Seaprints, Inc. v. Cadleway Props., Inc.

MICHAEL MASSENGALE

Reversed and remanded.

Jack Hardin, Houston, TX, for Appellants. Karen L. Hart, Randall K. Lindley, Bell Nunnally & Martin LLP, Dallas, TX, for Appellee.

Panel consists of Chief Justice RADACK, Justice MASSENGALE, and Justice HUDDLE. OPINION

MICHAEL MASSENGALE, Justice.

Appellants Seaprints, Inc., Herman H. Koster, and Elisabeth Koster filed a bill of review, seeking to vacate a 2007 default judgment entered against them in favor of appellee Cadleway Properties, Inc. The appellants claimed that they were never served with process and had no notice of the action in which the default judgment was rendered. Both sides of the dispute moved for traditional summary judgment, which the trial court entered in favor of Cadleway. However, because the appellants presented evidence corroborating their sworn denials of service, we reverse and remand the case for further proceedings consistent with this opinion.

We disagree with Cadleway's characterization of the burden of proof. As subsequent cases attest, the burden of proof for a bill-of-review plaintiff is preponderance of the evidence. Caldwell, 154 S.W.3d at 98 (“At trial, he must establish by a preponderance of the evidence that he was never served.”); Ward v. Nava, 488 S.W.2d 736, 738 (Tex.1972) (“As in any other fact issue, the burden was ... to establish his case by a preponderance of the evidence.”); Perez v. Old W. Capital Co., 411 S.W.3d 66, 72 (Tex.App.-El Paso 2013, no pet.) (“The party asserting lack of service must corroborate it with ‘evidence of supporting facts and circumstances' by a preponderance of evidence.”). Past pronouncements to the contrary have been abrogated by these decisions of more recent vintage.

Seaprints and the Kosters argue that they submitted corroborating evidence of their denials of service and that therefore summary judgment against them was improper. We review the record concerning each appellant individually to determine whether Salbert, Herman, and Elisabeth corroborated the denial of service with evidence of supporting facts and circumstances.

A. Service on the agent of Seaprints

Salbert, who was purportedly served as registered agent of Seaprints, executed an affidavit denying that he had been served with process. He further denied having had any awareness of the lawsuit until he was informed by the Kosters of their efforts to set aside the sheriff's sale. Significantly, Salbert did not merely deny that he had been served, but he averred that on the morning at issue he had not been at his home in League City, but he was instead in the nearby town of Webster, buying a carpet shampooer. Salbert thus furnished testimony of an independent fact or circumstance—his presence at a pawnshop in another town—and he did not merely deny that he had been served. See Min, 991 S.W.2d at 503. Moreover, the appellants presented a receipt indicating that Salbert purchased a carpet shampooer at 11:16 AM, seventeen minutes before the time listed on the affidavit of service. See Sanders v. Harder, 148 Tex. 593, 597, 227 S.W.2d 206, 209 (1950) (“[I]t is not required that the corroborating evidence be direct. It may be wholly circumstantial.”).

Cadleway argues that the receipt was hearsay. Although Cadleway objected to this evidence in the trial court, it did not obtain a ruling on its objection. “Failure to secure the trial court's ruling on the objections to the summary judgment evidence also waives the complaint for appeal.” Vice v. Kasprzak, 318 S.W.3d 1, 11 (Tex.App.-Houston [1st Dist.] 2009, pet. denied). The trial court's order granting summary judgment in Cadleway's favor does not function as an implicit ruling sustaining the objection. See Delfino v. Perry Homes, 223 S.W.3d 32, 35 (Tex.App.-Houston [1st Dist.] 2006, no pet.). While defects of substance in summary judgment evidence may be raised for the first time on appeal, hearsay is considered an objection as to form. See Grand Prairie Indep. Sch. Dist. v. Vaughan, 792 S.W.2d 944, 945 (Tex.1990) (per curiam) (failure to object to defects in form resulted in waiver); Green v. Indus. Specialty Contractors, Inc., 1 S.W.3d 126, 130 (Tex.App.-Houston [1st Dist.] 1999, no pet.) (defect of substance may be raised for the first time on appeal but hearsay is defect of form, not substance). As such, Cadleway waived its objection, and the receipt remains part of the summary-judgment evidence we consider.

In light of Salbert's sworn statement that he was at another location on the morning when he purportedly was served and his presentation of the receipt, which corroborates his account, we conclude that Seaprints presented evidence of independent facts and circumstances to corroborate its denial of service.

