In re Old Am. Cnty. Mut. Fire Ins. Co.
| Decision Date | 23 April 2014 |
| Docket Number | NUMBER 13-13-00644-CV |
| Parties | IN RE OLD AMERICAN COUNTY MUTUAL FIRE INSURANCE COMPANY |
| Court | Texas Court of Appeals |
On Petition for Writ of Mandamus.
MEMORANDUM OPINIONBefore Chief Justice Valdez and Justices Rodriguez and Garza
1
Relator, Old American County Mutual Fire Insurance Company ("Old American"), filed a petition for writ of mandamus in the above cause on November 20, 2013, contending through several issues that the trial court erred in granting a motion for new trial following a default judgment. The Court requested a response to the petition for writ of mandamus, and after granting extensions, received the response from the real partiesin interest, Jose Angel Cavazos, individually and as next friend of Sergio Javier Cavazos, and Lynette Garza, and further received a reply thereto from Old American. We deny the petition for writ of mandamus.
Jose Angel Cavazos and Sergio Javier Cavazos ("Cavazos") were involved in an automobile accident with a vehicle that was being driven by Lynette Garza. At the time of the accident, the vehicle operated by Garza was insured under a Texas personal automobile insurance policy issued by Old American, and insurance claim number 23502 was filed pursuant to the accident. Cavazos brought a personal injury lawsuit against Garza in cause number CL-11-2678-F in County Court at Law No. 4 of Hidalgo County as a result of the collision. Garza failed to answer or appear. On January 19, 2012, Cavazos obtained a default judgment against Garza for personal injury damages totaling $230,000.00 and prejudgment and postjudgment interest.
On April 30, 2012, Cavazos obtained an order for turnover relief in enforcement of the judgment providing that Garza's claims against Old American, if any, be turned over to Cavazos. The turnover order provides, in relevant part, that Garza owned causes of action against Old American and other insurance agencies pursuant to the insurance policy for, inter alia, fraud, breach of fiduciary duty, negligence, breach of contract, deceptive trade practices, bad faith, and violations of the Texas Insurance Code. The turnover order stated that the "[p]laintiffs are the owners of said cause[s] of action by virtue of this Order."
After Cavazos obtained the default judgment against Garza, but before renditionof the turnover order, on February 21, 2012, Old American filed a separate lawsuit against Garza and Cavazos, in cause number C0516-12-G, in the 370th District Court of Hidalgo County. In that suit, Old American sought declaratory relief that: the Old American policy provided no coverage for the default judgment obtained by Cavazos against Garza; that Old American had no duty to defend Garza; and that Old American had no liability to Garza or to Cavazos, derivatively. Following an extended period of time during which Old American obtained substituted service on the defendants, on March 4, 2013, Cavazos, represented by Armando Marroquin, filed an answer to the lawsuit which included a counterclaim against Old American. The answer and counterclaim described the automobile accident, the insurance claim that was filed, the lawsuit in cause number CL-11-1678-F, Garza's failure to answer the lawsuit, the default judgment, and the rendition of the turnover order assigning Garza's causes of action against Old American to Cavazos. According to the counterclaim, Old American had notice of the lawsuit and the default judgment, but nevertheless failed to answer or make an appearance for Garza.
On April 17, 2013, Old American filed a motion for default judgment against Garza in the separate proceeding for declaratory relief. The trial court signed an order setting the hearing on Old American's motion for default judgment for May 21, 2013 at 8:00 a.m. The order setting the motion for hearing shows that copies of the order were provided to counsel for Old American but not the other parties to the case. On May 2, 2013, Old American sent a letter to Marroquin incorrectly advising that the hearing on the motion for default judgment against Garza had been set for hearing on May 23, 2013 at 8:00 a.m. On May 21, 2013, the trial court proceeded with the default judgment hearing. OldAmerican appeared at the default judgment hearing, despite the fact that its notice letter to the other parties included the incorrect date for the hearing, but Marroquin, or other counsel for Cavazos or Garza, did not. That same day, the trial court signed the default judgment against Garza. The default judgment included declarations that Garza did not request a defense to the lawsuit from Old American, that Garza did not cooperate in the defense of the lawsuit, and that Old American had no duty to defend or indemnify Garza, and that Old American had no liability to Cavazos through the default judgment or otherwise. The judgment further included awards of attorney's fees. The default judgment, rendered in the original cause number, also severed the action between Old American and Garza into cause number C-0516-12-G1, "thereby making this judgment final and immediately appealable."
