Agristar, Inc. v. BWI Companies, Inc.

Agristar v. BWI Companies TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN NO. 03-95-00225-CV Agristar, Inc., Appellant v. BWI Companies, Inc., Appellee FROM THE DISTRICT COURT OF FAYETTE COUNTY, 155TH JUDICIAL DISTRICT NO. 94V-265, HONORABLE DAN R. BECK, JUDGE PRESIDING Appellee, BWI Companies, Inc. ("BWI") sued appellant, Agristar, Inc. ("Agristar"), for payments due under a sworn account for various purchases of commercial agricultural supplies. When Agristar failed to answer, a default judgment was rendered against it for the balance of the account plus interest, attorney's fees, and court costs. On appeal, Agristar contends that the trial court erred in failing to grant its motion for new trial. The dispositive issue on appeal is whether the acts of Agristar's former attorney will be imputed to Agristar. We will reverse the trial court's judgment and remand the cause for further proceedings. FACTUAL AND PROCEDURAL BACKGROUND Since 1991, Agristar has purchased agricultural supplies from BWI for use in growing potatoes to supply potato chip manufacturers. As a result of an alleged contamination of the soil mix purchased from BWI in 1993, Agristar experienced a lower crop yield, which resulted in a substantial loss to its business. After several failed attempts to negotiate the dispute, BWI brought this suit to collect the outstanding balance of $36,743.13. Agristar's registered agent, CT Corporation System, received the citation on November 16, 1994 and forwarded the documents to John Peterson in accordance with Agristar's earlier instructions. Peterson had previously been employed by Agristar as its corporate counsel, but had left the firm in March 1993. Agristar, however, had failed to update CT Corporation's instructions after Peterson's departure. Because the suit papers were forwarded to Peterson, Agristar did not receive notice of the suit and did not file an answer. After the trial court rendered a default judgment, Agristar filed a motion for new trial, which was overruled by operation of law. DISCUSSION In a single point of error, Agristar asserts that the trial court erred in failing to grant its motion for new trial. The standards for granting a new trial in an appeal from a default judgment are well established: (1) The appellant has the burden of proving that the failure to answer before judgment was unintentional and not the result of conscious indifference, but rather due to mistake or accident; (2) The motion for new trial must allege facts which in law constitute a meritorious defense; and (3) The granting of a new trial must not unduly delay or cause unnecessary injury to the appellee. Craddock v. Sunshine Bus Lines, 133 S.W.2d 124, 126 (Tex. 1939). The function of the court is not to deprive litigants of the right to trial by jury where the requirements of Craddock have been met. Accordingly, "where factual allegations in a movant's affidavits are uncontroverted, it is sufficient that the motion for new trial and accompanying affidavits set forth facts which if true would satisfy the test." Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 82 (Tex. 1992). The trial court signed the default judgment on December 21, 1994. Agristar filed its original motion for new trial on January 20, 1995 and an amended motion on February 17. Rule 329b of the Texas Rules of Civil Procedure states that "one or more amended motions for new trial may be filed without leave of court before any preceding motion for new trial filed by the movant is overruled and within thirty days after the judgment or other order complained of is signed." Tex. R. Civ. P. 329b. Thus, the rule requires the original and subsequent amended motions for new trial to be filed within thirty days after final judgment unless otherwise expressly permitted by the court. Because Agristar's amended motion for new trial was filed without leave of the court more than thirty days after the judgment was signed, we will confine our review to the denial of the original motion and accompanying affidavits. (1) Conscious Indifference In Director, State Employees Workers' Compensation Division v. Evans, 889 S.W.2d 266, 268-69 (Tex. 1994), the court held that a defendant satisfies his burden under the first element of Craddock by asserting uncontroverted facts that, if true, negate intentional or conscious indifference toward the proceeding. BWI argues that Agristar did not satisfy this burden because Agristar's failure to answer was the result of intentional actions by the corporation's agents. An agent's conscious indifference will be attributed to the movant where the movant specifically relied on the agent to answer the complaint. Holt Atherton, 835 S.W.2d at 83; Jackson v. Mares, 802 S.W.2d 48, 50 (Tex. App.Corpus Christi 1990, writ denied) (movant required to show proof of agent's good faith where duty to answer was delegated to agent); Cornerstone Alternatives, Inc. v. Patterson Oldsmobile-GMC-Toyota, Inc., 696 S.W.2d 702, 703 (Tex. App.Fort Worth 1985, no writ) ("When a party relies on its agent or representative to secure filing of answer, there must be showing that the failure to file was not intentional or result of indifference of either the party or his representative."). As a preliminary requirement in addressing the movant's responsibility for a third party's action, the movant's excuse for failing to answer must specifically entail reliance on a third-party agent to file an answer. The present case does not involve such reliance. CT Corporation was responsible only for receiving service of process and forwarding the