Peralta v. Heights Medical Center, Inc

• Decision Date: 24 February 1988
• Docket Number: No. 86-1430,86-1430
• Parties: R. "Roy" PERALTA, Appellant, v. HEIGHTS MEDICAL CENTER, INC., dba Heights Hospital, et al
• Court: U.S. Supreme Court

485 U.S. 80

108 S.Ct. 896

99 L.Ed.2d 75

R. "Roy" PERALTA, Appellant,

v HEIGHTS MEDICAL CENTER, INC., dba Heights Hospital, et al.

No. 86-1430.

Argued Nov. 30, 1987.

Decided Feb. 24, 1988.

Syllabus

In 1982, a default judgment was entered against appellant in appellee medical center's Texas state-court suit to recover a sum allegedly due under appellant's guarantee of a hospital debt incurred by one of his employees. The judgment was recorded, a writ of attachment was issued, and appellant's real property was sold to satisfy the judgment. In 1984, appellant initiated a bill of review proceeding seeking, inter alia, to set aside the default judgment and void the sale, and alleging that, since the original service of process itself showed it was untimely made and, in fact, he had never been personally served, the judgment was void under Texas law. The court entered summary judgment for appellee on the ground that it must be shown in a bill of review proceeding that the complainant had a meritorious defense to the action in which the judgment was entered, which appellant conceded he did not have. In affirming, the State Court of Appeals rejected appellant's contention that the meritorious-defense requirement violated his due process rights under the Fourteenth Amendment to the Federal Constitution, declaring that the requirement was "not onerous." The State Supreme Court denied appellant's application for a writ of error, noting "No Reversible Error."

Held: The holding below contravenes this Court's precedents, under which a judgment entered without notice or service violates the Due Process Clause. See, e.g., Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865; Armstrong v. Manzo, 380 U.S. 545, 85 S.Ct. 1187, 14 L.Ed.2d 62. The argument that appellant suffered no harm from the default judgment since the same judgment would again be entered on retrial absent a meritorious defense is untenable because, had he had notice of the suit, appellant might have impleaded the employee whose debt had been guaranteed, worked out a settlement, paid the debt, or sold the property himself rather than suffer its sale at a constable's auction for allegedly much less than its true value. Nor is there any doubt that the entry of the judgment itself had substantial adverse consequences, since the judgment was entered on county records, became a lien on appellant's property which impaired his ability to mortgage or alienate the property, and was the basis for issuance of the writ of execution under which the property was promptly sold, again without notice. The contention that appellant has other remedies to escape the consequences of an invalid judgment and should be left to pursue those avenues will not be considered here, since there is no indication that it was raised below. Pp. 84-87.

Reversed.

WHITE, J., delivered the opinion of the Court, in which all other Members joined, except KENNEDY, J., who took no part in the consideration or decision of the case.

Bruce Ian Schimmel, Houston, Tex., for appellant.

Jack E. Urquhart, Houston, Tex., for appellees.

Justice WHITE delivered the opinion of the Court.

Heights Medical Center, Inc. (hereafter appellee), sued appellant Peralta in February 1982 to recover some $5,600 allegedly due under appellant's guarantee of a hospital debt incurred by one of his employees. Citation issued, the return showing personal, but untimely, service. Appellant did not appear or answer, and on July 20, 1982, default judgment was entered for the amount claimed, plus attorney's fees and costs.

In June 1984, appellant began a bill of review proceeding in the Texas courts to set aside the default judgment and obtain other relief.¹ In the second amended petition, it was alleged that the return of service itself showed a defective service ² and that appellant in fact had not been personally served at all. The judgment was therefore void under Texas law. It was also alleged that the judgment was abstracted and recorded in the county real property records, thereby creating a cloud on appellant's title, that a writ of attachment was issued, and that, unbeknownst to him, his real property was sold to satisfy the judgment and for much less than its true value. Appellant prayed that the default judgment be vacated, the abstract of judgment be expunged from the county real property records, the constable's sale be voided, and that judgment for damages be entered against the Medical Center and Mr. and Mrs. Paul Seng-Ngan Chen, the purchasers at the constable's sale and appellees here.

