus, the facts pled by Composite Solutions affirmatively disclosed the invalidity of its claim for attorney's fees, and there was error in the original default judgment on the face of the record. See Quality Hardwoods, Inc., 2007 WL 1879797, at *2-3.
The legislature amended Civil Practice and Remedies Code section 38.001 effective September 1, 2021, to permit recovery of attorney's fees from an individual or "organization," as defined by Business Organizations Code section 1.002. See Act of May 28, 2021, 87th Leg., R.S., ch. 665, § 1, 2021 Tex. Sess. Law Serv. (West) (to be codified at Tex. Civ. Prac. & Rem. Code § 38.001). This suit was filed prior to that amendment taking effect, and so we apply the version that was in effect when this action was commenced. See id. § 2 (amendment applies to award of attorney's fees in action commenced on or after effective date of September 1, 2021).
CAT pointed out this error in its post-judgment motion, and, because the trial court retained plenary power over the case when the post-judgment motion was filed, the trial court acted within its authority to correct the error. "The trial court, regardless of whether an appeal has been perfected, has plenary power to grant a new trial or to vacate, modify, correct, or reform the judgment within thirty days after the judgment is signed." Tex.R.Civ.P. 329b(d). If an appropriate post-judgment motion is filed within that thirty-day period, the trial court's plenary power is extended for up to an additional seventy-five days. See Tex. R. Civ. P. 329b(e) ("If a motion for new trial is timely filed by any party, the trial court, regardless of whether an appeal has been perfected, has plenary power to grant a new trial or to vacate, modify, correct, or reform the judgment until thirty days after all such timely-filed motions are overruled, either by a written and signed order or by operation of law, whichever occurs first."); Lane Bank Equip. Co. v. Smith S. Equip., Inc., 10 S.W.3d 308, 310 (Tex. 2000); Propel Fin. Servs., LLC v. Conquer Land Utilities, LLC, 579 S.W.3d 485, 491 (Tex. App.-Corpus Christi-Edinburg 2019, pet. denied).
The trial court rendered its original default judgment on December 31, 2019, and CAT timely filed its Motion for a New Trial or Reformation of Judgment on January 30, 2020. See Tex. R. Civ. P. 329b(a). Thus, the trial court's plenary power was extended until CAT's motion was overruled by written and signed order or by operation of law. See id. R. 329b(e). When the trial court rendered its amended default judgment on February 17, 2020, it acted within its "plenary power to grant a new trial or to vacate, modify, correct, or reform the judgment." See id.
Composite Solutions argues that the trial court's rendition of the amended default judgment was improper because CAT failed to satisfy the Craddock test. Generally, before a default judgment can be set aside and a new trial granted, the defaulting party must satisfy the three elements of the Craddock test, i.e., (1) the defaulting party's failure to answer or to appear was not intentional, or the result of conscious indifference, but was due to a mistake or an accident; (2) the defaulting party has a meritorious defense or claim; and (3) the motion is filed at a time when the granting of a new trial will not occasion delay or work other injury to the prevailing party. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 82 (Tex. 1992); Craddock, 133 S.W.2d at 126. The Craddock test thus applies when a defendant who had previously defaulted is seeking a new trial. See Heine, 835 S.W.2d at 82 ("A trial court's discretion in determining whether to grant a new trial after the court renders a default judgment must be referenced to the guiding rule set out in Craddock[.]") (emphasis added).
Here, no motion for new trial was granted. The trial court instead acted within its authority to correct an error in its original default judgment. See, e.g., In re Provine, 312 S.W.3d 824, 829 (Tex. App.-Houston [1st Dist.] 2009, orig. proceeding) ("A trial court's power to modify its judgment is virtually absolute during the period of its plenary power."); Horseshoe Bay Resort Sales Co. v. Lake Lyndon B. Johnson Imp. Corp., 53 S.W.3d 799, 815 (Tex. App.-Austin 2001, pet. denied) (holding that "the court has authority sua sponte to modify the judgment within the duration of its plenary power"). While it retained plenary power, the trial court had the authority to modify the default judgment, with or without ruling on the motion for new trial. See Tunad Enters., Inc. v. Palma, No. 05-17-00208-CV, 2018 WL 3134891, at *3 (Tex. App.-Dallas June 27, 2018, no pet.) (mem. op.); see also Tex. R. Civ. P. 320 (providing that trial court has authority to set aside judgment while it retains plenary power); San Sebastian Realty Co., Inc. v. Huerta, No. 14-14-00819-CV, 2015 WL 9311805, at *5 (Tex. App.-Houston [14th Dist.] Dec. 22, 2015, pet. denied) (mem. op.) (concluding trial court had authority to modify judgment sua sponte within duration of its plenary power). Under the circumstances of this case, the trial court need not have considered the Craddock factors before rendering its amended default judgment.
Composite Solutions further argues that CAT cites no authority to support its contention that a trial court can modify a default judgment. At least one sister court, however, has expressly held that a trial court may modify a default judgment. See Tunad Enters., Inc., 2018 WL 3134891, at *3 ("While it retained plenary power, the trial court had the authority to modify the default judgment, with or without a motion for new trial."). Furthermore, Rule 329b does not identify any exceptions to a trial court's power to grant a new trial or to vacate, modify, correct, or reform a judgment. See Tex. R. Civ. P. 329b(d), (e). Composite Solutions cites no authority to support its contention that the trial court's broad authority to modify its judgments is limited in the context of default judgments, nor could we find any. See In re Provine, 312 S.W.3d at 829 ("A trial court's power to modify its judgment is virtually absolute during the period of its plenary power."); In re I.L., 580 S.W.3d 227, 244 (Tex. App.-San Antonio 2019, pet. dism'd) ("[D]uring the trial court's period of plenary power, the court always has the authority to change or modify the final order or judgment in the case.").
We overrule Composite Solutions sole issue.
Conclusion
We affirm the judgment of the trial court.