DFW Investment Properties Enterprises, LLC v. Esteban Aguinaga ( 2023 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-22-00501-CV
___________________________
DFW INVESTMENT PROPERTIES ENTERPRISES, LLC, Appellant
V.
ESTEBAN AGUINAGA, Appellee
On Appeal from the 153rd District Court
Tarrant County, Texas
Trial Court No. 153-334974-22
Before Sudderth, C.J.; Kerr and Walker, JJ.
Memorandum Opinion by Justice Walker
MEMORANDUM OPINION
Appellant DFW Investment Properties Enterprises, LLC, (DFW) appeals from
the trial court’s orders granting a default judgment in favor of Appellee Esteban
Aguinaga and denying DFW’s motion for new trial. DFW argues in three issues on
appeal that (1) this court should dismiss the appeal because there is no final judgment,
(2) the case should be remanded for a new trial based upon the standards of Craddock,1
and (3) Aguinaga’s petition discloses facts that invalidate his claims in whole or in
part. Because we hold that that the trial court abused its discretion in denying the
motion for new trial, we reverse and remand to the trial court.
I. BACKGROUND
Winifred Douglas Alford (Senior) and Lillie Mae Alford are the parents of
Winifred Douglas Alford (Junior)2 and Lachunda (Alford) Sparks. They divorced in
1973, and Lillie Mae was awarded the property located at 1013 East Shaw Street, Fort
Worth, Texas in the divorce decree. On July 20, 2011, Aguinaga entered into a
“Property Contract” with “Lili Alford”3 and “Winifred Alford” to purchase the
property at 1013 East Shaw Street. The contract does not indicate whether “Winifred
1
Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124 (Tex. [Comm’n Op.] 1939).
2
The record does not indicate the use of a suffix by either of the men named
Winifred Douglas Alford. However, for clarity we will refer to the father as Alford
Senior and the son as Alford Junior.
3
We note that the divorce decree states her name as Lillie Mae Alford.
2
Alford” refers to Alford Senior or Junior, but Aguinaga stated in his affidavit that it
was Senior. The contract was signed by Aguinaga and Winifred Alford, but not by
Lillie Mae Alford, the record title holder at that time. The contract states that
Aguinaga agreed to pay $13,000 for the property—a down payment of $6,500 and the
remainder within 30 days of purchase. Aguinaga stated in his affidavit that he
performed all of his contractual obligations pursuant to the contract. However,
Aguinaga never obtained a deed to the property.
Less than a month after the contract for the sale of the property was signed,
Lillie Mae Alford died intestate on August 10, 2011. Alford Junior and Sparks are the
heirs of Lillie Mae’s estate. After Lillie Mae’s death, a “Purchase Option Agreement”
for the property at 1013 East Shaw Street was entered into on August 22, 2011,
between “Owner” and “Buyer,” which stated that “Buyer” pays to “Owner” $13,000
in consideration for the option set forth in the agreement to purchase the property.
The option expired on August 23, 2011. The agreement is signed by Winifred Alford
as “Owner,” but the signature of the “Buyer” is illegible.4
On June 17, 2022, Sparks and Alford Junior, as grantors, signed a Warranty
Deed with Vendor’s Lien to DFW, as grantee, for the property at 1013 East Shaw
Street. DFW paid $65,000 in exchange for title to the property.
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Aguinaga attached the agreement to his petition but does not refer to it in his
petition, identify himself as the “buyer” in the agreement, or indicate whether Alford
Senior or Alford Junior signed the agreement as “Owner.”
3
On July 27, 2022, Aguinaga filed suit against Alford Senior, Alford Junior,
Sparks, and DFW alleging causes of action for trespass to try title, adverse possession,
quiet title, and a request for a declaratory judgment against all defendants. Aguinaga
also asserted a claim for breach of contract against Alford Senior.
The return of service shows that DFW was served on August 11, 2022, and
Sparks was served on August 4, 2022. There is no return of service in the record for
Alford Senior or Alford Junior. In its motion for new trial, DFW stated that Alford
Senior died on July 24, 2014. After there was no answer from DFW or Sparks,
Aguinaga filed a motion for default judgment against them on September 14, 2022.
