Winnie Stacey Alwazzan v. Isa Ali Alwazzan ( 2018 )

Opinion issued December 6, 2018
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-16-00589-CV
———————————
WINNIE STACEY ALWAZZAN, Appellant
V.
ISA ALI ALWAZZAN AND INTERNATIONAL AGENCIES CO., LTD.,
Appellees
On Appeal from the 306th District Court
Galveston County, Texas
Trial Court Case No. 13-FD-0848
DISSENTING OPINION
This case involves four divorce actions between the parties to the same marriage
filed consecutively in three different counties. I agree with the majority opinion that
petitioner Winnie Stacey Alwazzan (Winnie) failed to satisfy the Family Code’s
statutory residency requirement for maintaining a divorce action against her husband
Isa Ali Alwazzan (Isa) and a Bahrani company owned in part by Isa’s family,
International Agencies Co., Ltd. (IACL), in Galveston County; thus, the trial court
correctly dismissed the underlying Galveston County divorce action on that basis. I
also agree with the majority opinion that evidence supported the trial court’s sanctions
award against Winnie.
However, failure to establish residency is not a jurisdictional issue. I would hold
that the Harris County district court had both subject-matter jurisdiction and personal
jurisdiction over all the parties, that the Harris County divorce was final, and that
subject-matter jurisdiction not only did not attach in Galveston County but could not
attach, and therefore that the Galveston County court correctly entered judgment
dismissing the case for lack of jurisdiction. I would transfer this case to Harris County
for entry of the decree.
The majority opinion, by contrast, reverses both of the Galveston County court’s
jurisdictional holdings. In the majority’s opinion, the trial court did have subject-
matter jurisdiction over the divorce action and the issue of the court’s personal
jurisdiction over IACL was never reached and remains pending in Galveston County.
Accordingly, it holds that the trial court erred both by granting Isa’s plea to the
jurisdiction on the basis of lack of subject-matter jurisdiction and by finding that it
lacked personal jurisdiction over both Isa and IACL.
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I disagree on all these matters. I believe the majority opinion inaccurately
represents the proceedings and record below, and that the opinion is internally
inconsistent and incompatible with the facts of the case and the law. Therefore, I agree
with the majority opinion only insofar as it holds that dismissal was proper on statutory
grounds and affirms the sanctions award against Winnie, which remained pending
after dismissal of the action on jurisdictional grounds and was supported by evidence
before the Galveston County court.
In my view, the majority errs in holding that the Galveston County trial court
properly granted Isa’s plea to the jurisdiction based on Winnie’s failure to meet the
statutory residency requirement, which is a non-jurisdictional requirement, as the
majority acknowledges. It further errs in holding subject-matter jurisdiction still
inherently remained in the Galveston County court, requiring only that Winnie
establish residency there at some point. And it errs in leaving pending in that court
IACL’s special appearance and bill of review. The majority opinion and judgment thus
violate Texas Rule of Appellate Procedure 47.1, which requires the court of appeals to
hand down a written opinion that is as brief as practicable but that addresses every
issue raised and necessary to final disposition of the appeal. See TEX. R. APP. P. 47.1.
The majority makes other mistakes. It states in its fact section that because
Winnie objected to the trial court’s hearing IACL’s bill of review, pending in the same
court in a separately-filed action under the pendent jurisdiction afforded by the filing
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of Winnie’s action in Galveston County, and because that bill of review had a separate
cause number, the Galveston County court did not hear the bill of review. Yet the
record shows on its face that the Galveston County court did hear the bill of review.
The majority also states that IACL’s special appearance was not heard and is not
pending before this court in this appeal, even though (1) IACL filed a special
appearance both in the underlying action and in the bill of review; (2) IACL’s
appearance at the July 19, 2016 hearing on Isa’s plea to the jurisdiction was expressly
made subject to its special appearance, as was expressly acknowledged in the trial
court’s dismissal order; and (3) the trial court, in fact, heard and sustained the special
appearance and found the in rem order entered against IACL void and sanctionable
precisely because the trial court lacked personal jurisdiction over IACL as well as
subject-matter jurisdiction over the underlying Galveston County action.
Both of the Galveston County court’s July 21, 2016 Orders entered following
the July 19 hearing and now on appeal—its “Order Granting Isa Ali Alwazzan’s Plea
to the Jurisdiction” and its separate “Order Vacating May 6, 2016 Order for Judgment
in Rem Subject to Co-Respondent’s [IACL’s] Special Appearance”—reflect a record
different from the record as represented by the majority and support an understanding
different from the majority’s as to what transpired in the July 19 hearing. The trial
court’s rulings are based on facts the majority fails to credit that support jurisdictional
rulings the majority fails to make.
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The Galveston County trial court’s “Order Granting Isa Ali Alwazzan’s Plea to
the Jurisdiction” states that, “after considering the motions, the law, the evidence
submitted in the Motions, including the Declaration of Isa Alwazzan, the evidence
submitted at the hearing, and the arguments of counsel,” the court determined that Isa’s
Plea to the Jurisdiction should be granted because the court “lacked both subject matter
jurisdiction over the subject matter of this divorce action and personal jurisdiction of
the Respondents Isa Alwazzan and International Agencies Co. Ltd.” Because of these
jurisdictional rulings, the trial court did not reach the issues in Isa’s Motion for New
Trial. The trial court sustained the Plea to the Jurisdiction and held that it had no
jurisdiction to hear the divorce filed in Galveston County “or any of the motions,
orders and ancillary matters filed thereafter (including [but] not limited to the Turnover
and Appointment of Receiver Order and any and all actions related to a Receiver
and/or levy or other attachment of assets, property and/or funds)” related to the default
judgments taken against Isa and IACL. It ordered that the final decree of divorce
entered in Galveston County in June 2014 was “void and vacated,” dissolved the
receivership of IACL it had created by previous order, and ordered that “all other
judgments, orders and matters related to this cause are void, a nullity, of no effect,
vacated and not enforceable.”
The trial court’s “Order Vacating May 6, 2016 Order for Judgment in Rem
Subject to Co-Respondent’s Special Appearance” stated that, as a result of the July 19
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hearing and the various filings the court considered during the hearing—including
Isa’s plea to the jurisdiction and IACL’s bill of review—the court found that “the
Petitioner [Winnie] never had jurisdiction to commence this action.” The Order also
reflected that the court ruled that “the action be dismissed, the June 2014 judgment be
vacated, and that all subsequent supplemental orders be vacated,” including the
November 6, 2015 order for turnover and appointment of receiver for IACL and “the
May 6, 2016 Order which had granted the Receiver Judgment in Rem of funds that
had been levied from HSBC Bank[.]” The trial court vacated the May 6, 2016 Order
for Judgment In Rem and ordered HSBC Bank to release IACL’s funds restrained by
the receiver’s levy.
After obtaining dismissal of the Galveston County action and vacatur of the
court’s prior orders, Isa and IACL pursued sanctions against Winnie and her attorneys,
in the form of attorney’s fees, pursuant to Civil Practice and Remedies Code Chapter
10, Texas Rule of Civil Procedure 13, and the trial court’s inherent jurisdiction. Isa
and IACL claimed that Winnie and her attorneys violated Rule 13 and Chapter 10 by
“fil[ing] groundless pleadings in bad faith seeking to create jurisdiction where none
existed, alleging that separate property was community property, and seeking an
improper third attempt at a judgment against IACL and Isa[.]” Following a three-day
evidentiary hearing on the motion for sanctions in September 2016, the trial court
signed an order on October 25, 2016, awarding monetary sanctions, in the form of
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attorney’s fees, against Winnie only. At Winnie’s request, the court entered findings
of fact and conclusions of law.
For the reasons set forth below, I would hold that neither subject-matter
jurisdiction nor personal jurisdiction over either Isa or IACL ever properly attached in
Galveston County—and could never properly attach there under the established facts
of this case and the law—and that all actions of the Galveston County court, other than
its rulings on jurisdictional and related issues, its vacating of its prior orders, and its
sanctions award against Winnie, are null and void.
I would further hold that the non-suit obtained by Winnie in Harris County was
improper and that all claims pertinent to that divorce action were finally adjudicated
by the associate judge of that court. Therefore, the final order of the associate judge
constitutes the decree of divorce between Isa and Winnie, effective as of the day it was
signed and entered by the associate judge. Accordingly, all subsequent claims other
than post-judgment motions filed in the Harris County district court should have been
dismissed with prejudice.
I would affirm the order of the Galveston County court dismissing this action
on jurisdictional grounds, granting sanctions against Winnie, and vacating all other
orders. I would order this case transferred back to Harris County district court for entry
of the final decree of divorce in accordance with this opinion.
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I. Background
The complex material facts are restated below for clarity and completeness.
Isa, a citizen of the Kingdom of Bahrain, moved to Texas in the 1980s to attend
college, where he met Winnie. They married in 1985. Isa ultimately became an
American citizen, but he maintained his Bahraini citizenship. Isa and Winnie had three
children: a daughter born in 1985, a son born in 1995, and another son born in 1997.
Isa and Winnie lived with their children in Montgomery County, Texas.
A. The Montgomery County Divorce Actions
In 2011, Isa and Winnie separated. Winnie first filed for divorce in Montgomery
County in May 2011. She non-suited this action in July 2011 and re-filed for divorce
in the same county one week later. Four months after that, Winnie and Isa signed a
mediated settlement agreement (MSA). The MSA covered issues relating to
conservatorship, geographic restrictions on residency of the minor children, child
support, and division of the parties’ marital property. On the signature page, the MSA
cautioned the parties that it was “not subject to revocation,” that the “the Mediator will
only report to the Court that we have agreed on settlement terms,” and that “it is [the
parties’] responsibility to file this MSA with the Court.” Isa alleged that his attorney
informed him that she had filed the MSA with the Montgomery County court.
The MSA provided that Winnie’s attorney would prepare a final decree of
divorce by December 1, 2011. Winnie’s attorney forwarded the proposed final decree
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to Isa’s attorney on December 22, 2011. In partial compliance with the MSA, Isa
deposited $168,000.00 with the First Community Bank in Tomball as a lump-sum
child support payment. However, the Montgomery County court never signed a
divorce decree. Instead, Winnie retained new counsel, and, on February 7, 2012, her
new counsel filed a non-suit of the Montgomery County action.
B. The Harris County Divorce Action
On February 7, 2012, the same day that she filed her non-suit in the Montgomery
County action, Winnie filed an “Original Petition” for divorce in Harris County district
court. The petition did not mention the Montgomery County divorce action or the fact
that it had resolved all issues between the parties. Instead, Winnie averred that there
were “no court-ordered conservatorships . . . or other court ordered relationships”
concerning the couple’s two minor children.
In April 2012, Isa returned to Bahrain. Isa appeared in the Harris County divorce
action by retained counsel and filed a counter-petition against Winnie alleging that her
claims were barred by res judicata. Winnie also added IACL, Isa’s family’s company
in Bahrain, to the divorce suit, claiming that she had a community property interest in
the company.
Following a hearing on March 6, 2012, the associate judge of the Harris County
court signed temporary orders appointing Isa and Winnie joint managing conservators
of their minor sons K.A. and E.A. The orders provided, “These Temporary Orders
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shall continue in force until the signing of the Final Decree of Divorce or until further
order of this Court.” On April 27, 2012, the associate judge signed additional orders,
including an order that Isa pay Winnie’s expert fees and expenses and that he pay
“reasonable interim attorney’s fees and expenses” to Winnie’s attorneys. On August
1, 2012, the associate judge issued additional temporary orders ordering that Isa’s
income be withheld to pay child support. Each of these orders recited that the orders
remained in full force and effect until the final decree of divorce was signed.
