Donica Group, LP v. Thompson Excavating, Inc. and Bradley Thompson, Individually and as Former Shareholder of Thompson Excavating, Inc. ( 2020 )

Reverse and Render; Opinion Filed January 6, 2020
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-19-00235-CV
DONICA GROUP, LP, Appellant
V.
THOMPSON EXCAVATING, INC. AND BRADLEY THOMPSON, INDIVIDUALLY
AND AS FORMER SHAREHOLDER OF THOMPSON EXCAVATING, INC., Appellees
On Appeal from the 101st Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-17-13635
MEMORANDUM OPINION
Before Justices Schenck, Molberg, and Reichek
Opinion by Justice Schenck
Donica Group, L.P. (“Donica”) sued appellee Thompson Excavating, Inc. (“TEI”) for
breach of contract and obtained a default judgment against it. Appellees TEI and Bradley
Thompson, individually and as a former shareholder of TEI, filed a bill of review challenging the
default judgment. The trial court granted summary judgment in favor of Thompson and TEI. For
the reasons discussed below, we conclude the trial court lacked jurisdiction over this case. We
reverse the trial court’s judgment and render judgment denying TEI and Thompson’s petition for
equitable bill of review. Because all issues are settled in law, we issue this memorandum opinion.
TEX. R. APP. P. 47.4.
BACKGROUND
In July 2011, TEI’s sole officer, shareholder, and director, Thompson allowed TEI to forfeit
its charter.1 In 2014, without having reinstated TEI’s charter, Thompson entered into agreements
with Donica representing himself as an agent of TEI.2 In March 2017, Donica sued TEI for breach
of contract. Donica served TEI’s registered agent, Thompson, and when no answer was filed,
Donica obtained a default judgment against TEI in June 2017. The following month, Donica filed
suit against Thompson in Tarrant County. In that suit, Donica alleged TEI had forfeited its
corporate charter in 2011, so Donica was seeking to collect the default judgment from Thompson
as TEI’s officer and director.3
In October 2017, TEI and Thompson, individually and as former shareholder of TEI, filed
this bill of review, seeking to set aside the default judgment entered against TEI. TEI and
Thompson moved for traditional summary judgment, arguing TEI had not existed since 2011 and
thus could not have been served in the default judgment case such that the trial court never acquired
personal jurisdiction over TEI. The motion sought to set aside the default judgment as void and
to dismiss the underlying litigation for lack of jurisdiction. Donica responded, arguing Thompson
had been served in the default judgment case and chose to ignore the citation and thus he and TEI
were estopped from denying the corporate existence of TEI. The trial court signed an order
granting Thompson and TEI’s motion for summary judgment declaring the original judgment void
and ordering it to be vacated.4
1
TEI first filed its articles of incorporation in 1994. Prior to 2011, Thompson allowed TEI to forfeit its charter in 1997 and 2005, each time
applying and obtaining reinstatement of its charter within a few months of forfeiting it.
2
The record contains the following evidence Donica offered to show Thompson conducted business as TEI: bids submitted by Thompson
using TEI’s letterhead; agreements with Donica, signed by Thompson as President of TEI; a certificate of liability that showed TEI as the insured
party; and invoices showing TEI to be the billing party.
3
See TEX. TAX CODE ANN. § 171.255.
4
The trial court’s judgment included findings that TEI no longer existed as of 2011 and thus TEI was not properly served and the trial court
lacked jurisdiction to enter the default judgment against TEI.
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DISCUSSION
Donica raises ten issues on appeal. In its ninth issue, Donica argues the trial court erred in
granting summary judgment, challenging how TEI could be regarded as existing for purposes of
filing a suit seeking relief by bill of review and yet not existing for purposes of citation in the
default judgment case.
Donica’s argument—and the record on appeal—raise the issue of standing, which is a
component of subject-matter jurisdiction, and which we review de novo. See Webb v. Voga, 316
S.W.3d 809, 812 (Tex. App.—Dallas 2010, no pet.); see also Tex. Ass’n of Bus. v. Tex. Air Control
Bd., 852 S.W.2d 440, 444–46 (Tex. 1993) (appellate courts may review standing on own motion).
