Opinion
No. 05-16-01486-CV
05-07-2018
SHANE PERRY AND LIZETT PUGLIESE, Appellants v. BENBROOKE RIDGE PARTNERS L.P., PRETIUM PROPERTY MANAGEMENT LLC, BENBROOKE ROCKWALL INVESTMENT CORP, BENBROOKE REALTY INVESTMENT COMPANY, SAMUEL NICHOLSON, AND RICHARD LUBKIN, Appellees
On Appeal from the County Court at Law Rockwall County, Texas
Trial Court Cause No. 1-15-968
MEMORANDUM OPINION
Before Justices Francis, Evans, and Boatright
Opinion by Justice Evans
Appellants Shane Perry and Lizett Pugliese assert that the trial court abused its discretion by denying their motion for new trial. We reverse and remand.
BACKGROUND
Perry and Pugliese are married and owned and operated a laser clinic. Appellee Benbrooke Ridge Partners, L.P. entered into a shopping center lease agreement with Perry. Benbrooke Ridge filed a lawsuit in Justice Court seeking possession of the property. After obtaining possession, Benbrooke Ridge filed a lawsuit against Perry alleging he defaulted under the lease by failing to pay rent.
Perry filed an original and amended answer. In each he pleaded affirmative defenses, and in each Pugliese joined the suit as a third-party plaintiff and together with Perry asserted "counterclaims/third party claims" against Benbrooke Ridge and appellees Pretium Property Management LLC, Benbrooke Rockwall Investment Corporation, Benbrooke Realty Investment Company, Sam Nichols and Richard Lubkin. Perry and Pugliese alleged numerous causes of action in their counterclaims and third-party claims including, but not limited to, loss of consortium, conspiracy, harm resulting from a criminal act, fraudulent inducement, business disparagement, violations of the Texas Deceptive Trade Practice Act, fraud, intentional infliction of emotional distress, and tortious interference with contract. The pleaded factual basis for the counterclaims/third-party claims involved the lease, disputes about amounts owed under the lease, a commercial lock-out, Benbrooke's agent swatting Pugliese's phone out of her hand and locking Pugliese in the premises against her will, Benbrooke's admission of mistake about the amount of rent owed, Perry and Pugliese's continued occupancy of the leased premises, and continued altercations with Benbrooke's agent at the premises.
When the trial court called the case for trial, appellees appeared by and through their attorney and announced ready for trial, but neither Pugliese nor Perry appeared personally or through an attorney. The trial court heard evidence and argument of counsel and executed a post-answer default judgment which awarded as follows:
ORDERED, ADJUDGED AND DECREED, that Plaintiff, BENBROOKE RIDGE PARTNERS L.P., recover of and from Defendant, SHANE PERRY, the sum of ELEVEN THOUSAND NINE HUNDRED SIXTY-ONE AND 74/100 DOLLARS ($11,961.74), plus post-judgment rate of five percent (5%) per annum from the date hereof until paid in full, plus TWENTY THOUSAND AND 00/100 DOLLARS ($20,000.00) in reasonable attorneys [sic] fees; and all costs of court; and it is further,
ORDERED, ADJUDGED AND DECREED, that Plaintiff, Benbrooke Ridge Partners, L.P. recover of and from Defendant/Counter-Plaintiff, SHANE PERRY, the sum of TEN THOUSAND AND 00/100 DOLLARS ($10,000.00) if this case is unsuccessfully appealed to the Court of Appeals, TEN THOUSAND
AND 00/100 DOLLARS ($10,000.00) for responding to an Application for Writ of Error to the Supreme Court of Texas which is unsuccessful, and TEN THOUSAND AND 00/100 DOLLARS ($10,000.00) for legal services if the Application for Writ of Error is granted by the Supreme Court of Texas but the appeal is not successful; it is further,
ORDERED, ADJUDGED AND DECREED, that Defendant/Counter-Plaintiff and Third-Party Plaintiff, SHANE PERRY and Third Party Plaintiff, LIZETT PUGLIESE, take nothing from Counter-Defendant, BENBROOKE RIDGE PARTNERS, L.P. and Third Party Defendants, PRETIUM PROPERTY MANAGEMENT, LLC, BENBROOKE ROCKWALL INVESTMENT CORP, BENBROOKE REALTY INVESTMENT CORP, BENBROOKE REALTY INVESTMENT COMPANY, SAMUEL NICHOLSON, AND RICHARD LUBKIN, by their Counterclaim and Third Party Petition.
Perry and Pugliese filed a motion for new trial. According to the record, the trial court took the motion under advisement without a hearing on the merits. When the trial court failed to issue an order on the motion for new trial, the motion was overruled by operation of law. Perry and Pugliese timely filed a notice of appeal.
The official court reporter from the Rockwall County Court of Law submitted a letter to this Court advising that there was not a hearing on the motion for new trial and, accordingly, no reporter's record on that matter.
