Paramount Credit, Inc. v. Montgomery

• Citation: 420 S.W.3d 226
• Decision Date: 19 December 2013
• Docket Number: No. 01–12–00733–CV.,01–12–00733–CV.
• Parties: PARAMOUNT CREDIT, INC., d/b/a 5 Star Autoplex, Appellant v. Kimberly MONTGOMERY, Appellee.
• Court: Court of Appeals of Texas

420 S.W.3d 226

PARAMOUNT CREDIT, INC., d/b/a 5 Star Autoplex, Appellant

v.Kimberly MONTGOMERY, Appellee.

No. 01–12–00733–CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Dec. 19, 2013.

Ciano Pasta, Houston, TX, for Appellant.

Kenneth C. Kaye, League City, TX, Walter James Kronzer, III, Houston, TX, for Appellee.

Panel consists of Justices KEYES, HIGLEY, and MASSENGALE.

OPINION

MICHAEL MASSENGALE, Justice.

Paramount Credit, Inc., which does business as 5 Star Autoplex, appeals a default judgment entered in favor of Kimberly Montgomery. Among other things, Paramount argues that due to improper service, the trial court lacked personal jurisdiction over Paramount, and the judgment is therefore void. We sustain that issue, and we reverse and remand to the trial court.

Background

In October 2010, Paramount sold a car to Montgomery, in exchange for which she traded in another vehicle, made a down payment, and entered into a financing agreement for the balance, with Paramount as the lender. Montgomery alleges that Paramount represented that the purchased vehicle had a factory warranty, but she later learned that the vehicle had a “branded” title, meaning that it not only lacked a warranty, but it had in fact been totaled in an accident. In October 2011, Montgomery sued Paramount for breach of express and implied warranties, breach of contract, negligent misrepresentation, and violation of the Texas Deceptive Trade Practices Act.

Montgomery's Original Petition alleged that “Paramount Credit Inc. d/b/a 5 Star Auto Plex [sic] is a corporation and may be served with citation by serving its registered agent for service at 2724 Crossview #202, Houston, Texas 77063.” The day after the suit was filed, a citation was issued to “PARAMOUNT CREDIT INC. D/B/A 5 STAR AUTO PLEX, UPON WHOM PROCESS OF SERVICE [sic] MAY BE HAD BY SERVING ITS REGISTERED AGENT, 2724 CROSSVIEW # 202, HOUSTON, TX 77063.” This citation bears the signature of a deputy district clerk, but it does not bear a seal of the court. A deputy constable attempted to serve the citation but was unsuccessful. The deputy's signed return states,

Came to hand on the 10TH day of NOVEMBER, 2011 at 7:10 o'clock AM and executed in ____ County, Texas, by delivering to each of the within named defendants, in person true copy of this Citation. [sic] together with the accompany copy of 11CV1696 he [sic] following times and place, to wit:

....

not executed as to the Defendant PARAMOUNT CREDIT INC DBA 5 STAR AUTO PLEX, 2724 CROSSVIEW # 202, HOUSTON, TX. 77063

diligence used in finding said Defendant. [sic] attempts being 11/16/11 10:45 AM NO ANSWER CARD LEFT WITH DEPUTY'S CELL # ; 3PM PHONE CALLL [sic] FROM RESIDENT ADVISES

RENTING SINCE APRIL 2011–BAD ADDRESS

the cause of failure to execute this process is RETURN TO COURT–BAD ADDRESS

The return was a pre-printed form; the bold text above indicates portions of the return typed in by the deputy. The original citation and return were filed with the trial court.

After the citation was returned unserved, at Montgomery's request a new citation was issued to “PARAMOUNT CREDIT INC. D/B/A 5 STAR AUTO PLEX, Upon Whom Process of Service [sic] may be had by Serving, THE SECRETARY OF THE STATE OF TEXAS, CITATIONS UNIT, P.O. BOX 12079, AUSTIN, TX 78711, WHO SHALL THEN FORWARD A COPY TO: REGISTERED AGENT, MOHAMED MICHMICH, 2724 CROSSVIEW # 202, HOUSTON, TEXAS 77063.” The new citation was signed under seal of the court. The Officer's Return for the new citation states,

Came to hand January 11, 2012 at 1:07 P.M. and executed in Travis County, Texas, on January 12, 2012 at 11:53 A.M. by delivering to PARAMOUNT CREDIT INC D/B/A 5 STAR AUTO PLEX by delivering to Hope Andrade, Secretary of State of the State of Texas, at 1019 Brazos Street, Austin, Texas, 78701, by delivering to GAYLE MARIE LINEMAN, designated agent for service for the Secretary of State, duplicate true copies of the citation together with accompanying duplicate true copies of the Plaintiff's ORIGINAL petition.

This return was filed in the trial court. Two months later, the Secretary of State certified that “a copy of the Citation and Plaintiff's Original Petition” in Montgomery's suit

was received by this office on January 12, 2012, and that a copy was forwarded on January 13, 2012, by CERTIFIED MAIL, return receipt requested to:

Paramount Credit Inc D/B/A 5 Star Auto Plex

Registered Agent, Mohamed Michmich

2724 Crossview # 202

Houston, TX 77063

The PROCESS was returned to this office on March 9, 2012, bearing the notation Unclaimed.

