Opinion
No. 11-14-00066-CV
03-31-2016
ATCCO MORTGAGE, INC., Appellant v. SHELLY D. BEASLEY, INDEPENDENT EXECUTRIX FOR THE ESTATE OF VERNIE JOE LANG, Appellee
On Appeal from the 259th District Court Jones County, Texas
Trial Court Cause No. 023085
MEMORANDUM OPINION
This is an appeal from an order granting a motion to dismiss in favor of Shelly D. Beasley, independent executrix for the Estate of Vernie Joe Lang. The trial court found that the underlying claim of Atcco Mortgage, Inc. had been extinguished as provided for in the Texas Business Organizations Code. Atcco appeals. We affirm.
Almost thirty years ago, a trial court awarded the First State Bank in Abilene a default judgment against Joe Lang, individually and as trustee. Appellant alleged that, by way of several assignments of the judgment, Appellant came to be the ultimate owner of the judgment.
Lang passed away in 2011, and the probate court appointed Beasley as the independent executrix of Lang's estate. Appellant filed a claim in the probate proceeding based on the 1988 judgment. Appellant alleges that Appellee, in effect, denied the claim. As a result, Appellant filed its original petition against Appellee to establish a claim under Section 313 of the Texas Probate Code. TEX. PROB. CODE ANN. § 313 (West 2003). Appellee moved to dismiss the suit because Appellant did not have the statutory right to sue or defend in Texas courts. Later, the State of Texas reinstated Appellant's corporate charter, and Appellee filed an amended motion to dismiss in which it argued that, under the Business Organizations Code, the underlying claim had been extinguished during the time that Appellant's corporate charter was forfeited. The trial court granted the amended motion to dismiss.
Appellant raises two issues on appeal. Both issues present questions of law that we review de novo. Kenworthy v. Kenworthy Corp., 149 S.W.3d 296, 297 (Tex. App.—Eastland 2004, pet. denied). In its second issue, Appellant argues that the prerequisites for filing a suit to establish a probate claim occurred after Appellant's forfeiture; therefore, the claim against Appellee was not an "existing claim" subject to extinguishment under Section 11.359(a) of the Business Organizations Code. TEX. BUS. ORGS. CODE ANN. § 11.359(a) (West 2012).
In her amended motion to dismiss, Appellee relies on Section 11.359(a) of the Business Organizations Code to show that Appellant could not pursue its claim. Appellant failed to pay its state franchise taxes, and on July 7, 2006, the State forfeited Appellant's corporate charter. Consequently, as of July 7, 2006, Appellant was a terminated filing entity, with a limited three-year period of survival, that did not have the ability to sue and defend claims. Id. § 11.001(4) (West Supp. 2015) (defining a terminated entity as "a domestic entity the existence of which has been [] (A) terminated in a manner authorized or required by this code, unless the entity has been reinstated in the manner provided by this code; or (B) forfeited pursuant to the Tax Code, unless the forfeiture has been set aside"); Id. § 11.356(a)(2) (limiting the survival of a terminated filing entity to three years after termination to sue and defend claims); TEX. TAX CODE ANN. § 171.252(1) (West 2015) (revoking an entity's right to sue or defend when its corporate privileges have been forfeited). After Appellant filed this suit, Appellant sought, and received, reinstatement of its corporate charter on December 31, 2013, approximately seven years after the State forfeited Appellant's corporate charter.
Section 11.359(a) of the Business Organizations Code provides a three-year period after the termination of a filing entity for the terminated filing entity to pursue and defend existing claims. BUS. ORGS. § 11.359(a) ("Except as provided by Subsection (b), an existing claim by or against a terminated filing entity is extinguished unless an action or proceeding is brought on the claim not later than the third anniversary of the date of termination of the entity."). Because the State forfeited Appellant's corporate charter in 2006 and because Appellant failed to complete the necessary acts to reinstate its status until approximately seven years later, Appellee argues that the claim Appellant had against Lang was extinguished in 2009. We agree.
Appellant argues that a prior default judgment does not fall under the definition of "claim" in the Business Organizations Code because it is an adjudicated claim and that, therefore, Section 11.359(a) of the Business Organizations Code does not apply to the claim against Appellee. However, Section 11.001(1) of the Business Organizations Code provides that a claim is "a right to payment, damages, or property, whether liquidated or unliquidated, accrued or contingent, matured or unmatured." Id. § 11.001(1). The definition of claim in Section 11.001(1) of the Business Organizations Code is broad, and a prior default judgment that is enforceable as a right to payment falls under this definition. See id.
