Robert W. Jackson v. Textron Financial COrporation and Longagribusiness LLC N/K/A Farmtrac North America ( 2009 )

Reversed and Remanded and Memorandum Opinion filed April 14, 2009

Reversed and Remanded and Memorandum Opinion filed April 14, 2009.

In The

Fourteenth Court of Appeals

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NO. 14-07-01011-CV

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ROBERT W. JACKSON, Appellant

V.

TEXTRON FINANCIAL CORPORATION AND LONGAGRIBUSINESS LLC N/K/A FARMTRAC NORTH AMERICA, Appellees

On Appeal from the 80th District Court

Harris County, Texas

Trial Court Cause No. 2004-58293

M E M O R A N D U M   O P I N I O N

Appellant Robert W. Jackson appeals from a default judgment in favor of appellees Textron Financial Corporation (ATextron@) and LongAgribusiness LLC n/k/a Farmtrac North America (AFarmtrac@).  Jackson contends that the trial court erred by striking his second amended and verified answer, and by signing a default judgment against him.  Jackson asserts that the trial court erred because he had a live answer on file responding to Textron=s claim and was not required to file an answer to Farmtrac=s counterclaim against him.  We reverse and remand. 

Background

In its petition, Textron alleges that Jackson, who owned and operated a tractor dealership in Tomball, signed a dealer agreement with Farmtrac on May 30, 2001, covering tractors supplied by Farmtrac.  Textron alleges Jackson signed a separate contract with Textron under which Textron provided financing for Jackson=s equipment purchases from Farmtrac.

Textron alleges that Jackson terminated his dealer agreement with Farmtrac in December 2003, but did not return Farmtrac=s equipment.  According to Textron, Farmtrac recovered all of its equipment from Jackson=s inventory in April 2004, except for six pieces that Jackson asserted had been stolen.

Textron alleged that in July 2004, Textron accelerated the maturity of Jackson=s unpaid balance under the finance plan and demanded payment after Jackson failed to make timely payments.  According to Textron, Jackson did not tender payment in response to the demand; Textron made another demand for payment in September 2004, and advised Jackson that it would pursue legal action if he failed to pay all amounts due and owing.  Textron alleged Jackson again failed to tender payment.

Textron filed an original petition against Jackson in Harris County district court on October 15, 2004, seeking to recover on a sworn account.  The parties dispute whether this petition contained proper verification to seek recovery on a sworn account.  Jackson, acting pro se, filed an original answer containing a general denial on December 28, 2004.

Textron filed an amended and verified petition on October 14, 2005, seeking to recover on a sworn account.  Jackson filed a first amended and verified answer on December 13, 2005.

On January 24, 2006, Jackson filed a third-party claim (which he labeled a Across-claim@) against Farmtrac seeking damages for alleged negligence and indemnity for any damages Jackson owed to Textron.  Farmtrac filed a general denial and counterclaim against Jackson on April 25, 2006, seeking recovery for breach of contract.

The trial court signed a scheduling order on April 24, 2006, setting October 16, 2006 as the deadline for filing amended pleadings.  Jackson filed a second amended and verified answer on December 4, 2006 without seeking or obtaining leave to do so.

Farmtrac and Textron filed a joint motion to strike Jackson=s pleadings on January 24, 2007, asserting two grounds: (1) his failure to appear at two depositions; and (2) the untimely filing of his second amended and verified answer.  Jackson did not respond.  The trial court signed an order on February 2, 2007, stating that A[Jackson=s] Second Amended Verified Answer is hereby stricken.@  The order does not strike all of Jackson=s pleadings.

Farmtrac and Textron filed a joint motion seeking a default judgment on March 15, 2007, based upon their assertion that Athere is no verified denial on file to refute Textron and Farmtrac=s sworn account.@  The trial court signed an order on March 23, 2007, granting a default judgment against Jackson and awarding damages in favor of Textron and Farmtrac.

Jackson filed a motion for new trial on April 23, 2007.  On June 1, 2007, the trial court signed an order granting Jackson=s motion and vacating the March 23 default judgment as to damages only. 

The case was called to trial on August 20, 2007.  Textron and Farmtrac re-urged their previous joint motion for default.  The trial court signed an order on August 31, 2007, again granting Textron and Farmtrac a default judgment against Jackson. This order is substantially similar to the one the trial court signed on March 23, 2007; it holds Jackson  liable to Textron and Farmtrac, and awards damages of $126,561.05 plus post-judgment interest to Textron and Farmtrac.  Jackson appeals from the August 31 default judgment.^[1]    

Analysis

Jackson contends that the trial court abused its discretion in striking his second amended and verified answer.  Jackson further contends that default judgment was improper as to Textron because he had a live answer on file responding to Textron=s sworn account claim.  Jackson also contends that default judgment was improper as to Farmtrac=s breach- of-contract counterclaim because he was not obligated to file an answer to this counterclaim.  We address each issue in turn.

