Wolfgang Hirczy v. Citibank, N.A.

Opinion

Opinion issued August 26, 2014

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-13-00986-CV ——————————— WOLFGANG HIRCZY, Appellant V. CITIBANK, N.A., Appellee

On Appeal from the County Court at Law No. 2 Harris County, Texas Trial Court Case No. 1001936

MEMORANDUM OPINION

Wolfgang Hirczy appeals the post-answer default judgment rendered in

favor of appellee, Citbank, N.A., on its cause of action for breach of contract. In

four issues, Hirczy contends that (1) the trial court erred in granting judgment in favor of Citibank absent proof of the underlying contract; (2) the trial court’s

judgment contravenes federal law governing national banks; (3) the trial court’s

judgment contravenes federal and state policy favoring arbitration; and (4) the

absence of a reporter’s record constitutes reversible error. We affirm.

Background

Based on Hirczy’s default on a credit card agreement, Citibank filed suit

alleging breach of contract and seeking damages of $15,555.33, plus interest and

costs. The petition was accompanied by requests for disclosure, interrogatories,

and requests for admissions. Although the return of service reflects that Hirczy

was served with the petition and discovery requests on October 24, 2011, he failed

to answer any of the discovery requests.

The following May, 2012, Citibank amended its petition and filed a second

set of discovery requests 1 seeking that Hirczy admit, among other things, that (1)

he used a credit card account issued to him by the bank to make purchases and/or

obtain cash advances; (2) he made at least one payment on the account; (3) he was

provided with a copy of the applicable terms and conditions and/or the cardholder

agreement for the account prior to using the account; (4) he did not object to the

1 Although entitled “Plaintiff’s First Discovery Request,” these requests for disclosure, production, admissions, and interrogatories were actually Citibank’s second set of discovery requests. In this amended petition, Citibank sought damages in the amount of $15,831.33.

2 applicable terms and conditions; (5) Citibank paid all vendors and merchants for

any purchases charged by him to the account; (6) he received monthly account

statements; (7) he ceased making payments on the account; (8) he received a

demand letter for payment of the debt; (9) all due payments, credits, and/or

adjustments in his favor were applied to the account; and (10) he had a balance

remaining owed on the credit card account at the time he ceased making payments.

Despite several attempts, Citibank never served Hirczy with the amended pleading

and discovery requests. Hirczy filed his answer on February 3, 2013, but never

answered any of the discovery requests.

Although Citibank provided notice of the August 19, 2013 trial setting via

certified mail, 2 Hirczy failed to appear.

The following trial exhibits were admitted: 3

• Citibank’s notice to Hirczy of the trial setting and the court’s order for trial setting (Exhibit A);

• an affidavit on deemed admissions by Citibank’s attorney (Exhibit B);

• a certificate of last known mailing address (Exhibit C);

• a non-military affidavit (Exhibit D);

2 During the course of litigation, Hirczy filed a motion to dismiss and Citibank filed a motion for summary judgment but the trial court did not rule on these motions. 3 It is undisputed that Citibank presented no live testimony at trial.

3 • the affidavit of Daniel Fisher, a Citibank document control officer (Exhibit E); and

• an account statement (Exhibit F).

On August 21, 2013, the trial court entered judgment against Hirczy in the

amount of $15,831.33, plus interest and court costs. The trial court entered

findings of fact and conclusions of law on September 13, 2013, at Hirczy’s request.

Hirczy timely filed this appeal.

Discussion

In his first issue, Hirczy contends that the trial court’s judgment for Citibank

on its breach of contract cause was error because there was no evidence of the

underlying contract, i.e., the cardmember agreement. Absent proof of the terms of

the underlying contract, he argues, the evidence is insufficient.

We must initially address Hirczy’s argument that the trial court’s findings of

fact and conclusions of law demonstrate that the trial court used the wrong default

judgment standard in granting its judgment to Citibank. Conclusion of law No. 2

stated, “Defendant failed to appear for trial and default judgment was granted in

favor of the Plaintiff.” Hirczy argues that this conclusion, coupled with the trial

court’s findings of fact,4 reflects the trial court’s erroneous application of the

4 The trial court made the following findings of fact:

1. Citibank N.A. filed [its first amended petition] against Defendant Wolfgang Hirczy (“Hirczy”) on May 15, 2012. 4 criteria for a no-answer default judgment. We disagree. In its finding of fact no. 3,

the trial court noted that Hirczy had filed an original answer and finding of fact no.

8 stated, “Defendant failed to appear for trial on August 19, 2013 and a post-

answer default judgment was signed” (emphasis added).

A post-answer default judgment occurs where a timely answer, that puts the

merits of plaintiff’s claim at issue, is on file, but the defendant fails to appear at

trial. Sharif v. Par Tech, Inc., 135 S.W.3d 869, 872 (Tex. App.—Houston [1st

Dist.] 2004, no pet.) (citing Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex.