The Temporary Orders were subsequently partially modified in the associate
judge’s December 2012 Report.
On December 10, 2012, the Harris County case was tried before the district
court’s associate judge. IACL had not filed an answer and was not represented by
counsel at trial. Winnie averred that IACL had been served through the Texas
Secretary of State’s Office and would be in default. The court observed that the citation
lacked the signed return of service on IACL required by the Texas Rules of Civil
Procedure and that this meant “you don’t have good service.” The court then took
judicial notice that the citation “indicates that service was made on P.O. Box 1207,
Austin, Texas, Secretary of State Third Amended Petition for Divorce.”
Isa did not personally appear at trial, but he was represented by his retained
counsel. Because Isa was out of the country and not present, the associate judge ruled
that he was in default, struck Isa’s pleadings, and did not permit his counsel to raise
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his res judicata affirmative defense that all issues had been resolved in the MSA filed
in Montgomery County. Winnie’s counsel called her as the sole witness at trial.
At the end of the trial, counsel for both parties informed the associate judge that
they had agreed to waive a de novo hearing to the referring district court judge.
Winnie’s counsel stated, “[E]verybody is waiving appeal to the referring Court . . . so
that we’re trying it once.” Isa’s counsel responded, “That is correct, Judge. That is our
agreement.” The associate judge rejected Winnie’s counsel’s request that he
pronounce the divorce, explaining that only the district court judge could grant the
divorce by signing the decree.
Following trial, the associate judge issued a written report, addressing issues
that included conservatorship of the children and division of the community estate.
Winnie was awarded sole managing conservatorship and Isa possessory
conservatorship of the children. In the report, the associate judge awarded IACL’s
“assets and liabilities” to Isa. The associate judge awarded Winnie $3.5 million against
Isa but did not award her monetary relief against IACL.
Winnie then filed a motion “for additional findings.” In the motion she included
a request that the associate judge reconsider his finding of no liability against IACL.
She asked the associate judge to award a money judgment against IACL and Isa,
jointly and severally. Winnie asserted that she had shown at trial that Isa “hides his
money within [IACL] and withdraws it at his whim” and that IACL “is a sham to
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protect [Isa] from his creditors.” The associate judge denied Winnie’s motion on
February 21, 2013.
On April 10, 2013, Winnie filed a notice of non-suit in the Harris County action,
as she had in the Montgomery County action. The notice was served on Isa’s retained
counsel. The presiding judge of the Harris County district court signed an “Order on
Notice of Non-Suit” on April 12, 2013. The order stated that “the case is dismissed.”
C. The Galveston County Divorce Action
1. The April 10, 2013 Galveston County Divorce Action
On April 10, 2013—the same day that she non-suited her Harris County divorce
action following trial with its agreed waiver of a de novo hearing before the district
court—Winnie filed the suit underlying this appeal by filing an “Original Petition for
Divorce” in the Galveston County district court. Winnie named both Isa and IACL as
respondents. In her petition, she represented that she was “a resident of this
[Galveston] county or will have resided in [Galveston County] by final trial for the
preceding 90-day period.” Winnie stated that she and Isa had two minor children “who
are not under the continuing jurisdiction of any other court.” She also alleged that there
were “no court-ordered conservatorships . . . or other court-ordered relationships
affecting the children,” even though the Harris County action had not yet been
dismissed by order of the Harris County district court at that time. The petition made
no mention of either the Montgomery County divorce action or the Harris County
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divorce action.
In her affidavit in support of her original petition in the Galveston County
action, Winnie swore that she had “no idea” where Isa was and was unable to locate
him, despite her due diligence. She asserted that citation by publication would be the
appropriate means of serving Isa. She also asserted that IACL could be served through
the Texas Secretary of State, although she made no allegation that IACL was doing
business in Texas. She asserted only that IACL was a foreign corporation located at
“131 Cel-Khalefa Avenue, Manama, Kingdom of Bahrain.”
Winnie filed an amended petition in the Galveston County divorce action on
June 3, 2013. Winnie continued to seek relief from IACL in this petition. She alleged:
16. Relief from [IACL] for Fraudulent Transfer
[IACL] is a corporation established under the laws and customs of the
Kingdom of Bahrain. It is alleged to be the recipient of community funds,
interests, and/or property that was fraudulently transferred by [Isa] to
[IACL], without consideration and/or for less than reasonably equivalent
value. The purpose of the transfer was to defraud [Winnie’s] property
rights in that property and/or [Winnie’s] separate property rights in that
property, and [IACL] had notice of [Isa’s] intent to injure [Winnie’s]
rights. [Isa] has transferred and/or delivered and/or given to [IACL]
interests in the community estate.
[IACL] has further subjected itself to the jurisdiction of Texas and
furthered the villainous aims of the fraud, [waste], and emotional distress
of [Winnie] by attempting to form INTERCOL USA, LTD, CO, a
whol[ly] owned subsidiary of [IACL] formed by [Isa] to further
perpetrate scams on [Winnie’s] property rights through transfers of
property and structuring of the businesses.
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17. Sham corporation
[Isa] has disregarded the formalities of the corporation and treats the
assets and income of [IACL] as his own. By doing so, [Isa] has ignored
and disavowed the corporate veil. The assets of [IACL] should be treated
as community assets.
18. Fraud
[IACL] is alleged to have engaged in a pattern of conduct that
demonstrates a conspiracy to defraud [Winnie] of her interest in the
community estate. [IACL] has assisted and permitted [Isa] to open
businesses such as Innovative Design Concepts, Ltd., a British
Corporation . . . under the auspices of [IACL]. EXIT LONE STAR
REALTY is a Texas Corporation that was created as a subsidiary of
[IACL] in Texas to avoid the participation of [Winnie] and the
community.
Although Winnie alleged that IACL was involved in a fraudulent transfer, she
did not indicate which, if any, property had been fraudulently transferred. She did not
allege a factual basis for IACL’s liability in the divorce action. She alleged no factual
basis for finding that Isa exercised dominion and control over IACL, that IACL was
Isa’s alter ego, or that Isa managed the corporation. She alleged no facts to show that
IACL ignored its corporate form or to show that its assets could be treated as
community assets. She also failed to allege facts sufficient to establish jurisdiction
over IACL.
On June 3, 2013, Winnie filed a motion to serve Isa by publication. In her
supporting affidavit, she averred:
I have not seen my husband Isa Ali Alwazzan, since April 24, 2012. I
have no idea where he is at present. . . . [Isa] is a transient person. I have
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exercised due diligence to locate the whereabouts of [Isa] and have been
unable to do so. I have attempted to contact [Isa] at his old addresses, old
phone numbers, old friends, and hangouts. I have been unsuccessful in
finding him. [Isa] can be contacted through his company [IACL].
Although they will not tell me where he is, they can always get him a
message or money. Serving him through [IACL] would be as likely as
any other method of service to provide actual notice of this suit.
Winnie failed to inform the Galveston County court that she had been in regular
contact with Isa through her children, who spoke with him regularly by phone and had
taken several trips to visit him overseas, which were approved by Winnie in
accordance with the terms of the temporary orders in the Harris County suit. Winnie
also concealed from the Galveston County court that she communicated regularly with
Isa through email, and, although he did not respond, she knew from her children that
he was receiving and reading her emails.
The trial court granted Winnie’s motion, ordering that Winnie serve Isa “by
publishing notice in the Galveston County Daily News.” Winnie filed a return of
service, indicating that notice of the suit had been published on July 23, 2013. Winnie
made no other attempt to serve Isa in the Galveston County action.
Winnie also alleged that IACL could be served through the Texas Secretary of
State’s office. The citation and amended petition was served on the Texas Secretary
of State’s office on June 10, 2013. The Secretary of State then forwarded the amended
divorce petition and citation to an address in Bahrain that Winnie had provided.
However, the Secretary of State never returned proof to the Galveston County clerk to
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indicate whether service was made on IACL, and the record of filings with the
Secretary of State indicated that the citation was mailed to an incorrect address that
excluded a P.O. Box number: “131 Al-Khalefa Avenue, Manama, Kingdom of
Bahrain.” The certification by the Texas Secretary of State, dated September 3, 2013,
stated, “As of this date, no response has been received in this office.”
On November 7, 2013, the Galveston County court appointed an attorney ad
litem, W. David Marion, to represent Isa in his absence. Marion filed an answer on
Isa’s behalf, generally denying Winnie’s claims.
On June 10, 2014, Winnie’s counsel served a three-day “Notice of Intention to
Proceed with Default” on “each attorney of record.” The only attorney of record
besides Winnie’s attorneys was the court-appointed ad litem counsel for Isa. Neither
IACL nor Isa was given actual or constructive notice of the default trial.
2. The June 13, 2014 Galveston County Trial and Default Divorce Decree
The case was tried in the Galveston County district court before a visiting judge
on June 13, 2014. Winnie and her counsel attended trial, but neither Isa nor IACL
appeared. Isa’s appointed ad litem counsel appeared at trial on Isa’s behalf, arriving
late because of lack of notice. No counsel appeared for IACL.
Winnie was the only witness to testify at the default trial. She answered
affirmatively when asked by her counsel if, prior to filing the Galveston County action,
she had lived in Texas for at least six months and in Galveston County for at least
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ninety days. Winnie testified that Isa had left the country in 2012 with another woman
with whom he was having an affair and that Isa had cut off all funds to her. Winnie
testified that Isa had physically abused the children, including giving their youngest
son, E.A., a black eye shortly before Isa left the country.
Winnie testified that she served Isa by publication in the Galveston County
action because Isa was transient, traveling around Europe and the Middle East with no
fixed address. She stated that she tried to contact Isa through his family and through
IACL, but neither his family nor IACL would give her his address. She testified that
she had no way to contact Isa and stated that he had “cut off” communications with
her and their children. Winnie testified that E.A. had spoken to Isa via Skype, but Isa
did not tell E.A. where he was living.
Winnie testified concerning IACL and its connection to Isa’s family. She stated
that the company, which has its headquarters in Bahrain and engages in numerous
different types of businesses, was founded by Isa’s father, and ownership had later
been transferred to Isa and his two brothers after she and Isa married. She stated that,
during her marriage to Isa, IACL’s value had increased greatly, and it had built
numerous buildings in Bahrain. Although she offered no documentation concerning
the total assets of IACL or what it was worth, she testified that Isa often bragged that
IACL was worth $5 billion.
With respect to IACL’s connection to the United States, Winnie testified that
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IACL had provided all the funding for a real estate business that Isa had started on
IACL’s behalf in the United States. She also offered into evidence a “certificate of
filing” from the Texas Secretary of State’s Office for “INTERCOL USA LTD CO.,”
which, according to Winnie, was a company IACL used to conduct operations in the
Unites States. She did not provide details concerning the nature of these operations or
what actions IACL had taken or what business it had conducted in Texas. Winnie
agreed with her counsel that Isa would “bring [items] into the United States as
[IACL’s] agent and would sell stuff in the United States and likewise would buy stuff
in the United States, ship it at the request of [IACL] to sell at [IACL].”
Winnie did not testify that she had any first-hand knowledge of the affairs of
IACL or of any company it used for operation or business it conducted in Texas.
However, she characterized IACL as a corporate sham, testifying that Isa and his
family routinely disregarded IACL’s corporate form and intermingled assets with
IACL, including community property assets. She testified that, after she and Isa
separated, Isa transferred $500,000 of community funds to IACL, leaving her with
significant unpaid community debt. As a result, their martial residence, worth
$800,000, had been foreclosed upon.
Winnie’s documentary evidence included her inventory, which listed hers and
Isa’s assets and liabilities. She valued Isa’s 16.6666% ownership interest in IACL at
$666,000,000.00.