The following day, the trial court entered a default judgment against DFW and Sparks
for trespass to try title, adverse possession, and quiet title and issued a declaratory
judgment. Both DFW and Sparks filed motions for new trial, and the trial court
denied the motions. DFW filed this appeal from the trial court’s orders granting
Aguinaga’s motion for default judgment and denying its motion for new trial.5
II. JURISDICTION
We first address our jurisdiction to hear this appeal. After filing a notice of
appeal, DFW filed a Notice of Issues Regarding Finality of Judgment so that this
court could evaluate whether it had jurisdiction to proceed with the appeal. This
court issued a letter on January 30, 2023, that stated we would consider the issue of
5
Sparks is not a party to this appeal.
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jurisdiction when the case was submitted. We requested that the parties’ briefs on the
merits include a discussion of the jurisdictional issue. DFW argues in its first issue
that this court does not have jurisdiction over this appeal because the default
judgment did not dispose of all claims and all parties.
A. APPLICABLE LAW
We have jurisdiction to consider appeals only from final judgments or from
interlocutory orders made immediately appealable by statute. Lehmann v. Har-Con
Corp., 39 S.W.3d 191, 195 (Tex. 2001). An order that does not dispose of all pending
parties and claims remains interlocutory and unappealable until a final judgment is
rendered unless a statutory exception applies. See id.; In re Roxsane R., 249 S.W.3d 764,
774–75 (Tex. App.—Fort Worth 2008, orig. proceeding).
In Youngstown Sheet & Tube Co. v. Penn, the trial court’s summary judgment
disposed of all named parties in the petition except for one. 363 S.W.2d 230, 232
(Tex. 1962). The court noted that the defendant was never served with a citation, that
the defendant did not answer, and that there was nothing to indicate that the
petitioner ever expected to obtain service upon him. Id. The court held that in those
circumstances, “the case stands as if there had been a discontinuance as to
[defendant], and the judgment is to be regarded as final for the purposes of appeal.”
Id.In M.O. Dental Lab v. Rape, 139 S.W.3d 671, 675 (Tex. 2004), the court stated
that the holding in Youngstown was not altered by Lehmann. The court relied on
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Youngstown and concluded that the trial court’s order granting summary judgment was
final for purposes of appeal even though it did not dispose of all the parties because
the defendant was never served and not expected to be served. Id.The Youngstown standard to determine whether a judgment is final for purposes
of appeal is articulated as a three-factor test: “(1) the judgment expressly disposes of
some, but not all, defendants; (2) the only remaining defendants have not been served
or answered; and (3) nothing in the record indicates that the plaintiff ever expected to
obtain service on the unserved defendants[.]” Fair Oaks Hous. Partners, LP v.
Hernandez, 616 S.W.3d 602, 605 (Tex. App.—Houston [14th Dist.] 2020, no pet.).
B. DISCUSSION
Aguinaga’s petition names Alford Senior, Alford Junior, Sparks, and DFW as
defendants. The trial court’s order granting Aguinaga’s default judgment disposes
only of Sparks and DFW. The order disposes of the four causes of action against
Sparks and DFW but does not dispose of the breach of contract claim against Alford
Senior.
The record shows that Aguinaga requested service against all four defendants
and provided an address for each defendant. The request for service does not
distinguish between Alford Senior and Alford Junior. There is nothing in the record
to indicate whether the stated address is a current or last known address for the
Alford defendants. Further, there is nothing in the record to show that Aguinaga
requested substituted service for the Alford defendants. See Tex. R. Civ.
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Proc. 106(b)(2). From the record before us, neither Alford Senior nor Alford Junior
were served, filed an answer, or appeared before the trial court.
According to the motion for new trial filed by DFW, Alford Senior died on
July 24, 2014. The record shows that after obtaining service for DFW and Sparks,
Aguinaga filed a motion for default judgment against them, but did not include either
of the Alford defendants in its motion. There is nothing in the record before us to
show that Aguinaga expected to obtain service upon Alford Senior and Alford Junior.
See Fair Oaks Hous. Partners, LP, 616 S.W.3d at 607.
Accordingly, Aguinaga has satisfied the Youngstown factors and the case “stands
as if there had been a discontinuance” as to Alford Senior and Alford Junior. Id.
