Court Opinion

ID: 2814534
Source: CourtListenerOpinion
Date Created: 2015-07-04 04:20:15.54385+00
Date Added: 2024-06-11T11:30:32.601209
License: Public Domain

COURT OF APPEALS
                         SECOND DISTRICT OF TEXAS
                              FORT WORTH

                              NO. 02-14-00304-CV

BARRY NUSSBAUM                                                    APPELLANT

                                       V.

BUILDERS BANK, AN ILLINOIS                                         APPELLEE
BANKING CORPORATION

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        FROM THE 236TH DISTRICT COURT OF TARRANT COUNTY
                  TRIAL COURT NO. 236-265485-13

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                                  OPINION

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                                I. INTRODUCTION

      This appeal arises from competing summary-judgment motions filed in a

bill-of-review proceeding.   The primary issue we address in this appeal is

whether a defendant’s failure to update a contractually-agreed-to address for

service of process––so that service of process is attempted via the Texas long-

arm statute at the old agreed-to address set forth in the contract––constitutes
fault or negligence on the part of the defendant contributing to the entry of a

default judgment against him. Because, for the reasons set forth below, we

resolve this issue affirmatively, we will affirm the trial court’s judgment.

                    II. FACTUAL AND PROCEDURAL BACKGROUND

      Appellant Barry Nussbaum signed a guaranty agreement, guaranteeing

repayment of a $4,526,871.00 loan made by Appellee Builders Bank, an Illinois

Banking Corporation, to Meadowbrook 8B Limited Partnership (Borrower).

Borrower subsequently defaulted on the loan, and in due course, Builders Bank

sued Nussbaum for breach of the guaranty agreement.               Nussbaum failed to

answer, and Builders Bank obtained a default judgment against Nussbaum.

      Subsequently,     Nussbaum       timely   filed   a   bill-of-review     proceeding

challenging the default judgment.        Nussbaum filed a traditional motion for

summary judgment in the bill of review proceeding, claiming that the summary-

judgment evidence conclusively established that he was not properly served with

process. Nussbaum argued that absent service of process, he was entitled to a

summary judgment setting aside the default judgment.

      Builders Bank filed a cross-motion for summary judgment. Builders Bank

argued    that   the   summary-judgment         evidence    conclusively     established

Nussbaum’s own fault or negligence as at least a partial cause of entry of the

default judgment against him in the underlying lawsuit. Builders Bank asserted

that, in light of the summary-judgment evidence establishing that Nussbaum’s

fault and negligence had contributed to the entry of the default judgment against

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him, it had conclusively negated the third bill-of-review element and was

therefore entitled to summary judgment.

      The trial court denied Nussbaum’s motion for summary judgment, granted

Builders Bank’s motion for summary judgment, and ordered Nussbaum’s bill-of-

review action dismissed with prejudice. Nussbaum perfected this appeal. He

raises one issue, challenging both the trial court’s denial of his motion for

summary judgment and the trial court’s granting of Builders Bank’s motion for

summary judgment.

                            III. STANDARD OF REVIEW

      We review a traditional summary judgment de novo. Valence Operating

Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). To obtain summary judgment,

the movant must establish that there are no issues of material fact and that it is

entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Diversicare Gen.

Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005); Nixon v. Mr. Prop.

Mgmt., 690 S.W.2d 546, 548 (Tex. 1985). “An appellate court reviewing a

summary judgment must consider all the evidence in the light most favorable to

the nonmovant, indulging every reasonable inference in favor of the nonmovant

and resolving any doubts against the motion.” Goodyear Tire & Rubber Co. v.

Mayes, 236 S.W.3d 754, 756 (Tex. 2007).            When reviewing a summary

judgment, “[we] must consider whether reasonable and fair-minded jurors could

differ in their conclusions in light of all the evidence presented.”   Id. at 755.

When both sides move for summary judgment and the trial court grants one

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motion and denies the other, the reviewing court should review both sides’

summary-judgment evidence, determine all questions presented, and render the

judgment that the trial court should have rendered. Gilbert Tex. Constr., L.P. v.

Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010); FM Props.

Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).

                     IV. THE SUMMARY-JUDGMENT EVIDENCE

      The summary-judgment evidence included the guaranty agreement and

correspondence from Builders Bank. The May 20, 2005 guaranty agreement

executed by Nussbaum provided, in pertinent part,1

      17. Notice. All notices, communications and waivers under this
      Guaranty shall be in writing and shall be (i) delivered in person or (ii)
      mailed, postage prepaid, either by registered or certified mail, return
      receipt requested, or (iii) by overnight express carrier, addressed in
      each case as follows:

            ....

                   to Guarantor:             Barry Nussbaum
                                             ----- Via De La Valle, Suite ---
                                             Del Mar, California 92014

                   with a copy to:           Jesse Villarreal
                                             BNC Real Estate
                                             ------- Emily Road, Suite ---
                                             Dallas, Texas 75240

      Or to any other address as to any of the parties hereto, as such
      party shall designate in a written notice to the other party hereto.

      1
        We omit the numerical address from our opinion pursuant to rule 9.9(a)(3)
of the rules of appellate procedure. See Tex. R. App. P. 9.9(a)(3) (defining
sensitive data as including home addresses).

                                         4
            ....

      18. CONSENT TO JURISDICTION. TO INDUCE LENDER TO
      ACCEPT THIS GUARANTY, GUARANTOR IRREVOCABLY
      AGREES THAT, SUBJECT TO LENDER’S SOLE AND
      ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN
      ANY WAY ARISING OUT OF OR RELATED TO THIS GUARANTY
      WILL BE LITIGATED IN COURTS HAVING SITUS IN TARRANT
      COUNTY, TEXAS. GUARANTOR HEREBY CONSENTS AND
      SUBMITS TO THE JURISDICTION OF ANY COURT LOCATED
      WITHIN TARRANT COUNTY, TEXAS, WAIVES PERSONAL
      SERVICE OF PROCESS AND AGREES THAT ALL SUCH
      SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL
      DIRECTED TO GUARANTOR AT THE ADDRESS STATED
      HEREIN AND SERVICE SO MADE WILL BE DEEMED TO BE
      COMPLETED UPON ACTUAL RECEIPT. [Italics added.]

Builders Bank sent a letter declaring the loan that Nussbaum had guaranteed to

be in default; the letter was mailed to Nussbaum at the above address set forth in

the guaranty agreement, and the letter shows a courtesy copy was mailed to

Jesse Villarreal at the address listed for him in the guaranty agreement.2

      Builders Bank filed suit on January 14, 2009, alleging that Nussbaum was

a California resident doing business in Texas; Builders Bank’s original petition

recites that Nussbaum could be served with citation through the Texas Secretary

of State and states the above address as Nussbaum’s home or office address.

The summary-judgment evidence contains a Whitney3 certificate from the Texas

Secretary of State certifying that a copy of the citation and the original petition

      2
        An affidavit by Builders Bank’s Chief Executive Officer establishes that the
letters referenced herein were mailed by Builders Bank and sets forth the
addresses they were mailed to.
      3
       Whitney v. L & L Realty Corp., 500 S.W.2d 94 (Tex. 1973).

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was received by that office on January 20, 2009; was forwarded on January 22,

2009, to Nussbaum at the address above; and was returned bearing the notation,

“No Forwarding Order on File.”

      On May 19, 2009, Builders Bank filed a first-amended original petition,

which recites that Nussbaum may be served at the address above, except the zip

code of the address was changed to 94014 instead of 92014. The summary-

judgment evidence contains a second Whitney certificate from the Texas

Secretary of State certifying that a copy of the citation and first amended petition

was received by that office on May 22, 2009; was forwarded on May 26, 2009, to

Nussbaum at the address above––the Secretary of State’s return of service

recites the 92014 zip code; and was returned bearing the notation, “No

Forwarding Order on File.”

