Court of Appeals of Texas, Dallas.

PACE, III, INC. d/b/a Midas Muffler & Brake Shop, Appellant,

v.

Thomas BECHTER, Appellee.

No. 05-97-02054-CV.

|

Dec. 7, 2000.

Before Chief Justice THOMAS and Justices FARRIS¹ and ROSENBERG.²

OPINION

THOMAS.

*1 Pace, III, Inc. d/b/a Midas Muffler & Brake Shop appeals the trial court’s denial of its motion for new trial filed after the trial court entered a no-answer default judgment in favor of Thomas Bechter. In a single issue, Pace III asserts it was entitled to a new trial because it established all the elements set forth in Craddock v. Sunshine Bus Lines, Inc., 134 Tex. 388, 133 S.W.2d 124 (1939). We agree. Accordingly, we reverse.

Background

On June 20, 1997, Bechter sued his employer, Pace III, for negligence following an on-thejob injury to his toe. Bechter served John Pace, Pace III’s president and owner, with citation on July 7, 1997. On August 28, 1997, after Pace III failed to timely file an answer, Bechter obtained a default judgment awarding him $500,000 in damages, of which $22,500 were for past medical expenses and lost wages and $400,000 were for future medical expenses and loss of earning capacity.

Pace III became aware of the default judgment on September 30, 1997 and filed a verified motion for new trial, alleging the failure to file an answer was due to mistake or accident.³ The motion also set forth various defenses to Bechter’s cause of action and asserted Pace III would proceed to trial immediately upon a proper trial setting and would reimburse Bechter for his reasonable and necessary attorney’s fees incurred in obtaining the default. Bechter filed a response, challenging the allegations in Pace III’s motion, and the trial court held a hearing.

The hearing focused on Pace III’s failure to file an answer and the alleged defenses to Bechter’s cause of action. The undisputed testimony concerning Pace III’s failure to answer showed that, upon service, Pace consulted with Doug Yeager, Pace III’s corporate attorney. At Yeager’s direction, Pace instructed his office manager, Cecilia Mowery, to fax a copy of the petition to Philadelphia American Life Insurance Company (PALIC), the occupational carrier that had paid Bechter’s medical bills and disability benefits during the four months he was unable to work. Before faxing a copy of the petition to PALIC, Mowery called PALIC and spoke to Lee Ann Newsom, a PALIC senior benefit analyst, about what to do. Newsom responded that Mowery should “get [the petition] to her right away” and “[PALIC] would take it from there .” Mowery faxed the petition to PALIC the same day it was served. Assuming PALIC received the petition and would file an answer on its behalf, Pace III took no further action.

Newsom did not receive the petition, however, and did not hear about the lawsuit again until September 30, 1997, when Pace called to ask why PALIC had not filed an answer on Pace III’s behalf. Although she did not inform Mowery of this when she initially spoke to her about the lawsuit, Newsom explained that PALIC was not a liability carrier and would not defend Pace III. Newsom maintained PALIC did not fail to respond to the suit because PALIC “received nothing to respond to.” Pace admitted knowing the policy with PALIC was an occupational accident policy only, but denied knowing that under the policy, PALIC would not defend the company.

*2 Concerning Pace III’s assertion that it had various defenses to Bechter’s cause of action, the undisputed testimony showed that PALIC paid Bechter short-term disability benefits from September 28, 1996, seven days after he was injured, to January 24, 1997, the day before he returned to work “full duty.” Pace III supplemented these benefits with “additional wages.” The testimony also revealed PALIC paid all the medical bills Bechter submitted to it. This testimony was corroborated by business records.

Additionally, Bob Tucker, Bechter’s supervisor for a period after Bechter returned to work, testified that, although he was aware Bechter did not believe he was “producing”what he was capable of producing, Bechter never complained he was unable to perform his job because of any limitations resulting from his injury. In fact, Bechter “was able to do everything that was expected” and his salary was not affected by his perceived reduction in his level of production. In Tucker’s opinion, Bechter was one of the top technicians at the shop. Tucker also testified Pace III provided a safe working environment and, although he was not present when Bechter was injured, opined Bechter could have been at fault for the injury.

After considering the motion, response, evidence, and counsel’s arguments, the trial court denied the motion, without explanation.

