Opinion issued March 8, 2022
In The
Court of Appeals For The
First District of Texas ———————————— NO. 01-20-00566-CV ——————————— U.S. EMPLOYEES CREDIT UNION, Appellant V. FRED EUGENE WARNER, Appellee
On Appeal from the County Civil Court at Law No. 1 Harris County, Texas Trial Court Case No. 1150615
MEMORANDUM OPINION
U.S. Employees Credit Union appeals from a take-nothing judgment on its
contract claims against Fred Eugene Warner. The Credit Union argues that we must
reverse the judgment because the trial court abused its discretion by: (1) denying the Credit Union’s motion to withdraw deemed admissions; and (2) excluding one of
the Credit Union’s witnesses from testifying at trial. We reverse and remand.
BACKGROUND
Nature of Lawsuit
The Credit Union sued Warner for the breach of two contracts. The first
contract was for a credit card, and the second one was for a loan.
Summary-Judgment Motion and Deemed Admissions
The Credit Union moved for summary judgment. The Credit Union argued
that the summary-judgment evidence conclusively proved its right to recover on both
contracts. As evidence, the Credit Union attached the two contracts, a notice of
default and intent to accelerate, a notice of acceleration, and payoff summaries for
each of the contracts. The Credit Union also attached two affidavits. The first
affidavit was made by Tara Johnson, a senior collections specialist, who vouched
for the aforementioned documents in her capacity as the Credit Union’s custodian
of records. In her affidavit, Johnson also summarized the circumstances of Warner’s
defaults. The second affidavit was made by the Credit Union’s counsel regarding
reasonable and necessary attorney’s fees incurred in the suit against Warner.
In Warner’s response opposing summary judgment, he relied on deemed
admissions to create a genuine issue of material fact and negate the Credit Union’s
entitlement to judgment as a matter of law. Warner had previously served requests
2 for admissions on the Credit Union, which did not timely respond to them. As a
result, the Credit Union was deemed to have admitted several matters. Among other
things, the Credit Union was deemed to have admitted that it did not own Warner’s
account, did not provide any goods or services to Warner, and did not file suit within
two years of the last payment that Warner had made on the account.
The Credit Union replied by maintaining that any fact issue created by the
deemed admissions was either immaterial to the summary-judgment issues or was
material to a defense of lack of standing, which Warner had not pleaded.
The Credit Union also moved to withdraw the deemed admissions. The trial
court denied the Credit Union’s motion to withdraw the deemed admissions.
The Credit Union moved for reconsideration of the trial court’s denial of its
motion to withdraw. The Credit Union urged that, “in the midst of the COVID-19
pandemic,” it had “mistakenly failed to deliver the responses by the 30-day
deadline.” The trial court denied the Credit Union’s motion for reconsideration.
After denying the Credit Union’s motion to withdraw the deemed admissions
and its motion for reconsideration of the denial of its motion to withdraw the deemed
admissions, the trial court denied the Credit Union’s summary-judgment motion on
two grounds. First, the trial court held that the Credit Union had not conclusively
proved Warner had defaulted. Second, the trial court held that the Credit Union had
not conclusively proved it was owed damages in the amount sought.
3 Bench Trial
At the outset of trial, the Credit Union tried to introduce into evidence via a
business-records affidavit made by the company’s chief executive officer the
documents that it had previously submitted in conjunction with its summary-
judgment motion, specifically, the two contracts, notice of default and intent to
accelerate, notice of acceleration, and payoff summaries. It is undisputed that the
Credit Union had timely served the business-records affidavit on Warner 14 days in
advance of trial. See TEX. R. EVID. 902(10)(A). But Warner objected to the
introduction of these documents on the basis that the Credit Union had not timely
produced the documents during pretrial discovery.
The Credit Union also intended to have Johnson testify as its corporate
representative. Warner objected that Johnson should be excluded as a witness
because the Credit Union had not designated her as a corporate representative in
discovery and had only identified her as a witness about a week before trial. The
Credit Union conceded it had not identified Johnson in discovery, specifically in its
responses to Warner’s requests for disclosure. But the Credit Union contended that
Warner was well aware Johnson could be a witness, in part, because Johnson had
participated in the litigation before trial.
