John Panakkal Joy v. US Lloyds Insurance Company as Subrogee of Fred Sanchez and USAA Casualty Insurance Company

• Court: Court of Appeals of Texas
• Decided: April 18, 2023
• Docket: 05-22-00310-CV
• Status: Published

Opinion

REVERSE and REMAND; Opinion Filed April 18, 2023

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-22-00310-CV

JOHN PANAKKAL JOY, Appellant V. US LLOYDS INSURANCE COMPANY AS SUBROGEE OF FRED SANCHEZ AND USAA CASUALTY INSURANCE COMPANY, Appellees

On Appeal from the County Court at Law No. 6 Collin County, Texas Trial Court Cause No. 006-00954-2021

MEMORANDUM OPINION Before Justices Partida-Kipness, Smith, and Breedlove Opinion by Justice Smith John Panakkal Joy appeals from a post-answer default judgment. He asserts

that the trial court erred in granting the default judgment and denying his motion for

new trial because he did not receive notice of the trial setting and default judgment

hearing. Alternatively, Joy contends the trial court erred in denying his motion for

new trial because the uncontroverted evidence in support of the motion established

the three elements identified in Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d

124, 126 (1939). Because Joy established the Craddock elements, we reverse the

trial court’s default judgment and remand for further proceedings. Background

This lawsuit arises out of a three-car automobile accident involving vehicles

owned by Joy, Fred Sanchez, and Susann Bounds. Appellee US Lloyds Insurance

Company insured Sanchez, and appellee USAA Casualty Insurance Company

insured Bounds. US Lloyds, as subrogee of Sanchez, initiated this cause against

Joy. USAA, as subrogee of Bounds, sued Joy and Sanchez in justice of the peace

court. On appellees’ motion, the trial court consolidated the causes, and the

consolidated cause was set for trial on January 3, 2022.

On December 17, 2021, the parties filed an agreed motion to continue the trial

setting. Beginning December 22, Joy’s counsel took scheduled vacation time, which

ended on January 5. Also on December 22, the trial court’s administrator notified

the parties by email that the court would consider the agreed motion on January 3,

the morning of trial. On December 27, the trial court’s administrator emailed the

parties that the trial court had moved the trial setting from January 3 to January 4.

Neither Joy nor his counsel appeared for the January 4 trial setting, and

counsel for US Lloyds verbally moved for default judgment. USAA joined in the

motion. After hearing evidence, the trial court granted the motions and, on January

6, signed a default judgment against Joy.1

1 There was no discussion of the agreed motion to continue during the proceeding, and a January stamp on the parties’ proposed order granting the agreed motion to continue indicated that the trial court took no action on the motion. –2– Joy timely filed a verified motion to set aside the default judgment or,

alternatively, a motion for new trial. Neither US Lloyds nor USAA filed a response

to the motion. Following a February 25 hearing, the trial court denied the motion.

This appeal followed.

Standard of Review

We review denials of motions to set aside default judgments and motions for

new trial for an abuse of discretion. E.g., Dolgencorp of Tex., Inc. v. Lerma, 288

S.W.3d 922, 926 (Tex. 2009) (per curiam); Davis v. West, 433 S.W.3d 101, 108

(Tex. App.—Houston [1st Dist.] 2014, pet. denied). A trial court abuses its

discretion if it fails to grant a new trial when a defaulting defendant proves each

element of the Craddock test. Dolgencorp, 288 S.W.3d at 926; Chloe’s Concepts,

LLC v. Clear Rainbow, Inc., No. 05-20-00484-CV, 2021 WL 5998006, at *2 (Tex.

App.—Dallas Dec. 20, 2021, no pet.) (mem. op.). Under that test, the defendant

must establish that: (1) his failure to appear was not intentional or the result of

conscious indifference, but was the result of an accident or mistake; (2) he has a

meritorious defense; and (3) granting a new trial will occasion no delay or otherwise

injure the plaintiff who obtained the default judgment.2 Craddock, 133 S.W.2d at

2 The test is modified in the event the defendant establishes that his failure to appear was not intentional or the result of conscious indifference because he did not receive notice of the trial setting. See Mabon Ltd. v. Afri-Carib Enter., Inc., 369 S.W.3d 809, 813 (Tex. 2012) (per curiam); Lopez v. Lopez, 757 S.W.2d 721, 723 (Tex. 1988) (per curiam). In that case, due process requires a new trial without a showing of the second and third Craddock elements. Mabon, 369 S.W.3d at 813. Based on our disposition of this appeal, however, it is not necessary that we consider the modified test. –3– 126; Lopez v. Lopez, 757 S.W.2d 721, 722 (Tex. 1988) (per curiam) (applying

Craddock test to post-answer default judgments).