1979)).5 If a defendant has filed such an answer, the defendant’s failure to appear

2. Hirczy was served [with Citibank N.A.’s original petition] on October 24, 2012.

3. Hirczy filed his original answer in response to Citibank, N.A.’s petition on May 20, 2013.

4. Hirczy’s answer contained a general denial and objection and plea of privilege.

5. Citibank, N.A. filed its Motion for Summary Judgment on July 23, 2013.

6. The Court set the case on its trial docket on August 19, 2013.

7. Plaintiff appeared for trial and announced ready on August 19, 2013.

8. Defendant failed to appear for trial on August 19, 2013 and a post-answer default judgment was signed. 5 In contrast, under Texas Rules of Civil Procedure 239, “the plaintiff may . . . take judgment by default against [the] defendant if he has not previously filed an answer . . . .” TEX. R. CIV. P. 239. 5 at trial is neither an abandonment of the defendant’s answer nor an implied

confession of any issues thus joined by the defendant’s answer. Stoner, 578

S.W.2d at 682; Sharif, 135 S.W.3d at 872. Judgment cannot be entered on the

pleadings; instead, the party seeking judgment must offer evidence and prove his

case. Stoner, 578 S.W.2d at 682.

Proof of its breach of contract claim required Citibank to establish (1) the

existence of a valid contract between Hirczy and Citibank, (2) performance by

Citibank, (3) breach of the contract by Hirczy, and (4) damages sustained as a

result of the breach. See Am. Express Centurion Bank v. Minckler, 345 S.W.3d

204, 208 (Tex. App.—Dallas 2011, no pet.); Winchek v. Am. Express Travel

Related Servs. Co., 232 S.W.3d 197, 202 (Tex. App.—Houston [1st Dist.] 2007,

no pet.). In its petition, Citibank alleged that it issued a credit card to Hirczy in his

name, Hirczy received and used the card, Citibank performed under the contract by

reimbursing merchants who accepted Hirczy’s credit card in payment, Hirczy

breached the contract by defaulting on the payment obligation of the credit card

agreement; and the outstanding balance of Hirczy’s credit card account was

$15,831.33. Citibank’s requests for admissions sought Hirczy’s admission of the

truth of each of these allegations.

“Deemed admissions may be employed as proof, and once admissions are

deemed admitted by operation of law and where the admissions fully support each

6 element of a cause of action, including damages, they will fully support a judgment

based thereon.” Oliphant Fin., LLC v. Galaviz, 299 S.W.3d 829, 838 (Tex. App.—

Dallas 2009, no pet.) (noting “unanswered requests for admissions are deemed

admitted without the necessity of a court order and any matter thus admitted is

conclusively established as being true”); see TEX. R. CIV. P. 198.2(c). Here, the

record reflects that Hirczy failed to answer Citbank’s second requests for

admissions and, therefore, Citibank’s requests were deemed admitted without the

necessity of a court order.6 See Overstreet v. Home Indem. Co., 669 S.W.2d 825,

827–28 (Tex. App.—Dallas 1984), rev’d on other grounds, 678 S.W.2d 916 (Tex.

1984); see also Rowlands v. Unifund CCR, No. 14-05-01122-CV, 2007 WL

1395101, at *3 (Tex. App.—Houston [14th Dist.] 2007, no pet.) (“[T]o the extent

they address the elements of proof of a claim, deemed admissions provide

uncontroverted proof of these elements as a matter of law.”). Accordingly, Hirczy

is deemed to have admitted each of the elements of proof required to sustain the

judgment for Citibank.

At trial, the affidavit of Daniel Fisher, a Citibank document control officer,

was admitted attesting that Hirczy incurred charges on his account; failed to make

6 Although Hirczy was not served with this petition and set of discovery requests, he made an appearance in the suit when he subsequently filed his answer. Under Texas Rule of Civil Procedure 121, an answer constitutes an appearance and “dispense[s] with the necessity for the issuance or service of citation upon [the defendant].” TEX. R. CIV. P. 121.

7 the required payments on the account; defaulted on the account; the outstanding

balance on the account was $15,831.33, and the account balance was due and

owing as of the date of execution of the affidavit. Citibank also offered an account

statement for the period from April 21, 2010 to May 20, 2010 reflecting a balance

due of $15,831.33.

Hirczy’s deemed admissions and the evidence at trial supported each

element of Citibank’s breach of contract action. See Minckler, 345 S.W.3d at 208

(concluding credit card issuer was entitled to default judgment where deemed

admissions and evidence at trial supported issuer’s breach of contract claim against

cardholder); Galaviz, 299 S.W.3d at 837–38 (finding creditor was entitled to

default judgment because credit card account holder’s deemed admissions

conclusively proved all elements of creditor’s breach of contract claim).