Warner argued that if Johnson was excluded as a witness and the documents
at issue were excluded as well, then the sole evidence as to whether the Credit Union
4 had standing to bring the contract claims would be the deemed admissions. Because
the Credit Union had admitted it did not own Warner’s account in the deemed
admissions, Warner argued he was entitled to the entry of a take-nothing judgment
on both of the Credit Union’s contract claims.
The trial court agreed with Warner. It excluded Johnson as a witness, excluded
the documents, and rendered a take-nothing judgment on the Credit Union’s claims.
DISCUSSION
I. Deemed Admissions
The Credit Union argues that the trial court abused its discretion by denying
the motion to withdraw the deemed admissions. The Credit Union concedes it did
not timely respond to Warner’s requests, but it argues that good cause existed for the
withdrawal of the admissions. Specifically, the Credit Union argues that it
mistakenly believed it had timely answered all discovery requests. It further argues
that this “mistaken belief was exacerbated by technological difficulties” it
experienced during “the first three months” of the COVID-19 pandemic. According
to the Credit Union, when it discovered at mediation that it had not timely responded
to Warner’s requests for admissions, it immediately tendered its responses during
the mediation, which took place almost two months before the bench trial. The day
after mediation, the Credit Union moved to withdraw the deemed admissions.
5 A. Standard of review
We review a trial court’s ruling on a motion to withdraw deemed admissions
for an abuse of discretion. Cleveland v. Taylor, 397 S.W.3d 683, 694 (Tex. App.—
Houston [1st Dist.] 2012, pet. denied). In general, a trial court abuses its discretion
when its decision on a motion to withdraw deemed admissions is arbitrary,
unreasonable, or made without reference to guiding rules and principles. Id. To
legitimately exercise its discretion, the trial court must have enough evidence before
it to support the decision it made. Metro. Ins. & Annuity Co. v. Peachtree Settlement
Funding, 500 S.W.3d 5, 22 (Tex. App.—Houston [1st Dist.] 2016, no pet.).
B. Applicable law
If a party does not timely respond to requests for admissions, the matters in
the requests are deemed admitted without the need for a court order. TEX. R. CIV. P.
198.2(c). Any matters deemed admitted in this fashion are conclusively established
unless the trial court, on motion, allows the withdrawal of the admissions. Boulet v.
State, 189 S.W.3d 833, 836 (Tex. App.—Houston [1st Dist.] 2006, no pet.). Because
deemed admissions are conclusive absent withdrawal, they prevent a party who did
not timely respond from introducing contradictory evidence. USAA Cty. Mut. Ins.
Co. v. Cook, 241 S.W.3d 93, 102 (Tex. App.—Houston [1st Dist.] 2007, no pet.).
Ordinarily, the party moving for the withdrawal of deemed admissions must
show that good cause exists. TEX. R. CIV. P. 198.3(a). In addition to this showing of
6 good cause, to allow withdrawal, the trial court must find that the party relying on
the deemed admissions will not be unduly prejudiced by their withdrawal and that
withdrawal serves to allow the presentation of the merits. TEX. R. CIV. P. 198.3(b).
When deemed admissions dispose of a claim on the merits, good cause for
their withdrawal exists so long as there is no evidence of flagrant bad faith or callous
disregard for the rules by the party who did not timely respond to the requests for
admissions. Medina v. Raven, 492 S.W.3d 53, 62 (Tex. App.—Houston [1st Dist.]
2016, no pet.). At a minimum, a showing of flagrant bad faith and callous disregard
requires evidence that the party was mindful of the deadline and consciously chose
not to comply with it. Ramirez v. Noble Energy, 521 S.W.3d 851, 860 (Tex. App.—
Houston [1st Dist.] 2017, no pet.); see also Ralls v. Funk, 592 S.W.3d 178, 183 (Tex.
App.—Tyler 2019, pet. denied) (bad faith involves conscious wrongdoing for
dishonest or malicious purpose). And because claim-dispositive deemed admissions
function as a death-penalty discovery sanction, which implicates due-process
concerns, the ordinary burden of proof does not apply; instead, the party opposing
withdrawal of the deemed admissions bears the burden to prove a lack of good cause
by showing that the party seeking their withdrawal did not timely respond due to
flagrant bad faith or callous disregard for the rules. Medina, 492 S.W.3d at 62.