Analysis

In his second issue, Joy asserts that the trial court abused its discretion in

denying his motion for new trial because uncontroverted evidence in support of the

motion established each Craddock element. We agree and address the elements in

turn.

Failure to Appear

A defendant satisfies its burden under the first Craddock element when his

factual assertions, if true, negate intentional or consciously indifferent conduct by

the defendant and the plaintiff does not controvert the factual assertions. Milestone

Operating, Inc. v. ExxonMobil Corp., 388 S.W.3d 307, 310 (Tex. 2012) (per curiam)

(citing Sutherland v. Spencer, 376 S.W.3d 752, 755 (Tex. 2012)). “A failure to

appear is not intentional or due to conscious indifference . . . merely because it is

deliberate; it must also be without adequate justification. Proof of such

justification—accident, mistake, or other reasonable explanation—negates the intent

or conscious indifference for which reinstatement can be denied.” Smith v. Babcock

& Wilcox Constr. Co., 913 S.W.2d 467, 468 (Tex. 1995) (per curiam).

We consider the defendant’s knowledge and acts to determine whether he

satisfied his burden under the first Craddock element. Milestone Operating, 388

S.W.3d at 309–10. We also apply the first element of the Craddock test liberally.

–4– Posada v. Perkins, No. 05-20-00535-CV, 2022 WL 99998, at *3 (Tex. App.—Dallas

Jan. 11, 2022, no pet.) (mem. op.).

A party may supply evidence in support of a motion for new trial by filing a

verified motion, see Mathis v. Lockwood, 166 S.W.3d 743, 744 (Tex. 2005) (per

curiam); In re D.R.P., No. 04-14-00191-CV, 2014 WL 3843989, at *4 (Tex. App.—

San Antonio Aug. 6, 2014, no pet.) (mem. op.); Joiner v. AMSAV Group, Inc., 760

S.W.2d 318, 320–21 (Tex. App.—Texarkana 1988, writ denied), and Joy’s motion

for new trial was verified by his counsel. We also consider statements by Joy’s

counsel during the hearing on the motion as evidence on the Craddock elements.

See Mathis, 166 S.W.3d at 745 (citing Banda v. Garcia, 955 S.W.2d 270, 272 (Tex.

1997) (per curiam) (attorney’s unsworn statements tendered as evidence at hearing

were sufficient absent objection)).

The record shows that the trial court entered a scheduling order in July 2021,

setting a pretrial conference on December 2 and trial on January 3. At the pretrial

conference, appellees appeared and announced ready for trial. Neither Joy nor his

counsel appeared at the pretrial conference or filed the necessary pretrial documents.

According to Joy’s counsel, she was retained after the trial court entered the

scheduling order and, thereafter, failed to obtain a copy of the order. She did not

attend the pretrial conference because she did not know about it.

Joy’s counsel, however, was aware of the January 3 trial setting. And, on

December 17, she joined appellees in filing the agreed motion to continue the trial.

–5– The parties sought the continuance because it was the first trial setting, the parties

had not completed necessary depositions, and they wished to mediate the cause.

Relying on the agreed motion, Joy’s counsel began a planned leave from work

on December 22. She did not file a vacation letter with the trial court. Nor did she

check her work emails while she was on leave. An autoreply notified anyone

sending her an email that she would be out of the office until January 5 and, if

immediate assistance was needed, to contact either a colleague or her secretary.

Counsel, however, had designated a different service email in the Collin County case

management system. There was no evidence regarding whether counsel was

monitoring the designated service email or if it also had an autoreply. In any event,

counsel did not check her email until the afternoon of January 4 and, therefore, did

not see either the December 22 email that the court would consider the agreed motion

to continue on the morning of trial or the December 27 email that the trial court had

moved the trial setting from January 3 to January 4.3

According to the verified motion for new trial, counsel and Joy would have

appeared for trial on January 4 but for counsel’s “mistaken belief and reliance on her

internal work calendar, planned time off and the agreed motion to continue that was

filed on December 17, 2021.” Counsel mistakenly believed the trial court would

3 Joy’s counsel, both in the verified motion for new trial and at the hearing on the motion, stated that she did not receive the email notice that the trial setting had been changed to January 4. The record indicates, however, that the notice was sent to her designated service email in the Collin County case management system. –6– continue the trial setting given that the parties agreed to a continuance, no

depositions had been taken, and the parties desired to mediate the case. Her and

Joy’s failure to appear was not intentional or the result of conscious indifference, but

an embarrassing mistake by Joy’s counsel for which Joy should not be punished.

