Ex Parte: Gryphon Holdco, LLC v. the State of Texas

NO. 12-23-00265-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

EX PARTE: § APPEAL FROM THE 7TH

GRYPHON HOLDCO, LLC § JUDICIAL DISTRICT COURT

§ SMITH COUNTY, TEXAS

MEMORANDUM OPINION
Gryphon Holdco, LLC, appeals from a default judgment entered against it ordering it to
pay delinquent property taxes. In a single issue, Gryphon contends the evidence is legally and
factually insufficient to support the default judgment. We affirm.

BACKGROUND
In March 2018, Lindale Independent School District, Smith County, Smith County
Emergency Services District #01, and Tyler Junior College (collectively Appellees) sued
Enersafe Inc. and Gryphon to recover delinquent ad valorem taxes for business personal
property. 1 Gryphon was served via its registered agent on November 5, 2018. Enersafe was
served through the Texas Secretary of State in March 2021. Neither defendant filed an answer.
In the petition, Appellees claimed they were owed taxes for “Business Personal Property
consisting of furniture, fixtures, equipment, inventory, machinery and vehicles, used in the
operation of Enersafe, Inc. . . . assessed in the name of Enersafe, Inc. on the tax rolls of Lindale
Independent School District, Smith County, Texas.” The petition then listed the taxes owed to
each entity as of the date of filing for the year 2016. It further stated: “All Defendants named in
this suit either owned the property that is the subject of this suit on January 1 of the year in which

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Enersafe is not a party to this appeal.
taxes were imposed on said property, or owned or claimed an interest in or lien upon said
property at the time of the filing of this suit.”
In June 2023, Appellees filed a trial request form. The trial court held a short hearing on
July 17, during which it granted Appellees’ request for a default judgment. Gryphon then filed a
motion for new trial in which it argued it was “unaware it had been sued and was not aware that
an answer was required.” The trial court denied the motion. Gryphon filed a motion for
reconsideration, on which the trial court did not rule. This appeal followed.

DEFAULT JUDGMENT
In its sole issue, Gryphon contends the evidence is legally and factually insufficient to
support the trial court’s default judgment. Specifically, it urges that there is no evidence that it
owes any taxes or owns the property at issue.
In their brief, Appellees focus on the standard for reviewing the denial of a motion for
new trial found in Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124 (Tex. 1939).
However, Gryphon explicitly states in its reply that it is not appealing the denial of its motion for
new trial and is instead directly attacking the default judgment. To support its contention,
Gryphon points to Matter of Marriage of Williams, 646 S.W.3d 542 (Tex. 2022).
In Williams, a respondent in a divorce proceeding sought to challenge the trial court’s
property division following a default judgment when she had not raised the issue in the trial
court. Id. at 543-44. In a per curiam opinion, the Texas Supreme Court held that she could raise
her legal sufficiency challenge for the first time on appeal. Id. at 544. In its analysis, the Court
cited the differences between the equitable doctrine of Craddock and a legal sufficiency
challenge:

A motion under Craddock does not attempt to show an error in the judgment; rather, it seeks to
excuse the defaulting party's failure to answer by showing the Craddock elements. In contrast, a
complaint of legally or factually insufficient evidence assails the judgment, seeking to show that it
is not supported by evidence presented in the trial court.

Id. at 545 (internal citations omitted). The Court further cited to controlling civil law allowing a
default judgment damages award to be challenged:

Our decision in Holt Atherton Industries, Inc. v. Heine confirms that the sufficiency of the
evidence to support a default judgment can be challenged even though the challenging party is not
entitled to have the default set aside under Craddock. 835 S.W.2d 80, 83-84 (Tex. 1992). There,

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we held that the trial court had not abused its discretion by denying a motion for new trial because
it could have concluded from the evidence that the Craddock elements were not met. Id. at 83. But
we went on to hold that there was legally insufficient evidence to support the unliquidated
damages awarded in the default judgment. Id. at 85-86. And we explained that “when an appellate
court sustains a no evidence point after an uncontested hearing on unliquidated damages following
a no-answer default judgment, the appropriate disposition is a remand for a new trial on the issue
of unliquidated damages.” Id. at 86.

Id. at 545 (emphasis in original). Importantly, the Court cited crucial differences between a
divorce proceeding and a regular civil case, such as the case at hand:

Although defaults and sufficiency challenges operate somewhat differently in the divorce context,
there is similarly no reason in that context to require a Craddock motion as a prerequisite to a
sufficiency challenge. In a suit for divorce, the pleadings are not deemed admitted by the
defendant’s failure to appear, so the plaintiff must present sufficient evidence to support the
material allegations in the petition. In addition, legal and factual sufficiency challenges do not
constitute independent grounds for asserting error, but they are relevant factors in determining
whether the trial court abused its discretion.

Id. (internal citations omitted).
We disagree with Gryphon that Williams stands for the proposition that the entirety of the
default judgment can be challenged on appeal. The Texas Supreme Court used the current law
from Heine and applied it to a divorce case. Id. It did not upend established law regarding
default judgments. That the Court specifically distinguished divorce proceedings from general
default proceedings further negates Gryphon’s position.
When a default judgment is taken against the defendant, all allegations of material fact
set forth in the petition are deemed admitted except the amount of unliquidated damages, and the
default judgment conclusively establishes the defendant’s liability. Metro A, LLC v. Polley, No.
02-09-00025-CV, 2011 WL 4413233, at *5 (Tex. App.—Fort Worth Sept. 22, 2011, pet. denied)
(mem. op.); see Heine, 835 S.W.2d at 83; Morgan v. Compugraphic Corp., 675 S.W.2d 729,
731 (Tex. 1984). To determine unliquidated damages, the trial court must hear evidence
regarding damages. TEX. R. CIV. P. 243.
By failing to answer, Gryphon admitted the factual allegations in Appellees’ petition and
its liability for the event sued upon, i.e., delinquent taxes. Therefore, Appellees were not
required to present evidence of Gryphon’s liability. See Polley, 2011 WL 4413233, at *5; see
also Heine, 835 S.W.2d at 83; Morgan, 675 S.W.2d at 731. And Gryphon does not argue the

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damages award is either unliquidated or unsupported by evidence. 2 See TEX. R. APP. P. 38.1 (i)
(“brief must contain a clear and concise argument for the contentions made, with appropriate
citations to authorities and to the record”). Therefore, we overrule Gryphon’s sole issue.

DISPOSITION
Having overruled Gryphon’s sole issue, we affirm the trial court’s judgment. All pending
motions are overruled as moot.

GREG NEELEY
Justice

Opinion delivered May 31, 2024.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

2
Appellees filed certified copies of tax records with the trial court prior to the hearing on the default
judgment.

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COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT OF TEXAS

JUDGMENT

MAY 31, 2024

NO. 12-23-00265-CV

EX PARTE: GRYPHON HOLDCO, LLC

Appeal from the 7th District Court
of Smith County, Texas (Tr.Ct.No. 25,806-A)

THIS CAUSE came to be heard on the appellate record and briefs filed
herein, and the same being considered, it is the opinion of this court that there was no error in the
judgment.
It is therefore ORDERED, ADJUDGED and DECREED that the judgment
of the court below be in all things affirmed, and that all costs of this appeal are hereby adjudged
against the appellant, Gryphon Holdco, LLC, for which execution may issue, and that this
decision be certified to the court below for observance.

Greg Neeley, Justice.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.