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On June 13, 2014, the visiting Galveston County judge signed a default divorce
decree, dissolving Winnie and Isa’s marriage. At the time of the decree, E.A. was
Winnie and Isa’s only minor child, and the decree appointed Winnie as E.A.’s sole
managing conservator and Isa as his possessory conservator. The decree ordered Isa
to pay child support and spousal maintenance to Winnie. The decree also awarded
Winnie a money judgment of $416,532,514.56 against Isa and IACL, jointly and
severally.1 The visiting judge made no findings of fact.
On June 15, 2014, Isa’s appointed attorney ad litem sent a letter to Isa informing
him of the default divorce decree. The letter was addressed and sent to IACL. Isa
received the letter in early August 2014. Isa remarried in 2015. Isa’s appointed counsel
did not file a motion for new trial.
3. Winnie’s October 2015 Motion for Turnover and Appointment of a
Receiver for IACL, the Receiver’s Motion for Judgment In Rem
Against IACL, and IACL’s May 2, 2016 Special Appearance
More than a year after the visiting Galveston County judge signed the default
divorce decree, in October 2015, Winnie filed an “Application for Turnover after
Judgment and Appointment of Receiver.” She alleged that she had been unable to
collect the $416,532,514.56 money judgment from Isa and IACL, and she requested
that the trial court appoint a receiver to assist in the collection of the judgment. On
1
The Galveston County visiting judge signed a reformed decree of divorce on June 19,
2014. This decree specifically awarded Winnie real property in Hockley, Texas, and
a condo in Galveston, and the decree divested Isa of his interest in these properties.
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November 6, 2015, the trial court—a different judge than the visiting judge who signed
the default divorce decree in June 2014—granted Winnie’s application, appointed a
receiver, and authorized the receiver “to take possession of all non-exempt property”
in Isa’s or IACL’s “actual or constructive possession.” The court required the receiver
to post a bond of only $100.
In December 2015, the receiver issued a “Revised Court Levy” to HSBC Bank,
requesting the bank to intercept any wire transactions to IACL or Isa and send any
intercepted funds to the receiver. In response to the levy, HSBC Bank suspended a
series of wire transfers that were either originated by IACL or for which IACL was
the intended beneficiary.
On April 20, 2016, the receiver filed a motion for judgment in rem, requesting
that the court order HSBC Bank to place approximately $1,500,000 into the registry
of the court for eventual distribution to Winnie. A hearing was set for May 4, 2016, on
this motion.
On May 2, 2016, two days before the hearing on the receiver’s motion, IACL
filed a special appearance, which it amended on May 4. IACL challenged the trial
court’s personal jurisdiction over it, arguing that the trial court lacked personal
jurisdiction because IACL did not have sufficient minimum contacts with Texas.
IACL also asserted that Winnie failed to serve it with process, stating, “IACL has
never accepted or consented to service and it appears that the Secretary of State has no
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recorded proof of service.”
4. IACL’s May 4, 2016 Plea to the Jurisdiction
On May 4, 2016, IACL filed a “Motion to Set Aside Default Judgment for Lack
of Personal Jurisdiction and Subject Matter Jurisdiction and for Limited Discovery
Related to the Issues Raised for Vacatur,” subject to its special appearance. It sought
to set aside the default judgment signed on June 13, 2014, for lack of personal
jurisdiction over IACL because IACL did not have sufficient minimum contacts with
Texas and Winnie failed to serve IACL with process. IACL also argued that the
Galveston County court lacked subject-matter jurisdiction over IACL as a foreign
corporation because its amenity to jurisdiction had not been shown by the pleading of
jurisdictional facts in Winnie’s divorce petitions, such as facts relevant to a finding
that IACL was Isa’s alter ego, and could not be shown. IACL sought discovery of
jurisdictional facts and facts related to service of process.
The trial court signed an order denying IACL’s special appearance on May 5,
2016, without hearing the merits of the application. That same day, the trial court
signed an order granting the receiver’s motion for an in rem judgment, ordering HSBC
Bank to deposit over $3.6 million in funds originating from IACL into the court’s
registry to be distributed to the receiver and Winnie.
5. IACL’s May 11, 2016 Petition for Writ of Mandamus to this Court
On May 11, 2016, IACL filed a petition for writ of mandamus in this Court and
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a motion to stay the Galveston County court’s May 5, 2016 order enforcing the June
2014 default judgment, complaining that the trial court had not held a hearing on its
special appearance and asserting that the trial court did not have personal jurisdiction
over IACL and that the court had failed to hear and decide its special appearance. In
response to an emergency motion filed by IACL, this Court stayed the trial court’s
order requiring HSBC Bank to deposit funds originating from IACL into the registry
of the Galveston County court.
6. Isa’s June 13, 2016 Plea to the Jurisdiction and Motion for New Trial
While the mandamus petition was pending in this Court, on June 13, 2016, Isa
filed a motion for new trial and plea to the jurisdiction in the Galveston County court,
using newly retained counsel.
In his plea to the jurisdiction, Isa asserted that the Galveston County court
lacked subject-matter jurisdiction over this suit because, when suit was filed, the Harris
County court had continuing, exclusive jurisdiction over the matter. Isa also argued
that the rulings in the Harris County action had a res judicata effect, barring the
Galveston County court from considering Winnie’s claims. Isa further argued that the
parties had signed a binding MSA in the Montgomery County action which precluded
the Galveston County court from issuing contradictory rulings or orders. Finally, Isa
argued that the Galveston County court could not render a decree of divorce because
neither party had been a resident of Galveston County for the ninety days preceding
22
the filing of the Galveston County divorce action, as required by the Texas Family
Code section 6.301. See TEX. FAM. CODE ANN. § 6.301 (West 2006).
Isa’s motion for new trial, supported by his declaration, sought to vacate and
dismiss the June 2014 default divorce decree. See TEX. R. CIV. P. 329(a) (authorizing
trial court to grant motion for new trial filed within two years of judgment, if judgment
was rendered on service by publication and defendant did not appear in person or by
attorney of his own selection). Isa argued that a new trial was proper because:
(1) service of process by publication was invalid; (2) Winnie had not satisfied the
mandatory residency requirement of section 6.301; (3) the Harris County associate
judge had conducted a trial on the merits and entered a ruling, and thus res judicata
barred re-litigation of Winnie’s claims; (4) the MSA entered into in the Montgomery
County action remained enforceable; and (5) Winnie’s actions of filing the Galveston
County divorce action, after previously filing and non-suiting the same claims in both
Montgomery County and Harris County, constituted “blatant forum shopping.”
7. IACL’s June 30, 2016 Bill of Review
On June 30, 2016, IACL filed a separate bill-of-review action in the Galveston
County court, also seeking to vacate and dismiss the June 2014 default judgment
against it in this case. This action was filed under a different trial court cause number
from Winnie’s Galveston County divorce action. In its bill-of-review petition, IACL
asserted that the Galveston County court’s June 2014 divorce decree in this case should
23
be vacated because the Galveston County court lacked both subject-matter and
personal jurisdiction to render the decree, Winnie did not properly serve IACL with
process, and res judicata barred re-litigation of claims already decided by the Harris
County court.
Along with numerous other exhibits, IACL attached the affidavit of Abdul
Rahman Ali Alwazzan, the older brother of Isa. In it, Abdul Rahman averred that he
was one of two Directors of IACL and had been “for more than forty-four years.” He
averred that IACL is a Bahraini corporation “duly formed under the laws of The
Kingdom of Bahrain” in 1957, half of which is owned by the Alwazzan family. In
early 1972, his and Isa’s father died and half of the company passed equally to his
three sons. Abdul Rahman further averred that Isa moved to Texas in the early 1980s
and lived there until 2012; that Isa had never served as a manager, director, or officer
of IACL; and that he had not been employed by IACL. Although Isa used the name
“Intercol” for several of his businesses in Texas, these businesses sold different
products in a different market in a line of business—real estate brokerage—in which
IACL had never been involved.
Abdul Rahman further averred, “IACL did not do any business in Texas at any
time during the marriage between Isa and Winnie Stacey,” did not ship goods to Texas,
never had an interest in real property in Texas, never owned a subsidiary in Texas,
“and was not in any way doing business in Texas in any capacity, since the 1970’s.”
24
Finally, he averred that, according to the face of the certification of service, the Texas
Secretary of State sent notice to the wrong address that was inadequate for service to
reach IACL and that he “did not learn of the Galveston case until after the Receiver
had been appointed” in November 2015, “and [the Receiver] started with the intent of
disrupting IACL’s business.”
8. The Galveston County Court’s July 19, 2016 Hearing and Ultimate
Dismissal of Winnie’s Galveston County Divorce Action for Lack of
Subject-Matter and Personal Jurisdiction
The Galveston County court held a hearing on Isa’s motion for new trial and
plea to the jurisdiction on July 19, 2016. The court determined to proceed on Isa’s
motions, after which it stated it would “look at proceeding” on IACL’s bill of review.
Testimony elicited by Isa’s counsel established that, at the time of the June 2014
default hearing, Winnie worked for Tomball Ford. She had, in connection with a
request for a background check before starting employment, listed her current and past
addresses as in Magnolia, Texas, in Montgomery County, and then in Houston, in
Harris County; but she never had provided an address in Galveston County.
The ad litem attorney appointed by the court to represent Isa in the Galveston
County divorce action, David Marion, also testified. He testified, in response to
questions from Isa’s counsel, that he had been unable to contact Isa because he was
never given any information other than that Winnie could not find him. Nevertheless,
he appeared at trial in June 2014 on Isa’s behalf and attempted to represent his client.
25
He was unaware at that time that Isa and Winnie had previously signed an MSA, but
he testified that, had he known that the parties had settled all of their claims, he would
have advised the Galveston County court of that and would have asked that the current
case be abated or dismissed. He was also unaware of the trial on the merits before the
associate judge in Harris County, which would also have caused him to bring the
Harris County action to the attention of the Galveston County court and to seek that
this current case be dismissed or abated. He also testified that he was given three days’
notice of Winnie’s intention to take a default judgment in June 2014, rather than the
standard forty-five days’ notice of a first setting, but he did appear for part of the
default hearing. He did not know that at the time of the hearing Winnie was receiving
her mail in Tomball, Texas.
On cross examination by Winnie’s counsel, Marion admitted that he did not
send any discovery to find out facts from Winnie. He did not have any contact with
IACL, and he did not seek Isa’s address from IACL, but only sought Isa’s address
online and failed to find it.
On questioning from IACL’s attorney, Marion admitted that IACL did not
appear at the trial. Marion further testified that, after his appointment, he was made
aware that service had been authorized on IACL by serving anyone eighteen years of
age or older at a certain address in Bahrain. He knew that Isa had been authorized to
be served by publication in a Galveston newspaper or at the same address as IACL in
26
Bahrain, but he had not seen evidence that service was ever effected on IACL or on
Isa. However, after the June 2014 default trial, Marion sent notice to Isa at the Bahrain
address, and Isa spoke with him and referred to that letter at a later time. Marion also
testified that, while he did not know of the non-suit taken in the Harris County case,
he did know that it is not possible under Texas Rule of Civil Procedure 162 to take a
non-suit after a trial on the merits. Marion did not file a motion for new trial or any
appellate proceeding on Isa’s behalf following the default hearing; he only signed the
divorce decree as to form and substance. Marion first spoke to Isa in the summer of
2014 after the default hearing, and they subsequently exchanged a few telephone calls
and emails. Isa retained Marion to file a brief in support of Isa’s motion for new trial
filed by Isa’s subsequently retained counsel. Marion appeared at the July 19, 2016
hearing as a witness, not as retained counsel.
