Estate of Pollack v. McMurrey

858 S.W.2d 388, 36 Tex. Sup. Ct. J. 1100, 1993 Tex. LEXIS 99, 1993 WL 233455

• Court: Texas Supreme Court
• Decided: June 30, 1993
• Docket: D-1325
• Status: Published

Opinions

OPINION

GAMMAGE, Justice.

This is an appeal from a default judgment rendered against the Estate of Sheldon Pollack through its executors. The executors of the estate, collectively, the Estate, moved to have the default judgment set aside. This motion was cast as a motion for new trial. The trial court denied the motion. The court of appeals affirmed the judgment, approving the trial court’s denial of the Estate’s motion for new trial. 1991 WL 19846. The issue presented here is whether the trial court abused its discretion in refusing to set aside the default judgment against the Estate. We hold that the trial court abused its discretion in refusing to set aside the default judgment without a proper resolution of a factual dispute regarding the Estate’s failure to answer. Because of that error, we reverse the judgment of the court of appeals and remand the cause to the trial court for further proceedings consistent with this opinion and with instructions to conduct an evidentiary hearing to determine controverted material facts.¹

Loraine McMurrey sued Sheldon Pollack for fraud in connection with a real estate transaction. Pollack died after answering the suit. The executors of Sheldon Pollack’s estate, John Pollack and Eileen Erickson, reside in California. McMurrey’s counsel telephoned Sherman Lans, a partner in the California law firm handling the probate of Sheldon Pollack’s estate, and informed him that the Estate was being made a party to the suit.

Upon suggestion of death, the trial court issued a writ of scire facias pursuant to Tex.R.Civ.P. 152 requiring Pollack’s executors to appear and defend the suit.² The writ was served on the Texas Secretary of State and subsequently forwarded to the executors at their respective home addresses by certified mail, return receipt requested, in accordance with the Texas long-arm statute, Tex.Civ.PRAC. & Rem.Code §§ 17.044, 17.045 (Vernon 1986 & Supp. 1992). The records of the Texas Secretary of State show that executor John Pollack’s citation was returned marked “unclaimed” and that an unidentified person at executrix Eileen Erickson’s home (not Erickson) signed for her citation. There is no evidence in the record that either Pollack or Erickson personally received citation or had actual knowledge of the litigation. Neither executor nor Mr. Lans, the Estate’s attorney, filed an independent answer and the trial court subsequently rendered a default judgment against the estate. In a timely motion for new trial, the Estate moved to have the default judgment set aside.

MOTION FOR NEW TRIAL

The requirements for setting aside a default judgment by motion for new trial are set forth in Craddock v. Sunshine Bus Lines, Inc., 134 Tex. 388, 133 S.W.2d 124 (1939). The movant must (1) establish that the failure to answer was not intentional or the result of conscious indifference, (2) set up a meritorious defense, and (3) demonstrate that setting aside the default will not cause a delay or otherwise injure plaintiff. Id. at 393, 133 S.W.2d at 126. “[Wjhile trial courts have some measure of discretion in the matter, as, in truth, they have in all cases governed by equitable principles, it is not an unbridled discretion to decide cases as they might deem proper, without reference to any guiding rule or principle.” Id.

As movant, the Estate submitted the affidavits of both executors, in identical format, stating that, to the best of each one’s personal knowledge, each had received no correspondence concerning the litigation and that each was “totally unaware” of the litigation until after entry of the default judgment. Upon receipt of the affidavits, MeMurrey noticed the executors for deposition to determine the meaning of certain language in the affidavits, and to attempt explanation of what happened to Pollack’s and Erickson’s writ of scire facias.

The Estate responded with a motion for protective order claiming inconvenience, unavailability of deponents, and uselessness of their depositions with regard to Craddock’s “meritorious defense” requirement. Although no order was ever signed granting or denying the executors’ motion for protective order, they both refused to appear for the depositions. MeMurrey then filed objections to the affidavits pursuant to Tex.R.Civ.P. 215(2)(b)(4), requesting that the trial court not consider them since (1) they were conclusory, and (2) the executors had refused to be deposed.

Without hearing evidence, the trial court simply denied the Estate’s motion for new trial, reciting that the “objections to the affidavits of the estate’s representatives are meritorious and are granted, however, the motion fails on its own, it is therefore ORDERED that Motion for New Trial is denied.”

