Crown Bay Management, LLC D/B/A Lakeshore Village Apartments v. Surface Works, Inc. D/B/A Surface Connection and Wells Fargo Bank, N.A. ( 2022 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-21-00025-CV
___________________________
CROWN BAY MANAGEMENT, LLC D/B/A LAKESHORE VILLAGE
APARTMENTS, Appellant
V.
SURFACE WORKS, INC. D/B/A SURFACE CONNECTION AND WELLS
FARGO BANK, N.A., Appellees
On Appeal from County Court at Law No. 2
Tarrant County, Texas
Trial Court No. 2020-002577-2
Before Bassel, Wallach, and Walker, JJ.
Memorandum Opinion by Justice Walker
MEMORANDUM OPINION
In this garnishment action, we are asked to determine whether the trial court
that entered the underlying default judgment had personal jurisdiction over a Georgia
company. We conclude that because the record surrounding the entry of the default
judgment affirmatively revealed a jurisdictional defect, the resulting garnishment
judgment founded on the default judgment must be reversed.
I. BACKGROUND
A. DEFAULT JUDGMENT
Appellee Surface Works, Inc. d/b/a Surface Connection (a Texas corporation)
filed a suit on a sworn account, a quantum meruit claim, and a breach of contract
claim against appellant Crown Bay Management d/b/a Lakeshore Village Apartments
(a Georgia company) and LVA Holdings d/b/a Lakeshore Village Apartments (a
South Carolina company) in Tarrant County, Texas. Surface Works alleged that it had
contractually sold and provided resurfacing products to Crown Bay and LVA to be
used at LVA’s South Carolina apartments, which Crown Bay managed. Crown Bay
and LVA had allegedly failed to pay Surface Works approximately $20,000 under the
contract. Because Crown Bay and LVA did not have a registered agent for service in
Texas, Surface Works served them through the Texas Secretary of State, who then
sent the citations to Crown Bay’s address in Georgia and to LVA’s address in South
Carolina. See Tex. Bus. Orgs. Code Ann. §§ 5.251–.254; Tex. Civ. Prac. & Rem. Code
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Ann. §§ 17.044–.045. When neither answered the suit, Surface Works successfully
sought a default judgment. See Tex. R. Civ. P. 239, 241.
B. GARNISHMENT JUDGMENT
Seven months later, Surface Works filed an application for writ of garnishment
against Crown Bay’s and LVA’s checking accounts with appellee Wells Fargo Bank,
N.A. See Tex. R. Civ. P. 658. The trial court clerk issued the writ of garnishment
directed to the garnishee—Wells Fargo. See Tex. R. Civ. P. 659. Wells Fargo
answered and stated that it was withholding the judgment amount from Crown Bay’s
account, which contained $81,693.33.1 See Tex. R. Civ. P. 665.
On the same day that Wells Fargo answered the writ, Crown Bay and LVA
filed a declaratory-judgment action in Georgia against Surface Works and Wells Fargo,
seeking a declaration that they had not owed any amounts on the account and a
permanent injunction of any collection efforts. They also raised a breach-of-contract
claim based on their vendor agreement with Surface Works. The Georgia trial court
entered an ex parte temporary restraining order that restrained Wells Fargo from
freezing the funds. But after a hearing, the Georgia court denied Crown Bay and
LVA’s motion for a preliminary injunction, concluding that they had not shown
irreparable harm, a likelihood of success on the merits of their case, or the absence of
any other available remedy.
1
Although LVA had a Wells Fargo account, it contained insufficient funds to
satisfy the judgment—$4,032.36.
3
Surface Works then moved for judgment on its writ. See Tex. R. Civ. P. 668.
Crown Bay filed a petition to intervene and a motion to dissolve the writ of
garnishment, arguing that because the trial court had not had sufficient personal
jurisdiction over it to enter the default judgment, the judgment was void and therefore
could not be the basis for a garnishment judgment. See Tex. R. Civ. P. 664a. Notably,
Crown Bay did not attempt to directly attack the default judgment through a restricted
appeal or a bill of review. See generally Tex. R. App. P. 26.1(c) (setting six-month
deadline to directly attack a judgment in a restricted appeal); Tex. R. Civ. P. 329b(f)
(providing for direct attack on judgment through equitable bill of review after plenary
power has expired); PNS Stores, Inc. v. Rivera, 379 S.W.3d 267, 275 (Tex. 2012)
(characterizing bill of review as direct attack on default judgment); Garcia v. Ennis,
554 S.W.3d 209, 213–16 (Tex. App.—Fort Worth 2018, no pet.) (discussing bill of
review used as direct challenge to default judgment allegedly entered without proper
service of citation on defendant).
After an evidentiary hearing, the trial court denied Crown Bay’s motion to
dissolve the writ of garnishment and granted Surface Works’ motion for judgment,
ordering that Surface Works could recover the default-judgment amount from Wells
Fargo. See Tex. R. Civ. P. 668. The trial court also entered findings of fact and
conclusions of law that Crown Bay had minimum contacts with Texas sufficient for
the trial court to have exercised personal jurisdiction and to have entered the default
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judgment. Thus, the trial court concluded that at the time the writ of garnishment
was issued, Surface Works had a valid judgment against Crown Bay.
