Opinion
05-22-00390-CV
01-31-2023
TAKE 5 LLC, Appellant v. RACHEL SMITH AND SABRINA ROGERS, Appellees
On Appeal from the 193rd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-21-01558
Before Justices Carlyle, Garcia, and Rose
The Hon. Jeff L. Rose, Justice, Assigned.
MEMORANDUM OPINION
CORY L. CARLYLE JUSTICE
In this personal injury action filed by appellees Rachel Smith and Sabrina Rogers, the trial court entered a no-answer default judgment against appellant Take 5 LLC and denied its motion to set aside the default judgment and grant a new trial. Take 5 LLC contends the trial court erred because the affidavits of service and evidence presented were insufficient to support the default judgment and, alternatively, Take 5 LLC satisfied the Craddock requirements for a new trial. See Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (Tex. 1939). We reverse and remand in this memorandum opinion. See Tex. R. App. P. 47.4.
Background
In their February 3, 2021 original petition, appellees asserted negligence and negligence per se claims against "TAKE 5 LLC, a North Carolina limited liability company d/b/a TAKE 5 OIL CHANGE #62." Appellees stated that in 2019, they "obtained an oil change at the Take 5 LLC location at 601 West Centerville Road, Garland, Texas." After they left the oil-change facility, they were traveling on an interstate highway "ascending to speed of approximately 55 mph, when the hood of the vehicle flew open, obstructing the driver's view, causing the driver to run into concrete guardrail." According to appellees, "As a result of [Defendant's] failure to secure the vehicle's hood, both Plaintiff Smith and Plaintiff Rogers sustained physical injuries and Plaintiff Smith sustained substantial property damage to her vehicle."
On March 12, 2021, appellees filed an "Affidavit of Service" stating citation was "executed at 601 W CENTERVILLE RD, GARLAND, TX 75041-5447 within the county of DALLAS at 05:07 PM on Thu, Feb 25, 2021, by delivering a true copy [of the citation and petition] to the within named TAKE 5 OIL CHANGE #62, B/S BRANDON PAYNE, ASSISTANT MANAGER in person."
Appellees filed a second affidavit of service on March 22, 2021. That affidavit stated, among other things, that citation was "served on TAKE 5 LLC, a foreign limites [sic] liability company d/b/a TAKE 5 OIL CHANGE #62, c/o registerd [sic] agent, Corporation Service Company" on February 24, 2021, by serving the petition and citation on "Heather Hughes, Intake Representative for Corpoaration [sic] Service Company, register agent for TAKE 5 LLC, d/b/a TAKE 5 OIL CHANGE #62."
On March 30, 2021, appellees moved for default judgment based on Take 5 LLC's "failure to plead or otherwise respond." Additionally, appellees filed (1) affidavits of Ms. Rogers and Ms. Smith regarding their damages; (2) affidavits of Cecil Paul Smith, M.D., D.C., regarding each appellee's injuries and medical treatment; and (3) affidavits of appellees' healthcare providers' custodians of records regarding their medical expenses.
While appellees' motion for default judgment was pending, they filed a September 24, 2021 amended petition asserting the same claims described above. They also filed an October 13, 2021 affidavit of service stating, among other things, that citation was "to be served on TAKE 5 LLC AGENT, CORPORATION SERVICE SERVED WITH CITATION VIA ITS TEXAS REGISTERED COMPANY D/B/A CSC-LAWYERS INCORPORATING SERVICE COMPANY," and that on October 12, 2021, the affiant delivered "a true copy of the CITATION / PLAINTIFF'S ORIGINAL PETITION / with the date and hour of service endorsed thereon by me, to: Samantha Guerra, CSC-LAWYERS INCORPORATING SERVICE COMPANY as Authorized Agent."
On November 5, 2021, appellees filed an amended motion for default judgment based on Take 5 LLC's continued failure to respond. After a prove-up hearing, the trial court signed a February 2, 2022 default judgment against Take 5 LLC awarding $248,659.97 in damages to Ms. Smith and $99,367.50 in damages to Ms. Rogers.