The court of appeals affirmed the judgment, approving the trial court’s denial of the Estate’s motion for new trial. The court of appeals concluded that the Estate had failed to satisfy the first element of the Craddock test; it did not address the second or third elements.

INTENTIONAL OR CONSCIOUSLY INDIFFERENT FAILURE TO ANSWER

In order to determine whether the trial court abused its discretion in refusing to set aside the default judgment against the Estate, we must first consider whether the Estate’s failure to answer was intentional or the result of conscious indifference. Generally, when a party relies on an agent or representative to file an answer, the party must establish that the failure to answer was not intentional or the result of conscious indifference of either the party or the agent. See Carey Crutcher, Inc. v. Mid-Coast Diesel Servs., Inc., 725 S.W.2d 500, 502 (Tex.App.-Corpus Christi 1987, no writ); Wells v. Southern States Lumber & Supply Co., 720 S.W.2d 227, 229 (Tex.App.—Houston [14th Dist.] 1986, no writ).

Under the circumstances here, the inaction of the California probate attorney, Sherman Lans, meets the first Crad-dock test element, because an attorney is under no duty to answer a lawsuit until the client is actually served and requests the attorney to file an answer. There is no evidence in the record that anyone in Lans’ firm was aware the executors had been served or was requested to file an answer before entry of the default. The failure of the Estate’s attorneys to answer, under the facts, could not have been intentional or the result of conscious indifference.

The Texas Secretary of State is also deemed to be an agent of the Estate — but only for service of process. Tex.Civ.PRAC. & Rem.Code § 17.044(c). The Secretary of State was obviously not legally authorized or required to answer the lawsuit, and the executors were not relying on him to do so. The Estate was not required to negate intent or conscious indifference on the part of the Secretary of State.

Finally, without actual knowledge of the pending litigation, the executors’ failure to answer before entry of the default judgment could not have been intentional or the result of conscious indifference. See Cliff v. Huggins, 724 S.W.2d 778, 779 (Tex.1987).

Whether the executors’ failure to answer was intentional or the result of conscious indifference is a fact question. See Strackbein v. Prewitt, 671 S.W.2d 37, 38 (Tex.1984); Dallas Heating Co. v. Pardee, 561 S.W.2d 16, 20 (Tex.Civ.App.—Dallas 1977, writ ref’d n.r.e.). Had the executors’ affidavits not been challenged, the executors’ motion and affidavits asserted facts which, if true, would negate intentional or consciously indifferent conduct. Strackbein, 671 S.W.2d at 38-39. But, MeMurrey clearly did challenge the executors’ affidavits by filing objections pursuant to Tex. R.Civ.P. 215(2)(b)(4) and noticing the executors’ depositions.

Under such circumstances, contested issues are ordinarily decided after a hearing at which witnesses present sworn testimony in person or by deposition rather than by affidavit. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex.1992). MeMur-rey should have been allowed an opportunity to develop and present evidence of her own at such an evidentiary hearing.³ The trial court generally may not resolve disputed fact issues regarding intent or conscious indifference on affidavits alone. See Healy v. Wick Bldg. Sys., Inc., 560 S.W.2d 713, 721 (Tex.App.—Dallas 1977, writ ref'd n.r.e.).

Moreover, as the party seeking protection from discovery, the Estate bears the burden of proof. Weisel Enters., Inc. v. Curry, 718 S.W.2d 56 (Tex.1986). The Estate is required to plead its basis for seeking protective relief and to show particular, specific and demonstrable injury by facts sufficient to justify protection. Masinga v. Whittington, 792 S.W.2d 940 (Tex.1990). Here, that burden was not met. See Giffin v. Smith, 688 S.W.2d 112, 114 (Tex.1985). The record contains no evidence to support a finding that the Estate should be protected from discovery. The executors refused to be deposed. While the trial judge may exercise some discretion in granting protective orders, this discretion is not unlimited. Masinga, 792 S.W.2d at 940. The trial court’s failure to rule on the Estate’s motion for protective order denied McMurrey the opportunity to develop and present evidence. Denial of discovery without an exercise of informed discretion constitutes a clear abuse of discretion. Weisel Enters., 718 S.W.2d at 58.