Discussion

It is within the trial court’s sound discretion to grant or deny a motion for new trial, and the trial court’s ruling will not be disturbed on appeal absent a showing of an abuse of discretion. Strackbein v. Prewitt, 671 S.W.2d 37, 38 (Tex.1984). The trial court abuses its discretion by not granting a motion for new trial, following a default judgment, when the defaulting party establishes all the elements of the Craddock test. See Bank One, Tex., N.A. v. Moody, 830 S.W.2d 81, 85 (Tex.1992). Those elements are: (1) the failure of the defaulting party to answer before judgment was not intentional, or the result of conscious indifference on its part, but was due to mistake or accident, (2) the motion for new trial sets up a meritorious defense, and (3) the motion is filed at a time when the granting of the motion will not cause delay or otherwise work an injury to the non-defaulting party. See Craddock, 133 S.W.2d at 126. On appeal, Bechter does not dispute that Pace III satisfied the third element of the Craddock test. Thus, the issue is whether Pace III satisfied the first two prongs.

Conscious Indifference

In determining whether Pace III satisfied the first Craddock prong, we look to the knowledge and acts of Pace III. See Ferguson & Co. v. Roll, 776 S.W.2d 692, 698 (Tex.App.-Dallas 1989, no writ). We also look to the knowledge and acts of Pace III’s agents because when a defaulting party’s excuse for not answering is its reliance on a third party to answer, the defaulting party must also show it entrusted the third party to answer and the third party’s failure to answer was not due to conscious indifference. See id.; Estate of Pollack v. McMurrey, 858 S.W.2d 388, 391 (Tex.1993). The controlling factor is not the absence of negligence, but rather the absence of a purposeful or bad faith failure to answer or take some action which would seem indicated to a person of reasonable sensibilities under the same circumstances. See Craddock, 133 S.W.2d at 125; Johnson v. Edmonds, 712 S.W.2d 651, 652-53 (Tex.App.-Fort Worth 1986, no writ). Courts have interpreted this prong liberally in favor of the defaulting party, and some excuse, though not necessarily a good excuse, is sufficient to warrant setting aside a default judgment. See Craddock, 133 S.W.2d at 125; Gotcher v. Barnett, 757 S.W.2d 398, 401 (Tex.App.-Houston [14th Dist.] 1988, no writ).

*3 Pace III maintains the testimony adduced at trial clearly established its failure to answer was not purposeful or in bad faith. As to its own knowledge and acts, Pace III maintains that, by consulting with Yeager, informing PALIC of the lawsuit, and forwarding to PALIC, at Yeager and PALIC’s direction, a copy of the petition, it demonstrated it did not act with conscious indifference. Pace III maintains its reliance on PALIC to answer was reasonable in view of the fact that PALIC had paid Bechter’s disability benefits and medical bills and, when contacted about the suit, stated it “would take it from there.” As to PALIC’s knowledge and acts, Pace III maintains the testimony showing PALIC did not respond because it never received the petition demonstrated PALIC did not act with conscious indifference. In response, Bechter argues Pace III failed to show: (1) it arranged for PALIC to file an answer; (2) PALIC had a duty to defend; and (3) PALIC’s failure to answer was not the result of conscious indifference.⁴

We agree with Pace III that the steps it took upon being served negate it acted with conscious indifference and PALIC’s failure to answer because it never received the petition also negate PALIC acted with conscious indifference. See, e.g., K Mart Corp. v. Armstrong, 944 S.W.2d 59 (Tex.App.-Amarillo 1997, writ denied) (appellant negated conscious indifference where uncontroverted evidence showed appellant mailed petition to claims management company, even though claims management company never received petition and appellant failed to confirm receipt); General Life & Accident Ins. Co. v. Higginbotham, 817 S.W.2d 830 (Tex.App.-Fort Worth 1991, writ denied) (appellant negated conscious indifference where evidence showed petition was misplaced and never reached any of the intended company officials); Ferguson, 776 S.W.2d at 692 (appellant negated conscious indifference where uncontroverted testimony showed agent served with citation forwarded petition by interoffice mail to company president, who was to handle matter, even though president denied receiving petition); Evans v. Woodard, 669 S.W.2d 154 (Tex.App.-Dallas 1984, no writ) (appellant negated conscious indifference where evidence showed answer not filed due to confusion in attorney’s office). While there was no testimony at the hearing that Pace III specifically asked PALIC to defend it against Bechter’s lawsuit, the testimony was undisputed that Mowery contacted Newsom about the lawsuit and Newsom directed her to forward the petition to her so that PALIC “[c]ould take it from there.” Moreover, although PALIC may not have a duty to defend Pace III because it is not a liability carrier, there was no evidence Pace III was aware of this. In fact, Newsom admitted she did not inform Mowery, when Mowery first contacted her about the suit, that PALIC was not a liability carrier, and Pace maintained he was unaware PALIC would not defend Pace III. Under the facts of this case, we conclude Pace III established some excuse for failing to answer and thus, satisfied the first Craddock prong.

