Default Judgments Presentation

Default JudgmentsD. Todd Smithwww.appealsplus.com

April 10, 2023

04/10/2023 Copyright © 2012 Smith Law Group, P.C.

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Overview

• The paper is very comprehensive, though not focused on insurance-related issues per se

• Assume we’re talking about no-answer defaults

• Coming at this from the perspective of a P taking a default judgment. Focusing on four questions:– How do I take a default judgment effectively?– Will my default judgment withstand a motion for new trial?– Will my default judgment stand up on appeal?– How do keep insurance coverage for my default judgment?


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How Do I Take a Default Effectively?

First, consider whether you can legitimately take a default.

• Basic procedural prerequisites (see Appendix 1):– No answer filed when due—can be almost anything, any time– Citation with return on file for at least 10 days (TRCP 107)– Personal and subject-matter jurisdiction are present– D served with live pleading—not a more onerous amended

pleading—sufficient to provide fair notice of claims

• If “yes,” default likely worthwhile because D’s failure to answer admits all facts in petition other than the amount of unliquidated damages


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• Legitimately taking a default may involve “curing” some things that otherwise might be reversible error

• For example:– Citation and return can be amended to cure defects if trial court

retains plenary power– Theoretically, defects in petition can be cured as long as the

petition does not seek to impose a more onerous judgment (but should serve D per TRCP 21a)


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Next, consider the type of damages.

• Liquidated damages– Can be calculated from facts stated in petition and a written

instrument, i.e., a sworn account– No separate hearing or additional proof required– Great for Ps, but not likely in an insurance situation

• Unliquidated damages– Everything else– Must put on evidence of damages as in any other case


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Consider filing a motion for default judgment.

• Rules don’t require a motion, but filing one allows P to package everything up neatly– Recite facts demonstrating default– Provide certificate of last known address (TRCP 239a)– Non-military affidavit, if needed (50 App. U.S.C.A. § 521)

• In a no-answer situation, no notice to D required

• But notice may be advisable for purposes of protecting insurance coverage


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Next, obtain a hearing to prove up unliquidated damages.

• Generally involves live testimony before court reporter establishing the amount of damages as in contested trial

• Prove what you can prove, but overreach at your peril


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• Can you rely on affidavits?– Case law says yes, but Ds sometimes cite TRCP 243 to argue

that affidavits are not enough without a formal evidentiary hearing– Safest course is to hold a hearing on the record and formally

admit the affidavits into evidence

• Whether by affidavit or live testimony, must establish a “causal nexus” between conduct admitted in petition and damages suffered


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• Risky to rely only on requests for admissions “embedded” in petition that go to damages– Deemed admission rules and case law suggest this is OK,

BUT…– Citing “due process concerns,” one court reversed a substantial

default judgment based on deemed admissions that D’s conduct caused a specific amount of damages. Lucas v. Clark, 347 S.W.3d 800 (Tex. App.—Austin 2011, pet. denied).


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Finally, submit a proposed final default judgment.

• Identify the cause and the parties, state the relief granted, and recite all jurisdictional prerequisites– Citation was duly served with process– Return of service was on file 10 days– D failed to answer and appear

• Make sure the final default judgment disposes of all issues and parties—no presumption of finality here


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Will My Default Withstand a MNT?

An equitable MNT provides a method by which a defaulting D may get the judgment vacated in the trial court (see Appendix 2)

• Elements of an equitable MNT (Craddock) :– Failure to answer was not intentional, or the result of conscious

indifference on D’s part, but was due to a mistake or accident– MNT sets up sets up a meritorious defense– MNT will occasion no delay or otherwise injure P

• But per SCOTUS, a D who can prove lack of notice—lack of service in a no-answer case—gets a do-over without having to meet Craddock


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Element 1: D must show that the default resulted from accident or mistake, not intent or conscious indifference.

• D’s affidavits must show that D and any agent relied on—i.e., an insurer—satisfied this element– Explanation must be detailed, not conclusory– For some courts, almost any explanation will do. Others require

D to negate negligence. Paper lists many examples.– If D discharges this initial burden, P is entitled to discovery before

any hearing

• If the trial court finds for D, that finding will not be disturbed absent an abuse of discretion


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Element 2: D must set up a meritorious defense.

• MNT must allege facts that, in law, would constitute a defense to P’s cause of action

• D must support this element with prima facie evidence

• P can challenge the legal sufficiency of the facts alleged to form a meritorious defense, but that’s about it


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Element 3: No harm to P or undue delay.

• Once D so alleges, the burden shifts to P

• On harm, loss of the default judgment itself is not enough; Ds often successfully counteract by:– Offering to pay P’s expenses in procuring the default– Stating that D is ready to go to trial– Explanation must be detailed

• Delay is very case-specific; it must be undue, which generally means a loss of rights (i.e., evidence is no longer available)


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Will My Default Stand Up on Appeal?

No Craddock motion filed.

• A D who failed to timely file a MNT cannot rely on the Craddock elements as a basis for reversing a default

• In that situation, D has three options:– A direct appeal challenging some other aspect of the default,

such as sufficiency of the damages evidence—very limited– A restricted appeal brought within 6 months of the judgment

showing error on the face of the record– A bill of review—an independent lawsuit seeking to set aside the

judgment on equitable grounds similar to Craddock


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Craddock motion filed.

• A D who timely filed a MNT and lost can appeal the denial of the MNT or pursue a restricted appeal

• In a restricted appeal, D would have to show lack of participation, which fits default judgments


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• The key to holding on to a default judgment is to make sure the proceeding is handled properly on the front end

• Appendix 1 checklist should help you do that; or, if you’re representing a D who suffered a default judgment, the checklist should help identify potential avenues of attack

• The paper goes into detail on other considerations we can’t cover in 30 minutes, such as:– Specific requirements for citation and return– Rules for substituted service and citation by publication– What happens when D received no notice of the default– Restricted appeals and bills of review (a talk unto itself)


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How Do I Keep Insurance Coverage?

Two main concerns when insurance is in play: (1) lack of notice to insurer; and (2) lack of cooperation by insured.

• Arise from common policy provisions that are frequently raised to contest coverage

• Crocker: Notice provisions facilitate timely and effective defense of claim and trigger insured’s duty to defend by notifying insurer that a defense is expected

• Policies require insureds to cooperate in investigation or settlement of claims or defense against suit


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Key to both defenses is lack of prejudice to the insurer

• Notice: Insurer bears the burden– Actual knowledge of the suit before default will usually create a

fact issue on prejudice– Enforced through assignment, turnover, or breach of contract suit

as judgment creditor/third-party beneficiary

• Cooperation: Insurer bears the burden– Lack of cooperation is generally limited to situations in which the

insurer was actually deprived of a valid defense or the insurer makes an agreement that imposes liability on the insurer

– Abstract loss of the rights to investigate, defend, participate in, and control settlement negotiations are not sufficient


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• Help keep coverage in play by providing notice to the insurer at every opportunity– Notice of claim– Notice of suit– Notice of service– Notice of default judgment, hearing, and intent to take default– Notice of judgment to allow opportunity to file MNT

• An insurer facing documentation that it received notice along the way will have difficulty convincing a court that it suffered prejudice

Default JudgmentsD. Todd Smithwww.appealsplus.com

April 10, 2023

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Default Judgments Presentation