Hahn v. Whiting Petroleum Corp.

171 S.W.3d 307, 2005 WL 1361571
CourtCourt of Appeals of Texas
DecidedSeptember 15, 2005
Docket13-02-391-CV
StatusPublished
Cited by12 cases

This text of 171 S.W.3d 307 (Hahn v. Whiting Petroleum Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hahn v. Whiting Petroleum Corp., 171 S.W.3d 307, 2005 WL 1361571 (Tex. Ct. App. 2005).

Opinions

OPINION

Opinion by Justice GARZA.

By nine issues, Keith Hahn challenges a default judgment entered against him on a suit filed by Whiting Petroleum Corporation, RK Petroleum Corporation, and Tre-mont Energy, LLC. Because we conclude that Hahn satisfied Craddock’s three-prong test for a new trial following entry of a default judgment, we sustain Hahn’s seventh issue, reverse the case, and remand it to the trial court for further proceedings consistent with this opinion. See Craddock v. Sunshine Bus Lines, Inc., 134 Tex. 388, 133 S.W.2d 124, 126 (1939).

The plaintiffs’ suit against Hahn asserted causes of action for breach of fiduciary duty and constructive fraud. In addition to the claims against Hahn, the suit also asserted causes of action against Core Exploration & Production Corporation for (1) an accounting, (2) relief under section 91.404 of the natural resources code, (3) breaches of two different contracts, (4) breach of fiduciary duty, and (5) constructive fraud. The plaintiffs also sued Del Rio Energy, LLC under a single business enterprise theory, alleging that Del Rio was jointly and severally liable for the acts and omissions on which the claims against Core were premised. The trial court entered a default judgment against all three defendants, jointly and severally, for damages in excess of $1.6 million, including $30,000 in attorney’s fees. Only Hahn has appealed.

By two issues, Hahn argues that this Court should reverse the judgment against him and render a take-nothing judgment against the plaintiffs because (1) the judgment is based on a contract theory of recovery which was not pled in the suit against Hahn and (2) the facts alleged in the plaintiffs’ petition do not support a cause of action against Hahn for breach of contract, breach of fiduciary duty, or constructive fraud. Notwithstanding Hahn’s contention to the contrary, if we were to sustain either of these issues, we would remand the case to the trial court for further proceedings — not render a take-nothing judgment against the plaintiffs. See Roberts v. Mullen, 417 S.W.2d 74, 77-79 (Tex.Civ.App.-Dallas 1967) (reversing default judgment and remanding for jury [310]*310trial because judgment failed to conform to pleadings), aff'd, 428 S.W.2d 576 (Tex.1968); C & H Transp. Co. v. Wright, 396 S.W.2d 443, 446-47 (Tex.Civ.App.-Tyler 1965, writ refd n.r.e.) (reversing default judgment and remanding for jury trial because petition did not state a cause of action). Because we sustain Hahn’s seventh issue and therefore reverse the judgment and remand’ the case for further proceedings, we do not reach Hahn’s other issues, which would entitle Hahn to equal or lesser relief. See Tex.R.App. P. 47.1.

In his seventh issue, Hahn argues that the trial court erred by failing to grant his motion for new trial. Following the entry of a default judgment, a defendant may establish its entitlement to a new trial by satisfying the following three-prong test articulated by the supreme court in Craddock: (1) present facts showing that the failure to appear was not intentional or the result of conscious indifference but was due to accident or mistake, (2) set up a meritorious defense, and (3) file the motion for new trial when it would not cause delay or otherwise injure the prevailing party. Craddock, 133 S.W.2d at 126.

We begin with the first prong: the reason for Hahn’s failure to appear. See id. To meet this prong, Hahn had to prove that his failure to appear was not intentional on his or his agent’s part nor the result of his or his agent’s conscious indifference. Lowe v. Lowe, 971 S.W.2d 720, 723 (Tex.App.-Houston [14th Dist.] 1998, pet. denied). In Lowe, the Fourteenth Court explained that if (1) a lawyer has misled his client, or wholly failed to perform his professional duties, and (2) the client is free of responsibility and knowledge, the client meets the first prong of Craddock by showing his own lack of knowledge or lack of responsibility. Id. at 724.

Having reviewed the evidence adduced in support of Hahn’s motion for new trial, we conclude that the first element of the Craddock test has been established. Hahn produced uncontroverted evidence to show that his attorney failed to perform his professional duties. Therefore, Hahn needed to show only his own lack of knowledge and responsibility. See. id.

The uncontroverted evidence establishes the following facts: upon being served with the plaintiffs’ petition, Hahn forwarded the petition and citation to attorney Brian T. McLaughlin, who routinely handled Hahn’s legal matters, and asked McLaughlin to file an answer on his behalf. McLaughlin, who works for the law firm of Kerr & Ward, LLP, never filed an answer and did not inform Hahn that he would not represent him. Meanwhile, Kerr & Ward hired attorney Brad Miller, who represented the plaintiffs in the suit against Hahn. Miller continued to represent the plaintiffs against Hahn until April 17, 2002, when attorney James N. Stofer was designated lead counsel for the plaintiffs. On the same day Stofer took over the case for the plaintiffs, a default judgment was entered against Hahn.

Upon review of the Texas Rules of Professional Conduct, we conclude that McLaughlin had a professional duty to inform Hahn that he could no longer represent him because of a conflict of interest. Rule 1.06(a) states, “A lawyer shall not represent opposing parties to the same litigation.” Tex.R. PROf’l Conduct 1.06(a). Rule 1.06(e) explains that “[i]f a lawyer would be prohibited by this Rule from engaging in particular conduct, no other lawyer while a member or associated with that lawyer’s firm may engage in that conduct.” Id. 1.06(e). Given that Miller represented the plaintiffs, neither McLaughlin nor any other attorney working for Kerr & Ward could represent Hahn, as Hahn and [311]*311the plaintiffs were opposing parties to the same litigation. See id. Under rule 1.15, McLaughlin had to “give reasonable notice” to Hahn that he could not continue to represent him. See id. 1.15(d). McLaughlin also had a duty to take steps to the extent reasonably practicable to protect Hahn’s interests. See id. The uncontro-verted evidence shows that Hahn was never notified that McLaughlin would no longer represent him.

Given that McLaughlin did not perform his duties under the rules of professional conduct, the Craddock analysis focuses on whether Hahn proved that his failure to appear was unintentional and not the result of conscious indifference. See Lowe, 971 S.W.2d at 724. The uncontroverted evidence shows that on March 18, 2002, the same day Hahn was served, Hahn mailed the petition and citation to his attorney, along with instructions for his attorney to file an answer on his behalf. The evidence also shows that Hahn had no knowledge of his attorney’s failure to file an answer until after the default judgment was entered against him on April 17, 2002. Based on this evidence, we conclude that Hahn satisfied the first prong of the Crad-dock test by negating the possibility of intentional or consciously indifferent conduct.

Next, we address the second prong of the Craddock test: whether Hahn set up a meritorious defense. See Craddock, 133 S.W.2d at 126.

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171 S.W.3d 307, 2005 WL 1361571, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hahn-v-whiting-petroleum-corp-texapp-2005.