Fidelity & Guaranty Insurance Company v. Drewery Construction Company, Inc.

WiiE SUPREME COURT OF TEXAS
Wv
Post Office Box 12248
Austin, Texas 78711
(512) 463-1312
-*«#*
884 S.W.2d 151, 152 (Tex.
1994)(citations omitted). Circumstancesrequire this last rule, because presumptions can neitherbe
confirmed nor rebutted by evidencein an appellate court. Thus, for example, if the citation saysan
amended petition was attached (which named the defaulted party) and the return saysthe original
petition was served (which did not), an appellate court cannot tell from the record which is true. Id.
Similarly, ifthe petition says the registered agent for service is "Henry Bunting, Jr." but the citation
and return reflect service on "Henry Bunting," an appellate court cannot tell whether those persons
are different or the same. See Uvalde Country Club v. Martin LinenSupplyCo., Inc., 690 S.W.2d
884, 885 (Tex. 1985).
By contrast, when a default judgment is attacked by motion for new trial or bill ofreview in
the trial court,the record is not so limited. In those proceedings,the parties may introduceaffidavits,
depositions, testimony, and exhibits to explain what happened. See Goldv. Gold, 145 S.W.3d212,
V
214 (Tex. 2004) (per curiam). That being the case, these procedures focus on what has always been
and always should be the critical question in any default judgment: "Why did the defendant not
appear?"
If the answer to this critical question is "Because I didn't get the suit papers," the default
generally must besetaside.' See Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80,84 (1988) ("Failure
to give notice violates the most rudimentary demands of due process of law."); Caldwell v. Barnes,
154 S.W.3d 93,96-97 (Tex. 2004). Exceptions to this rule exist when nonreceipt is uncorroborated,
see Primate Constr., 884 S.W.2d at 152, or was a bill-of-review claimant's own fault, see Campus
Invs., Inc. v. Cullever, 144 S.W.3d 464, 466 (Tex. 2004).
But if the answer to the critical question is "I got the suit papers but then ...," the default
judgment should be set aside only ifthe defendant proves the three familiar Craddockelements. See
Craddock v. Sunshine Bus Lines, 133 S.W.2d 124,126 (Tex. 1939) (requiring new trial if defendant
shows (1) default was neither intentional nor conscious indifference, (2) meritorious defense, and
(3) new trial would cause neither delay nor undue prejudice).
In this case, undisputed evidence presented on the motion for new trial showed that Fidelity's
registered agent received the suit papers. Thus, the only relevance of the partial omission of
Fidelity's name is its possible role in the Craddock analysis. While errors in suit papers might
mislead a defendant into failing to answer, Fidelity makes no such assertion here. Because Fidelity's
failure to answer had nothing to do with this omission, it provides no ground for setting aside the
1Receiving suit papers or actual notice through a procedure not authorized for service is the treated the same
as never receiving them. See Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990).
( t
default judgment by motion for new trial.
Second, Fidelity argues that the default should be set aside because it was served with
Drewery's original petition, which was later amended before the default judgment. But the only
difference in the two petitions was an amendment to allow long-arm service on JenCra by serving
the Secretary of State. See generally TEX. Civ. Prac. & REM. CODE, Chapter 17. Service of an
amended petition on a party that has not appeared is necessary only when a plaintiff "seeks a more
onerous judgment than prayed for in the original pleading." Weaver v. HartfordAccident&Indem.
Co., 570 S.W.2d 367, 370 (Tex. 1978). That was not the case here.
Fidelity's last argument finds better traction. Of the three Craddock elements needed to set
aside a default, Drewery argues, and the court of appeals held, that Fidelity failed to establish only
the first — whether the default was the result of accident or mistake.2
Fidelity attached four affidavits to its motion for new trial that establish the following facts.
Fidelity's registered agent for service, Corporation Service Company (CSC), received Drewery's
petition and citation. Though in the ordinary course of business CSC would forward an electronic
scan of the documents to a Fidelity affiliate, computer records show this never occurred. As a
backup, in the ordinary course of business CSC would forward the service documents themselves
to the same affiliate, where they were compared with the electronic copy and then discarded after
90 days. As 90 days had passed before Fidelity learned ofthe default, all the records received during
that time had been discarded. Thus, neither CSC nor Fidelity could verify whether Drewery's suit
2Fidelity asserted as a meritorious defense that Drewery did notfilea timelyclaimonthe suretybondandcould
not produce written change orders. Fidelity asserted and Drewerydid not deny that a new trial would not cause delay
or undue prejudice. See Mathis v. Lockwood, 166 S.W.3d 743, 744 (Tex. 2005) (per curiam).
papers were actually forwarded by CSC to Fidelity. CSC averred that an employee of Fidelity's
affiliate "acknowledged receipt of the Petition," but the Fidelity agent who should have received
them averred that she never did.