7 The withdrawal of deemed admissions is unduly prejudicial in two situations:
when withdrawal will delay trial and when it will significantly impede the ability of
the party who opposes withdrawal to prepare for trial. Ramirez, 521 S.W.3d at 856.
C. Analysis
1. Good cause
The Credit Union alleged that Warner breached two contracts, one for a credit
card and another for a loan. To recover on these contracts, the Credit Union had to
prove the existence of valid contracts, performance or tendered performance on its
own part, breach of the contracts by Warner, and damages. AKIB Constr. v.
Shipwash, 582 S.W.3d 791, 806 (Tex. App.—Houston [1st Dist.] 2019, no pet.).
Of the 13 requests for admissions propounded by Warner, solely the seventh
one, which asked the Credit Union to admit it did not own his account, is dispositive
of the merits of the Credit Union’s contract claims. See Shipley v. Unifund CCR
Partners, 331 S.W.3d 27, 29–30 (Tex. App.—Waco 2010, no pet.) (rendering
judgment against entity bringing suit to recover credit card debt because entity
offered no proof of account ownership and thus lacked standing). None of the other
12 requests for admissions addressed claim-dispositive subjects. To the extent
Warner asserted below that the Credit Union’s admissions that it did not provide
goods or services to him or bring suit within two years of his last payment are claim-
dispositive, we disagree. The former admission is not claim-dispositive because
8 lending money and extending credit do not constitute the provision of goods or
services. See Williams v. Unifund CCR Partners Assignee of Citibank, 264 S.W.3d
231, 234–35 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (bank has cause of
action to recover money or credit advanced as loan when customer does not pay
credit card account and this claim does not relate to provision of goods or services
because making loan does not constitute provision of goods or services). The latter
admission is not claim-dispositive because the statute of limitations for breach of
contract is four years. TEX. CIV. PRAC. & REM. CODE § 16.004(a)(3).
Accordingly, by failing to timely answer Warner’s seventh request for
admission about the ownership of his account, the Credit Union was deemed to have
admitted it did not own Warner’s account and thus had no claims it could bring
against him. As a result of this deemed admission, the trial court barred the Credit
Union from introducing contrary evidence, like the documents the Credit Union had
sought to introduce at trial via a business-records affidavit. These documents were
the evidence the Credit Union relied on to prove its contract claims on summary
judgment and at trial: the two contracts, notice of default and intent to accelerate,
notice of acceleration, and payoff summaries for both contracts.
Therefore, because the deemed admission about the ownership of Warner’s
account was dispositive of both contract claims, the Credit Union was not required
to show good cause for withdrawal of this deemed admission. Instead, Warner was
9 required to negate the existence of good cause for withdrawal of this deemed
admission by showing that the Credit Union’s untimely response resulted from
flagrant bad faith or callous disregard for the rules. Medina, 492 S.W.3d at 62.
The Credit Union maintains it failed to timely respond to Warner’s requests
for admissions by mistake. In the context of deemed admissions, a mistake or
accident, as opposed to conscious indifference, constitutes good cause for
withdrawal. Boulet, 189 S.W.3d at 836. Similarly, lack of care, simple bad judgment,
or mistaken beliefs about the status of discovery are not enough to show the kind of
flagrant bad faith or callous disregard necessary to deny a motion to withdraw
deemed admissions that are claim-dispositive. Ramirez, 521 S.W.3d at 859.
Warner does not refer us to any evidence in the appellate record that
affirmatively contradicts the Credit Union’s claim of mistake. Moreover, we have
not located any evidence in the appellate record that could support a trial-court
finding that the Credit Union failed to timely respond to the requests for admissions
in flagrant bad faith or as a result of callous disregard for the rules. The trial court
therefore abused its discretion by implicitly finding that Warner had shown the
Credit Union acted in flagrant bad faith or callous disregard for the rules. See Metro.
Ins. & Annuity Co., 500 S.W.3d at 22 (trial court cannot legitimately exercise its
discretion in absence of evidence supporting decision it makes).
