The Details Make the Difference on Default Judgments
August 6, 2015
The Supreme Court of Texas has held plaintiffs to a high standard in obtaining no-answer default judgments against defendants. The Court continues this trend in the recently decided case of Katy Venture, Ltd. v. Cremona Bistro Corp., No. 14-0629 (Tex. July 24, 2015),which only again reminds practitioners to not take any aspect of their motions for default judgment for granted.
In Katy Venture, a plaintiff restaurant operator, Cremona Bistro Corp. (“Cremona”), sustained a catastrophic fire to its restaurant and sued the defendant property owner, Katy Venture, Ltd. (“Katy Venture”), which had exclusive control over the area of the premises where the fire originated. When Cremona sought to serve Katy Venture’s registered agent for service of process with the citation, it became apparent that Katy Venture had not been diligent about updating its registered agent’s address with the Texas Secretary of State. Cremona then served the Texas Secretary of State with the citation, as agent for Katy Venture, and the Secretary of State in turn forwarded the citation to the outdated address, effectuating service.
Katy Venture undisputedly did not receive the citation because it was served at the outdated address, and therefore, Katy Venture did not answer Cremona’s lawsuit. When Cremona moved for a default judgment, it certified to the trial court that the last known address for Katy Venture was the outdated registered agent’s address, as opposed to Katy Venture’s new address, which Cremona had allegedly visited for a meeting, and had been provided in correspondence. The Court’s clerk used the address certification to provide Katy Venture with notice that a default judgment was being entered against them, which again, Katy Venture did not receive, and default judgment was entered against Katy Venture for more than $820,000.
Upon learning of the default judgment, Katy Venture sought to overturn the judgment, and was required to show that its own negligence did not contribute to the failure to receive notice of the lawsuit. Cremona argued that Katy Venture’s negligence in failing to update the address of the registered agent contributed to the failure to receive notice of the lawsuit. Katy Venture argued that Cremona impermissibly certified the outdated address as Katy Venture’s last known address, despite having actual knowledge of an updated address.
The Texas Supreme Court sided with Katy Venture determining that there was some evidence that Cremona’s negligence caused the failure to provide notice of the default, and ruled that the matter should be submitted to a trier of fact. The Supreme Court reasoned that even though Katy Venture did not update its registered agent’s address with the Texas Secretary of State, there was no guarantee that Cremona would have certified the correct last known mailing address for Katy Venture, even if Katy Venture updated its registered agent’s address. Updating the registered agent’s address would only have provided Cremona with another means of discovering Katy Venture’s correct address.
In the wake of this ruling, practitioners should continue to take a diligent approach to preparing motions for default judgment, and ensure that their client approves the factual accuracy of all details identified in the motion for default judgment. Every aspect of the motion could come under attack on appeal, and even an issue as trivial as the defendant’s current address could be sufficient grounds to overturn the plaintiff’s default judgment.