Court Opinion

ID: 3111090
Source: CourtListenerOpinion
Date Created: 2015-10-16 06:53:50.748169+00
Date Added: 2024-06-11T10:17:12.114798
License: Public Domain

Opinion issued December 19, 2013.

                                    In The

                             Court of Appeals
                                    For The

                        First District of Texas
                           ————————————
                            NO. 01-12-00733-CV
                          ———————————
   PARAMOUNT CREDIT, INC., D/B/A 5 STAR AUTOPLEX, Appellant
                                      V.
                  KIMBERLY MONTGOMERY, Appellee

                  On Appeal from the 122nd District Court
                         Galveston County, Texas
                      Trial Court Case No. 11CV1696

                                OPINION

      Paramount Credit, Inc., which does business as 5 Star Autoplex, appeals a

default judgment entered in favor of Kimberly Montgomery. Among other things,

Paramount argues that due to improper service, the trial court lacked personal
jurisdiction over Paramount, and the judgment is therefore void. We sustain that

issue, and we reverse and remand to the trial court.

                                   Background

      In October 2010, Paramount sold a car to Montgomery, in exchange for

which she traded in another vehicle, made a down payment, and entered into a

financing agreement for the balance, with Paramount as the lender. Montgomery

alleges that Paramount represented that the purchased vehicle had a factory

warranty, but she later learned that the vehicle had a “branded” title, meaning that

it not only lacked a warranty, but it had in fact been totaled in an accident. In

October 2011, Montgomery sued Paramount for breach of express and implied

warranties, breach of contract, negligent misrepresentation, and violation of the

Texas Deceptive Trade Practices Act.

      Montgomery’s Original Petition alleged that “Paramount Credit Inc. d/b/a 5

Star Auto Plex [sic] is a corporation and may be served with citation by serving its

registered agent for service at 2724 Crossview #202, Houston, Texas 77063.” The

day after the suit was filed, a citation was issued to “PARAMOUNT CREDIT

INC. D/B/A 5 STAR AUTO PLEX, UPON WHOM PROCESS OF SERVICE

[sic] MAY BE HAD BY SERVING ITS REGISTERED AGENT, 2724

CROSSVIEW #202, HOUSTON, TX 77063.” This citation bears the signature of

a deputy district clerk, but it does not bear a seal of the court. A deputy constable

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attempted to serve the citation but was unsuccessful. The deputy’s signed return

states,

          Came to hand on the 10TH day of NOVEMBER, 2011 at 7:10
          o’clock AM and executed in ____ County, Texas, by delivering to
          each of the within named defendants, in person true copy of this
          Citation. [sic] together with the accompany copy of 11CV1696 he
          [sic] following times and place, to wit:

          ....

          not executed as to the Defendant PARAMOUNT CREDIT INC
          DBA 5 STAR AUTO PLEX, 2724 CROSSVIEW #202,
          HOUSTON, TX. 77063
          diligence used in finding said Defendant. [sic] attempts being
          11/16/11 10:45 AM NO ANSWER CARD LEFT WITH
          DEPUTY’S CELL #; 3PM PHONE CALLL [sic] FROM
          RESIDENT ADVISES RENTING SINCE APRIL 2011-BAD
          ADDRESS
          the cause of failure to execute this process is RETURN TO COURT-
          BAD ADDRESS

The return was a pre-printed form; the bold text above indicates portions of the

return typed in by the deputy. The original citation and return were filed with the

trial court.

          After the citation was returned unserved, at Montgomery’s request a new

citation was issued to “PARAMOUNT CREDIT INC. D/B/A 5 STAR AUTO

PLEX, Upon Whom Process of Service [sic] may be had by Serving, THE

SECRETARY OF THE STATE OF TEXAS, CITATIONS UNIT, P. O. BOX

12079, AUSTIN, TX 78711, WHO SHALL THEN FORWARD A COPY TO:

REGISTERED AGENT, MOHAMED MICHMICH, 2724 CROSSVIEW #202,

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HOUSTON, TEXAS 77063.” The new citation was signed under seal of the court.

The Officer’s Return for the new citation states,

      Came to hand January 11, 2012 at 1:07 P.M. and executed in Travis
      County, Texas, on January 12, 2012 at 11:53 A.M. by delivering to
      PARAMOUNT CREDIT INC D/B/A 5 STAR AUTO PLEX by
      delivering to Hope Andrade, Secretary of State of the State of Texas,
      at 1019 Brazos Street, Austin, Texas, 78701, by delivering to GAYLE
      MARIE LINEMAN, designated agent for service for the Secretary of
      State, duplicate true copies of the citation together with accompanying
      duplicate true copies of the Plaintiff's ORIGINAL petition.