suit papers to the person named by Agristar. It was not CT Corporation's duty to see that an answer was filed. Agristar had previously instructed CT Corporation to forward suit papers to Peterson. At the time of his receipt of the documents in this case, however, Peterson was no longer Agristar's agent. Therefore we need not consider BWI's contention that Agristar either relied upon Peterson to answer the complaint or retained him for the limited purpose of receiving notice and process from CT Corporation. Agristar's comptroller plainly states in his affidavit that Peterson was released two years before his receipt of notice from CT Corporation and was not, at that time, retained in any capacity by Agristar. Since the requirements of agency and reliance are not both present, Agristar did not need to produce proof to negate any conscious indifference that might be attributable to Peterson. Alternatively, BWI contends that CT Corporation's notice of the proceeding amounted to actual notice to Agristar. By implication, BWI argues that CT Corporation was required to inform Agristar directly as to the proceedings under its duty as registered agent for service of process. This argument relies on the following provision of the Texas Business Corporation Act: "The president and all vice presidents of the corporation and the registered agent of the corporation shall be agents of such corporation upon whom any process, notice, or demand required or permitted by law to be served upon the corporation may be served." Tex. Bus. Corp. Act Ann. art. 2.11(A) (West 1980). The purpose of this statute is merely to explain the manner by which service may be made on a domestic corporation. It does not, as BWI suggests, create an implied duty for CT Corporation to act beyond the scope of its authority. Agristar relied upon CT Corporation to do nothing more than forward notice and suit papers to the recipient designated by Agristar. CT Corporation performed this limited function in accordance with Agristar's instructions. In light of that, and because Agristar did not rely on CT Corporation to file an answer or to notify the firm other than by following the stated instructions, Agristar did not need to produce proof to negate any conscious indifference that might be attributable to CT Corporation. In the absence of an agency relationship and specific reliance, we will not impute to the defaulting party a third party's conscious indifference. With respect to the failure of Agristar itself to update its instructions to CT Corporation, we believe Agristar's evidence adequately demonstrated that this mistake was not the result of conscious indifference. See Harold-Elliot Co. v. K.P./Miller Realty, 853 S.W.2d 752, 756 (Tex. App.Houston [1st Dist.] 1993, no writ) (failure to provide secretary of state with change of address of registered agent was not conscious indifference). Meritorious Defense Under Craddock, the movant is required to "set up a meritorious defense." As explained by the supreme court in Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex. 1966), when a defaulting defendant in its motion for new trial has set forth a meritorious defense supported by affidavits or other evidence, a new trial should not be denied upon any consideration of counter-affidavits or contradictory testimony offered in resistance to the motion. Thus, the movant is required to set forth facts which constitute a meritorious defense, but is not burdened with the further requirement of convincing a trier of fact of this defense. Agristar produced evidence that it incurred losses as a result of defective materials purchased from BWI and that such losses would offset some or all of the balance due on the sworn account. If this allegation is true, Agristar would have at least the defenses of failure or partial failure of consideration. See Hendricks v. Moore, 297 S.W.2d 811, 813 (Tex. 1957); Aultman & Taylor Co. v. Hefner, 2 S.W. 861, 863 (Tex. 1886); Allison Ranch Co. v. Angelo Auto Elec., 145 S.W.2d 645, 648 (Tex. Civ. App.Austin 1940, writ dism'd); M. S. Kaplan Co. V. Wiley, 33 S.W.2d 289, 291 (Tex. Civ. App.Amarillo 1930, writ ref'd). No Unnecessary Injury to the Appellee Finally, Craddock requires the movant to allege that granting a new trial will not cause unnecessary injury to the plaintiff. Once the affirmation is made, the plaintiff bears the burden of proof. Director, State Employees Workers' Comp. Div. v. Evans, 889 S.W.2d 266, 270 (Tex. 1994). In the present case, Agristar's offer to advance promptly to trial and to compensate BWI for its expenses adequately negates the issue of delay or injury to BWI. CONCLUSION Because Agristar satisfied the three elements of the Craddock test, we sustain Agristar's sole point of error. We reverse the trial court's judgment and remand the cause to that court for further proceedings. J. Woodfin Jones, Justice Before Chief Justice Carroll, Justices Jones and B. A. Smith Reversed and Remanded Filed: January 10, 1996 Do Not Publish 1. Even if we were to consider Agristar's amended motion and the affidavits submitted in support thereof, the result of this appeal would be the same. explain the manner by which service may be made on a domestic corporation. It does not, as BWI suggests, create an implied duty for CT Corporation to act beyond the scope of its authority. Agristar relied upon CT Corporation to do nothing more than forward notice and suit papers to the recipient designated by Agristar. CT Corporation performed this limited function in accordance with Agristar's instructions. In light of that, and because Agristar did not rely on