Estate of Pollack v. McMurrey, No. D-1325

• Court: Supreme Court of Texas
• Writing for the Court: GAMMAGE; Concurring opinion by GONZALEZ; Concurring opinion by ENOCH, J., joined by CORNYN; Dissenting opinion by DOGGETT; GONZALEZ; ENOCH; CORNYN; DOGGETT
• Citation: 858 S.W.2d 388
• Parties: The ESTATE OF Sheldon L. POLLACK, Deceased, Petitioner, v. Loraine McMURREY, Respondent.
• Decision Date: 30 June 1993
• Docket Number: No. D-1325

Page 388

858 S.W.2d 388 The ESTATE OF Sheldon L. POLLACK, Deceased, Petitioner,
v.
Loraine McMURREY, Respondent. No. D-1325. Supreme Court of Texas. June 30, 1993.

Page 389

Robert G. Bailey, Houston, for petitioner.

Van E. McFarland, Houston, for respondent.

OPINION

GAMMAGE, Justice.

This is an appeal from a default judgment rendered against the Estate of Sheldon Pollack through its executors. The executors of the estate, collectively, the Estate, moved to have the default judgment set aside. This motion was cast as a motion for new trial. The trial court denied the motion. The court of appeals affirmed the judgment, approving the trial court's denial of the Estate's motion for new trial. 1991 WL 19846. The issue presented here is whether the trial court abused its discretion in refusing to set aside the default judgment against the Estate. We hold that the trial court abused its discretion in refusing to set aside the default judgment without a proper resolution of a factual dispute regarding the Estate's failure to answer. Because of that error, we reverse the judgment of the court of appeals and remand the cause to the trial court for further proceedings consistent with this opinion and with instructions to conduct an evidentiary hearing to determine controverted material facts. ¹

Loraine McMurrey sued Sheldon Pollack for fraud in connection with a real estate transaction. Pollack died after answering the suit. The executors of Sheldon Pollack's

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estate, John Pollack and Eileen Erickson, reside in California. McMurrey's counsel telephoned Sherman Lans, a partner in the California law firm handling the probate of Sheldon Pollack's estate, and informed him that the Estate was being made a party to the suit.

Upon suggestion of death, the trial court issued a writ of scire facias pursuant to TEX.R.CIV.P. 152 requiring Pollack's executors to appear and defend the suit. ² The writ was served on the Texas Secretary of State and subsequently forwarded to the executors at their respective home addresses by certified mail, return receipt requested, in accordance with the Texas long-arm statute, TEX.CIV.PRAC. & REM.CODE §§ 17.044, 17.045 (Vernon 1986 & Supp.1992). The records of the Texas Secretary of State show that executor John Pollack's citation was returned marked "unclaimed" and that an unidentified person at executrix Eileen Erickson's home (not Erickson) signed for her citation. There is no evidence in the record that either Pollack or Erickson personally received citation or had actual knowledge of the litigation. Neither executor nor Mr. Lans, the Estate's attorney, filed an independent answer and the trial court subsequently rendered a default judgment against the estate. In a timely motion for new trial, the Estate moved to have the default judgment set aside.

MOTION FOR NEW TRIAL

The requirements for setting aside a default judgment by motion for new trial are set forth in Craddock v. Sunshine Bus Lines, Inc., 134 Tex. 388, 133 S.W.2d 124 (1939). The movant must (1) establish that the failure to answer was not intentional or the result of conscious indifference, (2) set up a meritorious defense, and (3) demonstrate that setting aside the default will not cause a delay or otherwise injure plaintiff. Id. at 393, 133 S.W.2d at 126. "[W]hile trial courts have some measure of discretion in the matter, as, in truth, they have in all cases governed by equitable principles, it is not an unbridled discretion to decide cases as they might deem proper, without reference to any guiding rule or principle." Id.

As movant, the Estate submitted the affidavits of both executors, in identical format, stating that, to the best of each one's personal knowledge, each had received no correspondence concerning the litigation and that each was "totally unaware" of the litigation until after entry of the default judgment. Upon receipt of the affidavits,

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McMurrey noticed the executors for deposition to determine the meaning of certain language in the affidavits, and to attempt explanation of what happened to Pollack's and Erickson's writ of scire facias.

The Estate responded with a motion for protective order claiming inconvenience, unavailability of deponents, and uselessness of their depositions with regard to Craddock's "meritorious defense" requirement. Although no order was ever signed granting or denying the executors' motion for protective order, they both refused to appear for the depositions. McMurrey then filed objections to the affidavits pursuant to TEX.R.CIV.P. 215(2)(b)(4), requesting that the trial court not consider them since (1) they were conclusory, and (2) the executors had refused to be deposed.

