Opinion
3:01-CV-1951-M.
December 3, 2001.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion for Relief from Judgment, filed on October 11, 2001. Because the Defendant was not properly served with process in accordance with Texas' substituted service of process statute, the Default Judgment, entered by the County Court at Law No. 4, Dallas County, Texas, on October 1, 2001, is declared void and hereby SET ASIDE.
BACKGROUND
This case arises from a failed marriage. On March 21, 1999, the Plaintiff's daughter, Velinda Savariego ("Velinda"), married the Defendant, Steven Melman ("Melman") in what is claimed to have been a "lavish" formal ceremony and reception that allegedly cost the Plaintiff $250,000.00. Melman filed for divorce in November 1999. On August 10, 2001, the Plaintiff sued Melman in state court to recover the cost of the wedding. He further alleged Melman falsely represented that he was eligible to be married, but knowingly concealed the existence of a common law marriage. Plaintiff asserts that in order to obtain a religious divorce, the Defendant fraudulently represented to at least two rabbis that he had repaid all debts and returned all gifts to the Plaintiff.After filing suit in County Court in Dallas, the Plaintiff attempted service on Melman in accordance with the Texas long-arm statute, by forwarding copies of the Petition and citation to the Secretary of State on August 30, 2001. A copy of the citation was not forwarded by the Secretary of State to Melman until September 10, 2001. On the morning of October 1, 2001, the Plaintiff obtained the Default Judgment at issue in this Motion. Apparently without knowing of the Default Judgment, Melman filed a special appearance and, sometime in the afternoon of October 1, 2001, filed a Notice of Removal. He now seeks to set aside the Default Judgment as void for improper effectuation of service of process under Fed.R.Civ.P. 60(b).
Once a state court action is removed, it is governed by federal, rather than state, procedure. Aguacate Consol. Mines, Inc. v. Deeprock, Inc., 566 F.2d 523, 525 (5th Cir. 1978). Fed.R.Civ.P. 60(b) governs relief from default judgments:
Rule 60. Relief from Judgment or Order
(b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, Etc. On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void. . . .
Fed.R.Civ.P. 60(b) (1992). Melman brings his Motion to set aside the Default Judgment pursuant to Rule 60(b)(1), claiming mistake, inadvertence, or excusable neglect, in the following ways:
* The Default Judgment was entered before Melman's time to answer expired; * The Default was entered on the County Court at Law docket after the case was removed to federal court;
* Melman was not notified that the Secretary of State of Texas was his alleged agent for service of process or that he was allegedly served in Austin, Texas on August 30, 2001 through the Secretary of State;
* The Secretary of State of Texas was not an authorized agent for service of process upon Melman because he did not conduct business in Texas at any time;
* The Secretary of State of Texas and the Plaintiff's counsel failed to follow the proper procedures for preparing and serving process on a non-resident defendant; and
* The County Court did not have personal jurisdiction over Melman.
However, because the Court finds service was not properly effectuated, it relies on Rule 60(b)(4), rather than Rule 60(b)(1), to set aside the default judgment. See Harper Macleod Solicitors v. Keaty Keaty, 260 F.3d 389, 393 (5th Cir. 2001) (upholding the district court's treatment of the defendants' insufficient service of process argument as a request for relief from judgment under Rule 60(b)(4)).
ANALYSIS
To support the default judgment against a jurisdictional challenge, Texas law requires the Plaintiff to prove the pleadings established that Melman was amenable to service, and by evidence in the record, that Melman was served in the manner required by Texas' long-arm statute, as set forth in Tex. Civ. Prac. Rem Code §§ 17.044(b), and 17.045.Section 17.044(b) of the Texas Civil Practice Remedies Code provides for substituted service on the Secretary of State of Texas for non-resident defendants doing business in Texas who do not maintain a regular place of business in Texas, provided that the relevant proceeding arises out of business done in Texas. The Plaintiff alleges that Melman has done business in Texas by committing a tort, in whole or in part, in this state.
See Tex. Civ. Prac. Rem. Code Ann. § 17.044(b) (West 1997).
See Tex. Civ. Prac. Rem. Code Ann. § 17.042 (West 1997); Valdez v. Kreso, Inc., 144 F. Supp.2d 663, 668 (N.D. Tex. 2001). Melman also argues that the Secretary of State was not the proper recipient of service of process because Melman did not commit a tort in Texas. As stated by Melman, "[t]he purpose of raising this argument in this Reply Brief is not to ask the court to dismiss on the merits. Rather, the purpose is to prove the default judgment is void due to improper service of process through the Secretary of State of Texas." Def.'s Reply at 3. The Plaintiff alleged, in his Original Petition, that Melman was a non-resident who committed torts in the state of Texas, namely fraudulently representing himself as being eligible to be married and fraudulently concealing his common law marriage. The Plaintiff argues these acts, if true, make Melman amenable to service of process under Texas' long-arm statute. See South Mill Mushrooms Sales v. Weenick, 851 S.W.2d 346, 348 (Tex.App.-Dallas 1993, writ denied). Currently pending are Melman's Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(2) or, In the Alternative, Motion for Summary Judgment, and the Plaintiff's Motion for Continuance of Defendant's Motion to Dismiss or, In the Alternative, Motion for Summary Judgment, to allow for Further Discovery of jurisdictional facts to establish personal jurisdiction. Because the Court finds service of process improper, the issue of whether Melman was doing business in Texas such that this Court has personal jurisdiction over him will be determined in the disposition of the Defendant's Motion to Dismiss.
