Designating an Unknown Person as a Responsible Third Party

2 minute read

In re Chitkara

Dallas Court of Appeals, No. 05-24-00482-CV (June 12, 2024)
Justices Pedersen III, Smith (Opinion, linked here), and Garcia 
If a defendant wants to designate an unknown person as a responsible third party, Civil Practice & Remedies Code § 33.004(j) prescribes unique requirements—distinct from those governing designation of known persons— that must be closely followed.
Chitkara sued Ortiz and his employer, Hellas Construction, when Ortiz abruptly pulled in front of Chitkara on the Dallas North Tollway, causing a collision. Ortiz and Hellas alleged in their answer that “the occurrence in question was the result of a person not a party to the suit.” They subsequently sought to designate this “John Doe” as a responsible third party under CPRC Chapter 33. The trial court granted that request, but the Dallas Court of Appeals disagreed on mandamus, directing that the order be vacated.
Section 33.004(j) provides the “exclusive” procedure and delineates the specific requirements for a defendant to designate an “unknown person” as a responsible third party:
  • The defendant must allege in the answer “that an unknown person committed a criminal act that was a cause of the loss or injury that is the subject of the lawsuit” and must plead “facts sufficient for the court to determine that there is a reasonable probability that the act of the unknown person was criminal”;
  • The defendant must state in its answer “all identifying characteristics of the unknown person, known at the time of the answer”; and
  • The pleading containing these required allegations must be filed “not later than 60 days after the filing of the defendant’s original answer.”
Although Ortiz and Hellas vaguely alleged that “the occurrence in question was the result of a person not a party to the suit,” they did not allege criminal conduct or facts sufficient to show criminal conduct. Nor did they allege “all identifying characteristics of the unknown person.” The trial court therefore abused its discretion by granting the motion to designate. The Court of Appeals also rejected defendants’ argument that they should be allowed to replead to add the required allegations, saying that would undermine the “explicit timing requirement” of § 33.004(j).

Oh Deer…No TRO During Appeal

2 minute read

 In re: Texas Parks and Wildlife Department

Dallas Court of Appeals, No. 05-24-00582-CV (May 23, 2024)
Justices Reichek, Carlyle, and Miskel (opinion available here)

Lesson learned: serving an out-of-state registered agent for the out-of-state defendant is not proper service under Texas law. 

The owners of a commercial deer-breeding facility brought suit to enjoin the Texas Parks and Wildlife Department from carrying out a “deer depopulation order” after the detection of Chronic Wasting Disease at the facility. The trial court denied the Department’s plea to the jurisdiction and entered a temporary injunction, and the Department filed an interlocutory appeal. The Dallas Court of Appeals entered a temporary order preventing the depopulation pending resolution of the appeal, but the Supreme Court stayed that Order. The trial court then entered a TRO regarding the manner of the depopulation. The Department sought mandamus to vacate that TRO.
The Court of Appeals conditionally granted the writ, holding that the TRO violated CPRC §51.014(b)’s automatic stay. Section 51.014(b) stays the commencement of trial pending most interlocutory appeals. But in the case of certain specified appeals, it goes further and “stays all other proceedings in the trial court pending resolution of [the] appeal,” as well. An appeal from the denial of a plea to the jurisdiction by a governmental unit—like that taken by the Department here—gives rise to that more extensive stay, which the appeals court held prohibits entry of a TRO. The trial court therefore abused its discretion in issuing a TRO in violation of the automatic stay.

WAIT…I CAN’T SERVE THE REGISTERED AGENT?