10 On appeal, Warner tries to avoid this result by arguing that none of the deemed
admissions were dispositive of the merits. He posits that the deemed admissions
were solely relevant to the trial court’s denial of the Credit Union’s summary-
judgment motion, not the take-nothing judgment the trial court rendered against the
Credit Union at trial. But the record contradicts Warner. At trial, Warner argued that
the records attached to the business-records affidavit should be excluded and that the
deemed admissions established that the Credit Union lacked standing to bring its
contract claims because it had admitted it did not own Warner’s account. On this
basis, Warner requested the entry of a take-nothing judgment. Thus, the deemed
admission concerning whether the Credit Union owned Warner’s account was
dispositive of the merits of the contract claims. See Ramirez, 521 S.W.3d at 858–59
(request for admission asking plaintiff to admit that defendant was not proper party
to suit amounted to request that plaintiff admit his claim against defendant was
invalid and thus was claim-dispositive in nature).
Warner also suggests the record does in fact support a finding of callous
disregard based on the Credit Union’s violation of other discovery rules.
Specifically, Warner relies on a discovery sanction the trial court apparently imposed
on the Credit Union after it failed to timely produce documents responsive to
Warner’s requests for production before the parties’ court-ordered mediation, which
was held about two months before trial. According to Warner, this discovery
11 sanction consisted of awarding him the attorney’s fees he incurred in connection
with the parties’ unsuccessful mediation. At trial, Warner’s counsel represented that
the Credit Union’s counsel had not yet paid Warner these attorney’s fees.
Neither Warner’s requests for production nor the trial court’s order imposing
sanctions on the Credit Union for its failure to timely respond to these requests
before mediation are in the record. But accepting Warner’s account at face value,
this prior discovery sanction does not support a finding of the kind of flagrant bad
faith or callous disregard of the rules that is required to sustain the trial court’s refusal
to allow the Credit Union to withdraw a claim-dispositive deemed admission.
Whatever obligation the Credit Union may have had to produce documents
before mediation in response to Warner’s requests for production, the Credit Union
ultimately included the documents at issue as exhibits to its summary-judgment
motion. Consequently, Warner received these documents before the discovery
period came to a close. The parties conducted discovery in this suit at Level 2.
Hence, under the circumstances of this case, the discovery period ended 30 days
before the trial date. See TEX. R. CIV. P. 190.3(b)(1)(B)(i).1 Given that the Credit
1 Rule 190.3 of the Texas Rules of Civil Procedure was amended after this suit was tried. The version of Rule 190.3 in effect when this suit was pending in the trial court provided that discovery ended the earlier of 30 days before trial or 9 months after the earlier of the first oral deposition or the due date of the first response to written discovery. The 9-month alternative provided in the former rule did not apply because the suit was scheduled for trial within 6 months of the Credit Union’s filing of the suit. 12 Union moved for summary judgment about six weeks before the trial, the Credit
Union provided Warner with the documents on which it relied to support its contract
claims before the discovery period ended. At trial, Warner conceded he had received
the documents at issue before the discovery period ended.
In other words, the prior discovery sanction the trial court imposed on the
Credit Union for its failure to timely produce documents in response to Warner’s
production requests concerned the impact this discovery infraction had on
mediation, not trial. This distinction matters because due process requires there to
be a nexus between the offender, the offensive conduct, and the discovery sanction
imposed. Zuehl Land Dev. v. Zuehl Airport Flying Cmty. Owners Ass’n, 510 S.W.3d
41, 55 (Tex. App.—Houston [1st Dist.] 2015, no pet.); Taylor v. Taylor, 254 S.W.3d
527, 533 (Tex. App.—Houston [1st Dist.] 2008, no pet.). On this record, the Credit
Union’s failure to timely produce documents before mediation in response to
Warner’s requests for production bears no relationship to the trial court’s refusal to
allow the Credit Union to withdraw the claim-dispositive deemed admission and
introduce evidence in support of its contract claims at trial. While the Credit Union’s
initial failure to timely produce the documents at issue may have undermined the
mediation, this failure had no impact on trial because the Credit Union ultimately
produced the documents on which it relied before the discovery period ended.
13 Moreover, even if the record showed the nexus required by due process was
satisfied in this instance, a death-penalty discovery sanction—one that is claim-
dispositive—is appropriate solely when the trial court finds an offender’s
misconduct justifies a presumption that its claims lack merit. Salomon v. Lesay, 369
S.W.3d 540, 558 (Tex. App.—Houston [1st Dist.] 2012, no pet.). Warner did not
argue in the trial court that any of the discovery misconduct at issue justifies a
presumption that the Credit Union’s contract claims lack merit. Nor has he done so
on appeal. The trial court did not make such a finding, and the evidence in the record
does not suggest the Credit Union’s contract claims are meritless. On the contrary,
but for the claim-dispositive deemed admission, the Credit Union would have
introduced documentary evidence in support of its contract claims at trial.
