In Re: Luiz Valdetaro v. the State of Texas ( 2023 )

Deny and Opinion Filed December 21, 2023
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-23-00714-CV
IN RE: LUIZ VALDETARO, Relator
On Appeal from the County Court at Law No. 4
Dallas County, Texas
Trial Court Cause No. CC-21-02555-D
MEMORANDUM OPINION
Before Justices Molberg, Goldstein, and Breedlove
Opinion by Justice Molberg
Relator Luiz Valdetaro filed a petition for writ of mandamus seeking relief
from (1) an order granting Mountain Reservoir Corp.’s bill of review and (2) an
order denying Valdetaro’s application for turnover relief. Because we conclude the
trial court abused its discretion in granting the bill of review, we conditionally grant
the writ. We otherwise conclude the trial court did not abuse its discretion in denying
the application for turnover relief.
I. Background
On June 25, 2021, Valdetaro sued Mountain Reservoir and its president,
Richard Wade. Wade was served and filed a pro se answer, and citation for
Mountain Reservoir was served upon the secretary of state which then forwarded the
citation to the company’s registered agent.
After Mountain Reservoir failed to answer or appear, Valdetaro moved for
default judgment in February 2022. The trial court granted Valdetaro’s motion and
rendered a final default judgment against Mountain Reservoir on May 2, 2022, for
$119,456.28 plus post-judgment interest. The judgment stated Mountain Reservoir
was served with citation and a copy of the petition through the secretary of state but
had failed to appear.
On May 31, 2022, Mountain Reservoir filed a notice of appeal, “desir[ing] to
appeal the final default judgment entered on May 2, 2022, and all rulings therein.”
Mountain Reservoir also filed a bill of review on August 26, 2022, in which it argued
the default judgment should be set aside because Valdetaro failed to properly serve
Mountain Reservoir. Mountain Reservoir argued the secretary of state forwarded
the notice to its registered agent, Vcorp Services, LLC, which forwarded it to Jim
Salz, the “current contact at the time to receive such notices.” Mountain Reservoir
contended its and Wade’s relationship with Salz had been severed “long prior to July
2021.” Salz did not provide Wade or Mountain Reservoir with “notice of receipt of
the service of process,” and the company therefore was “without knowledge of the
service of process, and did not retain counsel or take any action to defend [itself.]”
Mountain Reservoir argued the trial court never properly acquired personal
jurisdiction over it.
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On September 30, 2022, Valdetaro filed an application for turnover under civil
practice and remedies code § 31.002 against Mountain Reservoir, seeking an order
compelling the company to turn over its assets, including shares of stock and cash.
Valdetaro alleges the trial court denied its turnover application, although no order to
that effect appears in the record before us.
Mountain Reservoir dismissed its appeal and instead pursued its bill of
review. Valdetaro moved for reconsideration of its application for turnover, and
Mountain Reservoir responded that, because its bill of review was pending, the
application should again be denied. At the hearing on the motion to reconsider, the
court indicated it would deny the turnover application and would address the bill of
review as soon as possible.
On February 3, 2023, the trial court granted Mountain Reservoir’s bill of
review. But then, on March 9, 2023, Mountain Reservoir nonsuited the bill of review
and filed a new petition for bill of review on April 13, 2023, “to set forth the correct
basis for the relief requested by petitioner.” Mountain Reservoir again argued the
default judgment should be set aside because the trial court lacked personal
jurisdiction over the company because Valdetaro failed in proper service.
On April 17, 2023, the trial court denied Valdetaro’s motion for
reconsideration of its application for turnover relief. On July 11, 2023, the trial court
granted Mountain Reservoir’s second bill of review and ordered that the final default
judgment was vacated and set aside.
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II. Discussion
Valdetaro presents six issues for our review, generally challenging the trial
court’s granting the bill of review and denying the turnover application. A writ of
mandamus will issue if a trial court abuses its discretion and no adequate remedy by
appeal exists. In re C.J.C., 603 S.W.3d 804, 811 (Tex. 2020) (orig. proceeding). A
trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable
as to amount to a clear and prejudicial error of law or if it clearly fails to correctly
analyze or apply the law. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382
(Tex. 2005) (orig. proceeding).
