Bank of N.Y. v. Chesapeake 34771 Land Trust

• Citation: 456 S.W.3d 628
• Decision Date: 16 January 2015
• Docket Number: No. 08–13–00252–CV,08–13–00252–CV
• Parties: Bank of New York f/k/a the Bank of New York as Trustee for the Certificateholders of the CWABS, Inc. Asset Backed Certificates, Series 2005–9, Appellant, v. Chesapeake 34771 Land Trust, Appellee.
• Court: Texas Court of Appeals

456 S.W.3d 628

Bank of New York f/k/a the Bank of New York as Trustee for the Certificateholders of the CWABS, Inc. Asset Backed Certificates, Series 2005–9, Appellant

v.Chesapeake 34771 Land Trust, Appellee.

No. 08–13–00252–CV

Court of Appeals of Texas, El Paso.

January 16, 2015

R. Dwayne Danner, McGlinchey Stafford, PLLC, Dallas, Lorin M. Subar, Nathan Anderson, for Bank of New York f/k/a The Bank of New York as trustee for the Certificateholders of the CWABS, Inc. Asset Backed Certificates, Series 2005–9.

Kenneth S. Harter, Law Offices of Kenneth S. Harter, Carrollton, for Chesapeake 34771 Land Trust.

Before McClure, C.J., Rodriguez, J., and Larsen, Senior Judge, Larsen, Senior Judge (Sitting by Assignment)

OPINION

YVONNE T. RODRIGUEZ, Justice

This is a restricted appeal from a no-answer default judgment. Appellee, Chesapeake 34771 Land Trust (hereinafter, “the Trust”), sued Appellant, the Bank of New York f/k/a The Bank of New York as Trustee for the Certificateholders of The CWABS, Inc. Asset Backed Certificates, Series 2005–9 (hereinafter, “the Bank”), to quite title to a house. In two issues, the Bank contends the default judgment should be overturned because service of process was improper and because the relief granted was not authorized by law and was in excess of that plead. Because we conclude the Bank was not served properly, we reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

The house in dispute was purchased at a foreclosure sale by the Trust's predecessor. When the Trust subsequently acquired the home, it was encumbered by a note and deed of trust previously assigned to the Bank. Proceeding on the theory that the Bank did not have good title because of various alleged irregularities concerning the purported assignment, the Trust filed suit against the Bank seeking, among other relief, to set aside the Bank's deed or to exercise its equitable right of redemption.

In its petition, the Trust alleged the Bank is “a foreign financial institution” that “has designated its agent for service of process to be a person out of the state of Texas ... [and] is identified as such on the records of the Secretary of State....” The Trust identified the Bank's agent as “Phebe Miller” and directed that “service should be on the Secretary of State Citation Unit, who should then transmit the Citation and Petition to” Miller at an address in New York City. A private process server served the citation and petition on the Secretary of State, and the Secretary of State issued a certificate stating his office forwarded copies of the citation and petition to Miller by certified mail, return receipt requested at the address listed in the petition. The record, however, does not contain the return receipt. After the time to answer had lapsed, the Trust moved for a default judgment. In its amended motion, the Trust asserted—for the first time—that the Bank was a “foreign fiduciary corporation” rather than a foreign financial institution. The trust argued that service through the Secretary of State was proper because, “under such circumstances as are present here, the registered agent of the corporation is the Secretary of State, and the person or office to which the Secretary is to transmit such is the designee for receiving process.”

To bolster its argument, the Trust submitted supporting documentation and a brief. Among the documents submitted by the Trust were: (1) printouts from the Secretary of State's website identifying the Bank as a “Foreign Corporate Fiduciary” and Miller as its “registered agent;” and (2) a “Foreign Bank or Trust Company Filing” executed by the Bank “[p]ursuant to the provisions of Section 105A of the Texas Probate Code ” to “qualify[ ] or serv[e] in any fiduciary capacity in the State of Texas.” In that filing, the Bank declared:

5. This foreign bank or trust company hereby appoints the Secretary of State of Texas as its agent for service of process upon whom all notices and processes issued by any court of this state may be served in any action or proceeding relating to any trust, estate, fund or other matter within this state with respect to which such foreign bank or trust company is acting in any fiduciary capacity, including the acts or defaults of such foreign bank or trust company with respect to any such trust, estate or fund. This appointment is of indefinite duration and irrevocable.

6. The name and address of the officer, agent or other person to whom any notice or process received by the Secretary of State may be forwarded is:

Name: Phebe Miller....

In its brief, the Trust attempted to assuage any qualms the trial court may have had about granting a default judgment by further arguing that “EVEN IF [the Bank] WERE TO BE FOUND TO BE A FINANCIAL INSTITUTION, THE SERVICE MADE UPON IT COMPLIED WITH APPLICABLE LAW ... AND WAS EFFECTIVE[.]” Especially pertinent here, the Trust asserted that it was not required to serve the Bank pursuant to Section 17.028 of the Texas Civil Practice and Remedies Code —titled “Service on Financial Institutions”—and “that service not made in such a fashion [does not] require[ ] setting aside a default.”

