Mistaken Nomenclature Negates Default Judgment

Deutsche Bank has won a restricted appeal to set aside a no-answer default judgment. The petition named the defendant as “DEUTSCHE BANK NATIONAL TRUST COMPANY, herein sued in its capacity as the Trustee for the Morgan Stanley ABS Capital 1 Inc., Trust 2006-NC5, Mortgage Pass Through Certificates, Series 2006-NC5.” But the clerk’s office issued a citation addressed to “Deutsche Bank National Trust Company as Trustee Company,” and that name was also used on the affidavit of service. Because the citation was addressed to the wrong party, the attempted service of process was invalid and the default judgment had to be set aside.

Deutsche Bank Nat’l Trust Co. v. Kingman Holdings, LLC, 05-14-00855-CV

Supreme Court Update: Reasonable Diligence Not Established

A year ago, the Dallas Court of Appeals affirmed the denial of an equitable bill of review in which the defendants claimed that the plaintiff had not exercised reasonable diligence in its attempts to effect service through registered mail and personal delivery. The Texas Supreme Court has now set aside that ruling, holding that the defendants had presented some evidence that their failure to receive notice of the default judgment resulted solely from the plaintiff’s failure to certify the defendants’ last known mailing address, and not from any negligence or fault on the defendants’ own part. The record contained evidence that the plaintiff’s owner had met with the defendants’ registered agent at their current address, rather than the outdated address on file with the Secretary of State, that raised a genuine issue of material fact as to the validity of the plaintiff’s “last known mailing address” certification.

Katy Venture, Ltd. v. Cremona Bistro, LLC, No. 14-0629

Service of Process on a Financial Institution

In this restricted appeal, the plaintiff carried out service on the defendant, a bank with a registered agent in New York, solely though service of process upon the Texas Secretary of State.  On appeal, the Court agreed with the defendant that such service was improper because the plaintiff failed to strictly comply with CPRC 17.028, which permits service upon a financial institution by service to “the president or a branch manager at any office located in the state.”

Bank of N.Y. Mellon v. Redbud 115 Land Tr.

“Manner of Service” Required in TRCP 107 Affidavit

In this memorandum opinion, the court found insufficient the sheriff’s affidavit of service, because the affidavit merely stated that the recipient “was served.”  According to the Court, “[b]ecause the return does not state the manner of service, it does not strictly comply with [TRCP] 107, which requires the officer’s return state ‘the manner of delivery of service.'”

U.S. Bank v. Pinkerton Consulting & Investigations

Reasonable Diligence Established

The defaulting defendant in this case claimed that the plaintiff’s service through the Secretary of State was defective because the plaintiff did not establish reasonable diligence in its failed efforts to effect service via registered mail and personal delivery.  The Court of Appeals found that the plaintiff exercised reasonable diligence in both of its prior attempts to carry out service.  Regarding registered mail, the record established that the plaintiff paid the clerk and arranged to have the defendants served by certified mail, return receipt requested at the defendant’s registered address.  When the mailing was returned with the notation that it was undeliverable and could not be forwarded, the plaintiff had sufficiently exercised reasonable diligence.  Regarding personal service, the plaintiff sent a process server to defendant’s registered address, but neither plaintiff’s business nor its registered agent were there.  According to the Court, this was enough since “[t]he statute does not require efforts to find the registered agent at any place other than at the entity’s registered office.”

Katy Venture Ltd. v. Cremona Bistro Corp.

Default Judgment Upheld

The plaintiff sued his former employer, El Paisano, for unpaid wages and unpaid overtime.  After four unsuccessful attempts by a process server to serve El Paisano at the address of its registered agent, the plaintiff served the Texas Secretary of State, who then forwarded the process to the same address via certified mail.  That attempt at service also failed, and the process was returned to the secretary of state with the notation “unclaimed.”  The plaintiff then moved for a default judgment, which the trial court granted.

El Paisano eventually learned of the default judgment and sought to have it set aside.  The trial court denied its motion for a new trial, and El Paisano appealed.  El Paisano argued, among other things, that it was not properly served because the secretary of state did not send the process to its principal place of business.  The Court of Appeals rejected that argument and upheld the default judgment, noting that the plaintiff was entitled to use substituted service on the secretary of state and that the secretary of state had no obligation to send it anywhere other than the address of El Paisano’s registered agent.

El Paisano Nw Hwy v. Arzate, No. 05-12-01457-CV

Substitute Service Survives Restricted Appeal

A pair of California residents sought to set aside a default judgment by means of a restricted appeal. The defendants claimed that the trial court lacked jurisdiction due to defective service of process, which had been accomplished through the Secretary of State. The Secretary of State’s certificate of service stated that process for both defendants had been “Unclaimed.” After the defendants failed to appear, the trial court entered default judgment for $612,500 in damages and another $13,258.27 in attorney fees. The Court of Appeals affirmed. Although the process server had listed the date of execution as taking place the month before he received the citation, that apparent typographical error was not enough to invalidate the return of service, particularly where the other service documents demonstrated the correct date of service. Substitute service through the Texas Secretary of State was also proper, the Court held, because the petition alleged that they were doing business in Texas by entering into a promissory note and guaranty with a Texas company, with the note also secured by real property located in Kaufman County. Nor did the “Unclaimed” notations demonstrate that the citations had not been served. Instead, the Court followed previous cases holding that it indicated only that the defendants had refused or failed to claim the citations from the Secretary of State’s mailings, not that service had not been accomplished.

Dole v. LSREF2 APEX 2, LLC, No. 05-12-01683-CV

Can’t “Refuse” Service on the Secretary of State

Big D appealed from the denial of its motion for new trial following a no-answer default judgment. The court of appeals found that the trial court properly refused to set aside the default judgment.  Big D did not prove that its failure to answer was not intentional or the result of conscious indifference but was due to a mistake or accident.  Rollins properly served Big D by substituted service on the secretary of state after seven failed attempts to serve Big D’s registered agent at the agent’s registered office and home.  The substitute service on the secretary of state was not rendered void by the process being returned with the notation “Refused” because the secretary is not an agent for serving but for receiving process on the defendant’s behalf.  Big D also failed to show that the evidence was insufficient to support the amount of damages awarded by the trial court.  The court of appeals found that the car owner’s testimony regarding the “Blue Book” value of her vehicle was not so weak that the finding of damages was clearly wrong and unjust.  Thus, the court of appeals affirmed the trial court’s judgment.

Big D Transmission v. Rollins, No. 05-11-01019

Details Matter

Karen Smith sued Brown Consulting & Associates, her employer, for injuries she sustained during the course of her employment.  BCA never appeared, and the trial court entered  default judgment in Smith’s favor.   On appeal, BCA argued that Smith failed to properly serve it, and that the default judgment should be voided.  The Court of Appeals agreed with BCA, finding that the affidavit Smith submitted in suport of her rule 106(b) motion for substitute service of process was defective for two reasons.  First, the affidavit did not contain a statement that BCA’s address was the usual place of business of the defendant or its registered agent.  Second, the affidavit did not contain a statement that the address is a place where the registered agent could probably be found.  Because the Court strictly construes the rules governing service when a default judgment is entered, it reversed the trial court’s entry of default judgment and remanded the case for further proceedings.

Brown Consulting v. Smith