2 minute read

Lawton Candle, LLC v. BG Personnel, LP

Dallas Court of Appeals, No. 05-23-00449-CV (May 13, 2024)
Justices Garcia, Breedlove (Opinion),
and Kennedy
Lesson learned: serving an out-of-state registered agent for the out-of-state defendant is not proper service under Texas law.  
In this restricted appeal, the Oklahoma defendant, Lawton Candle, LLC, claimed the default judgment against it was improper because it had not been properly served with process. The plaintiff, BG Personnel, LP, had served Lawton Candle with the lawsuit through its registered agent in Oklahoma because Lawton Candle did not maintain a registered agent in Texas. When Lawton Candle did not timely answer the petition, BG Personnel obtained a default judgment. 
To reverse a default judgment on restricted appeal a defendant must show “error [that is] is apparent on the face of the record.” Defective service constitutes such an error. Appellate courts strictly enforce service rules when reviewing default judgments. Thus, the question here was: is service on a party’s agent registered in another state authorized by Texas law? The Court held that it was not.
Section 5.201(b) of the Texas Business Organizations Code authorizes service on a business entity’s registered agent, president, or any vice president. And section 5.255(3) allows service on each manager of a manager-managed domestic LLC. For a foreign LLC, section 2.256 adds to those methods any “other means of service of process . . . as provided by law.” Although this would indicate that service of Lawton Candle’s Oklahoma registered agent was effective, section 5.201 prohibits registered agents from being a resident of a different state. 
Based on this language, the only means recognized by the Business Organizations Code to serve an out-of-state entity with no registered agent in Texas is through the Texas Secretary of State pursuant to section 5.251, which makes the Secretary of State the registered agent for foreign companies that don’t maintain one in Texas. 
The Court noted that its “strict compliance” interpretation of the service rules may yield a “rather weird conclusion[],” but determined it was good public policy in the end. Therefore, the Court vacated the trial court’s default judgment and remanded the case.

"Just Throw it Away"

2 minute read

In the Interest of MBG and ATG
Dallas Court of Appeals, No. 05-23-00505-CV (May 2, 2024)
Justices Partida-Kipness, Nowell (opinion available here),
and Smith

Kelli Hinson

You can’t always trust your soon-to-be ex-husband. The wife
in this divorce case learned that the hard way when she failed to answer or
appear at trial and was unhappy with the orders entered by the Court. She filed
a motion for new trial, arguing she met the Craddock factors. She
testified that her failure to respond was not due to conscious indifference
because, after she received the divorce petition, the husband told her to
“throw it away and wait to hear from his lawyer regarding mediation.” Relying
on that advice, the wife failed to take any action to protect herself in the
divorce proceeding. The trial court was unconvinced, however, particularly
given that the wife later received an email from the husband’s lawyer saying
that the divorce petition was on file and the husband did wish to move forward.

The Court of Appeals agreed with the trial court and
affirmed the denial of the wife’s motion for new trial. It held that “conscious
indifference” includes behavior such as a “pattern of ignoring deadlines and
warnings from the opposing party” and failing “to take some action which would
seem indicated to a person of reasonable sensibilities under the same or similar
circumstances.”

The Court of Appeals did grant the wife some relief,
however. It held that the trial court abused its discretion in awarding the
husband more relief than requested in his petition. Texas is a “fair notice”
state, which means that all parties are entitled to fair notice of a claim, and
a trial court may not grant relief to a person who has not requested such
relief in a live pleading. 

No Interlocutory Appeal from Denial of Ken Paxton’s Plea to Jurisdiction in Disciplinary Case

3 minute read

Paxton v. Commission for Lawyer Discipline
Dallas Court of Appeals, No. 05-23-00218-CV (April 18, 2024)
Justices Nowell (Opinion, linked
here), Miskel
(Dissent, linked here), and Kennedy