For these reasons, we hold the Credit Union’s failure to timely produce
documents before mediation in response to Warner’s requests for production cannot
support a finding of flagrant bad faith or callous disregard for the rules of the kind
that could sustain the trial court’s later refusal to allow the Credit Union to withdraw
the claim-dispositive deemed admission about the ownership of Warner’s account.
2. Undue prejudice
The record likewise is devoid of evidence that the withdrawal of the deemed
admissions would have unduly prejudiced Warner by delaying trial or significantly
impeding Warner’s ability to prepare for trial. This is an uncomplicated suit in which
14 the Credit Union alleged Warner owed money under two contracts, one relating to a
credit card and the other relating to a loan. The suit’s uncomplicated nature is
underscored by the fact that a mere six months elapsed between the Credit Union’s
filing of the suit and the trial date. The Credit Union disclosed the documents on
which it relied to support its contract claims when it moved for summary judgment,
six weeks or so before trial and before discovery ended. Thus, this is not a case of
an attempted trial by ambush. The Credit Union’s claims and the evidence on which
it relied to support these claims were known well in advance of trial. Finally, the
Credit Union first moved to withdraw the deemed admissions almost two months
before trial. Had the trial court promptly allowed withdrawal, nothing in the record
indicates that this simple case could not have proceeded to trial as scheduled or that
doing so would have affected Warner’s ability to prepare.
On this record, the lone prejudice Warner would have suffered had the trial
court allowed withdrawal of the deemed admissions would have been having to try
the case on the merits, rather than prevailing by procedural default. Having to try a
case on the merits is not the kind of undue prejudice contemplated by the discovery
rules. See Ramirez, 521 S.W.3d at 856 (undue prejudice consists of trial delay or
inability to prepare for trial in context of withdrawal of deemed admissions).
If having to try a case on the merits could constitute undue prejudice, then
claim-dispositive deemed admissions effectively could never be withdrawn. That is
15 the exact opposite result contemplated by the law governing requests for admissions.
Under the governing law, the primary purpose of requests for admissions is to
simplify trials by identifying and eliminating discrete factual matters about which
there is no genuine controversy. Boulet, 189 S.W.3d at 838. Requests for admissions
are not intended to be used to demand that a plaintiff admit that it has no cause of
action. Medina, 492 S.W.3d at 62. However, this is exactly how Warner used his
requests for admissions by demanding the Credit Union admit it did not own
Warner’s account, instead of demanding the Credit Union admit discrete factual
matters relevant to the ultimate question of account ownership.
Warner responds that but for the deemed admissions, he would have
conducted additional discovery in preparation for trial. Having not had the
opportunity conduct this additional discovery, he urges that withdrawal of the
deemed admissions would have unduly prejudiced his preparedness for trial.
Texas law has long disapproved of the use of requests for admissions for the
purpose of demanding that a plaintiff admit it has no claim. See id. Because Warner
at the very least should have known his demand that the Credit Union admit it had
no claim against him was improper, Warner cannot argue that he reasonably
refrained from conducting additional discovery in reliance on the resulting deemed
admission to his detriment. See Time Warner v. Gonzalez, 441 S.W.3d 661, 668–69
(Tex. App.—San Antonio 2014, pet. denied) (any prejudice arising from withdrawal
16 of deemed admissions due to opposing party’s failure to conduct discovery in
reliance on improper requests for admissions does not qualify as undue prejudice).
In sum, Warner improperly used his requests for admissions not as a tool to
identify and eliminate uncontroverted facts, but as a trapdoor to try and avoid trial
altogether. See Medina, 492 S.W.3d at 61 (requests for admissions intended to be
discovery tool, not trapdoor). Thus, releasing the Credit Union from the trap it fell
into, even as a result of its own mistaken failure to timely respond to the requests,
could not unduly prejudice Warner. See id. at 54–55, 60–64 (reversing trial court’s
refusal to allow plaintiff to withdraw deemed admissions to requests asking plaintiff
to admit defendant was not at fault for accident, plaintiff was not injured in accident,
and driver of plaintiff’s vehicle failed to maintain proper lookout at time of accident).