ANALYSIS
In their sole issue, Perry and Pugliese assert that the trial court abused its discretion in denying their motion for new trial.
A. Standard of Review
The standard of review of the denial of a motion for new trial is abuse of discretion. See Dugan v. Compass Bank, 129 S.W.3d 579, 582 (Tex. App.—Dallas 2003, no pet.). When a defaulting party moving for new trial meets all three elements of the Craddock test, then a trial court abuses its discretion if it fails to grant a new trial. See Old Republic Ins. Co. v. Scott, 873 S.W.2d 381, 382 (Tex. 1994).
B. Analysis
To be entitled to a new trial a party must satisfy the three elements of the Craddock test: (1) the failure of the defendant to answer before judgment was not intentional, or the result of conscious indifference on his part, but was due to a mistake or an accident; (2) the motion for new trial sets up a meritorious defense; and (3) the motion is filed at a time when the granting thereof will occasion no delay or otherwise work an injury to the plaintiff. Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (Tex. 1939). The defaulting party has the burden of proving all three elements of the Craddock test are met before a trial court is required to grant a motion for new trial. See Freeman v. Pevehouse, 79 S.W.3d 637, 641 (Tex. App.—Waco 2002, no pet.). Further, the prerequisites for setting aside a no-answer default judgment have been applied to post-answer default judgments. See Dir., State Emp. Workers' Comp. Div. v. Evans, 889 S.W.2d 266, 268 (Tex. 1994).
1. Failure to appear
In order to determine whether the trial court abused its discretion in refusing to set aside the default judgment against Perry and Pugliese, we first consider whether Perry and Pugliese's failure to appear at trial was not intentional or the result of conscious indifference, but due to a mistake or an accident. In determining whether there is intentional disregard or conscious indifference, the trial court examines the knowledge and acts of the parties who failed to appear. In re K.A.R., 171 S.W.3d 705, 717 (Tex. App.—Houston [1st Dist.] 2005, no pet.). A failure to appear is not intentional or due to conscious indifference merely because it was deliberate; rather it must also be without justification. Id. Proof of such justification such as accident, mistake or other reasonable explanation will negate intent or conscious indifference. Id. In addition, a trial court may generally may not resolve disputed fact issues regarding intent or conscious indifference on affidavits alone. See Tactical Air Def. Serv., Inc. v. Searock, 398 S.W.3d 341, 348-49 (Tex. App.—Dallas 2013, no pet.). In situations where the fact issues regarding intent are controverted, the court is bound to accept as true the affidavits of the movant unless his opponent requests an evidentiary hearing. Id. at 349; Averitt v. Bruton Paint & Floor Co., 773 S.W.2d 574, 576 (Tex. App.—Dallas 1989, no pet.); Healy v. Wick Bldg. Sys., Inc., 560 S.W.2d 713, 721 (Tex. Civ. App.—Dallas 1977, writ ref'd n.r.e.).
Perry filed a declaration and Jeremy Anderson, Pugliese's attorney, filed an affidavit in support of the motion for new trial. Perry's declaration stated that he had a conversation with Benbrooke Ridge's attorney, Spencer Shytles, and Anderson about depositions and the upcoming trial date—September 28, 2016. In his declaration, Perry stated that Anderson advised he was already scheduled for trial on September 28th in a different case and would not be available until mid-October. Perry further stated that Anderson and Shytles agreed to move the trial to the end of October or sometime later in the year and that it was "collectively understood that the trial was once again delayed."
In Anderson's affidavit, he stated that he had a conversation with Perry and Shytles about rescheduling depositions and the trial setting. He specifically stated that:
I advised both gentlemen that I was unavailable until mid October due to a 5-7 day federal jury trial in Lubbock, Texas [Cause No. 5:12-cv-0185] before the Honorable Sidney Fitzwater that started on Monday, September 26, 2016.Shytles also filed an affidavit in response to these affidavits which stated that he did not agree to move the trial setting on Anderson's behalf or go to the court clerk to discuss a new trial setting. Further, Shytles stated that he knew about Anderson's trial in Lubbock but when he did not receive a motion for continuance or an order from the trial court, he appeared at the trial setting. Shytles also states in his affidavit that:
During this conversation, Spencer Shytles agreed to continue the depositions on October 13, 2016 and that he would alert Court staff regarding my conflict for the current trial setting. The parties further discussed moving the trial date to a later date in October or November as schedules permitted. As he was walking away he reached for and opened the door to the Court's personnel offices. I believed at the time, foolishly in hindsight, that Mr. Shytles would indeed be true to his word.
As this Court is aware, I did specifically inform the Court, at the trial setting, of Mr. Anderson's statements and possible trial in Lubbock, and specifically told the Court that I did not wish to take advantage of either opposing counsel or the pro se party.