 More fallout from failed
litigation regarding purported irregularities in the 2020
presidential election. A day after one panel of
the Dallas Court of Appeals unanimously affirmed summary judgment rejecting the State Bar’s disciplinary charges
against Sidney Powell—largely because of the Bar’s less-than-ideal briefing at
trial and on appeal—another divided panel of that same court found it lacked
jurisdiction to review a trial court’s denial of Ken Paxton’s plea to the jurisdiction regarding the
Bar’s disciplinary action against him.
The
State Bar’s Commission for Lawyer Discipline alleged that Paxton made “‘dishonest’
representations to the Supreme Court [in his role as lead counsel for the
State] in Texas v. Pennsylvania.” The Commission contended these alleged
misrepresentations “constitute[d] professional misconduct and violate[d] Rule
8.04(a)(3) of the Texas Disciplinary Rules of Professional Conduct.” Paxton
filed a plea to the trial court’s jurisdiction, asserting the Commission’s
action violated the separation-of-powers doctrine and was barred by sovereign
immunity. When the trial court denied that plea, Paxton sought appellate review
pursuant to TCPRC § 51.014(a)(8), which authorizes interlocutory appeal from an
order that “grants or denies a plea to the jurisdiction by a governmental unit”
of the State or, by judicial extension, a plea by a State official sued in his
or her official capacity. Paxton contended that, because Texas law directs only
the Attorney General to “prosecute and defend all actions in which the state is
interested,” the Bar Commission’s case was effectively leveled against him in
his official capacity and the AG’s office itself; the denial of his plea,
therefore, fell within § 51.014(a)(8).
But
the Dallas Court disagreed. The Court noted that the Commission did not
challenge the AG’s discretionary decision to file the Texas v.
Pennsylvania lawsuit, but instead targeted specific alleged
misrepresentations made by Paxton as counsel in that case. And the Commission
sought no relief against the AG’s office or Paxton in his official capacity,
but only against Paxton individually as an attorney licensed by the State of
Texas. Therefore, the Court concluded, the trial court’s denial of Paxton’s
plea to the jurisdiction did not fall within § 51.014(a)(8), and it had no
jurisdiction to hear the interlocutory appeal.
Justice
Emily Miskel dissented. A lot. She would have found jurisdiction for the appeal
under § 51.014(a)(8) and reversed the trial court’s denial of Paxton’s plea to
the jurisdiction, arguing the Commission’s action targeted Paxton in his
official capacity and was barred by the separation-of-powers doctrine as well
as sovereign immunity. She went on to contend the Commission’s complaint also
was defective on the merits.
Last
year—foreshadowing this case—the El Paso Court of Appeals rejected separation-of-powers
and sovereign-immunity defenses in a similar disciplinary action brought by the
Commission against First Assistant AG Brent Webster, also based on alleged
misrepresentations in Texas v. Pennsylvania. Comm’n for Lawyer Discipline
v. Webster, 676 S.W.3d 687 (Tex. App.—El Paso 2023). Webster filed a
petition for review in the Supreme Court of Texas. The petition remains pending,
with briefs on the merits having been requested and filed. So, there’s more to
come in Webster and likely in the Paxton case, as well.

TRAP 24.2’s $25-million Supersedeas Cap Applies Per Judgment Debtor, Not Per Judgment

2 minute read

Greystar
Development & Construction, LP  v. Williams

Dallas Court of Appeals, No. 05-23-01168-CV
(April 10, 2024)

Justices
Molberg, Carlyle, and Breedlove (Opinion, linked here)

Ken Carroll

Williams secured a judgment holding
three defendants jointly and severally liable for actual damages of more than
$360 million. The three defendants posted one joint bond in the total amount of
$25 million—the supersedeas “security” cap prescribed by TCPRC § 52.006(b)(2)
and TRAP 24.2(a)(1)(B)—contending this was sufficient to suspend execution
against all three, pending appeal. Pursuant to TRAP 24.1(b)(2), however, the
trial court reviewed the joint bond and found it did not comply with the
statute or the rule and did not suspend enforcement of the judgment. The trial
court reasoned that the $25-million cap applied to each judgment debtor,
rather than to the judgment as a whole. The court directed the defendants to
specify which of them would be covered by the existing bond and then to file
additional bonds for the other two defendants in order to suspend execution. Defendants,
who by then had commenced an appeal on the merits, filed a motion pursuant to
TRAP 24.4 seeking appellate review of the trial court’s ruling. 

The
Dallas Court of Appeals affirmed the trial court’s decision. The Court noted a
split of authority about whether the $25-million cap was to be applied per
judgment or per judgment debtor. In Huff Energy Fund, LP v. Longview Energy
Co., a divided panel of the San Antonio Court had held the cap applied to
the judgment as a whole. The Tyler Court, however, came to the opposite
conclusion in John M. O’Quinn, PC v. Wood. The Tyler court reasoned that
the Civil Practice and Remedies Code defines “security” to mean “a bond or
deposit posted … by a judgment debtor to suspend execution of the
judgment during appeal of the judgment.” 

