REVERSE and REMAND; and Opinion Filed December 28, 2015.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-14-01090-CV
ZOHRA KHWAJA, Appellant
V.
QUIK-WAY RETAIL ASSOCIATES II, LTD., Appellee
On Appeal from the 95th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-14-01589
MEMORANDUM OPINION
Before Justices Bridges, Francis, and Myers
Opinion by Justice Francis
Zohra Khwaja appeals the trial court’s denial of her motion for new trial. In a single
issue, Zohra argues the trial court abused its discretion because she satisfied all three elements
set out in Craddock v. Sunshine Bus Lines, Inc., 134 Tex. 388, 392, 133 S.W.2d 124, 126 (1939).
We agree. We reverse the trial court’s default judgment against Zohra and remand this cause for
further proceedings.
In 2011, Zohra formed Akbar Alesha, LLC and opened a convenience store/gas station.
Akbar Alesha contracted with Quik-Way Retail Associates II, Ltd. to purchase gasoline and
agreed to brand the facility as a Shell station. Zohra signed the contract on behalf of Akbar
Alesha and signed a personal guaranty of the contract. Zohra had a full-time job, so when the
station opened in late 2011, Zohra’s sister, Nazli, agreed to manage the business, including
ordering gas and other supplies, hiring and training employees, and handling the financial
aspects of the business. Despite their efforts, the store lost money; according to the sisters, this
was in large part because Quik-Way failed to timely supply gas to the store causing a decline in
sales. In the spring of 2012, Akbar Alesha sued Quik-Way for breach of contract. Quik-Way
filed a counterclaim and a motion for summary judgment which the trial court granted, awarding
Quik-Way over $66,000. In December 2013, Akbar Alesha ceased operations and filed for
bankruptcy.
In February 2014, Quik-Way sued Zohra for breach of contract and sued both sisters for
various causes of action based on fraud, unjust enrichment, negligent misrepresentation, and civil
conspiracy, among other claims. When the sisters did not answer, Quik-Way moved for a no-
answer default judgment. Quik-Way presented no evidence of damages but did present evidence
on its claim for attorney’s fees. The trial court granted default judgment for Quik-Way,
awarding over $344,000 in damages, exemplary damages, and attorney’s fees.
Zohra and Nazli filed a timely motion for new trial, asking the trial court to set aside the
default judgment and grant them a new trial. In their motion, the sisters alleged their failure to
answer was not intentional or the result of conscious indifference, but was due to a mistake or
accident in that they believed they had hired an attorney and he was preparing an answer. They
also asserted they had a meritorious defense to the claims and that the granting of their motion
for new trial would not occasion delay or otherwise work an injury to Quik-Way. In its
response, Quik-Way objected to the sisters’ affidavits and generally argued they failed to
establish the three elements. After a hearing, the trial court granted Nazli’s motion for new trial
but denied Zohra’s.
In her sole issue, Zohra claims the trial court abused its discretion by denying her motion
for new trial because she satisfied all three Craddock elements. We review a trial court’s ruling
on a motion for new trial under an abuse of discretion standard. Hinkle v. Hinkle, 223 S.W.3d
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773, 783 (Tex. App.―Dallas 2007, no pet.). A default judgment should be set aside if the
defendant proves: (1) the failure to appear was not intentional or the result of conscious
indifference, but was the result of an accident or mistake, (2) the motion for new trial sets up a
meritorious defense, and (3) a new trial would cause neither delay nor undue prejudice.
Craddock, 133 S.W.2d at 126. When a defaulting party moving for new trial meets all three
elements of the Craddock test, a trial court abuses its discretion if it fails to grant a new trial.
Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 926 (Tex. 2009); Old Republic Ins. Co. v.
Scott, 873 S.W.2d 381, 382 (Tex. 1994).
We begin with the first element. A defendant is consciously indifferent when she “knew
[she] was sued but did not care.” Sutherland v. Spencer, 376 S.W.3d 752, 755 (Tex. 2012). A
defendant satisfies her burden under this element when her factual assertions, if true, negate
intentional or consciously indifferent conduct by the defendant and the factual assertions are not
controverted by the plaintiff. Id.; see In re R.R., 209 S.W.3d 112, 115 (Tex. 2006) (per curiam)
(“[S]ome excuse, although not necessarily a good one, will suffice to show that a defendant’s
failure to file an answer was not because the defendant did not care.”).
Although Quik-Way objected to the affidavits and other evidence filed in support of the
motion for new trial, it did not secure any rulings on its objections; thus, we consider all the
evidence in support of the motion for new trial. Zohra first asserted her failure to answer was not
intentional or conscious indifference but was due to accident or mistake, namely
miscommunications with counsel. In her affidavit, Zohra explained that her sister Nazli handled
the financial and personnel matters in the business and was the day manager of the store. After
they were sued, Nazli said she would handle the lawsuit. According to Zohra, Nazli was more
educated and did not have a full-time outside job. Zohra said she relied on her sister and
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believed a lawyer had been hired and that an answer had been filed. Nazli’s affidavit and
attachments further supported Zohra’s assertions.
A party’s belief that she had taken the appropriate steps to hire counsel is not consciously
indifferent conduct, nor does it show Zohra knew she was being sued but did not care. See
Strackbein v. Prewitt, 671 S.W.2d 37, 38–39 (Tex. 1984) (failure to answer not the result of
intentional act or conscious indifference when defendant presented uncontroverted evidence of
breakdown in communication as to who was mailing lawsuit documents to attorney). We
conclude the evidence shows Zohra’s failure to answer was neither intentional nor the result of
consciously indifferent conduct, and she provided a sufficient excuse to satisfy the first element
of the Craddock test.