This certification was also filed in the trial court.

By late March 2012, Paramount had not answered the petition, and both returns had been on file with the clerk of the trial court for more than 10 days, as required by the Rules of Civil Procedure. SeeTex.R. Civ. P. 107(h). Montgomery moved for a default judgment. In May 2012, after a hearing at which Montgomery and her attorney testified, the trial court entered a default judgment against Paramount for $31,934.96 in actual damages, $63,869.92 in additional damages, $6,000 in attorney's fees, pre-judgment and post-judgment interest, costs of court, and cancellation of the remaining balance of the loan from Paramount to Montgomery. Paramount timely filed a notice of restricted appeal.

Analysis

To prevail on a restricted appeal, the appellant “must establish that: (1) it filed notice of the restricted appeal within six months after the judgment was signed; (2) it was a party to the underlying lawsuit; (3) it did not participate in the hearing that resulted in the judgment complained of and did not timely file any post-judgment motions or requests for findings of fact and conclusions of law; and (4) 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. 30. Only the fourth element is at issue in this case.

A restricted appeal is a direct attack on the judgment. Barker CATV Constr., Inc. v. Ampro, Inc., 989 S.W.2d 789, 792 (Tex.App.-Houston [1st Dist.] 1999, no pet.). The default judgment can only be sustained if the record before the trial court affirmatively shows that Paramount was served in strict compliance with the Texas Rules of Civil Procedure. Primate Constr., Inc. v. Silver, 884 S.W.2d 151, 152 (Tex.1994) (per curiam); Barker CATV Constr., 989 S.W.2d at 792. If the record before the trial court does not affirmatively show, at the time that default judgment is requested, that the defendant has appeared, was properly served, or waived service in writing, the trial court lacks personal jurisdiction over the defendant. Marrot Commc'ns, Inc. v. Town & Country P'ship, 227 S.W.3d 372, 376 (Tex.App.-Houston [1st Dist.] 2007, pet. denied). “In contrast to the usual rule that all presumptions will be made in support of a judgment, there are no presumptions of valid issuance, service, and return of citation when examining a default judgment.” Barker CATV Constr., 989 S.W.2d at 792. Failure to comply strictly with the Rules of Civil Procedure constitutes reversible error on the face of the record. Ins. Co. of State of Pa. v. Lejeune, 297 S.W.3d 254, 255–56 (Tex.2009).

A corporation is not a person capable of accepting process on its own behalf, and it therefore must be served through an agent. See, e.g., Wohler v. La Buena Vida in W. Hills Inc., 855 S.W.2d 891, 892 (Tex.App.-Fort Worth 1993, no writ). Service may be made on the corporation's registered agent, president, or any vice president. Tex. Bus. Orgs.Code Ann. §§ 5.201(b), 5.255(1) (West 2012). By statute, Texas domestic corporations must “designate and continuously maintain in this state (1) a registered agent; and (2) a registered office.” Id. § 5.201(a). “The registered agent ... is an agent of the entity on whom may be served any process, notice, or demand required or permitted by law to be served on the entity.” Id. § 5.201(b)(1). The registered agent may be an individual or an organization. Id. § 5.201(b)(2). Whether an individual or an organization, the registered agent must “must maintain a business office at the same address as the entity's registered office.” Id. § 5.201(b)(3). “The registered office (1) must be located at a street address where process may be personally served on the entity's registered agent; [but] (2) is not required to be a place of business of the filing entity....” Id. § 5.201(c).

The Secretary of State becomes an agent for purposes of service of process when a corporation fails to designate a registered agent or when “the registered agent of the entity cannot with reasonable diligence be found at the registered office of the entity.” Id.§ 5.251(1). The law requires strict compliance with these conditions; “[o]nly after the registered agent of a corporation cannot be found with reasonable diligence at the registered office can the Secretary of State act as agent of the corporation for service of process.” Marrot Commc'ns, 227 S.W.3d at 377. Thus, if this court cannot determine from the face of the record the address at which service was attempted or the individual upon whom service was attempted, a default judgment obtained after service on the Secretary of State cannot stand, even if a corporation has failed to designate and maintain a registered agent and registered office. RWL Constr., Inc. v. Erickson, 877 S.W.2d 449, 451–52 (Tex.App.-Houston [1st Dist.] 1994, no writ). Similarly, this court has overturned a default judgment rendered when the registered office was vacant, but evidence of that fact was not in the record at the time of default judgment. Marrot Commc'ns, 227 S.W.3d at 378–79.

We cannot affirm a default judgment unless it is clear from the face of the record upon whom the attempted service of process was made, where, when, how, and in what capacity. For example, if “Henry Bunting, Jr.,” is the registered agent of an entity, but “Henry Bunting” is actually served and it is not clear from the record that the latter was...