Opinion
No. 11-05-00172-CV
March 9, 2006.
On Appeal from the 90th District Court Stephens County, Texas, Trial Court Cause No. 28,408.
Panel consists of: WRIGHT, C.J., and McCALL, J., and STRANGE, J.
MEMORANDUM OPINION
This appeal arises from a bill of review proceeding. Electric Mobility Corporation (Electric Mobility) seeks to set aside a no-answer default judgment. After conducting a preliminary hearing, the trial court entered an order dismissing Electric Mobility's bill of review. We reverse and remand.
Background Facts
On February 26, 2002, Joyce Ingram filed a products liability action against Electric Mobility. She alleged that a defect in an electric scooter manufactured by Electric Mobility caused a fire which destroyed her home. Electric Mobility acknowledges that its registered agent for service was served with citation on August 26, 2002. However, Electric Mobility did not file an answer. The trial court entered a default judgment against Electric Mobility on October 28, 2002, in the amount of $600,000.
The judgment awarded Ingram $200,000 in compensatory damages and $400,000 in exemplary damages.
Electric Mobility filed the underlying bill of review proceeding on September 10, 2003. It alleged that it had no notice of the products liability action until it received postjudgment discovery from Ingram on April 23, 2003. At Electric Mobility's request, the trial court conducted a preliminary hearing under the procedures outlined in Baker v. Goldsmith, 582 S.W.2d 404 (Tex. 1979). The trial court subsequently entered an order dismissing Electric Mobility's request to set aside the default judgment.
Appellate Issues
Electric Mobility raises two issues on appeal. In its first issue, Electric Mobility contends that the default judgment should be set aside because of deficiencies in the citation and return of service. See TEX. R. CIV. P. 99, 107. Electric Mobility asserts in its second issue that the trial court erred in determining that the default judgment was proper because Electric Mobility's registered agent for service had actual notice of the suit. Ingram argues that the trial court did not err in dismissing the bill of review proceeding because Electric Mobility failed to pursue an available legal remedy prior to pursuing the bill of review. Ingram also asserts that Electric Mobility failed to perfect service of its bill of review petition on a proper party.
The trial court did not make formal findings of fact and conclusions of law in its order of dismissal. The trial court indicated in its order of dismissal that the default judgment was not invalid because of the registered agent's actual receipt of the citation.
Standard of Review
The grant or denial of a bill of review will not be disturbed unless it is affirmatively shown that there was an abuse of judicial discretion. Interaction, Inc. v. State, 17 S.W.3d 775, 778 (Tex.App.-Austin 2000, pet. denied). A trial court abuses its discretion if it acts without reference to any guiding rules or principles or acts in an arbitrary or unreasonable manner. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). When reviewing matters committed to a trial court's discretion, an appellate court may not substitute its own judgment for the trial court's judgment. Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992). Nor may a reviewing court set aside the trial court's determination unless it is clear from the record that the trial court could only reach one decision. Id. at 840. Our review of a trial court's determination of the legal principles controlling its ruling is much less deferential. Id. A trial court has no discretion in determining what the law is or applying the law to the facts. Id. Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion. Id. Bill of Review Proceedings
A bill of review is an equitable proceeding brought by a party seeking to set aside a prior judgment that is no longer subject to challenge by a motion for new trial or appeal. Caldwell v. Barnes, 154 S.W.3d 93, 96 (Tex. 2004) ( Caldwell II); Goldsmith, 582 S.W.2d at 406. Bill of review plaintiffs must ordinarily plead and prove (1) a meritorious defense to the underlying cause of action (2) which the plaintiffs were prevented from making by the fraud, accident or wrongful act of the opposing party or official mistake (3) unmixed with any fault or negligence on their own part. Caldwell II, 154 S.W.3d at 96; Caldwell v. Barnes, 975 S.W.2d 535, 537 (Tex. 1998) ( Caldwell I); Goldsmith, 582 S.W.2d at 406-08. Bill of review plaintiffs claiming non-service, however, are relieved of two elements ordinarily required to be proved in a bill of review proceeding. Caldwell II, 154 S.W.3d at 96; Caldwell I, 975 S.W.2d at 537. First, if a plaintiff was not served, constitutional due process relieves the plaintiff from the need to show a meritorious defense. Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 86-87 (1988); Caldwell II, 154 S.W.3d at 96-97; Caldwell I, 975 S.W.2d at 537. Second, the plaintiff is relieved from showing that fraud, accident, wrongful act or official mistake prevented the plaintiff from presenting such a defense. Caldwell II, 154 S.W.3d at 97; Caldwell I, 975 S.W.2d at 537.
