Lee Hoffpauir, Inc. v. Kenneth Kretz and Elayne Kretz , 431 S.W.3d 776 ( 2014 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-13-00597-CV
Lee Hoffpauir, Inc., Appellant
v.
Kenneth Kretz and Elayne Kretz, Appellees
FROM THE DISTRICT COURT OF BURNET COUNTY, 424TH JUDICIAL DISTRICT
NO. 40,811, HONORABLE DANIEL H. MILLS, JUDGE PRESIDING
OPINION
Lee Hoffpauir, Inc. (Hoffpauir Inc.) appeals an order denying its motion for new trial
challenging a no-answer default judgment in favor of appellees Kenneth and Elayne Kretz. We will
reverse the district court’s judgment and remand for further proceedings.
BACKGROUND
The underlying dispute concerns a “fifth-wheel” travel trailer (essentially a type of
large camper or RV) owned by the Kretzes. In 2011, the rear axle of the Kretzes’ vehicle caught
fire and they sought repairs at a Burnet automotive service facility operated by Hoffpauir Inc. The
Kretzes later sued Hoffpauir Inc. alleging that the repairs had taken eight months to complete and
had been “performed shoddily.” Making matters worse, according to the Kretzes, Hoffpauir Inc.
personnel had not properly cared for the vehicle in the interim, causing “significant mold, mildew,
and warping to the hand-milled woods” in the vehicle’s interior, rendering it “virtually unusable.”
Based on these allegations, the Kretzes sought recovery of actual damages under theories of
negligence, breach of contract, and DTPA violations; treble damages under the DTPA; and
attorney’s fees.
The ensuing trial-level proceedings turned out to have little to do with the merits of
the Kretzes’ claims and instead centered on whether Hoffpauir Inc. was entitled to a day in court to
defend against them. Upon filing suit, the Kretzes attempted to serve Hoffpauir Inc. with process
through its registered agent, Lee Hoffpauir,1 via registered or certified mail, return receipt requested.2
The return of service and attached “green card”3 collectively reflect that an agent of the District Clerk
mailed the process to Mr. Hoffpauir by registered or certified mail, return receipt requested, “with
delivery restricted to addressee only,” and that the green card was returned bearing the name
and signature of an “Alice Bird.” Although Ms. Bird did not so indicate on the green card, it is
undisputed that she is the office manager for Hoffpauir Inc., but what is significant for this appeal
is that she, not Mr. Hoffpauir, signed the card. Following Bird’s receipt of process, Hoffpauir Inc.
did not file an answer, and the Kretzes eventually moved for default judgment. After a trial on
damages, the district court rendered final judgment awarding the Kretzes over $500,000 in damages,4
plus about $7,000 in attorney’s fees. Thereafter, Hoffpauir Inc. timely filed a motion for new trial
1
See Tex. Bus. Orgs. Code §§ 5.201 (requiring corporations to designate and maintain
registered agent within the state “on whom may be served any process, notice, or demand required
or permitted by law to be served on the entity”), .255(1) (corporate president and vice presidents
deemed registered agents “[f]or the purpose of service of process, notice, or demand”).
2
See Tex. R. Civ. P. 106(a)(2) (authorizing service of citation and petition via registered or
certified mail, return receipt requested).
3
See id. R. 107.
4
Specifically, $50,000 for “diminution in value” of the vehicle; $106,808 for “loss of use”;
$14,250 for “economic damages incurred due to the loss of use”; and $342,106 (approximately
two times the total of the preceding amounts) representing “multiple damages per the DTPA.”
2
with affidavits intended to establish the Craddock elements,5 but did not complain of defective
service. Without holding a hearing, the district court denied the motion by written order, and it is
from this order that Hoffpauir Inc. now appeals.
ANALYSIS
Hoffpauir Inc. brings three issues on appeal, arguing that (1) the district court lacked
personal jurisdiction over it because the Kretzes failed to serve it through its registered agent; (2) the
evidence conclusively established the Craddock elements; (3) alternatively, the evidence presented
at the damages trial was legally and factually insufficient to support the judgment award. It places
primary emphasis on the first issue, and we agree with Hoffpauir Inc. that this contention is
meritorious and singularly dispositive.
Hoffpauir Inc. argues that service was defective in several respects, including a
critical failure ever to serve its registered agent, Mr. Hoffpauir.6 The Kretzes do not dispute these
assertions but urge that Hoffpauir Inc. waived this basis for challenging the judgment by not
asserting it in its motion for new trial. They acknowledge that in Wilson v. Dunn, the Texas Supreme
Court held that a defendant could raise the issue of defective service for the first time on appeal.7
However, they insist that this holding of Wilson, which was decided in 1990, has since been
5
See Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (Tex. 1939).