3. Presentation of the merits
Here, it is indisputable that allowing the Credit Union to withdraw the deemed
admissions would have served to allow the presentation of the merits. The trial
court’s refusal to allow the withdrawal of the deemed admissions foreclosed the
Credit Union from presenting any evidence on the merits of its contract claims.
Warner argues that withdrawal of the deemed admissions would not have
served to allow the presentation of the merits because the trial court also excluded
the Credit Union’s corporate representative, Johnson, from testifying at trial.
Without Johnson’s sponsoring testimony, Warner reasons, the documents on which
17 the Credit Union relied in support of its claims would not have been admissible.
Warner therefore maintains that the entry of a take-nothing judgment would have
remained proper under the circumstances even if the trial court had allowed
withdrawal of the deemed admissions because the Credit Union had no evidence.
We disagree. It is undisputed that the Credit Union tried to introduce the
documents supporting its claims via a business-records affidavit. See TEX. R. EVID.
803(6), 902(10) (excepting business records from hearsay rule and making these
records self-authenticating when accompanied by business-records affidavit). With
this affidavit, the documents did not require a sponsoring witness. See Savoy v. Nat’l
Collegiate Student Loan Tr. 2005-3, 557 S.W.3d 825, 830–34 (Tex. App.—Houston
[1st Dist.] 2018, no pet.) (affirming judgment for plaintiff in suit to recover on
defaulted loan, subject to remittitur reducing damages to amount supported by
evidence, in case in which plaintiff did not call any live witnesses during bench trial
and instead submitted documents proving claim via business-records affidavit).
We hold that the trial court abused its discretion by disallowing the Credit
Union from withdrawing the claim-dispositive deemed admission as to account
ownership, which precluded the Credit Union from introducing contrary evidence at
trial and thereby deprived it of the chance to be heard on the merits of its claims. We
sustain the Credit Union’s first issue to the extent of this claim-dispositive deemed
admission. As the other deemed admissions are not claim-dispositive and thus could
18 not serve as the basis for the trial court’s judgment for Warner, we need not address
whether the trial court abused its discretion in refusing to allow the Credit Union to
withdraw them. See TEX. R. APP. P. 44.1(a) (providing that court of appeals cannot
reverse judgment based on error of law unless error probably caused rendition of
improper judgment or prevented appellant from presenting appeal); TEX. R. APP. P.
47.1 (requiring court of appeals to issue written opinion that is as brief as practicable
but addresses every issue raised and necessary to finally dispose of appeal).
II. Excluded Witness
The Credit Union maintains that the trial court also abused its discretion by
refusing to allow Johnson to testify as the company’s corporate representative. The
Credit Union argues that it identified Johnson as its corporate representative more
than a month before trial by submitting the affidavit she made in support of the
company’s motion for summary judgment. The Credit Union further argues that
Johnson attended mediation on behalf of the company almost two months before
trial. Thus, the Credit Union reasons, Warner was neither surprised nor unfairly
prejudiced by Johnson’s appearance as a corporate representative at trial.
However, we need not resolve the Credit Union’s second issue. The trial
court’s refusal to allow withdrawal of the claim-dispositive deemed admission and
its concomitant refusal to allow the Credit Union to introduce evidence in support of
its claims at trial require us to reverse the trial court’s judgment. See Ramirez, 521
19 S.W.3d at 861–62 (party cannot obtain judgment based on deemed admissions that
are dispositive of the merits without showing opposing party is not entitled to
withdrawal of admissions due to its bad faith or callous disregard for rules).
Accordingly, we do not reach the Credit Union’s second issue. See TEX. R. APP. P.
47.1 (requiring court of appeals to issue written opinion that is as brief as practicable
but addresses every issue raised and necessary to finally dispose of appeal).
CONCLUSION
We reverse the trial court’s take-nothing judgment and remand this cause to
the trial court with instructions to grant the Credit Union’s motion to withdraw the
claim-dispositive deemed admission and conduct a new trial. See Medina, 492
S.W.3d at 60 (withdrawal of admissions and new trial are proper remedy).
Gordon Goodman Justice
Panel consists of Justices Goodman, Rivas-Molloy, and Farris.