(quoting Youngstown, 363 S.W.2d at 232). We overrule the first issue.
III. CRADDOCK ELEMENTS
In its motion for new trial, DFW argued that it satisfied the elements of
Craddock to set aside the default judgment. 133 S.W.2d at 126. In the second issue
DFW challenges the trial court’s denial of the motion for new trial and argues that
because the Craddock elements were satisfied, the case should be remanded for a new
trial.
A. APPLICABLE LAW
The decision to grant a new trial after a default judgment is within the
discretion of the trial court. Craddock 133 S.W.2d at 126; In re E.P.C., No. 02-10-
00050-CV, 2010 WL 5187691, at *1 (Tex. App.—Fort Worth Dec. 23, 2010, no pet.)
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(mem. op.); Johnson v. Edmonds, 712 S.W.2d 651, 652 (Tex. App.—Fort Worth 1986,
no writ). In determining whether a trial court abused its discretion, we must decide
whether the trial court acted without reference to any guiding rules or principles; in
other words, we must decide whether the act was arbitrary or unreasonable. Cire v.
Cummings, 134 S.W.3d 835, 838–39 (Tex. 2004); E.P.C., 2010 WL 5187691, at *1. An
appellate court cannot conclude that a trial court abused its discretion merely because
the appellate court would have ruled differently in the same circumstances. E.I. du
Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 558 (Tex. 1995); see also Low v.
Henry, 221 S.W.3d 609, 620 (Tex. 2007). In other words, an appellate court cannot
merely substitute its judgment for that of the trial court. Walker v. Gutierrez,
111 S.W.3d 56, 62 (Tex. 2003).
When, as in this case, “no findings of fact and conclusions of law are filed, the
denial of a motion to set aside the default judgment and for new trial must be upheld
on any legal theory supported by the evidence.” Huey-You v. Kimp, No. 02–16–00172–
CV, 2018 WL 359633, at *5 (Tex. App.—Fort Worth Jan. 11, 2018, pet. denied)
(mem. op. on reh’g); see Strackbein v. Prewitt, 671 S.W.2d 37, 38 (Tex. 1984).
Craddock established the standard for trial courts to use in deciding whether a
default judgment should be set aside and a new trial granted. 133 S.W.2d at 126. The
movant must establish (1) that the failure to appear “was not intentional, or the result
of conscious indifference . . ., but was due to a mistake or an accident”; (2) that the
movant has a meritorious defense; and (3) that the granting of the motion for new
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trial “will occasion no delay or otherwise work an injury to the plaintiff.” Id.; E.P.C.,
2010 WL 5187691, at *1. “To support the motion for new trial, the defendant must
make factual allegations that are supported by evidence, such as accompanying
affidavits setting forth facts, which, if true, satisfy the standard.” Ramirez v. LaCombe,
No. 01-17-00977-CV, 2019 WL 922058, at *3 (Tex. App.—Houston [1st Dist.] Feb.
26, 2019, no pet.) (mem. op.) (citations omitted). However, conclusory allegations are
insufficient. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 82 (Tex. 1992). If the
party requesting a new trial meets all three requirements of the Craddock test, the trial
court commits an abuse of discretion if it does not grant a new trial. Old Republic Ins.
Co. v. Scott, 873 S.W.2d 381, 382 (Tex. 1994).
B. FAILURE TO APPEAR NOT INTENTIONAL OR RESULT OF
CONSCIOUS INDIFFERENCE
In determining whether the failure to appear was due to intentional disregard or
conscious indifference, the court “must look to the knowledge and acts of the
defendant.” Strackbein, 671 S.W.2d at 39. If the factual assertions in the defendant’s
affidavit are uncontroverted by the plaintiff, the defendant satisfies his burden if his
affidavit sets forth facts that, if true, negate intentional or consciously indifferent
conduct by the defendant. Dir., State Emps. Workers’ Comp. Div. v. Evans, 889 S.W.2d
266, 269 (Tex. 1994).