Meritorious Defense

*4 In determining whether Pace III satisfied the second Craddock prong, we look for evidence presented by Pace III establishing a prima facie defense to Bechter’s action and which would cause a different, though not necessarily opposite, result upon retrial. See Harlen v. Pfeffer, 693 S.W.2d 543, 546 (Tex.App.-San Antonio 1985, no writ); Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex .1966). If evidence of a meritorious defense was established, we take as true the actual allegations supporting the meritorious defense, despite any controverting evidence. Jackson v. Mares, 802 S.W.2d 48, 51 (Tex.App.-Corpus Christi 1990, writ denied). Where several defenses are raised, the second prong is met if any one of the defenses qualifies as meritorious. Gotcher, 757 S.W.2d at 403.

The elements of negligence are: (1) a legal duty owed by one to another, (2) a breach of that duty, and (3) damages proximately resulting from the breach. See Van Horn v. Chambers, 970 S.W.2d 542, 544 (Tex.1998). In this case, Pace III maintains it satisfied the second Craddock prong because the testimony and evidence presented at the hearing established, at a minimum, a defense to Bechter’s damages of past and future lost wages/earning capacity and medical expenses. Specifically, Pace III points to the testimony and records showing PALIC paid Bechter short-term disability benefits and all the medical bills Bechter submitted to PALIC; the testimony that Bechter was able to perform his job duties without any difficulty; and the testimony that Bechter’s salary was not affected by Bechter’s perceived limitations. In response, Bechter contends Pace III’s allegations in its motion for new trial are mere conclusions and the testimony and evidence at trial were uncorroborated, contradicted and simply insufficient to establish a meritorious defense.⁵ We disagree with Bechter.

Although Pace III’s allegations in its motion for new trial may not, on their own, have established a meritorious defense, Pace III expanded on those allegations at the hearing on its motion for new trial. Moreover, contrary to Bechter’s contention, the testimony concerning the payment of benefits and medical expenses, Bechter’s performance level, and his salary was undisputed and corroborated by business records. This testimony could cause a different result with respect to damages. See Ferguson, 776 S.W.2d at 698-99. Accordingly, we conclude Pace III satisfied the second prong of the Craddock test.

Because Bechter does not dispute Pace III satisfied the third Craddock element, and having concluded Pace III satisfied the first two elements, we conclude the trial court abused its discretion in denying Pace III’s motion for new trial. We sustain Pace III’s sole issue.

We reverse the judgment and remand the cause to the trial court for further proceedings consistent with this opinion.

	Footnotes
1		The Honorable David F. Farris, Retired Justice, Court of Appeals, Second District of Texas, sitting by assignment.
2		The Honorable Barbara E. Rosenberg, Former Justice, Court of Appeals, Fifth District of Texas at Dallas, sitting by assignment.
3		Pace III also filed, under rule 306a of the rules of civil procedure, a motion to have the post-judgment and appellate time periods run from September 30, 1997. See Tex.R.Civ.P. 306a(4), (5); Tex.R.App.P. 4.2. The trial court granted the motion, and Bechter does not contest the ruling.
4		Apparently construing Pace III’s argument to be it relied on PALIC and Yeager to answer, Bechter also argues Pace III failed to show it asked Yeager to file an answer and failed to show why Yeager did not answer. We need not address this argument, however, because Pace III does not assert its failure to answer was the result of its reliance that Yeager would file an answer. Although Pace consulted with Yeager upon service of citation, Yeager directed Pace to forward the petition to its insurance carrier. Pace acted on Yeager’s advice and never “entrusted [Yeager] with the responsibility for answering the suit.” See Estate of Pollack, 858 S.W.2d at 391.
5		Bechter also challenges the testimony suggesting Bechter could have been at fault for the injury. Bechter maintains that Pace III cannot rely on that testimony because Pace III does not have workers’ compensation coverage and, as such, is precluded from asserting contributory negligence as a defense. See Tex.Lab.Code Ann. § 406.033 (Vernon 1996). While Pace III asserted in its original brief that such testimony established yet another defense to Bechter’s cause of action, in its reply brief, Pace III acknowledges it cannot avail itself of the defense of contributory negligence. Accordingly, we do not address this contention any further.