On May 22, 2013, the day after the hearing and default judgment were rendered, and the day before the incorrect hearing date set forth in Old American's notice letter, Marroquin filed an answer on behalf of Garza in cause number C-0516-12G. The following day, on May 23, 2013, Marroquin filed a verified motion for new trial and motion for sanctions on behalf of Garza in cause number C-0516-12G. The motion for new trial and for sanctions alleged that counsel for Old American intended to deceive Marroquin and his clients regarding the hearing date and that counsel intentionally omitted Marroquin's name from the order he drafted setting the hearing date on the motion for default so that the district clerk would not send notice of the hearing to Marroquin. Marroquin further asserted that Jose and Sergio Cavazos "intended to file an answer on behalf of [Garza] as they own the cause of action, if any which [Garza] may have againstOld American" and that if counsel for Old American had "been truthful . . . about the hearing date, the answer . . . would have been timely and a default would not have occurred." The motion for new trial and sanctions further asserted that the failure to appear was not intentional or the result of conscious indifference, and that Craddock v. Sunshine Bus Lines, Inc. did not apply because there was no notice of the hearing. See 133 S.W.2d 124, 126 (Tex. 1939).2 Marroquin further sought sanctions against Old American's counsel for "misleading conduct."
On May 30, 2013, in the original cause number C-0516-12G, Old American filed a verified motion challenging Marroquin's authority to represent Garza. On August 26, 2013, Marroquin filed a brief on behalf of Garza in support of his position. The brief contended that Marroquin had authority to represent his interests based on the default judgment taken by Cavazos against Garza and the resulting turnover order. Garza also argued in favor of a new trial. According to the brief, Cavazos "own[s] all of the causes of action held by [Garza], including those in this case," and "[t]his establishes the authority to pursue any and all actions by [Garza] against Old American."
The trial court held hearings on June 5, 2013 on the motion for new trial, and again on June 17, 2013 on the motion or new trial and on Old American's motion to showauthority.3 On August 29, 2013, the trial court signed an order finding that Marroquin had the authority to represent Garza and granting Garza's motion for new trial.
This original proceeding ensued. Old American contends that the new trial order in this case was either void or an abuse of discretion. Old American raises five issues: (1) where a party moves for new trial on Craddock grounds, that party must show evidence of all three elements of Craddock to be entitled to a new trial; thus if evidence of any of the three is missing, the motion must be denied; (2) where a party claims, as one of its Craddock grounds, that default was not intentional or the result of conscious indifference, that party must show that the party, as well as its attorney, was not behaving with intent or conscious indifference; moreover, a claim that a defaulting party lacked notice must relate that notice to a deadline to answer, not to the hearing on the default, of which the defaulting party is entitled to no notice; (3) among the three Craddock prongs is the need to show a meritorious defense, and the party seeking a new trial cannot put on evidence of a meritorious defense where, as a matter of law, the party has no defense; (4) where the motion for new trial was filed under the wrong cause number, it did not extend the trial court's plenary power rendering the order granting new trial void as a matter of law when rendered after plenary power expired; and (5) where the putative attorney for the defaulting party did not have authority to answer for or appear for the defaulting party, he should have been disqualified and the answer and motions he filed on her behalf struck, rendering the order granting new trial void. See id.
Mandamus is appropriate when the relator demonstrates that the trial court clearly abused its discretion and the relator has no adequate remedy by appeal. In re Reece, 341 S.W.3d 360, 364 (Tex. 2011) (orig. proceeding); In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding). The relator has the burden of establishing both prerequisites to mandamus relief, and this burden is a heavy one. In re CSX Corp., 124 S.W.3d 149, 151 (Tex. 2003) (orig. proceeding).
A trial court clearly abuses its discretion if it reaches a decision that is so arbitrary and unreasonable that it amounts to a clear and prejudicial error of law or if it clearly fails to analyze the law correctly or apply...
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