Opinion
No. 01-01-00813-CV
Opinion issued August 21, 2003
On Appeal from the 80th District Court, Harris County, Texas, Trial Court Cause No. 2000-57174
Gregory R. Ave, Touchstone, Bernays, Johnston, Beall Smith, LLP 1201 Elm St. Ste 4700 Dallas, TX 75270-2138, for appellant.
Michael C. Engelhart, Engelhart Greenwood, L.L.P. 5821 SouthWest Frwy, Suite 222, Houston, TX 77057, Dan'a Draper-Lawson, 14637 North 39th Way Pheonix, AZ 85032-5270, for appellant.
MEMORANDUM OPINION
This is a restricted appeal brought by appellants, Econo Lube N' Tune, Inc. (the Corporation) and Econo Lube N' Tune, from a default judgment rendered against them in favor of Dan'a Draper Lawson ("Lawson"). In their first issue, which is dispositive of the appeal, appellants assert that the default judgment violates the automatic stay provided by United States Bankruptcy Code and, therefore, is void as a matter of law. We reverse and vacate the judgment.
11 U.S.C.A. § 362(a)(1) (2003).
Background
On November 4, 1998, Lawson took her car for repair work to the Corporation's facility located at 10611 Westheimer, Houston, Texas. Later that same day, Lawson was injured in a car accident, which she asserts was due to the improper repair of her brakes as performed in the shop.
Lawson filed suit against appellants on November 6, 2000. In response to the suit, the Corporation filed with the trial court a "Notice of Pending Chapter 11 Case and Notice of Automatic Stay," including a copy of the bankruptcy petition. On February 26, 2001, the trial court rendered a final default judgment for $1,192,750 in actual damages and $119,275 in prejudgment interest, jointly and severally, against appellants.
Automatic Stay
In their first issue, appellants assert that, because the default judgment violates the automatic stay provided by United States Bankruptcy Code Section 362, it is void as a matter of law. The Bankruptcy Code provides that the filing of a bankruptcy petition operates as a stay of the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.
11 U.S.C.A. § 362(a)(1) (2003).
When a defendant files a bankruptcy petition, an automatic stay goes into effect and abates any judicial proceeding against that party. In re Southwestern Bell Tel. Co. , 35 S.W.3d 602, 604 (Tex. 2000) (citing 11 U.S.C. § 362(a)). The bankruptcy stay deprives state courts of jurisdiction over the debtor and his property until the stay is lifted or modified. Baytown State Bank v. Nimmons , 904 S.W.2d 902 (Tex.App.-Houston [1st Dist.] 1995, writ denied). Consequently, any subsequent judicial proceedings taken against the debtor are in violation of the automatic stay and are void, not merely voidable. Id. ; Continental Casing Corp. v. Samedan Oil , 751 S.W.2d 499, 501 (Tex. 1988). In its appellate brief, the Corporation states that "Econo Lube N' Tune" is its registered trademark, and a name under which it does business. There is nothing in the appellate record to indicate anything to the contrary, and appellee has not directly contradicted this statement. We take as true all statements of fact made by an appellant unless they are contradicted. Tex.R.App.P. 38.1(f). Thus, the record reflects that appellants comprise a single corporate entity.
In her petition, Lawson named Econo Lube N' Tune as a defendant, noting that she "believed" it to be a Texas company, but without ascertaining or identifying the nature of the business entity-corporation, sole proprietorship, or otherwise. Appellee also concedes in her brief that the franchise agreement she attached as an appendix to the brief, which is not part of the appellate record, was not entered into by the appellants until March 2000 16 months after the accident and four months after Econo Lube N' Tune, Inc. filed for bankruptcy.
We hold that the automatic bankruptcy stay applies to both appellants. We sustain appellants' first issue. Because this issue is dispositive of the appeal, we decline to address appellants' second issue.
We vacate the default judgments rendered against both appellants, and direct the trial court to stay all further proceedings in this cause pursuant to Section 362 of the Bankruptcy Code.