Cappetta v. Hermes

• Decision Date: 27 December 2006
• Docket Number: No. 04-06-00125-CV.,04-06-00125-CV.
• Citation: 222 S.W.3d 160
• Parties: Dr. Christopher J. CAPPETTA, Appellant, v. Michael HERMES, Sr., Appellee.
• Court: Texas Court of Appeals

222 S.W.3d 160

Dr. Christopher J. CAPPETTA, Appellant, v. Michael HERMES, Sr., Appellee.

No. 04-06-00125-CV.

Court of Appeals of Texas, San Antonio.

December 27, 2006.

Rehearing Overruled February 16, 2007.

From the 73rd Judicial District Court, Bexar County, Texas, Trial Court No. 2001-CI-04623; David A. Berchelmann, Jr., Judge Presiding¹.

Elizabeth Conry Davidson, San Antonio, for appellant.

Allen F. Cazier, San Antonio, for appellee.

Sitting: ALMA L. LÓPEZ, Chief Justice, CATHERINE STONE, Justice, SARAH B. DUNCAN, Justice, KAREN ANGELINI, Justice, SANDEE BRYAN MARION, Justice, PHYLIS J. SPEEDLIN, Justice, REBECCA SIMMONS, Justice.

OPINION

Opinion by SARAH B. DUNCAN, Justice.

Dr. Christopher J. Cappetta appeals the trial court's orders granting Michael Hermes, Sr.'s motion to dismiss for want of prosecution and denying Dr. Cappetta's motion to reinstate. On our own initiative, we have taken the appeal en banc to revisit the standard that applies to reinstatement motions. We hold the standard set forth in Texas Rule of Civil Procedure 165a(3) applies to all reinstatement motions, regardless of whether the basis for the dismissal was Rule 165a(1) or (2) or the trial court's inherent power. Because the trial court has not had an opportunity to review Dr. Cappetta's reinstatement motion in light of this standard, we reverse the trial court's judgment and remand the cause with instructions for it to do so.

FACTUAL AND PROCEDURAL BACKGROUND

Dr. Christopher J. Cappetta filed this suit on March 28, 2001 to recover on a promissory note signed by Michael Hermes, Jr.; Truly Elegant Custom Homes, Inc.; and Michael Hermes, Sr. On April 10, 2001, the defendants filed a joint answer asserting a general denial and that the note was not yet due. Thereafter, Cappetta served requests for disclosures on April 27, 2001, requests for admissions on July 2, 2001, and requests for production on March 9, 2002. That same spring, however, Cappetta told his trial attorney that he believed some or all of the defendants were planning to file for bankruptcy. Believing it would be a waste of resources to pursue the matter aggressively if a bankruptcy was looming, Cappetta and his attorney decided to wait and see whether a bankruptcy petition was in fact filed.

On October 8, 2002, the case was dismissed for want of prosecution. On October 21, 2002, Cappetta moved to reinstate, contending he did not appear at the dismissal hearing because his attorney had incorrectly calendared the hearing date and asserting that the parties had agreed to request a non-jury trial setting for January 2003.² This motion was granted on November 19, 2002 and, on Tuesday, February 28, 2003, Cappetta filed motions to set the case for a non-jury trial and on the alternative dispute resolution docket. That same day, the case was set for an ADR hearing on March 10, 2003 and for trial on the non-jury docket on May 1, 2003 at 9:30 a.m. However, the following Thursday, March 6, 2003, the defendants' attorney filed a notice stating that Michael Hermes, Jr., individually and doing business as Truly Elegant Custom Homes, Inc., had filed a chapter 7 bankruptcy petition.³ Immediately following the entry of this notice on the docket sheet is the following notation: "CASE CLOSED OTHER DISPOSITION AFTER COURT REVIEW — PENDING IN BANKRUPTCY COURT." Despite this notation, on November 19, 2004, the trial court again dismissed Cappetta's suit without notice or hearing. When Cappetta's trial attorney received notice of this dismissal on December 20, 2004, he drafted a reinstatement motion and went to file it. However, when he arrived at the clerk's office, he was informed that, because the case was dismissed while a bankruptcy proceeding and automatic stay were pending, the trial court had already reinstated the case on its own initiative.

