Afri-Carib Enterprised, Inc. v. Mabon Limited.
(Tex.App.- Houston [14th Dist.] Mar. 31, 2009)(Yates)
(default judgment, bill of review, summary judgment reversed)
O P I N I O N
This is an appeal of a bill of review and subsequent summary judgment. The trial court granted a
bill of review, set aside a default judgment, and entered summary judgment in favor of appellee
Mabon Limited. Appellant Afri-Carib Enterprises, Inc. appeals, arguing the trial court improperly
granted the bill of review, rendering its subsequent actions invalid as well.
We reverse and remand.
I. Background
Afri-Carib sued Mabon in 1996 for breach of contract. Mabon hired counsel and made an
appearance. When the case was called to trial nearly two years later, neither Mabon nor its
counsel appeared. The trial court entered a default judgment in 1998, which Mabon learned about
after collection efforts began. That began a series of post-judgment activities, including an
unsuccessful restricted appeal[1] and a prior bill of review.[2]
After the most recent remand, the trial court again considered Mabon’s bill of review. Mabon
argued that it did not receive personal notice of the trial setting or default judgment and that the
notices sent to its attorney cannot be imputed to it because its attorney was suspended from the
practice of law at the time the notices were sent. The trial court granted the bill of review and set
aside the default judgment, thereby restoring the parties to their prior positions in the litigation. It
then granted summary judgment for Mabon in the underlying suit based on limitations.
This appeal followed. Afri-Carib argues that the trial court erred in granting the bill of review
because the evidence is insufficient to show that Mabon did not receive notice of the trial setting
and default judgment, Mabon did not meet the requirements for a bill of review, and Mabon is not
entitled to a bill of review because of unclean hands. Afri-Carib also argues that because granting
the bill of review was improper, granting summary judgment in the underlying suit was also
improper.
II. Analysis
1. Bill of Review
a. Controlling Law
A bill of review is an equitable proceeding brought by a party seeking to set aside a prior
judgment that is no longer appealable or subject to a motion for new trial. Caldwell v. Barnes, 154
S.W.3d 93, 96 (Tex. 2004). A bill of review plaintiff must ordinarily plead and prove (1) a
meritorious defense to the underlying cause of action, (2) which he was prevented from asserting
by the fraud, accident or wrongful act of the opposing party or official mistake, (3) unmixed with
any fault or negligence on his own part. Id. "These grounds are narrow and strictly construed
because the need for equitable relief must be counter balanced against the fundamental
importance of achieving finality of judgments and the elimination of endless litigation.” Gone v.
Gone, 993 S.W.2d 845, 847 (Tex.App.- Houston [14th Dist.] 1999, pet. denied); accord King
Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003).
After the bill of review hearing, the trial court ruled in favor of Mabon and then issued findings of
fact and conclusions of law. Conclusions of law are reviewed de novo. Gone, 993 S.W.2d at
848. The trial court’s findings of fact have the same weight as a jury verdict, and we review the
legal and factual sufficiency of the evidence as we would a jury’s findings. See CA Partners v.
Spears, 274 S.W.3d 51, 69 (Tex.App.- Houston [14th Dist.] 2008, pet. filed); Gone, 993 S.W.2d at
847. If there is more than a scintilla of evidence supporting a finding of fact, we will overrule a
legal sufficiency challenge. CA Partners, 274 S.W.3d at 69. In reviewing a factual sufficiency
challenge, we consider all of the evidence and will set aside a finding only if it is so against the
great weight and preponderance of the evidence as to be clearly wrong and unjust. Id.
b. Notice
The trial court found that Mabon had no notice of the trial setting because the notice sent to its
attorney, whose law license was suspended at the time, could not be imputed to Mabon. In its
second issue, Afri-Carib argues that the evidence is legally and factually insufficient to support the
finding that Mabon had no notice.
It is well-settled Texas law that notice to an attorney who is suspended or disbarred will not be
imputed to the client. See Leon’s Fine Foods of Tex., Inc. v. Merit Inv. Partners, L.P., 160 S.W.3d
148, 154 (Tex.App.- Eastland 2005, no pet.); J.J.T.B., Inc. v. Guerrero, 975 S.W.2d 737, 739 (Tex.
App.- Corpus Christi 1998, pet. denied); Langdale v. Villamil, 813 S.W.2d 187, 190 (Tex.App.-
Houston [14th Dist.] 1991, no writ). This is because such an event prevents an attorney from
practicing law and therefore automatically severs the attorney/client relationship. See Cannon v.
ICO Tubular Servs., Inc., 905 S.W.2d 380, 387 (Tex.App.- Houston [1st Dist.] 1995, no writ);
Langdale, 813 S.W.2d at 190.
