Guadalupe Economic Services Corporation v. Pedro DeHoyos, Jr. and Charlot DeHoyos

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-05-00096-CV

Guadalupe Economic Services Corporation, Appellant

v.

Pedro DeHoyos, Jr. and Charlot DeHoyos, Appellees

FROM THE DISTRICT COURT OF BASTROP COUNTY, 21ST JUDICIAL DISTRICT NO. 24,436, HONORABLE TERRY L. FLENNIKEN, JUDGE PRESIDING

OPINION

Pedro and Charlot DeHoyos sued Guadalupe Economic Services Corporation

(“GES”) and others.1 Neither GES nor any of the other defendants appeared at trial. The district

court entered a default judgment against each defendant. On restricted appeal, GES argues that the

DeHoyoses failed to send it notice of the trial date and, consequently, that the district court erred in

entering a judgment against it. See Tex. R. Civ. P. 245; see also Smith v. Lippmann, 826 S.W.2d

1 Additional defendants were U.S. Bank, N.A.; Morris Hickman, individually and d/b/a Home Ownership of Texas, Inc. (“Hickman”); National Circuit Systems, Inc., f/n/a Austin Home Partners, Inc. (“NCS”); and First Texas Mortgage Group, Inc. (“FTM”). U.S. Bank was non-suited before trial. Only GES appealed the judgment. 137, 138 (Tex. 1992) (per curiam). We will affirm in part and reverse and remand in part for further

proceedings.

BACKGROUND

GES is a nonprofit organization that was involved in a “lease to own” program

designed to enable low-income purchasers to buy houses. Under the program, GES would purchase

a house subject to a mortgage. After purchasing the house, GES would then “rent” it to a potential

buyer participating in the program. The potential buyer, as tenant, would pay rent equal to the

monthly mortgage payment to GES for a two-year period. GES, in turn, was responsible for the

monthly mortgage payments. At the end of the lease term, and after making all the rent payments,

the potential buyer would then assume the mortgage.

In June 2000, the DeHoyoses became tenants of GES under this program. In April

2002, GES stopped paying its monthly mortgage payments and would not allow the DeHoyoses to

pay the remaining balance on the mortgage. U.S. Bank foreclosed on the property on March 13,

2003. On March 31, the DeHoyoses sued GES for deceptive trade practices, see Tex. Bus. & Com.

Code Ann. §§ 17.46(b)(5), (b)(7), (b)(9), (b)(23), 17.50(a)(3) (West 2002); fraud, see id. § 17.45

(West 2002); and fraud in a real estate context, see id. § 27.01-.02 (West 2002).

GES, which apparently was not represented by counsel at the time, responded to the

DeHoyoses’ petition by mailing a letter to the district court requesting that the suit be dismissed.

In its letter, GES justified its failure to make the mortgage payments by alleging that the DeHoyoses

had failed to pay rent for eight months, had eight past-due payments, and had eight late fees.

2 According to GES, its inability to pay was due to the DeHoyoses’ failure to pay rent. The letter did

not state a cause number, and, although it identified the plaintiffs, it did not identify all the

defendants. The letter was signed by Richard Lopez, GES’s Executive Director. Lopez is not a

lawyer.

On August 11, 2004, the DeHoyoses sent a notice to the district court setting the trial

date for September 8, 2004. See Tex. R. Civ. P. 245. Although the notice stated that it would be

sent to “all parties of record,” the DeHoyoses conceded at trial and in their appeal that GES was not

served.

GES did not appear at the trial.2 The district court then entered a judgment jointly

and severally against all the defendants for $302,203 in actual damages and individually against GES

for $371,402 in exemplary damages. This appeal followed.3

DISCUSSION

GES raises six issues on appeal, together complaining that its due process rights were

violated because it was not provided notice of the hearing even though it had filed an answer. See

Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 86-87 (1988) (after making appearance in case,

2 None of the defendants appeared at trial. Although NCS filed an answer and was sent notice of the trial date, it failed to appear. FTM was not sent notice of the trial date and did not appear. At trial, the DeHoyoses’ counsel stated that he had a Soldier’s and Sailor’s Affidavit verifying the absence of Mr. Hickman. See Soldiers’ and Sailors’ Civil Relief Act of 1940, 50 U.S.C.A. app. §§ 501-548, 560-593 (West 1990) (servicemember who is party in civil judicial proceedings may obtain stay of proceedings if certain conditions are met). 3 GES did not timely file a postjudgment motion or a request for findings of fact and conclusions of law. Thus, it filed this appeal as a restricted appeal. See Tex. R. App. P. 30.

