Opinion
NO. 14-15-00356-CV
07-19-2016
ANN VO, ALI REZA YAZDANI, AND BLUE BALLROOM, LLC, Appellants v. FRANKLIN BUSINESS, INC., Appellee
On Appeal from the 157th District Court Harris County, Texas
Trial Court Cause No. 2013-00421A
MEMORANDUM OPINION
In this appeal following a default judgment, appellants Ann Vo, Ali Reza Yazdani, and Blue Ballroom, LLC (collectively, Appellants) assert in four issues that the trial court abused its discretion in striking their pleadings as a discovery sanction and signing a default judgment or judgment nihil dicit in favor of appellee Franklin Business, Inc. Because we determine that the trial court erroneously signed a judgment by default or nihil dicit when the Appellants had an answer on file, we reverse and remand.
Background
This dispute arose when several plaintiffs, not parties to this appeal, filed suit against Vo and Damon Cobbs regarding the operation of a club located on real property in downtown Houston owned by Franklin Business. That dispute was consolidated with another case involving the same matters, but different plaintiffs. Franklin Business intervened in the consolidated lawsuit to protect its interest in the lease of the property, as well as to recover for the wrongful removal of equipment and fixtures from the club. As is explained below, Franklin Business's dispute with Appellants was severed from the main case and is the subject of this appeal.
These plaintiffs include Kerry Carter, Letonia Carter, Evelyn Alexander, Houston Live Sport's [sic] Lounge, LLC, and the Blue Ballroom, LLC.
The plaintiffs in this case are Sean Chavis and Houston Live Sport's [sic] Lounge, LLC.
Pertinent to this appeal, Franklin Business alleged that Appellants and Cobbs were all de facto partners in the operation of the club on the property and, thus, jointly and severally liable to it under the lease and for the removal of the equipment and fixtures. Neither Appellants nor Cobbs answered Franklin Business's plea in intervention. Franklin Business and the other plaintiffs successfully obtained temporary restraining orders against Vo, Yazdani, and Cobbs.
Franklin Business also included Cobbs as a defendant in its plea in intervention. Although Franklin Business obtained a no-answer default judgment against Cobbs, Cobbs successfully moved for a new trial in the trial court and is not a party to this appeal.
A lengthy discovery dispute arose between Franklin Business, the other plaintiffs, Vo, and Yazdani. Franklin Business filed several motions to compel Vo and Yazdani to answer its discovery requests and joined in motions to compel filed by the other plaintiffs. The trial court signed orders compelling Vo and Yazdani to file complete and sworn answers to discovery requests and overruled their objections to several requests for admissions and interrogatories. Nonetheless, Vo and Yazdani continued to file unverified and incomplete discovery responses, failed to respond to several motions to compel, filed several unverified motions to continue hearings, and sought dismissal of the suit and sanctions against the other parties.
On appeal, Appellants do not assert that the trial court erred in granting sanctions for discovery abuse; instead, they complain that the sanctions should have been directed at their trial counsel, rather than them, and that the sanctions were excessive. In other words, they do not dispute that our record is rife with evidence supporting the imposition of sanctions for discovery abuse.
Ultimately, Franklin Business joined in a motion to compel filed by the other plaintiffs in the main case. The other plaintiffs moved, among other things, to strike the pleadings or limit the testimony of Vo and Yazdani. Vo and Yazdani did not respond to this motion. The trial court granted the other plaintiffs' motion to compel and struck Vo's and Yazdani's answers to the other plaintiffs' petition. At that time, none of the Appellants had answered Franklin Business's plea in intervention.
Franklin Business subsequently filed a "Motion for Entry of Judgment by Default and Conditional Motion for Severance" (the motion for judgment) against Vo, Yazdani, Cobbs, and Blue Ballroom. In this motion, Franklin sought judgment by default or nihil dicit. Franklin Business attached evidence of its damages to its motion. Further, Franklin Business conditionally sought a severance to make any judgments final. After Franklin Business filed its motion for judgment, Appellants filed an answer to the plea in intervention, asserting a general denial of all of Franklin Business's claims. Appellants also moved for a continuance so that they could respond to Franklin Business's motion for judgment. Although Franklin Business filed a response challenging the propriety of Vo's and Yazdani's attorney filing an answer on behalf of Blue Ballroom, Franklin Business did not move to strike Appellants' answer.