B. Service on Herman Koster

Herman also executed an affidavit denying that he was served with process. In it, he averred that on the date he was purportedly served, February 6, 2007, he was living in Kemah and had separated from Elisabeth. He denied being at his former home in Seabrook at any time that day. He disavowed having had any knowledge of the lawsuit until he heard about the sheriff's sale. In addition to Herman's affidavit, the appellants offered copies of his car registration (dated July 30, 2007), bills (dated October 30, 2006 and May 9, 2007), and his driver's license (expiration date, August 27, 2008), all showing his Kemah address. Furthermore, appellants presented the affidavit of Kay Sykes, a former neighbor of the Kosters in Seabrook, who averred, “Herman Koster moved to Kemah, Texas at the beginning of 2006 and did not return after that to live with Elisabeth.” Diane Gillebaard, in her affidavit, claimed Herman moved in January 2006 to an apartment that she and her husband owned in Kemah and that he resided there until they sold the property in 2008.

Like the successful bill-of-review plaintiff in Min, Herman corroborated his denial of service by affirming that he had changed his residence over a year before the date he was supposedly served at his former home. See Min, 991 S.W.2d at 503. He further stated that he and Elisabeth were separated at that time, “an independent fact or circumstance” consistent with his absence from the marital home. He also specifically denied being at the Seabrook residence at any time on the day when he was supposedly served. Aside from Herman's testimony, appellants offered circumstantial evidence, in the form of the various documents bearing his Kemah address, to support Herman's claim that he had changed residences. The affidavits of Sykes and Gillebaard are evidence that Herman was living in Kemah as he claims, and thus further circumstantial evidence that he was not present in Seabrook on the night he was supposed to have been served. Although Cadleway claims that the affidavits of Sykes and Gillebaard are “riddled with factual conclusions,” this objection is inadequate as it fails to identify specific objectionable portions of the affidavits or to explain why any particular passages should be disregarded as conclusory. See Walston v. Anglo–Dutch Petroleum (Tenge) L.L.C., No. 14–07–00959–CV, 2009 WL 2176320, at *8 n. 8 (Tex.App.-Houston [14th Dist.] July 23, 2009, no pet.) (mem. op.) (dismissing objections to affidavits when they were not supported by legal authority and failed to identify specific statements challenged within paragraphs); Stewart v. Sanmina Tex. L.P., 156 S.W.3d 198, 207 (Tex.App.-Dallas 2005, no pet.) (refusing to consider objections to affidavits—that they were conclusory and not based on personal knowledge—when objections were not sufficiently specific).

Given Herman's denial that he was present at the Seabrook residence at any time on the day in question, his affirmation that he was living somewhere else due to his separation from his wife, and the several documents and collateral affidavits attesting to his change of residence, we conclude that he presented evidence of independent facts and circumstances to corroborate his denial of service.

C. Service on Elisabeth Koster

Elisabeth also made an affidavit denying that she was served with process. However, she did not deny being present at the Seabrook residence, and in her deposition, she admitted that “as far as [she] knew,” she was home in Seabrook on the night she was purportedly served. Like Herman and Salbert, she denied having had any knowledge of the proceedings against her until she learned of the sheriff's sale.

Elisabeth averred that she was the president of Seaprints and that Salbert, its registered agent, had never notified her that the company had been served with process or had a judgment entered against it. Referring to herself and Herman, she further stated, “We could not possibly have both been served at my home address on that date because Herman Koster was not there on that date. We had separated and he moved to Kemah, Texas, in January of 2006.”

Elisabeth also stated, “In August of 2008, Herman Koster and I refinanced the commercial property we owned in Pearland, Brazoria County, Texas with Amegy Bank. At that time, neither we nor the bank making the loan had any knowledge of the judgment made the subject of this case.” She continued, “In my opinion the property was worth at least $950,000 in 2012, and the outstanding mortgage against the property was less than $400,000. Had I known of any judgment against me which endangered my ownership in the property, I certainly would have taken action to protect my property.”

Unlike the other two individuals purportedly served by Wheeler, Elisabeth did not claim to have been somewhere other than the address on the return of service at the time of the purported service. On the contrary, she acknowledged having been at her home. Nonetheless, the summary-judgment evidence, taken as a whole, adequately corroborated Elisabeth's denial of service. Importantly, the affidavits of service claimed that both of the Kosters were served at the Seabrook residence at the same time. As both Kosters averred in their affidavits, Herman was not living at the Seabrook residence at that time and was not present on that night. The evidence suggesting that the affidavit of service was false as to Herman therefore tends to suggest that the affidavit of service was false as to Elisabeth as well. Similarly, if taken as true, Salbert's denial that he was served and the corroborating evidence that he was somewhere else that morning impeach Wheeler's credibility and that of the affidavit he executed claiming to have served Elisabeth.