Under Texas law, standing requires an examination of the following: whether the plaintiff was
personally injured; whether the plaintiff’s alleged injury is fairly traceable to the defendant’s
conduct; and whether the plaintiff’s alleged injury is likely to be redressed by each form of
requested relief. See Heckman v. Williamson Cty., 369 S.W.3d 137, 155 (Tex. 2012). To have
standing to pursue a bill of review, a person generally must have been a party to the prior judgment
or have had a then-existing interest or right that was prejudiced by the prior judgment. See Frost
Nat’l Bank v. Fernandez, 315 S.W.3d 494, 502 (Tex. 2010).
In their motion for summary judgment, Thompson and TEI argued TEI did not exist at the
time Donica sued it for breach of contract and thus it could not have been served. Their motion
relied on section 11.356(a) of the business organizations code, which provides that a terminated
entity like TEI continues in existence for three years after its termination “only for purposes of
prosecuting or defending in the terminated filing entity’s name an action or proceeding brought by
or against the terminated entity.” See TEX. BUS. ORGS. CODE ANN. § 11.356(a). The record at trial
established that TEI forfeited its charter pursuant to section 171.309 of the tax code on July 29,
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2011.5 An entity “the existence of which has been . . . forfeited pursuant to the tax code . . .” is a
terminated entity. See id. § 11.001(4)(B).6
We question how a terminated entity may be injured, or have a then-existing interest or
right that was prejudiced, by a default judgment entered against it. See Fernandez, 315 S.W.3d at
502. TEI and Thompson argue the general rule requires parties to the underlying default judgment
be included as parties in a bill of review proceeding. We agree with this general rule. See HSBC
Bank USA, N.A. v. Watson, 377 S.W.3d 766, 778 (Tex. App.—Dallas 2012, pet. dism’d).
However, it does not follow that a terminated entity that did not exist in the underlying default
proceeding could thereafter exist for purposes of filing a bill of review. TEI and Thompson cite
to and only rely on decisions from other courts they use as supporting the principle that “a forfeited
corporation can defend itself.” See Super Ventures, Inc. v. Chaudhry, 501 S.W.3d 121, 127–28
(Tex. App.—Fort Worth 2016, no pet.); Cruse v. O’Quinn, 273 S.W.3d 766, 770 (Tex. App.—
Houston [14th Dist.] 2008, pet. denied); Mello v. A.M.F. Inc., 7 S.W.3d 329, 331 (Tex. App.—
Beaumont 1999, pet. denied). However, none of these decisions from other appellate courts is
controlling, and all are factually distinguishable as none involved a bill of review or even a
collateral attack of a judgment. See Chaudhry, 501 S.W.3d at 127–28 (holding trial court erred by
concluding corporation lacked capacity to assert counterclaims or defend against plaintiff’s claims
where corporation’s right to transact business was forfeited after suit and reinstated before trial);
Cruse, 273 S.W.3d at 770 (holding law firm’s forfeiture of corporate charter did not strip it of its
5
Section 171.309 of the tax code provides that the secretary of state may forfeit the charter, certificate, or registration of a taxable entity if
the taxable entity does not revive its forfeited privileges within 120 days after the date the privileges were forfeited. See TEX. TAX CODE ANN.
§ 171.309(2).
6
The tax code provides that if the corporate privileges of a corporation are forfeited under this subchapter, the corporation shall be denied the
right to sue or defend in a court of this state. See TEX. TAX CODE ANN. § 171.252.
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right to appeal); Mello, 7 S.W.3d at 331 (interpreting section 171.252 of tax code to limit
defendants from bringing cross actions, not from merely defending lawsuits).
The record reflects—and the parties agree—that TEI forfeited its charter on July 29, 2011,
and had not reinstated the charter as of March 15, 2017, when Donica filed its suit for breach of
contract against TEI, nor had TEI’s charter been reinstated when it and Thompson filed this bill of
review. As a terminated entity, TEI no longer existed and could only have appeared as a party to
bring suit within three years of its termination. See BUS. ORGS. § 11.356(a). We conclude TEI no
longer existed and therefore could not have any then-existing interest or right that was prejudiced
by a default judgment. See Fernandez, 315 S.W.3d at 502.