This Court is with the majority of Texas courts of appeals in permitting
mandamus review of an interlocutory order granting a bill of review. See In re
T.D.B., No. 05-17-01137-CV, 2018 WL 947905, at *4 (Tex. App.—Dallas Feb. 20,
2018, orig. proceeding) (mem. op.) (concluding no adequate appellate remedy lies
from erroneously granted bill of review); In re Reedle, No. 05-16-01483-CV, 2017
WL 944030, at *1 (Tex. App.—Dallas Mar. 10, 2017, orig. proceeding) (mem. op.);
Schnitzius v. Koons, 813 S.W.2d 213, 218 (Tex. App.—Dallas 1991, orig.
proceeding).
A. Bill of review
In his third through sixth issues, Valdetaro argues the bill of review was
improperly granted because Mountain Reservoir failed to exhaust available legal
remedies. Valdetaro argues the default judgment was not a surprise to Mountain
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Reservoir because its president, Wade, was aware of the suit against the company
and of Valdetaro’s intent to serve it via the secretary of state. Valdetaro further
argues Mountain Reservoir failed to exhaust its legal remedies.
A bill of review is a direct attack on a judgment that is no longer appealable
or subject to a motion for new trial. Frost Nat. Bank v. Fernandez, 315 S.W.3d 494,
504 (Tex. 2010). To obtain an equitable bill of review, a petitioner must ordinarily
plead and prove (1) a meritorious defense to the cause of action alleged to support
the judgment, (2) which the petitioner was prevented from making by official
mistake or by the opposing party’s fraud, accident, or wrongful act, (3) unmixed
with the fault or negligence of the petitioner. King Ranch, Inc. v. Chapman, 118
S.W.3d 742, 752 (Tex. 2003). However, when a petitioner claims a due process
violation for no service or notice, it need not prove the first two elements, and the
third element, lack of negligence, is conclusively established if the petitioner can
prove it was never served with process. Mabon Ltd. v. Afri-Carib Enterprises, Inc.,
369 S.W.3d 809, 812 (Tex. 2012). But petitioners alleging they were not served
must still prove the third and final element required in a bill of review proceeding
that the judgment was rendered unmixed with any fault or negligence of their own.
Caldwell v. Barnes, 154 S.W.3d 93, 97 (Tex. 2004).
Generally, a bill of review is available only if a party has exercised due
diligence in pursuing all adequate legal remedies against a former judgment and,
through no fault of its own, has been prevented from making a meritorious claim or
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defense by the fraud, accident, or wrongful act of the opposing party. Wembley Inv.
Co. v. Herrera, 11 S.W.3d 924, 927 (Tex. 1999) (per curiam). We narrowly construe
the grounds on which a petitioner may obtain a bill of review due to Texas’s public
policy favoring the finality of judgments. Id.We conclude the trial court abused its discretion in granting Mountain
Reservoir’s bill of review on July 11, 2023. Mountain Reservoir argued in its bill of
review it was not properly served and that, as a result, the trial court lacked personal
jurisdiction over it. But Mountain Reservoir conceded the secretary of state was
served with citation and Valdetaro’s petition, and the record before us includes a
certificate from the secretary of state confirming it received process on Mountain
Reservoir’s behalf. Thus, service of process on Mountain Reservoir was
conclusively established because substitute service on the secretary was permitted
here. Mountain Reservoir did not contest that the secretary of state was an
authorized agent for service of process, only that service was deficient. Mountain
Reservoir had the burden to prove that service on the secretary of state was improper,
and it did not carry that burden. See Mabon Ltd., 369 S.W.3d at 812. Rather, the
fault was Mountain Reservoir’s in failing to inform its registered agent of a new
contact person for receiving citation and petition. See Campus Invs., Inc. v. Cullever,
144 S.W.3d 464, 466 (Tex. 2004) (per curiam) (party that “failed to update addresses
for its registered agent and registered office” and thus “never received anything the
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Secretary sent” was “negligent in failing to comply with its statutory duties” and its
bill of review was thus properly denied).