6
In this regard, there is no evidence that Mr. Hoffpauir ever actually received the citation
and petition from Ms. Bird, and even if he had, “[r]eceiving suit papers or actual notice through a
procedure not authorized for service is treated the same as never receiving them.” Fidelity & Guar.
Ins. Co. v. Drewery Constr. Co., 186 S.W.3d 571, 574 n.1 (Tex. 2006) (per curiam) (citing Wilson
v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990)).
7
800 S.W.2d at 837.
3
abrogated by intervening rule revisions made through the supreme court’s 1997 promulgation of the
current Texas Rules of Appellate Procedure.
Wilson involved a no-answer default judgment taken against a defendant who had
been served through substituted service and who had actually received the citation and suit papers,
but the substituted service had not been obtained in compliance with Texas Rule of Civil Procedure
106(b).8 As in the present case, the defendant (Dunn) filed a motion for new trial that did not
complain about defective service but raised the issue on appeal.9 The Texas Supreme Court held that
defective service required reversal of the default judgment, observing that “[f]or well over a century
the rule has been firmly established in this state that a default judgment cannot withstand direct
attack by a defendant who complains that he was not served in strict conformity with applicable
requirements.”10 Nor did Dunn’s actual notice of the citation and petition change the analysis, the
supreme court added, because “[a]ctual notice to a defendant, without proper service, is not sufficient
to convey upon the court jurisdiction to render default judgment against him” because “jurisdiction
is [instead] dependent upon citation issued and served in a manner provided for by law.”11 Having
disposed of these contentions, the supreme court turned to the issue of whether Dunn had
been required to preserve his defective-service complaint by raising it in his motion for new trial.
The entirety of the court’s analysis of that question consisted of the following observation:
“Rule 324”—the rule of civil procedure providing that a new trial motion is required to preserve for
8
See id. at 833-36.
9
See id. at 835.
10
Id. at 836.
11
Id. at 836-37.
4
appeal certain complaints related to factual insufficiency of the evidence or “[a] complaint on
which evidence must be heard”12—“imposes no such requirement for preservation of such error.”13
The Kretzes acknowledge that the same is true of Rule 324 today—it still does not
include complaints about defective service among the issues that must be preserved for appeal
through a new trial motion.14 Their focus instead is on a footnote to the supreme court’s preservation
holding in Wilson that offered the following observations concerning the interplay of Rule 324’s
preservation requirement with then-applicable rules of appellate procedure:
Rule 324 states that no complaints other than those specified in the rule need be
raised in a motion for new trial as a prerequisite to appeal. The rule was amended in
1978 and 1981 to limit the use of motions for new trial to preserve error. However,
Texas Rule of Appellate Procedure 52(a) provides that a complaint is not preserved
for appellate review unless it is presented to the trial court and a ruling obtained.
This rule serves the salient purpose of requiring that all complaints to be urged on
appeal first be presented to the trial court so that any error can be corrected without
appeal, if possible. How Rule 52(a) applies to complaints which cannot be raised
prior to judgment but are not specifically required by Rule 324 to be raised in a
motion for new trial, is unclear. On the one hand, if Rule 52(a) required that such
complaints be raised by some means tantamount to a motion for new trial but simply
not called by that name, then Rule 324 would be deceptive and its policy impaired.
On the other hand, if Rule 52(a) does not apply to such complaints, then its language
is overly broad and its policy undermined. These problems should be considered in
future amendments to the rules.15
The appellate rule referenced by the Wilson court, subpart (a) of the now-former Rule 52, stated
the “general rule” that “[i]n order to preserve a complaint for appellate review, a party must have
12
Tex. R. Civ. P. 324.
13
Wilson, 800 S.W.2d at 837.
14
Tex. R. Civ. P. 324.
15
Wilson, 800 S.W.2d at 837 n.9.
5
presented to the trial court a timely request, objection or motion, stating the specific grounds for the
ruling he desired the court to make if the specific grounds were not apparent from the context.”16
While the substance of former Rule 52’s “general rule” of error preservation has been carried into
the current Tex. R. App. P. 33.1,17 the Kretzes reason that Rule 33.1 changed other provisions within
former Rule 52 in a manner reflecting the supreme court’s resolution of the issue raised in the Wilson
footnote in favor of requiring parties to preserve by post-judgment motion any complaints they
could not raise prior to that time. They point to three differences between the former and current
rule: (1) while subpart (d) of former Rule 52 provided, in relevant part, that “[a] point in a motion
for new trial is a prerequisite to appellate complaints in those instances provided in paragraph (b)
of Rule 324 of the Texas Rules of Civil Procedure,”18 there is no such provision in current Rule 33.1;
(2) subpart (b) of Rule 33.1 contains a proviso stating that “[i]n a civil case, the overruling by
operation of law of a motion for new trial or a motion to modify the judgment preserves for
appellate review a complaint properly made in the motion . . . .”;19 and (3) Rule 33.1(d) specifies that
complaints regarding the sufficiency of evidence in a bench trial “may be made for the first time on
appeal,”20 which, the Kretzes reason, confirms by negative implication that other types of complaints
may not be preserved that way.