II. COLLATERAL ATTACK: WAS THE DEFAULT JUDGMENT VOID?
On appeal, Crown Bay argues that the trial court erred by entering judgment on
the writ of garnishment because the default judgment, upon which the writ was based,
was void for a lack of personal jurisdiction based on Crown Bay’s lack of minimum
contacts in Texas. In short, Crown Bay is collaterally attacking the default judgment.
See PNS Stores, 379 S.W.3d at 272.
A. REVIEW PARAMETERS
A judgment is void and may be collaterally attacked at any time when “the
court rendering judgment had no jurisdiction of the parties or property, no
jurisdiction of the subject matter, no jurisdiction to enter the particular judgment, or
no capacity to act.” Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 863 (Tex. 2010); see
also Fleming v. Seeligson, 57 Tex. 524, 531 (1881) (noting sole issue in collateral attack is
whether judgment was void). If a personal-jurisdiction defect implicates due process,
the judgment will be void and cannot be used to support a writ of garnishment. See
PNS Stores, 379 S.W.3d at 272; Kelly v. Gibbs, 19 S.W. 563, 563 (Tex. 1892) (op. on
reh’g); Amato v. Hernandez, 981 S.W.2d 947, 950 (Tex. App.—Houston [1st Dist.]
1998, pet. denied) (op. on reh’g). But if a personal-jurisdictional defect does not
implicate due process, e.g., there was a lack of proper service of process, the judgment
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is merely voidable and is not subject to a collateral attack. See Joiner v. Vasquez,
632 S.W.2d 755, 757 (Tex. App.—Dallas 1981, no pet.).
In a collateral attack of an allegedly void judgment, the judgment is presumed
valid unless the record affirmatively reveals a jurisdictional defect. PNS Stores,
379 S.W.3d at 273. This presumption extends to the fact that “the parties have been
properly brought into court.” State Mortg. Corp. v. Ludwig, 48 S.W.2d 950, 954 (Tex.
1932). We may not consider extrinsic evidence in determining the affirmative
presence of a jurisdictional defect. See York v. State, 373 S.W.3d 32, 41 (Tex. 2012);
White v. White, 179 S.W.2d 503, 504–05 (Tex. [Comm’n Op.] 1944); Levy v. Roper,
256 S.W. 251, 253 (Tex. 1923) (quoting Crawford v. McDonald, 33 S.W. 325, 328 (Tex.
1895)); Stockyards Nat’l Bank v. Presnall, 194 S.W. 384, 384 (Tex. 1917); see also PNS
Stores, 379 S.W.3d at 273; In re Blankenship, 392 S.W.3d 249, 257 (Tex. App.—San
Antonio 2012, no pet.).
B. PERSONAL JURISDICTION
Crown Bay bases its personal-jurisdiction argument on evidence it largely
adduced at the trial court’s hearing on its motion to dissolve the writ and on Surface
Works’ motion to render judgment on the writ, specifically: (1) Crown Bay’s corporate
counsel’s testimony at the hearing that Crown Bay is not registered to do business in
Texas and does not conduct any business in Texas; (2) Surface Works’ credit
manager’s testimony at the hearing that she called and emailed Crown Bay and LVA
from Texas to attempt to collect the monies due and that their orders had been either
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called in or emailed to Surface Works in Texas; (3) the evidence at the hearing
showing that the only contact with Texas was Crown Bay’s contracting with a Texas
resident—Surface Works; and (4) Surface Works’ failure to allege jurisdictional facts
in its original suit.
As we explained, Crown Bay must establish that the default judgment was void
based on the record as it stood at the time the default judgment was rendered.
Accordingly, any evidence adduced in Crown Bay’s collateral attack—in connection
with its postjudgment motion to dissolve the writ as an intervenor—is not considered.
See Mitchell v. Map Res., Inc., 615 S.W.3d 212, 220 (Tex. App.—El Paso 2020, pet.
pending) (plurality op.) (“[A] court may consider the entire record of the prior
proceedings, but it remains confined thereto and may not consider evidence outside
that record.”); Holloway v. Starnes, 840 S.W.2d 14, 18 (Tex. App.—Dallas 1992, writ
denied) (“In a collateral attack, extrinsic evidence may not be used to establish a lack
of jurisdiction.”); cf. In re D.L.S., No. 05-08-00173-CV, 2009 WL 1875579, at *2 (Tex.
App.—Dallas July 1, 2009, no pet.) (mem. op.) (holding because extrinsic evidence
cannot be considered, “[a] collateral attack fails if the judgment contains jurisdictional
recitals, even if other parts of the record show a lack of jurisdiction”; thus,
“jurisdictional recitals in a judgment that is regular on its face import absolute verity
and can be attacked only directly, not collaterally”).