This return was filed in the trial court. Two months later, the Secretary of State

certified that “a copy of the Citation and Plaintiff’s Original Petition” in

Montgomery’s suit

      was received by this office on January 12, 2012, and that a copy was
      forwarded on January 13, 2012, by CERTIFIED MAIL, return receipt
      requested to:

             Paramount Credit Inc D/B/A 5 Star Auto Plex
             Registered Agent, Mohamed Michmich
             2724 Crossview #202
             Houston , TX 77063

      The PROCESS was returned to this office on March 9, 2012, bearing
      the notation Unclaimed.

This certification was also filed in the trial court.

      By late March 2012, Paramount had not answered the petition, and both

returns had been on file with the clerk of the trial court for more than 10 days, as

required by the Rules of Civil Procedure.               See TEX. R. CIV. P. 107(h).

Montgomery moved for a default judgment. In May 2012, after a hearing at which

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Montgomery and her attorney testified, the trial court entered a default judgment

against Paramount for $31,934.96 in actual damages, $63,869.92 in additional

damages, $6,000 in attorney’s fees, pre-judgment and post-judgment interest, costs

of court, and cancellation of the remaining balance of the loan from Paramount to

Montgomery. Paramount timely filed a notice of restricted appeal.

                                      Analysis

       To prevail on a restricted appeal, the appellant “must establish that: (1) it

filed notice of the restricted appeal within six months after the judgment was

signed; (2) it was a party to the underlying lawsuit; (3) it did not participate in the

hearing that resulted in the judgment complained of and did not timely file any

post-judgment motions or requests for findings of fact and conclusions of law; and

(4) error is apparent on the face of the record.” Alexander v. Lynda’s Boutique,

134 S.W.3d 845, 848 (Tex. 2004); TEX. R. APP. P. 30. Only the fourth element is

at issue in this case.

       A restricted appeal is a direct attack on the judgment. Barker CATV Constr.,

Inc. v. Ampro, Inc., 989 S.W.2d 789, 792 (Tex. App.—Houston [1st Dist.] 1999,

no pet.). The default judgment can only be sustained if the record before the trial

court affirmatively shows that Paramount was served in strict compliance with the

Texas Rules of Civil Procedure. Primate Constr., Inc. v. Silver, 884 S.W.2d 151,

152 (Tex. 1994) (per curiam); Barker CATV Constr., 989 S.W.2d at 792. If the

                                          5
record before the trial court does not affirmatively show, at the time that default

judgment is requested, that the defendant has appeared, was properly served, or

waived service in writing, the trial court lacks personal jurisdiction over the

defendant. Marrot Commc’ns, Inc. v. Town & Country P’ship, 227 S.W.3d 372,

376 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). “In contrast to the usual

rule that all presumptions will be made in support of a judgment, there are no

presumptions of valid issuance, service, and return of citation when examining a

default judgment.” Barker CATV Constr., 989 S.W.2d at 792. Failure to comply

strictly with the Rules of Civil Procedure constitutes reversible error on the face of

the record. Ins. Co. of State of Pa. v. Lejeune, 297 S.W.3d 254, 255–56 (Tex.

2009).

      A corporation is not a person capable of accepting process on its own behalf,

and it therefore must be served through an agent. See, e.g., Wohler v. La Buena

Vida in W. Hills Inc., 855 S.W.2d 891, 892 (Tex. App.—Fort Worth 1993, no

writ). Service may be made on the corporation’s registered agent, president, or any

vice president. TEX. BUS. ORGS. CODE ANN. §§ 5.201(b), 5.255(1) (West 2012).

By statute, Texas domestic corporations must “designate and continuously

maintain in this state (1) a registered agent; and (2) a registered office.” Id.

§ 5.201(a). “The registered agent . . . is an agent of the entity on whom may be

served any process, notice, or demand required or permitted by law to be served on

                                          6
the entity.” Id. § 5.201(b)(1). The registered agent may be an individual or an

organization. Id. § 5.201(b)(2). Whether an individual or an organization, the

registered agent must “must maintain a business office at the same address as the

entity’s registered office.” Id. § 5.201(b)(3). “The registered office (1) must be

located at a street address where process may be personally served on the entity’s

registered agent; [but] (2) is not required to be a place of business of the filing

entity . . . .” Id. § 5.201(c).

       The Secretary of State becomes an agent for purposes of service of process

when a corporation fails to designate a registered agent or when “the registered

agent of the entity cannot with reasonable diligence be found at the registered

office of the entity.” Id. § 5.251(1). The law requires strict compliance with these

conditions; “[o]nly after the registered agent of a corporation cannot be found with

reasonable diligence at the registered office can the Secretary of State act as agent

of the corporation for service of process.” Marrot Commc’ns, 227 S.W.3d at 377.

