Guaranty County Mutual Insurance Co. v. Reyna

OPINION DIAL, Justice. This is an appeal from a default judgment in a DTPA case. On October 26, 1983 appellee, Fred Reyna, filed a Suit for Declaratory Judgment against Guaranty County Mutual Insurance Company, Appellant, and its agent, Trey Bingham. The lawsuit alleged that damage inflicted by vandals to a truck driven by Reyna was covered under his insurance policy with Guaranty and that it had wrongfully denied payment. Bingham and Guaranty filed a general denial, and the parties began to pursue discovery in preparation for trial. On March 30, 1984, Reyna filed a Motion for Nonsuit but did not provide notice to Guaranty or Bingham. The court granted the motion. That same day Reyna filed a new petition, which was processed under a new cause number, and added a Deceptive Trade Practices claim. Guaranty and Bing-ham were served with the new petition via certified mail. The record reflects that Jim Craft, claims supervisor at Guaranty, contacted the company’s attorney, G. Allen Ramirez, and reported that he received a certified letter stating that Reyna was suing for treble damages under the Texas Deceptive Trade Practices Act. According to Ramirez’s testimony, he believed that the DTPA cause of action constituted an amendment to the original lawsuit rather than an entirely new cause of action. Accordingly, he filed no response. A default judgment was rendered, and a nonsuit was taken as to Trey Bingham. [327] Guaranty filed a Motion for New Trial, alleging accident and mistake (based upon Ramirez’s misunderstanding as to the DTPA action), denying any conscious indifference, and setting up a meritorious defense through affidavit and testimony at the hearing. The motion was denied. Guaranty appeals from this adverse ruling, claiming in its single point of error that the trial court abused its discretion in denying the motion. Guaranty asserts that it has met the required burden in setting aside the default judgment as set forth in Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124, 126 (1939), and therefore the judgment should be set aside, and the second lawsuit should be reinstated. We agree with Guaranty as to the burden which must be sustained in setting aside a default judgment but conclude that it has not satisfied this burden based upon the guidelines set forth in Craddock. In Craddock, the Court held that a default judgment should be set aside and a new trial ordered when defendant’s failure to answer was unintentional and not the result of conscious indifference, but rather was the result of accident or mistake. The court further stated that the defendant must “set up” a meritorious defense in his Motion for New Trial and must show that the granting of the motion would cause no delay or otherwise work an injury to the plaintiff. Craddock v. Sunshine Bus Lines, supra. Even if Guaranty could establish that it meets the “meritorious defense” and “mistake” requirements (which is subject to dispute according to the record), it has failed to overcome the resulting injury to Reyna if the judgment were set aside. Guaranty contends that it is willing to reimburse Reyna for his costs in taking the default judgment; and therefore, no pecuniary harm will result. While Guaranty may be able to cover the financial losses incurred in taking the default judgment, it cannot circumvent the pecuniary harm caused by the loss of Reyna’s cause of action against Bingham, since it is now barred by limitations. Guaranty claims that under § 17.56A of the Texas Deceptive Trade Practices Act, the cause did not accrue until May 15,1984, when Reyna “discovered” the alleged deceptive practice. Guaranty further alleges that even if the two year limitation period has run, it has been suspended pending this appeal and Bingham could be joined as a party defendant in the reinstated lawsuit. We disagree. Limitations barred Reyna’s claim against Bingham in May of 1984, since the claim arose in May of 1982 (when Bingham told Reyna that his claim would not be paid). Thus, the two year statute of limitations under the Act bars further action against Bingham. TEX.BUS. <& COM. CODE ANN. § 17.56A (Vernon Supp.1985). The critical fact which leads us to this conclusion is that Reyna nonsuited Bing-ham. Case law addressing the issue of suspension of limitations when a nonsuit or other voluntary dismissal is involved, has consistently held that limitations is not tolled during the pendency of a suit voluntarily abandoned by the plaintiff. Flatonia State Bank v. Southwestern Life Insurance Co., 133 Tex. 243, 127 S.W.2d 188, 192, rev’d on other grounds, 128 S.W.2d 790 (1939); see also Dalo v. Laughlin, 636 S.W.2d 585, 589 (Tex.App. — San Antonio 1982, no writ) (stated abandoned lawsuit equivalent to “voluntary nonsuit” and does not toll limitations). An order of dismissal or voluntary nonsuit places the parties in the position they occupied before the court’s jurisdiction was invoked, just as if the suit had never been brought. Crofts v. Court of Civil Appeals for the Eight Supreme Judicial District, 362 S.W.2d 101, 104 (Tex.1962) (order of dismissal); Molinar v. Plains Insurance Co., 660 S.W.2d 845, 849 (Tex.App. — Amarillo 1983, no writ) (nonsuit). Based upon the case law discussed above, it is apparent that Reyna would be deprived of his cause of action against Bingham if the default judgment were set aside. Since Bingham was nonsuited, we must view the present situation as though the DTPA action never existed against Bingham, and since the limitation period has passed, any future action is barred as [328] to him. Reyna would therefore be precluded from pursuing one potential source of recovery. This certainly represents the type of harm which Craddock seeks to avoid. In its brief and oral argument, Guaranty strongly urges that limitations was tolled pending the appeal of this case and cites two early cases in support thereof. While these decisions held that an appeal suspends limitations until a case is finally decided by an appellate court, neither case involved the taking of a nonsuit. Orndorff v. State, 108 S.W.2d 206 (Tex.Civ.App. — El Paso 1937, writ ref'd); Zanecetti v. City of Fort Worth, 21 S.W.2d 355 (Tex.Civ.App. — Fort Worth 1929, rev’d on other grounds, 29 S.W.2d 958 (Tex.Comm’n App. 1930, holding approved). In the present case, Reyna was granted a nonsuit as to Trey Bingham, a crucial factor lacking in the cases cited by Guaranty, and its emphasis on these cases is therefore misplaced. We overrule Guaranty’s point of error and affirm the judgment of the trial court.