Blue Ballroom was a plaintiff in the main case, while Vo and Yazdani were named defendants.
The trial court granted Appellants' request for an extension of time in which to respond to Franklin Business's motion for judgment. Appellants neither responded further nor alerted the trial court to their answer during the allotted time. The trial court signed an order granting Franklin Business's motion for judgment and severed Franklin Business's claims against Appellants and Cobbs from the main case. The trial court also signed a final judgment in the severed action in favor of Franklin Business. In this judgment, the trial court awarded actual damages against Appellants and Cobbs and exemplary damages against Vo and Yazdani.
As noted above, the trial court later granted Cobbs a new trial and returned Franklin Business's claims against him to the main case.
Appellants filed a motion for new trial and a supplemental motion seeking sanctions against Franklin Business. Both of these motions were denied, and this appeal in the severed action between Franklin Business and Appellants timely followed.
Default Judgment or Judgment Nihil Dicit
In their fourth issue, which is dispositive of this appeal, Appellants assert that the trial court erred in signing a judgment by default or nihil dicit against them because they had filed an answer prior to entry of judgment. Franklin Business responds that the trial court's sanction order, in which the trial court struck the "defendants'" answers, prevented Appellants from later filing an answer. We disagree with Franklin Business for the following reasons.
Because we determine that, at the time the trial court entered an order striking the answer to Franklin Business's intervention, Appellants had filed no such answer, we need not address whether it would have been substantive error to strike the answer to Franklin Business's petition in intervention. See Tex. R. App. P. 47.1 ("The court of appeals must hand down a written opinion that is as brief as practicable but that addresses every issue raised and necessary to final disposition of the appeal."). --------
First, as discussed above, when the trial court struck Vo's and Yazdani's answers, neither of them had answered Franklin Business's plea in intervention. Further, this order contained no language preventing Appellants from answering Franklin Business's intervention. Thus, the effect of this order was to strike any answers Vo and Yazdani had on file in the case at the time the order was signed. But because none of the Appellants had actually answered Franklin Business's plea in intervention, there were no answers to Franklin Business's pleading on file to be stricken at that time.
Franklin Business further asserts, "Given the punitive foundation for the default judgment/default nihil dicit, the defendants were unable to file any subsequent putative answer in an attempt to 'unstrike' any prior one or 'undefault' themselves." Franklin Business relies on Woodruff v. Cook, a case from the Dallas Court of Appeals, to support this proposition. 721 S.W.2d 865, 870-71 (Tex. App.—Dallas 1987, writ ref'd n.r.e.) (op. on reh'g). In Woodruff, Woodruff had answered the plaintiff's suit, the trial court struck Woodruff's answer as a discovery sanction, and the trial court refused to grant Woodruff leave to file an amended answer. Id. at 867. The Dallas Court of Appeals concluded that the trial court had the authority "to strike an answer, keep it stricken, and enter a default judgment."
But here, Franklin Business acknowledges in its brief that, when the trial court struck Vo's and Yazdani's answers in the main case, they did not have answers to its plea in intervention on file:
On December 2, 2014, the trial court signed an Order Granting Third Motion to Compel (the "Death Penalty Order") in which it struck both Vo's and Yazdani's answers. Admittedly, on that day, these defendants did not have answers to Franklin's petition in intervention on file. . . .(emphasis added). We are not faced with a party's attempt to overcome the trial court's discovery sanction of striking her answer by filing an amended answer. Appellants did not file an amended answer; instead, they answered for the first time Franklin Business's plea in intervention. Thus, our record reflects that Appellants' answer to Franklin Business's pleading was not struck by the trial court when it signed the discovery abuse order striking Vo's and Yazdani's answers because that answer had not yet been filed. Accordingly, this case is readily distinguishable from Woodruff, the only case cited by Franklin Business in support of its claim that the trial court pre-emptively struck Appellants' unfiled answer to Franklin Business's plea in intervention when it signed the December 2 order.