Thus, if this court cannot determine from the face of the record the address at

which service was attempted or the individual upon whom service was attempted, a

default judgment obtained after service on the Secretary of State cannot stand, even

if a corporation has failed to designate and maintain a registered agent and

registered office. RWL Constr., Inc. v. Erickson, 877 S.W.2d 449, 451–52 (Tex.

App.—Houston [1st Dist.] 1994, no writ). Similarly, this court has overturned a

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default judgment rendered when the registered office was vacant, but evidence of

that fact was not in the record at the time of default judgment. Marrot Commc’ns,
227 S.W.3d at 378–79.

      We cannot affirm a default judgment unless it is clear from the face of the

record upon whom the attempted service of process was made, where, when, how,

and in what capacity. For example, if “Henry Bunting, Jr.,” is the registered agent

of an entity, but “Henry Bunting” is actually served and it is not clear from the

record that the latter was authorized to accept process, the default judgment must

be reversed. Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884,

885 (Tex. 1985) (per curiam); see also Hercules Concrete Pumping Serv., Inc. v.

Bencon Mgmt. & Gen. Contracting Corp., 62 S.W.3d 308, 310–11 (Tex. App.—

Houston [1st Dist.] 2001, pet. denied) (service invalid as against Hercules Concrete

Pumping Service, Inc., when return showed service on “Hercules Concrete

Pumping”). Similarly, if the record is unclear as to which address was used for the

attempt or when the attempt was made, the judgment will be reversed. RWL

Constr., 877 S.W.2d at 451–52. The judgment will also be overturned when the

return fails to show a manner of service, but makes a conclusory statement such as

that delivery was accomplished “by serving” an individual. E.g., Watson Van &

Storage Co. v. Busse, 451 S.W.2d 557, 558 (Tex. Civ. App.—Houston [1st Dist.]

1970, no writ).

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        In this case, there is no dispute that only one attempt at direct service of

Paramount was made and that the attempt was unsuccessful. Rather, the parties

dispute whether Montgomery exercised reasonable diligence in attempting to serve

Paramount’s registered agent at its registered office prior to serving the Secretary

of State. “When a citation has been returned unserved, the officer’s return must

itself show the diligence used by the officer to execute the citation and the cause of

his failure to execute.” David A. Carl Enters., Inc. v. Crow-Shutt #14, 553 S.W.2d
118, 120 (Tex. App.—Houston [1st Dist.] 1977, no writ) (citing TEX. R. CIV. P.

107).

        Paramount has named a registered agent, Mohamed Michmich, who was

named in the second citation which was used to effect substituted service and in

the resulting Secretary of State’s certificate. Montgomery’s petition, however, did

not name the registered agent, nor did the first citation which the deputy constable

attempted to serve.

        The original citation directed only that service be made upon the registered

agent of Paramount, but it did not identify the agent by name. Although the

registered agent for a corporation could be an individual or an organization, TEX.

BUS. ORGS. CODE ANN. § 5.201(b)(2) (West 2012), the citation provided no

guidance to the process server as to whether it would be serving an individual or an

organization. The officer’s return does not use the term “registered agent” or name

                                          9
any individual with whom the deputy interacted. On the contrary, it indicates only

that there was “no answer” when the deputy attempted service. It states that the

deputy left a card, and that “resident advises renting since April 2011—Bad

Address.” Although somebody apparently called the deputy in response to the

attempt to serve process, the return does not identify the “resident” who found the

card and called the deputy or what inquiry the officer made. It provides no

information from which it can be assumed that the deputy spoke with the

individual designated as Paramount’s registered agent, Michmich.       Indeed the

record suggests otherwise, considering that instead of arranging to accept service

of process, the caller “advise[d] renting since April 2011”—a period of seven

months—leading the officer to conclude he had a “bad address.”

      The facts stated in the officer’s return are insufficient to support that

conclusion.   We cannot determine whether the deputy asked for “Paramount

Credit,” “5 Star Auto Plex,” “Registered Agent,” or some other person, office, or

entity. It is entirely plausible on the face of the record that the deputy simply

spoke with the wrong person, someone who did not have enough knowledge to

respond differently. Regardless of who contacted the deputy, there is no basis

upon which we can conclude that the deputy was able to communicate that he was

attempting to serve process on Mohamed Michmich. The person on the other end

of the phone call may not have known anything about Paramount Credit or 5 Star

                                        10
Auto Plex, but he may have known the whereabouts of Michmich. Because the

citation did not give the deputy sufficient information to ask the right question,

there was no way he reasonably could have concluded that he had been given a bad

address.

