Appeals court reverses summary judgment in Index Brook case, says it failed to establish appellants' bad faith

By Tomas Kassahun | Feb 5, 2019

HOUSTON – The 14th Court of Appeals has reversed a trial court’s ruling against PEM Offshore Inc. and Philips Matthew, saying appellee Index Brook LTD failed to prove appellants’ bad faith or callous disregard for the rules in a breach of contract case over the purchase of shares.

“We cannot conclude that the record establishes Matthew’s bad faith or a conscious disregard for the rules,” Justice Ken Wise wrote in the Jan. 31 opinion.

According to the opinion, Index is an international corporation with a principal place of business in Nigeria.

“In October 2016, Index sued appellants for breach of contract and fraudulent inducement after Index allegedly paid $2 million to appellants for shares in PEM, which appellants did not deliver to Index,” the opinion states.

The opinion states Index attempted to serve Matthew at a location on Kitty Street in Stafford, while "Index attempted to serve PEM through Matthew as PEM’s registered agent at an address in Houston with suite number 370."

“Service was unsuccessful and the trial court granted Index’s motion for substitute service,” the opinion stated.

In December 2016, Matthew filed an answer with a general denial on behalf of PEM and responded to Index’s requests for disclosure, the Appeals Court said.

“Regarding Index’s request to state the name and address of each potential party, Matthew identified himself at the Kitty Street address and PEM at the Houston address with suite number 370,” the opinion stated.

The opinion states Index then filed a motion for summary judgment on March 7, 2017, based on appellants’ deemed admissions, arguing that it "served appellants with requests for admissions and that appellants did not respond."

“On March 23, 2017, appellants filed a motion to strike deemed admissions, a response to the request for admissions and a motion for continuance of the summary judgment hearing because appellants had not received the request for admissions,” Wise wrote.

After the appellants filed a response to the motion for summary judgment, the 270th District Court of Harris County granted the summary judgment to Index, but later "granted appellants a new trial because appellants did not receive sufficient notice of the hearing on the motion for summary judgment," the opinion stated.

When Index filed a second motion for summary judgment in August 2017, appellants filed a response and argued that "Index did not prove appellants’ bad faith or callous disregard of the rules," the appeals court said. 

The trial court denied the appellants' motion to strike the deemed admissions and granted a final summary judgment for Index, ordering the appellants to pay $2 million in damages and more than $13,000 in costs and attorneys' fees. An appeal followed from the appellants.

According to the opinion, the record contains "undisputed evidence" to rebut the presumption of service of the request for admissions. Wise wrote the envelope was stamped “return to sender,” “unclaimed” and “unable to forward.”

"Matthew testified through several affidavits that he never received the request for admissions and had no knowledge of them until Index filed its first motion for summary judgment," according to the opinion.

“The record shows that a pro se litigant expressed genuine confusion over his discovery obligation, yet he promptly attempted to correct the error by providing his correct address, showing that he did not receive the request for admissions, and answering the undelivered request for admissions soon after he became aware of the request,” Wise wrote.

The Appeals Court reversed the trial court’s summary judgment and remanded.

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