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MM&J INVESTMENTS LLC and Tim Moneymaker, Individually, Appellants v. KTH INVESTMENTS, LLC d/b/a West Texas Agency, Appellee
MM&J Investments, LLC (MM&J), and Tim Moneymaker, appellants, appeal the trial court's overruling, by operation of law, their motion for new trial. We reverse and remand to the trial court for a new trial.
Factual and Procedural Background
In October of 2016, MM&J and KTH Investments, LLC (KTH), appellee, entered into an asset purchase agreement under which MM&J agreed to buy an insurance franchise from KTH for $110,000. When MM&J did not close on the deal on the scheduled date, KTH filed suit against MM&J and two of its owners, Moneymaker and Danny Mayfield, alleging claims for breach of contract, tortious interference with contract, tortious interference with a business relationship, and fraud. Appellants answered asserting a general denial and numerous defenses. Subsequently, appellants amended their answer to assert counterclaims and demanded a jury trial.
In March of 2018, the attorney for MM&J and Moneymaker moved to withdraw from representation. The trial court granted the motion. In April of 2018, KTH and Mayfield reached a settlement agreement and filed a joint motion to dismiss KTH's claims against Mayfield. The trial court granted this dismissal motion and the case against appellants proceeded.
On June 4, 2018, the trial court signed an order setting the case for a non-jury trial on August 2, 2018. The trial court mailed a copy of the order to Moneymaker at his last known address by first class mail. Appellants did not appear for trial. KTH presented evidence to the bench. The trial court rendered default judgment against appellants and signed a final judgment providing that appellants take nothing by their counterclaims and finding in favor of KTH on its breach of contract and fraud claims. The court awarded KTH damages in the amount of $110,000, attorney's fees of $25,000, plus pre-judgment and post-judgment interest.
Appellants received notice of the default judgment on August 22, 2018, when Moneymaker signed for a certified mail notice of the default judgment. Within a week, appellants filed a motion for new trial. Moneymaker submitted an affidavit with the new trial motion explaining that he did not receive notice of the trial setting. The trial court held a hearing on the motion at which the parties stipulated that the trial court sent the order setting trial to Moneymaker's correct address by first class mail, and that the mailing was not returned to the court. During the hearing, Moneymaker testified under oath that he did not receive the order setting hearing. Moneymaker also testified that mail was often misdelivered at the multiple story office building in which he maintained his office. At the end of the hearing, the trial court took the matter under advisement. However, when the trial court did not timely rule on appellants' motion, it was overruled by operation of law. From this ruling, appellants appealed.
Appellants present two issues by their appeal. By their first issue, appellants contend that the trial court abused its discretion in denying their motion for new trial. Appellants' second issue contends that there was no evidence to support the trial court's judgment in favor of KTH. We will only review appellants' first issue because we find it to be dispositive.
Standard of Review
“A motion for new trial is addressed to the trial court's discretion and the court's ruling will not be disturbed on appeal in the absence of a showing of an abuse of discretion.” Cliff v. Huggins, 724 S.W.2d 778, 778-79 (Tex. 1987). A trial court does not abuse its discretion when it denies a motion for new trial after entry of default judgment unless the defaulting party proves the elements identified in Craddock v. Sunshine Bus Lines, Inc., 134 Tex. 388, 133 S.W.2d 124, 126 (1939). See Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 926 (Tex. 2009) (per curiam). Under Craddock, the party against whom default was entered must show that (1) his failure to appear was not intentional or the result of conscious indifference, (2) he has a meritorious defense, and (3) the granting of a new trial will not operate to cause delay or injury to the opposing party. Cliff, 724 S.W.2d at 779. If the party proves the first element under Craddock by establishing that he was not given notice of a trial setting, a court may dispense with the second and third elements. Mathis v. Lockwood, 166 S.W.3d 743, 744 (Tex. 2005).2
The law prefers for cases to be resolved on their merits wherever possible, rather than by default. Ashworth v. Brzoska, 274 S.W.3d 324, 329 (Tex. App.—Houston [14th Dist.] 2008, no pet.). We presume a trial court will only hear a case after proper notice has been given to the parties. Id. That all parties receive notice that is reasonably calculated, under the circumstances, to apprise them of the pendency of the action and to afford them the opportunity to present their objections is a requirement of due process. Cruz v. Sanchez, 528 S.W.3d 104, 109 (Tex. App.—El Paso 2017, pet. denied) (citing Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 84, 108 S. Ct. 896, 99 L. Ed. 2d 75 (1988)). Failing to give notice to a party of a trial setting violates the due process requirements of the United States Constitution. Mabon Ltd. v. Afri-Carib Enters., Inc., 369 S.W.3d 809, 813 (Tex. 2012) (per curiam). In fact, “[a] post-answer default judgment will only be valid if the defendant received notice of the default judgment hearing.” $429.30 v. State, 896 S.W.2d 363, 366 (Tex. App.—Houston [1st Dist.] 1995, no writ). As such, a lack of notice of a trial setting is a ground for reversal of a default judgment. Custom-Crete, Inc. v. K-Bar Servs., 82 S.W.3d 655, 660 (Tex. App.—San Antonio 2002, no pet.) (citing LBL Oil Co. v. Int'l Power Servs., Inc., 777 S.W.2d 390, 390-91 (Tex. 1989) (per curiam)).
