IN RE: TEXAS REAL ESTATE COMMISSION

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Court of Appeals of Texas, San Antonio.

IN RE: TEXAS REAL ESTATE COMMISSION

No. 04-17-00379-CV

Decided: January 24, 2018

Sitting: Sandee Bryan Marion, Chief Justice Rebeca C. Martinez, Justice Patricia O. Alvarez, Justice

MEMORANDUM OPINION

Relator Texas Real Estate Commission (“TREC”) seeks mandamus relief from the trial court's order granting real party in interest Evan Jacobson's bill of review and setting aside a default judgment against him. Based on the reasons set forth below, we conditionally grant TREC's petition.

BACKGROUND

In 2012, Dr. Ben Luong sued Evan Jacobson, a licensed real estate agent, both individually and d/b/a Advantage Realty Group for breach of a joint venture agreement to acquire, renovate, and sell residences for a profit. Luong claimed that Jacobson intentionally misrepresented the amounts of invoices for materials and supplies used in the remodeling and commingled joint venture money with his own funds. Luong also pled that Jacobson had violated the Texas Real Estate Licensing Act, and sought recovery of his actual damages from the Real Estate Recovery Trust Account. See TEX. OCC. CODE ANN. §§ 1101.601-.602 (West 2012 & Supp. 2016). Jacobson retained an attorney and filed an answer. Jacobson's counsel subsequently withdrew on June 13, 2013, and Jacobson proceeded pro se in the case. On July 1, 2013, Luong's attorney filed a motion to set the case for a non-jury trial on July 31, 2013. On July 15, 2013, Jacobson filed an “Original Answer to Motion to Set on Non-Jury Docket” objecting to the trial setting because: (i) he did not receive proper notice of the setting; and (ii) he was scheduled to be out of town from July 25 to August 6, 2013.

On July 31, 2013, Luong and his attorney appeared for trial, but Jacobson did not appear. Prior to permitting Luong's attorney to present evidence of damages, the trial court made several inquiries into whether Jacobson had been given the required notice of the trial setting.2 Luong's attorney represented to the court that he sent a letter with notice of the trial setting to Jacobson at his last known address by both certified mail and regular mail. The trial court noted that Jacobson had filed an objection to the setting, but the court treated it as a motion for continuance and overruled it. The trial court expressly stated it was relying on “the representation [by Luong's counsel] to the Court that you have given proper notice to the Defendant of today's hearing,” and proceeded to enter a post-answer default judgment against Jacobson. The judgment awarded Luong actual damages of $45,587.25 for fraud/misrepresentation, breach of contract, and violations of the Texas Real Estate Licensing Act, and $7,268.48 in attorney's fees. Luong also received treble damages of $136,761.75 under the Deceptive Trade Practices Act.

Jacobson did not file a motion for new trial or a notice of appeal. Luong sought to collect the actual damages portion of the judgment from the Real Estate Recovery Trust Account. See TEX. OCC. CODE ANN. §§ 1101.601-.602. After a hearing on May 12, 2014, the trial court found that the $45,587.25 in actual damages and the $7,268.48 in attorney's fees awarded to Luong were payable out of the Real Estate Recovery Trust Account, and ordered TREC to pay Luong the sum of $50,000. The court also ordered Luong to assign to TREC “all of his right, title and interest in the judgment, to the extent of payment.” TREC and Luong negotiated a settlement and TREC paid Luong $41,200.00 in exchange for the transfer and assignment of Luong's rights and interest in the judgment.

In 2016, Jacobson filed an original petition for bill of review seeking to set aside the July 31, 2013 default judgment and to enjoin its enforcement and collection. In his petition, Jacobson asserted he did not receive the required forty-five days' notice of the trial setting and Luong's attorney misrepresented to the trial court that Jacobson had received the required notice. Jacobson also asserted he was deprived of the ability to file a timely motion for new trial by the district clerk's official mistakes in (i) failing to promptly notify him that a default judgment had been entered against him by sending the notice more than thirty days after entry of the judgment, and (ii) erroneously informing him on the day he received actual notice of the judgment that “there was nothing he could do to change or modify the judgment” because thirty days had already passed. Jacobson also pled that he had a meritorious defense to Luong's claims in the underlying lawsuit based on his records containing invoices, expenses, bills, and charges for the supplies and repairs relating to the two joint venture projects.

