LEASE FINANCE GROUP, LLC v. Childers

• Court: Texas Court of Appeals
• Citation: Lease Fin. Grp. LLC v. Childers, 310 SW 3d 120 (Tex. App. 2010)
• Decision Date: 18 March 2010
• Docket Number: No. 2-09-010-CV.,2-09-010-CV.
• Parties: LEASE FINANCE GROUP, LLC, Appellant, v. Randy CHILDERS, Arlington Motor Cars USA, and JP Morgan Chase Bank, N.A., Appellees.

310 SW 3d 120

LEASE FINANCE GROUP, LLC, Appellant, v. Randy CHILDERS, Arlington Motor Cars USA, and JP Morgan Chase Bank, N.A., Appellees.

No. 2-09-010-CV.

Court of Appeals of Texas, Fort Worth.

March 18, 2010.

Mark C. Snyder, Guest & Associates, PC, Irving, TX, for Appellant.

Franklin W. Cram, Franklin W. Cram PC, Mansfield, TX, Truman E. Spring, Jr., Dallas, TX, for Appellees.

Panel: GARDNER, WALKER, and McCOY, JJ.

OPINION

ANNE GARDNER, Justice.

I. Introduction

Appellant Lease Finance Group, LLC ("LFG") appeals a judgment of garnishment in favor of Appellees Randy Childers and Arlington Motor Cars USA¹ against JP Morgan Chase Bank, N.A. ("Chase").² LFG contends in three issues that the trial court erred by denying LFG's motion to set aside judgment and for new trial. We reverse and remand.

II. Factual and Procedural Background

AMC obtained a default judgment against LFG on May 2, 2008, in the amount of $24,500. On September 12, 2008, AMC filed an application for writ of garnishment naming Chase as garnishee and seeking to garnish funds held by Chase for LFG. The trial court issued the writ on September 15, 2008, and Chase was served with the writ on September 19, 2008. Chase filed its original answer on October 7, 2008. AMC and Chase then submitted an "agreed" judgment of garnishment to the trial court that was signed by counsel for AMC and Chase; the "agreed" judgment was not signed by LFG.

The trial court signed the judgment of garnishment on October 10, 2008. The judgment stated in the first paragraph:

The Court, having found that Judgment-Defendant LFG has been properly served with a copy of the Writ of Garnishment in accordance with Rule 663a and has failed to answer or to otherwise enter an appearance in this garnishment suit, is of the opinion that judgment should be rendered in accordance with the pleadings on file and as set forth herein.

Unaware of the October 10 judgment of garnishment, LFG filed its "Original Answer and Motion to Dissolve Writ of Garnishment" on October 24, 2008. LFG first learned of the October 10 judgment of garnishment at the hearing on its motion to dissolve on November 3, 2008.³

LFG thereafter filed a "Motion to Set Aside Judgment in Garnishment and for New Trial" on November 7, 2008, claiming it was not served in strict compliance with the rules of civil procedure. LFG submitted an affidavit by its attorney, Mark Snyder, in support of the motion. Snyder stated in the affidavit that he told AMC's attorney, Franklin Cram, on either October 6 or October 7, 2008, that he would not accept service of the writ of garnishment on behalf of LFG. Snyder also averred that he received a faxed letter from Cram on October 9, 2008. The October 9, 2008 letter enclosed a copy of an undated facsimile to LFG forwarding the writ of garnishment and application for writ of garnishment. Snyder further testified that he was unaware AMC had moved forward with the judgment of garnishment on October 10, 2008, and that he incorrectly calculated LFG's answer day as if responding to service of citation rather than a writ of garnishment.

LFG attached a copy of the October 9, 2008 letter from Cram as an exhibit to Snyder's affidavit. In the October 9, 2008 letter to Snyder, Cram stated: "I am enclosing the fax I sent to LFG." Although the enclosed facsimile included the writ of garnishment, the application for writ of garnishment, and an affidavit from Childers, the October 9, 2008 letter did not set forth the date on which AMC sent the facsimile to LFG. Further, the enclosed facsimile is not dated and does not include facsimile-transmission information indicating when AMC sent it; the only facsimile-transmission information relates to the facsimile sent by Cram to Snyder on October 9, 2008, the day before the trial court signed the agreed judgment.

The trial court conducted a hearing on LFG's Motion to Set Aside Judgment in Garnishment and for New Trial on December 5, 2008. Although LFG contested notice under rule 663a in its motion, AMC did not offer evidence of notice at the hearing or in a written response.⁴ The trial court orally denied LFG's motion at the end of the hearing,⁵ and this appeal followed.

III. Service of Writ of Garnishment on LFG

In its first and second issues, LFG argues the trial court erred by denying its motion to set aside judgment and for new trial because there is no evidence in the record that LFG was properly served with notice of the writ of garnishment, or, alternatively, the notice LFG received was untimely.⁶ In response, AMC contends the trial court correctly denied LFG's motion because the judgment recites notice was proper under rule 663a, there is no minimum notice required under rule 663a, and LFG failed to prove that it was not served in compliance with rule 663a.⁷

A. Standard of Review

A trial court's order denying a motion to set aside a default judgment or for new trial is reviewed under an abuse of discretion standard. Strackbein v. Prewitt, 671 S.W.2d 37, 38 (Tex.1984); Martinez v. Martinez, 157 S.W.3d 467, 469 (Tex.App.-Houston 14th Dist. 2004, no pet.). The trial court abuses its discretion if it acts without reference to any guiding rules or principles. Goode v. Shoukfeh, 943 S.W.2d 441, 446 (Tex.1997).