Testimony in Ward v. Nava, 488 S.W.2d 736 (Tex.1972), that the Supreme Court of Texas found corroborative illustrates the scope of circumstantial evidence upon which a bill-of-review plaintiff may rely:

Ward stated in this affidavit that he was not served in person; that on Friday, November 19, 1971, someone, whose name he did not remember, called and asked about the lawsuit. Ward did not elaborate as to the identity of the party calling nor did he state for what reason the party calling might have an interest in the case. As a result of the call, Ward began looking for the papers that were supposed to have been served on him. He found the petition in his house as a result of his search on Sunday, November 21, and presumed that it had originally been left in his mailbox. He forgot to take the papers the next day, but delivered them to his insurance agent the following day, November 23, 1971. By this time the default judgment had been entered.

The actions of Ward in searching for the papers and in promptly taking the papers to the insurance agent on their discovery constitute some corroborating evidence of Ward's contention that he had not been served.
488 S.W.2d at 737. Though this evidence was indirect, the court nonetheless found it sufficient to corroborate denial of service.

Elisabeth's testimony about the value of the Brazoria County property and the Kosters' successful use of it as collateral is further circumstantial evidence corroborating her denial of service. In Sanders v. Harder, 148 Tex. 593, 227 S.W.2d 206 (1950), the Supreme Court of Texas found the following facts to be corroborative of the bill-of-review plaintiff's denial of service:

An examination of the record has convinced us that there are corroborating circumstances in this case. Jim Sanders bought this property in 1925 and moved upon it in 1926. He married Jessie Sanders in 1933, and the property has been occupied by them as a homestead since that date. It would be most unnatural for a husband and wife to ignore a suit which would take their homestead from them. After the default judgment was rendered in 1941 their possession was not disturbed until a writ of scire facias was served upon them in this case approximately seven years later. That unusual delay unexplained lends some support to petitioners' testimony. Jim Sanders testified that he made improvements on the property after 1941.... Other circumstances are relied upon by petitioners, but we think that those mentioned, while not as strong as might be desired, do constitute some competent evidence corroborating the testimony of the petitioners.
148 Tex. at 597–98, 227 S.W.2d at 209. Although the default judgment obtained by Cadleway did not concern title to the property ultimately seized in satisfaction of the judgment, which real estate was not appellants' homestead, the evidence that a bank was willing to lend the Kosters money secured by property subject to execution under an unsatisfied judgment, and the fact that the two stood to lose a building with a value of $900,000 by not paying a default judgment of $11,295, is evidence that they lacked an awareness of the judgment against them. As in Sanders, there was a delay of many years between entry of the judgment and an attempt to enforce it by seizure of the plaintiffs property. To echo the Supreme Court, it would be most unnatural for two people to ignore a judgment that could take such a valuable property from them.

In both Ward and Sanders, the Supreme Court allowed corroborating evidence to take the form of the parties' testimony about their own behavior, including their own inaction, if that behavior could be seen as inconsistent with service and awareness of the proceedings against them. See Ward, 488 S.W.2d at 737; Sanders, 148 Tex. at 597–98, 227 S.W.2d at 209. Elisabeth's statements in her affidavit about the value of the property and its use as collateral are likewise testimony as to behavior that could be regarded as inconsistent with service.

Considering the evidence corroborating the other denials of service, the fact that Herman and Elisabeth were purportedly served at the same time and place, and the evidence presented of behavior inconsistent with awareness of the judgment, we conclude that Elisabeth corroborated her denial with supporting evidence of independent acts and circumstances.

In its motion for summary judgment, Cadleway did not contend that the evidence it presented that the appellants were served, such as Wheeler's new affidavit and the records from the security booth, conclusively established service. Rather, it argued that the appellants had offered nothing more than bare denials of service, which denials were inadequate to the altered standard of proof required to controvert affidavits of service. Since each of the appellants produced evidence corroborating the denial of service, evidence that created a genuine issue of material fact on the subject of service under the corroboration requirement for a bill of review, the trial court should not have granted summary judgment for Cadleway. We sustain the appellants' first issue.

II. Seaprints and Rosters' motion for summary judgment

In their second issue, the appellants argue that the trial court should have granted their motion for summary judgment because the judgment nunc pro tunc against them was entered after the trial court's plenary power had expired, it was correcting a judicial error, and it was therefore void. Crucially, however, the appellants do not argue in their brief, and they did not argue in their motion for summary judgment, that they conclusively established the elements of a bill of review. Whether a plaintiff is entitled to employ a bill of review is a necessary predicate that must be established if the validity of the judgment attacked is to be ruled upon. See Caldwell, 154 S.W.3d at 97–98 (clarifying procedures to be used when a plaintiff files a bill of review); Baker v. Goldsmith, 582 S.W.2d 404, 409 (Tex.1979) (same). Therefore, regardless of the merits of the argument that the judgment was inappropriately amended nunc pro tunc to correct a judicial error, it would be precipitate for a court to enter summary judgment in their favor when they still have not established the elements of a bill of review. Appellants' second issue is overruled.

Conclusion

We reverse the judgment of the trial court and remand the case for further proceedings consistent with this opinion.