Court Opinion

ID: 4469733
Source: CourtListenerOpinion
Date Created: 2020-01-07 11:10:13.923238+00
Date Added: 2024-06-11T07:51:45.955341
License: Public Domain

Reverse and Render; Opinion Filed January 6, 2020

                                             In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                      No. 05-19-00235-CV

                   DONICA GROUP, LP, Appellant
                               V.
 THOMPSON EXCAVATING, INC. AND BRADLEY THOMPSON, INDIVIDUALLY
AND AS FORMER SHAREHOLDER OF THOMPSON EXCAVATING, INC., Appellees

                        On Appeal from the 101st Judicial District Court
                                     Dallas County, Texas
                             Trial Court Cause No. DC-17-13635

                             MEMORANDUM OPINION
                          Before Justices Schenck, Molberg, and Reichek
                                   Opinion by Justice Schenck
       Donica Group, L.P. (“Donica”) sued appellee Thompson Excavating, Inc. (“TEI”) for

breach of contract and obtained a default judgment against it. Appellees TEI and Bradley

Thompson, individually and as a former shareholder of TEI, filed a bill of review challenging the

default judgment. The trial court granted summary judgment in favor of Thompson and TEI. For

the reasons discussed below, we conclude the trial court lacked jurisdiction over this case. We

reverse the trial court’s judgment and render judgment denying TEI and Thompson’s petition for

equitable bill of review. Because all issues are settled in law, we issue this memorandum opinion.

TEX. R. APP. P. 47.4.
                                                              BACKGROUND

            In July 2011, TEI’s sole officer, shareholder, and director, Thompson allowed TEI to forfeit

its charter.1 In 2014, without having reinstated TEI’s charter, Thompson entered into agreements

with Donica representing himself as an agent of TEI.2 In March 2017, Donica sued TEI for breach

of contract. Donica served TEI’s registered agent, Thompson, and when no answer was filed,

Donica obtained a default judgment against TEI in June 2017. The following month, Donica filed

suit against Thompson in Tarrant County. In that suit, Donica alleged TEI had forfeited its

corporate charter in 2011, so Donica was seeking to collect the default judgment from Thompson

as TEI’s officer and director.3

            In October 2017, TEI and Thompson, individually and as former shareholder of TEI, filed

this bill of review, seeking to set aside the default judgment entered against TEI. TEI and

Thompson moved for traditional summary judgment, arguing TEI had not existed since 2011 and

thus could not have been served in the default judgment case such that the trial court never acquired

personal jurisdiction over TEI. The motion sought to set aside the default judgment as void and

to dismiss the underlying litigation for lack of jurisdiction. Donica responded, arguing Thompson

had been served in the default judgment case and chose to ignore the citation and thus he and TEI

were estopped from denying the corporate existence of TEI. The trial court signed an order

granting Thompson and TEI’s motion for summary judgment declaring the original judgment void

and ordering it to be vacated.4

     1
       TEI first filed its articles of incorporation in 1994. Prior to 2011, Thompson allowed TEI to forfeit its charter in 1997 and 2005, each time
applying and obtaining reinstatement of its charter within a few months of forfeiting it.
     2
        The record contains the following evidence Donica offered to show Thompson conducted business as TEI: bids submitted by Thompson
using TEI’s letterhead; agreements with Donica, signed by Thompson as President of TEI; a certificate of liability that showed TEI as the insured
party; and invoices showing TEI to be the billing party.
     3
         See TEX. TAX CODE ANN. § 171.255.
     4
       The trial court’s judgment included findings that TEI no longer existed as of 2011 and thus TEI was not properly served and the trial court
lacked jurisdiction to enter the default judgment against TEI.

                                                                       –2–
                                            DISCUSSION

       Donica raises ten issues on appeal. In its ninth issue, Donica argues the trial court erred in

granting summary judgment, challenging how TEI could be regarded as existing for purposes of

filing a suit seeking relief by bill of review and yet not existing for purposes of citation in the

default judgment case.

       Donica’s argument—and the record on appeal—raise the issue of standing, which is a

component of subject-matter jurisdiction, and which we review de novo. See Webb v. Voga, 316
S.W.3d 809, 812 (Tex. App.—Dallas 2010, no pet.); see also Tex. Ass’n of Bus. v. Tex. Air Control

Bd., 852 S.W.2d 440, 444–46 (Tex. 1993) (appellate courts may review standing on own motion).