Winnie testified on examination by IACL’s attorney that she had signed the
MSA and that she had represented to the Galveston County court by affidavit that the
MSA was never filed in Montgomery County. She admitted that, in fact, it was filed
in Montgomery County. She also admitted that, after the MSA was signed, she non-
suited the Montgomery County divorce action and the same day filed a new petition
for divorce in Harris County. She also admitted that when she applied for work at
Tomball Ford in 2015 she did not give her employer any address other than Houston
in Harris County and Magnolia in Montgomery County. She likewise admitted that
27
she gave testimony in the Harris County divorce action before the associate judge. She
also admitted that she worked for her counsel of record, Daniel Lemkuil, during 2014.
Winnie testified that she did not remember asking the Harris County associate
judge to award her $666 million against Isa and IACL or the judge declining to do so.
She did recall non-suiting her Harris County divorce action and filing a new petition
for divorce in Galveston County on the same day, April 10, 2013. Winnie also admitted
that while she was claiming she did not know where Isa was or have any way to reach
him at the time the Harris County action was tried and non-suited and the Galveston
County action filed,2 she had sent numerous emails to Isa, she had signed the passport
application permitting her minor son to visit Isa in London the month before the default
hearing in June 2014, and she had emailed Isa where to pick their son up in baggage
claim when he landed, but she did not notify the court that she knew where Isa was.
Instead, she affirmatively represented to the Galveston County court at the default
hearing that her children had only Skyped once with Isa and had gotten a few emails.
She was unable to point to any documentation showing receipt of service by either Isa
or IACL at the address in Bahrain. Isa offered evidence to show that Winnie had not
used due diligence to locate him before claiming that she needed to serve him by
publication and she had not spoken with his court-appointed ad litem attorney.
2
Winnie admitted that her counsel provided notice of her non-suit of the Harris County
action to Isa’s retained counsel in that action, but she never sent a copy of the
Galveston County action to that counsel.
28
The parties also presented evidence regarding whether Winnie had been a
resident of Galveston County for the preceding ninety days when she filed the
Galveston County action on April 10, 2013, as required by Family Code section 6.301.
In both her original and amended petitions, Winnie had represented that she was “a
resident of [Galveston] [C]ounty or will have resided in this county by final trial for
the preceding ninety-day period.” At the June 2014 default trial, Winnie had answered
affirmatively when her counsel asked whether she had “lived in Galveston County 90
days prior to filing suit.”
At the July 2016 hearing, Winnie testified that she had moved to Galveston
County in February 2013, less than ninety days before filing suit in April 2013. In
response to questioning from her attorney, Winnie testified that she had moved from
Montgomery County to Galveston, where she spent “a majority of the time,” although
she also had a house in Hockley, in Harris County. Winnie’s counsel pointed out that
she had filed her amended petition in June 2013, more than ninety days after the date
Winnie testified she had moved to Galveston.
Isa presented evidence at the hearing to show that Winnie had never established
residency in Galveston County. In his declaration supporting his motion for new trial,
Isa stated that Winnie told him, in an email dated July 24, 2013, that she was only
going to Galveston on the weekends, and that she was still living in their “old area.”
Isa also called as a witness Linda McCann, custodian of records for Tomball Ford. Isa
29
offered business records from Tomball Ford, including Winnie’s employment
application from January 2015, in which she listed her address as a Houston address.
As part of the application process, Winnie had also filled out an authorization for a
background check, which asked her to list her “addresses within the past seven years.”
She listed a Magnolia, Texas address and indicated that she had lived there from 2001
until 2010. She also listed a Houston address on the background check, but not a
Galveston address.
At the hearing, Winnie was asked why she had not listed a Galveston address
on the background check if she had resided there in 2013. She responded, “I didn’t see
this within the past seven years [instruction] or I would have put my other addresses.”
Winnie also stated that she had not provided the Galveston address for the background
check because she “didn’t have a Galveston address” because she could not receive
mail at her Galveston condo. She agreed that by signing the authorization she was
representing to her employer that her answers were true.
Winnie also testified that she had filed a non-suit of her Harris County action
and filed a new suit in Galveston County after the Harris County associate judge failed
to award her damages against IACL because she could not afford to appeal. She
admitted that Isa had signed the Montgomery County MSA. She also admitted that her
testimony at the default hearing that IACL did business in the United States was based
on the shipment of a Mazda vehicle to her son from IACL as a gift paid for by Isa.
30
Winnie admitted, in response to questioning, that Isa inherited his shares in the
family business, IACL, as a child, before his marriage to Winnie. But when Winnie’s
lawyers attempted to elicit her testimony that IACL was formed in 2002, during the
marriage, as evidence that Isa’s ownership interest in IACL was community property,
the court refused to allow further pursuit of Isa’s and Winnie’s property interests other
than to acknowledge that there were both separate and community property interests
at stake, and it refused to admit evidence on this issue.
Finally, IACL’s counsel read into the record from the transcript of the trial
before the Harris County associate judge the statement of Winnie’s counsel that
“everybody is waiving appeal to the referring court [the Harris County district court]
to you so that we’re trying it once. That was my understanding.” And he read the
response of Isa’s counsel, “That is correct, Judge. That is our agreement.” Winnie
testified that she could not remember that.
At the end of the hearing, the trial court remarked, “What a mess,” and recited
numerous problems with the case, including active pleadings by Isa on file in the
Montgomery County action when it was non-suited by Winnie so that it was “a court
of continuing jurisdiction in the Montgomery County case” when the Harris County
action was filed; that Harris County was “a court of continuing jurisdiction when the
Galveston County case was filed”; that the non-suit in the Harris County action was
“not a nonsuit” because Winnie “had put on her case and rested,” leaving that case
31
active; that Winnie failed to use due diligence in locating Isa and IACL in the
Galveston County action; that the Galveston County court had granted a default
judgment without required notice when there was an answer on file by Isa’s court-
appointed attorney ad litem, which required “a regular final hearing with a 45-day
notice”; and that the Galveston County lacked venue because Winnie testified she had
moved to Galveston in February 2013 and filed her suit on April 10, 2013, which was
less than the ninety days required to establish venue.
The trial court commented, “[T]his is probably one of the most egregious
examples of forum shopping out there. I’ve never read a case this bad. . . . I am going
to grant the plea to the jurisdiction and dismiss the case.” The court asked the parties
to draft appropriate orders, including an order “rescinding [its] previous order
regarding the money” and vacating its orders appointing the receiver and ordering
money placed in the registry of the court. The trial court refused to sever the cases
against Isa and IACL at Winnie’s counsel’s request. The court indicated a belief that
IACL’s separately-filed bill of review would be mooted by the final orders in the
divorce action.
On July 21, 2016, the trial court signed an “Order Granting Isa Ali Alwazzan’s
Plea to the Jurisdiction,” providing in relevant part:
The Court held a hearing on both motions [Isa’s plea to the jurisdiction
and motion for new trial] on July 19, 2016. . . .
32
After considering the motions, the law, the evidence submitted in the
Motions, including the Declaration of Isa Alwazzan, the evidence
submitted at the hearing, and the arguments of counsel, the Court has
determined that the Plea to the Jurisdiction should be SUSTAINED
because—from the inception of this divorce proceeding to the present—
the Court lacked both subject matter jurisdiction over the subject matter
of this divorce action and personal jurisdiction of the Respondents Isa
Alwazzan and International Agencies Co. Ltd. Because of the ruling on
jurisdiction, the Court did not reach the issues on the Motion for New
Trial.
It is therefore, ORDERED, that Isa Alwazzan’s Plea to the Jurisdiction is
SUSTAINED and that the court has no jurisdiction to hear the divorce
filed on April 10, 2013 or any of the motions, orders and ancillary matters
filed thereafter (including [but] not limited to the Turnover and
Appointment of Receiver Order and any and all actions related to a
Receiver and/or levy or other attachment of assets, property and/or
funds).
It is further ORDERED that the July 19, 2014 Reformed Final Decree of
Divorce is void and vacated.
It is further ORDERED that the Receivership that was created by Order
dated November 8, 2015, is hereby dissolved.
It is further ORDERED, that all other judgments, orders and matters
related to this cause are void, a nullity, of no effect, vacated and not
enforceable.
It is further ORDERED, that the Receiver is discharged from his duties
and all monies and property collected by him shall be released, or
returned to the proper party forthwith. . . .
That same day, the trial court also signed its “Order Vacating May 6, 2016 Order
for Judgment In Rem.” That order stated,
On the 19th Day of July, 2016 day came on to be heard Respondent
Isa Al Wazzan’s Plea to the Jurisdiction.
33
The Receiver appeared in person. The Petitioner Winnie Stac[e]y
Alwazzan, appeared in person and by counsel. The Respondent Isa
Alwazzan appeared by counsel. The co-respondent, Internal Agencies
Co. Ltd. (“IACL”) appeared through counsel.
After the Court’s review of the respondent Isa Alwazzan’s Plea to
the Jurisdiction, and briefs filed by the Petitioner and Receiver in
opposition, and by co-respondent IACL in support of its Bill of Review
in a separate but related action, captioned as International Agencies Co.
Ltd. v. Alwazzan, et al., 16 FD1958, arguments by the parties and
evidence entered during the hearing, including testimony of two
witnesses, the Court found that the Petitioner never had jurisdiction to
commence this action, and ruling that the action be dismissed, the June
2014 judgment be vacated, and that all subsequent supplemental orders
be vacated, including the November 8, 2015 Order for Turnover and
Appointment of Receiver and the May 6, 2016 Order which had granted
the Receiver Judgment in Rem of funds that had been levied from HSBC
Bank USA N.A. (“HSBC”) and restrained in the amount of $3,693,091.42
(the “Restrained Funds”). THE COURT FINDS that the May 6, 2016
Order for Judgment In Rem is hereby vacated, and the full amount of
restrained funds via the Receiver’s Levy, be immediately released from
the creditor process initiated by the Receiver.
IT IS ORDERED that the receivership is dissolved . . . and that
HSBC shall immediately release the Restrained Funds.
Based on the trial court’s July 21 orders vacating the June 2014 default divorce
decree, dismissing the Galveston County divorce action, dismissing the receiver, and
vacating the receiver’s judgment in rem, this Court dismissed as moot IACL’s
previously filed mandamus petition regarding these matters. In re Int’l Agencies Co.,
Ltd., No. 01–16–00383–CV, 2016 WL 6462199, at *1 (Tex. App.—Houston [1st
Dist.] Nov. 1, 2016, orig. proceeding) (mem. op.).
34
9. Isa’s and IACL’s Motion for Sanctions and the September 2016
Hearing
After obtaining dismissal of the Galveston County action and vacatur of the
court’s prior orders, Isa and IACL pursued sanctions against Winnie and her attorneys.
They requested that the trial court impose sanctions, in the form of attorney’s fees,
pursuant to Civil Practice and Remedies Code Chapter 10, Texas Rule of Civil
Procedure 13, and the trial court’s inherent power. Isa and IACL argued that Winnie
and her attorneys filed suit in Galveston County “to seek a different result against
IACL” after they “failed in their earlier attempt [to recover against IACL] in Harris
County.” They argued that sanctions were appropriate because Winnie and her
attorneys had made “intentional misrepresentations of fact to this Court [to] falsely
create jurisdiction and deny [Isa and IACL] notice of the Galveston County” suit.
Isa and IACL argued that Winnie and her attorneys violated Rule 13 and
Chapter 10 by “fil[ing] groundless pleadings in bad faith seeking to create jurisdiction
where none existed, alleging that separate property was community property, and
seeking an improper third attempt at a judgment against IACL and Isa[.]” Isa and IACL
pointed out that Winnie and her attorneys had: (1) falsely alleged and maintained that
Winnie had resided in Galveston County for the required ninety-day period; (2) falsely
35
asserted that Winnie had “no idea where Isa was” to obtain service by publication;
(3) falsely asserted that there were no prior court orders of conservatorship affecting
the children; (4) asserted that Isa had fraudulently transferred community assets to
IACL with no supporting evidence; and (5) concealed the Montgomery County MSA
and the Harris County divorce action from the Galveston County court.
