Holt Atherton Industries, Inc. v. Heine

Decision Date17 June 1992
Docket NumberNo. D-0562,D-0562
Citation835 S.W.2d 80
PartiesHOLT ATHERTON INDUSTRIES, INC., Petitioner, v. Roy HEINE, and Wife, Kitty Heine, Respondents.
CourtTexas Supreme Court

COOK, Justice.

This case presents two questions: 1) whether the trial court abused its discretion in denying the motion of defendant Holt Atherton Industries, Inc. to set aside default judgment and for new trial; and 2) whether there is any evidence to support recovery of lost profits. We hold that the trial court did not abuse its discretion in denying the motion for new trial and that the evidence is legally insufficient to support recovery of lost profits. Therefore, we affirm in part and reverse in part the judgment of the court of appeals. 797 S.W.2d 250.

In January 1987, Roy and Kitty Heine took their bulldozer to Holt Machinery Company for repairs under an alleged oral warranty. Holt Machinery did not recognize the oral warranty. The bulldozer remained in the possession of Holt Machinery but it was not being repaired because Holt Machinery did not recognize the warranty and the Heines did not agree to pay for repairs. In August of 1987, Holt Machinery merged into Holt Atherton Industries, Inc. Holt Atherton then merged into B.D. Holt Company. In September of 1987, the Heines agreed to pay for the repairs to their bulldozer. In March 1988, the Heines brought this action against B.D. Holt, B.D. Holt Co., and Holt Co. of Texas alleging violations of the Deceptive Trade Practices Act (Tex.Bus. & Com.Code §§ 17.41-17.63), breach of express and implied warranties, breach of contract, negligence, and tortious interference with business relations. In July 1988, the Heines' Second Amended Original Petition added Holt Atherton as a defendant and was properly served on Holt Atherton's registered agent, Stevenson Atherton. In August 1988, the trial court rendered default judgment against Holt Atherton due to its failure to appear and answer. The Heines severed their cause of action against Holt Atherton to obtain a final judgment. Subsequently, the trial court stayed the actions against the other defendants pending the outcome of this appeal. Holt Atherton moved to set aside the default judgment and for new trial. The trial court denied Holt Atherton's motion, and the court of appeals affirmed. 797 S.W.2d 250.


A trial court's discretion in determining whether to grant a new trial after the court renders a default judgment must be referenced to the guiding rule set out in Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124 (1939). The rule is:

A default judgment should be set aside and a new trial ordered in any case in which the failure of the defendant to answer before judgment was not intentional, or the result of conscious indifference on his part, but was due to a mistake or an accident; provided the motion for a new trial sets up a meritorious defense and is filed at a time when the granting thereof will occasion no delay or otherwise work an injury to the plaintiff.

Craddock, 133 S.W.2d at 126; Bank One, Texas, N.A. v. Moody, 830 S.W.2d 81 (Tex.1992).

When applying the Craddock test, the trial court looks to the knowledge and acts of the defendant as contained in the record before the court. Strackbein v. Prewitt, 671 S.W.2d 37, 38-39 (Tex.1984). Where factual allegations in a movant's affidavits are uncontroverted, it is sufficient that the motion for new trial and accompanying affidavits set forth facts which, if true, would satisfy the Craddock test. Cliff v. Huggins, 724 S.W.2d 778, 779 (Tex.1987); Strackbein, 671 S.W.2d at 38-39. However, conclusory allegations are insufficient. Folsom Investments, Inc. v. Troutz, 632 S.W.2d 872, 875 (Tex.App.--Fort Worth 1982, writ ref'd n.r.e.).

When a defendant relies on his agent to file an answer, he must demonstrate that both he and his agent were free of conscious indifference. Harris v. Lebow, 363 S.W.2d 184, 186 (Tex.Civ.App.--Dallas 1962, writ ref'd n.r.e.). Because Stevenson Atherton was Holt Atherton's registered agent, Holt Atherton must show that Stevenson Atherton's failure to answer was due to a mistake or accident rather than intentional or due to conscious indifference.

The evidence introduced by Holt Atherton in support of its motion for new trial was uncontroverted by the Heines. Therefore, the trial court could accept this evidence as true and apply the Craddock requirements. The only evidence Holt Atherton presented to the trial court to negate intentional disregard or conscious indifference was the affidavit of Stevenson Atherton, which states:

The failure of the corporation to file an answer herein was due to accident and mistake due to the complete lack of any knowledge as to the facts or circumstances involved in this cause. Holt Atherton Industries, Inc. has never done any business with Roy or Kitte [sic] Heine, nor repaired any type of equipment nor provided any type of service of any kind to either Roy or Kitte [sic] Heine. The corporation known as Holt Atherton Industries, Inc. has not been actively involved in the operation of a business that repairs heavy equipment of any type during the time period set forth in the Heine's [sic] lawsuit.

