Texas MacHinery & Equipment Co. v. Gordon Knox Oil & Exploration Co. , 12 Tex. Sup. Ct. J. 452 ( 1969 )

SMITH, Justice.

In this proceeding in the nature of a bill of review, instituted by Gordon Knox Oil and Exploration Company, a corporation, Respondent here, the trial court granted Respondent relief from a default garnishment judgment. The Court of Civil Appeals affirmed. 434 S.W.2d 182. We reverse the judgments of the courts below and render judgment that the Respondent take nothing.

On March 26, 1962, Texas Machinery and Equipment Company, Incorporated, executed an assignment to three foreign corporations of all its assets. At such time Texas Machinery had pending a suit against one Frank Montgomery, and on May 1, 1962, a judgment against Montgomery in the sum of $11,080 was rendered in favor of Texas Machinery. On March 14, 1963, the charter of Texas Machinery was forfeited in the statutory manner by the Texas Secretary of State. On June 29, 1967, garnishment proceedings were instituted in the name of Texas Machinery against Respondent who was alleged to be indebted to Frank Montgomery. Service was had upon Respondent by serving one J. J. Joyce, its secretary-treasurer. Respondent failed to answer the garnishment citation, and under date of July 31, 1967, suffered the default judgment which is under attack in this suit. The assignee corporations were not named as parties in the suit against Montgomery or in the subsequent sworn application for writ of garnishment. This suit was instituted by Respondent on September 29, 1967, and was designated as being “in the Nature of a Bill of Review to set aside” the garnishment judgment. It was the view of the lower courts that the garnishment judgment in the name of Texas Machinery, a nonexistent corporation, was void, and that Respondent was entitled to the relief sought in its bill of review action.

We first dispose of the holding of the Courts below that the garnishment judgment taken in the name of Texas Machinery, a nonexistent corporation, was void. It is our view that the problem is not one of voidness of the garnishment judgment; it is, rather, whether the court possessed the jurisdictional power to render the judgment. McEwen v. Harrison, 162 Tex. 125, 345 S.W.2d 706 (1961). There is no question of the jurisdictional power of the court in the main suit to enter judgment against Montgomery in favor of Texas Machinery. The court unquestionably had jurisdiction of the subject matter of the proceeding and of the parties. The judgment roll in the garnishment proceeding did not disclose either the assignment of the chose in action against Montgomery or the subsequent forfeiture of the corporate charter of Texas Machinery. The right of an assignee to continue a suit in the name of its assignor, the assignee not being a necessary party and the presence of the assignor not being required, has been recognized. It was held in Ferguson-McKinney Dry Goods Co. v. Garrett, 252 S.W. 738, 741 (Tex.Comm.App.1923):

“But, even if there had been a dissolution, legally speaking, of the original plaintiff company, in 1916, we do not think there was any abatement of the pending cause. Therefore no new question of limitation arose. The evidence shows that the old corporation, before the dissolution, assigned the cause of action to the new company, and the latter had a right to continue to prosecute the suit in the name of the old corporation or be substituted as party plaintiff. No hiatus existed. Assignee was not even a necessary party.”

An assignee can recover either in his own name or in that of the assignor. Citizens State Bank of Houston v. O’Leary, 140 Tex. 345, 167 S.W.2d 719 (1942). See also Thaxton v. Smith, 90 Tex. 589, 40 S.W. 14 (1897); McFadin v. MacGreal, 25 Tex. 73 (1860) and Minerva Mercantile Co. v. Cameron Compress Co., 15 S.W.2d 62 (Tex.Civ.App.1929, writ ref.). Issuance of the writ of garnishment in the name of Texas Machinery as the judgment creditor conformed to the general rule that processes under a judgment are issued in the name of the party in whose favor the judgment was rendered. See Garvin v. Hall, 83 Tex. 295, 18 S.W. 731 (1892); Cleveland v. Simpson, 77 Tex. 96, 13 S.W. 851 (1890); and Owens v. Clark, 78 Tex. 547, 15 S.W. 101 (1890).