Afri-Carib argues that this rule does not apply to Mabon because "whatever infirmity [its attorney]
had existed before he was hired.” The evidence does show that Mabon’s attorney was
suspended at the time Mabon hired him. However, Afri-Carib cites no authority for the proposition
that the notice rule is inapplicable here, particularly in the absence of any evidence that Mabon
hired its attorney knowing his license was suspended.
We conclude that, as a matter of law, Mabon did not have constructive notice of the trial setting
based on the notices sent to Mabon’s attorney because its attorney was not authorized to practice
law at the time. See Leon’s Fine Foods, 160 S.W.3d at 154; J.J.T.B., 975 S.W.2d at 739;
Langdale, 813 S.W.2d at 190.
Afri-Carib further asserts that the evidence is insufficient to show that Mabon’s representative did
not receive actual notice of the trial from its supposed attorney. Mabon’s representative testified
that he did not know about the trial setting, and the court’s records show only that a notice was
sent to Mabon’s attorney of record. See Cannon, 905 S.W.2d at 387-88 (holding that evidence
that trial notice was sent to wrong attorney and defendant’s testimony that he was unaware of trial
setting proved he had no notice); Langdale, 813 S.W.2d at 191 (holding defendant did not receive
notice of trial setting based on defendant’s testimony that he did not receive notice and court
records showing notice sent only to former attorney). Afri-Carib contends that someone else at
Mabon could have received the notice, but no evidence supports that assertion. We conclude that
more than a scintilla of evidence supports the trial court’s finding that Mabon did not have notice of
the trial, and this finding is not against the great weight and preponderance of the evidence.
Therefore, the evidence is legally and factually sufficient to support the trial court’s finding, and we
overrule Afri-Carib’s second issue.
c. Diligence
In its first issue, Afri-Carib contends that the trial court erred in granting Mabon’s bill of review
because Mabon did not establish all the elements. A bill of review plaintiff typically must prove a
meritorious defense, wrongful conduct of the opposing party, and its own diligence and lack of
negligence. See Caldwell, 154 S.W.3d at 96. However, when, as here, a bill of review plaintiff
has no notice, he is relieved of the burden of proving these first two elements. Id.; Abou-Trabi v.
Best Indus. Uniform Supply, Inc., No. 14-02-01000-CV, 2003 WL 22252876, at *3 (Tex.App.-
Houston [14th Dist.] Oct. 2, 2003, no pet.) (mem. op.). The Texas Supreme Court has held that
although a bill of review plaintiff without notice must still prove the third element - that it was not
negligent - lack of service of process conclusively establishes the lack of negligence element.
See Caldwell, 154 S.W.3d at 97; see also Abou-Trabi, 2003 WL 22252876, at *4. The trial court
followed Caldwell in finding that Mabon’s lack of notice of the trial setting conclusively established
its lack of negligence. Afri-Carib argues that this rule does not apply in this case. We agree.
A bill of review plaintiff’s obligation of non-negligence includes a duty of diligence in not allowing a
default judgment to be taken against him. See Abou-Trabi, 2003 WL 22252876, at *4 (stating
that a bill of review plaintiff must prove "an absence of negligence in allowing the trial court to
render the default judgment against him”); accord Winrock Houston Assocs. Ltd. P-ship v.
Bergstrom, 879 S.W.2d 144, 149 (Tex.App.- Houston [14th Dist.] 1994, no writ); see also
Caldwell, 154 S.W.3d at 97 ("An individual who is not served with process cannot be at fault or
negligent in allowing a default judgment to be rendered.” (emphasis added)). In Caldwell, the bill
of review plaintiff alleged he had no notice of the suit whatsoever. Caldwell, 154 S.W.3d at 97-
98. Clearly, a defendant having no notice of a suit against him cannot be negligent in allowing a
default judgment to be taken. Id. at 97. However, a party who has been properly served or
appeared in a lawsuit must be diligent. Ross v. Nat’l Ctr. for the Employment of the Disabled, 197
S.W.3d 795, 798 (Tex. 2006) ("[D]iligence is required from properly served parties or those who
have appeared.”). "A party’s failure to make reasonable inquiries regarding his pending litigation
is failure to exercise diligence, and without the showing of such diligence, a bill of review will fail
since the appellant will not be able to prove his non-negligence in allowing the judgment against
him to be rendered and to become final.” Abou-Trabi, 2003 WL 22252876, at *4; see also
Ponsart v. Citicorp Vendor Fin., Inc., 89 S.W.3d 285, 290 (Tex.App.- Texarkana 2002, no pet.)
("Even if [plaintiff] did not actually know the court had entered a default judgment against him, he
should have been aware that failing to answer [the] complaint would result in a default judgment.”);
Hernandez v. Koch Mach. Co., 16 S.W.3d 48, 59 (Tex.App.- Houston [1st Dist.] 2000, pet.
denied) ("It is generally held that a party to a lawsuit is charged with notice that the suit may be
dismissed for want of prosecution when there is inaction for a long period of time.”). Even if a
party does not know of a trial setting, if he appeared in the case but was not diligent in monitoring
the case status, he could be ineligible for a bill of review. See Abou-Trabi, 2003 WL 22252876,
at *4.[3] Therefore, the trial court erred in concluding that Mabon’s lack of negligence was
established in this case a matter of law.