The question before this Court is whether appellants, through Moneymaker, proved that they did not receive notice of the trial setting. Moneymaker filed an affidavit attesting that he did not receive the notice of trial setting and he reiterated this lack of notice through his sworn testimony at the hearing on the motion for new trial. KTH argued that the stipulation entered into by the parties, which established that the notice of trial setting was sent to Moneymaker's correct address by first class mail and was not returned to the court as undeliverable, was sufficient to give rise to the presumption of service under Rule 21a of the Texas Rules of Civil Procedure.
Under Rule 21a, all notices other than citation—including notice of trial setting—may be served in person, by mail, by commercial delivery service, by fax, by email, or by another manner approved by the trial court. Tex. R. Civ. P. 21a(a)(2). Service by mail is complete upon deposit of the document, postpaid and properly addressed, in the mail. Tex. R. Civ. P. 21a(b)(1). If notice is properly served in this manner, Rule 21a creates a presumption that the notice was received by the addressee. Cliff, 724 S.W.2d at 780. We acknowledge that the stipulation in this case is sufficient to give rise to the presumption that Moneymaker was served with the notice of trial setting. However, this presumption vanishes when evidence is introduced that the notice was not actually received. Wembley Inv. Co. v. Herrera, 11 S.W.3d 924, 927 (Tex. 1999); Cliff, 724 S.W.2d at 780; Ashworth, 274 S.W.3d at 331 (citing Mathis, 166 S.W.3d at 744-45). Consequently, the stipulation establishes that the notice of trial setting was properly mailed to Moneymaker, but this evidence does not controvert Moneymaker's affidavit and testimony that he did not receive the notice.3 See Mathis, 166 S.W.3d at 745 (“Without this presumption, there was no evidence that Mathis received notice of the trial setting. Testimony by Lockwood's counsel that notice was sent did not contradict Mathis's testimony that notice was never received.”). Even if the trial judge disbelieved Moneymaker's testimony, that would not provide affirmative evidence that service occurred. Id. (citing Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 512, 104 S. Ct. 1949, 80 L. Ed. 2d 502 (1984) (“When the testimony of a witness is not believed, the trier of fact may simply disregard it. Normally the discredited testimony is not considered a sufficient basis for drawing a contrary conclusion.”)).
Because Moneymaker's affidavit and testimony that he did not receive the notice is uncontroverted, we conclude that the evidence establishes that appellants did not receive notice of the trial setting and, as such, the trial court abused its discretion by denying appellants' motion for new trial. Accordingly, we reverse the trial court's default judgment and remand this proceeding for a new trial. See Tex. R. App. P. 43.2(d).
2. We acknowledge that in Mathis, the Supreme Court did not need to address whether the third element of the Craddock test applied because it found that the record did not establish that the granting of a new trial would injure the plaintiff. Id. But, as cited in Mathis, this Court has concluded that the third Craddock element does not apply when the defendant does not receive notice of the trial setting resulting in the default judgment. In re Marriage of Runberg, 159 S.W.3d 194, 200 (Tex. App.—Amarillo 2005, no pet.); accord In re Marriage of Parker, 20 S.W.3d 812, 817-18 (Tex. App.—Texarkana 2000, no pet.).
3. The Texas Supreme Court has identified forms of proof of service, which include a certificate of service, a return receipt from certified or registered mail, and an affidavit certifying service. See Mathis, 166 S.W.3d at 745. None of these forms of proof are present in this case.
Judy C. Parker, Justice
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Docket No: No. 07-18-00396-CV
Decided: April 08, 2020
Court: Court of Appeals of Texas, Amarillo.
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