Bill of review plaintiffs alleging they were not served, however, must still prove that the judgment was rendered unmixed with any fault or negligence of their own. Caldwell II, 154 S.W.3d at 97; Caldwell I, 975 S.W.2d at 537. This third and final element is conclusively established if the plaintiff can prove that he or she was never served with process. Caldwell II, 154 S.W.3d at 97; Caldwell I, 975 S.W.2d at 537. An individual who is not served with process cannot be at fault or negligent in allowing a default judgment to be rendered. Caldwell II, 154 S.W.3d at 97. Proof of non-service, then, will conclusively establish the third and only element that bill of review plaintiffs are required to prove when they are asserting lack of service of process as their only defense.
Under the procedures outlined in Goldsmith, a bill of review plaintiff is required, as a pretrial matter, to present prima facie proof of a meritorious defense to the underlying cause of action. 582 S.W.2d at 408. This requirement is dispensed with when the plaintiff is claiming lack of service of process. Caldwell II, 154 S.W.3d at 97. When a plaintiff claims lack of service, the trial court should (1) dispense with any pretrial inquiry into a meritorious defense, (2) hold a trial, at which the bill of review plaintiff assumes the burden of proving that the plaintiff was not served with process, thereby conclusively establishing a lack of fault or negligence in allowing a default judgment to be rendered, and (3) conditioned upon an affirmative finding that the plaintiff was not served, allow the parties to revert to their original status as plaintiff and defendant with the burden on the original plaintiff to prove his or her case. Id. at 97-98.
Analysis
We note at the outset that the proceedings which occurred in the trial court differ from the procedures outlined in Caldwell II. Although Electric Mobility claims a lack of proper service, the trial court conducted a preliminary hearing on the bill of review request. Electric Mobility requested the preliminary hearing by filing a written request for the trial court to conduct a preliminary hearing under Goldsmith. At the invitation of Electric Mobility's trial counsel, the trial court considered the merits of Electric Mobility's non-service contention at the preliminary hearing. The trial court dismissed the bill of review proceeding based upon its determination that Electric Mobility had not established its lack of service claim. Accordingly, we must determine if the trial court erred by rejecting Electric Mobility's lack of service contention at the preliminary hearing.
Prior to addressing the merits of Electric Mobility's complaints, we address the arguments advanced by Ingram for upholding the trial court's dismissal of the bill of review proceedings. Ingram first argues that "Electric Mobility has not shown continuous due diligence to perfect service from the date of the filing of the Bill of Review. . . . Electric Mobility has never perfected service of its Bill of Reviews on Judgment Plaintiff, Joyce Ingram, a proper representative of her estate, or any of her heirs." (emphasis in original) However, an answer was filed on Ingram's behalf in the bill of review proceeding. Under TEX. R. CIV. P. 121, the filing of an answer constitutes an appearance of a defendant and dispenses with the necessity for the issuance or service of citation.
Ingram apparently died after Electric Mobility filed the bill of review proceeding. Irrespective of this fact, the record indicates that Ingram remains a party to this appeal.
Ingram additionally contends that Electric Mobility failed to pursue an available legal remedy prior to filing the bill of review. Ordinarily, a person must exercise due diligence to avail himself of all adequate legal remedies against a former judgment before filing a bill of review. Caldwell I, 975 S.W.2d at 537. The trial court signed the default judgment on October 28, 2002. Electric Mobility alleges in its bill of review petition that it did not become aware of either the products liability action or the default judgment until April 23, 2003. Ingram argues that Electric Mobility failed to explain why it did not pursue a restricted appeal even though it became aware of the default judgment within six months of its entry. See TEX. R. APP. P. 26.1(c), 30. Ingram's argument fails as a matter of law under the supreme court's holding in Gold v. Gold, 145 S.W.3d 212 (Tex. 2004), wherein the court held that the filing of a restricted appeal is not a prerequisite to filing a bill of review.
Defective Citation?
Electric Mobility attached a copy of the citation from the products liability action to its bill of review petition. Electric Mobility contends that the citation was defective because it was directed to "Ralph Stanthin" rather than "Electric Mobility Corporation." The citation provided in relevant part as follows:
Ralph Santhin was Electric Mobility's registered agent for service. The citation's misidentification of Santhin as "Stanthin" is not an issue in this appeal.
