Strict Compliance Required for Default Judgment

In Bailey’s Furniture, Inc. v. Graham-Rutledge & Co., No. 05-11-00710-CV, the Fifth District Court of Appeals reaffirmed the long standing rule that strict compliance with Texas Rule of Civil Procedure 106(b) is necessary to establish proper service on a defaulting defendant.   

In this case, the plaintiff unsuccessfully attempted to serve Charles Bailey, registered agent for Defendant Bailey’s Furniture on several occasions.  Therefore, plaintiff filed a motion for substituted service supported by an affidavit from the process server. The affidavit repeatedly stated, “Defendant, Charles Bailey”, instead of referring to him as the registered agent.  The trial court granted the motion for substituted service, and the plaintiff soon thereafter took a default judgment against Bailey’s Furniture for over $48,000. 


Bailey’s Furniture eventually filed a motion for new trial with the trial court, which was denied. Upon appeal, the appellate court held that service on Bailey’s Furniture was not valid because the affidavit supporting the motion for substituted service did not strictly comply with Texas Rule of Civil Procedure 106(b), and therefore, there was no proper service on the actual defendant, and the trial court did not have personal jurisdiction over Bailey’s Furniture. The default judgment was void.  The case was reversed and remanded for further proceedings.

Supreme Court of Texas Continues to Interpret Craddock in Favor of Defaulting Party

On October 26, 2012, the Supreme Court of Texas released a per curiam opinion in Milestone Operating, Inc. v. ExxonMobil Corporation, No. 11-0647. ExxonMobil sued Milestone Operating, Inc. (“Milestone”) for breach of contract related to an oil and gas agreement. Milestone failed to appear and ExxonMobil took a default judgment against Milestone.

 

Milestone filed a motion for new trial challenging the service on Milestone’s registered agent, Donald Harlan, as defective and arguing that Milestone met the Craddock factors to set aside the default judgment. The trial court denied the motion for new trial. The court of appeals affirmed, holding that Milestone did not establish the first Craddock factor.

  

To satisfy the first prong of Craddock, the defaulting party must make factual assertions that, if true, negate intentional or consciously indifferent conduct by the defaulting party. Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (Tex. 1939). Consciously indifferent conduct occurs when “the defendant knew it was sued but did not care." Fidelity & Guar. Inc. Co. v. Drewery Constr. Co., 186 S.W.3d 571, 574 (Tex. 2006) (per curiam).

 

At the Supreme Court, Milestone argued that it satisfied the first Craddock factor because its evidence established that Milestone’s failure to answer was not intentional or due to conscious indifference. Milestone also challenged the service of process as defective.

 

Milestone alleged the Harlan did not recall being served with ExxonMobil’s petition, even after reviewing his office notes and speaking with co-workers about the events on the day of alleged service. At the trial court, Harlan had also testified regarding his process for responding to service when Milestone had been sued in the past. Yet, in this matter, Harlan could not remember being served with ExxonMobil’s petition or implementing his usual process for responding to service. ExxonMobil presented evidence that the process server’s fiancée recalled witnessing the process server serving Harlan with the petition. However, the Court found that this evidence did not controvert Harlan’s testimony that he did not recall being served or recall implementing his typical process for responding to service.

 

Thus, the Court held that the evidence showed that Milestone’s failure to answer was neither intentional nor the result of conscious indifference. The Court reversed and remanded the case to the intermediate court of appeals for consideration of the remaining Craddock factors.