In reaching this conclusion, we necessarily reject Mountain Reservoir’s
argument that the trial court’s July 11, 2023 order granting the second bill of review
was superfluous. Mountain Reservoir contends the trial court had already entered a
final judgment on the bill of review in the first proceeding, that its own nonsuit was
ineffective because it was filed more than 30 days after that judgment was rendered,
and the order granting the second bill of review was thus meaningless. This
argument misunderstands bill of review proceedings. If a bill of review is granted,
a second step follows that requires adjudication of whether the bill of review
defendant has proved the elements of his original cause of action. See Cleburne
Foods, LLC v. Zawideh, No. 05-18-00436-CV, 2018 WL 3968486, at *2 (Tex.
App.—Dallas Aug. 20, 2018, no pet.) (mem. op.). This subsequent trial on the merits
of the original cause of action “occurs in the same proceeding as the trial on the bill
of review.” Id. (quoting Hartford Underwriters Ins. v. Mills, 110 S.W.3d 588, 590
(Tex. App.—Fort Worth 2003, no pet.)). An order granting a bill of review and
setting aside a prior judgment that does not dispose of all the issues of the case on
the merits is therefore interlocutory and not a final judgment. Id.Thus, the trial court’s February 3, 2023 order granting the first bill of review
was interlocutory and the trial court’s plenary power had not expired when Mountain
Reservoir nonsuited its bill of review. However, we must address the further
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question of whether Mountain Reservoir was able to nonsuit the bill of review
proceeding given that the trial court had already granted the bill.
The general rule is a plaintiff has the right to take a nonsuit at any time until
it introduces all evidence other than rebuttal evidence. Hyundai Motor Co. v.
Alvarado, 892 S.W.2d 853, 854–55 (Tex. 1995) (per curiam). Such a nonsuit may
have the effect of vitiating earlier interlocutory orders; “[a] decision on the merits,
such as a summary judgment, however, is not vitiated.” Id. A nonsuit sought after
such a decision results in “a dismissal with prejudice as to the issues pronounced in
favor of the defendant.” Id. (emphasis added). Without such a rule, “the plaintiff
could in effect avoid any summary judgment by merely requesting a nonsuit after
the case was adjudicated by the summary judgment.” Id. at 855. The import of
Alvarado and related cases is that a party who has had his claims adjudicated
unsuccessfully cannot later nonsuit his claims to avoid the judgment. Curry v. Bank
of Am., N.A., 232 S.W.3d 345, 354 (Tex. App.—Dallas 2007, pet. denied).
Here, Mountain Reservoir was not seeking to undo an adverse merits decision
but a favorable preliminary decision. That makes this case like In re Baxter, No. 05-
16-01174-CV, 2016 WL 6099547, at *2 (Tex. App.—Dallas Oct. 19, 2016, no pet.)
(mem. op.), where the real parties in interest sought a court order pursuant to rule
202 authorizing a pre-suit deposition. After the trial court issued such an order and
before the deposition was taken, the real parties nonsuited the proceeding without
prejudice to refiling the petition. Id. at *1.
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The relator filed a petition for writ of mandamus to have the rule 202 petition
dismissed with prejudice, arguing that Alvarado meant the real parties’ nonsuit was
ineffective following the trial court’s ruling on the petition. Id. This Court
concluded Alvarado did not apply because it was “not a situation where a plaintiff
loses on one claim and seeks to nonsuit the entire case in an effort to avoid the effect
of the adverse order” and the trial court’s ruling on the rule 202 petition was not a
ruling on the merits. Id. at *2. Instead, “the real parties in interest obtained a
favorable ruling (the order compelling the deposition) and then relinquished the right
to take the deposition and nonsuited their rule 202 petition entirely.” Id. The real
parties in interest were therefore entitled to nonsuit the petition. Id.