These affidavits contain contested facts about whether the parties agreed to move the trial date and who was going to advise the court about Anderson's trial conflict. The record, however, does not contain any request by Benbrooke Ridge for an evidentiary hearing to resolve the conflicting affidavits. As stated above, when addressing a disputed fact issue regarding intent, the trial court is bound to accept as true the affidavits of the movant, unless the opponent requests an evidentiary hearing. See Tactical Air Def. Serv.. 398 S.W.3d at 349; Averitt, 773 S.W.2d at 576; Healy, 560 S.W.2d at 721.
In addition, it is uncontested that Anderson was in trial in federal court on the day that this case was called to trial, and all parties, including the judge, were aware of this fact prior to the trial court entering a default judgment. Even a mistaken belief that one court would grant a continuance because counsel was in trial in another court satisfies the Craddock requirement that the failure to appear must not be intentional or the result of conscious indifference. See Smith v. Babcock & Wilcox Const. Co., Inc., 913 S.W.2d 467, 468 (Tex. 1995) ("The Smiths' attorney reasonably explained his failure to appear for trial. He was actually in trial in another county and believed, based upon his credible explanation, that the court would grant a continuance for that reason. Even if the Smiths' attorney was not as conscientious as he should have been, his actions did not amount to conscious indifference."). Taking all of this into consideration, we conclude that Perry and Pugliese's failure to appear was not intentional or the result of conscious indifference and they have satisfied the first prong of the Craddock test.
2. Meritorious defense
To satisfy the second Craddock element, Perry and Pugliese were required to set up a "meritorious defense." Estate of Pollack v. McMurrey, 858 S.W.2d 388, 392 (Tex. 1993). A meritorious defense is "one that, if proved, would cause a different result upon retrial of the case, although it need not be a totally opposite result." See Liepelt v. Oliveira, 818 S.W.2d 75, 77 (Tex. App.—Corpus Christi 1991, no writ). A "meritorious defense" also means that the motion must have alleged facts which in law would constitute a defense to the cause of action asserted by the plaintiff, and must be supported by affidavits or other evidence proving prima facie that the defendant has such meritorious defense. Id. Affidavits attached to the motion for new trial "do not have to be offered into evidence in order to be considered by the trial court for the meritorious defense element or any other element of the Craddock test." See Dir., State Employees Workers' Comp. Div., 889 S.W.2d at 268. "Setting up a meritorious defense is determined based on the facts alleged in the movant's motion and supporting affidavits, regardless of whether those facts are controverted." Id. at 270. Once these requirements are satisfied, allegations of a meritorious defense, if sufficiently specific, must be accepted as true despite the presence of disputed facts. See Liepelt, 818 S.W.2d at 77.
In Perry's answer, he asserted various affirmative defenses to the breach of contract claim, including contributory negligence or proportionate responsibility, illegality, failing to mitigate damages, unclean hands, satisfaction and accord, and equitable estoppel. In Perry and Pugliese's counterclaims/third-party claims, they pleaded as the basis of their fraud claim the accounting and improper charges asserted by appellees as due and owing under the lease. In their motion for new trial, Perry and Pugliese argued that a document used by Benbrooke Ridge entitled the "Shane Perry Account Audit" to prove up their damages at trial was not a true business record. Perry also asserted that the thousands of dollars in late fees referenced in this document exceeded the amounts Benbrooke Ridge was entitled to recover under the terms of the lease agreement. Perry and Pugliese attached to their thirteen-page motion fifty-one pages of supporting evidence including (1) Perry's declaration, (2) the Shane Perry Account Audit, and (3) the deposition transcript of John Comerford, the commercial property manager of Pretium Property Management. Perry's declaration provides as follows:
Perry also alleges that Benbrooke Ridge used this document in the eviction hearing in the Justice Court.
Shortly after Benbrooke was awarded possession by JP Court 2 in Rockwall County and we vacated the Brookshire's shopping center, I was served with the current lawsuit for an alleged breach of the Commercial Lease Agreement. In preparation of filing an answer, I began investigation [sic] into the allegations and began uncovering thousands of dollars in fraudulent fees charged to my account based on the "Shane Perry Account Audit" submitted in the Eviction hearing in JP Court on December 15, 2015. These fees were not allowed according to our Lease.Perry questioned Comerford in his deposition regarding the late fees charged to him as follows:
Q: At any point did you find that I was overcharged?
A: I think we had covered that there were late fees that had been miscalculated because SKYLINE was allowed to automatically calculate, where the lease agreement only allows for the -- if I remember correctly, the outstanding balance, not the late fees on that balance, to be charged. So that has to be done manually. And at one point, I believe it was - - I want to say June or July -- that was brought to your attention and addressed.
Q: So -- yeah. If you can, in a "yes" or "no," would you -- would you say at any point that I was overcharged?