The trial court conducted a three-day evidentiary hearing on the motion for
sanctions in September 2016. Winnie and her attorneys testified at the hearing, and
each of them had separate counsel. In October 2016, the trial court signed an order
awarding monetary sanctions, in the form of attorney’s fees, against Winnie only.3 The
trial court did not award sanctions against her attorneys. Winnie requested that the trial
court issue findings of fact and conclusions of law regarding the sanctions, which the
trial court did in November 2016.
In addition to its findings and conclusions with respect to its previous orders,
the court found facts supporting sanctions pursuant to Chapter 10 and Rule 13. The
court found that the original petition for divorce in Galveston County was filed by
Winnie’s counsel, Jared Woodfill, on her behalf on April 10, 2013, after consultation
3
The trial court imposed $50,000 in sanctions against Winnie on behalf of Isa and
$100,000 in sanctions on behalf of IACL. The court imposed an additional $25,000 in
sanctions against Winnie on behalf of Isa and $25,000 on behalf of IACL if she
continued to litigate her claims in the trial court; $85,000 in sanctions on behalf of
ISA and $85,000 on behalf of IACL if Winnie appealed to the court of appeals; and
$35,000 in sanctions on behalf of Isa and $35,000 on behalf of IACL if Winnie filed
a petition for review with the Texas Supreme Court.
36
with Winnie’s additional counsel Daniel Lemkuil. The court found that the filing of
the suit constituted “inappropriate forum shopping, a violation of the rules of Texas
procedure, and violation of the duties of candor and obligations imposed under
[Chapter] 10 and Rule 13, for Winnie Stacey, and her attorneys Daniel Lemkuil and
Jared Woodfill, . . . to file the Original Galveston Petition in this Court on April 10,
2013, and to proceed in this Court” for a number of reasons.
The facts found by the trial court in support of sanctions included:
(1) the original filing of divorce in Montgomery County that was later
reasserted in Harris County and then again in Galveston County, even
though the MSA reached during the pendency of the Montgomery County
action was intended to and did resolve all issues between the parties;
(2) the subsequent filing of the Harris County action and trial to a final
decision before the associate judge on December 21, 2012, the parties’
agreed waiver of the right to a de novo hearing before the referring district
court, Winnie’s request for “additional rulings” after the associate judge
awarded Winnie $3.5 million against Isa but did not find liability on the
part of IACL, and Winnie’s filing of a non-suit of the final decision on
the merits and commencement of a new case in Galveston County “as an
alternative to appealing the Harris County decision” without
“precedential or statutory authority” to non-suit the decision on the
merits;
(3) the filing of the original Galveston County divorce petition “for the
improper purpose of attempting to get a judgment against IACL, after the
Harris County court had adjudicated the same claims against the same
parties in a final disposition on the merits,” in a petition that “included
false or misleading statements,” the filing of a false affidavit signed by
Winnie stating that she did not know how to contact Isa even though she
knew Isa had been represented by counsel in the Harris County action,
which was non-suited the same day she filed her petition in Galveston
County; and
(4) the provision of false testimony regarding Winnie’s residence at
37
the time of filing the Galveston County action, the concealment of the
final trial on the merits in Harris County and a decision by the associate
judge, false pleadings regarding IACL “for the improper purpose of
falsely invoking Jurisdiction over IACL in Texas,” and the failure to
attempt to give either Isa or IACL actual notice of the suit at any time
prior to the June 2014 default hearing with the knowledge that neither Isa
nor IACL would have reasonable notice to appear.
The court also entered conclusions of law finding sanctionable behavior based on these
facts.
II. Winnie’s Appeal and the Majority’s Rulings
Winnie now appeals, raising three issues. In her first two issues, Winnie
contends that the trial court erred in “dismissing the case on a plea to the jurisdiction,”
asserting that no jurisdictional grounds were presented to the trial court to support
vacatur of the June 2014 divorce decree and dismissal of the case. The majority
agrees with Winnie but affirms dismissal of the Galveston County action anyway on
statutory grounds that did not form the basis of the trial court’s dismissal of the suit,
namely that Winnie failed to establish residency in Galveston County ninety days
prior to filing her divorce action there. I agree that Winnie failed to satisfy the ninety-
day residency requirement for filing suit for divorce, but I do not find that issue
dispositive.
In her third issue, Winnie challenges the sanctions award. The majority affirms
that as well. I agree with the majority’s holding on this issue.
I would affirm the Galveston County court’s judgment dismissing the case on
38
Isa’s plea to the jurisdiction for lack of both subject-matter jurisdiction and personal
jurisdiction, granting sanctions, and vacating all other orders of that court. Rather than
attempting to refute the majority’s reasoning and conclusions on each of the issues, I
have set out below what I consider to be a correct analysis of the law on the facts of
the case and the correct disposition.
III. Plea to the Jurisdiction
A. Standard of Review of a Plea to the Jurisdiction
A plea to the jurisdiction seeks dismissal of a case based on lack of subject-
matter jurisdiction. Harris Cty. v. Sykes, 136 S.W.3d 635, 638 (Tex. 2004); see also
City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex. 2013) (per curiam) (stating that
subject-matter jurisdiction is essential to court’s power to decide case). A trial court
must decide at the earliest opportunity whether it has the constitutional or statutory
authority to decide a case before allowing the case to proceed. Tex. Dept. of Parks &
Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). “As a general proposition,
before a court may address the merits of any case, the court must have jurisdiction over
the party or the property subject to the suit, jurisdiction over the subject matter,
jurisdiction to enter the particular judgment, and capacity to act as a court.” State Bar
of Tex. v. Gomez, 891 S.W.2d 243, 245 (Tex. 1994).
B. Subject-Matter Jurisdiction
1. Standard of Review of Subject-Matter Jurisdiction
39
Whether a court has subject-matter jurisdiction is a question of law. Miranda,
133 S.W.3d at 226; Tex. Nat. Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849,
855 (Tex. 2002). Whether a pleader has alleged facts that affirmatively demonstrate the
trial court’s subject-matter jurisdiction is a question of law which we review de novo.
Miranda, 133 S.W.3d at 226; see City of Dallas v. Carbajal, 324 S.W.3d 537, 538
(Tex. 2010) (per curiam) (stating that whether court has subject-matter jurisdiction is
question of law that we review de novo). Likewise, whether undisputed evidence of
jurisdictional facts establishes a trial court’s jurisdiction is a question of law. Miranda,
133 S.W.3d at 226. In some cases, disputed evidence of jurisdictional facts that
implicate the merits of the case may require resolution by the fact-finder. Id.
When a plea to the jurisdiction challenges the pleadings, we determine whether
the pleader has alleged facts that affirmatively demonstrate the trial court’s jurisdiction
to hear the case. Id.; Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446
(Tex. 1993). We construe the pleading liberally in favor of the plaintiff and look to the
pleader’s intent. Miranda, 133 S.W.3d at 226. If the pleadings do not contain facts
sufficient to affirmatively demonstrate the trial court’s jurisdiction, but do not
affirmatively demonstrate that the defects are incurable, the plaintiff should be allowed
the opportunity to amend. Id. at 226–27. However, if the pleadings affirmatively negate
the existence of jurisdiction, the plea to the jurisdiction may be granted without
affording the plaintiff the opportunity to amend. Id. at 227.
40
If a plea to the jurisdiction challenges the existence of jurisdictional facts, we
consider relevant evidence submitted by the parties when it is necessary to resolve the
jurisdictional issues. Id. When the jurisdictional challenge implicates the merits of the
plaintiff’s cause of action and the plea to the jurisdiction includes evidence, the trial
court must examine the relevant evidence to determine whether a fact question exists.
Id. If the evidence creates a fact question concerning the jurisdiction issue, the trial
court cannot grant the plea to the jurisdiction. Id. at 227–28. “However, if the relevant
evidence is undisputed or fails to raise a fact question on the jurisdictional issue, the
trial court rules on the plea to the jurisdiction as a matter of law.” Id. at 228. “[T]his
standard generally mirrors that of a summary judgment under Texas Rule of Civil
Procedure 166a(c).” Id. When reviewing a plea to the jurisdiction in which the pleading
requirements have been met and evidence that implicates the merits of the case has
been submitted in support of the plea, we take as true all evidence favorable to the
nonmovant and indulge every reasonable inference and resolve any doubts in favor of
the nonmovant. Id. The scheduling of a hearing on a plea to the jurisdiction is left to
the sound discretion of the trial court, “which is in the best position to evaluate the
appropriate time frame for hearing a plea in any particular case.” Id. at 229.
2. Whether the Galveston County Court Had Subject-Matter Jurisdiction
The trial court granted Isa’s plea to the jurisdiction, ruling, among other things,
that the court lacked subject-matter jurisdiction over the Galveston County divorce
41
action. Winnie appealed the trial court’s dismissal of the Galveston County divorce
action. On appeal, Isa argues that the trial court’s dismissal was proper, contending
that the Galveston County court did not obtain jurisdiction because (1) subject-matter
jurisdiction never properly attached in Galveston County due to Winnie’s failure to
establish residency in Galveston County and (2) Winnie could never establish
jurisdiction over her claims in Galveston County as the Harris County court had made
a final ruling on the merits when the associate judge issued his written report following
a bench trial and the parties agreed to waive appeal to the referring district court;
therefore, Winnie’s subsequent non-suit of the Harris County action resulted in a
dismissal with prejudice of all claims decided in that action, leaving only the final
decree of divorce to be entered by the Harris County court. I agree with Isa.
a. Failure to satisfy statutory residency requirements for divorce
suit
Family Code section 6.301 provides that “[a] suit for divorce may not be
maintained in this state unless at the time the suit is filed either the petitioner or the
respondent has been . . . (1) a domiciliary of this state for the preceding six-month
period; and (2) a resident of the county in which the suit is filed for the preceding 90-
day period.” TEX. FAM. CODE ANN. § 6.301. Although this section is not jurisdictional,
it controls a petitioner’s right to sue for a divorce, is mandatory, and cannot be waived.
In re Milton, 420 S.W.3d 245, 252 (Tex. App.—Houston [1st Dist.] 2013, orig.
42
proceeding); In re Green, 385 S.W.3d 665, 669 (Tex. App.—San Antonio 2012, orig.
proceeding). Typically, when neither the petitioner nor the respondent meets the
residency requirements, the trial court abates the suit so that one of them can meet the
requirements. In re Milton, 420 S.W.3d at 252. However, when the record indicates
that neither party intends to reside in the county of suit, abatement will not cure a
failure to meet the residency requirements, and the proper remedy is dismissal. Id.; In
re Green, 385 S.W.3d at 670.
Here, it is undisputed that Isa did not reside in Galveston County at the time suit
was filed and did not intend to reside in that county. And the trial court found, among
other things, that “[o]n July 19, 2016, Winnie Stacey testified that she did not reside
in Galveston County 90 days before filing the April 10, 2013 petition,” that “there is
no credible evidence that Winnie Stacey was ever a resident of Galveston in 2013 and
2014,” and that “Winnie Stacey and her counsel changed the typical pleading language
as a basis for venue in divorce petitions to obscure the fact that she had no basis for
venue in Galveston” at the time of filing. This Court may set aside a finding of fact
only if the finding is so contrary to the overwhelming weight of the evidence as to be
clearly wrong or unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam)
(stating such with regard to jury findings); Ferrara v. Nutt, 555 S.W.3d 227, 235 (Tex.
