in Re American Gunite Management Company, Inc.

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-11-00349-CV
IN RE AMERICAN GUNITE RELATOR
MANAGEMENT COMPANY, INC.
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ORIGINAL PROCEEDING
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MEMORANDUM OPINION1
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The issue we address in this original proceeding is whether the trial court
abused its discretion by denying Relator American Gunite Management
Company, Inc.‘s motion to withdraw deemed admissions. Because the deemed
admissions are merits-preclusive (in fact, Real Party in Interest Plaintiff has filed
a motion for summary judgment in the trial court based solely on the deemed
admissions), we hold that the trial court abused its discretion by denying
American Gunite‘s motion to withdraw the deemed admissions.
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See Tex. R. App. P. 47.4.
The rules of civil procedure authorize deemed admissions when a party
fails to respond to requests for admissions, essentially authorizing an automatic
sanction without the necessity for filing a motion for sanctions. See Tex. R. Civ.
P. 198.2(c); Wheeler v. Green, 157 S.W.3d 439, 443 (Tex. 2005). Requests for
admissions, however, were ―never intended to be used as a demand upon a
plaintiff or defendant to admit that he had no cause of action or ground of
defense.‖ Stelly v. Papania, 927 S.W.2d 620, 622 (Tex. 1996). The true purpose
of requests for admissions is to enable parties to eliminate uncontroverted
matters. See id.
The purpose of the rules of civil procedure is to obtain a just, fair,
equitable, and impartial adjudication of the litigants‘ rights under established
principles of substantive law. Tex. R. Civ. P. 1; Stelly, 927 S.W.2d at 622; In re
Kellogg-Brown & Root, Inc., 45 S.W.3d 772, 775 (Tex. App.—Tyler 2001, orig.
proceeding) (granting petition for writ of mandamus based on trial court‘s failure
to set aside deemed, merits-preclusive admissions). The discovery rules were
not designed as traps, nor should we construe them to prevent a litigant from
presenting the truth. Stelly, 927 S.W.2d at 622; Kellogg-Brown & Root, Inc., 45
S.W.3d at 775. Thus, when merits-preclusive admissions are deemed admitted
as an automatic discovery sanction under rule 198, they are nonetheless subject
to the long-standing due-process principles applicable to other judicially imposed
death penalty sanctions and must be set aside absent flagrant bad faith or
callous disregard for the rules. See Wheeler, 157 S.W.3d at 443; Petree v. S.
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Farm Bureau Cas. Ins. Co., 315 S.W.3d 254, 259 (Tex. App.––Corpus Christi
2010, no pet.) (―‗[A]bsent flagrant bad faith or callous disregard for the rules, due
process bars merits-preclusive sanctions.‘‖ (quoting Wheeler, 157 S.W.3d at
443)); Approximately $1,589.00 v. State, 230 S.W.3d 871, 875 (Tex. App.––
Houston [14th Dist.] 2007, no pet.) (explaining that ―a trial court should permit
withdrawal of merits-preclusive, deemed admissions if the record contains no
evidence of flagrant bad faith or callous disregard for the rules‖); In re Rozelle,
229 S.W.3d 757, 764 (Tex. App.––San Antonio 2007, orig. proceeding)
(conditionally granting writ of mandamus because trial court abused its discretion
by refusing to set aside merits-preclusive, deemed admissions absent evidence
of flagrant bad faith or callous disregard for the rules); see also Duff v.
Spearman, 322 S.W.3d 869, 885 (Tex. App.––Beaumont 2010, pet. denied);
Thomas v. Select Portfolio Servicing, Inc., 293 S.W.3d 316, 320 (Tex. App.––
Beaumont 2009, no pet.). Once the trial court acknowledges the merits-
preclusive effect of the deemed admissions, the due process concern is
automatically raised under the applicable law. See Wheeler, 157 S.W.3d at 443;
Rozelle, 229 S.W.3d at 762.
American Gunite and Real Party in Interest Plaintiff entered into two Rule
11 agreements extending the deadline for each party to respond to discovery
requests. The deadline set by the second Rule 11 agreement was May 30,
2011. American Gunite served its responses to requests for admissions on June
9, 2011, ten days late. The lawsuit had been filed on February 14, 2011, less
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than four months before American Gunite served its ten-day-late responses to
requests for admissions; no depositions had been scheduled or taken, and there
was not a trial setting. At the hearing on American Gunite‘s motion to withdraw
the deemed admissions, its counsel explained,
We entered into informal settlement discussions, which
continue to this day, Your Honor.
And toward that end, in an effort to keep costs down, which
apparently has gone awry, we entered into two separate Rule 11
Agreements to extend discovery for us to respond until May 30th.