CITATION
THE STATE OF TEXAS
TO: RALPH STANTHIN REGISTERED AGENT FOR ELECTRIC MOBILITY CORPORATION 24015 AYSCAUGH LANE KATY, TEXAS 77493
DEFENDANT(S) IN THE HEREAFTER STYLED AND NUMBERED CAUSE.
The completed "return of service" portion of the citation reads in relevant part as follows:
OFFICER/AUTHORIZED PERSON RETURN
Came to hand at 11:17 o'clock A.M., on the 20 day of August 2002. Executed at (address) 17423 Katy Freeway Houston, Texas 77094 in Harris County at 11:04 o'clock A.M. on the 26 day of August, 2002, by delivering to Ralph Stanthin defendant, in person, a true copy of this Citation together with the accompanying 1 copy(ies) of the PLAINTIFF'S ORIGINAL PETITION AND REQUEST FOR DISCLOSURE attached thereto. (emphasis added)
A bill of review is a direct attack on a judgment. McEwen v. Harrison, 345 S.W.2d 706, 709 (Tex. 1961). In any direct attack on a judgment, there is no presumption in favor of valid issuance, service, or return of citation. Primate Constr., Inc. v. Silver, 884 S.W.2d 151, 152 (Tex. 1994). To uphold a default judgment on direct attack, the record must reflect strict compliance with the rules of civil procedure governing service of citation. Id. at 152; McKanna v. Edgar, 388 S.W.2d 927, 929-30 (Tex. 1965). If strict compliance is not affirmatively shown, the service of process is invalid and has no effect. Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884, 885 (Tex. 1985). When a judgment is directly attacked and strict compliance is required, actual receipt of service is immaterial. Wilson v. Dunn, 800 S.W.2d 833, 837 (Tex. 1990).
The El Paso Court of Appeals addressed an almost identically worded citation in Stafford Construction Co. v. Martin, 531 S.W.2d 667 (Tex.Civ.App.-El Paso 1975, no writ). The petition in Stafford named "Stafford Construction Company, Inc." as the defendant. 531 S.W.2d at 668. The citation at issue in Stafford provided as follows: "To Robert H. Stafford, Registered Agent for Stafford Construction Company, Inc. . . . Defendant in the hereinafter styled and numbered cause[.]" Id. The court held that the citation was defective to confer service on Stafford Construction Company, Inc. because the citation was directed to Robert H. Stafford. Id. at 670.
We conclude that the holding in Stafford is applicable to the citation at issue in this appeal. TEX. R. CIV. P. 99(b)(8) requires citations to "be directed to the defendant." As was the situation in Stafford, the citation at issue was directed to an agent of Electric Mobility rather than Electric Mobility itself. Accordingly, the record does not reflect strict compliance with the requirement that citation be directed to the defendant. The fact that Electric Mobility's registered agent may have had actual notice of the action is of no consequence. The supreme court has repeatedly held that a party who becomes aware of proceedings without proper service of process has no duty to participate in them. Caldwell II, 154 S.W.3d at 97 n. 1; Wilson, 800 S.W.2d at 836.
Disposition
Given the record before it, the trial court abused its discretion by dismissing Electric Mobility's bill of review, claiming a lack of proper service in the products liability action. Electric Mobility's first and second issues are sustained.
In addition to asking for the trial court's dismissal of the bill of review proceeding to be reversed, Electric Mobility asks this court to take the further step of setting aside the default judgment. Electric Mobility contends that this relief is appropriate because the record establishes that the default judgment was void as a matter of law. We conclude that the procedural posture of this case prevents us from rendering a judgment setting aside the default judgment. The only proceedings which have occurred in the trial court are a preliminary hearing. Electric Mobility only presented its request for the trial court to set aside the default judgment orally at the preliminary hearing. The holding in Caldwell II indicates that the question of proper service in a bill of review proceeding is a matter to be resolved at trial rather than at a preliminary hearing. 154 S.W.3d at 97-98. Accordingly, it is necessary for the bill of review proceeding to be remanded to the trial court so that the service issue can be fully developed. This Court's Ruling
Electric Mobility's trial counsel made the following announcement at the beginning of the preliminary hearing: "Your Honor, we have filed a motion for a preliminary hearing, but we would ask that the Court go ahead and set aside the default and grant the Bill of Review."
To the extent that Electric Mobility contends that the default judgment should be set aside as a matter of law, it would appear that a motion for summary judgment would be an appropriate vehicle for presenting this contention to the trial court.
The trial court's order dismissing the bill of review is reversed, and the cause is remanded.