TREC intervened in the bill of review proceeding, arguing that Jacobson was not entitled to bill of review relief and TREC would be injured if the default judgment was set aside because it already paid a portion of the judgment to Luong. The trial court held an evidentiary hearing on the bill of review on March 6, 2017. Jacobson and Luong testified, as did Henry J. Novak, Jacobson's former trial attorney in the underlying lawsuit. On March 15, 2017, the trial court signed a general order granting the bill of review and setting aside the default judgment. TREC then filed this petition for writ of mandamus, asking this court to order the trial court to vacate its order and reinstate the July 31, 2013 judgment.

ANALYSIS

Mandamus relief is appropriate only to correct a clear abuse of discretion by the trial court when there is no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding). A trial court has no discretion in determining what the law is or applying the law to the facts. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). “[A] clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion.” Id. We have previously recognized that mandamus is the appropriate remedy for a bill of review that was erroneously granted based on the lack of an adequate remedy by appeal. In re J.M., IV, 373 S.W.3d 725, 728 (Tex. App.—San Antonio 2012, orig. proceeding).

A. General Bill of Review Standard

A bill of review is an equitable proceeding through which a party seeks to set aside a judgment that may no longer be challenged by a motion for new trial or an appeal. Caldwell v. Barnes, 154 S.W.3d 93, 96 (Tex. 2004). Due to the public interest in the finality of judgments, the grounds for obtaining a bill of review are narrow. In re J.M., 373 S.W.3d at 728. A bill of review petitioner must generally plead and prove (1) a meritorious defense to the underlying cause of action, (2) which the petitioner was prevented from making by the fraud, accident or wrongful act of the opposing party, or by official mistake, (3) unmixed with any fault or negligence on the petitioner's part. Caldwell, 154 S.W.3d at 96; In re J.M., 373 S.W.3d at 728-29.

B. Parties' Arguments

In its mandamus petition, TREC argues that Jacobson failed to prove the second and third prongs of this general bill of review standard.3 Among other arguments, TREC argues Jacobson failed to prove his own lack of fault or negligence because he admitted receiving actual knowledge of the default judgment on or about September 5, 2013 and could have still filed a motion for new trial under the extended timeline provided by Rule 306a, but failed to pursue that legal remedy. See TEX. R. CIV. P. 306a(4) (providing that when a party adversely affected by a judgment does not receive notice or acquire actual knowledge of the judgment within twenty days after the judgment is signed, then the thirty-day period for filing a motion for new trial is extended and begins on the date notice is received or actual knowledge is acquired, as long as no more than ninety days have passed since the judgment was signed). Jacobson responds to this argument by asserting he was prevented from timely filing a motion for new trial based on the misinformation provided to him by the clerk's office, and relies on this court's opinion in In re RPH Capital Partners, LP, No. 04-16-00424-CV, 2017 WL 2561562, at *2 (Tex. App.—San Antonio June 14, 2017, orig. proceeding), to assert that Luong's failure to provide him with forty-five days' notice of the trial setting satisfies the test set out in Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (Tex. Com. App. 1939), thereby entitling him to bill of review relief.

C. In re RPH Capital Partners, L.P. Modified Bill of Review Standard

In In re RPH Capital Partners, L.P., 2017 WL 2561562, at *2, this court held the general bill of review standard is modified “when a party is prevented from filing a motion for new trial because the trial court failed to send notice of a default judgment.” As this court explained, “When a defaulting party shows that it was not notified that a judgment was taken, and this lack of notice caused the party to miss the deadline for filing a motion for new trial, the bill-of-review plaintiff must satisfy the test set out in Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 216 (Tex. Com. App. 1939), governing the granting of motions for new trial following a default judgment.” Id. (emphasis added). Therefore, the modified standard is only applicable when the failure to send notice of a default judgment “cause[s] the party to miss the deadline for filing a motion for new trial.” Id.

D. Modified Bill of Review Standard Inapplicable

In this case, the trial court signed the default judgment on July 31, 2013, and the record establishes the district clerk failed to timely send Jacobson notice of the default judgment. However, the record also establishes that Jacobson received notice of the default judgment through a corrected notice the district clerk mailed on September 5, 2013.