Appellee filed a motion for summary judgment asserting that in a bill of review proceeding such as appellant filed, it must be shown that petitioner had a meritorious defense to the action in which judgment had been entered, that petitioner was prevented from proving his defense by the fraud, accident, or wrongful act of the opposing party, and that there had been no fault or negligence on petitioner's part. Although it was assumed for the purposes of summary judgment that there had been defective service and that this lapse excused proof of the second and third requirement for obtaining a bill of review, it was assertedly necessary, nevertheless, to show a meritorious defense, which appellant had con- ceded he did not have. In response to the motion, appellant repeated the allegations in his petition and filed an affidavit denying that he had ever been personally served or had ever been notified of the entry of default judgment ³ or of the sale of his property. Appellee's motion for summary judgment was granted. Record 54.

Appellant's motion for rehearing for the first time asserted federal constitutional claims under the Fourteenth Amendment. Appellee answered that under Texas law there were three avenues by which to attack a judgment on the grounds that it was void for want of service: an appeal within 30 days of the judgment; by writ of error within 6 months; and by bill of review. It being too late to seek either of the first two courses, appellee urged that the bill of review was the only route then open to appellant, and that route was not available to him—even assuming he did not receive notice of the action filed against him—since he had no meritorious defense. Appellee denied that the meritorious-defense requirement threatened any federal constitutional rights. Rehearing was denied.

On appeal to the Texas Court of Appeals, appellant repeated his claims that in the absence of valid service of process and notice of the judgment, showing a meritorious defense was not necessary under Texas law and requiring it violated the Fourteenth Amendment. Appellee argued that despite the allegation of no service and no notice of judgment, the meritorious-defense requirement prevented relief and that even though the bill of review was the only avenue of relief, the State could constitutionally insist on the showing of a meritorious defense. The Court of Appeals affirmed, reciting the three elements essential for granting a bill of review and holding that a meritorious defense must be shown whether there had been proper service and notice or not. 715 S.W.2d 721 (1986). The court rejected the due process challenge because it viewed the meritorious-defense requirement as "not onerous." Id., at 722. Rehearing was denied, as was the application for a writ of error filed with the Texas Supreme Court, that court noting, "No Reversible Error." App. to Juris. Statement 2a.

Because the holding below appeared problematic in light of our precedents, we noted probable jurisdiction. 481 U.S. 1067, 107 S.Ct. 2458, 95 L.Ed.2d 868 (1987). The case was briefed and argued, and we now reverse.⁴

In opposition to summary judgment, appellant denied that he had been personally served and that he had notice of the judgment. The case proceeded through the Texas courts on that basis,⁵ and it is not denied by appellee that under our cases, a judgment entered without notice or service is constitutionally infirm. "An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under the circumstances, to apprise interested parties of the pendency of the action and afford them the opportunity to present their objections." Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). Failure to give notice violates "the most rudimentary demands of due process of law." Armstrong v. Manzo, 380 U.S. 545, 550, 85 S.Ct. 1187, 1190, 14 L.Ed.2d 62 (1965). See also World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980); Mathews v. Eldridge, 424 U.S. 319, 333, 96 S.Ct. 893, 902, 47 L.Ed.2d 18 (1976); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110, 89 S.Ct. 1562, 1569, 23 L.Ed.2d 129 (1969); Pennoyer v. Neff, 95 U.S. (5 Otto) 714, 733, 24 L.Ed. 565 (1878).

The Texas courts nevertheless held, as appellee urged them to do, that to have the judgment set aside, appellant was required to show that he had a meritorious defense, apparently on the ground that without a defense, the same judgment would again be entered on retrial and hence appellant had suffered no harm from the judgment entered without notice. But this reasoning is untenable. As appellant asserts, had he had notice of the suit, he might have...