In a recent Texas Supreme Court case, the Court considered whether the Defendants satisfied the requirements to set aside a non-answer default judgment. See Milestone Operating Inc. v. ExxonMobil Corp., no. 11-0647, 2012 WL 5285085, (Tex. Oct. 26, 2012). In this case, Defendants failed to answer ExxonMobil's lawsuit and ExxonMobil obtained a $1.8 million dollar default judgment against the Defendants. The judgment was upheld in the lower courts, but ultimately, the Texas Supreme Court reversed the judgment and remanded the case.
ExxonMobil filed suit against DSTJ, L.P. and Milestone Operating, Inc. (collectively, "Milestone"), alleging that Milestone breached an agreement between the parties. After Milestone failed to answer, ExxonMobil filed a Motion for default judgment. ExxonMobil alleged that its private process server properly served both parties with a citation and a copy of ExxonMobil's petition. The trial court granted ExxonMobil the default judgment with an award of almost $1.8 million.
Milestone filed a timely motion for a new trial, arguing that service on its officer, Harlan, was defective and that Milestone established the necessary elements to set aside the default judgment. See Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (Tex. 1939) (requiring a new trial if the defendant shows (1) that the default was neither intentional nor the result of conscious indifference, (2) a meritorious defense, and (3) that a new trial would cause neither delay nor undue prejudice). The trial court denied the motion for a new trial, and the Court of Appeals affirmed holding that Milestone failed to meet its burden to satisfy Craddock's first element.
Milestone contended that the evidence established that their failure to answer was not intentional or due to conscious indifference. In analyzing the issue, the Texas Supreme Court's analysis focused only on whether Milestone offered sufficient evidence to meet its burden under the first element of the Craddock test. A defendant satisfies its burden under this element when its factual assertions, if true, negate intentional, consciously indifferent conduct by the defendant and the factual assertions are not controverted by the plaintiff.
The Court concluded that the evidence here showed that Milestone's failure to answer was neither intentional nor the result of consciously indifferent conduct. Therefore, Milestone provided a sufficient excuse to satisfy Craddock's first element. Accordingly, the Court granted the Petition for review, and without a hearing or oral arguments, they reversed the Court of Appeals' judgment and remanded the case back to consider if the defendants met the second and third Craddock elements.
What Does This Mean?
Here are some things you can do in the event a default judgment was taken against you:
1. Notify an attorney immediately;
2. Explain why the answer was not filed timely with an affidavit from a person with knowledge explaining that it was an unintentional mistake which caused the error of not filing an Answer; and
3. File a Motion to Set Aside the Default Judgment and a Motion for a New Trial.
The case law is pretty clear that the mistake doesn't have to be a good one, only unintentional. Thus, an honest explanation of why the Answer was not filed should satisfy the first requirement of the Craddock test.
S. Mathew Samuel is an Associate at The Bassett Firm. Mr. Samuel's practice focuses on Transportation Litigation, Products Liability, Personal Injury, Premises Liability, Toxic Tort, Workers' Compensation, and Deceptive Trade Practices. He received his B.A. from the University of Texas at Austin in 1996 and his J.D. from St. Mary's University School of Law in 1999. Mr. Samuel was voted a Texas Super Lawyer in 2010, 2011, and 2012.