The Dallas Court found the reasoning
of the Tyler Court persuasive and adopted its resolution, “hold[ing] that the
$25-million cap in § 52.006 of the Texas Civil Practice and Remedies Code [and
TRAP 24.2] applies per judgment debtor and not per judgment.”

  

i_5214825v.151

 

  

State Bar of Texas – Appellate Section: Nominations to the Texas Appellate Hall of Fame

less than a minute

 

 State Bar of Texas – Appellate Section

 Nominations
to the Texas Appellate Hall of Fame 


A few years ago, CCSB co-founder and appellate legend
Marvin Sloman was inducted into the Texas Appellate Hall of Fame. The
recognition was richly deserved and a great honor for Marvin and the firm.

Now it’s your opportunity to
nominate a worthy practitioner to join Marvin and others in the Hall. The Appellate
Section will honor new Hall of Fame inductees at a presentation and ceremony
during this year’s Advanced Civil Appellate Practice course and Section meeting,
scheduled for September 5-6, 2024. 

Guidelines for nominating someone, as well
as a link for submitting your nomination, are found here. Nominations
should be submitted no later than Thursday, May 30, 2024.




Judicial Admissions: Be Careful What You Plead, and How

less than a minute

Advantage Aviation Technologies, Inc. v. Axcess Aviation Maintenance Services, Inc.

Dallas Court of Appeals, No. 05-23-00344-CV (December 27, 2023)
Justices Molberg (Opinion, linked here), Pedersen III, and Smith

Axcess secured judgment against Advantage Aviation for breach of two contracts. Advantage challenged that judgment on appeal by arguing that it had no contracts with Axcess and that the contracts on which the judgment was based were between Axcess and a different party. Problem was, in the trial court Advantage had counterclaimed, unsuccessfully, for breach of the very same contracts that it tried to deny on appeal. And it had done so “without equivocation and not in the alternative,” alleging it sustained damages of more than $90,000 from Axcess’s breach of those contracts. Oops.

Citing its prior opinion in Murphy v. Killer Ridez, Inc., No. 05-13-00035-CV, 2014 WL 428987, the Dallas Court of Appeals summarily rejected Advantage’s appeal and affirmed, saying: 

Assertions of fact, not pleaded in the alternative, in the live pleadings of a party are regarded as formal judicial admissions. … A judicial admission that is clear and unequivocal is conclusive upon the party making it; it relieves the opposing party of the burden of proving the admitted fact and bars the admitting party from disputing it.

No Double Dipping: Court of Appeals Slashes Damages Award for Breach of Construction Contract

2 minute read

Joy & Yoo Properties, Inc. v. Roeder Holdings, LLC

Dallas Court of Appeals, No. 05-22-00699-CV (November 28, 2023)
Justices Pedersen (Opinion, linked here), Garcia, and Kennedy

MDK owned a tract of land in Burleson, Texas. In 2009, Joy & Yoo Properties purchased one of the lots on the tract and agreed to construct improvements on the entire tract (not just its lot), including fire lanes, access drives, sewers, and water lines. But the property was never developed according to the agreement. In 2011, the bank foreclosed on MDK’s property, and the bank sold the property to Roeder in 2017. In 2019, Roeder demanded that Joy & Yoo complete the improvements required under the contract with MDK. Roeder sued Joy & Yoo and obtained summary judgment on liability for breach of contract.

