Richard Ross v. Access Healthsource, Inc., Kathryn Horn and Joel Hendryx ( 2003 )

COURT OF APPEALS

COURT OF APPEALS

EIGHTH DISTRICT OF TEXAS

EL PASO, TEXAS

RICHARD ROSS,                                                )

                                                                              )

Appellant,                          )

                                                                              )     No.  08-03-00079-CV

v.                                                                           )

                                                                              )                 Appeal from the

ACCESS HEALTHSOURCE, INC., As               )

Assignee of O. R. BROOKER, W. A.                   )     County Court at Law #7

PITCHFORD, NATALIE T. BORNSTEIN,         )

MARIA G. CARDENAS, VERNOY                    )          of El Paso County, Texas

WALKER, RANDOLPH WALDMAN,               )

WALKER JACKSON, and MARY WARD,        )                  (TC# 99-1459)

and KATHRYN HORN and JOEL HENDRYX,   )

                                                                              )

Appellees.                          )

MEMORANDUM  OPINION

Appellant Richard M. Ross appeals a turnover order to enforce a default judgment against him in cause number 99-1459 and the trial court=s granting of summary judgment denying the bill of review in favor of Appellees, Access Healthsource, Inc., as assignee of O.R. Brooker, W.A. Pitchford, Natalie T. Bornstein, Maria G. Cardenas, Vernoy Walker, Randolph Waldman, Walker Jackson, and Mary Ward; and Kathryn Horn and Joe Hendryx (collectively AAppellees@) and denial of his summary judgment motion in cause number 2003-080.  The two related appeals were consolidated for briefing and oral argument purposes only, therefore separate opinions will be issued for each cause.  Mr. Ross raises eight issues for review, five challenge the trial court=s turnover order and the remaining three contend the trial court erred in granting summary judgment in favor of Appellees and in denying Mr. Ross= summary judgment motion.  We affirm the trial court=s turnover order in trial cause number 99-1459.

PROCEDURAL AND FACTUAL BACKGROUND

On April 26, 1999, Plaintiffs O. R. Brooker, W. A. Pitchford, Natalie T. Bornstein, Maria G. Cardenas, Vernoy Walker, Joel Hendryx, Randolph Waldman, Walker Jackson, Kathryn Horn, and Mary Ward brought suit against Defendants Mr. Ross, Dr. Richard Standridge, and James Farrelly in County Court of Law Number Seven, El Paso County, Texas.  In their original petition, Plaintiffs, all shareholders in a physician practice management organization, alleged that the Defendants fraudulently induced them to execute a stock merger agreement in which they transferred all their existing capital stock into stock of Access Healthsource, Inc. Specifically, Plaintiffs alleged that the Defendants falsely represented how and why the stock merger into Access Healthsource would be beneficial to them, and as a result of the Defendants= misrepresentations, the value of their stock went from $5 million to zero dollars.  Defendants Dr. Standridge and Mr. Farrelly were served by process and filed an answer in the lawsuit.

On October 19, 1999, the trial court granted Appellees= motion for substitute service of process on Appellant, Mr. Ross, at an address in Scottsdale, Arizona.  The Arizona process server=s affidavit on November 1, 1999, states that he attempted to personally serve Mr. Ross at the given address, but had to post and mail the documents served.  The description of documents served does not list the citation and the record does not contain a return receipt for certified mail, though the affidavit states the documents were mailed by certified mail.  On January 21, 2000, Appellees obtained a default judgment against Mr. Ross in which they were awarded $5 million in actual damages and $5 million in exemplary damages plus interest and attorney=s fees.  The default judgment recites that Mr. Ross was duly served with process in cause number 99-1459.  On February 29, 2000, the trial court severed Appellees= cause of action against Defendants Dr. Standridge and Mr. Farrelly from its default judgment against Mr. Ross.^[1]

In March 2000, Appellees sought enforcement of the Texas default judgment in an Arizona state court.  On April 17, 2000, Mr. Ross filed a motion under Ariz.R.Civ.P. 60(c) to vacate the foreign judgment Appellees had filed in Arizona based on insufficient service of process.  In their response to Mr. Ross= motion, Appellees asserted he was properly served in the Texas lawsuit.  On August 8, 2000, the Arizona state court found insufficient service of process on Mr. Ross and ordered the foreign judgment filed by Appellees Avoid and hereby vacated.@

On December 16, 2002, Appellees filed a motion for turnover relief, seeking to enforce the Texas default judgment it obtained against Mr. Ross in January 2000.  The trial court granted Appellees= motion on January 15, 2003, specifically finding that Appellees have an interest in a final, fully enforceable, and due and owing judgment against Mr. Ross, that none of the property identified in the motion as subject to turnover relief can be readily attached or levied on by ordinary legal process in Texas, and that the property is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.  Mr. Ross filed a motion to reconsider the turnover order, in which he argued the default judgment was void for lack of service of process and asserted that an Arizona court had already found the judgment was void for insufficient service on him.  After a hearing on the motion to reconsider, the trial court on January 31, 2003, denied Mr. Ross= motion to reconsider the turnover order. Mr. Ross timely filed his notice of appeal to challenge the trial court=s order in cause number 99-1459.