16
See Tex R. App. P. 52(a), 49 Tex. B.J. 573 (Tex. 1986, superseded 1997).
17
Id. R. 33.1(a).
18
See id. R. 52(d), 49 Tex. B.J. 573 (Tex. 1986, superseded 1997).
19
Id. R. 33.1(b).
20
Id. R. 33.1(d).
6
As the Kretzes further emphasize, this Court previously agreed in Elite Towing that
these changes to the TRAPs “directly address the supreme court’s concern expressed in Wilson,” so
as to require that parties who are unable to preserve error prior to judgment must do so through a
post-judgment motion.21 However, in suggesting that these changes completely abrogate Wilson’s
specific holding that a defective-service complaint may be raised for the first time on appeal, the
Kretzes carry the argument too far. The reason this is so is apparent from a careful reading of Wilson
and the analysis that precedes the supreme court’s brief disposition of the preservation issue—failure
to lawfully serve a defendant means that the trial court lacks personal jurisdiction over him or her,22
and a complete failure to serve a defendant renders a judgment vulnerable to challenge at any time.23
Elite Towing holds nothing to the contrary—our discussion of preservation concerned an appellate
challenge to an attorney’s fee award, not an issue of personal jurisdiction.24
We conclude that the current Texas Rules of Appellate Procedure have not abrogated
Wilson’s holding that a defendant may raise a defective-service complaint for the first time on
appeal, and certainly not where, as here, the plaintiff failed to serve the defendant altogether. In this
regard, we note that the Fort Worth Court of Appeals relied on similar reasoning in rejecting the
same argument concerning the effect of Rule 33.1 on Wilson and holding that a defective-service
21
Elite Towing, Inc. v. LSI Fin. Grp., 985 S.W.2d 635, 644 (Tex. App.—Austin 1999,
no pet.).
22
Wilson, 800 S.W.2d at 836.
23
See PNS Stores, Inc. v. Rivera, 379 S.W.3d 267, 271-75 (Tex. 2012).
24
Elite Towing, 985 S.W.2d at 644.
7
complaint could be raised for the first time on appeal25 and that our other sister courts have uniformly
understood that Wilson remains viable in the context of a defective-service complaint.26 We are
unpersuaded that we should be the first Texas court to say otherwise, and especially not under the
circumstances presented here.
Accordingly, we conclude that Hoffpauir Inc. has preserved its defective-service
complaint for our review. The merits of that complaint are uncontested (and appropriately so), so
we sustain Hoffpauir Inc.’s first issue. As this holding establishes Hoffpauir Inc.’s entitlement to
the entirety of the appellate relief it seeks, we do not reach its second and third issues.27 We reverse
the district court’s judgment and remand for further proceedings.
__________________________________________
Bob Pemberton, Justice
Before Chief Justice Jones, Justices Pemberton and Rose
Reversed and Remanded
Filed: May 6, 2014
25
All Commercial Floors, Inc. v. Barton & Rasor, 97 S.W.3d 723, 725-26 (Tex. App.—Fort
Worth 2003, no pet.).
26
See, e.g., Robb v. Horizon Cmtys. Improvement Ass’n, Inc., 417 S.W.3d 585, 590
(Tex. App.—El Paso 2013, no pet.); In re C.T.F., 336 S.W.3d 385, 387-88 (Tex. App.—Texarkana
2011, no pet.); Benefit Planners, L.L.P. v. RenCare, Ltd., 81 S.W.3d 855, 858 (Tex. App.—San
Antonio 2002, pet. denied); see also Adame v. Palisades Collection, L.L.C., No. 05-11-00793-CV,
2012 WL 2564717, at *1 (Tex. App.—Dallas July 3, 2012, no pet.) (mem. op.); Houston Precast,
Inc. v. McAllen Constr., No. 13-07-00135-CV, 2008 WL 4352636, at *1 (Tex. App.—Corpus Christi
Sept. 25, 2008, no pet.) (mem. op.).
27
See Tex. R. App. P. 47.1.
8