Holt Atherton argues that its motion and affidavit established that it failed to answer due to an accident or mistake. Atherton's statement that no answer was filed "due to accident and mistake" is merely a conclusory allegation. There is no explanation of the nature of the mistake. The factual allegations only serve to set up a meritorious defense. There are no factual allegations supporting the first part of the Craddock test. The essence of Holt Atherton's evidence is that it did not file an answer because Stevenson Atherton did not think Holt Atherton could possibly be held liable.

The trial court did not abuse its discretion in denying the motion because it could have concluded, based on the evidence before it, that Holt Atherton's failure to answer was intentional or due to conscious indifference. There was no support given to the allegation of mistake or accident. Because we hold that the first element of the Craddock test was not satisfied, we do not reach the other two elements.


Once a default judgment is taken on an unliquidated claim, all allegations of fact set forth in the petition are deemed admitted, except the amount of damages. Morgan v. Compugraphic Corp., 675 S.W.2d 729, 731 (Tex.1984). A court rendering a default judgment must hear evidence of unliquidated damages. TEX.R.CIV.P. 243; see Morgan, 675 S.W.2d at 731. The trial court, in this case, held a hearing and determined that the Heines suffered damages in the amount of $159,665 including $120,000 for lost profits. 1

Holt Atherton argues that there is no evidence supporting the trial court's award of damages for lost profits. "In a nonjury trial, where no findings of fact or conclusions of law are filed or requested, it will be implied that the trial court made all the necessary findings to support its judgment." Burnett v. Motyka, 610 S.W.2d 735, 736 (Tex.1980) (citing Goodyear Tire and Rubber Co. v. Jefferson Construction Co., 565 S.W.2d 916 (Tex.1978); Lassiter v. Bliss, 559 S.W.2d 353 (Tex.1978)). When, as in this case, a statement of facts is brought forward, these implied findings may be challenged by factual or legal sufficiency points. Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex.1989); Burnett, 610 S.W.2d at 736. In determining a legal sufficiency question, a court must consider only the evidence and inferences that tend to support the finding, and disregard all evidence and inferences to the contrary. Best v. Ryan Auto Group, Inc., 786 S.W.2d 670, 671 (Tex.1990); King v. Bauer, 688 S.W.2d 845, 846 (Tex.1985). If there is more than a scintilla of evidence to support the finding, the no evidence challenge fails. Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987); Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983).

Recovery for lost profits does not require that the loss be susceptible of exact calculation. White v. Southwestern Bell Tel. Co., 651 S.W.2d 260, 262 (Tex.1983); Southwest Battery Corp. v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1098 (1938). However, the injured party must do more than show that they suffered some lost profits. The amount of the loss must be shown by competent evidence with reasonable certainty. White, 651 S.W.2d at 262; Southwest Battery, 115 S.W.2d at 1098. What constitutes reasonably certain evidence of lost profits is a fact intensive determination. As a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained. See, e.g., Pena v. Ludwig, 766 S.W.2d 298, 304 (Tex.App.--Waco 1989, no writ); Frank B. Hall & Co. v. Beach, Inc., 733 S.W.2d 251, 258 (Tex.App.--Corpus Christi 1987, writ ref'd n.r.e.); Keller v. Davis, 694 S.W.2d 355, 357 (Tex.App.--Houston [14th Dist.] 1985, writ ref'd n.r.e.); Automark of Texas v. Discount Trophies, 681 S.W.2d 828, 830 (Tex.App.--Dallas 1984, no writ). Although supporting documentation may affect the weight of the evidence, it is not necessary to produce in court the documents supporting the opinions or estimates. See, e.g., Pena, 766 S.W.2d at 304; Keller, 694 S.W.2d at 357. 2

The Heines' testimony was the only evidence presented concerning their lost profits and can be divided into two segments. First, Mr. Heine was examined by his counsel. Then, the trial judge questioned both Heines.

When Mr. Heine was examined by his counsel, only one question was asked which touched on lost profits. The relevant question and answer are:

Q. Now as a result of the defendant keeping the dozer for eight months, did you lose out on $200,200 in lost income during that time period?

A. Yes, sir, I did.

Even if...

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