Without hearing evidence, the trial court simply denied the Estate's motion for new trial, reciting that the "objections to the affidavits of the estate's representatives are meritorious and are granted, however, the motion fails on its own, it is therefore ORDERED that Motion for New Trial is denied."

The court of appeals affirmed the judgment, approving the trial court's denial of the Estate's motion for new trial. The court of appeals concluded that the Estate had failed to satisfy the first element of the Craddock test; it did not address the second or third elements.

INTENTIONAL OR CONSCIOUSLY INDIFFERENT FAILURE TO ANSWER

In order to determine whether the trial court abused its discretion in refusing to set aside the default judgment against the Estate, we must first consider whether the Estate's failure to answer was intentional or the result of conscious indifference. Generally, when a party relies on an agent or representative to file an answer, the party must establish that the failure to answer was not intentional or the result of conscious indifference of either the party or the agent. See Carey Crutcher, Inc. v. Mid-Coast Diesel Servs., Inc., 725 S.W.2d 500, 502 (Tex.App.--Corpus Christi 1987, no writ); Wells v. Southern States Lumber & Supply Co., 720 S.W.2d 227, 229 (Tex.App.--Houston [14th Dist.] 1986, no writ).

Under the circumstances here, the inaction of the California probate attorney, Sherman Lans, meets the first Craddock test element, because an attorney is under no duty to answer a lawsuit until the client is actually served and requests the attorney to file an answer. There is no evidence in the record that anyone in Lans' firm was aware the executors had been served or was requested to file an answer before entry of the default. The failure of the Estate's attorneys to answer, under the facts, could not have been intentional or the result of conscious indifference.

The Texas Secretary of State is also deemed to be an agent of the Estate--but only for service of process. TEX.CIV.PRAC. & REM.CODE § 17.044(c). The Secretary of State was obviously not legally authorized or required to answer the lawsuit, and the executors were not relying on him to do so. The Estate was not required to negate intent or conscious indifference on the part of the Secretary of State.

Finally, without actual knowledge of the pending litigation, the executors' failure to answer before entry of the default judgment could not have been intentional or the result of conscious indifference. See Cliff v. Huggins, 724 S.W.2d 778, 779 (Tex.1987).

Whether the executors' failure to answer was intentional or the result of conscious indifference is a fact question. See Strackbein v. Prewitt, 671 S.W.2d 37, 38 (Tex.1984); Dallas Heating Co. v. Pardee, 561 S.W.2d 16, 20 (Tex.Civ.App.--Dallas 1977, writ ref'd n.r.e.). Had the executors' affidavits not been challenged, the executors' motion and affidavits asserted facts which, if true, would negate intentional or consciously indifferent conduct. Strackbein, 671 S.W.2d at 38-39. But, McMurrey clearly did challenge the executors' affidavits by filing objections pursuant to TEX.R.CIV.P. 215(2)(b)(4) and noticing the executors' depositions.

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Under such circumstances, contested issues are ordinarily decided after a hearing at which witnesses present sworn testimony in person or by deposition rather than by affidavit. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex.1992). McMurrey should have been allowed an opportunity to develop and present evidence of her own at such an evidentiary hearing. ³ The trial court generally may not resolve disputed fact issues regarding intent or conscious indifference on affidavits alone. See Healy v. Wick Bldg. Sys., Inc., 560 S.W.2d 713, 721 (Tex.App.--Dallas 1977, writ ref'd n.r.e.).

Moreover, as the party seeking protection from discovery, the Estate bears the burden of proof. Weisel Enters., Inc. v. Curry, 718 S.W.2d 56 (Tex.1986). The Estate is required to plead its basis for seeking protective relief and to show particular, specific and demonstrable injury by facts sufficient to justify protection. Masinga v. Whittington, 792 S.W.2d 940 (Tex.1990). Here, that burden was not met. See Giffin v. Smith, 688 S.W.2d 112, 114 (Tex.1985). The record contains no evidence to support a finding that the Estate should be protected from discovery. The executors refused to be deposed. While the trial judge may exercise some discretion in granting protective orders, this discretion is not unlimited. Masinga, 792 S.W.2d at 940. The trial court's failure to rule on the Estate's motion for protective order denied McMurrey the opportunity to develop and present evidence. Denial of discovery without an exercise of informed discretion constitutes a clear abuse of discretion. Weisel Enters., 718 S.W.2d at 58.

The trial court should have taken steps to assure McMurrey's right to discovery on the issue of whether the Estate satisfied the first element of Craddock. The trial court may not short circuit the adversary process simply because the executors failed to submit to deposition. TransAmerican Nat'l Gas Co. v. Powell, 811 S.W.2d 913, 918 & n. 8 (Tex.1991). Because the Estate's motion for new trial presented...