Take 5 LLC filed a March 3, 2022 motion to set aside the default judgment and grant a new trial. It contended it "was not properly served with citation and a copy of Plaintiffs' live petition" because the affidavits of service, among other defects, (1) "misidentified" the person or entity to be served; (2) did not "affirmatively show" that the person served was "a proper agent for service of process for Defendant"; and (3) in the case of the October 13 affidavit of service, "indicate[d] that an outdated and supplanted pleading was served instead of Plaintiffs' Amended Petition."
Alternatively, Take 5 LLC asserted the trial court should grant its motion for new trial because Craddock's three required elements were satisfied. Specifically, Take 5 LLC contended (1) its failure to appear "was not intentional or the result of conscious indifference, but instead was due to a mistake or accident"; (2) it "has a meritorious defense" because, among other things, "Defendant does not operate the subject Take Oil Change located in Garland, Texas"; and (3) "setting aside the default judgment would not result in delay or otherwise injure Plaintiffs." Take 5 LLC also asserted "[t]here has been no loss of witnesses or other evidence here" and it "is ready to proceed with discovery in this matter" and "pay the reasonable attorney's fees and expenses that Plaintiffs incurred in obtaining the default judgment."
The attachments to Take 5 LLC's motion included affidavits of two attorneys: (1) Cal Everett, vice president and assistant general counsel for Driven Brands Inc., "the parent company of Take 5 LLC"; and (2) Josiah Garton, corporate counsel for Driven Brands Inc. Mr. Everett's affidavit stated:
3. When a new lawsuit is purportedly served on Take 5 LLC, the suit papers, including service of process, are routed to its parent company, Driven Brands Inc. in Charlotte, North Carolina, typically to corporate counsel via email. A separate file is set-up for each new claim, and outside counsel is assigned to defend the interests of Driven Brands Inc., including its subsidiaries, such as Take 5 LLC.
4. The week of February 21-27, 2021 was a particularly busy one for corporate counsel, including a mediation and numerous meetings throughout the week. During that week, corporate counsel received just shy of 700 emails, one of which was from Corporation Service Company d/b/a CSC-Lawyers Incorporating Service Company forwarding a copy of Plaintiffs' Original Petition in this case. In the busyness of the week, counsel overlooked that email and, therefore, did not become aware of this lawsuit. On October 12, 2021, corporate counsel received an email from Corporation Service Company d/b/a CSC Lawyers Incorporating Service Company with a copy of Plaintiffs' Amended Petition in this case. During that week, several personnel changes took place that disrupted the normal workflow within the legal department. In the resulting disorder, counsel overlooked that email and, therefore, did not become aware of this lawsuit. Take 5 LLC did not intentionally ignore or fail to pay attention to this lawsuit.
5. Neither corporate counsel, nor anyone at Take 5 LLC, became aware of this lawsuit until February 15, 2022, when they received an email from a District Manager in Dallas, Texas stating that a default judgment had been entered against one of the Take 5 Oil Change locations in his district.
6. After receiving notice of the default judgment, I promptly contacted Texas attorney Brian Rawson of the law firm Hartline Barger LLP to represent Take 5 LLC in this matter and to prepare a motion to set aside the default judgment and motion for new trial. Any alleged failure to answer was not the result of conscious indifference, because Defendant was not aware that this lawsuit had been filed or that it had an obligation to respond until after the default judgment was entered.
7. Take 5 LLC's failure to file a responsive pleading or otherwise make an appearance in this case was not intentional or the result of conscious indifference, but was purely due to a mistake or accident.