Under Rule 306a(4), if an adversely affected party does not receive notice of a judgment from the clerk or acquire actual knowledge of the judgment, the time period for filing a motion for new trial under Rule 329b begins to run on the date the party receives notice or acquires actual knowledge of the judgment provided certain jurisdictional requirements are met. See TEX. R. CIV. P. 306a(4). In order to establish a new time period for filing a motion for new trial under Rule 306(a)(4), the party must file a sworn motion and prove to the trial court: (1) the date on which the party or his attorney received notice or acquired actual knowledge of the judgment; and (2) that the date was more than twenty but less than ninety-one days after the judgment was signed. See TEX. R. CIV. P. 306(a)(4)-(5). “Compliance with the provisions of Rule 306a(5) is a jurisdictional prerequisite to extending the time to file post-judgment motions.” In re Estrada, 492 S.W.3d 42, 50 (Tex. App.—Corpus Christi 2016, orig. proceeding).

At the bill of review hearing, Jacobson testified he received the September 5, 2013 corrected notice “a few days” after it was sent. Assuming Jacobson received the notice on September 10, 2013, he would have received notice well within the ninety-day time period for filing the motion pursuant to Rule 306a. “Because [Jacobson] learned of the judgment more than twenty but less than ninety-one days after the judgment was signed, Rule 306a was available to extend the time to file a motion for new trial or other post-judgment motion.” Id. at 51. Because Rule 306a was available, Jacobson's failure to receive notice of the judgment did not “cause[ ] him to miss the deadline for filing the motion for new trial.” In re RPH Capital Partners, L.P., 2017 WL 2561562, at *2.

Although the dissenting opinion quotes the language from In re RPH Capital Partners, L.P. recognizing that the general bill of review standard is modified only when the lack of notice that a judgment was taken “cause[s] the party to miss the deadline for filing a motion for new trial,” the dissenting opinion ignores this requirement. Id. Instead, the dissenting opinion contends, “In cases where the trial court fails to send timely notice of a default judgment, the general bill of review standard is modified.” By ignoring the requirement that the modified bill of review standard applies only when the lack of notice of a judgment causes the party to miss the deadline for filing a motion for new trial, the dissenting opinion reads this court's decision in In re RPH Capital Partners, L.P. too broadly.4

In his brief, Jacobson argues the modified bill of review standard should apply because he relied on the misinformation provided by the district clerk's office. As Jacobson recognizes, however, the Texas Supreme Court has held that misinformation from an officer of the court can only be considered in the bill of review context where the misinformation is provided by the clerk in performing his official duties. See Hanks v. Rosser, 378 S.W.2d 31, 34 (Tex. 1964); Alexander v. Hagedorn, 226 S.W.2d 996, 1000-1001 (Tex. 1950). Although Jacobson argues the clerk was performing official duties in providing him with the erroneous legal advice, we disagree. Generally, a clerk is not performing his official duties in providing legal advice. But see McRoberts v. Ryals, 863 S.W.2d 450, 453-54 (Tex. 1993) (reliance on clerk's misleading statement of law which was provided in his official capacity in announcing a directive of the court will not be treated as negligence by the party as a matter of law in a bill of review proceeding). Because Jacobson was not entitled to rely on the erroneous legal advice provided by the district clerk, the general bill of review standard applies. Under that standard, Jacobson was not entitled to relief by bill of review because he failed to exercise due diligence in pursuing his legal remedies following the default judgment. See Gold v. Gold, 145 S.W.3d 212, 214 (Tex. 2004) (noting “it is hard to imagine any case in which failure to pursue [a motion for new trial] would not be negligence” in the bill of review context); In re Estrada, 492 S.W.3d at 51 (holding real parties in interest not entitled to bill of review because they failed to exercise due diligence in pursuing Rule 306a extension for filing a motion for new trial); Moseley v. Omega OB-GYN Assocs. of S. Arlington, No. 2-06-291-CV, 2008 WL 2510638, at *2 (Tex. App.—Fort Worth June 19, 2008, pet. denied) (holding trial court abused its discretion in granting a bill of review where party did not attempt to utilize Rule 306a to extend the time for filing a motion for new trial); Smalling v. Smalling, Nos. 01-97-00246-CV & 01-98-00691-CV, 1998 WL 394349, at *2 (Tex. App.—Houston [1st Dist.] July 16, 1998, no pet.) (same).