The court of appeals refused relief on the ground that Fidelity's affidavits did not explain
what happened to the service documents:
[TJhere is no affidavit from a person who actually handled the citation explaining
how the citation was lost or where in the chain of communication a breakdown
occurred that led to Fidelity's failure to answer the citation. In this case, none ofthe
affidavits Fidelity submitted explain what happened to the citation. Each affidavit
stated that Fidelity's failure to answer was not intentional. However, a trial court
cannot vacate a default judgment based only upon general allegations or conclusions.
S.W.3d at (citations omitted).
We disagree that Fidelity's four affidavits were general or conclusory. To the contrary, they
detail the procedures for handling service papers in general and what is known about Drewery's
papers in particular. In the case of the electronic records, they explain precisely where the
breakdown occurred — at data entry by CSC.
We also disagree that to establish that papers were lost there must be an affidavit from the
person who lost them describing how it occurred. People often do not know where or how they lost
something — that is precisely why it remains "lost." This Court has often set aside default
judgments when papers were misplaced, though no one knew precisely how. See OldRepublic Ins.
Co. v. Scott, 873 S.W.2d 381,3 82 (Tex. 1994) (reversing default when investigator averred that she
believed suit papers were inadvertently included among files transferred to another adjustment
company); Estate ofPollackv. McMurrey, 858S.W.2d 388,391 (Tex.1993) (reversing defaultwhen
unidentified person signed for papers and never delivered them to executrix); Hanks v. Rosser, 378
S.W.2d 31, 32, 36 (Tex. 1964) (reversing default when druggist testified he placed suit papers "on
his prescription counter," that he "just lost them" and "never did find them").
We agree that a conclusory statement that documents were "lost" must generally be supported
by some explanation from the person most likely to have seen them, or of the efforts made to find
them.3 But the Craddock standard is one of intentional or conscious indifference — that the
defendant knew it was sued but did not care. An excuse need not be a good one to suffice. See
Craddock, 133 S.W.2d at 125.
The affidavits here show neither intent nor indifference. Instead, they detail Fidelity's efforts
to establish a system that would avoid precisely what happened. As Drewery did not controvert this
proof, the trial court was not at liberty to disregard it. See Dir., State Employees Workers' Comp.
Div. v. Evans, 889 S.W.2d 266, 269 (Tex. 1994).
Accordingly, without hearing oral argument, we reverse the court of appeals' judgment and
remand the case to the trial court for further proceedings consistent with this opinion. TEX. R. App.
P. 59.1.
OPINION DELIVERED: February 24, 2006
3Compare Freeman v. Pevehouse, 79 S.W.3d 637, 645 (Tex. App.-Waco 2002, no pet.) (affirming defaultin
absence of affidavit from any employee at insurer's address to which citation was faxed); BancTEXAS McKinney, N.A.
v. Desalination Sys., Inc., 847 S.W.2d 301, 302-03 (Tex. App.-Dallas 1992, no writ) (affirming default in absence of
affidavit from bank president upon whom citation was served); Motiograph, Inc. v. Matthews, 555 S.W.2d 196, 197
(Tex. Civ. App.-Dallas 1977, writ ref d n.r.e.) (affirming default as affidavit stated only that citation was "inadvertently
misplaced"by unnamed employee); with Gen. LifeandAccident Ins. Co. v. Higginbotham, 817 S.W.2d 830,832 (Tex.
App.-Fort Worth 1991, writ denied) (reversing default as proof showed citation was mistakenly filed rather than
forwarded to proper officials for answer, even though there was no explanation as to when or how misfiling occurred).
IN THE SUPREME COURT OF TEXAS
strict
No. 05-0295
Fidelity and Guaranty Insurance Company, PEfrfflfofeasW CLERK
v.
Drewery Construction Company, Inc., Respondents
On Petition for Review from the
Court of Appeals for the Twelfth District of Texas
JUDGMENT
THE SUPREME COURT OF TEXAS, having heard this cause on petition for review from
the Court of Appeals for the Twelfth District, and having considered the appellate record and
counsels' briefs, but without hearing oral argument under Texas Rule of Appellate Procedure 59.1,
concludes that the court of appeals' judgment should be reversed.
IT IS THEREFORE ORDERED, in accordance with the Court's opinion, that:
1) The court of appeals' judgment is reversed;
2) The cause is remanded to the trial court for further
proceedings consistent with this Court's opinion; and
3) Fidelity and Guaranty Insurance Company shall
recover, and Drewery Construction Company, Inc.
shall pay, the costs incurred in this Court.
Copies of this judgment and the Court's opinion are certified to the Court of Appeals for the
Twelfth District and to the District Court of Nacogdoches County, Texas, for observance.
Opinion of the Court delivered Per Curiam
February 24, 2006