Turnover Order

In his Issues One through Five, Mr. Ross argues the trial court erred in rendering a turnover order to enforce the default judgment because that judgment is void.  Specifically, Mr. Ross contends the default judgment is void for improper service of process, that the Arizona judgment finding the default judgment void is entitled to full faith and credit, and as a void judgment, the default judgment is a nullity that cannot be enforced.

Standard of Review

We review a turnover order under an abuse of discretion standard.  Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991).  In this review, we conduct a two-pronged analysis: (1) Did the trial court have sufficient information upon which to exercise its discretion; and (2) Did the trial court err in its application of discretion?  Lindsey v. Lindsey, 965 S.W.2d 589, 591 (Tex.App.--El Paso 1998, no pet.). The traditional sufficiency review comes into play with regard to the first question.  Id.  We then proceed to determine whether, based on the elicited evidence, the trial court made a reasonable decision, or whether it is arbitrary and unreasonable, that is, whether the trial court acted without reference to any guiding rules and principles.  See id.; Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex. 1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986).

Turnover Relief on Default Judgment

Pursuant to Section 31.002 of the Texas Civil Practice and Remedies Code, Appellees filed for turnover relief to enforce the default judgment against Mr. Ross.  Section 31.002(a) provides:

(a)        A judgment creditor is entitled to aid from a court of appropriate jurisdiction through injunction or other means in order to reach property to obtain satisfaction on the judgment if the judgment debtor owns property, including present or future rights to property, that:

(1)        cannot readily be attached or levied on by ordinary legal process; and

(2)        is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.

Tex.Civ.Prac.&Rem.Code Ann. ' 31.002(a)(Vernon Supp. 2004).

After the trial court granted Appellees= motion for turnover relief, Mr. Ross filed a motion to reconsider with the court, attacking the default judgment as void for improper service of process and asserting that the Arizona state court had found the judgment was void for insufficient process and that the court=s order should be given full faith and credit by the court.

On appeal, Mr. Ross raises the same complaints of improper service and void judgment to challenge the default judgment Appellees sought to enforce.  In his brief, Mr. Ross argues that a default judgment not based on proper service is void, not merely voidable.  The authorities Mr. Ross relies upon in attacking the default judgment involve direct attacks brought against default judgments.  See e.g., Pino v. Perez, 52 S.W.3d 357, 358-59 (Tex.App.--Corpus Christi 2001, no pet.)(AThis restricted appeal is a direct attack on the default judgment and there are no presumptions favoring valid issuance, service and return of the citation.@); Lozano v. Hayes Wheels International, Inc., 933 S.W.2d 245, 247 (Tex.App.--Corpus Christi 1996, no writ) (direct appeal of default judgment, citing to cases involving direct attacks on default judgments which hold there is no presumption of due service of process and requiring strict compliance with the rules of civil procedure relating to citation of service).  However, Mr. Ross= improper service of process challenge was in effect a collateral attack on the default judgment, triggering certain presumptions as to the validity of that judgment.

A collateral attack is an attempt to avoid the effect of a judgment in a proceeding brought for some other purpose.  Kortebein v. American Mutual Life Ins. Co., 49 S.W.3d 79, 88 (Tex.App.--Austin 2001, pet. denied), cert. denied, 534 U.S. 1128, 122 S. Ct. 1065, 151 L. Ed. 2d 968 (2002); see also Fuhrer v. Rinyu, 647 S.W.2d 315, 317 (Tex.App.--Corpus Christi 1982, no writ)(opin. on reh=g)(discussing different rules applicable to direct attacks and collateral attacks on default judgments).  Unless a judgment is void, it is not subject to collateral attack.  See Browning v. Placke, 698 S.W.2d 362, 363 (Tex. 1985).  A judgment is void when the court that rendered it lacked:  (1) jurisdiction over the parties or property; (2) jurisdiction over the subject matter; (3) jurisdiction to render a particular judgment; or (4) the capacity to act as a court.  Id.  If a judgment does not fail to meet one of these jurisdictional requirements, it is merely voidable, not void and is subject only to direct attack.  Id.  Unlike a direct attack upon a default judgment, the usual presumptions of service will be made in support of the judgment.  See National Medical Enterprises of Texas, Inc. v. Wedman, 676 S.W.2d 712, 714-15 (Tex.App.--El Paso 1984, no writ); see also Primate Constr., Inc. v. Silver, 884 S.W.2d 151, 152 (Tex. 1994)(in direct attack by writ of error validity of issuance, service, and return of citation is not presumed).  It is well-settled that jurisdictional recitations in a judgment that is regular on its face are accorded absolute verity and can be attacked only directly, not collaterally.  Akers v. Simpson, 445 S.W.2d 957, 959 (Tex. 1969); Dispensa v. University State Bank, 987 S.W.2d 923, 929 (Tex.App.--Houston [14th Dist.] 1999, no pet.).

