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Supreme Court of Texas finds defendant hit with $21.6M judgment is instead entitled to new trial

SOUTHEAST TEXAS RECORD

Saturday, December 21, 2024

Supreme Court of Texas finds defendant hit with $21.6M judgment is instead entitled to new trial

Appellate Courts
Texas

Supreme Court of Texas | File Photo

AUSTIN – A defendant who was hit with a $21.6 million verdict at a one hour-long bench trial has successfully appealed that result to the Supreme Court of Texas, which found proper notice procedures were not followed and thus, the defendant is entitled to a new trial.

On Aug. 30, the state Supreme Court issued such a per curiam ruling for defendant Richard Wade’s appeal of the judgment at trial, which had ended Luiz Valdetaro and Vertical Computer Systems, Inc.’s suit against Wade.

“Wade is the former president, CEO, and director of Vertical Computer Systems, Inc. In April 2020, Vertical’s chief technical officer and several of its shareholders sued Wade and his co-director for breach of fiduciary duty and fraud. The original petition states Wade’s address for service of process as ‘3717 Cole Avenue, Apt. 293, Dallas, Texas 75204.’ Confirming receipt of service at that address, Wade, through his trial counsel, timely filed an answer and a verified plea for abatement of the suit pending Vertical’s joinder as a necessary party. Attached to the plea is Wade’s unsworn declaration verifying his address as ‘3717 Cole Ave., Apt. 293, Dallas, Texas 75204,” the Supreme Court of Texas stated.

“About a year later, the plaintiffs’ claims against Wade were severed into a separate action, and the trial court ordered the parties to submit those claims to binding arbitration in accordance with Wade’s employment agreement. Shortly thereafter, in June 2021, Wade’s attorney filed a motion to withdraw. The motion stated that Wade had been notified by certified mail, regular mail and email about the motion and his right to object. Unlike previous filings, however, the motion identified Wade’s ‘last known address’ as ‘3717 Cole Ave., Apt. 277, Dallas, Texas 75204’ – same street address, different apartment number.”

While that motion was pending, the trial court notified the parties that the case was set to be dismissed for lack of prosecution in August 2021. The dismissal notice stated that Wade had ‘No Known Address.’ Days later, the trial court granted counsel’s motion to withdraw. Wade did not object to counsel’s withdrawal, and no attorney was substituted as counsel.

The next month, the trial court removed the case from the dismissal docket and scheduled a bench trial for April 19, 2022. Notice of the trial setting was mailed to Wade on Aug. 24, 2021, at the Apt. 277 address that counsel’s motion to withdraw had listed as Wade’s ‘last known address’ rather than the Apt. 293 address the plaintiffs had designated for service, which Wade had confirmed in his declaration. Trial commenced by Zoom as scheduled on April 19, 2022. Wade appeared pro se, but remained silent until the court asked if he wanted to cross-examine the plaintiffs’ second witness.

Wade declined to ask questions of that second witness and later offered a brief narrative response and an even briefer closing argument, but no evidence on his own behalf.

Within one hour of the trial beginning, the Court announced: “I’ve already made a decision. I’m ruling in favor of the plaintiff[s] on all of this.” The final judgment awarded the plaintiffs more than $21 million for breach of fiduciary duty, theft, embezzlement and fraud.

“Wade promptly filed a pro se notice of appeal, arguing that the trial notice was ‘sent to the wrong address’ and that he did not receive notice ‘until the day the trial started…when [the clerk] emailed instructions on how to log into the trial ‘call.’ The Fifth Court of Appeals affirmed the multimillion-dollar judgment, but we hold that proceeding to trial in derogation of Wade’s right to notice was reversible error. Failure to provide notice of a trial setting to a party who has appeared in the case ‘violates basic principles of due process,’ warranting a new trial. Under Rule 21a, service of notice by mail is complete when a post-paid and ‘properly addressed’ document is deposited in the mail. Notice served in accordance with Rule 21a raises a presumption that notice was received, but ‘we cannot presume that notice was properly sent,” the state Supreme Court said.

“Wade contends that he did not receive proper notice because the trial notice was not ‘properly addressed.’ As Wade notes, notice of the trial setting was mailed to an address provided by withdrawing counsel that differed from the address Wade had provided to the Court. Furthermore, the clerk’s office had itself demonstrated confusion about Wade’s address by stating on the dismissal notice that he had ‘No Known Address.’ When Wade first spoke at trial, he informed the Court that he lacked adequate notice about the trial setting. The Court interrupted Wade before he could articulate the specifics of his complaint, but the ensuing colloquy demonstrates the Court’s understanding that Wade was challenging receipt of notice based on an incorrect address. The Court rejected Wade’s complaint, citing a duty to notify the Court Clerk about any address changes. The Court might be right about the duty, but it was wrong about the consequence.”

According to the state Supreme Court, “whether Wade’s error is more aptly characterized as a failure to correct a mistake than a failure to provide an updated address, makes little difference in the due-process inquiry.”

“A new trial is necessary because there is no allegation that withdrawing counsel intentionally provided an incorrect address for his client, and nothing from which to infer intent or conscious disregard on Wade’s part in failing to notice, correct or update the address. To the contrary, the record contains evidence of a reasonable explanation for Wade’s failure to monitor the suit: The trial court had previously ordered the parties to binding arbitration and, consistent with that order, counsel’s motion to withdraw informed Wade that there were no pending trial court deadlines,” the Supreme Court of Texas stated.

“As an alternative argument for affirmance, plaintiffs contend that Wade waived his right to notice by failing to move for a continuance. Although the constitutional right to due process is waivable, any such waiver must be voluntary, knowing, and intelligent. That standard is not satisfied here. When Wade broached the subject of inadequate notice, the trial court cut him off, saying: ‘You were responsible for keeping the Court notified of your change of address,’ and ‘I’m not sure what else to tell you.’ Wade’s failure to move for a continuance at that moment or elsewise during the exceedingly brief trial cannot fairly be characterized as a voluntary, knowing and intelligent waiver.”

The state Supreme Court then granted the petition for review and, without hearing oral argument, reversed the Fifth Court of Appeals’ judgment – thus, remanding the matter to the trial court for further proceedings consistent with this opinion.

Supreme Court of Texas case 23-0443

From the Southeast Texas Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com

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