8. Take 5 LLC has meritorious defenses to the claims Plaintiffs assert in this case. Specifically, Take 5 LLC did not own, operate, or conduct business at the property in question located at 601 West Centerville Road, Garland, Texas 75041 on the date of the subject incident, as alleged in . . . Plaintiffs' Amended Petition. Take 5 LLC did not have any agents, officers, principals, vice principals, or employees acting within the course and scope of their agency or other relationship at the premises where the alleged acts and/or omissions giving rise to Plaintiffs' claims are alleged to have occurred at the time when such incident is alleged to have occurred. Therefore, Take 5 LLC is not liable to Plaintiffs in the capacity in which it has been sued, and there is a defect of parties in this case. Essentially, Plaintiffs have sued the wrong party.
9. A new trial will not cause Plaintiffs any delay or injury. This lawsuit is in its early stages. No written discovery has been exchanged, and no depositions have been taken. Take 5 LLC is ready to proceed with discovery in this matter. To Take 5 LLC's knowledge, there has been no loss of witnesses or other evidence.
Mr. Garton's affidavit contained statements similar to paragraphs 3 through 7 of Mr. Everett's affidavit, but differed slightly as follows:
4. The week of February 21-27, 2021 was a particularly busy one for me, including a mediation and numerous meetings throughout the week. During that week, I received just shy of 700 emails, one of which was from Corporation Service Company d/b/a CSC-Lawyers Incorporating Service Company forwarding a copy of Plaintiffs' Original Petition in this case. In the busyness of the week, I overlooked that email and, therefore, did not become aware of this lawsuit. On October 12, 2021, I received an email from Corporation Service
Company d/b/a CSC Lawyers Incorporating Service Company with a copy of Plaintiffs' Amended Petition in this case. During that week, several personnel changes took place that disrupted the normal workflow within the legal department. In the resulting disorder, I overlooked that email and, therefore, did not become aware of this lawsuit. I did not intentionally ignore or fail to pay attention to this lawsuit. It was solely the result of me being overwhelmed with work and emails and this alert was unfortunately missed.
5. Neither I, nor anyone at Take 5 LLC, became aware of this lawsuit until February 15, 2022, when they received an email from a District Manager in Dallas, Texas stating that a default judgment had been entered against one of the Take 5 Oil Change locations in his district.
6. After receiving notice of the default judgment, we promptly contacted Texas attorney Brian Rawson of the law firm Hartline Barger LLP to represent Take 5 LLC in this matter and to a prepare motion to set aside the default judgment and motion for new trial. Any alleged failure to answer was not the result of conscious indifference, but was solely the result of an accident and mistake on my part.
Appellees filed a response to Take 5 LLC's motion, contending service was proper and the Craddock elements were not satisfied. Appellees argued, among other things, (1) Take 5 LLC's failure to file an answer "is the epitome of conscious indifference" because its counsel "received the citation and petition not once, but on two separate occasions" and "had 11 months to remedy an 'overlook,' yet chose not to"; (2) "[n]o facts or evidence was included" to support Take 5 LLC's alleged "defense"; and (3) granting Take 5 LLC's motion will "impact the availability of witnesses and the preservation of evidence" and "cause delay which would be detrimental to Plaintiffs" because Ms. Smith now resides in Ohio and Ms. Rogers now resides in Florida. The attachments to appellees' response consisted of the three affidavits of service and several printed screenshots from the Dallas Central Appraisal District's website showing the current owner of the property located at 601 W. Centerville Road in Garland as Take 5 LLC, 440 S. Church St., Charlotte, North Carolina, "DBA: TAKE 5 OIL CHANGE #62."
Following a hearing, the trial court signed an April 1, 2022 order denying Take 5 LLC's motion to set aside the default judgment and grant a new trial.
Standard of review and applicable law
We review denials of motions to set aside default judgments and motions for new trial for an abuse of discretion. E.g., Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 926 (Tex. 2009) (per curiam); Davis v. West, 433 S.W.3d 101, 108 (Tex. App.-Houston [1st Dist.] 2014, pet. denied). The test for abuse of discretion is whether the trial court acted arbitrarily or without reference to guiding legal principles. Cire v. Cummings, 134 S.W.3d 835, 839 (Tex. 2004).