Here, the default judgment rendered against Mr. Ross was signed and filed on January 21, 2000.  The judgment recites that:

[T]hough duly served with process, Defendant RICHARD ROSS, as at all times heretofore, failed to appear or answer, but wholly made default.  The citation with the Officer=s return thereon has been on file with the Clerk of this Court in excess of ten (10 ) days exclusive of the day of filing and the day the cause was called.

With respect to his turnover complaints, Mr. Ross directs this Court=s attention to evidence in the record which shows that Appellees failed to comply with the rules of civil procedure related to service of process on him.  See Tex.R.Civ.P. 99(a), 103, 106, and 107.  For the purposes of the collateral attack, however, the default judgment recitals regarding service are contrary to this other evidence and therefore, do not support Mr. Ross= contention that the judgment is void for turnover relief purposes.

Mr. Ross also contends the trial court should not have enforced the default judgment because it should have given full faith and credit to the Arizona judgment voiding that default judgment, which he authenticated in Texas as a foreign judgment under the Uniform Enforcement of Foreign Judgments Act.  Specifically, Mr. Ross urges that the authenticated Arizona judgment equates to a Texas judgment holding that the default judgment was void.  The Arizona state court=s AOrder Vacating Foreign Judgment@ states the following in pertinent part:

On March 31, 2000, plaintiffs O.R. Brooker, W.A. Pritchard, Natalie Bornstein, Maria G. Cardenas, Vernoy Walker, Joel Hendryx, Randolph Waldman, Walker Jackson, Kathryn Horn, and Mary Ward filed herein a foreign Judgment entered against defendant Richard Ross on January 21, 2000, in Cause No. 99-1459 in the County Court at Law Number 7, El Paso County, Texas. Thereafter, on April 17, 2000, defendant Ross filed a motion under Rule 60(c), Ariz.R.Civ.P., to vacate the judgment.

                                                              .               .              .

THE COURT FINDS insufficient service of process on defendant Ross; therefore,

IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the foreign Judgment filed herein by plaintiffs in Cause No. 99-1459 in the County Court at Law Number 7, El Paso County, Texas is void and hereby vacated.

The Arizona order clearly indicates that the court=s refusal to give full faith and credit to the Texas default judgment, which was domesticated as a foreign judgment by Appellees in that state.  See U.S. Const. art. IV, ' I.  There is nothing in the order or the record to indicate the Arizona court did anything more than vacate the domesticated foreign judgment in Arizona. Therefore, we reject Mr. Ross= contention that the Arizona state court order vacating the foreign judgment in Arizona has the effect of voiding the Texas default judgment for enforcement purposes in Texas.

With the exception of his collateral attack on the underlying default judgment, Mr. Ross raises no other challenges to the trial court=s order granting turnover relief.  Since the default judgment on its face states Mr. Ross was properly served, the trial court was bound by the recitals in the judgment.  See Browning, 698 S.W.2d at 363; Akers, 455 S.W.2d at 959.  Thus, we conclude the trial court did not abuse its discretion in granting the turnover order.  Issues One through Five are overruled.^[2]

Accordingly, we affirm the trial court=s turnover order.

December 4, 2003

DAVID WELLINGTON CHEW, Justice

Before Panel No. 2

Barajas, C.J., McClure, and Chew, JJ.

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^[1] On October 27, 2000, Appellees amended their original petition in their severed action against Dr. Standridge and Mr. Farrelly, now cause number 2000-764, to include Mr. Ross as a Defendant and alleged claims virtually identical to those alleged in the default judgment against Mr. Ross.  Mr. Ross filed an answer to that suit on November 17, 2000.

^[2] In Issues Six through Eight of his appellate brief, Mr. Ross complains of the trial court=s granting of summary judgment denying his bill of review in cause number 2003-080, which was  consolidated with this appeal for briefing and oral argument purposes only.  Disposition of these remaining issues is addressed in this Court=s opinion styled Ross v. Access Healthsource, Inc., et al., No. 08-03-00096-CV.