F For service to be proper under the statute, the Plaintiff had to strictly comply with the notice requirements of § 17.045(a):
If the Secretary of State is served with duplicate copies of process for a nonresident, he shall require a statement of the name and address of the nonresident's home or home office and shall immediately mail a copy of the process to the nonresident.
Id. at § 17.045(a) (emphasis added).
The Plaintiff correctly states that Melman's time in which to answer was triggered by service on the Secretary of State. The defendant must answer on or before 10:00 a.m. on the Monday following the expiration of twenty days from this date of service. Here, it is undisputed that the Secretary of State was served with process on August 30, 2001. Under Tex. R. Civ. P. 99, therefore, Melman's answer was due on or before 10:00 a.m. on September 24, 2001.
See Whitney, 500 S.W.2d at 96; Bonewitz v. Bonewitz, 726 S.W.2d 227, 230 (Tex.App.-Austin 1987, writ ref'd n.r.e.).
See Tex. R. Civ. P. 99.
Melman also argues that the Default Judgment was entered on the docket of the County Court after the case was removed. However, the Default Judgment became effective once it was "rendered;" that is, when the Court officially announced, either in writing or in open court, its decision on the matter. See S A Restaurant Corp. v. Leal, 892 S.W.2d 855, 857 (Tex. 1995). Here, this occurred when the Judgment was signed, on the morning of October 1, 2001, not when it was entered on the docket in the afternoon the same day. In re Barber, 982 S.W.2d 364, 367 (Tex. 1998).
It is undisputed, however, that the Secretary of State waited eleven days before mailing the citation and petition to Melman. Melman argues this eleven day delay violated the Secretary of State's duty to "immediately" mail a copy of the papers to Melman. The Plaintiff urges that the case of Bonewitz v. Bonewitz is controlling. There, the Court found a five day delay (including three business days) in transmitting the papers did not violate the Secretary of State's duty to forward process immediately. In this instance, eleven days, six of which were business days, passed before the Secretary of State forwarded the citation and Petition to Melman on September 10, 2001. Further, Melman claims he did not receive the citation until September 14, 2001, only ten days before his answer was due. Given national events that occurred during this time frame, a delay in receipt would certainly not be unlikely.
726 S.W.2d 227, 229 (Tex.App.-Austin 1987, writ ref d n.r.e.).
See Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990) (trial court lacked jurisdiction to render a default judgment where the plaintiff failed to file an affidavit to support his motion for substituted service); McKanna v. Edgar, 388 S.W.2d 927, 929 (Tex. 1965) (trial court lacked jurisdiction where the record failed to allege that the defendant had neither a registered business nor an agent in Texas); Verges v. Lomas Nettleton Fin. Corp., 642 S.W.2d 820, 821 (Tex.App.-Dallas, no writ) (failure to comply with the address provision of the substituted service statute rendered default judgment void); Royal Surplus Lines Ins. Co. v. Samaria Baptist Church, 840 S.W.2d 382, 383 (Tex. 1992) ("a typographical error in the forwarding address is grounds to set aside a default judgment based on substituted service").
As stated by the Texas Supreme Court, "[f]or well over a century the rule has been firmly established that a default judgment cannot withstand direct attack by a defendant who complains that he was not served in strict compliance with applicable requirements." Here, the Court finds that the Secretary's failure to immediately forward the citation cut the Plaintiff's answer time in half and failed to satisfy the statutory basis for obtaining a default.
Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990) (emphasis added). See also Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884, 886 (Tex. 1985) (per curiam) ("[t]here are no presumptions in favor of a valid issuance, service, and return of citation in the face of a [direct] attack on a default judgment").
This decision accords with recent Fifth Circuit precedent. In Harper Macleod Solicitors v. Keaty Keaty, the Fifth Circuit upheld a finding by the district court that service on the Secretary of State of Texas was defective. There, the plaintiff provided the Secretary with a former, rather than current, address for certain partnership defendants and made a typographical error in the suite number in the address for certain individual defendants. The Court found actual notice of citation by such defendants was of no consequence. The default judgment was void under Fed.R.Civ.P. 60(b)(4) for lack of proper effectuation of service in accordance with Texas' long-arm statute.
260 F.3d 389, 397 (5th Cir. 2001).
An overlay to the strictness with which the Court must approach the technical requirements of service of process when a default judgment is challenged, is this Circuit's general aversion to default judgments. As the Fifth Circuit recently stated, "[f]ederal courts should not be agnostic with respect to the entry of default judgments, which are `generally disfavored in the law' and thus `should not be granted on the claim, without more, that the defendant had failed to meet a procedural time requirement.'"
See Bludworth Bond Shipyard, Inc. v. M/V Caribbean Wind, 841 F.2d 646, 649 (5th Cir. 1988).
See Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000) ("mere delay does not alone constitute prejudice"); Lindsey v. Prive Corp., 161 F.3d 886, 892 (5th Cir. 1998); United States v. One Parcel Real Property, 763 F.2d 181, 183 (5th Cir. 1985) ("modern federal procedure favors trials on the merits"); Azzopardi v. Ocean Drilling Exploration Co., 742 F.2d 890, 895 (5th Cir. 1984) (finding that "[u]nless it appears that no injustice results from the default, relief should be granted" and setting aside a default judgment where the defendant acted immediately to rectify its mistake); Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 403 (5th Cir. 1981) (noting that Rule 60(b) should be "applied most liberally to judgments in default").
See Lacy, 227 F.3d at 292 (citing Mason Hanger-Silas Mason Co. v. Metal Trades Council, 726 F.2d 166, 168 (5th Cir. 1984)).
The Court concludes that the Default Judgment is void under Fed.R.Civ.P. 60(b)(4). The Court, therefore sets aside the Default Judgment entered by the state court.