The Corpus Christi Court of Appeals has reversed a $27 million default judgment against a general contractor whose attorney withdrew from representation less than a week before trial.
All Valley Innovations Group, LLC and Enrique J. Castellanos v. Carrell (No. 13-24-00628-CV; April 9, 2026) arose from a dispute over a construction contract. Carrell hired All Valley as general contractor to perform repairs and renovation of his property on South Padre Island. When the parties fell out, Carrell fired All Valley and demanded payment of damages. All Valley refused to pay, so Carrell filed suit, asserting breach of contract, negligence, fraud, and misrepresentation. Eventually, the case was set for trial for August 26, 2024. On July 31, All Valley’s counsel moved to withdraw for nonpayment of his attorney’s fees. Carrell opposed the motion. At the hearing on August 15, All Valley’s counsel claimed that he filed the motion because he hadn’t been able to communicate with his clients, who didn’t appear in person at the hearing. Carrell’s counsel agreed to withdraw opposition to the motion on condition that the trial date remain the same. Withdrawing counsel represented to the trial court that he had informed Castellanos about the trial date, so the court granted the motion and stated that it would not continue the trial date if Defendants obtained new counsel.
The trial court’s order granting withdrawal stated that a copy of the motion was delivered by certified mail and email to Defendants at their last known address and email. It also stated that they were notified of the pending trial date. Three days prior to that date, a new attorney filed his notice of appearance as Defendants’ counsel and moved to continue the trial. The trial court did not rule on the motion but went ahead with a bench trial as scheduled. After the trial court called out for Defendants in the courtroom three times without answer, Carrell proceeded with his default judgment evidence. The trial court awarded total damages of $27,308.251.41, including actual damages, past and future lost profits, punitive damages, and attorney’s fees. Defendants filed a motion for new trial a month later, asserting that the awarded damages lacked sufficient evidence, Defendants’ new counsel lacked sufficient time to prepare for trial, and counsel’s failure to appear was excusable under the Craddock factors. The motion was heard and overruled by operation of law. Defendants appealed.
In an opinion by Justice Fonseca, the court of appeals reversed and remanded. The question turned on whether Defendants established the Craddock factors: (1) the failure to appear was not intentional or the result of conscious indifference, but was a mistake or accident; (2) there is a meritorious defense; and (3) a new trial will not result in delay or prejudice to the plaintiff. In a post-answer default judgment, however, if the first factor is proven by evidence that the party didn’t receive notice of the default judgment hearing, a defendant need not prove the other two.
The court observed first that the trial court permitted Defendants’ counsel to withdraw less than a week before trial. “Texas law,” the court stated, “requires the court to ‘give the party time to secure new counsel and time for the new counsel to investigate the case and prepare for trial’” (citation omitted). Though Defendants didn’t directly challenge the trial court’s ruling on the motion to withdraw, the close proximity to the trial date was a factor in Defendants’ failure to appear. “All that is required,” the court noted, “is some excuse, even if not a good one, regarding the failure to appear” (citations omitted). And if the defaulting party had no actual notice of the default judgment hearing, the default judgment must be thrown out. Here Plaintiff relief on evidence that Defendants’ former counsel sent notices to Defendants at their last known address, but testimony established that they never received it because counsel “sent it to an email not checked by [Defendants’] representative, and that it was not forwarded until the default judgment was signed.” Defendants Castellanos further testified that new counsel tried to call him over the weekend, but he was on vacation and didn’t check his phone. “While this is not a good excuse,” the court observed, “it is some excuse, which is all that is required.”
In any event, the record established that new counsel didn’t have authority to appear on behalf of Defendants when he filed his notice of appearance and motion for continuance. “Regardless of whether his acts constituted conscious indifference,” the court determined, “they cannot be imputed on [Defendants] without [their] express authority. Certainly, [Defendants] could not provide authority to an attorney to appear on their behalf that they had not spoken to prior to the trial date. Moreover, [counsel’s] representation of [Defendants] on other matters does not automatically confer authority in this case as [Plaintiff] argues.” Consequently, the court ruled, there was no substantive evidence that Defendants’ former counsel “definitively spoke with [Defendants] about the trial date.” Absent proof of conscious indifference, the trial court abused its discretion in denying the motion for new trial.