I. Order Striking Jackson=s Second Amended and Verified Answer

Jackson challenges the propriety of the order striking his second amended and verified answer.  As a prerequisite to presenting a complaint for our review, the record must show that the complaint was made to the trial court by a timely request, objection, or motion on which the trial court either ruled or refused to rule.  Tex. R. App. P. 33.1(a).

The filing of a timely motion for new trial challenging a trial court=s order striking pleadings and entering judgment against the complaining party is sufficient to preserve the complaint for our review. See Willis v. Willis, 826 S.W.2d 700, 702 (Tex. App.CHouston [14th Dist.] 1992, no writ); see also Wade v. Farmers Ins. Group, No. 14-01-00691-CV, 2002 WL 1404713, at *2 (Tex. App.CHouston [14th Dist.] June 27, 2002, no pet.) (not designated for publication). Jackson=s timely motion for new trial objecting to the striking of his second amended and verified answer and subsequent default judgment against him preserved his challenge to the trial court=s order.  See Willis, 826 S.W.2d at 702.

Trial courts have authority to establish the time within which pleadings may be filed.  Tex. R. Civ. P. 166.  Trial courts have implicit authority to impose sanctions for violations of orders issued pursuant to Rule 166, so long as those sanctions are just and appropriate.  See Koslow=s v. Mackie, 796 S.W.2d 700, 703-04 (Tex. 1990); Taylor v. Taylor, 254 S.W.3d 527, 532 (Tex. App.CHouston [1st Dist.] 2008, no pet.).

We review a trial court=s sanction for violation of a scheduling order for an abuse of discretion.  See Koslow=s, 796 S.W.2d at 704; Taylor, 254 S.W.3d at 532.  The test for abuse of discretion is whether the trial court acted without reference to any guiding rules and principles, or whether the act was arbitrary or unreasonable.  See Koslow=s, 796 S.W.2d at 704; Taylor, 254 S.W.3d at 532.

The trial court signed a scheduling order on April 24, 2006, setting October 16, 2006 as the deadline for filing amended pleadings.  Jackson filed a second amended and verified answer on December 4, 2006 without seeking or obtaining leave to do so.  Farmtrac and Textron filed a joint motion to strike Jackson=s pleadings on January 24, 2007 based upon the untimely December 4 filing and, alternatively, Jackson=s failure to appear at two depositions. The trial court signed an order on February 2, 2007 stating that A[Jackson=s] Second Amended Verified Answer is hereby stricken.@  The order does not state upon which of the two bases proposed by Textron and Farmtrac the trial court relied.

Because Jackson filed his second amended and verified answer long after the trial court=s pleadings deadline of October 16, 2006, the trial court had implicit authority to impose just and appropriate sanctions.  See Koslow=s, 796 S.W.2d at 704; Taylor, 254 S.W.3d at 532.  Since untimely filing provides a legitimate basis for striking the pleading and the trial court=s order struck only this pleading, we conclude that the trial court did not abuse its discretion in striking this particular pleading.  See Koslow=s, 796 S.W.2d at 704; Taylor, 254 S.W.3d at 532.^[2]    

We overrule Jackson=s issue regarding the order striking his second amended and verified answer.

II. No-Answer Default Judgment

Jackson challenges the propriety of the default judgment entered against him in favor of Textron because he asserts that he still had a live answer on file addressing Textron=s sworn account claim.  Jackson also challenges the propriety of the default judgment entered against him in favor of Farmtrac because he asserts that he was not obligated to file an answer to Farmtrac=s counterclaim. 

The parties= arguments on appeal primarily address the default judgment as being a no-answer default judgment.  The record indicates that the only basis upon which Textron and Farmtrac moved for default judgment was Jackson=s purported lack of a live answer.  In the default judgment, the trial court granted Textron=s and Farmtrac=s motion, rendering what is ostensibly a no-answer default judgment.  Thus, we analyze it as such.

A. Live Answer Addressing Textron=s Claim

Jackson challenges the propriety of the default judgment entered against him in favor of Textron because he asserts that he still had a live answer on file addressing Textron=s sworn account claim.  Jackson contends that because the trial court=s February 2 order struck only his second amended and verified answer, his first amended and verified answer filed December 13, 2005 was revived and effective to foreclose a no-answer default judgment.