The case went to a jury trial on damages, and the jury awarded two measures of damages: $618,718.07, the cost to construct the improvements, and $480,000, the lost value of Roeder’s land without the improvements. The trial court entered a judgment that included both damages measures, totaling $1,098,718.07. Joy & Yoo appealed.
Joy & Yoo argued that the trial court awarded Roeder overlapping measures of damages, resulting in an improper double recovery, and the appeals court agreed. The Court explained that there are two measures of damages for breach of a construction contract: (1) remedial damages, which assess the cost to complete or to repair the subject of the contract; and (2) difference-in-value damages, which assess the difference between the value with the improvements as constructed versus the value had the improvements been constructed according to the contract. Remedial damages are appropriate when the contractor has substantially performed. The difference-in-value measure applies when the contractor has not substantially complied with the contract terms.
The Court of Appeals concluded that remedial damages and difference-in-value damages are alternative measures and held that allowing a party to recover both would be an improper double recovery. Roeder argued that it was proper for the judgment to include both measures of damages, because the remedial damages were direct damages whereas the difference-in-value damages were consequential damages. The Court rejected this argument, concluding the difference-in-value damages are direct damages and noting that Roeder did not plead for consequential damages.
The appeals court therefore vacated the damages award. Because undisputed evidence showed that Joy & Yoo had not substantially performed, the Court remanded to the trial court and instructed it to enter a $480,000 judgment based on the difference-in-value measure and to recalculate interest based on the reduced damages award.

Penny Wise But Pound Foolish. Serving as Your Company’s Registered Agent Can Be Costly in the Long Run

3 minute read

Huffman Asset Management, LLC v. Colter

Dallas Court of Appeals, No. 05-22-00779-CV (November 8, 2023)
Justices Partida-Kipness (Opinion, linked here), Reichek, and Breedlove

Entities that do business in Texas, like corporations and limited liability companies, must “designate and continuously maintain” a registered agent and a registered office to be served with process. For around $100 annually, an entity can hire a company to serve as its registered agent and provide an address for its registered office. A business owner who faces ever-increasing expenses may be tempted to save costs by personally serving as his or her business’s registered agent and listing the business’s current address as its registered office. But this decision can prove perilous, as it did in this case.

The Colters claimed their apartment was infested by insects and sued their landlord, Prairie Capital, LLC, and its property management company, Huffman Asset Management, LLC. Both entities listed Douglas Huffman as their registered agent. Public filings for Prairie Capital listed a house in Highland Village as its registered office, and Huffman Management’s filing listed an office in Dallas as its registered office. But when the Colters tried to serve Huffman at these addresses, a bank occupied the address listed for Huffman Management and their process server was told Huffman had sold the Highland Village house.
Unable to serve Huffman, the Colters served the Secretary of State, as Texas law allows when a registered agent cannot be located at the registered office. The Secretary of State must then send notice to the “most recent address of the entity on file with the secretary of state” via certified mail. Tex. Bus. Orgs. Code § 5.253. The Secretary of State issued certificates confirming that it forwarded the documents the Colters served to the Highland Village house for Huffman Management and the Dallas office for Prairie Capital and that it later received the documents back “Return to Sender.”
The Colters then obtained a default judgment. The trial court sent a Notice of Default Judgment to the defendants at a Dallas address on San Jacinto Street, which the Colters listed as the defendants’ last known mailing address but was not either defendant’s registered office. The defendants appeared and moved for a new trial. The trial court denied the motion, and the defendants appealed.
On appeal, the defendants argued the Colters’ service on the Secretary of State was invalid because they gave the Secretary of State “bad” addresses. They argued the Colters knew the San Jacinto address was the defendants’ “most recent … address on file with the secretary of state.” Tex. Bus. Orgs. Code § 5.253. The defendants pointed to public information reports filed with the Secretary of State listing the San Jacinto address as each company’s principal place of business. The court of appeals rejected this argument, reasoning that the purpose of § 5.253 and related provisions is to effect service on the designated registered agent at the designated office. The Secretary of State, according to the court, should not have to ignore an entity’s filings about its registered agent and office in favor of a more recent filing not related to service of process.
A $100 annual fee gets a company a registered agent and registered office consistently available during normal business hours at an address that will not change. While this might seem like an easy expense to eliminate because a principal of the business can serve as the registered agent, a company faces a real risk of a default judgment if its registered agent is not actually available for service or if it fails to keep its registered agent information updated with the Secretary of State.