Texas Supreme Court is Currently Owned by the Banks
Texas Justices Take Up Question Of How Banks Are Served
The Texas Supreme Court will weigh in on an intermediate appellate court split over the proper way to serve process on banks designated as foreign corporate fiduciaries in lawsuits, agreeing to review U.S. Bank NA’s challenge to a no-answer default judgment allegedly caused by improper service.
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR RESIDENTIAL ASSET MORTGAGE PRODUCTS, INC., MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATES, SERIES 2005-EFC2 v. DENNIS MOSS; from Dallas County; 5th Court of Appeals District (05-19-00223-CV, ___ SW3d ___, 05-21-20)
[Note: The date and time for oral argument are yet to be determined.]
Service Provisions Of Texas Estates Code Do Not Only Apply In Estate Proceedings
JUN 4, 2020 | REPUBLISHED BY LIT: JUN 22, 2021
The Texas Estates Code, sections 505.001, et. seq., contains provisions for service on a foreign corporate fiduciary. A foreign corporate fiduciary is a corporate fiduciary that does not have its main office or a branch office in Texas. In the May 2020 opinion of U.S. Bank v. Moss, the Texas Appeals Court, Fifth District, Dallas, addressed whether service of a foreign corporate fiduciary under the Texas Estates Code applicable in Texas probate court could constitute proper service in a non-estate proceeding.
The Facts of U.S. Bank v. Moss
Moss purchased a house in Texas, which he refinanced in 2005. Moss signed a home equity deed of trust when he refinanced. USB claimed ownership of the deed of trust.
Moss sued USB in 2017 in its capacity as a foreign fiduciary corporation. Moss alleged that the deed of trust was not enforceable because the statute of limitations had expired. Moss attached USB’s foreign Corporate Fiduciary Probate Code filing appointing the Secretary of State as its registered agent and designating Kristen Strong, Corporate Counsel and Assistant Secretary, U.S. Bank National Association, as the person to whom service was to be directed.
Moss’ lawsuit was served on the Texas secretary of state. The secretary of state issued a Whitney Certificate stating: “Process was returned to this office on March 21, 2017, bearing the notation, return to sender, no such number, unable to forward.” The court granted a default judgment in favor of Moss against USB on April 5, 2017.
In June 2017 USB filed a notice to remove the action to federal court. USB argued that removal was timely because USB had changed its registered agent to CT Corporation before Moss attempted service. The federal court granted Moss’ motion to remand. After remand, the Texas state court determined that it lacked jurisdiction to consider the validity of the default judgment.
USB filed an independent bill of review seeking to set aside the default. Both parties moved for summary judgment.
Moss argued, among other points, that USB irrevocably appointed the secretary of state as its agent for service of process. USB urged that Moss did not demonstrate that service was proper and failed to plead sufficient jurisdictional facts to effect service under the Texas Estates Code.
How Do You Serve A Financial Institution Under Texas Law?
The Civil Practice and Remedies Code section 17.028 is one way to serve a financial institution under Texas law.
The Civil Practice and Remedies Code provides that service may be made on a financial institution by “serving the registered agent of the financial institution; or if the financial institution does not have a registered agent, serving the president or branch manager at any office located in this state.” Tex. Civ. Prac. & Rem. Code § 17.028(b).
Service Of A Foreign Corporate Fiduciary Under The Texas Estates Code
Under the Texas Estates Code, a foreign corporate fiduciary is defined as a “corporate fiduciary that does not have its main office or a branch office in [Texas].” Tex. Est. Code § 505.001.
A foreign corporate fiduciary must appoint the secretary of state as its agent for service of process and “[s]ervice of notice or process . . . on the secretary of state as agent for a foreign corporate fiduciary has the same effect as if personal service had been had in [Texas] on the foreign corporate fiduciary.” Tex. Est. Code §§ 505.004, 505.005.
“[T]he appointment of the secretary of state as the agent to receive service of process . . . is limited to matters related to an estate in which the foreign bank or trust company is acting as an executor, administrator, trustee, guardian of the estate, or in any other fiduciary capacity.”
Does the Texas Civil Practice and Remedies Code Conflict with the Texas Estates Code?
No, the service provisions of the Texas Civil Practice and Remedies Code and the Texas Estates Code do not conflict. Both statutes permit service on the secretary of state, and § 505.005 applies specifically to foreign corporate fiduciaries when they are sued in that capacity. As succinctly stated by the Texas Appeals Court:
The Estates Code requires foreign corporate fiduciaries to appoint “the secretary of state and the secretary of state’s successors as the fiduciary’s agent for service of process,” specifically for actions related to the trust “to which the fiduciary is acting in a fiduciary capacity.” Tex. Est. Code § 505.004(a) (2). The appointment is “of indefinite duration and irrevocable.” Id.
Section 17.028’s required methods for serving a financial institution include “serving the registered agent of the financial institution.” Tex. Civ. Prac. & Rem. Code § 17.028(b). Because the financial institution appoints the secretary of state as its agent when it acts as a foreign corporate fiduciary, serving the secretary of state qualifies as “serving the registered agent of the financial institution.” Therefore, service on a foreign corporate fiduciary under the Estates Code is valid service under § 17.028.
Was Service Under The Texas Estates Code Improper Because The Underlying Proceeding Was Not Party Of An Estate Proceeding?
No. Section 505.004(a)(2) of the Texas Estates Code states that the appointment of the secretary of state as the fiduciary’s agent applies to any action or proceeding “relating to a trust, estate, fund, or other matter within this state with respect to which the fiduciary is acting in a fiduciary capacity…”
If the statute were to be construed to apply only to estate proceedings, the language applying the statute to “other matter[s]” would be rendered meaningless.
The Court concluded that valid service on a financial institution servicing as a foreign corporate fiduciary under the Texas Estates Code is valid service under section 17.028 of the Texas Civil Practice and Remedies Code.
Bio of Ken Harter, Attorney for Dennis Moss
Ken received his degree in Rhetoric from the University of California, Berkeley, in 1976, and graduated with his Juris Doctor decree, Cum Laude from the University of San Diego, where he received the “Book Award” for excellence in scholarship in the filed of Constitutional Law.
During his final year, Ken interned at the office of the Municipal Attorney of Anchorage, Alaska, where he tried a number of cases.
After graduating from law school, Ken passed the California Bar and then moved to Dallas, where he joined the Texas Bar in 1980.
During his first stint in Dallas, Ken tried several cases in federal and state courts, including complex civil matters, federal conspiracy cases, and felonies. In addition, Ken handled several appeals in both state and federal courts.
In 1985 Ken took a temporary leave from the law and operated a business in Santa Barbara, California, where he raised his three children.
Then, after serving for a short time as Vice President of a bank holding company, Ken opened his firm again in January 2008.
Since then, Ken has continued his litigation practice, representing people in a wide array of cases, including family, probate, criminal, and bankruptcy.
The largest practice area for his firm is mortgage litigation. Ken has handled hundreds of cases against major national and international banks defending against attempts at foreclosing properties.
Ken’s broad experience in the business, banking, and legal worlds make him uniquely able to assist his clients in resolving their problems.