A no-answer default judgment may not be rendered against a defendant who has filed an answer.  Faunce v. NCNB Tex. Nat=l Bank, 846 S.W.2d 876, 877 (Tex. App._Houston [14th Dist.] 1992, no writ) (opinion on rehearing); see also Tex. R. Civ. P. 239.  The striking of a subsequent answer revives the most recent prior answer so long as the prior answer is substantially different from the stricken one.  See Vordenbaum v. Ackerman, 393 S.W.2d 927, 929 (Tex. Civ. App._San Antonio 1965), aff=d as reformed, 403 S.W.2d 362 (Tex. 1966); see also Carrillo v. Garzon, No. 14-94-00630-CV, 1995 WL 628156, at *5 n.1 (Tex. App._Houston [14th Dist.] Oct. 26, 1995, no writ) (not designated for publication).  Here, Jackson=s prior answer was substantially different because it did not allege that (1) there were inaccuracies in the amounts Textron charged Jackson; (2) Textron was paid by a third party for all amounts sued upon; (3) Textron was seeking a Adouble recovery;@ (4) third party criminal activity was a superseding intervening cause; and (5) Textron failed to join all necessary parties.  See Vordenbaum, 393 S.W.2d at 929.

It is undisputed that the trial court=s February 2, 2007 order struck only Jackson=s second amended and verified answer filed on December 4, 2006.  With regard to Textron=s sworn account claim, the trial court=s action revived Jackson=s first amended and verified answer filed on December 13, 2005, as his live answer.  See id. 

We reject Textron=s argument that a no-answer default judgment was proper because Jackson=s first amended and verified answer lacked the proper verification to properly address a claim on a sworn account.  Jackson=s live answer defeats a motion for no-answer default judgment regardless of whether the answer was verified. See Davis v. Jefferies, 764 S.W.2d 559, 560 (Tex. 1989) (per curiam) (AA default judgment may not be rendered after the defendant has filed an answer.@); Faunce, 846 S.W.2d at 877.  We do not address the sufficiency of the verification found in Jackson=s first amended and verified answer.

Because Jackson=s first amended and verified answer was revived, the trial court erred by signing a no-answer default judgment against him.  See Faunce, 846 S.W.2d at 877.

We sustain Jackson=s issue regarding the trial court=s entry of a no-answer default judgment against him in favor of Textron.

B. No Obligation to File an Answer to Farmtrac=s Counterclaim

Jackson challenges the propriety of the default judgment entered against him in favor of Farmtrac because he asserts that he was not obligated to file an answer to Farmtrac=s counterclaim.  Jackson contends that he is deemed to have pleaded a general denial in answer to Farmtrac=s counterclaim by virtue of his previous appearance in this civil action.

AWhen a counterclaim or cross-claim is served upon a party who has made an appearance in the action, the party so served, in the absence of a responsive pleading, shall be deemed to have pleaded a general denial of the counterclaim or cross-claim . . . .@  Tex. R. Civ. P. 92.

It is undisputed that Jackson made an appearance in this civil action before the signing of either default judgment against him.  Therefore, he is deemed to have pleaded a general denial in response to Farmtrac=s counterclaim because the striking of his second amended and verified answer left him with no written answer to the counterclaim on file with the court.  See id.

We reject Farmtrac=s argument that a no-answer default judgment was proper because Jackson=s deemed answer was not verified.  Jackson=s deemed answer defeats a motion for no-answer default judgment regardless of lack of verification.  See Davis, 764 S.W.2d at 560; Faunce, 846 S.W.2d at 877.  We do not address whether (1) Farmtrac=s counterclaim is in fact a sworn account claim; or (2) Jackson was obligated to file a verified answer to refute Farmtrac=s counterclaim.  

Because Jackson is deemed to have answered Farmtrac=s counterclaim with a general denial, the trial court erred by signing a no-answer default judgment against him on Farmtrac=s counterclaim.  See Faunce, 846 S.W.2d at 877.

We sustain Jackson=s issue regarding the trial court=s entry of a no-answer default judgment against him in favor of Farmtrac.

Conclusion

The trial court=s no-answer default judgment is reversed, and the cause is remanded for further proceedings consistent with this opinion.^[3]    

/s/ William J. Boyce

Justice

Panel consists of Justices Frost, Brown, and Boyce.

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  ¹ We do not presume a default judgment to be an appealable final judgment.  See Lehmann v. Har-Con Corp., 39 S.W.3d 191, 199-200 (Tex. 2001). A judgment that finally disposes of all remaining parties and claims based upon a review of the record is final and appealable. Id. The August 31, 2007 default judgment is final because it addresses all relief sought by Textron and Farmtrac against Jackson, and disposes of Aany and all claims by Jackson against Textron or Farmtrac.@ Therefore, the default judgment is final and appealable, and we have jurisdiction over Jackson=s appeal.  See id.

  ² Given this holding, we need not address the alternative ground (discovery sanctions) asserted in the motion for striking Jackson=s second amended and verified answer because it is unnecessary to the disposition of this appeal.  See Tex. R. App. P. 47.1.

  ³ Jackson also asserts on appeal that default judgment was erroneous if it was intended as a discovery sanction.  As noted above, the only reason for entry of the default judgment was the striking of Jackson=s second amended and verified answer, and that action did not support the subsequent entry of a default judgment for the reasons explained above.