B. Applicable Law

"A writ of garnishment impounds the alleged money, property, or credits of the debtor." Mendoza v. Luke Fruia Invs., Inc., 962 S.W.2d 650, 651 (Tex.App.-Corpus Christi 1998, no pet.) (citing Beggs v. Fite, 130 Tex. 46, 52, 106 S.W.2d 1039, 1042 (1937)). "The writ of garnishment affords a harsh remedy. It was not known to the common law, but is purely statutory." Walnut Equip. Leasing Co. v. J-V Dirt & Loam, 907 S.W.2d 912, 914 (Tex. App.-Austin 1995, writ denied). "For this reason, garnishment proceedings cannot be sustained unless they strictly conform to the statutory requirements and related rules." Id. Specifically, "the garnishor must strictly comply with the requirement that it serve the debtor, and its failure to comply is not a mere irregularity." Id. "Without proper service of the writ on the debtor, no control or custody of his property can be gained by his answer." Mendoza, 962 S.W.2d at 652.

Rule 663a of the rules of civil procedure states, in relevant part: "The defendant shall be served in any manner prescribed for service of citation or as provided in Rule 21a with a copy of the writ of garnishment, the application, accompanying affidavits and orders of the court as soon as practicable following the service of the writ." Tex.R. Civ. P. 663a; see also Hering v. Norbanco Austin I, Ltd., 735 S.W.2d 638, 641 (Tex.App.-Austin 1987, writ denied). Actual knowledge or a voluntary appearance by the debtor is insufficient and does not waive rule 663a's requirement of service of the writ. Walnut Equip. Leasing Co., 907 S.W.2d at 914; Hering, 735 S.W.2d at 642; see also Requena v. Salomon Smith Barney, Inc., No. 01-00-00783-CV, 2002 WL 356696, at *3 (Tex.App.-Houston 1st Dist. March 7, 2002, no pet.); Mendoza, 962 S.W.2d at 652. Although rule 663a does not entitle a debtor to a minimum of twenty days' notice as with service of an original petition, Mullins v. Main Bank & Trust, 592 S.W.2d 24, 26 (Tex.Civ.App.-Beaumont 1979, no writ), the debtor does have the right to service of the writ of garnishment and related documents "as soon as practicable following the service of the writ" on the garnishee. Tex.R. Civ. P. 663a.

C. Analysis

LFG argues the trial court erred by denying its motion to set aside and for new trial because there is no evidence in the record that LFG was served with notice of the writ of garnishment, or, alternatively, that the notice LFG received was untimely. Before addressing LFG's issues, we must first address AMC's contentions that there is sufficient evidence of service because the judgment recites service was proper under rule 663a, that there is no minimum notice required under rule 663a, and that LFG had the burden to prove it was not properly served under rule 663a.

1. No Presumption of Service from Recitation in Judgment

AMC contends there is sufficient evidence of service because the judgment recites LFG was served in compliance with rule 663a. Although a recitation of due notice in a judgment is some, but not conclusive, evidence of proper notice of trial settings and hearings, see Osborn v. Osborn, 961 S.W.2d 408, 411 (Tex.App.-Houston 1st Dist. 1997, pet. denied), the rule does not apply to default judgments. In an attack upon a default judgment, a recitation of due service in the judgment does not lead to a presumption of due service. Morris v. Zesati, 162 S.W.3d 669, 671 (Tex.App.-El Paso 2005, no pet.) (citing McKanna v. Edgar, 388 S.W.2d 927, 929 (Tex.1965)). Instead, the plaintiff must "prove that the defendant was served in the required manner." Id.

Here, the judgment in garnishment is analogous to a default judgment because the trial court signed the judgment in garnishment before LFG answered or otherwise appeared. See Tex.R. Civ. P. 239 (providing trial court may render default judgment on the pleadings against a defendant that has not filed an answer); see also Crowe v. Ware, No. 05-96-01294-CV, 1998 WL 258398, at *1-2 (Tex.App.-Dallas May 22, 1998, no pet.) (treating judgment in garnishment as default judgment on appeal by judgment debtor claiming lack of service under rule 663a). While the judgment debtor is not a necessary party to the garnishment action, the rules require that he be served under rule 663a. Hering, 735 S.W.2d at 642 (citing Horseley, Collecting on Judgments (State Bar of Texas Professional Development Program 1981)).

"Rule 663a is unambiguous in its requirement that the debtor be given notice of the garnishment and of his rights to regain his property." Id. at 641. "Garnishment proceedings cannot be sustained unless they strictly conform to the statutory requirements and related rules." Walnut Equip. Leasing Co., 907 S.W.2d at 914. "No control or...