When it comes to the effect of a nonsuit, rule 202 petitions are analogous to
petitions for bill of review. Although rule 202 proceedings do not assert substantive
claims or causes of action, see Bennett v. Zucker, No. 05-19-01445-CV, 2021 WL
3701365, at *4 (Tex. App.—Dallas Aug. 20, 2021, pet. denied) (mem. op.), the
petitioner has the burden to produce evidence to support required findings under the
rule, see In re EMR (USA Holdings) Inc., No. 05-19-00286-CV, 2019 WL 1198831,
at *1 (Tex. App.—Dallas Mar. 14, 2019, orig. proceeding) (mem. op.); TEX. R. CIV.
P. 202.4(a). Likewise, the first step of a bill of review proceeding is ancillary to the
underlying claims and does not assert a cause of action or substantive claim, and the
petitioner has the burden to prove the bill of review standard. Furthermore, just as
in Baxter, the real party in interest here obtained a favorable ruling when the trial
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court granted Mountain Reservoir’s original petition for bill of review. Accordingly,
we conclude Alvarado did not preclude Mountain Reservoir from nonsuiting its
petition for bill of review after the trial court had granted the petition in the first step
of the proceeding.
Given the above, we conclude the trial court abused its discretion and
Valdetaro has no adequate remedy by appeal. Accordingly, we conditionally grant
relator’s petition for writ of mandamus. A writ will issue only in the event the trial
court fails to vacate its July 11, 2023, order granting Mountain Reservoir’s petition
for bill of review and issue a new order denying Mountain Reservoir’s April 13,
2023, petition for bill of review.
B. Turnover order
Valdetaro also contends the trial court abused its discretion in denying his
application for turnover because Mountain Reservoir has not done anything to
suspend enforcement of the judgment and has failed to offer any defense to the
application other than the filing of a bill of review. Valdetaro argues the stock
certificates it seeks are properly the subject of a turnover order “because they are not
easily located and may be outside” of Texas.
The Texas turnover statute provides judgment creditors with a procedural
device to assist them in satisfying their judgment debts. Alexander Dubose Jefferson
& Townsend LLP v. Chevron Phillips Chem. Co., L.P., 540 S.W.3d 577, 581 (Tex.
2018) (citing TEX. CIV. PRAC. & REM. CODE § 31.002). Under the statute, a judgment
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creditor may seek court assistance in reaching a judgment debtor’s property that is
difficult to attach or levy on by ordinary legal process. Id. (citing Beaumont Bank,
N.A. v. Buller, 806 S.W.2d 223, 224 (Tex. 1991)). “The court may,” among other
things, “order the judgment debtor to turn over nonexempt property that is in the
debtor’s possession or is subject to the debtor’s control.” TEX. CIV. PRAC. & REM.
CODE § 31.002(b)(1).
As the just-quoted “may” language makes clear, a turnover order under
subsection (b)(1) lies within the sound discretion of the trial court. See id.; Brink v.
Ayre, 855 S.W.2d 44, 46 (Tex. App.—Houston [14th Dist.] 1993, no writ) (“The
language, therefore, is discretionary, as opposed to mandatory. And the requested
turnover relief is directed to the sound discretion of the trial court.”). The trial court
may consider other relevant factors in deciding whether to grant, deny, or modify
turnover relief. Brink, 855 S.W.2d at 46.
We conclude Valdetaro has failed to show the trial court abused its discretion
in denying his application for turnover relief and his motion for reconsideration.
Valdetaro’s argument seems to imply the trial court was required to grant his
application if he made a particular showing under the turnover statute. But, as
discussed above, the trial court’s decision was discretionary. See TEX. CIV. PRAC.
& REM. CODE § 31.002(b)(1). Furthermore, Valdetaro has failed to demonstrate that
he satisfied all the requirements of the turnover statute, namely, that Mountain
Reservoir is the owner of the stocks, the property could not be readily attached, and
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the property is not exempt from attachment, execution, or seizure for the satisfaction
of liabilities. Id. § 31.002(a). Finally, we observe that the trial court indicated it was
denying reconsideration of the turnover application so it could decide the petition
for bill of review first. Given our above resolution of the bill of review issue,
Valdetaro is free to revisit the turnover question in the trial court. We deny
Valdetaro’s petition for writ of mandamus on this issue.
/Ken Molberg/
230714f.p05 KEN MOLBERG
JUSTICE
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