3 defendant is entitled to notice of trial setting as matter of due process under Fourteenth Amendment);

see also LBL Oil Co. v. International Power Servs., Inc., 777 S.W.2d 390, 390 (Tex. 1989). The

DeHoyoses respond that GES was not entitled to notice because it did not file an answer. See Wilson

v. Wilson, 132 S.W.3d 533, 536 (Tex. App.—Houston [1st Dist.] 2004, pet. denied).

Because GES has filed a restricted appeal, we review the district court’s decision for

reversible error. See Tex. R. App. P. 44. The error must appear on the face of the record. Norman

Comm. v. Texas Eastman Co., 955 S.W.2d 269, 270 (Tex. 1997). Therefore, we will reverse only

if the decision, on its face, “probably caused the rendition of an improper judgment.” Tex. R. App.

P. 44.

It is axiomatic that, in order for a judgment to be accorded finality, all parties to a

lawsuit must have been accorded procedural due process of law. Anderson v. Anderson, 698 S.W.2d

397, 399 (Tex. App.—Houston [14th Dist.] 1985, writ dism’d). Courts have repeatedly held that due

process requires that a party be given notice of a lawsuit and an opportunity to be heard. Mullane

v. Central Hanover Bank & Trust Co., 339 U.S. 306, 312 (1950); Cunningham v. Parkdale Bank,

660 S.W.2d 810, 813 (Tex. 1983). A letter filed by a non-attorney corporate officer may be an

answer, albeit a defective one, sufficient to forestall a default judgment.4 See KSNG Architects, Inc.

4 Only a licensed attorney can appear and represent a corporation in litigation. Kunstoplast of Am. v. Formosa Plastics Corp., USA, 937 S.W.2d 455, 456 (Tex. 1996); Dell Dev. Corp. v. Best Indus. Unif. Supply Co., 743 S.W.2d 302, 303 (Tex. App.—Houston [14th Dist.] 1987, writ denied); Electronic Data Sys. Corp. v. Tyson, 862 S.W.2d 728, 737 (Tex. App.—Dallas 1993, no writ); Globe Leasing, Inc. v. Engine Supply & Mach. Serv., 437 S.W.2d 43, 45 (Tex. Civ. App.—Houston [1st Dist.] 1969, no writ); see also Tex. R. Civ. P. 7. However, when considering answers filed by non- attorney corporate officers, the courts of appeals have “gone to great lengths to excuse defects in answers to prevent the entry of default judgments against parties who have made some attempt,

4 v. Beasley, 109 S.W.3d 894, 899 n.5 (Tex. App.—Dallas 2003, no pet.); Custom-Crete, Inc. v. K-Bar

Servs., 82 S.W.3d 655, 658 (Tex. App.—San Antonio 2002, no pet.); R.T.A. Int’l v. Cano, 915

S.W.2d 149, 150-51 (Tex. App.—Corpus Christi 1996, writ denied); see also In re Lewis, No. 07-04-

0432, 2004 Tex. App. LEXIS, at *6-7 (Tex. App.—Amarillo 2004, no pet.).

The trial court errs if it proceeds to trial when an answer is on file without giving

notice of the trial setting. Terehkov v. Cruz, 648 S.W.2d 441, 442 (Tex. App.—San Antonio 1983,

no writ). The term “answer” has been construed to mean a “written pleading of some character.”

Santex Roofing & Sheet Metal, Inc. v. Venture Steel, Inc., 737 S.W.2d 55, 56 (Tex. App.—San

Antonio 1987, no writ) (citing State v. Patterson, 40 S.W. 224 (Tex. Civ. App.—Houston [1st Dist.]

1897, no writ)). A responsive pleading should be liberally construed in the absence of special

exceptions. Id. at 56-57. However, an answer must contain sufficient information to place in issue

the claims made in the suit. Terehkov, 648 S.W.2d at 443.

