Jim Coleman Company v. Rainer Randles Investments, LLC

Opinion issued July 3, 2014.

In The

Court of Appeals

For The

First District of Texas

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NO. 01-13-00764-CV

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JIM COLEMAN COMPANY, Appellant

V.

RAINER RANDLES INVESTMENTS, LLC, Appellee

On Appeal from the County Civil Court at Law No. 3

Harris County, Texas

Trial Court Cause No. 1018914

MEMORANDUM OPINION

In this breach–of–contract dispute, Rainer Randles Investments, LLC sued

the Jim Coleman Company for damages stemming from its purchase of a defective

ice machine. When Coleman failed to appear for trial, the trial court awarded a

default judgment to Rainer. On restricted appeal, Coleman complains that (1) it

did not receive notice of the trial setting; and (2) legally insufficient evidence

supports the trial court’s default judgment. We agree with the second contention;

therefore, we reverse and remand.

Background

In July 2009, Rainer purchased an ice machine from Coleman for $109,975.

Rainer paid Coleman $5,000 for installation of the machine. In February 2011, the

machine ceased operating properly. Despite Rainer’s requests, Coleman refused to

repair the machine.

Course of proceedings

In August 2012, Rainer sued Coleman for breach of contract and breach of

warranty, among other claims, alleging that (1) Coleman promised to service the

ice machine for its lifetime; and (2) the machine was defective. Coleman timely

answered. In December 2012, the trial court granted Coleman’s counsels’ motion

to withdraw. The trial court set a trial for March 4, 2013. After the withdrawal,

the trial court clerk did not mail a notice of the trial setting to Coleman’s correct

address, but Rainer’s counsel sent a notice by certified mail, return receipt

requested. On January 11, 2013, a person at Coleman’s correct address signed in

receipt of the notice.

On March 4, 2013, Coleman did not appear for trial. Robert Rainer, a

corporate representative, and his counsel testified. The trial court awarded to

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Rainer $150,975 in damages, $30,000 for attorney’s fees, and conditional appellate

attorney’s fees. On September 4, 2013, Coleman filed a notice of restricted appeal.

Discussion

To prevail on restricted appeal, Coleman must establish that: (1) it filed a

notice of restricted appeal within six months after the judgment was signed; (2) it

was a party to the underlying lawsuit; (3) it did not participate in the hearing that

resulted in the complained–of judgment and did not timely file any post–judgment

motions or requests for findings of fact and conclusions of law; and (4) error is

apparent on the face of the record. See Alexander v. Lynda’s Boutique, 134

S.W.3d 845, 848 (Tex. 2004) (citing TEX. R. APP. P. 26.1(c), 30). Rainer

acknowledges the first three elements; only the fourth element is at issue here.

Coleman asserts that two errors are apparent on the face of the record: insufficient

notice of the trial setting and legally insufficient evidence to support the judgment.

I. Notice

Rainer proffered evidence that it notified Coleman of the trial when its

counsel mailed a copy of the notice with a cover letter to Rainer at its address; it

adduced evidence that Rainer’s agent received the certified letter. Coleman

contends that there is no proof that Rainer’s counsel attached the actual notice of

the trial setting to the transmittal letter. Nothing from the face of the record,

however, indicates that the attachment was lacking, and counsel introduced the

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notice and transmittal letter into evidence at the default–judgment hearing.

Coleman also observes that the signature on the receipt of the notice is illegible,

but nothing in the record contradicts the inference that the signature is genuine and

that Coleman’s agent received the letter. These arguments are unavailing; when

nothing on the face of the record contradicts effective notice, appellate courts

presume that it was given. Id. at 849–50; Ginn v. Forrester, 282 S.W.3d 430, 432–

33 (Tex. 2009) (per curiam); see also Welborn–Hosler v. Hosler, 870 S.W.2d 323,

328 (Tex. App.—Houston [14th Dist.] 1994, no writ) (“The law presumes that a

trial court will hear a case only after proper notice to the parties.”). Because the

record indicates that Coleman received notice of the trial setting, Coleman’s first

contention is without merit. See Ginn, 282 S.W.3d at 432–33; Alexander, 134

S.W.3d at 849–50.

II. Legal Sufficiency

Standard of review

If challenged, a review of the record on a restricted appeal includes a review

of legal and factual insufficiency claims. Wilson v. Wilson, 132 S.W.3d 533, 536

(Tex. App.—Houston [1st Dist.] 2004, pet. denied) (citing Norman Commc’ns v.

Tex. Eastman Co., 955 S.W.2d 269, 270 (Tex. 1997) (per curiam)).