      Nussbaum executed a summary-judgment affidavit stating that he had

moved from the Via De La Valle address listed in the guaranty agreement in

2006, that he did not ever receive citation in the underlying suit, and that he was

unaware of the default judgment entered against him until Builders Bank

attempted to domesticate the judgment in a proceeding in California.         In his

deposition, Nussbaum testified that he never designated by written notice to

Builders Bank a current address for notice and service per the terms of the

guaranty.

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                                V. APPLICABLE LAW

                                A. Bill of Review

      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. Ross v. Nat’l Ctr. for the Emp’t of the Disabled, 197 S.W.3d 795,

797 (Tex. 2006); Caldwell v. Barnes, 154 S.W.3d 93, 96–97 (Tex. 2004); Baker

v. Goldsmith, 582 S.W.2d 404, 406 (Tex. 1979). The fundamental policy that

finality must be accorded to judgments makes the grounds upon which a bill of

review will be granted narrow and restricted. See King Ranch, Inc. v. Chapman,

118 S.W.3d 742, 751 (Tex. 2003), cert. denied, 541 U.S. 1030 (2004). 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, 154 S.W.3d at

97.

      A bill-of-review plaintiff claiming no service is relieved of the obligation to

prove the first two elements because a judgment entered without notice is

constitutionally infirm regardless of whether the plaintiff possesses a defense he

was prevented from making. Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 84–

85, 108 S. Ct. 896, 899 (1988). A bill-of-review plaintiff alleging that he was not

served, however, is still required to prove the third bill-of-review element––that

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the judgment was rendered unmixed with any fault or negligence of his own.4

Caldwell, 154 S.W.3d at 97. This third element may be considered established if

the plaintiff proves that he was not served with process due to no fault or

negligence on his part because, generally, an individual who is not served cannot

be at fault in allowing a default judgment to be entered. Id. But a bill-of-review

plaintiff who is not served with process because of his own fault or negligence is

not entitled to relief in an equitable bill of review. See Campus Invs., Inc. v.

Cullever, 144 S.W.3d 464, 466 (Tex. 2004) (holding bill-of-review plaintiff not

served with process because of failure to update the address of registered agent

for service of process was not entitled to bill-of-review relief based on own fault

or negligence); Zuyus v. No’Mis Commc’ns, Inc., 930 S.W.2d 743, 746–47 (Tex.

App.––Corpus Christi 1996, no writ) (holding bill-of-review plaintiff not served

with process because of failure to “claim” service of process properly mailed to

him was not entitled to bill-of-review relief based on own fault or negligence); see

also Labra v. Labra, No. 04-13-00285-CV, 2014 WL 3611551, at *2 (Tex. App.—

San Antonio July 23, 2014, no pet.) (mem. op.) (holding bill-of-review plaintiff

who did not receive notice of dispositive hearing because of failure to update her

current address on file with the trial court was not entitled to bill-of-review relief

based on own fault or negligence).

      4
        To the extent that Nussbaum asserts the contrary proposition of law as
part of his sole issue, we overrule this portion of his issue.

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             B. Right of Contract Concerning Notice and Service

       As a fundamental matter, Texas law recognizes and protects a broad

freedom of contract. Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 95 (Tex.), cert.

denied, 132 S. Ct. 455 (2011). The Texas Supreme Court “has long recognized

Texas’[s] strong public policy in favor of preserving the freedom of contract.”

Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 664 (Tex.

2008) (upholding parties’ right to contract for insurance coverage of exemplary

damages for gross negligence in the workers’ compensation context).              The

supreme court has repeatedly explained that

      if there is one thing which more than another public policy requires it
      is that men of full age and competent understanding shall have the
      utmost liberty of contracting, and that their contracts when entered
      into freely and voluntarily shall be held sacred and shall be enforced
      by Courts of justice.

Nafta Traders, 339 S.W.3d at 95–96. Consequently, “[a]s a rule, parties have the

right to contract as they see fit as long as their agreement does not violate the

law or public policy.” In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129–30

(Tex. 2004) (orig. proceeding) (holding parties may contract to waive right to jury

trial). “Parties are free, of course, to contract out of statutory default rules . . .

and may even contractually waive constitutional rights.”          Solar Applications

Eng’g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 112 (Tex. 2010).