Accordingly, we focus on the record surrounding the default judgment. To
establish a personal-jurisdictional defect sufficient to render the default judgment
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void, this record must “expose[] personal jurisdictional deficiencies as to violate due
process.” PNS Stores, 379 S.W.3d at 273. Surface Works alleged in its petition that it
was a Texas corporation; that Crown Bay had its principal place of business in
Georgia, did not maintain a registered agent in Texas, and could be served through
the Texas Secretary of State; and that all the events giving rise to Surface Works’
claims arose in Tarrant County. Surface Works also alleged that Crown Bay had
contracted with Surface Works for goods and services; Surface Works provided the
goods and services to Crown Bay between March 2, 2018, and May 24, 2019; Surface
Works timely presented its claims for payment to Crown Bay; Crown Bay failed to
pay; and all of these events occurred in Texas. The trial court clerk issued citation to
Crown Bay, and the affidavit of service shows that Crown Bay was served through the
Texas Secretary of State. The Texas Secretary of State certified that Crown Bay
received the citation on July 29, 2019.
On August 27, 2019, Surface Works moved for a default judgment after Crown
Bay failed to appear. It attached a certificate that Crown Bay’s last known mailing
address was in Georgia at the address to which the Texas Secretary of State had
previously forwarded the citation. On September 9, the trial court signed the default
judgment and found that Crown Bay “although having been duly and legally cited to
appear and answer, failed to appear and answer, and wholly made default.”
We agree with Crown Bay that this record evidence affirmatively shows a
jurisdictional defect, allowing Crown Bay to collaterally attack the default judgment in
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the subsequent garnishment proceeding. Personal jurisdiction is either general or
specific. For specific jurisdiction, a defendant must purposefully avail itself of the
privilege of conducting business in Texas, and we focus on the quality of a
defendant’s contacts with Texas as a whole. See Furtek & Assocs., L.L.C. v. Maxus
Healthcare Partners, LLC, No. 02-15-00309-CV, 2016 WL 1600850, at *4 (Tex. App.—
Fort Worth Apr. 21, 2016, no pet.) (collecting cases).
The record before the trial court when it entered the default judgment showed
that Crown Bay, a Georgia limited-liability company, had contracted with Surface
Works, a Texas corporation; that Surface Works had shipped the contracted-for
goods to LVA in South Carolina; and that Surface Works unsuccessfully sought
payment under the contract for over one year. Courts have consistently held that a
nonresident buyer who orders goods from a Texas seller, who then ships those goods
to the buyer in another state, is not subject to specific jurisdiction based on the
contract. See, e.g., U-Anchor Advert., Inc. v. Burt, 553 S.W.2d 760, 762–63 (Tex. 1977);
Gulf Coast Int’l, L.L.C. v. The Rsch. Corp. of the Univ. of Haw., 490 S.W.3d 577, 585–86
(Tex. App.—Houston [1st Dist.] 2016, pet. denied). See generally Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 478, 105 S. Ct. 2174, 2185 (1985) (“If the question is whether
an individual’s contract with an out-of-state party alone can automatically establish
sufficient minimum contacts in the other party’s home forum, we believe the answer
clearly is that it cannot.”). Surface Works’ alleged collection efforts in Texas do not
change this result. See, e.g., Furtek & Assocs., 2016 WL 1600850, at *5; Max Protetch,
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Inc. v. Herrin, 340 S.W.3d 878, 886 (Tex. App.—Houston [14th Dist.] 2011, no pet.);
Internet Advert. Grp., Inc. v. Accudata, Inc., 301 S.W.3d 383, 389–90 (Tex. App.—Dallas
2009, no pet.). And the alleged contacts with Texas certainly do not satisfy the more
demanding general-jurisdiction inquiry, which requires continuous and systematic
general business contacts with Texas.2 See, e.g., Furtek & Assocs., 2016 WL 1600850, at
*7–8.
Although we are to presume that Crown Bay was properly haled into Texas and
that the default judgment was thus valid, these presumptions fail here because the
record shows the opposite. See PNS Stores, 379 S.W.3d at 273; State Mortg., 48 S.W.2d
at 954.
III. CONCLUSION
The record before the trial court at the time the default judgment was entered
affirmatively revealed a jurisdictional defect—a lack of personal jurisdiction that
violated due process—rendering the default judgment void. Thus, the trial court
erred by denying Crown Bay’s motion to dissolve the writ in the subsequent
garnishment proceeding and by rendering a garnishment judgment founded on the
void default judgment. We reverse the trial court’s garnishment judgment and render
Even if we considered the jurisdictional evidence adduced at the hearing on
2
Crown Bay’s motion to dissolve, this evidence did not establish specific or general
jurisdiction over Crown Bay. See, e.g., U-Anchor, 553 S.W.2d at 763; Furtek & Assocs.,
2016 WL 1600850, at *5–8; TeleVentures, Inc. v. Int’l Game Tech., 12 S.W.3d 900, 908–09
(Tex. App.—Austin 2000, pet. denied).
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judgment dissolving the writ of garnishment and discharging the garnishee. See Tex.
R. App. P. 43.2(c).
/s/ Brian Walker
Brian Walker
Justice
Delivered: January 27, 2022
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