Since we have held that the garnishment judgment in the name of Texas Machinery Company, Inc. is not void, it becomes necessary for this Court to pass upon the question of whether or not the Respondent has shown sufficient cause which would entitle it to set aside the default judgment described in its bill of review. We hold that it has not. As heretofore indicated, Texas Machinery obtained a judgment in the sum of $11,080.00 against Montgomery. The judgment was rendered in Cause No. 38,725-B, styled Texas Machinery and Equipment Company, Inc. v. Frank Montgomery, Individually, and Montgomery Equipment Company. The application for writ of garnishment, which is involved here, was filed in Cause No. 38,725-B and the writ of garnishment was issued and subsequently served pursuant to such application. In accordance with a stipulation entered into by the parties, Cause No. 38,725-B was consolidated with and made a part of the present cause, which appeared on the docket of the trial court as Cause No. 55,359, styled Gordon Knox Oil and Exploration Company v. Texas Machinery and Equipment Company, Inc. et al. Both of these causes of action were filed in the 140th Judicial District Court of Lubbock County, Texas. Thus, it is seen that the garnishment judgment was obtained in an adversary proceeding between parties in actual litigation.

The Respondent did not allege non-negligence on its part. The evidence shows that the secretary-treasurer of Texas Machinery was served with the writ of garnishment on July 5, 1967. It is admitted that the secretary-treasurer made a notation upon the copy of the writ served upon him, which reads: “We have no A/C payable to Frank Montgomery or Montgomery Equipment Company — have not had in years.” The President of the Respondent Company testified to facts showing that the secretary-treasurer negligently failed to notify him of the garnishment writ. The President testified that he had no knowledge of the garnishment writ until September 15, 1967, long after the default judgment had been rendered on July 31, 1967. Respondent does not deny that it received the notice required by Rule 239a, Texas Rules of Civil Procedure, of the default judgment. The President of the Respondent Company merely stated that he was never informed that the secretary-treasurer received a notice from the court that a judgment had been entered.

Respondent, under the record in this case, cannot obtain relief by bill of review from the judgment of July 31, 1967. Although a meritorious defense was proved, the Respondent failed to allege and prove .that its failure to answer the garnishment suit was unmixed with any fault or negligence on its part. A party seeking relief from a default judgment in a garnishment proceeding by way of bill of review is bound by the same rules of procedure as those governing any action to set aside a default judgment. In Alexander v. Hagedorn, 148 Tex. 565, 226 S.W.2d 996 (1950) this Court said:

“Although the bill of review is an equitable proceeding, before a litigant can successfully invoke it to set aside a final judgment he must allege and prove: (1) a meritorious defense to the cause of action alleged to support the judgment, (2) which he was prevented from making by the fraud, accident or wrongful act of the opposite party, (3) unmixed with any fault or negligence of his own.”

The imposition of these strict requirements is grounded on the necessity that finality be accorded to judgments. French v. Brown, 424 S.W.2d 893 (Tex.Sup.1967); Hanks v. Rosser, 378 S.W.2d 31 (Tex.Sup.1964). The validity of this approach to final judgments in adversary proceedings between parties in actual litigation has been repeatedly reaffirmed by this Court and is firmly settled. Although, McEwen v. Harrison, 162 Tex. 125, 345 S.W.2d 706 (1961), is not a bill of review case, it does set out in detail the requirements which must be met by a litigant seeking to set aside a final judgment such as we have here.

Further, Respondent cannot prevail because it has not shown that it was prevented from making its defense to the Petitioners’ suit by their fraud or wrongful act. See Alexander v. Hagedorn, supra. The Respondent did allege that the Petitioners were guilty of fraud upon the court in obtaining the judgment in Cause No. 38,725-B. However, it is clear from the pleadings that the basis for the allegations of fraud was that a non-existent corporation “did not have the legal right to sue or defend in any court in this state.” It was upon this ground that the default judgment was held to be void. Prior to entering judgment, the trial judge stated: “I’m pretty sure that if Texas Machinery and Equipment Company had been a corporation in existence at the time, that we’re real short on the requisite to set aside a default judgment here in this garnishment suit.” There existed no legal reason for the court to set aside the default judgment. The Respondent, therefore, is not entitled to have the suit tried on its merits.

Accordingly, the judgments of the courts below are reversed and judgment is rendered that the Respondent take nothing.

STEAKLEY and REAVLEY, JJT., dissent.