      Parties to a contract may agree in advance to submit to the jurisdiction of a

given court, to permit notice to be served by the opposing party, or even to waive

notice altogether. Nat’l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 315–16,

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84 S. Ct. 411, 414, (1964); In re AIU Ins. Co., 148 S.W.3d 109, 114 (Tex. 2004)

(orig. proceeding) (recognizing as issue of first impression that contractual forum-

selection clauses are enforceable).        Parties who contractually agree to a

particular mode of notification of legal proceedings should be bound by a

judgment in which that particular mode of notification has been followed. See,

e.g., Lease Fin. Grp., LLC v. Moore, 2014 WL 300800, at *1–2 (N.Y. App. Div.

Jan. 28, 2014) (declining to set aside default judgment when service of process

was attained in accordance with provision of parties’ equipment finance

lease/guaranty agreement). When a party to a contract agrees or consents to a

certain manner of service and service is accomplished in that manner, “if there

has been any denial of due process, . . ., it is the result of a self-inflicted wound.”

Fin. Fed. Credit Inc. v. Brown, 683 S.E.2d 486, 491 (S.C. 2009) (holding Texas

default judgment on guaranty agreement was not void for lack of service of

process when nonresident defendant was served by Texas plaintiff in

accordance with service-of-process provisions defendant consented to in

guaranty agreement signed by defendant); Nat’l Equip. Rental, Ltd. v. Polyphasic

Health Sys., Inc., 490 N.E.2d 42, 46 (Ill. App. Ct. 1986) (explaining that Illinois

recognizes service of process through agreed means; the parties to a guaranty

agreed to the method of service).

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               VI. APPLICATION OF THE LAW TO THE PRESENT FACTS

      Nussbaum raises one issue and three subissues on appeal.             We first

address Nussbaum’s second and third subissues asserting that the trial court

erred by granting Builders Bank’s motion for summary judgment. Builders Bank

moved for summary judgment on the ground that Nussbaum was not entitled to

bill-of-review relief because the summary-judgment evidence conclusively

negated the third bill-of-review element––that entry of the default judgment

against Nussbaum was not attributable to or mixed with Nussbaum’s fault or

negligence.

      Viewing the summary-judgment evidence in the light most favorable to

Nussbaum, as the nonmovant, it conclusively establishes that on May 20, 2005,

Nussbaum signed a $4.5 million guaranty. Nussbaum agreed––per the terms of

the guaranty that he signed––that notices and service of process concerning the

guaranty could be mailed to him by certified or registered mail at the Via De La

Valle, Del Mar address. The parties to the guaranty were free to agree to this

contractual provision; it is not against any law and does not violate any public

policy.   See Nat’l Equip. Rental, Ltd., 375 U.S. at 315–16, 84 S. Ct. at 414

(recognizing parties’ rights to contractually agree to terms of service of process);

Nafta Traders, 339 S.W.3d at 95; Solar Applications Eng’g, Inc., 327 S.W.3d at

112; Fairfield Ins. Co., 246 S.W.3d at 664; Prudential Ins. Co. of Am., 148
S.W.3d at 129–30; see also Fin. Fed. Credit Inc., 683 S.E.2d at 491; Nat’l Equip.

Rental, Ltd., 490 N.E.2d at 46.     Although Nussbaum contractually agreed to

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service of process by certified mail or registered mail at the Via De La Valle, Del

Mar address, he moved from that address in 2006 and failed to provide, per the

terms of the guaranty, written designation to Builders Bank of an updated

address   for notice    and service     of   process concerning the       guaranty.

Consequently, Builders Bank sent all notices required under the guaranty,

including notice of default of the underlying loan, to Nussbaum at the address

designated in the guaranty––the Via De La Valle, Del Mar address––and mailed

a copy to Jesse Villarreal at the address listed for him in the guaranty agreement.

Builders Bank’s petitions identified the Via De La Valle, Del Mar address as the

home address or home office address, and the Texas Secretary of State mailed

service of process to Nussbaum via certified mail to that address. See Tex. Civ.