A defendant can prove its entitlement to a new trial after a no-answer default judgment in either of two ways. MobileVision Imaging Servs., L.L.C. v. LifeCare Hosps. of N. Tex., L.P., 260 S.W.3d 561, 564 (Tex. App.-Dallas 2008, no pet.). Generally, a motion for new trial should be granted where service of process was invalid. Id. (citing Fid. & Guar. Ins. Co. v. Drewery Constr. Co., 186 S.W.3d 571, 574 (Tex. 2006) (per curiam)). Alternatively, a default judgment should be set aside and a new trial granted when the defaulting party establishes the three Craddock elements: (1) the failure to appear was not intentional or the result of conscious indifference, but was the result of an accident or mistake, (2) the motion for new trial sets up a meritorious defense, and (3) granting the motion will occasion no delay or otherwise injure the plaintiff. Id. (citing Craddock, 133 S.W.2d at 126). When a defaulting party moving for new trial meets all three elements of the Craddock test, a trial court abuses its discretion if it fails to grant a new trial. Dolgencorp, 288 S.W.3d at 926; see also Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 86 (Tex. 1992) ("[A]n adjudication on the merits is preferred in Texas.").
A defendant satisfies its burden under the first Craddock element when its factual assertions, if true, negate intentional or consciously indifferent conduct by the defendant and the factual assertions are not controverted by the plaintiff. Milestone Operating, Inc. v. ExxonMobil Corp., 388 S.W.3d 307, 310 (Tex. 2012). "Consciously indifferent conduct occurs when 'the defendant knew it was sued but did not care.'" Sutherland v. Spencer, 376 S.W.3d 752, 755 (Tex. 2012) (quoting Fid. & Guar. Ins., 186 S.W.3d at 576). "[S]ome excuse, although not necessarily a good one, will suffice to show that a defendant's failure to file an answer was not because the defendant did not care." In re Marriage of Sandoval, 619 S.W.3d 716, 721 (Tex. 2021) (per curiam) (quoting Sutherland, 376 S.W.3d at 755). "The failure to respond must arise from more than mere negligence, and the element of conscious indifference can be overcome by a reasonable explanation." Id. (citing Smith v. Babcock & Wilcox Constr. Co., 913 S.W.2d 467, 468 (Tex. 1995) (per curiam)).
We consider the defendant's knowledge and acts to determine whether its burden as to the first Craddock element was satisfied. Id. "[A] failure to respond is not considered to be intentional or due to conscious indifference merely because it is deliberate; it must also be without adequate justification." Id. at 723. "Proof of justification-accident, mistake (including some mistakes of law), or other reasonable explanation-negates intent or conscious indifference." Id. "In other words, the fact that an inference of conscious indifference may be drawn does not foreclose the defendant from positing a reasonable excuse for his actions." Id.
The second Craddock element requires the defendant to "set[] up a meritorious defense." Craddock, 133 S.W.2d at 126. A meritorious defense is one that, if true, would cause a different result on retrial, though it need not be a totally opposite result. L'Arte De La Mode, Inc. v. Neiman Marcus Grp., 395 S.W.3d 291, 296 (Tex. App.-Dallas 2013, no pet.). "Setting up a meritorious defense does not require proof 'in the accepted sense.'" Dolgencorp, 288 S.W.3d at 927-28 (quoting Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex. 1966)). "Rather, the motion sets up a meritorious defense if it alleges facts which in law would constitute a defense to the plaintiff's cause of action and is supported by affidavits or other evidence providing prima facie proof that the defendant has such a defense." Id. at 928. "Once such requirements are met, controverting evidence offered by the nonmovant should not be considered." Id.