A defendant who timely files a pro se answer by a signed letter that identifies the

parties, the case, and the defendant’s current address, has sufficiently appeared by answer and

deserves notice of any subsequent proceedings. Lippmann, 826 S.W.2d at 138. In Lippman, for

example, the defendant responded to a citation by writing a letter pro se to the district clerk. Id. at

137. The letter stated: “I (Gilbert Smith) have received and signed for the citation for case number

43,846, Rae Lippmann v. Gilbert Smith, issued by the Honorable District Court 75th Judicial District

albeit deficient, unconventional, or flat out forbidden under the Rules of Civil Procedure, to acknowledge that they have received notice of the lawsuit pending against them.” Hock v. Salaices, 982 S.W.2d 591, 593 (Tex. App.—San Antonio 1998, no pet.).

5 of Libert (sic) County, Texas at the Court House of said County in Liberty, Texas on the 31st day

of March of 1989.” Id. The letter noted the defendant’s mailing address immediately below his

signature. Id. The supreme court held that although this letter was not a “standard form” of an

answer, it still gave the court a timely response acknowledging receipt and acceptance of the citation

and petition. Id. Therefore, the defendant was entitled to notice of the hearing. Id.

Although the supreme court stated in Lippman that a letter possessing all of the listed

identifying factors was a sufficient answer, it did not address whether a letter that included some, but

not all of the factors, would also be sufficient. However, the court cited Terehkov v. Cruz as

authority for its holding. Lippman, 826 S.W.2d at 138 (citing Terehkov, 648 S.W.2d at 442). In

Terehkov, the San Antonio court held that a pro se answer was sufficient even though it only

contained the defendant’s signature, address and an assertion that it was not liable for the plaintiff’s

claims. Terehkov, 648 S.W.2d at 442. The Lippman court did not limit Terehkov in any way.

Instead, it adopted Terehkov’s proposition that a signed letter sent to a clerk that acknowledged

receipt of a citation was a sufficient answer. Lippman, 826 S.W.2d at 138.

In applying Lippman, we have held that a pro se document does not constitute an

answer if it in no way responds to the petition. See Narvaez v. Maldonado, 127 S.W.3d 313, 318

(Tex. App.—Austin 2004, no pet.). In Narvaez, the defendant signed the return portion of the

citation and mailed it back to the district clerk. Id. The defendant claimed that the envelope in

which the citation was mailed included his return address and should therefore constitute as an

answer. Id. On appeal, we held that the document was not an answer because it was not a letter, did

6 not include the defendant’s current address, and did not even acknowledge receipt or acceptance of

the citation and petition. Id.

GES’s letter is more similar to the letter in Lippman than to the document in Narvaez.

Instead of merely containing a signature on the citation as in Narvaez, GES’s letter timely

acknowledged receipt and acceptance of the citation and petition and responded to the DeHoyoses’

allegations. Specifically, the letter stated:

We have received the Citation of Personal Service filed by Pedro and Charlot Dehoyos, and have prepared this response per your request. Guadalupe Economic Services . . . requests that this Citation and all charges therein be dismissed.

GES’s letter further asserted that the DeHoyoses were eight months past due on their rent and had

incurred eight months worth of late fees. GES argued that it was not capable of making mortgage

payments on behalf of nonpaying tenants because it is a nonprofit and does not have sufficient cash

to do so. Richard Lopez, GES’s Executive Director, signed the letter, and GES’s address was

provided at the foot of its letterhead.

Although GES’s letter failed to state the cause number and the additional defendants,

the information it provided about the case was sufficient to allow the district clerk’s office to identify

it and file it correctly. See Harris v. Harris, 850 S.W.2d 241, 242-43 (Tex. App.—Houston [1st

Dist] 1993, no writ) (information in pro se letter sufficient to identify case number constituted

answer). We conclude that the letter constituted an answer sufficient to entitle GES to notice of

proceedings in this case.

7 The DeHoyoses concede that, as long as GES gave an answer to the suit, it was

otherwise legally entitled to notice of the trial date. GES had an answer on file, and, because it was

not provided notice of the trial date, a default judgment against it is reversible error. See Terehkov,

648 S.W.2d at 442. We sustain GES’s issues.

CONCLUSION

We have sustained GES’s issues on appeal. We affirm in part; we reverse the

judgment in part, concerning GES’s liability, and remand for further proceedings.

__________________________________________

Bob Pemberton, Justice

Before Justices B. A. Smith, Puryear and Pemberton

Affirmed in Part; Reversed and Remanded in Part

Filed: October 27, 2005