Counsel apologized to the trial court.

Appellees argue that counsel’s decision to stop checking her email before

confirming that the trial court would grant a continuance constituted conscious

indifference to the trial setting. And, as the trial court noted at the hearing on the

motion for new trial, it was “completely on” Joy’s counsel to update her email

address and file a vacation letter. Under the circumstances, the trial court very well

may have considered counsel’s actions negligent. Negligence in failing to appear,

however, does not establish intentional disregard or conscious indifference. See

Take 5 LLC v. Smith, No. 05-22-00390-CV, 2023 WL 1229028, at *5 (Tex. App.—

Dallas Jan. 31, 2023, no pet.) (mem. op.); Titan Indem. Co. v. Old S. Ins. Grp., Inc.,

221 S.W.3d 703, 708 (Tex. App.—San Antonio 2006, no. pet.). Indeed, a

defendant’s justification for his failure to appear need not necessarily be a good one.

See Sutherland, 376 S.W.3d at 755. A mistaken belief can negate intentional or

consciously indifferent conduct. See Perry v. Benbrooke Ridge Partners L.P., No.

05-16-01486-CV, 2018 WL 2138957, at *3 (Tex. App.—Dallas May 7, 2018, no

pet.) (mem. op.).

–7– The facts set out in Joy’s verified motion for new trial and as explained by his

counsel during the hearing on the motion establish that counsel mistakenly assumed

the motion for continuance would be granted. We conclude that these facts

demonstrate that the failure to appear for the January 4 trial setting was not

intentional or the result of conscious indifference. See, e.g., Smith, 913 S.W.2d at

468 (defendant’s attorney’s failure to appear did not amount to conscious

indifference when he credibly explained that he was in trial in another county and

believed the court would grant a continuance for that reason); One Hundred Seventy-

One Thousand One Hundred & 00/100 ($171,100.00) in U.S. Currency v. State, No.

04-18-00123-CV, 2019 WL 3229188, at *3 (Tex. App.—San Antonio Apr. 17, 2019,

no pet.) (mem. op.) (although defendant’s attorney mistakenly assumed fourth

motion for continuance would be granted, failure to appear did not rise to level of

conscious indifference); Intras, LLC v. Core 3 Techs., LLC, No. 05-17-00832-CV,

2018 WL 3387269, at *2 (Tex. App.—Dallas July 12, 2018, no pet.) (mem. op.)

(attorney’s mistaken belief that settlement discussions would continue and plaintiff

would not take any action in lawsuit was, at worst, mere negligence and did not show

intent or conscious indifference in defendant’s failure to answer).

Appellees did not file a response to Joy’s motion for new trial. At the hearing

on the motion, counsel for US Lloyds made comments regarding the likelihood that

the motion to continue the trial setting would not be granted based on the court

administrator’s emails and his assumption that Joy’s counsel was “on” the emails.

–8– USAA’s counsel opposed the motion for new trial and stated that Joy’s counsel’s

service email address was on the administrator’s emails. Appellees did not

controvert that Joy’s counsel mistakenly believed the agreed motion to continue

would be granted and took her planned leave relying on that belief, and the trial court

could not disregard those facts. Fidelity & Guar. Ins. Co. v. Drewery Const. Co.,

186 S.W.3d 571, 576 (Tex. 2006) (per curiam); see also Dir., State Emps. Workers’

Comp. Div. v. Evans, 889 S.W.2d 266, 269 (Tex. 1994) (plaintiff did not controvert

defendant’s assertion that she was mistaken about trial date, and court must take it

as true). Accordingly, we conclude that Joy established the first Craddock element

with facts showing that his and his counsel’s failure to appear for trial was the result

of mistake and not intentional or the result of conscious indifference.

Meritorious Defense

A defendant satisfies the second Craddock element if his motion for new trial

“alleges facts which in law would constitute a defense to the plaintiff’s cause of

action and is supported by affidavits or other evidence providing prima facie proof

that the defendant has such a defense.” Dolgencorp, 288 S.W.3d at 928. Unlike the

first Craddock element, a plaintiff cannot controvert a meritorious defense. See Ivy

v. Carrell, 407 S.W.2d 212, 214 (Tex. 1966).