The purpose of the third Craddock element is "to protect a plaintiff against the sort of undue delay or injury that would result in a disadvantage when presenting the merits of the case at a new trial, 'such as a loss of witnesses or other valuable evidence.'" Id. at 929 (quoting Dir., State Employees Workers' Comp. Div. v. Evans, 889 S.W.2d 266, 270 (Tex. 1994)). Once a defendant has alleged that granting a new trial will not injure the plaintiff, the burden of proof of injury shifts to the plaintiff. Id.; L'Arte De La Mode, 395 S.W.3d at 297.
Analysis
Take 5 LLC asserts two issues on appeal: (1) the trial court erred by granting appellees' motion for default judgment and denying Take 5 LLC's motion to set aside the default judgment and grant a new trial because "the affidavits of service and evidence presented were insufficient to support the default judgment under Texas law" and (2) alternatively, the trial court erred by denying Take 5 LLC's motion to set aside the default judgment and grant a new trial because Craddock's requirements were satisfied. Because we decide Take 5 LLC's second issue in its favor, we need not address its first issue. See Tex. R. App. P. 47.1; see also Comput. Assocs. Int'l, Inc. v. Wall's Catering & Party Prods., No. 05-01-01633-CV, 2002 WL 1767223, at *2 (Tex. App.-Dallas Aug. 1, 2002, no pet.) (not designated for publication) (noting that complaint of defective service in appeal of denial of motion for new trial need not be addressed because Craddock elements were satisfied).
As to the first Craddock element, Take 5 LLC contends it presented sworn affidavits "establishing that it was not aware of the lawsuit until after the default judgment had been entered" and it "immediately hired counsel to defend the case" when the overlooked email messages were found, thus demonstrating its failure to answer was the result of accident or mistake and not intentional or the result of conscious indifference. Appellees argue (1) the affidavits of Mr. Everett and Mr. Garton "are not only conclusory and vague, but they do not explain why neither corporate counsel did inquire as to the status of the case between the week of February 21-27, 2021, to October 12, 2021, or from October 12, 2021, to the date of the default hearing"; (2) "[a]ttorneys are held to a higher degree of responsibility and duty when it comes to legal issues and deadlines," including "not neglecting legal matters entrusted to them"; and (3) Take 5 LLC's counsel "completely neglected this matter, and their 'oversight' should not be awarded."
As described above, "[t]he failure to respond must arise from more than mere negligence." Sandoval, 619 S.W.3d at 721. Generally, "in cases holding that the acts of attorneys reached the level of conscious indifference, the nonmovant presented evidence that the movant's attorney was aware of the impending default judgment or that the movant's attorney had repeatedly ignored deadlines or communications." Cervantes v. Cervantes, No. 03-07-00381-CV, 2009 WL 3682637, at *8 (Tex. App.-Austin Nov. 5, 2009, no pet.) (mem. op.).
The above-described affidavits stated Take 5 LLC and its corporate counsel "did not intentionally ignore or fail to pay attention to this lawsuit." Corporate counsel "overlooked" two emails from Take 5 LLC's agent and "therefore, did not become aware of this lawsuit." Upon becoming aware, the attorneys promptly contacted outside counsel to proceed with a motion for new trial. The circumstances that resulted in the emails being "overlooked" included corporate counsel "being overwhelmed with work and emails" and "personnel changes" that "disrupted the normal workflow within the legal department" and resulted in "disorder." Nothing in the record demonstrates Take 5 LLC "knew it was sued but did not care." See Sutherland, 376 S.W.3d at 755.
We conclude Take 5 LLC provided a sufficient excuse to satisfy the first Craddock element and established that its failure to answer was neither intentional nor the result of consciously indifferent conduct. See Sandoval, 619 S.W.3d at 721, 723; see also In re A.P.P., 74 S.W.3d 570, 574 (Tex. App.-Corpus Christi-Edinburg 2002, no pet.) (concluding first Craddock element was satisfied where attorney's affidavit stated that after he learned of default judgment against his client, he discovered petition had been timely delivered to his office but was inadvertently placed in wrong file and not brought to his attention); Leonard v. Leonard, 512 S.W.2d 771, 773 (Tex. App.-Corpus Christi-Edinburg 1974, writ dism'd w.o.j.) (concluding failure to answer "was due to mistake or accident" and not conscious indifference where attorney for defendant saw served papers after they were received in his office but then placed them in filing cabinet instead of spot where urgent work was usually placed and became busy with other matters).
