Service Provisions Of Texas Estates Code Do Not Only Apply In Estate Proceedings
June 4, 2020
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.
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Court Affirms Default Judgment Against A Foreign Corporate Fiduciary Because Service Was Proper Under The Texas Estates Code
In United States Bank Nat’l Ass’n v. Moss, U.S. Bank (USB) sought to vacate a default judgment in an underlying suit involving title to real property through a bill of review based on allegedly improper service under the Texas Estates Code. No. 05-19-00223-CV, 2020 Tex. App. LEXIS 4030 (Tex. App.—Dallas May 21, 2020, no pet. history). In the underlying case, a home owner sued the lender, who was assigned the deed of trust as a trustee, alleging that the lender’s claims were barred by the statute of limitations. After the trial court entered a default judgment for homeowner, the lender filed a collateral bill of review action to set it aside, claiming that service was not appropriate. The trial court granted summary judgment for the homeowner, and the lender appealed.
The court of appeals first discussed service of process under the Texas Estates Code and the Texas Civil Practice and Remedies 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 “may be appointed by will, deed, agreement, declaration, indenture, court order or decree, or otherwise and may serve in this state in any fiduciary capacity, including as: trustee of a personal or corporate trust.” Tex. Est. Code § 505.003(a). 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.” Bank of N.Y. v. Chesapeake 34771 Land Trust, 456 S.W.3d 628, 635 (Tex. App.—El Paso 2015, pet. denied); see also Bank of N.Y. Mellon v. NSL Prop. Holdings, LLC, No. 02-17-00465-CV, 2018 WL 3153540, at *5 (Tex. App.—Fort Worth 2018 no pet.) (mem.op). 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). USB’s status as a foreign financial institution is irrelevant to the statute’s application. See Bank of N.Y. Mellon v. Redbud 115 Land Tr., 452 S.W.3d 868, 871 (Tex. App.—Dallas 2014, pet. denied) (nothing in § 17.028 limits its application to Texas financial institutions).
Id. The court of appeals held that these two statutes 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.” Id. The court then held that the lender was properly served by the secretary of state and was negligent in not keeping its designee for receiving process updated.
Finally, the court held against the lender on three issues: it held that the plaintiff’s pleading was sufficient to support service under the Texas Estates Code, service on the lender’s registered agent (the Texas Secretary of State) was appropriate, and the Whitney Certificate from the Secretary of State was sufficient to show proper service. The court affirmed the trial court’s summary judgment for the homeowner.
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Leeannwatson
July 3, 2020 at 8:25 am
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