A: Yes. There were incorrect late fees that were charged.
The facts alleged in Perry and Pugliese's motion, if true, would support Perry's affirmative defenses to Benbrooke Ridge's cause of action and could support their fraud counterclaim/third party claim. See State Farm Life Ins. Co. v. Mosharaf, 794 S.W.2d 578, 585 (Tex. App.—Houston [1st Dist.] 1990, writ denied) ("[A] meritorious defense is not limited to one that, if proved, would lead to an entirely opposite result. It is sufficient if at least a portion of the judgment would not be sustained on retrial."). Accordingly, Perry and Pugliese satisfied the second prong of Craddock test.
Appellees argue in their brief that Pugliese did not file an affidavit in support of the motion for new trial and Perry's declaration provides "no evidence of any claim contained in his affirmative defenses." Appellees do not cite any authority for the proposition that a Craddock motion for new trial must provide evidence for each separate defense or counterclaim or third-party claim, or that a movant must supply their own affidavit as distinguished from other supporting evidence. We note in both their motion for new trial and appellants' brief, Perry and Pugliese frame their argument in the terminology used in Craddock of a "meritorious defense." In other words, they do not separately argue about their counterclaims/third-party claims. Their evidence, however, supported at least one defense and one counterclaim/third-party claim that, if true, may have resulted in a different judgment. In addition, the "meritorious defense" arguments in both their motion for new trial and their brief on appeal is argued for both of them and Pugliese only had third-party claims; she did not have any defenses because she was not sued as a defendant. We do not consider Perry and Pugliese's use of Craddock's terminology to negate their argument that they are entitled to a new trial of the entire case.
Neither Perry and Pugliese nor appellees provided any authorities, nor have we located any, which address the application of the Craddock factors to counterclaims or third-party claims or grant a Craddock motion for new trial as to some defenses but not others. We need not reach that issue on these facts.
3. No delay or injury to plaintiff
The final Craddock element requires that the motion for new trial be filed at a time when the granting of it would not cause a delay or otherwise work an injury to the plaintiff. See Dir., State Employees Workers' Comp. Div., 889 S.W.2d at 270. Essentially, the purpose of this element is to protect the plaintiff against undue delay or injury, such as the loss of witnesses or other valuable evidence that would disadvantage the plaintiff in presenting the merits of the case at the new trial. Lowe v. Lowe, 971 S.W.2d 720, 725 (Tex. App.—Houston [14th Dist.] 1998, pet. denied). Once a defendant has alleged that granting a new trial will not injure the plaintiff, the burden of going forward with proof of injury shifts to the plaintiff. See Dir., State Employees Workers' Comp. Div., 889 S.W.2d at 270.
Here, Perry and Pugliese alleged in their verified motion for new trial that:
A new trial will cause no delay as [Perry and Pugliese] are prepared for trial immediately following the ORDERED continued depositions. Opposing counsel had already agreed to continue the depositions on October 13, 2016 and move the trial until after the depositions.Thus, the burden of proof shifted to Benbrooke to prove injury. See id. In its response to the motion for new trial, however, Benbrooke simply filed a general denial. In addition, the declaration of Shytles in support of the motion for new trial did not refute Perry and Pugliese's assertion that a new trial would cause no injury or disadvantage to Benbrooke. Finally, as stated above, an evidentiary hearing was not held on the motion for new trial. Accordingly, Benbrooke has failed to present any evidence that it would suffer an injury if a new trial were granted. Accordingly, Perry and Pugliese have satisfied the third prong of the Craddock test.
***
A new trial will cause no injury or disadvantage to Benbrooke in presenting the merits of its case, loss of witness or evidence. It announced ready for trial on September 28, 2016 with a single witness who is a corporate representative still employed by Benbrooke and presented evidence already submitted with its Second Amended Petition, and no evidence was presented in defense of the counterclaims and third party claims against them.
CONCLUSION
For these reasons, we agree with Perry and Pugliese that the trial court abused its discretion when the motion for new trial was overruled by operation of law. We, therefore, reverse and remand the case to the trial court for further proceedings.
/David Evans/
DAVID EVANS
JUSTICE 161486F.P05
JUDGMENT
On Appeal from the County Court at Law, Rockwall County, Texas
Trial Court Cause No. 1-15-968.
Opinion delivered by Justice Evans. Justices Francis and Boatright participating.
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 appellants SHANE PERRY AND LIZETT PUGLIESE recover their costs of this appeal from appellees BENBROOKE RIDGE PARTNERS L.P., PRETIUM PROPERTY MANAGEMENT LLC, BENBROOKE ROCKWALL INVESTMENT CORP, BENBROOKE REALTY INVESTMENT COMPANY, SAMUEL NICHOLSON, AND RICHARD LUBKIN. Judgment entered this 7th day of May, 2018.