Even if we could accept Jacobson's argument that the information the clerk provided was in the performance of the clerk's official duties, the misinformation would only satisfy the second bill of review requirement. See Gracey v. West, 422 S.W.2d 913, 915-16 (Tex. 1968). Jacobson's failure to exercise due diligence by using Rule 306a to extend the deadline for filing a motion for new trial establishes his own negligence which relates to the third bill of review requirement. See Garza v. Attorney Gen., 166 S.W.3d 799, 817-18 (Tex. App.—Corpus Christi 2005, no pet.). Even if Jacobson was not aware that an extension was available under Rule 306a, ignorance of the law is not an excuse. In re Office of Attorney Gen., 193 S.W.3d 690, 693-94 (Tex. App.—Beaumont 2006, orig. proceeding) (noting pro se litigant is charged with knowledge of the law and “ignorance of the law is generally not a sufficient justification to set aside agreed judgments that are final”). The availability of that remedy and Jacobson's failure to pursue it dictate the unfortunate outcome we are forced to reach in this proceeding.

We acknowledge Luong's failure to provide Jacobson with the required notice of trial setting resulted in a manifest injustice especially in view of the representations Luong's attorney made to the trial court at the default judgment hearing. And, “[w]hile manifest injustice to the defaulting party is a material consideration [in a bill of review proceeding,] another [material consideration] is the necessity for there being finality to judgments.” Hanks, 378 S.W.2d at 33. Stated differently, “[t]he burden on the [bill of review] movant is harsh because of the justifiable public policy that judgments must become final at some point.” Steward v. Steward, 734 S.W.2d 432, 434 (Tex. App.—Fort Worth 1987, no writ).

CONCLUSION

Because Jacobson did not seek an extension of time to file a motion for new trial under Rule 306a, he failed to establish due diligence in pursuing his available legal remedies. Therefore, the trial court abused its discretion by granting Jacobson's petition for bill of review and setting aside the default judgment against Jacobson. Accordingly, we conditionally grant TREC's petition for writ of mandamus and direct the trial court to: (1) vacate its order granting Jacobson's bill of review; and (2) reinstate the July 31, 2013 default judgment. The writ will issue only in the event the trial court fails to comply within fifteen days from the date of this opinion.

FOOTNOTES

2.   The record reflects the following:THE COURT: Did the Defendant get his 45 days' notice?[Luong's attorney]: Yes.***THE COURT: And you gave him 45 days' notice?[Luong's attorney]: Yes, Your Honor.***THE COURT: He's already — And I didn't realize that this was a post-answer default, I mean — so, again, I just want to be sure that he's got proper notice of the setting. ․. So, make clear on the record what you — what you've done in terms of notice and we can proceed.[Luong's attorney]: Your Honor, I'd like to go ahead and call Mr. Ben Luong.THE COURT: And he's going to testify about the notice issue?[Luong's attorney]: No, Your Honor. As far as —THE COURT: Make it clear on the record what it is. That way —[Luong's attorney]: As far as the notice, Your Honor, we have sent a letter with the notice of the setting, that was set for today, to the last-known address of Mr. Jacobson. We sent that certified mail as well as by regular mail, Your Honor.

3.   Luong filed a brief in support of TREC's mandamus petition.

4.   The dissenting opinion criticizes this opinion for ignoring this court's precedent in In re RPH Capital Partners, L.P. and City of Laredo v. Threadgill, 686 S.W.2d 734 (Tex. App.—San Antonio 1985, no writ). Having previously addressed the manner in which the dissenting opinion misreads In re RPH Capital Partners, L.P., we address the dissenting opinion's second criticism which appears to imply that Threadgill holds that a party's failure to pursue the legal remedy available to him under Rule 306(a) does not preclude the modified bill of review standard from applying. This court's decision in Threadgill, however, did not address the remedy available under Rule 306(a), and that remedy was not addressed for a good reason. The default judgment in Threadgill was taken on March 22, 1983, and the City of Laredo filed its petition for a bill of review on May 12, 1983. 686 S.W.2d at 734. The amendments to the Texas Rules of Civil Procedure adopting Rule 306(a) as a new rule were not effective until April 1, 1984. See Steve McConnico Daniel W., Practicing Law with the 1984 Rules: Texas Rules of Civil Procedure Amendments Effective April 1, 1984, 36 BAYLOR L. REV. 73, 104 (1984). Accordingly, because Rule 306(a) was not applicable to our decision in Threadgill, our holding in this opinion does not ignore that precedent.

Sandee Bryan Marion, Chief Justice

Dissenting Opinion by: Rebeca C. Martinez, Justice

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