On this record, the trial court granted a default judgment.

DEFECTIVE SERVICE OF PROCESS

In its first issue, the Bank contends the default judgment is void because the record fails to establish that it was served in accordance with Section 17.028. We agree.

Standard of Review

A party may bring a restricted appeal if it: (1) filed notice of the restricted appeal within six months after the judgment was signed; (2) was a party to the underlying lawsuit; (3) did not participate in the hearing that resulted in the judgment in issue; (4) did not timely file any post-judgment motions or requests for findings of fact and conclusions of law; and (5) error is apparent on the face of the record. Alexander v. Lynda's Boutique, 134 S.W.3d 845, 848 (Tex.2004) ; Tex.R.App.P. 26.1(c). Here, the parties contest only the fifth element—whether error appears on the face of the record.

When reviewing a default judgment in a restricted appeal, we do not indulge any presumptions in favor of proper issuance, service, and return of citation. Primate Constr., Inc. v. Silver, 884 S.W.2d 151, 152 (Tex.1994) (per curiam); Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884, 885 (Tex.1985) (per curiam); Whiskeman v. Lama, 847 S.W.2d 327, 329 (Tex.App.–El Paso 1993, no writ). Instead, the prevailing party bears the burden to prove service of process was proper, including under any of the long-arm statutes authorizing substituted service on the Secretary of State. Primate Constr., 884 S.W.2d at 153 ; Whiskeman, 847 S.W.2d at 328–29. If the record fails to show strict compliance with the rules relating to the issuance, service, and return of citation, error is apparent on the face of the record, and the attempted service of process is invalid. Primate Constr., 884 S.W.2d at 152–53 ; Uvalde Country Club, 690 S.W.2d at 885 ; Whiskeman, 847 S.W.2d at 328–29. For purposes of a restricted appeal, the record consists of all papers on file in the appeal. Norman Communications v. Tex. Eastman Co., 955 S.W.2d 269, 270 (Tex.1997) (per curiam).

Applicable Law

Section 17.028 outlines the procedure for giving notice of a lawsuit to a “financial institution” as defined by Section 201.101 of the Texas Finance Code. See Tex.Civ.Prac. & Rem.Code Ann. § 17.028 (West Supp.2014). In relevant part, Section 17.028 provides that “citation may be served on a financial institution by: (1) serving the registered agent of the financial institution; or (2) if the financial institution does not have a registered agent, serving the president or a branch manager at any office located in this state.” Tex.Civ.Prac. & Rem.Code Ann. § 17.028(b).

“[W]hen a procedure for giving notice and obtaining jurisdiction is statutorily established, that method is generally exclusive and the form prescribed must be followed with reasonable strictness.” Colson v. Thunderbird Bldg. Materials, 589 S.W.2d 836, 840 (Tex.Civ.App.–Amarillo 1979, writ ref'd n.r.e.) [internal citations omitted]. “Thus, when there is a specific statute that sets out the steps that must be taken, the inquiry is not whether the defendant had actual knowledge of the proceeding against him; rather, the question is whether that knowledge was conveyed to him in the manner required by the statute.” Id. [internal citations omitted].

Discussion

Service of process on the Bank was ineffective because it was not effectuated pursuant to Section 17.028. A party suing a financial institution in Texas must serve process on the institution in accordance with Section 17.028 ; otherwise, service is ineffective. See The Bank of New York Mellon v. Redbud 115 Land Trust, No. 05–13–01149–CV, 452 S.W.3d 868, 871–73, 2014 WL 7014373, at *2–*3 (Tex.App.–Dallas Dec. 5, 2014, no pet. h.) (concluding that Section 17.028 is the exclusive method for serving a financial institution, foreign, or domestic); Perez v. Bank of Am., N.A., No. 13–CV–285, 2013 WL 5970405, at *4 (W.D.Tex. Nov. 7, 2013) (concluding that, “[t]o properly serve a financial institution under Texas law[,]” a plaintiff must abide by Section 17.028 ); see also Bank of New York Mellon v. Soniavou Books, LLC, 403 S.W.3d 900, 903 (Tex.App.–Houston [14th Dist.] 2013, no pet.) (concluding that bank was not properly served under Section 17.028 in light of plaintiff s concession that it did not serve bank in accordance with Section 17.028 in suit challenging foreclosure sale). It is beyond dispute that the Bank is a financial institution. See Tex.Fin.Code Ann. § 201.101 (West 2006) (including within the definition of a “financial institution” a bank or trust company chartered in another state). Indeed, the Trust alleged as much in its petition and concedes as much in its appellate brief. It is also beyond dispute that the Trust did not serve the Bank in accordance with Section 17.028. Instead, the Trust served the Secretary of...