The second element of the Craddock test requires a defendant to “set up” a meritorious
defense in its motion for new trial. Dolgencorp, 288 S.W.3d at 927. This does not require proof
“in the accepted sense.” Id. at 927−28. Rather, the motion sets up a meritorious defense if it
alleges facts which in law would constitute a defense to the plaintiff's cause of action and is
supported by affidavits or other evidence providing prima facie proof that the defendant has such
a defense. Id. at 928. Once such requirements are met, controverting evidence offered by the
nonmovant should not be considered. Id.
In her motion for new trial, Zohra alleged the underlying suit was a simple breach of
contract case but that the majority of Quik-Way’s claims against the sisters sounded in tort.
Zohra stated that, although Quik-Way claims she misrepresented facts and concealed facts that
were material, Quik-Way did not elaborate on what those alleged facts were and did not describe
any representations or statements by either sister that were untrue. In their affidavits, Zohra and
her sister testified they did not make misrepresentations or intend to defraud Quik-Way. This
raises a meritorious defense with respect to Quik-Way’s tort claims against her.
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With respect to Quik-Way’s claim for breach of contract, Quik-Way alleged Zohra
“entered in various agreements” with Quik-Way
including, but not limited to, the MFSC Guaranty and the Incentive Agreement
Guaranty. The agreements are binding and enforceable agreements between
Plaintiff and Zohra Khwaja. The breaches of contract by Zohra Khwaja resulted
in injury to Plaintiff.
In her motion for new trial and affidavit, Zohra contended she has a defense to Quik-Way’s
breach of contract claim against her because Quik-Way breached first by not delivering gas and
by withholding credit card payments. In response, Quik-Way noted the trial court granted its no-
evidence summary judgment, “Zohra acknowledges” this in her affidavit, and therefore, she has
no defense to the breach of contract claim raised here. The no-evidence summary judgment is
not in this record, nor are any of the pleadings from that case. Thus, we cannot determine
whether Zohra is prevented from raising any defense to the breach of contract claims asserted by
Quik-Way in this case. Furthermore, because the trial court’s judgment awards a lump sum in
damages, we cannot determine what damages, if any, were awarded on Quik-Way’s breach of
contract claim. We conclude Zohra raised a meritorious defense as to Quik-Way’s breach of
contract claims.
Finally, the purpose of the third element of the Craddock test is to protect a plaintiff
against undue delay or injury that would result in a disadvantage when presenting the merits of
its case at a new trial, such as the loss of a witness or other critical evidence. See id. at 929.
Once a defendant alleged that granting a new trial will not injure the plaintiff, the burden of
going forward with proof of injury shifts to the plaintiff. Id.
Zohra asserted that granting a new trial would not delay or otherwise injure Quik-Way
since less than a month had passed since the default judgment was taken and that she and Nazli
were ready to go forward with the case. The burden then shifted to Quik-Way to disprove this
assertion. In response, Quik-Way merely stated “Defendants have exhibited a pattern of delay
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tactics aimed at preventing Plaintiff from collecting on its Final Judgment.” But Quik-Way did
not allege a specific injury, such as the loss of witnesses or valuable evidence. We conclude
Quik-Way did not prove that the granting of a new trial would cause such harm or injury as to
preclude the granting of a new trial. See id. Thus, Zohra satisfied her burden with respect to the
third element of the Craddock test.
To the extent Quik-Way asserts Zohra did not offer to reimburse Quik-Way for the costs
incurred or state she was willing to go to trial immediately, we note that while these are
important factors to examine, they are not dispositive of whether the motion should be granted.
Dir., State Emp. Workers’ Comp. Div. v. Evans, 889 S.W.2d 266, 270 n.3 (Tex. 1994); see
Angelo v. Champion Rest. Equip. Co., 713 S.W.2d 96, 97 (Tex. 1986) (holding that although
offer to reimburse plaintiff for costs incurred in obtaining default judgment or readiness for trial
may be important factors for trial court to consider, they are not preconditions for granting
motion; court must deal with facts on case-by-case basis in order to do equity; furthermore, once
defendant alleged granting of new trial will not delay or otherwise injure plaintiff, burden of
going forward with proof of injury shifts to plaintiff). Because Zohra’s motion for new trial
satisfied all three elements of the Craddock test, she is entitled to a new trial. We sustain her
issue on appeal.
We reverse the default judgment and remand the cause to the trial court for further
proceedings.
/Molly Francis/
MOLLY FRANCIS
141090F.P05 JUSTICE
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
ZOHRA KHWAJA, Appellant On Appeal from the 95th Judicial District
Court, Dallas County, Texas
No. 05-14-01090-CV V. Trial Court Cause No. DC-14-01589.
Opinion delivered by Justice Francis,
QUIK-WAY RETAIL ASSOCIATES II, Justices Bridges and Myers participating.
LTD., Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and this cause is REMANDED to the trial court for further proceedings consistent
with this opinion.
It is ORDERED that appellant ZOHRA KHWAJA recover her costs of this appeal from
appellee QUIK-WAY RETAIL ASSOCIATES II, LTD..
Judgment entered this 28th day of December, 2015.
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