Accordingly, we conclude TEI lacked standing to file this bill of review and now turn to
examine whether Thompson had standing.
Although Thompson was served as TEI’s registered agent in the underlying suit, he was
not named a party to the suit or mentioned in the default judgment. Thompson nevertheless argues
he has standing in this suit because Donica brought a separate suit against him in Fort Worth in
which Donica seeks to enforce the default judgment against him as a former officer of TEI.
However, because that suit was not filed until after the default judgment was signed, any interest
or injury Thompson describes is one that did not exist at the time of the underlying default
judgment. See Fernandez, 315 S.W.3d at 502.
Thompson also argues that under a previous decision from this Court, Farris v. Nortex Oil
& Gas Corp., 404 S.W.2d 87, 89 (Tex. Civ. App.—Dallas 1966, writ ref’d n.r.e.), a bill of review
is the proper procedure for a former stockholder to attack a judgment against a dissolved entity.
In Farris, this Court stated that where stockholders of a dissolved corporation were not
parties to the judgment against the dissolved corporation, those stockholders could not directly
appeal “or seek any relief from the effect of the judgment in that case,” such that stockholders’
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sole remedy was to file a bill of review. See id. However, in Farris, the dissolved corporation
appeared and participated in the underlying judgment. See id. As a result, there was no doubt of
jurisdiction in the original action and certainly no argument by the shareholders seeking to avoid
personal liability on that account. See id.
All errors—other than jurisdictional deficiencies—render the judgment merely voidable
and must generally be corrected on direct attack. See Browning v. Placke, 698 S.W.2d 362, 363
(Tex. 1985). Thus, while it was true in Farris that the sole remedy available to former stockholders
who were not parties to the underlying judgment against a dissolved corporation was a bill of
review, it is not true in this case where Thompson seeks to establish the judgment entered against
TEI as void. See PNS Stores, Inc. v. Rivera, 379 S.W.3d 267, 271 (Tex. 2012) (“It is well settled
that a litigant may attack a void judgment directly or collaterally, but a voidable judgment may
only be attacked directly.”). Accordingly, we find Farris inapplicable here.
We conclude Thompson lacked standing to file this bill of review.
Because neither TEI nor Thompson had standing to file this bill of review, we conclude
the trial court lacked jurisdiction to enter this judgment. See Tex. Ass’n of Bus., 852 S.W.2d at
444–46.
CONCLUSION
We reverse the trial court’s judgment and render judgment denying TEI and Thompson’s
petition for bill of review and reinstate the prior judgment in favor of Donica.
/David J. Schenck/
DAVID J. SCHENCK
JUSTICE
190235F.P05
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
DONICA GROUP, LP, Appellant On Appeal from the 101st Judicial District
Court, Dallas County, Texas
No. 05-19-00235-CV V. Trial Court Cause No. DC-17-13635.
Opinion delivered by Justice Schenck.
THOMPSON EXCAVATING, INC. AND Justices Molberg and Reichek participating.
BRADLEY THOMPSON,
INDIVIDUALLY AND AS FORMER
SHAREHOLDER OF THOMPSON
EXCAVATING, INC., Appellee
In accordance with this Court’s opinion of this date, we REVERSE the judgment of the
trial court and RENDER judgment denying THOMPSON EXCAVATING, INC. AND
BRADLEY THOMPSON, INDIVIDUALLY AND AS FORMER SHAREHOLDER OF
THOMPSON EXCAVATING, INC.’s petition for bill of review and reinstate the prior judgment
in favor of DONICA GROUP, LP.
It is ORDERED that appellant DONICA GROUP, LP recover its costs of this appeal
from appellee THOMPSON EXCAVATING, INC. AND BRADLEY THOMPSON,
INDIVIDUALLY AND AS FORMER SHAREHOLDER OF THOMPSON EXCAVATING,
INC.
Judgment entered this 6th day of January, 2020.
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