Under Texas law, standing requires an examination of the following: whether the plaintiff was

personally injured; whether the plaintiff’s alleged injury is fairly traceable to the defendant’s

conduct; and whether the plaintiff’s alleged injury is likely to be redressed by each form of

requested relief. See Heckman v. Williamson Cty., 369 S.W.3d 137, 155 (Tex. 2012). To have

standing to pursue a bill of review, a person generally must have been a party to the prior judgment

or have had a then-existing interest or right that was prejudiced by the prior judgment. See Frost

Nat’l Bank v. Fernandez, 315 S.W.3d 494, 502 (Tex. 2010).

       In their motion for summary judgment, Thompson and TEI argued TEI did not exist at the

time Donica sued it for breach of contract and thus it could not have been served. Their motion

relied on section 11.356(a) of the business organizations code, which provides that a terminated

entity like TEI continues in existence for three years after its termination “only for purposes of

prosecuting or defending in the terminated filing entity’s name an action or proceeding brought by

or against the terminated entity.” See TEX. BUS. ORGS. CODE ANN. § 11.356(a). The record at trial

established that TEI forfeited its charter pursuant to section 171.309 of the tax code on July 29,

                                                –3–
2011.5 An entity “the existence of which has been . . . forfeited pursuant to the tax code . . .” is a

terminated entity. See id. § 11.001(4)(B).6

           We question how a terminated entity may be injured, or have a then-existing interest or

right that was prejudiced, by a default judgment entered against it. See Fernandez, 315 S.W.3d at

502. TEI and Thompson argue the general rule requires parties to the underlying default judgment

be included as parties in a bill of review proceeding. We agree with this general rule. See HSBC

Bank USA, N.A. v. Watson, 377 S.W.3d 766, 778 (Tex. App.—Dallas 2012, pet. dism’d).

However, it does not follow that a terminated entity that did not exist in the underlying default

proceeding could thereafter exist for purposes of filing a bill of review. TEI and Thompson cite

to and only rely on decisions from other courts they use as supporting the principle that “a forfeited

corporation can defend itself.” See Super Ventures, Inc. v. Chaudhry, 501 S.W.3d 121, 127–28

(Tex. App.—Fort Worth 2016, no pet.); Cruse v. O’Quinn, 273 S.W.3d 766, 770 (Tex. App.—

Houston [14th Dist.] 2008, pet. denied); Mello v. A.M.F. Inc., 7 S.W.3d 329, 331 (Tex. App.—

Beaumont 1999, pet. denied). However, none of these decisions from other appellate courts is

controlling, and all are factually distinguishable as none involved a bill of review or even a

collateral attack of a judgment. See Chaudhry, 501 S.W.3d at 127–28 (holding trial court erred by

concluding corporation lacked capacity to assert counterclaims or defend against plaintiff’s claims

where corporation’s right to transact business was forfeited after suit and reinstated before trial);

Cruse, 273 S.W.3d at 770 (holding law firm’s forfeiture of corporate charter did not strip it of its

     5
       Section 171.309 of the tax code provides that the secretary of state may forfeit the charter, certificate, or registration of a taxable entity if
the taxable entity does not revive its forfeited privileges within 120 days after the date the privileges were forfeited. See TEX. TAX CODE ANN.
§ 171.309(2).
     6
        The tax code provides that if the corporate privileges of a corporation are forfeited under this subchapter, the corporation shall be denied the
right to sue or defend in a court of this state. See TEX. TAX CODE ANN. § 171.252.

                                                                         –4–
right to appeal); Mello, 7 S.W.3d at 331 (interpreting section 171.252 of tax code to limit

defendants from bringing cross actions, not from merely defending lawsuits).

       The record reflects—and the parties agree—that TEI forfeited its charter on July 29, 2011,

and had not reinstated the charter as of March 15, 2017, when Donica filed its suit for breach of

contract against TEI, nor had TEI’s charter been reinstated when it and Thompson filed this bill of

review. As a terminated entity, TEI no longer existed and could only have appeared as a party to

bring suit within three years of its termination. See BUS. ORGS. § 11.356(a). We conclude TEI no

longer existed and therefore could not have any then-existing interest or right that was prejudiced

by a default judgment. See Fernandez, 315 S.W.3d at 502.