On May 25, 2005, the bankruptcy court discharged the debts of Michael J. Hermes, Jr. and Truly Elegant Custom Homes, Inc. On October 6, 2005, after investigating Michael Hermes, Sr.'s non-exempt assets, Cappetta non-suited Hermes, Jr. and Truly Elegant and set the case against Hermes, Sr. for trial on the non-jury docket for December 5, 2005. On October 31, 2005, however, Michael Hermes, Sr. moved to dismiss, asserting the case had sat on the court's docket for "29 months with no activity." At the ensuing hearing, Cappetta's attorney acknowledged that "there was not a stay order issued against [] Hermes, Sr.," but argued that he decided to wait to pursue the matter because there was some controversy as to whether all of Hermes, Jr.'s and Truly Elegants' debts would be fully discharged and because he wanted to avoid a multiplicity of suits. The trial court granted Hermes's motion and dismissed the case. Cappetta moved to reinstate, supporting his motion with his trial attorney's five-page affidavit, which explained his inactivity as follows:

During the time the bankruptcy stay was in place, in accordance with the notice of stay I received from the court, I took no action on behalf of my client to prosecute the case against the defendants. I did not move to sever the remaining defendant's case out to pursue him because I believed that there was a chance that the bankruptcy filed by the other two could be dismissed. I did not want to risk losing any of my client's rights by dropping them. I also felt that if they were dismissed, that it would be a substantial waste of judicial resources to sever them from the suit, then re-file new lawsuits against them after they were dismissed from bankruptcy.

At the ensuing hearing, Cappetta's attorney on appeal elaborated on Cappetta's trial attorney's affidavit and the argument made at the dismissal hearing, explaining as follows:

In this situation we have one note, all three were makers on the note. They were all [d]efendants in this case, they all had the same defenses, all the same claims were being pled against them. And if — and if we had made an effort at that time to proceed against Mr. Hermes, Senior, they could have, I believe, made the argument that they should be subject to the stay. And I think that they certainly would have made that argument because they would have argued that if we are allowed to continue proceeding against him we can do discovery, we can take depositions, we could even possibly go to trial and take a judgment. All of these things if they ended up in [Cappetta's] favor would prejudice the bankruptcy estate because the bankruptcy estate includes not just property of the debtor, but it also — it includes his rights and claims that he has under law. And if this case were established be it by a default judgment that [Cappetta] got somehow, by a summary judgment, or a normal judgment, or even if discovery was answered that was harmful to — the bankruptcy debtor, then the court would have — the bankruptcy court I think would have viewed that under federal law they were entitled to a stay because their interests were completely aligned, they were completely identical, there are no differences between these three makers under the note.

In response, Hermes's attorney argued that, as Cappetta's attorney admitted in his affidavit, "what really prompted the case being reactivated was that [Cappetta's] counsel learned that Mr. Hermes, Senior had some non homestead property deeded into his name." At the conclusion of the hearing, the trial court denied Cappetta's motion to reinstate without stating the grounds for its ruling or the reinstatement standard it applied.

Cappetta appealed, filing a brief that seeks to establish that the dismissal was erroneous regardless of whether it was based upon a failure to appear under Rule 165a(1), a failure to comply with the supreme court's time standards under Rule 165a(2), or a failure to exercise due diligence in prosecuting the case under the court's inherent power. See Villarreal v. San Antonio Truck & Equip., 994 S.W.2d 628, 630 (Tex.1999) ("trial court's authority to dismiss for want of prosecution stems from two sources: (1) Rule 165a of the Texas Rules of Civil Procedure, and (2) the court's inherent power"). In his brief, Hermes, Sr. argues his motion sought an inherent power dismissal only. We agree and therefore limit our discussion to that ground.

DISMISSAL

"We review a dismissal for want of prosecution under a clear abuse of discretion standard." MacGregor v. Rich, 941 S.W.2d 74, 75 (Tex.1997). To avoid dismissal, Cappetta was required to show he exercised reasonable diligence in prosecuting the case. See id. However, at the hearing, Cappetta's counsel did not explain the procedural history of the case detailed above (most of which is taken from the affidavit accompanying Cappetta's motion to reinstate); he did not ask the trial court to take judicial notice of matters appearing in the court's file; he did not explain the interrelated nature of his claims against Hermes, Sr. and the two bankrupt defendants; he did not offer any evidence from the bankruptcy proceedings; and he did not offer any argument as to why the bankruptcy stay might have precluded him from proceeding. Rather, counsel simply stated that he decided to delay pursuing Cappetta's claim against Hermes, Sr. because the bankrupts' debts might not be fully discharged and to avoid a multiplicity of suits. Under these circumstances, we hold the trial court did not abuse its discretion in granting Hermes, Sr.'s motion to dismiss.

REINSTATEMENT

The standard of review on appeal is clear. We review an order denying a motion to reinstate under an abuse of discretion standard. See Smith v. Babcock & Wilcox Constr. Co., 913 S.W.2d 467, 468 (Tex.1995) (per curiam). "A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner without reference to any guiding rules or principles." Walker v. Gutierrez, 111 S.W.3d 56, 62 (Tex.2003). Considerably less clear are the "guiding rules or principles" that govern the trial court's exercise of discretion...