The party seeking a new trial has the burden to prove the lack of intent or
conscious indifference by offering some type of excuse for the failure to answer, but
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the excuse need not necessarily be a good excuse. Sharpe v. Kilcoyne, 962 S.W.2d 697,
701 (Tex. App.—Fort Worth 1998, no pet.); Liberty Mut. Fire Ins. Co. v. Ybarra,
751 S.W.2d 615, 617–18 (Tex. App.—El Paso 1988, no writ). In other words, a
“failure to appear is not intentional or due to conscious indifference . . . merely
because it is deliberate; it must also be without adequate justification. Proof of such
justification—accident, mistake, or other reasonable explanation—negates the intent
or conscious indifference for which reinstatement can be denied.” Smith v. Babcock &
Wilcox Constr. Co., 913 S.W.2d 467, 468 (Tex. 1995).
In support of its allegation that the failure to timely answer was not intentional
or the result of conscious indifference, DFW offered the affidavit of its owner and
managing director, Alfredo Goytia. Goytia stated in the affidavit:
I received emails from the registered agent regarding service of citation
for this lawsuit, but I mistakenly thought the notices were reminders
associated with the recent municipal notices DFW had received and I
therefore did not open the emails relating to citation.
Until research was conducted following the entry of the
interlocutory default judgment, I did not become aware that a hardcopy
of the citation was reportedly sent to DFW’s post office box, perhaps
because items too large for the post office box were held at the counter
for pickup with a notice placed in the box that was inadvertently missed.
On or about September 8, 2022, I was first alerted to this lawsuit
by the wholesaler who had brought me the opportunity to purchase the
Property. The wholesaler told me he had been alerted to the lawsuit by
one of the sellers.
I promptly began working to obtain legal representation to assist
in DFW’s response to the lawsuit because DFW desires to be heard on
the merits in this lawsuit. I immediately called an attorney friend who is
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in the title business and, based on his advice, I initiated a claim with my
title insurance company to obtain an attorney.
Until I contacted [Aguinaga] several weeks after closing, I thought
[Aguinaga] was a tenant who was no longer paying rent. I had no reason
to suspect he claimed title. When I contacted him in person and
introduced myself as the manager for the new owner, [Aguinaga] told me
he owned the house. I asked [Aguinaga] if he had paperwork, which he
said he had. However, he never provided the paperwork he claimed to
have and refused to communicate with me further despite several
attempts to reach out to him. To my knowledge, [Aguinaga] did not
repudiate DFW’s or DFW’s predecessor’s title, provide notice of a claim
of exclusive title, or do anything to establish exclusive possession and
title to the Property prior to the filing of the lawsuit on July 27, 2022. As
the manager of DFW who handled the purchase of the Property, I had
no reason to think that the occupant claimed title.
DFW did not fail to answer the lawsuit by the deadline because
the company didn’t care. As manager of DFW who is responsible for
receiving notices of citation and responding to lawsuits, I certainly do
care about the lawsuit, but I was mistaken about the notices received
regarding service of citation. DFW didn’t file an answer to the lawsuit
on time because of my mistake. I would appreciate the opportunity to
be heard in this lawsuit. DFW would be unfairly harmed if we are not
allowed to test the claims being made against its title.
Aguinaga served the registered agent for DFW, and there is no allegation that
the registered agent was improperly served. According to Goytia, the registered agent
sent an email providing notice of the lawsuit, but he mistakenly did not open it. DFW
also inadvertently did not pick up the hard copy of the petition from the post office
counter. Aguinaga filed a response to DFW’s motion for new trial stating that DFW’s
decision not to open the emails “constitutes intentional disregard or conscious
indifference.” Aguinaga does not provide any controverting evidence to show that
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Goytia had actual notice of the lawsuit or that the statements in his affidavit were
false.
Intentional or conscious indifference for purposes of Craddock means “that the
defendant knew it was sued but did not care.” Fidelity & Guar. Ins. Co. v. Drewery
Constr. Co., 186 S.W.3d 571, 576 (Tex. 2006). A defendant’s mere negligence does not
show conscious indifference. Id.; see also Levine v. Shackelford, Melton, & McKinley,
L.L.P., 248 S.W.3d 166, 168 (Tex. 2008). Goytia’s affidavit reveals negligence on the
part of DFW, but it does not establish that DFW knew there was a lawsuit, did not
care, and intentionally failed to answer. See Titan Indem. Co. v. Old S. Ins. Grp., Inc.,
221 S.W.3d 703, 710 (Tex. App.—San Antonio 2006, no pet.). Because the factual
assertions in Goytia’s affidavit are uncontroverted by Aguinaga and set forth facts that
show the failure to answer was the result of a mistake, DFW satisfied its burden to
negate intentional or consciously indifferent conduct. See Dir., State Emps. Workers'
Comp. Div., 889 S.W.2d at 269.