The test for legal sufficiency is “whether the evidence at trial would enable

reasonable and fair–minded people to reach the verdict under review.” City of

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Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In making this determination,

we credit favorable evidence if a reasonable fact–finder could, and disregard

contrary evidence unless a reasonable fact–finder could not. Id. If the evidence

falls within the zone of reasonable disagreement, then we may not substitute our

judgment for that of the fact–finder. Id. at 822. In making credibility

determinations, however, the fact–finder “cannot ignore undisputed testimony that

is clear, positive, direct, otherwise credible, free from contradictions and

inconsistencies, and could have been readily controverted.” Id. at 820.

Analysis

If a defendant files an answer, a trial court may not render judgment on the

pleadings; rather, the plaintiff is required to offer evidence and prove all aspects of

its claim. Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 930 (Tex. 2009)

(per curiam); Bradley Motors, Inc. v. Mackey, 878 S.W.2d 140, 141 (Tex. 1994)

(per curiam); Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex. 1979). A

conclusory statement cannot support a judgment even when the opposing party

fails to object to it at trial. City of San Antonio v. Pollock, 284 S.W.3d 809, 816

(Tex. 2009). A conclusory statement expresses “a factual inference without stating

the underlying facts on which the inference is based.” Arkoma Basin Exploration

Co. v. FMF Assocs. 1990–A, Ltd., 249 S.W.3d 380, 389 n.32 (Tex. 2008) (quoting

BLACK’S LAW DICTIONARY 308 (8th ed. 2004)) (internal quotation omitted).

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The testimony in support of the judgment adduced at the trial court default

hearing was limited to a recitation of Rainer’s causes of action as alleged in its

petition:

Rainer’s counsel: At the time was it represented to you that they would

service the machine down at that location and they would warrant and

maintain the machine for you?

Robert Rainer: Yes.

Rainer’s counsel: Have they done that?

Robert Rainer: No.

...

Rainer’s counsel: Did they fraudulently induce you into that agreement?

Robert Rainer: Yes.

Rainer’s counsel: Did they violate the contract?

Robert Rainer: Yes.

Rainer’s counsel: Did they breach the implied and expressed warranties of

the agreement?

Robert Rainer: Yes.

Rainer’s counsel: Did they violate the Texas Deceptive Trade Practices

Act?

Robert Rainer: Yes.

Rainer’s counsel: And were your damages the $114,975 that you paid?

Robert Rainer: Yes.

Rainer’s counsel: Did you also have damages—has it been 18 months that

the machine has not worked?

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Robert Rainer: Correct, yes.

Rainer’s counsel: What are your lost profits monthly for the amount that

you would have made had the machine worked?

Robert Rainer: 2,000 a month.

...

Rainer’s counsel: Is that what your lawsuit was for was $150,975 in

principal?

Robert Rainer: Yes.

Mere recitation of the pleadings is insufficient for a post–answer default

judgment to survive a challenge on restricted appeal. See Lerma, 288 S.W.3d at

930. Rainer proffered testimony, but that testimony did not offer any specific facts

supporting its recitations of liability, nor, in particular, any evidence that the

claimed breaches and fraud caused its damages. Coleman filed an answer

generally denying the allegations in Rainer’s petition. Thus, it was incumbent

upon Rainer to adduce adequate proof of causation, together with all of the other

elements required to prove its claims. See Stoner, 578 S.W.2d at 682 (holding that

post–answer default judgment constitutes neither abandonment of defendant’s

answer nor implied confession of any issues joined by that answer). Because the

testimony supporting the judgment is bereft of specific liability facts, and contains

no evidence of causation in particular, we hold that legally insufficient evidence

supports the trial court’s default judgment. See Pollock, 284 S.W.3d at 816;

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Morgan v. Compugraphic Corp., 675 S.W.2d 729, 732 (Tex. 1984) (holding that it

is incumbent on party seeking default judgment to present competent evidence of

causal nexus between event sued upon and party’s alleged damages, even when no

answer is filed and liability is uncontested).

When legally insufficient evidence supports a post–answer default judgment,

we remand the case for a new trial. See Lerma, 288 S.W.3d at 930–31 (remanding

for new trial when post–answer default evidence is insufficient, because “the

uncontested proceedings are often abbreviated and perfunctory . . . [and] less likely

to result in a fully–developed factual record”); Bennett v. McDaniel, 295 S.W.3d

644, 645 (Tex. 2009) (per curiam) (applying Lerma in restricted appeal). We hold

that the trial court erred in granting a default judgment based on legally insufficient

evidence; thus, we remand the case for a new trial on the merits.

Conclusion

We reverse the judgment of the trial court and remand the case for a new

trial.

Jane Bland

Justice

Panel consists of Justices Keyes, Bland, and Brown.

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