App.—Houston [1st Dist.] 2018, no pet.) (stating that courts review legal and factual
sufficiency of evidence supporting trial court’s fact findings by using same standards
43
to review jury verdicts). Here, that is not the case.
I would hold that jurisdiction never attached in the Galveston County trial court
and that court lacked subject-matter jurisdiction to address the merits of the Galveston
County divorce action. See Gomez, 891 S.W.2d at 245 (“As a general proposition,
before a court may address the merits of any case, the court must have jurisdiction
over the party or the property subject to the suit, jurisdiction over the subject matter,
jurisdiction to enter the particular judgment, and capacity to act as a court.”). However,
because the statutory residency requirement for filing a suit for divorce is not
jurisdictional, subject-matter jurisdiction theoretically could attach over Winnie’s
divorce action, reviving all of Winnie’s claims against both IACL and Isa and forcing
them to defend themselves again on issues of personal and subject-matter jurisdiction
and venue already brought before the court in this action, all other things being equal.
Thus, a ruling that jurisdiction over this divorce suit failed to attach because the parties
failed to meet statutory requirements for filing a divorce action in Galveston County
is not enough by itself to dispose of all of the jurisdictional issues properly raised by
the parties and heard and addressed by the trial court or to dismiss the suit on a plea to
the jurisdiction. See Miranda, 133 S.W.3d at 226–27 (stating that when pleadings do
not affirmatively demonstrate incurable jurisdictional defect, plaintiff should be
allowed opportunity to amend, but when pleadings affirmatively negate jurisdiction,
plea to jurisdiction may be granted). Therefore, I disagree with the majority that the
44
trial court dismissed the suit on this basis, which the court did not even mention in its
order dismissing the suit on Isa’s plea to the jurisdiction.
b. Effect of improper taking of non-suit on subsequent actions
In his plea to the jurisdiction, Isa asserted, among other things, that the
Galveston County court lacked subject-matter jurisdiction over the suit because, when
suit was filed, the Harris County court had continuing, exclusive jurisdiction over the
matter and that the Harris County action had a res judicata effect, barring the Galveston
County court from considering Winnie’s claims. I agree.4
4
Isa further claimed that the trial court “lack[ed] jurisdiction to issue rulings or orders
that contradicted the parties’ binding mediated settlement agreement” they had signed
in the Montgomery County divorce action. A mediated settlement agreement is
enforceable in the same manner as any other written contract. TEX. CIV. PRAC. & REM.
CODE ANN. § 154.071(a) (West 2011). Moreover, a written settlement agreement may
be enforced as a contract even if one party withdraws consent before judgment is
entered on the agreement. Ford Motor Co. v. Castillo, 279 S.W.3d 656, 663 (Tex.
2009); Padilla v. LaFrance, 907 S.W.2d 454, 461 (Tex. 1995). Therefore, I would
hold that the mediated settlement agreement in the Montgomery County action
became valid and enforceable when it was signed by the parties and filed with the
Montgomery County trial court. However, I would conclude that Winnie breached the
agreement by her bad faith dismissal of the Montgomery County action and filing of
the same divorce action in Harris County and that her prior material breach excused
Isa’s performance under the MSA. See Mustang Pipeline Co. v. Driver Pipeline Co.,
134 S.W.3d 195, 196, 198 (Tex. 2004) (per curiam); Henry v. Masson, 333 S.W.3d
825, 835 (Tex. App.—Houston [1st Dist.] 2010, no pet.). Isa did not continue
performing under the MSA but instead retained counsel and entered an appearance in
the Harris County duplicate divorce action improperly filed by Winnie, acquiesced in
the associate judge’s issuance of temporary orders, participated through his counsel in
the trial to the associate judge, agreed to waive appeal of the associate judge’s report
to the referring judge, and opposed Winnie’s subsequent motion asking the associate
judge to modify his report to impose liability on IACL. Accordingly, both Winnie and
Isa knowingly and voluntarily waived any rights accorded to them by the MSA. I
would hold that the Montgomery County MSA does not affect the proper disposition
45
Texas Rule of Civil Procedure 162 provides that “[a]t any time before the
plaintiff has introduced all of his evidence other than rebuttal evidence, the plaintiff
may dismiss a case, or take a non-suit, which shall be entered in the minutes.” TEX. R.
CIV. P. 162; see Villafani v. Trejo, 251 S.W.3d 466, 468–69 (Tex. 2008) (“Under Texas
law, parties have an absolute right to nonsuit their own claims for relief at any time
during the litigation until they have introduced all evidence other than rebuttal
evidence at trial.”). A non-suit is “effective when it is filed.” Univ. of Tex. Med. Branch
at Galveston v. Estate of Blackmon ex rel. Shultz, 195 S.W.3d 98, 100 (Tex. 2006) (per
curiam). “If a claim is timely nonsuited, the controversy as to that claim is
extinguished, the merits become moot, and jurisdiction as to the claim is lost.” City of
Dallas v. Albert, 354 S.W.3d 368, 375 (Tex. 2011).
The Texas Supreme Court has also held, however, that a party’s right to take a
non-suit “cannot be used to disturb a court’s judgment on the merits of a claim.”
Villafani, 251 S.W.3d at 469. In Hyundai Motor Co. v. Alvarado, the Texas Supreme
Court addressed the effect of the plaintiffs’ non-suit filed after the trial court had
granted partial summary judgment in favor of the defendant on several of the plaintiffs’
claims. See 892 S.W.2d 853, 854 (Tex. 1995) (per curiam). In Alvarado, the plaintiffs,
who had been injured in a car accident, sued Hyundai in Webb County and alleged
several theories of liability. Id. Hyundai moved for partial summary judgment, arguing
of this suit.
46
that almost all of the claims were preempted by federal law, and the trial court granted
the motion. Id. The plaintiffs then non-suited their case in Webb County and filed suit
against Hyundai in Duval County, raising identical claims as in their first petition,
including the claims on which the Webb County court had granted partial summary
judgment. Id. The Webb County court signed an order of non-suit. Id. Hyundai then
requested the Webb County court modify that order, arguing that the plaintiffs could
not refile the claims on which partial summary judgment had been granted. Id. The
trial court agreed with Hyundai, entering an order stating that the claims adjudicated
by the prior summary judgment were dismissed with prejudice. Id.
In addressing whether the trial court’s summary judgment order survived the
plaintiffs’ subsequent non-suit, the Texas Supreme Court noted the general rule that
plaintiffs have the right to take a non-suit at any time until they introduce all of their
evidence other than rebuttal evidence and that a non-suit may have the effect of
vitiating earlier interlocutory orders. Id. The court then stated, however, that a trial
court’s decisions on the merits, such as summary judgment orders and partial summary
judgment orders, are not vitiated by a subsequent non-suit. Id. at 855. Noting that, in
summary judgment practice, the plaintiff need not produce any evidence, the court
reasoned that if Rule 162 governing non-suits “provided the only cut-off point after
which a plaintiff could no longer take a nonsuit,” then plaintiffs could essentially avoid
any summary judgment ruling by requesting a non-suit after the trial court ruled on the
47
summary judgment. Id.
The supreme court held, “Once a judge announces a decision that adjudicates a
claim, that claim is no longer subject to the plaintiff’s right to nonsuit. A non-suit
sought after such a judicial pronouncement results in a dismissal with prejudice as to
the issues pronounced in favor of the defendant.” Id.; see Gen. Agents Ins. Co. of Am.,
Inc. v. El Naggar, 340 S.W.3d 552, 556–57 (Tex. App.—Houston [14th Dist.] 2011,
pet. denied) (stating that court’s reasoning in Alvarado was “rooted in the doctrines of
res judicata and collateral estoppel, which ‘promote judicial efficiency, protect parties
from multiple lawsuits, and prevent inconsistent judgments by precluding the
relitigation’ of matters that have already been decided”) (quoting In re Team Rocket,
L.P., 256 S.W.3d 257, 260 (Tex. 2008) (orig. proceeding)); Curry v. Bank of Am., N.A.,
232 S.W.3d 345, 354 (Tex. App.—Dallas 2007, pet. denied) (stating that party who
has had his claims “adjudicated unsuccessfully cannot later non-suit his claims to
avoid the judgment”). The court stated, “The dismissal is with prejudice as to the issues
disposed of by the summary judgment.” See Alvarado, 892 S.W.2d at 855 (remanding
case to appellate court to consider plaintiffs’ argument that trial court erred in ruling
that most of their claims were preempted by federal law). A similar holding should be
made here.
Here, Winnie and Isa, through his former counsel, participated in a trial on the
merits before the associate judge in the Harris County action on December 10, 2012.
48
The associate judge heard testimony from Winnie, admitted exhibits into evidence,
and considered the arguments of counsel. At the end of the trial, counsel for both
Winnie and Isa informed the associate judge that they had agreed to waive a de novo
hearing to the referring district court judge. Winnie’s counsel stated on the record in
open court, “[E]verybody is waiving appeal to the referring Court . . . so that we’re
trying it once,” and Isa’s counsel responded, “That is correct, Judge. That is our
agreement.” This agreement was made on the record prior to the start of any hearing
in the referring court.
The associate judge executed his written report on December 21, 2012, entered
it on January 11, 2013, and sent it to all counsel of record. The associate judge’s report
addressed conservatorship of the then-minor children, payment of child support, and
division of the parties’ community estate. The report awarded Winnie sole managing
conservatorship and Isa possessory conservatorship of the children. Among the
property awarded to Isa, the associate judge awarded IACL “and its assets and
liabilities” to Isa. The associate judge awarded Winnie $3.5 million against Isa, but
specifically denied Winnie any recovery against IACL.
Winnie subsequently filed a request that the associate judge reconsider some of
his property awards and make “additional rulings.” In that motion, she requested that
the associate judge reconsider his findings of no liability against IACL. She asked that
a money judgment be awarded in her favor against IACL and Isa, jointly and severally.
49
Winnie asserted that Isa “hides his money within [IACL] and withdraws it at his
whim,” and she claimed that IACL “is used as a sham to protect [Isa] from his
creditors.” The associate judge denied Winnie’s request on February 21, 2013, stating
that “[t]he judgment in favor of [Winnie] against [Isa] includes consideration of the
value of [IACL].”
On April 10, 2013, Winnie filed a notice of non-suit in the Harris County action,
and on the same day she filed her original petition for divorce in the Galveston County
action. The referring district judge of the Harris County court signed an “Order on
Notice of Non-Suit” on April 12, 2013, dismissing the Harris County action.
I would apply the Texas Supreme Court’s holding in Alvarado to this case in
which a full trial on the merits was held before a Harris County associate judge; the
parties affirmatively represented to the associate judge that they did not wish to seek
a trial de novo before the referring district court; the associate judge issued a written
report that resolved issues of conservatorship and property division and that awarded
Winnie $3.5 million against Isa but denied her recovery against IACL; Winnie sought
additional rulings from the associate judge concerning, among other things, IACL’s
liability to her; and, after the associate judge declined to reconsider its rulings or make
any additional rulings, Winnie non-suited the Harris County action and filed an
identical divorce proceeding against Isa and IACL on the same day in Galveston
County.
50
I would hold that the associate judge “announce[d] a decision that
adjudicate[d]” all of Winnie’s claims, such that her claims were no longer subject to
her right to non-suit. See Alvarado, 892 S.W.2d at 855; see also TEX. FAM. CODE ANN.