      We have previously held that one attempt at service constitutes reasonable

diligence when it is clear from the record that further attempts would be futile. For

example, if the return identifies “the person upon whom service was attempted,”

but indicates the citation could not be executed because the location had been

occupied by some other person or entity for ten years, future attempts would be

futile. Ingram Indus., Inc. v. U.S. Bolt Mfg., Inc., 121 S.W.3d 31, 34 (Tex. App.—

Houston [1st Dist.] 2003, no pet.). Similarly, future attempts would have been

futile when a deputy attempted to serve Michael E. Moore but found that the

address given was and had been the Goodson residence for nearly a year and that

the Goodsons still received occasional mail for Moore and other former residents.

G.F.S. Ventures, Inc. v. Harris, 934 S.W.2d 813, 816–17 (Tex. App.—Houston

[1st Dist.] 1996, no pet.); see also BLS Dev., LLC v. Lopez, 359 S.W.3d 824, 827–

28 (Tex. App.—Eastland 2012, no pet.) (repeated attempts at service on a vacant

property would be futile). These cases are not applicable to the facts of this case.

Here, it is impossible to tell what inquiry the deputy made, who responded, or what

the actual contents of that response might have been. To support the default

                                         11
judgment, the officer’s citation itself must affirmatively show the exercise of

reasonable diligence. David A. Carl Enters., 553 S.W.2d at 120. It is not clear

from the record that one attempt at service constituted reasonable diligence under

the facts before us.

      This case is similar to Uvalde Country Club v. Martin Linen Supply Co., 690
S.W.2d 884 (Tex. 1985) (per curiam), in which the Supreme Court of Texas held

that omission of part of the registered agent’s name from the citation and return

invalidated service. 690 S.W.2d at 885. In that case, the Court held that service

was invalid due to the omission of the suffix “Jr.” in the agent’s name. Id. Here,

there was no name whatsoever given for Paramount’s registered agent on the

original citation or return. The record must affirmatively show that the person

upon whom service was attempted was, in fact, the registered agent. Id.; see also

Mobile Pipe–Dillingham v. H.E. Stark, 468 S.W.2d 552, 554 (Tex. App.—

Beaumont 1971, no writ) (when no statements in the petition or citation established

identity of registered agent and no evidence was reported, service on purported

agent was defective); Pharmakinetics Labs., Inc. v. Katz, 717 S.W.2d 704, 706

(Tex. App.—San Antonio 1986, no writ) (“It should be noted that when serving an

agent for a corporation or other entity, the citation must affirmatively show that the

individual served is in fact the agent for service.” (citation omitted)).

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      It is true that the second citation, served on the Secretary of State, and the

Secretary of State’s certificate contain the phrase “Registered Agent, Mohamed

Michmich.” But as this court explained in Marrot Communications, Inc. v. Town

and Country Partnership, 227 S.W.3d 372 (Tex. App.—Houston [1st Dist.] 2007,

pet. denied), the certificate does not establish that the “defendant’s registered agent

could not, with reasonable diligence be found at the registered office” prior to

service on the Secretary of State. Id. at 378 (quotation marks omitted) (citing

Ingram Indus., 121 S.W.3d at 34). That is the critical issue in this case, and the

Secretary of State’s certificate is no evidence that Montgomery exercised

reasonable diligence.

      We also note an additional error on the face of the original citation. The

original citation was not “signed by the clerk under seal of court,” as required by

Rule of Civil Procedure 99(b)(2). The absence of a seal renders the original

citation invalid. TEX. R. CIV. P. 99(b)(2); see also Verlander Enters., Inc. v.

Graham, 932 S.W.2d 259, 262 (Tex. App.—El Paso 1996, no pet.).

      The original deputy’s return is also defective. It does not bear the name of

the case in which the citation was issued. TEX. R. CIV. P. 107(b)(1). It does not

identify “the court in which the case is filed.” TEX. R. CIV. P. 107(b)(2). It does

not state “the manner of delivery of service or attempted service.” TEX. R. CIV.

P. 107(b)(8). And it does not show “the diligence used by the officer . . . to

                                          13
execute the same and the cause of failure to execute, and where the defendant is to

be found, if ascertainable.” TEX. R. CIV. P. 107(d).

      Accordingly, we conclude there is error on the face of the record. The

record does not affirmatively show that Montgomery exercised reasonable

diligence in attempting to serve Paramount’s registered agent at its registered

office prior to serving the Secretary of State. Thus, the trial court lacked personal

jurisdiction over Paramount at the time of the default judgment, and that judgment

must be reversed.

      We sustain Paramount’s first issue.

      Because we have found reversible error on the face of the record, we need

not address Paramount’s other arguments on appeal.

                                    Conclusion

      We reverse the default judgment and remand to the trial court for further

proceedings in accordance with this opinion.

                                               Michael Massengale
                                               Justice

Panel consists of Justices Keyes, Higley, and Massengale.

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