Next, Appellant argues that, even if the judgment was a claim under the Business Organizations Code, it was not an existing claim as defined by former Section 11.001(3) of the Business Organizations Code. At the time this suit was filed, an "existing claim" was "a claim against the entity that existed before the entity's termination and is not barred by limitations" or "a contractual obligation incurred after termination." Act of May 13, 2003, 78th Leg., R.S., ch. 182, § 1, 2003 Tex. Gen. Laws 267, 391 (current version at TEX. BUS. ORGS. CODE § 11.001(3)). Thus, Appellant's argument is that Section 11.359(a) of the Business Organizations Code does not extinguish a claim by the terminated filing entity. However, Section 11.359(a) of the Business Organizations Code provides for the extinguishment of existing claims "by or against a terminated filing entity." BUS. ORGS. § 11.359(a). It is clear that the legislature included in Section 11.359(a) suits against the terminated filing entity, as defined in former Section 11.001(3), and also suits that the terminated filing entity might bring against another party. See id. Consequently, all claims that Appellant could bring, or could be brought against Appellant, at the time of its termination were extinguished three years after Appellant became a terminated filing entity.
Appellant further argues that the claim did not exist at the time of its termination because it did not have a probate claim until Lang died. It is true that Appellant could not have filed this suit against Appellee prior to (1) Lang's death, (2) Appellant filing a claim with Lang's estate, and (3) Lang's estate rejecting the claim. However, the ability to enforce the judgment existed at the time of the forfeiture of Appellant's corporate charter. The claim to enforce the underlying default judgment is the claim that the Business Organizations Code extinguished in 2009. See id. Because the underlying claim—the prior default judgment—was extinguished in 2009, the trial court properly dismissed Appellant's claim against Appellee.
Appellant cites to G. Richard Goins Construction Co. v. S.B. McLaughlin Associates, as authority for its argument that, once the Secretary of State has reinstated the corporate charter of a terminated filing entity, that entity may pursue and defend claims. 930 S.W.2d 124, 128 (Tex. App.—Tyler 1996, writ denied) ("Once the right to sue or defend is revived, the corporation may sue or defend all causes of action, regardless of whether such causes arose before or during the period of forfeiture."). However, the court in McLaughlin does not address the extinguishment of claims that occurs three years after an entity forfeits its corporate charter because the timeline of events in that case permitted the reinstated filing entity to pursue the claim. Id. at 127-28. In McLaughlin, the entity was terminated in 1987, forfeited its certificate of authority to do business in 1988, and suit was filed against it in 1989. Id. at 127. Because the plaintiff filed suit within three years of the termination of the entity, the entity could defend the suit upon reinstatement of its certificate of authority to do business. Id at 128; see former TEX. BUS. CORP. ACT art. 7.12 (expired Jan. 1, 2010). Because we find that the prior default judgment was an existing claim under Section 11.359(a) and that Appellant's corporate charter was forfeited for more than three years without reinstatement prior to the filing of this suit, we hold that the trial court did not err when it granted Appellee's motion to dismiss. We overrule Appellant's second issue.
In the first issue, Appellant argues that the trial court erred when it dismissed the suit and the underlying claim with prejudice because the order constituted a collateral attack on the prior judgment. When the trial court granted Appellee's motion to dismiss, it did not address the validity of the prior default judgment. Rather, the trial court dismissed the suit against Appellee because the underlying claim—the prior judgment—could no longer be pursued by Appellant. BUS. ORGS. § 11.359(a). We do not find that Appellee's motion to dismiss was a collateral attack on a prior judgment. Instead, we analogize the use of Section 11.359(a) of the Business Organizations Code to limitations statutes. See, e.g., TEX. CIV. PRAC. & REM. CODE ANN. § 16.004 (West 2002) (providing that "[a] person must bring suit on the following actions not later than four years after the day the cause of action accrues"). As a result, the trial court's dismissal order does not affect the validity of the underlying judgment. The dismissal merely applies to Appellant's ability to bring a claim to enforce the judgment, just as any other claim must be brought before the statute of limitations expires. Because the application of Section 11.359(a) does not operate as a collateral attack on the underlying default judgment, we find that the trial court did not err when it granted Appellee's motion to dismiss. We overrule Appellant's first issue.
We affirm the order of the trial court.
JIM R. WRIGHT
CHIEF JUSTICE March 31, 2016 Panel consists of: Wright, C.J.,
Willson, J., and Bailey, J.