The trial court should have taken steps to assure McMurrey’s right to discovery on the issue of whether the Estate satisfied the first element of Craddock. The trial court may not short circuit the adversary process simply because the executors failed to submit to deposition. TransAmerican Nat’l Gas Co. v. Powell, 811 S.W.2d 913, 918 & n. 8 (Tex.1991). Because the Estate’s motion for new trial presented questions of material fact upon which evidence must be developed and heard, the cause must be remanded to the trial court for further proceedings. Hensley v. Salinas, 583 S.W.2d 617, 618 (Tex.1979). Should the Estate continue to refuse to comply with proper discovery requests, the trial court may, after notice and hearing, make such orders as are just, and in accordance with Tex.R.Civ.P. 215.

MERITORIOUS DEFENSE

The second Craddock test element requires the Estate to “set up” a meritorious defense.⁴ This means “[t]he motion must allege facts which in law would constitute a defense to the cause of action asserted by the plaintiff, and must be supported by affidavits or other evidence proving prima facie that,the defendant has such meritorious defense.” Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex.1966). The trial court may not try the defensive issues in deciding whether to set aside the default judgment and should not consider counter affidavits or conflicting testimony offered to refute the movant’s factual allegations. Id.

On motion for new trial, the Estate filed the affidavits of Gerald A. Malat and James R. Leahy, attorneys that represented Sheldon Pollack before he died. The affidavits stated that the dispute between Pollack and McMurrey had earlier been compromised and settled. According to Malat and Leahy, MeMurrey promised in 1985 not to sue Sheldon Pollack in connection with the real estate transaction underlying this suit, in return for which Pollack renounced all benefits from the transaction and executed a quit-claim deed conveying all his interest in the subject property to MeMurrey. The affidavits of Malat and Leahy are sufficient to “set up” a meritorious defense.

MeMurrey contends that because the alleged compromise agreement was not reduced to writing, it is not enforceable and therefore does not constitute a meritorious defense. MeMurrey relies on Tex.R.Civ.P. 11, which provides that “no agreement between attorneys or parties touching any suit pending will be enforced unless it be in writing, signed and filed with the papers as part of the record, or unless it be made in open court and entered of record.” Rule 11, however, applies only to agreements concerning a pending suit; it does not apply to a pre-existing agreement asserted as a defense to a suit.⁵ See Recio v. Redo, 666 S.W.2d 645, 648 (Tex.App.—Corpus Christi 1984, no writ). We conclude the Estate has satisfied the second element of the Craddock test.

DELAY OR PREJUDICE

Finally, the Estate was required to demonstrate that setting aside the default judgment would not cause a delay or otherwise injure MeMurrey. The Estate’s motion for new trial represented that granting the motion would not cause delay or prejudice MeMurrey. This representation shifted the burden to MeMurrey to prove injury. See Cliff v. Huggins, 724 S.W.2d at 779. MeMurrey alleged generally that vacating the default would prejudice her ability to collect a judgment against Pollack’s estate, but offered no proof in support of this allegation. MeMurrey filed a claim against Pollack’s estate for her alleged damages on June 9, 1989, over two months before entry of the default judgment. She has not demonstrated that vacating the default judgment and requiring her to proceed to trial would prejudice the status of this claim under California law should a judgment ultimately be rendered in her favor. We conclude the Estate has satisfied the third element of the Craddock test.

CONCLUSION

For the reasons stated above, we conclude that the trial court erred in failing to set aside the default judgment. Accordingly, we reverse the judgment of the court of appeals and remand the cause to the trial court for further proceedings consistent with this opinion.

Concurring opinion by GONZALEZ, J. Concurring opinion by ENOCH, J., joined by CORNYN, J. Dissenting opinion by DOGGETT, J.

1 . The Estate did not assert the argument that "the court of appeals failed to recognize the fundamental error the trial court committed in failing to overturn its default judgment when an answer had already been filed by Mr. Pollack” until its amended application for writ of error to this court. Since we decide the case on other grounds, we need not address that argument.