While those discussions were going on, my client and I
inadvertently missed the deadline, that May 30th deadline to
respond. As soon as we did realize that we had missed the deadline
and that we were mistaken, we served our discovery responses.
They were approximately nine days late.
....
Good cause exist[s] if the failure to timely serve was the result
of mistake or inadvertence, which is exactly what happened in this
case, Your Honor. We just missed the deadline out of a mistake. It
was not a conscious or deliberate effort on our part.
At the hearing on American Gunite‘s motion to withdraw the deemed
admissions, Real Party in Interest Plaintiff, the trial court, and American Gunite
all recognized that many of the deemed admissions were merits-preclusive.2
Prior to the hearing, Real Party in Interest Plaintiff had already filed a motion for
summary judgment based solely on the deemed admissions. At the hearing, the
2
For example, one of the requests for admissions asked American Gunite
to ―[a]dmit or deny that you have failed to perform under your Gunite Warranty.‖
Another asked, ―Admit or deny that Plaintiff is entitled to summary judgment on
all of its causes of action alleged in the Petition.‖
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trial court recognized the merits-preclusive effect of the deemed admissions.
The trial court stated on the record, ―You may want to set [Real Party in Interest
Plaintiff‘s motion for summary judgment] as quickly as possible because it looks
to me that these admissions stipulate you out on liability.‖ At the hearing,
American Gunite‘s counsel pointed out the merits-preclusive nature of the
deemed admissions: ―Again, Your Honor, it‘s particularly important to allow
withdraw and amendment when the admissions are merits-preclusive. And a
cursory review of the admissions demonstrates that they are exactly that.‖
Although Real Party in Interest Plaintiff, the trial court, and American
Gunite all recognized the merits-preclusive effect of the deemed admissions, and
although no evidence was presented to the trial court of flagrant bad faith or
callous disregard for the rules, the trial court denied American Gunite‘s motion to
set aside the deemed admissions.3 We hold that the trial court abused its
3
The trial court stated on the record that
the reason I‘m not [granting the motion to withdraw the deemed
admissions is because] [t]here w[ere] two notices of deadlines
affirmatively stated signed as part of the Rule 11 Agreement. To not
enforce it would be to say I‘m not enforcing a Rule 11 agreement.
And I‘m not willing to do that.
Thus, the trial court refused to apply rule 198.3‘s good-cause and lack-of-
prejudice standards because it apparently determined that these standards were
inapplicable to discovery dates contained in a rule 11 agreement. But the
automatic sanction of deeming requests admitted absent a timely served
response is provided for in rule 198.2(c). See Tex. R. Civ. P. 198.2(c) (providing
that ―[i]f a response is not timely served, the request is considered admitted
without the necessity of a court order‖). Absent application of rule 198.2(c), no
automatic sanction exists for a party‘s failure to timely serve responses to
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discretion by denying American Gunite‘s motion to set aside the deemed
admissions because the deemed admissions were merits-preclusive and the
record contains no evidence of flagrant bad faith or callous disregard for the rules
by American Gunite. See, e.g., Wheeler, 157 S.W.3d at 443; Stelly, 927 S.W.2d
at 622; Duff, 322 S.W.3d at 885; Petree, 315 S.W.3d at 259; Thomas, 293
S.W.3d at 320; Approximately $1,589.00, 230 S.W.3d at 875; Rozelle, 229
S.W.3d at 764; Kellogg-Brown & Root, Inc., 45 S.W.3d at 775. Accordingly, we
conditionally grant the petition for writ of mandamus. We order the trial court to
withdraw its August 19, 2011 order denying American Gunite‘s motion to
withdraw deemed admissions and to enter an order permitting withdrawal of the
deemed admissions. The writ will issue only if the trial court fails to comply within
ten days.
SUE WALKER
JUSTICE
PANEL: WALKER, MEIER, and GABRIEL, JJ.
requests for admissions. If rule 198.2(c)‘s automatic sanction is to apply to
responses to requests for admissions not timely served by a date set forth in a
rule 11 agreement, then rule 198.3‘s good-cause and lack-of-prejudice provisions
must likewise apply. See Tex. R. Civ. P. 198.3. It is illogical to apply the
automatic sanction provision of rule 198 to the violation of a discovery deadline
set in a rule 11 agreement but to hold that the good-cause and lack-of-prejudice
provisions of rule 198.3 do not apply to the violation of a discovery deadline set in
a rule 11 agreement. The record before us alternatively conclusively establishes
rule 198.3‘s requisites of good cause and lack of prejudice. We alternatively hold
that the trial court abused its discretion by not granting American Gunite‘s motion
to withdraw on this basis as well.
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DELIVERED: October 3, 2011
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