Prac. & Rem. Code Ann. § 17.045(a) (West 2015). Thus, to the extent that

Nussbaum failed to receive notice or service of process concerning Builders

Bank’s suit against him for breach of the guaranty agreement he had signed,

such failure was the result of a self-inflicted wound based on his own fault or

negligence in failing to provide to Builders Bank a written designation of a current

address for service. See Campus Invs., Inc., 144 S.W.3d at 466; Labra, 2014
WL 3611551, at *2; Zuyus, 930 S.W.2d at 746–47; see also Fin. Fed. Credit Inc.,
683 S.E.2d at 491.      Because the summary-judgment evidence conclusively

negates the third bill-of-review element Nussbaum bore the burden of

establishing––that the default judgment was rendered unmixed with his fault or

negligence––Builders Bank was entitled to summary judgment. See Campus

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Invs., Inc., 144 S.W.3d at 466; Labra, 2014 WL 3611551, at *2; Zuyus, 930
S.W.2d at 746–47. We hold that the trial court did not err by granting Builders

Bank’s motion for summary judgment; we overrule Nussbaum’s second and third

subissues.

      Nussbaum’s issue and his first subissue complain that the trial court erred

by denying his motion for summary judgment because he was not served with

process.     Because we have held that the summary-judgment evidence

conclusively negates the third bill-of-review element Nussbaum bore the burden

of establishing, even if Nussbaum was not served with process, he is still

precluded from obtaining bill-of-review relief because of the role his own fault or

negligence played in the entry of the default judgment against him. See Campus

Invs., Inc., 144 S.W.3d at 466 (holding bill-of-review plaintiff not served with

process not entitled to bill-of-review relief based on own fault or negligence);

Labra, 2014 WL 3611551, at *2 (same); Zuyus, 930 S.W.2d at 746–47 (same).

Consequently, we need not address whether proper service on Nussbaum was

established by the Whitney certificates from the Texas Secretary of State.5 See

      5
        We do note, however, that the following cases appear contrary to
Nussbaum’s position that he was not properly served. See Campus Invs., Inc.,
144 S.W.3d at 466 (holding that “[w]hen substituted service on a statutory agent
is allowed, the designee is not an agent for serving but for receiving process on
the defendant’s behalf”); Capitol Brick, Inc. v. Fleming Mfg. Co., 722 S.W.2d 399,
401 (Tex. 1986) (holding that absent fraud or mistake, the secretary of state’s
Whitney certificate is conclusive evidence that the Secretary of State, as agent
for the nonresident, received service of process and forwarded the service as
required by the statute); Dole v. LSREF2 APEX 2, LLC, 425 S.W.3d 617, 620–21
(Tex. App.—Dallas 2014, no pet.) (holding certificate from secretary of state
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Tex. R. App. P. 47.1 (requiring appellate court to address issues necessary for

final disposition of the appeal).

                                    VII. CONCLUSION

      Having overruled Nussbaum’s second and third subissues and having

determined that we need not address the remainder of his issue, we affirm the

trial court’s summary judgment for Builders Bank.

                                                      /s/ Sue Walker
                                                      SUE WALKER
                                                      JUSTICE

PANEL: LIVINGSTON, C.J.; WALKER and SUDDERTH, JJ.

SUDDERTH, J., dissents without opinion.

DELIVERED: July 2, 2015

indicating service was returned “unclaimed” conclusively established service
under long-arm statute); Mahon v. Caldwell, Haddad, Skaggs, Inc., 783 S.W.2d
769, 772 (Tex. App.––Fort Worth 1990, no writ) (“The fact that the certificate from
the Secretary of State evidenced that process was forwarded by certified mail
was sufficient to grant jurisdiction over the defendant.”); see also Williamson v.
State, Nos. 03-11-00786-CV, 03-12-00344-CV, 2013 WL 3336869, at *3–4 (Tex.
App.—Austin June 26, 2013, pet. denied) (mem. op.).

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