Afri-Carib further argues that Mabon’s lack of diligence was established as a matter of law. It
points to evidence of correspondence between Mabon and its attorney showing no mention of the
lawsuit in the two years prior to entry of the default judgment, even though they corresponded
about a separate business venture. However, Mabon did not put on its evidence of diligence,
including other methods of communication such as phone calls, because of the theory that
evidence of diligence was not required in this case, and the trial court made no finding regarding
actual diligence.
We sustain Afri-Carib’s first issue to the extent it argues that the trial court erred in finding that
Mabon established diligence as a matter of law by showing lack of notice. We overrule Afri-Carib’
s first issue to the extent it argues that Mabon’s lack of diligence was established as a matter of
law. We reverse the trial court’s judgment granting Mabon’s bill of review and remand for further
proceedings.
2. Unclean Hands
In its third issue, Afri-Carib contends that even if Mabon would otherwise be entitled to a bill of
review, it came to court with unclean hands and thus it should be denied on this basis. One who
seek equity must do equity and must come to court with clean hands. See Dunnagan v. Watson,
204 S.W.3d 30, 41 (Tex.App.- Fort Worth 2006, pet. denied); Flores v. Flores, 116 S.W.3d 870,
876 (Tex.App.- Corpus Christi 2003, no pet.). Whether equitable relief should be denied based
on unclean hands is left to the discretion of the trial court. Dunnagan, 204 S.W.3d at 41; Flores,
116 S.W.3d at 876.
Afri-Carib argues that Mabon has unclean hands because its corporate representative
supposedly lied during the bill of review hearing and in its answer about the location of some of
Mabon’s offices and about whether a certain individual had a relationship with Mabon. The trial
court found the doctrine of unclean was "inapplicable under the facts.” We agree. The unclean
hands doctrine should not be applied unless the misconduct at issue is connected to the subject
of the litigation and the party asserting the defense has been seriously harmed by the
misconduct. See Sharma v. Vinmar Int’l, Ltd., 231 S.W.3d 405, 423 (Tex.App.- Houston [14th
Dist.] 2007, no pet.); Dunnagan, 204 S.W.3d at 41. Afri-Carib has not even attempted to explain
how the alleged misrepresentations relate to the subject of the underlying litigation, much less how
it was harmed at all. We overrule Afri-Carib’s third issue.
3. Summary Judgment
In its fourth issue, Afri-Carib contends we must reverse summary judgment on the underlying
breach of contract claim because the trial court improperly granted Mabon’s bill of review. First,
we note that Afri-Carib did not challenge the merits of the summary judgment ruling. Second, we
agree that because we are reversing the trial court’s judgment granting Mabon’s bill of review, we
must also reverse the trial court’s grant of summary judgment. Accordingly, we do not address the
merits of the trial court’s summary judgment ruling. Afri-Carib’s fourth issue is sustained.
III. Conclusion
Because the trial court erred in determining that Mabon’s lack of notice established lack of
negligence as a matter of law, we reverse the trial court’s judgment granting Mabon’s bill of review
and remand for further proceedings. Because the trial court’s ability to consider Mabon’s motion
for summary judgment was contingent upon granting its bill of review, we also reverse the trial
court’s grant of summary judgment.
/s/ Leslie B. Yates
Justice
Panel consists of Justices Yates, Seymore, and Boyce.
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[1] Mabon Ltd. v. Afri-Carib Enters., 29 S.W.3d 291 (Tex.App.- Houston [14th Dist.] 2000, no pet.).
[2] Mabon Ltd. v. Afri-Carib Enters., No. 01-03-01219-CV, 2005 WL 1117983 (Tex.App.- Houston [1st Dist.] May 12, 2005,
pet. denied) (mem. op.).
[3] Mabon argues that Abou-Trabi does not apply because it involved a situation in which the party was not diligent in
pursuing legal remedies after receiving notice. Mabon’s argument misses the point. The defendant in Abou-Trabi was
served with process and answered. 2003 WL 22252876, at *1. After he did not appear for trial and a default judgment was
entered, he filed a bill of review and claimed he did not have notice of the trial setting. Id. at *2. We affirmed the trial court’s
denial of his bill of review because he had not been diligent in making reasonable inquiries about the litigation he knew
was pending against him. Id. at *4. That is exactly the situation here. Mabon was served and made an appearance but did
not receive notice of the trial setting. Therefore, as in Abou-Trabi, its diligence in allowing the default judgment to be taken
against it must be examined rather than presumed as a matter of law.