Joy’s motion for new trial asserts, among other things, that Sanchez’s

negligence, and not Joy’s, caused the automobile accident and the accident was an

unavoidable accident or resulted from sudden emergency. Joy’s counsel verified the

–9– motion. And, to further support the facts set out in the motion, Joy attached the

Texas Peace Officer’s Crash Report for the accident. The crash report reflects that

Joy and Sanchez reported conflicting versions of the facts of the accident. Joy

reported that his vehicle was stationary behind Bounds’s vehicle at a stop light when

Sanchez’s vehicle struck Joy’s back right bumper, pushing Joy’s vehicle into

Bounds’s vehicle. Sanchez reported that Joy changed into Sanchez’s lane, causing

Sanchez to hit Joy’s vehicle and push it into Bounds’s vehicle. Based on the

positioning of the vehicles, it appeared to the accident investigator that Joy had not

changed lanes, but had been, and remained, in the lane behind Bounds’s vehicle.

Appellees never argued to the trial court that Joy’s motion failed to properly

assert and support a meritorious defense or object that the crash report was not

competent evidence. Accordingly, Joy presented a prima facie case that he had

meritorious defenses related to lack of negligence, lack of causation, and sudden

emergency, which we conclude was sufficient to establish the second Craddock

element. See, e.g., Goskie v. Benningfield, No. 11-02-00107-CV, 2003 WL 188556,

at *2 (Tex. App.—Eastland Jan. 16, 2003, no pet.) (mem. op.); Hidalgo Cnty.

Emergency Serv. Found. v. Mejia, No. 13-16-00576-CV, 2018 WL 2731881, at *5

(Tex. App.—Corpus Christi-Edinburg June 7, 2018, pet. denied) (mem. op.).

Undue Delay and Injury to Plaintiff

The third Craddock element examines whether a new trial would cause undue

delay or injury to the plaintiff. Dolgencorp, 288 S.W.3d at 929. “The willingness

–10– of a party to go to trial immediately and pay the expenses of the default judgment

are important factors for the court to look to in determining whether it should grant

a new trial.” Evans, 889 S.W.2d at 270 n.3. These factors, however, are not

dispositive of whether the motion should be granted. Id.

In his verified motion for new trial, Joy asserted that vacating the default

judgment and rescheduling trial on the first available docket would not cause delay

or otherwise injure appellees. Specifically, Joy noted that less than eight months had

passed since the trial court had consolidated the cause and, in connection with the

agreed motion to continue, appellees had indicated they needed additional time to

prepare their case. Joy’s counsel offered to reimburse appellees for the reasonable

expenses they incurred in obtaining the default judgment. Because Joy contended

that granting a new trial would not injure appellees, the burden of proof shifted to

appellees to prove injury. See Dolgencorp, 288 S.W.3d at 929. Appellees, however,

did not respond to Joy’s motion or submit any proof of injury at the hearing on the

motion. Accordingly, we conclude that Joy has satisfied the third Craddock element.

See, e.g., Hunter v. Ramirez, 637 S.W.3d 858, 864 (Tex. App.—Houston [14th Dist.]

2021, no pet.); Norton v. Martinez, 935 S.W.2d 898, 903 (Tex. App.—San Antonio

1996, no pet.) (defendant met third Craddock factor when plaintiff did not respond

to motion or offer evidence to rebut showing of no undue delay or injury).

–11– Conclusion

In sum, the uncontroverted factual allegations in Joy’s verified motion for new

trial and his counsel’s statements at the hearing on the motion satisfied each

Craddock element. In denying the motion, the trial court abused its discretion. See

Dolgencorp, 288 S.W.3d at 926. Accordingly, we sustain Joy’s second issue and,

in light of this disposition, need not consider Joy’s first issue. See TEX. R. APP. 47.1.

We reverse the trial court’s default judgment and remand the case for further

proceedings.

/Craig Smith/ CRAIG SMITH 220310F.P05 JUSTICE

–12– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

JOHN PANAKKAL JOY, Appellant On Appeal from the County Court at Law No. 6, Collin County, Texas No. 05-22-00310-CV V. Trial Court Cause No. 006-00954- 2021. US LLOYDS INSURANCE Opinion delivered by Justice Smith. COMPANY AS SUBROGEE OF Justices Partida-Kipness and FRED SANCHEZ AND USAA Breedlove participating. CASUALTY INSURANCE COMPANY, Appellees

In accordance with this Court’s opinion of this date, the judgment of the trial court is REVERSED and this cause is REMANDED to the trial court for further proceedings consistent with this opinion.

It is ORDERED that each party shall bear its own costs of this appeal. The obligations of The Ohio Casualty Insurance Company as surety on appellant’s supersedeas bond are DISCHARGED.

Judgment entered this 18th day of April 2023.

–13–