As to the second Craddock element, Take 5 LLC provided an affidavit asserting (1) it "did not own, operate, or conduct business at the property in question located at 601 West Centerville Road, Garland, Texas 75041 on the date of the subject incident" or "have any agents, officers, principals, vice principals, or employees acting within the course and scope of their agency or other relationship at the premises"; (2) it is not liable to Plaintiffs in the capacity in which it has been sued; and (3) there is a defect of parties in this case and "Plaintiffs have sued the wrong party." Though appellees contend these statements are "conclusory" and that Take 5 LLC provided no "facts behind the defense," we disagree. The affidavit asserts facts that, if proven true, would cause a different result on retrial. See L'Arte De La Mode, 395 S.W.3d at 296. Further, though appellees contend the purported defense is "factually insufficient" in light of the Dallas Central Appraisal District records they provided, their evidence is irrelevant to our analysis regarding this Craddock element. See Dolgencorp, 288 S.W.3d at 928. We conclude Take 5 LLC met its burden as to the second Craddock element.
With regard to the third Craddock element, Take 5 LLC contends that after it alleged granting the motion for new trial would not cause delay or prejudice, appellees did not meet their burden to prove they would be injured if the default judgment were set aside and a new trial granted. Appellees respond (1) Take 5 LLC "has not proven it is ready, willing, or able to go to trial immediately" and (2) "overruling the trial court's denial of the motion for new trial would cause further injury to the Plaintiffs/Appellees, as they will have to wait several more months and incur litigation costs before they can obtain a judgment and start collection on their judgment."
"[E]vidence of a delay in obtaining compensation for injuries for which a plaintiff is entitled is not the type of injury that this [Craddock] prong speaks to." Hampton-Vaughan Funeral Home v. Briscoe, 327 S.W.3d 743, 749 (Tex. App.-Fort Worth 2010, no pet.) (citing Evans, 889 S.W.2d at 270); see also Dolgencorp, 288 S.W.3d at 929 (explaining that "a 'harm' common to all parties facing a motion for new trial after obtaining a post-answer default judgment" is generally not sufficient to establish injury under Craddock). Additionally, though the "willingness of a party to go to trial immediately" is an "important factor[] for the court to look to in determining whether it should grant a new trial," it is "not dispositive of whether the motion should be granted." Evans, 889 S.W.2d at 270 n.3.
Appellees also asserted in the trial court that because they both currently reside outside of Texas, granting the motion for new trial would "impact the availability of witnesses" and "cause delay." They do not address that assertion on appeal or explain how they would not still have access to their own testimony.
Because Take 5 LLC stated in its motion for new trial that it would pay appellees' reasonable attorney's fees and expenses in obtaining the default judgment and that it was prepared to proceed with the case, the burden then shifted to appellees to prove injury. See L'Arte De La Mode, 395 S.W.3d at 297. We conclude appellees did not prove such harm or injury as would preclude granting the new trial. See id. Thus, Take 5 LLC satisfied the third Craddock element.
Because Take 5 LLC met its burden as to all three Craddock elements, the trial court abused its discretion by denying the motion to set aside the default judgment and grant a new trial. Dolgencorp, 288 S.W.3d at 926. We reverse the trial court's default judgment and remand this case to the trial court for further proceedings consistent with this opinion.
JUDGMENT
In accordance with this Court's opinion of this date, the judgment of the trial court is REVERSED and this cause is REMANDED to the trial court for further proceedings consistent with this opinion.
It is ORDERED that appellant TAKE 5 LLC recover its costs of this appeal from appellees RACHEL SMITH AND SABRINA ROGERS.