Accordingly, we overrule Hirczy’s first issue.

Hirczy’s second issue contends that, if permitted to stand, the trial court’s

judgment would contravene federal law by allowing national banks to obtain

judgments without the necessity of establishing a contractual basis for charging

interest in compliance the Truth in Lending Act, 15 U.S.C. § 1601, Regulation Z,

12 C.F.R. § 226, and the National Bank Act, 12 U.S.C. § 85. Hirczy complains

that without proof of the terms of the credit contract, “it is not even possible to

determine whether a [Truth in Lending Act] violation occurred . . . .”

8 We find this argument unavailing for several reasons. First, Hirczy is not

complaining that default judgment was improper because Citibank failed to

provide disclosures related to credit terms mandated by federal banking law.

Rather, he argues that, without evidence of the cardholder agreement, it is

impossible to determine whether Citibank made the mandatory disclosures. This

argument, alleging a hypothetical violation of federal law, is without merit.

Second, we note that in failing to respond to Citibank’s first set of requests for

admissions, Hirczy was deemed to have admitted that he received all applicable

notices. 7 Galaviz, 299 S.W.3d at 838. Third, Hirczy did not raise this argument

before the trial court in either his answer or his motion to set aside the default

judgment. See TEX. R. APP. P. 33.1. Thus, we overrule Hirczy’s second issue.

In his third issue, Hirczy contends that the default judgment, if affirmed,

would contravene federal and state policy favoring arbitration. He argues that

Citibank’s failure to produce the cardmember agreement precluded him from

7 In failing to respond to Citibank’s requests for admissions that accompanied its amended petition, Hirczy admitted that he (1) was notified of all applicable interest rates, late-fees, over-limit fees and other fees and/or penalties that could be assessed on the account prior to use of the account, (2) the monthly account statements received by him for the account accurately set forth all transactions, purchases, payments, credits, debits, deductions, interest rates, late-fees, over-limit fees and/or other fees posted to the account, (3) was notified of all charges and/or amendments to the terms and conditions and/or cardholder agreement for the account, and (4) was notified of any changes to the applicable interest rates, late- fees, over-limit fees and other fees and/or penalties that could be assessed to the account. In failing to respond, these unanswered requests became deemed admissions. See Oliphant Fin., LLC v. Galaviz, 299 S.W.3d 829, 838 (Tex. App.—Dallas 2009, no pet.). 9 invoking the arbitration clause that was likely a provision under the contract.

Hirczy’s argument, however, presupposes that there was an arbitration provision in

the contract and that he would have exercised his right to arbitrate. Further, the

record does not indicate that Hirczy attempted to serve Citibank with document

requests that would have allowed him to obtain the contract. 8 Finally, a party’s

contractual right to arbitration (if one existed) is not self-executing; a trial court

does not err in failing to compel arbitration when nobody asked it to do so. Cf.

Forged Components, Inc. v. Guzman, 409 S.W.3d 91, 100 (Tex. App.—Houston

[1st Dist.] 2013, no pet.) (noting presumption favoring arbitration arises only after

party seeking to compel arbitration proves existence of valid, enforceable

arbitration agreement) (citing In re Kellogg Brown & Root, Inc., 166 S.W.3d 732

(Tex. 2005)). Consequently, we overrule Hirczy’s third issue.

In his fourth issue, Hirczy contends that the absence of a reporter’s record

requires reversal of the default judgment. Hirczy correctly notes that when a

judgment is rendered after presentation of evidence to the court in the absence of

the appellant and his attorney, the failure to have the court reporter present to make

a record constitutes reversible error. See Sharif, 135 S.W.3d at 873. However,

Citibank states in its brief that all of the exhibits admitted at trial were included in

8 In his answer, Hirczy requested “a copy of the amended petition with whatever attachments so I can figure out how to respond.” Such a request does not constitute a request for the contract. 10 the clerk’s record and no live testimony was presented at trial. In his reply brief,

Hirczy acknowledges that “the absence of a reporter’s record in this case is no

longer an issue because [Citbank] avers in its brief that no oral testimony was

presented at trial, and that all of the trial exhibits are included in the appellate

record.” See Galaviz, 299 S.W.3d at 837–38 (noting plaintiff may be awarded

damages on liquidated claim without necessity of hearing or presentation of

evidence and affirming award on contract claim based on deemed admissions).

Thus, we conclude that Hirczy has abandoned this issue on appeal, and we need

not address his fourth issue.

Conclusion

We affirm the trial court’s judgment.

Jim Sharp Justice

Panel consists of Justices Keyes, Sharp, and Huddle.