2 . Scire facias not only abrogates the common-law rule that death abates suit, but also provides for substitution of any person or persons succeeding to the rights of the original party, whether executor, administrator, heir, or person holding the same practical relation. Hermann v. Higgins Oil & Fuel Co., 260 S.W. 1094, 1099 (Tex.Civ.App.—Galveston 1924, writ refd). “When revived [the action] must be regarded as pending from the date of its original institution." McCampbell v. Henderson, 50 Tex. 601, 612 (1879). Logically, the revived action is merely a continuation of the original action, and the substituted party stands in the same shoes as the original party, whatever that may have been. Based on these principles, numerous cases have acknowledged that the decedent’s answer in an original action inures to the benefit of his legal representative in the revived action. See, e.g., Coven v. Dailey, 652 S.W.2d 527 (Tex.App.—Austin 1983, writ refd n.r.e.) (effect of defendant’s death was to substitute her legal representative in her place to defend plaintiffs suit); Brown v. Prairie View A & M Univ., 630 S.W.2d 405 (Tex.App.—Houston [14th Dist.] 1982, writ refd n.r.e.) (in dismissing a suit for want of prosecution, failure to procure scire facias is to be considered along with other circumstances pertaining to the exercise of reasonable diligence); Estate of Gripon v. Bostick, 610 S.W.2d 541 (Tex.Civ.App.—Houston [1st Dist.] 1980, no writ) (default judgment against estate improper since the answer filed before decedent’s death inured to the benefit of his legal representative); Clark v. Turner, 505 S.W.2d 941 (Tex.Civ.App.—Amarillo 1974, no writ) (scire fa-cias requiring the executor to appear and defend is not a new action, but a process in the nature of an ordinary citation to an action previously instituted; upon substitution of the executor as defendant, action proceeds, not as a new suit, but as an action pending from the date of its original institution); Atkins v. Home, 470 S.W.2d 229 (Tex.Civ.App.—Houston [14th Dist.] 1971, no writ) (administrator adopted the pleadings of the decedent as if he had done so expressly); Estate of Pewthers v. Holland Page Indus., Inc., 443 S.W.2d 392 (Tex.Civ.App.—Austin 1969, writ refd n.r.e.) (decedent’s answer inured to benefit of his legal representative); Hermann v. Higgins Oil & Fuel Co., 260 S.W. at 1099 (custodians of estate authorized to be made plaintiffs in the suit and prosecute the cause of action for the benefit of the decedent).

3 . This is in contrast to the "meritorious defense” requirement, where the trial court must determine only whether the movant has set forth facts constituting a meritorious defense, and should not consider controverting evidence offered by the non-movant. See Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex.1966).

4 . The issue of whether Peralta v. Heights Medical Ctr., Inc., 485 U.S. 80, 108 S.Ct. 896, 99 L.Ed.2d 75 (1988), affects the requirement of showing of meritorious defense in this situation has not been briefed and argued, and we do not address it in this case. See General Elec. Co. v. Falcon Ridge Apartments, 811 S.W.2d 942, 944 (Tex.1991); Ortega v. RepublicBank, 792 S.W.2d 452, 453 n. 1 (Tex.1990); LBL Oil Co. v. International Power Serv., Inc., 777 S.W.2d 390 (Tex.1989) (per curiam); Beck v. Beck, 771 S.W.2d 141 (Tex.1989); Lopez v. Lopez, 757 S.W.2d 721, 723 (Tex.1988) (per curiam).

5 . The record indeed contains writings referencing the purported compromise agreement. MeMurrey previously sued Sheldon Pollack's partner, Ronan Gomberg, asserting claims arising out of the same real estate transaction underlying the present suit. On March 27, 1985, McMurrey’s counsel, Van E. McFarland, wrote a letter to Sheldon Pollack stating that Pollack had not been joined in the earlier suit because Pollack had renounced any interest in the subject property, and further requesting that Pollack execute a quit-claim deed, which Pollack did. When Pollack was subsequently joined in the earlier suit, his counsel, Beverly D. Mason, protested in a letter of December 5, 1985, that the joinder was in violation of the compromise and settlement agreement, and demanded that Pollack be dismissed from the suit. MeMurrey acceded to this demand and dismissed Pollack from the earlier suit. The December 5 letter, along with an authenticating affidavit, was submitted to the trial court as an exhibit to the Estate’s motion for new trial. The March 27 letter is an exhibit to Sheldon Pollack’s deposition, portions of which were also submitted as an exhibit to the motion for new trial.