EMCC INC., Assignee in Interest to REVGRO NATIONS v. Tony W. Johnson ( 2006 )

IN THE

TENTH COURT OF APPEALS

 

No. 10-05-00287-CV

EMCC INC., Assignee in Interest

to REVGRO NATIONS,

                                                                      Appellant

 v.

Tony W. Johnson,

                                                                      Appellee

From the County Court at Law No. 1

McLennan County, Texas

Trial Court No. 2005-0171CV1

DISSENTING Opinion

          This case presents an important issue for default judgment practice.  In this case, we have the reverse side of the coin that was addressed by the Texas Supreme Court in New.  Texas Commerce Bank v. New, 3 S.W.3d 515 (Tex. 1999).  The problem preventing a definitive resolution of the issue here is that there is no one to carry this issue to the next level to get the issue resolved because the defendant did not appear for trial or in this appeal.  See Sherman Acquisition II LP v. Graham, No. 10-05-00375-CV, 2006 Tex. App. LEXIS ____ (Tex. App.—Waco Oct. 18, 2006, no pet. h.) (Gray, C.J., dissenting) (the issue dies at the intermediate appellate level because there is no interested party to file a petition for review with the Supreme Court of Texas).

          In New, the plaintiff relied upon affidavits and pleading allegations as admissions by default to support a default judgment of liability, damages, and attorney’s fees.  The trial court accepted the pleading admissions to establish liability and the affidavits to prove damages and attorney’s fees.  The court of appeals determined, however, that the affidavits could not be used to prove unliquidated damages or attorney’s fees for a default judgment because the affidavits contained hearsay. New v. Texas Commerce Bank, 971 S.W.2d 711, 714 (Tex. App.—Austin 1998), rev’d, Texas Commerce Bank v. New, 3 S.W.3d 515, 517 (Tex. 1999).  The Texas Supreme Court reversed the court of appeals and held that the affidavits were probative and had not been objected to and, therefore, the trial court did not err in considering those affidavits as proof of damages and attorney’s fees.  Id.

          We have the opposite issue in this appeal.  The issue we have is what happens when the trial court rejects the affidavits as insufficient evidence upon which to base the default judgment as to damages and attorney’s fees?

          The majority has held that we can conduct a de novo examination of the evidence, without regard to the trial court’s determination, and render the judgment we decide is appropriate.  I agree the trial court erred in rendering a default judgment for nominal damages when he found the evidence insufficient to render a default judgment.  However, I believe the proper trial court judgment was a default judgment on liability and to set the issue of a determination of damages for trial.  Accordingly, I would reverse and remand for further proceedings consistent with this dissenting opinion.

Procedural Background

          The trial court and this Court concluded:

(1) this was not a suit on a sworn account;[1]

(2) the plaintiff pled, in the alternative to a suit on sworn account, a suit for breach of contract; and

(3) the defendant defaulted by failing to appear or answer the suit.

We all agree EMCC was entitled to and obtained a default judgment on liability.  EMCC also claims they are entitled to a default judgment for the alleged damages and attorney’s fees for their suit on sworn account or in the alternative for the breach of contract. 

          The majority and I agree that the trial court erred when it rendered a default judgment for nominal damages. What we disagree about is what happens regarding damages in this situation.  The question is whether, upon default, the plaintiff was entitled to damages for breach of an agreement as alleged, for the amount alleged, and for attorney’s fees in the amount alleged.  The amount of damages was alleged in the petition and were also attempted to be proved up by an affidavit.  The affidavit referenced an attached statement of the account which was not actually attached to the affidavit.  EMCC also alleges it is entitled to damages and attorney’s fees based on a set of requests for admissions that were set out in the body of the petition.[2]

          The trial court was entitled to reject the affidavit as inadequate proof of damages because it was internally inconsistent and lacked the exhibit it stated was attached.  The affidavits and requests for admissions were also inconsistent with the theory on which liability was based.  The affidavit and the requests for admissions were clearly designed to prove up a suit on sworn account, not a suit on a credit card debt.  As such, the facts as “proved” by the affidavit and the purportedly deemed admissions are not entirely consistent with a suit on a contract. 

          The majority accepts as conclusive that which the trial court rejected.  Even if a review of the affidavits to determine the facts de novo is within our discretion, and I believe it is not, I would not.  The trial court did not believe that EMCC had proven its damages. The proper result was a default judgment on liability and to set the matter for trial on the merits to determine the amount of damages and attorney’s fees. This was not a summary judgment proceeding or a trial on unliquidated damages at the trial court; nor should we make it one at this Court.

Conclusion

The majority holds that EMCC conclusively proved its damages, modifies the judgment, and renders a judgment for all the damages and attorney’s fees sought by EMCC.  For the reasons stated, I do not believe damages and attorney’s fees have been conclusively proven, and we have no authority to make findings of fact.  Accordingly, I would reverse and remand for further proceedings.  Because the majority does not, I respectfully dissent.

                                                          TOM GRAY

                                                         Chief Justice

Dissenting opinion delivered and filed October 25, 2006

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[1] I have some problems with this conclusion.  The basis for this conclusion comes from a question by the trial court and response by EMCC’s attorney during a motion for new trial.  I do not think the following statement in a motion for rehearing gets us to this conclusion.  Even if we use existing case authority about the statements of counsel made during a hearing to get past the issue of whether the lawyer had to be put under oath before he is testifying as an officer of the court, the answer clearly indicates that the lawyer is not at all certain about what this suit is about.  Further, this is a hearing on the motion for new trial, not at a trial or dispositive hearing, so that you would normally not expect an attorney to be offering evidence at this stage of the proceeding.  The court’s question and the attorney’s response was:

THE COURT:  Well, what is this suit about, anyway?  What is this suit about?

MR. BAUMANN:  Credit card.  I believe it’s a credit card.

[2] I do not opine on the propriety of putting the actual request for admission into the body of the petition as opposed to a separate discovery document.  I note only that the propriety of this practice has not been closely examined and independently decided.