After Franklin filed its Motion for Entry of Judgment by Default and yet before the trial court actually signed the final judgment on January 21, 2015, Vo, Yazdani and Blue Ballroom filed a formal answer generally denying the allegations set forth in Franklin Business's plea in intervention on December 22, 2014.
A no-answer default judgment may not be rendered after the defendant has filed an answer. Tex. R. Civ. P. 239 ("Upon such call of docket, or at any time after a defendant is required to answer, the plaintiff may in term time take judgment by default against such defendant if he has not previously filed an answer . . . ."); Davis v. Jefferies, 764 S.W.2d 559, 560 (Tex. 1989) (per curiam); Thottumkal v. Sidhu, No. 14-13-00966-CV, 2014 WL 6968616 at *3 (Tex. App.—Houston [14th Dist.] Dec. 9, 2014, no pet.) (mem. op.). And judgment nihil dicit is generally limited to situations where (1) the defendant has entered a dilatory plea that has not placed the merits of the plaintiff's case in issue or (2) the defendant has filed an answer, but withdrawn it. See Frymire Eng'g Co. v. Grantham, 524 S.W.2d 680, 681 (Tex. 1975) (per curiam). Although there is some difference between a no-answer default judgment and a judgment nihil dicit, "the general rule is that the two are so similar that the same rules apply with respect to the effect and validity of the judgment." Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex. 1979). Regardless of whether the judgment was by default or nihil dicit, our record reflects that Appellants had an answer on file that had not been withdrawn before the trial court signed that judgment.
Although our record does not indicate that Appellants made the trial court aware that they had filed an answer before the court signed the judgment, a trial court errs in rendering a default judgment after a defendant files an answer even when it is not aware that an answer has been filed. Davis, 764 S.W.2d at 560 (concluding that entry of default judgment was erroneous, even though trial court was unaware that defendants had answered). Even if an answer is late or signed by the wrong party, a trial court has no discretion to sign a default judgment when a defendant has filed an answer. See, e.g., id.; see also Sells v. Drott, 259 S.W.3d 156, 158-59 (Tex. 2008) (trial court erred in striking allegedly defective pleading signed by "interloper" and signing default judgment because defendant "had the right to notice of a challenge to the validity of the answers and an opportunity to present evidence and argument before the answers were stricken and a default judgment granted"); Granade v. Granade, No. 14-10-00340-CV, 2011 WL 2899627, at *2 (Tex. App.—Houston [14th Dist.] July 21, 2011, no pet.) (mem. op.) ("The Supreme Court of Texas and this court have taken an expansive view of what may be construed as an answer in a suit."); R.T.A. Int'l, Inc. v. Cano, 915 S.W.2d 149, 151 (Tex. App.—Corpus Christi 1996, writ denied) ("A signature of either a party or his attorney is only a formal requisite of an answer and the lack thereof does not justify default in a normal case.").
In sum, our record reflects the following pertinent facts. The order striking Vo's and Yazdani's answers was signed before Appellants' answer to Franklin Business's plea in intervention was filed; it operated to strike any answers they had on file at the time. But nothing in that order indicates that Appellants were barred from answering Franklin Business's plea in intervention. Appellants subsequently filed a general denial to Franklin Business's plea in intervention. Franklin Business did not move to strike Appellants' answer once it was filed, nor is there an order striking that answer. Accordingly, Appellants had an answer on file before the trial court signed the default judgment or judgment nihil dicit in this case.
Based on the foregoing, the trial court erred in signing the default judgment or judgment nihil dicit. We sustain Appellants' fourth issue.
Conclusion
We have determined that the trial court erred in signing a default judgment or judgment nihil dicit in this case. Our resolution of this issue requires that we reverse and remand this case to the trial court for proceedings consistent with this opinion.
/s/ Sharon McCally
Justice Panel consists of Justices Christopher, McCally, and Busby.