Rase Forwarding, LLC and Garalon Investments, LLC v. Euler Hermes North American Insurance Company

Citation: Not availableDocket: 13-20-00366-CV

Court: Court of Appeals of Texas; August 26, 2021; Texas; State Appellate Court

Original Court Document: View Document

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Rase Forwarding, LLC and Garalon Investments, LLC appeal a judgment from the 93rd District Court of Hidalgo County, Texas, which set aside a transfer of real property between them following a default judgment in favor of Euler Hermes North American Insurance Company. The appellants argue that the trial court erred by: (1) granting default judgment without notifying them of the hearing despite their prior appearances; (2) striking their answer without allowing them to hire counsel or amend their pleadings; and (3) awarding attorney’s fees without supporting evidence. The appeal is classified as a restricted appeal, requiring Rase and Garalon to demonstrate four elements: timely filing of the appeal notice, being parties to the lawsuit, non-participation in the contested hearing, and the presence of apparent error in the record. The court has reversed and remanded the case for further proceedings. The background details include Euler's lawsuit under the Texas Uniform Fraudulent Transfer Act, the sequence of service and pleadings, the motion to strike based on unauthorized representation, and the default judgment proceedings, culminating in the court's extensive orders against Rase and Garalon.

The legal document addresses the requirements for a restricted appeal in Texas, highlighting that the first three requirements are jurisdictional, meaning failure to meet them precludes consideration of the appeal. The fourth requirement is not jurisdictional. For a restricted appeal, the review is limited to the face of the record, which consists of all documents before the trial court at the time of judgment. Errors must be apparent from this record; inferred errors are insufficient for reversal. 

Rase and Garalon satisfied the second and third requirements, as they were parties to the original lawsuit and their general denial in the answer did not constitute participation in the proceedings. The lack of post-judgment motions or requests for findings of fact further supports their position. 

Regarding the first requirement, Rase and Garalon argue that their notices of appeal were timely because they were filed within six months of the amended judgment. Euler contends that the notices were late, as they were filed on the 181st and 182nd days, asserting that the six-month period should be strictly interpreted as 180 days. Under Texas law, the notice of appeal in a restricted appeal must be filed within six months, with the timeframe based on months rather than days.

Rase and Garalon timely filed their notices of restricted appeal within six months of the trial court's amended final judgment, which was signed on February 21, 2020. Their notices were filed on August 20, 2020, in compliance with TEX. R. APP. P. 25.1(a). The excerpt cites case law indicating that an appeal is perfected upon filing a written notice with the trial court clerk.

Rase and Garalon assert that their due process rights were violated because they did not receive notice of the default judgment hearing. They argue that their general appearances entitled them to such notice, and that the striking of their answer does not negate their appearance. In response, Euler contends that determining a lack of notice would require inference, thus negating the claim of error.

Despite their answer being filed by non-lawyers and subsequently struck, it is deemed sufficient to avoid a default judgment under Texas law. The answer, though defective, constituted a general appearance because it did not challenge the court's jurisdiction, requested a favorable judgment, and acknowledged the action's proper pendency. The cited case law supports the notion that even a defective answer can prevent a default judgment if it meets specific criteria for a general appearance.

In Grynberg v. M-I L.L.C., the court affirmed that a pro se response filed by a corporate representative is a general appearance, as established in Quality Truck Parts, Inc. v. Circle K Constr. LLC. Any answer, even if defective, constitutes an appearance under TEX. R. CIV. P. 121, supported by cases such as Baker v. Monsanto and Gonzalez v. Phoenix Frozen Foods, which highlight that amended answers also count as appearances. 

The determination of whether Rase and Garalon received notice of the default judgment hearing follows their established appearance. The law generally disfavors default judgments, which can be classified as no-answer, post-answer, or post-appearance defaults. Specifically, notice is required for post-appearance default judgments, as seen in LBL Oil Co., where lack of notice led to a reversal.

Rase and Garalon argued they were not notified of the default judgment hearing, as indicated by the order only copying Euler's counsel. However, the absence of their contact information does not definitively prove they did not receive notice. Silence in the record regarding notice, as referenced in Alexander and Ginn, does not constitute error. The trial court is required to provide 45 days' notice for a default judgment hearing, equating it to a trial setting per TEX. R. CIV. P. 245, which was recognized in LBL Oil Co. and further emphasized in Custom-Crete, Inc. v. K-Bar Servs. Inc.

A default judgment hearing is considered a trial setting that can decisively resolve a case. An error was identified in the record regarding the scheduling of Euler's default judgment hearing, which took place 19 days after the order was signed on February 3, 2020, falling short of the mandated 45-day notice period under Texas Rule of Civil Procedure 245. This violation was supported by precedents, including Blanco v. Bolanos, which noted similar issues with inadequate notice in post-answer default judgment scenarios. Consequently, Rase and Garalon's first issue was upheld, leading to the reversal of the trial court's judgment, vacation of the default judgment, and remand for further proceedings consistent with this opinion. The opinion was delivered by Justice Nora L. Longoria on August 26, 2021, and since the first issue was decisive, subsequent issues were not addressed.