§ 201.007 (West Supp. 2018) (setting out powers of associate judge, including powers
to conduct hearing, hearing evidence, make findings of fact, formulate conclusions of
law, recommend order to be rendered, and, in certain situations, render and sign final
order). The actions of Winnie and her counsel in non-suiting the Harris County action
and immediately filing an identical action in Galveston County were clearly taken to
avoid the associate judge’s rulings following a trial on the merits which, although
awarding Winnie $3.5 million against Isa, awarded her no recovery against IACL. I
would therefore hold that Winnie’s subsequent non-suit of the Harris County action
resulted in a dismissal of the action with prejudice to its refiling in another county. See
Alvarado, 892 S.W.2d at 855 (“The dismissal is with prejudice as to the issues
disposed of by the summary judgment.”).
The only remaining question is what, if anything, is left to be adjudicated in the
Harris County divorce action.
In 2007, the Texas Legislature amended Family Code section 201.007. That
section, as amended, permitted an associate judge to sign a final order including a
waiver of de novo appeal to the referring court as authorized by section 201.015 of the
Code, but it did not expressly state that the associate judge had authority to render a
51
decision. Thus, at the time of the parties’ hearing before the Harris County associate
judge, Family Code section 201.007(a)(16) allowed an associate judge to “sign a final
order that includes a waiver of the right of appeal [for a trial de novo before the
referring district court] pursuant to Section 201.015.” Act of May 25, 2007, 80th Leg.,
R.S., ch. 839, § 1, 2007 Tex. Gen. Laws 1748, 1749 (amended 2017) (current version
at TEX. FAM. CODE ANN. § 201.007(a)); see also Act of May 23, 2007, 80th Leg., R.S.,
ch. 1235, § 7, 2007 Tex. Gen. Laws 4150, 4152 (amended 2015) (current version at
TEX. FAM. CODE ANN. § 201.015(a), (g)) (providing that, after hearing before associate
judge, party may request de novo hearing before referring court, but also providing
that parties may waive right to de novo hearing).
In 2017, however, following a decision of this Court holding that under Family
Code section 201.007, as amended in June 2007, an associate judge of a family court
had the power to sign a final order but not to render a final decision,5 the Texas
Legislature again amended section 201.007 to make clear that associate judges had
had such power at all times subsequent to the addition of new subsection
201.007(a)(16) in June 2007.
Current section 201.007(e), effective September 2017, clarifies the intent of the
Legislature in amending section 201.007 in 2007. It provides, “An order signed before
5
See Gerke v. Kantara, 492 S.W.3d 791, 792–95 (Tex. App.—Houston [1st Dist.]
2016, no pet.).
52
May 1, 2017, by an associate judge under Subsection (a)(16) is a final order rendered
as of the date the order was signed.” TEX. FAM. CODE ANN. § 201.007(e).
Here, the parties agreed on the record in open court at the end of the trial before
the Harris County associate judge to waive a de novo hearing before the referring
court. The associate judge adjudicated all issues in the case but erroneously informed
the parties that only the referring court could grant the divorce by signing the decree.
The associate judge subsequently signed and filed his final report on December 21,
2012. Under section 201.007(e), that final report constituted a final order of the
referring court. See id. Winnie then filed a motion for additional findings, which the
associate judge denied on February 21, 2013. Only after failing to get a favorable
ruling on this motion did Winnie file a non-suit in the Harris County district court and
immediately file a new divorce action in Galveston County. That suit was improperly
filed.
The majority opines that the associate judge’s final report did not satisfy the
requirements of a final order under section 201.007(a)(16) and also did not contain a
written waiver of appeal to the trial court entered prior to “a hearing” before the
associate judge. I respectfully disagree. I would hold that the final report issued by the
associate judge substantially complied with the requirements of section 201.007(a)(16)
by disposing of all issues before the trial court. And I would further hold that, even if
the parties’ agreement to waive trial de novo to the referring judge did not meet the
53
technical requirements of section 201.007(a) by being entered “before the start of a
hearing,” trial de novo was waived “on the record,” as permitted by Family Code
section 201.015(g). See Act of May 23, 2007, 80th Leg., R.S., ch. 1235, § 7, 2007 Tex.
Gen. Laws 4150, 4152 (“Before the start of a hearing by an associate judge, the parties
may waive the right of a de novo hearing before the referring court in writing or on
the record.”) (emphasis added). Furthermore, the parties’ agreement to waive that de
novo hearing complied with the requirements of an agreement of counsel under Texas
Rule of Civil Procedure 11 and was therefore enforceable. See TEX. R. CIV. P. 11
(providing that no agreement between counsel will be enforced unless it is in writing,
signed, and filed with papers of court as part of record, or “unless it be made in open
court and entered of record”). Moreover, while the appellate record is silent as to
whether a hearing was held before the associate judge denied Winnie’s request for
additional findings of fact and conclusions of law in February 2013 after entering its
final report in December 2012, there is no question that both Isa and Winnie
understood the rulings of the associate judge disposing of all the issues in the case to
be final and were awaiting only the entry of a final decree of divorce on those rulings,
which the associate judge mistakenly believed only the referring court could enter,
when Winnie non-suited the entire divorce suit.
I would hold that the parties waived de novo appeal to the referring court as to
any of the issues adjudicated by the associate judge. Accordingly, the associate judge’s
54
final order constituted a final order of the referring court that became effective as of
the date of the associate judge’s final order. I would hold that subject-matter
jurisdiction never attached to this Galveston County action for divorce because of
Winnie’s failure to satisfy statutory residency requirements. And I would further hold
that subject-matter jurisdiction over the merits of this divorce suit could never properly
be established in Galveston County because of Winnie’s non-suit of her Harris County
action after the Harris County associate judge had heard the merits and rendered its
final order and post-order rulings. This non-suit was plainly designed to thwart the
referring Harris County court’s entry of a final decree of divorce incorporating the
associate judge’s final report.
I agree with the Texas Supreme Court’s ruling in Hyundai v. Alvarado requiring
dismissal with prejudice of all issues decided by the associate judge prior to improper
non-suit, preventing their refiling in another county. See Alvarado, 892 S.W.2d at 855
(“The dismissal is with prejudice as to the issues disposed of by the summary
judgment.”). Under the circumstances of this case, I would likewise dismiss with
prejudice in Galveston County all issues decided by the associate judge’s final order
in the Harris County divorce action. Concluding that the associate judge’s final order
was not final in the Harris County action because Winnie’s non-suit caused the decree
of divorce not to be signed by the referring court, I would remand the case to the
Galveston County court and direct that court to transfer the case to Harris County, the
55
county of proper jurisdiction and venue, for entry of the decree of divorce. In re Milton,
420 S.W.3d at 254 (directing trial court to transfer divorce case from county where
residency was not established to county having both jurisdiction and venue).
C. Whether the Galveston County Court Had Personal Jurisdiction over Isa
and IACL
Because I would sustain the trial court’s dismissal of this case for lack of subject-
matter jurisdiction and would remand this case for transfer to the Harris County district
court for entry of a decree of divorce incorporating the associate judge’s final order, I
would not find it necessary to address the trial court’s ruling that it lacked personal
jurisdiction over both Isa and IACL. However, even if I did not find that the Galveston
County trial court lacked subject-matter jurisdiction over this suit for divorce, I would
hold that the Galveston County court correctly ruled that it lacked personal jurisdiction
over both Isa and IACL, and I would affirm its vacatur of the default judgments against
Isa and IACL for lack of personal jurisdiction.6
1. Standard of Review of Personal Jurisdiction
Texas courts may only exercise in personam jurisdiction over nonresidents if
6
I address the issue of personal jurisdiction primarily because the majority’s
representation of the record and analysis of the applicable law on both subject-matter
and personal jurisdiction leave the issue of the proper forum in which to resolve this
case and the issue of personal jurisdiction over both litigants open for future litigation
in multiple forums, violating Rule of Appellate Procedure 47.1. See TEX. R. APP. P.
47.1 (requiring court of appeals to address every issue necessary for final disposition
of appeal).
56
(1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the
exercise of jurisdiction is consistent with federal and state constitutional due process
guarantees. See Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex.
2007); Glob. Paragon Dallas, LLC v. SBM Realty, LLC, 448 S.W.3d 607, 611 (Tex.
App.—Houston [14th Dist.] 2014, no pet.). “Personal jurisdiction is composed of two
elements: (1) the defendant must be amenable to the jurisdiction of the court; and (2) if
the defendant is amenable to the jurisdiction of the court, the plaintiff must validly
invoke that jurisdiction by valid service of process on the defendant.” Kawasaki Steel
Corp. v. Middleton, 699 S.W.2d 199, 200 (Tex. 1985) (per curiam); Velasco v. Ayala,
312 S.W.3d 783, 798 (Tex. App.—Houston [1st Dist.] 2009, no pet.); Furst v. Smith,
176 S.W.3d 864, 868 (Tex. App.—Houston [1st Dist.] 2005, no pet.).
“A Texas court may assert personal jurisdiction over a nonresident defendant
only if the requirements of both the Fourteenth Amendment’s due process clause and
the Texas long-arm statute are satisfied.” Silbaugh v. Ramirez, 126 S.W.3d 88, 95
(Tex. App.— Houston [ 1st Dist.] 2002, no pet.); see Kawasaki Steel, 699 S.W.2d at
200 (stating that Texas long-arm statute “reaches as far as the federal constitutional
requirements of due process will permit”). The exercise of personal jurisdiction by a
Texas court is proper when the nonresident defendant has established minimum
contacts with Texas, and the exercise of jurisdiction comports with “traditional notions
of fair play and substantial justice.” Moki Mac River Expeditions, 221 S.W.3d at 575
57
(quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945)).
For purposes of due process, “[a] defendant establishes minimum contacts with a
state when it ‘ purposefully avails itself of the privilege of conducting activities
within the forum state, thus invoking the benefits and protections of its laws.’”
Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009)
(quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1240 (1958)).
The validity of issuance, service, or return of citation is not presumed. See
Velasco, 312 S.W.3d at 797 (citing Amato v. Hernandez, 981 S.W.2d 947, 949 (Tex.
App.—Houston [1st Dist.] 1998, pet. denied)). “If the record does not show strict
compliance with the rules regarding service of citation, then service was invalid
and the judgment is void.” Id. “Strict compliance” means literal compliance with the
rules governing issuance, service, and citation. Id. An incorrect name is sufficient
to show a citation is not in strict compliance with the rules. Id.; Medeles v. Nunez,
923 S.W.2d 659, 662–63 (Tex. App.—Houston [ 1st Dist.] 1996, writ denied)
(concluding that citation was invalid because it named “Maria Mendeles,” rather than
“Maria Medeles,” as defendant), overruled on other grounds by Barker CATV
Constr. Inc. v. Ampro Inc., 989 S.W.2d 789 (Tex. App.—Houston [1st Dist.] 1999,
no pet.).
To support a default judgment upon substituted service, as here, two
requirements must be met: “(1) the pleadings must allege facts that, if true, would
58
make the defendant amenable to process by the use of the long-arm statute; and
(2) there must be proof in the record that the defendant was in fact served in the
manner required by statute.” Comm’n of Contracts of Gen. Exec. Comm. of
Petroleum Workers Union of Republic of Mex. v. Arriba, Ltd., 882 S.W.2d 576, 585
(Tex. App.—Houston [ 1st Dist.] 1994, no writ) (citing Capitol Brick, Inc. v. Fleming
Mfg. Co., 722 S.W.2d 399, 401 (Tex. 1986)); Whitney v. L & L Realty Corp., 500
S.W.2d 94, 95–96 (Tex. 1973) (holding that, in cases involving substituted service on
Texas Secretary of State, record must contain showing that Secretary of State
forwarded copy of process to defendant to establish personal jurisdiction over
defendant).
The plaintiff bears the initial burden to plead sufficient allegations to bring a
nonresident defendant within the reach of Texas’s long arm statute. Moki Mac
River Expeditions, 221 S.W.3d at 574. If the plaintiff has pleaded sufficient
jurisdictional allegations, the defendant assumes the burden of negating all bases for
jurisdiction. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 793 (Tex.