C. MERITORIOUS DEFENSE
The second prong of the Craddock test requires DFW to “set up” a meritorious
defense in its motion for new trial. Dolgencorp of Texas, Inc. v. Lerma, 288 S.W.3d 922,
927–28 (Tex. 2009). Setting up a meritorious defense does not require proof “in the
accepted sense.” Id. at 928 (quoting Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex. 1966)).
Rather, the motion sets up a meritorious defense if it (1) alleges facts which in law
would constitute a defense to the plaintiff’s cause of action and (2) is supported by
12
affidavits or other evidence providing prima facie proof that the defendant has such a
defense. Id. Once such requirements are met, controverting evidence offered by the
nonmovant should not be considered. Id.In his petition, Aguinaga alleged causes of action for trespass to try title,
adverse possession, quiet title, and a request for a declaratory judgment against DFW.
To prevail in a trespass to try title action, Aguinaga must (1) prove a regular chain of
conveyances from the sovereign, (2) establish superior title out of a common source,
(3) prove title by limitations, or (4) prove title by prior possession coupled with proof
that the possession was not abandoned. Brumley v. McDuff, 616 S.W.3d 826, 832 (Tex.
2021). In a quiet-title suit, Aguinaga must prove, as a matter of law, that he has a right
of ownership and that the adverse claim is a cloud on the title that equity will remove.
Id.In his petition, Aguinaga stated that he is the superior title holder to the
property, that he has maintained the property, that he has been in exclusive
possession of the property for eleven years, and that he has not abandoned the
property. In his action to quiet title, Aguinaga stated that DFW has no rights under
the invalid warranty deed.
In defense, DFW provided proof that Lillie Mae Alford was the record title
holder at the time of the alleged contract for sale to Aguinaga. Lillie Mae did not sign
the property contract conveying the property to Aguinaga. Alford Senior signed the
contract as owner, but DFW provided evidence that he was not the owner at that
13
time. Aguinaga admits that he never obtained the deed to the property. DFW
obtained the warranty deed from Alford Junior and Sparks—Lillie Mae’s heirs. DFW
argued in its motion for new trial that any claim of adverse possession was suspended
for twelve months following the deaths of Lillie Mae and Alford Senior. DFW’s
motion therefore sets up a meritorious defense by alleging facts which in law would
constitute a defense to Aguinaga’s causes of action, and it is supported by evidence
providing prima facie proof that DFW has such a defense. See Dolgencorp of Texas, Inc.,
288 S.W.3d at 928.
D. DELAY OR INJURY TO AGUINAGA
The trial court signed the order granting the default judgment on
September 15, 2022. DFW filed an answer, special exceptions, and affirmative
defenses and asserted cross-claims on September 27, 2022. DFW stated in its motion
for new trial that it was prepared to go to trial and would reimburse Aguinaga for any
costs caused by the failure to timely answer. Once DFW alleged that granting its
motion for new trial would not injure Aguinaga, the burden shifted to Aguinaga to
prove injury. Id. at 929. Aguinaga did not allege any specific injury that would negate
DFW’s showing of no undue delay or injury. Aguinaga failed to prove that the
granting of a new trial would cause such harm or injury as would preclude the
granting of a new trial. Therefore, DFW satisfied the third prong of the Craddock test.
See id.
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Because DFW’s motion for new trial satisfied all three elements of the Craddock
test, the trial court abused its discretion by denying the motion. Accordingly, we
sustain DFW’s second issue on appeal. Because of our disposition of the second
issue, we need not address DFW’s third issue on appeal. Tex. R. App. P. 47.1.
IV. CONCLUSION
Having sustained DFW’s second issue, we reverse the trial court’s orders
granting Aguinaga’s motion for default judgment and denying DFW’s motion for new
trial and remand the case to the trial court for further proceedings consistent with this
opinion.
/s/ Brian Walker
Brian Walker
Justice
Delivered: June 22, 2023
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