Russell v. Northeast Bank
| Decision Date | 07 August 1975 |
| Docket Number | No. 16514,16514 |
| Citation | 18 UCCRep.Serv. 161,527 S.W.2d 783 |
| Parties | 18 UCC Rep.Serv. 161 James L. RUSSELL, Appellant, v. NORTHEAST BANK, Appellee. (1st Dist.) |
| Court | Texas Court of Appeals |
W. Timothy Lewis, Stephen Perel, Houston, for appellant.
Ducoff & Chanon, Bernard L. Chanon, Houston, for appellee.
Northeast Bank was awarded a default judgment against James L. Russell in the amount of $26,875.00 and attorney's fees in the amount of $4,031.25 in a suit brought by Northeast Bank against Russell on a promissory note. Russell asserts the trial court erred in overruling his timely filed motion to set aside the default judgment and for a new trial, contending that the evidence established that his failure to answer before judgment was not intentional or the result of conscious indifference but was due to mistake or accident; that he had set up a meritorious defense and that a delay would not injure Northeast Bank. He also asserts that the court erred in considering opposing testimony and evidence upon the hearing of his motion to set aside the default judgment and for new trial.
In his affidavit attached to his motion, Russell stated that he had been served with citation on September 18, 1974 and immediately called the bank's attorney whom he had known for twenty-five years. He stated that he explained to the bank's attorney that he had an agreement with J. Felton Leake, the president of Northeast Bank, and Herb Handley, chairman of its board of directors and a principal stockholder, whereby Handley was to pay off Russell's note out of the funds which he owed to Russell. According to his affidavit, Russell owned 16,400 shares of stock in the bank and on April 22, 1974 Handley had agreed to purchase his stock for $4.80 per share (or a total purchase price of $78,720.00). Russell stated in his affidavit that the bank's attorney replied that he would 'hold off on the suit and wouldn't do anything further' so that Russell could complete his agreement with Handley and the bank. He stated that relying on the attorney's representation he proceeded to try to complete the agreement but that 'the next thing' he knew, he received a postcard from the District Clerk's office advising that the default judgment had been taken against him. He stated he then contacted his attorney and related the events to him. He further stated that between September 18, 1974, when he talked to the bank's attorney, and December 10, 1974, when he received the postcard from the District Clerk, he had been in the bank on several occasions and conversed with various bank officers, but that nothing was ever said about the note or the lawsuit. He said that if he had known the attorney's representations were untrue he would not have relied thereon and certainly would have instructed his attorney to file an answer in the suit. He said he had been a director of the bank and felt that the bank would not do anything to prejudice his rights. At the hearing on the motion, Russell testified that he had an agreement with Mr. Leake, the president of the bank, and Mr. Handley, chairman of the board, and chief executive officer of the bank, under the terms of which Handley was to purchase Russell's stock in the bank and from the purchase price, the sum of $25,000.00 was to be paid to the bank. He further testified, however, that the president of the bank had never agreed not to collect the note from him or that he would no longer be responsible for its payment.
Over objection the attorney for the bank was permitted to testify that all conversations which he had had with Russell had occurred prior to filing suit and that he had only agreed to postpone filing of the suit for thirty days.
The trial court found that Russell's failure to timely file answer was of his own doing and such failure did not result from representations alleged to have been made to him or from accident or mistake. The trial court also found that the Northeast Bank had not agreed to release Russell from his obligation nor to accept another debtor in his stead. Russell attacks both the legal and factual sufficiency of these findings.
'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 accident; provided the motion for 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 v. Sunshine Bus Lines, Inc., 134 Tex. 388, 393, 133 S.W.2d 124, 126 (1939); Ivy v. Carrell, 407 S.W.2d 212, 213 (Tex.1966).
In Beard v. McKinney, 456 S.W.2d 451, 453 (Tex.Civ.App.--Houston (1st), 1970, no writ), the appellant asserted that a timely answer had not been filed on his behalf because of a breakdown in the procedure of his attorney's office and his attorney's reliance upon the actions of appellee's attorney which were inconsistent with the taking of the default judgment. We indicated that in a case of this nature a 'slight excuse' may constitute justification for failure to file a timely answer. Considered alone, Russell's testimony would tend to support his contention that his failure to file timely answer was not intentional or the result of conscious indifference on his part. However, his testimony was contradicted by the testimony of the bank's attorney who stated that their conversation had occurred prior to filing of suit and that he had only agreed to postpone filing for 30 days. The trial court was at liberty to consider such contradictory testimony and to accept it as true. Strode v. Silverman, 217 S.W.2d 454, 457 (Tex.Civ.App.--Waco, 1949, writ ref'd); Capps v. Huff, 427 S.W.2d 121 (Tex.Civ.App.--Eastland, 1968, no writ). We hold its findings are supported by the evidence and are not against the great weight and preponderance of the evidence.
We are further of the opinion that Russell failed to establish a meritorious defense to the bank's suit. In his answer Russell pleaded only that he was not liable on the...
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