       Accordingly, we conclude TEI lacked standing to file this bill of review and now turn to

examine whether Thompson had standing.

       Although Thompson was served as TEI’s registered agent in the underlying suit, he was

not named a party to the suit or mentioned in the default judgment. Thompson nevertheless argues

he has standing in this suit because Donica brought a separate suit against him in Fort Worth in

which Donica seeks to enforce the default judgment against him as a former officer of TEI.

However, because that suit was not filed until after the default judgment was signed, any interest

or injury Thompson describes is one that did not exist at the time of the underlying default

judgment. See Fernandez, 315 S.W.3d at 502.

       Thompson also argues that under a previous decision from this Court, Farris v. Nortex Oil

& Gas Corp., 404 S.W.2d 87, 89 (Tex. Civ. App.—Dallas 1966, writ ref’d n.r.e.), a bill of review

is the proper procedure for a former stockholder to attack a judgment against a dissolved entity.

       In Farris, this Court stated that where stockholders of a dissolved corporation were not

parties to the judgment against the dissolved corporation, those stockholders could not directly

appeal “or seek any relief from the effect of the judgment in that case,” such that stockholders’

                                               –5–
sole remedy was to file a bill of review. See id. However, in Farris, the dissolved corporation

appeared and participated in the underlying judgment. See id. As a result, there was no doubt of

jurisdiction in the original action and certainly no argument by the shareholders seeking to avoid

personal liability on that account. See id.

       All errors—other than jurisdictional deficiencies—render the judgment merely voidable

and must generally be corrected on direct attack. See Browning v. Placke, 698 S.W.2d 362, 363

(Tex. 1985). Thus, while it was true in Farris that the sole remedy available to former stockholders

who were not parties to the underlying judgment against a dissolved corporation was a bill of

review, it is not true in this case where Thompson seeks to establish the judgment entered against

TEI as void. See PNS Stores, Inc. v. Rivera, 379 S.W.3d 267, 271 (Tex. 2012) (“It is well settled

that a litigant may attack a void judgment directly or collaterally, but a voidable judgment may

only be attacked directly.”). Accordingly, we find Farris inapplicable here.

       We conclude Thompson lacked standing to file this bill of review.

       Because neither TEI nor Thompson had standing to file this bill of review, we conclude

the trial court lacked jurisdiction to enter this judgment. See Tex. Ass’n of Bus., 852 S.W.2d at

444–46.

                                              CONCLUSION

       We reverse the trial court’s judgment and render judgment denying TEI and Thompson’s

petition for bill of review and reinstate the prior judgment in favor of Donica.

                                                   /David J. Schenck/
                                                   DAVID J. SCHENCK
                                                   JUSTICE
190235F.P05

                                                 –6–
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

 DONICA GROUP, LP, Appellant                        On Appeal from the 101st Judicial District
                                                    Court, Dallas County, Texas
 No. 05-19-00235-CV         V.                      Trial Court Cause No. DC-17-13635.
                                                    Opinion delivered by Justice Schenck.
 THOMPSON EXCAVATING, INC. AND                      Justices Molberg and Reichek participating.
 BRADLEY THOMPSON,
 INDIVIDUALLY AND AS FORMER
 SHAREHOLDER OF THOMPSON
 EXCAVATING, INC., Appellee

        In accordance with this Court’s opinion of this date, we REVERSE the judgment of the
trial court and RENDER judgment denying THOMPSON EXCAVATING, INC. AND
BRADLEY THOMPSON, INDIVIDUALLY AND AS FORMER SHAREHOLDER OF
THOMPSON EXCAVATING, INC.’s petition for bill of review and reinstate the prior judgment
in favor of DONICA GROUP, LP.

       It is ORDERED that appellant DONICA GROUP, LP recover its costs of this appeal
from appellee THOMPSON EXCAVATING, INC. AND BRADLEY THOMPSON,
INDIVIDUALLY AND AS FORMER SHAREHOLDER OF THOMPSON EXCAVATING,
INC.

Judgment entered this 6th day of January, 2020.

                                              –7–