2002). “Because the plaintiff defines the scope and nature of the lawsuit, the
defendant’s corresponding burden to negate jurisdiction is tied to the allegations in
the plaintiff’s pleading.” Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658
(Tex. 2010). But if the plaintiff fails to plead facts sufficient to bring the defendant
within reach of the Texas long-arm statute, the defendant must only prove that it does
59
not reside in Texas to negate jurisdiction. Id. at 658–59.
Whether a court has personal jurisdiction over a defendant is a question of law
that appellate courts review de novo. Moki Mac River Expeditions, 221 S.W.3d at 574.
Appellate courts review the trial court’s factual findings for legal and factual
sufficiency and review the trial court’s legal conclusions de novo. BMC Software, 83
S.W.3d at 794. The court may set aside a finding of fact only if the finding is so
contrary to the overwhelming weight of the evidence as to be clearly wrong or unjust.
Cain, 709 S.W.2d at 176. When there is a legal sufficiency challenge, if there is more
than a scintilla of evidence to support the questioned finding, the no-evidence point
fails. BMC Software, 83 S.W.3d at 795. “If findings of fact are not challenged, they
are binding on the parties and on this Court.” In re K.R.P., 80 S.W.3d 669, 673
(Tex. App.—Houston [1st Dist.] 2002, pet. denied); see also Botter v. Am. Dental
Ass’n, 124 S.W.3d 856, 860 n.1 (Tex. App.—Austin 2003, no pet.) (“When a court
issues findings of fact we are to assume that they are valid unless they are challenged
by the appellant . . . .”).
“[A] judgment entered without notice or service is constitutionally infirm,” and
some form of attack must be available when defects in personal jurisdiction violate
due process. Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 84, 108 S. Ct. 896,
899 (1988). A complete failure of service deprives a litigant of due process and a
trial court of personal jurisdiction; the resulting judgment is void and may be
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challenged at any time. In re E.R., 385 S.W.3d 552, 566 (Tex. 2012); see Peralta,
485 U.S. at 84, 108 S. Ct. at 899 (“Failure to give notice violates ‘the most rudimentary
demands of due process of law.’”) (quoting Armstrong v. Manzo, 380 U.S. 545, 550,
85 S. Ct. 1187, 1190 (1965)). “[A] judgment may also be challenged through a
collateral attack when a failure to establish personal jurisdiction violates due process.”
PNS Stores, Inc. v. Rivera, 379 S.W.3d 267, 273 (Tex. 2012).
Texas Rule of Civil Procedure 107 prohibits a default judgment until proof of
service has been on file for ten days. TEX. R. CIV. P. 107(h). In cases involving
substituted service on the Texas Secretary of State, the proof of service that is filed
at least ten days before a default judgment must include a Whitney certificate
reflecting that the Secretary of State forwarded citation and process to the defendant.
MC Phase II Owner, LLC v. TI Shopping Ctr., LLC, 477 S.W.3d 489, 492–93 (Tex.
App.—Amarillo 2015, no pet.) (recognizing continued viability of Whitney and its
certificate requirement).
2. The Galveston County Court’s Lack of Personal Jurisdiction over Isa
In his motion for new trial, Isa asserted that service of process on him by
publication was ineffective. He claimed that Winnie did not use reasonable diligence
to locate him for service. Isa asserted that Winnie lied to the trial court in her affidavit
supporting substituted service when she testified that she did not know Isa’s location
or how to find him.
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Winnie has consistently taken the position that Isa left the United States
permanently in April 2012. Although she had an address in Bahrain—IACL’s
headquarters—with which to serve Isa, his email address, and other means to
communicate with him—including through the attorney who represented Isa in the
Harris County action, which Winnie non-suited the same day she filed the Galveston
County action—Winnie requested leave to serve Isa by publishing a notice in a
Galveston newspaper.
The Galveston County court found, in its findings of fact issued following the
sanctions hearing—none of which Winnie challenges on appeal—that Winnie had a
physical address where Isa or IACL could likely be reached, knew how to contact Isa
and his family in Bahrain, and continued to write emails to him after filing the Galveston
County action, but she never informed him of the Galveston lawsuit. The court found
that, instead, Winnie swore in two affidavits that “she did not know how to contact
Isa . . . when in fact she and her attorneys knew that Isa was represented by an
attorney in the Harris County action on the very day” that she filed the Galveston
County action and served Isa’s attorney with a notice of non-suit for the Harris County
action. The court also found that, despite Winnie’s affidavit testimony that she did
not know how to get in touch with Isa and her testimony during the June 2014
default hearing that their children had been “cut off” and that she did not have a
way to contact Isa a f t e r he left the United States, Winnie knew the children had
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been communicating with Isa, she knew that her children had made trips to visit him
out of the country, and she had facilitated one of the trips that her youngest son, who
was a minor at the time, took to see Isa while the Galveston County action was
pending. Winnie, however, did not give Isa actual notice of the Galveston County
action prior to the June 2014 default hearing.
The Texas Supreme Court recently addressed the adequacy of notice by
publication in In re E.R. After discussing cases from the United States Supreme Court
concerning notice by publication, the Texas Supreme Court summarized these
decisions by stating, “[W]hen a defendant’s identity is known, service by publication
is generally inadequate.” In re E.R., 385 S.W.3d at 560. The court further noted that
notice by publication, which was already “constitutionally suspect” in the mid-
twentieth century, “is even more vulnerable today given the precipitous decline in
newspaper readership.” Id. at 561. “[S]ervice by publication should be a last resort, not
an expedient replacement for personal service.” Id. When it is both “possible and
practicable to more adequately warn” a defendant of a pending lawsuit, especially one
concerning a parent’s relationship with his minor child, notice by publication is
constitutionally inadequate. Id. at 566; see Jones v. Flowers, 547 U.S. 220, 237, 126
S. Ct. 1708, 1720 (2006) (stating that “chance alone” brings person’s attention to
advertisement in newspaper and notice by publication is adequate only where “it is not
reasonably possible or practical to give more adequate warning”) (quoting Mullane v.
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Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 315, 317, 70 S. Ct. 652, 658 (1950)).
I agree with Isa that, in the Galveston County action, Winnie used notice by
publication “as a first resort,” not as a last resort, and that her request to publish notice
in the Galveston County Daily News when she knew that Isa did not live in the United
States and when she had several methods for getting in contact with him at her disposal
was “reasonably calculated to avoid actual notice to Isa.” Because it was both possible
and practicable for Winnie to have given Isa notice of the filing of her suit in Galveston
County, and she did not do so, I would hold that service on Isa was constitutionally
ineffective and the trial court properly concluded that it lacked personal jurisdiction
over Isa.
3. Lack of Personal Jurisdiction over IACL
IACL also claimed that it was not properly served with process. It raised this
claim in its separately filed June 30, 2016 bill-of-review action seeking to overturn the
divorce decree and orders issued in this action by default, which was docketed in the
same Galveston County court under a separate cause number. IACL claimed that
service through the Texas Secretary of State’s Office was not effective because Winnie
had provided an incorrect address for IACL. In its bill-of-review petition, IACL also
claimed that it was not amenable to process because it lacked sufficient minimum
contacts with Texas to be sued in this forum and Winnie failed to plead jurisdictional
facts to support a finding that IACL purposefully availed itself of doing business in
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Texas.
Winnie’s divorce petitions in the Galveston County action did not allege any
specific act or transaction performed by IACL in Texas. Instead, with respect to IACL’s
activities in Texas, the petitions only alleged that IACL “attempt[ed] to form” an
entity called “Intercol USA” as a subsidiary and that a company called “Exit Lone
Star Realty” was formed as a Texas subsidiary of IACL. The Galveston County
court specifically found that these allegations were false.
The Galveston County court also found that the only documentary evidence
linking IACL to Texas was a bill of lading entered into evidence at the default hearing.
Although Winnie had offered this document as evidence that IACL was doing business
in Texas—and thus possessed sufficient minimum contacts with Texas to support
personal jurisdiction—Winnie later acknowledged during the July 2016 hearing that
the bill of lading related to a gift that Isa had shipped from Bahrain to K.A., their eldest
son. The court found that Winnie offered no evidence that any company formed or
doing business in Texas during her marriage to Isa “either (i) [was] a subsidiary of
IACL, (ii) was controlled by IACL, (iii) was going business through IACL, or (iv) was
doing business with IACL in Texas.” The court therefore found that Winnie had
knowingly pleaded facts without a good faith basis “for the improper purpose of falsely
invoking jurisdiction over IACL in Texas.”
Winnie does not challenge the sufficiency of the evidence supporting the
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Galveston County court’s findings of facts. I would hold that the Galveston County
court’s findings are fully supported by the record on appeal and that Winnie produced
no evidence that IACL ever purposefully availed itself of the privilege of doing business
in Texas or established sufficient minimum contacts with Texas. See Retamco
Operating, 278 S.W.3d at 338 (“A defendant establishes minimum contacts with a
state when it ‘ purposefully avails itself of the privilege of conducting activities
within the forum state, thus invoking the benefits and protections of its laws.’”).
IACL also argues that, as with Isa, Winnie failed to properly serve it with
process, thus depriving the Galveston County court of personal jurisdiction over it. As
IACL points out, Winnie attempted to serve it by means of substituted service on
the Texas Secretary of State. The record contains the return of service which indicated
that the citation was sent by the Galveston County Clerk to the Secretary of State on
June 24, 2013.
Rule of Civil Procedure 108a governs service of process in foreign countries and
allows for the usage of several methods of service. See TEX. R. CIV. P. 108a(1). The
Rule requires that the method used “must be reasonably calculated, under all of the
circumstances, to give actual notice of the proceedings . . . in time to answer and
defend.” Id.
The correct address for Abdul Rahman Alwazzan—Isa’s older brother and a
director of IACL—is at 131 Al-Khalifa Avenue, P. O. Box 584, in Manama, Kingdom
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of Bahrain. Winnie, however, attempted service by using an address that did not use
the Post Office box number. Using this incorrect address would not have resulted in
service, and, thus, the method of service that Winnie used was not “reasonably
calculated” to give IACL “actual notice of the proceedings . . . in time to answer and
defend” the Galveston County action. See id.
For the forgoing reasons, I would hold that the Galveston County court failed to
obtain personal jurisdiction over IACL because, in addition to the complete lack of
evidence of a connection between IACL and the State of Texas, IACL had not been
served with process and IACL therefore lacked constitutionally required notice of the
Galveston County action when default judgment was entered against it, in violation of
its due process rights under the Fourteenth Amendment to the United States
Constitution. I would further hold that the default judgment of the Galveston County
trial court against it is void for this reason. See In re E.R., 385 S.W.3d at 566 (holding
that complete failure of service deprives litigant of due process and trial court of
personal jurisdiction; resulting judgment is void and may be challenged at any
time).
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IV. Conclusion
I would hold that the Galveston County court did not err when it concluded that it
lacked both subject-matter jurisdiction over this divorce action and personal
jurisdiction over both Isa and IACL, and granted Isa’s plea to the jurisdiction. I would
affirm the judgment of the trial court granting Isa’s plea to the jurisdiction, awarding
sanctions against Winnie, and vacating all other orders of that court. I would further
hold that the Harris County associate judge’s December 21, 2012 report constituted a
valid final order of the Harris County district court, and I would transfer this case to
the Harris County court for entry of the final order of the Harris County associate
judge’s December 21, 2012 final order as the decree of divorce in this case.
Evelyn V. Keyes
Justice
Panel consists of Justices Jennings, Keyes and Higley.
Justice Keyes, dissenting.
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