in Re HMR Funding, LLC

Citation: Not availableDocket: 14-18-00085-CV

Court: Court of Appeals of Texas; July 31, 2018; Texas; State Appellate Court

Original Court Document: View Document

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Petition for Writ of Mandamus was denied in the case involving HMR Funding, LLC, with both majority and dissenting opinions issued on July 31, 2018. The dissenting opinion argues that the trial court improperly denied HMR Funding's motion to dismiss under Texas Rule of Civil Procedure 91a, claiming it was untimely. The dissent asserts that HMR Funding filed the motion within the proper timeframe, as the trial court based its denial solely on the alleged late-filing without considering the motion's merits. HMR Funding lacks an adequate appellate remedy, prompting the call for mandamus relief to compel the trial court to vacate its order and rule on the merits.

The background involves Robert Coleman suing the Best Transportation Parties for injuries from a motor vehicle accident, with HMR Funding assigned the right to recover medical expenses. The Best Transportation Parties filed a third-party petition against HMR Funding on June 2, 2016, and attempted service through the Texas Secretary of State on July 11, 2016. HMR Funding contends this service was defective but appeared in the case on February 22, 2017, asserting various defenses. On April 24, 2017, HMR Funding filed a Rule 91a motion, arguing the Best Transportation Parties lacked standing and the merits of their claims were baseless. The Best Transportation Parties claimed the motion was filed late, arguing the sixty-day deadline started upon service to the Secretary of State. HMR Funding countered that the deadline began upon its appearance in court. The trial court ultimately denied the motion, imposed $2,500 in attorney's fees on HMR Funding, and later granted permission for HMR to appeal, though the appellate court denied the petition for permissive interlocutory appeal. The case raises a significant issue regarding the interpretation of the term "service" in relation to Rule 91a for parties not yet served with citation or having appeared in the lawsuit.

Under Rule 91a, the sixty-day period for filing a motion to dismiss starts when a party is properly served with citation or makes an appearance in the lawsuit, whichever occurs first. The Best Transportation Parties argue that HMR Funding waived service defects by not filing a motion to quash. However, if HMR Funding had filed such a motion, it would only have delayed its requirement to answer, not affected the initiation of the sixty-day period for a Rule 91a motion to dismiss. 

Section 17.044 of the Texas Civil Practice and Remedies Code states that the secretary of state serves as an agent for nonresidents who engage in business but haven't designated a resident agent, provided that there have been unsuccessful attempts to serve designated agents. Section 5.251 of the Texas Business Organizations Code similarly provides that the secretary of state can serve as an agent if the entity fails to maintain a registered agent in Texas or if the registered agent cannot be found at the registered office. 

The Best Transportation Parties claimed that HMR Funding, as a foreign business entity, designated Capitol Services Corporation as its registered agent and provided its address for service in Texas. However, they did not allege that HMR Funding failed to maintain a registered agent, that there were two unsuccessful attempts to serve its agents, or that its registered agent could not be located. Since none of these conditions are met, the secretary of state was not a proper agent for service of process on HMR Funding, rendering the service of citation ineffective.

HMR Funding was not properly served with citation, thus the sixty-day period to file a Rule 91a motion to dismiss began upon its appearance in the lawsuit on February 22, 2017. It timely filed its motion to dismiss on April 24, 2017. The trial court abused its discretion by denying this motion based on an incorrect determination of untimeliness, depriving HMR Funding of a prompt ruling on the merits. The relator lacks an adequate appellate remedy, which is assessed by weighing the benefits of mandamus review against its detriments. Mandamus relief would preserve HMR Funding's substantive and procedural rights, offer essential legal guidance on the start of the sixty-day period for filing a Rule 91a motion, and prevent unnecessary costs associated with eventual reversals of improper proceedings.

The Texas Legislature has mandated that the Supreme Court of Texas establish rules for dismissing claims without basis in law or fact, including a requirement for a decision within 45 days after filing. Under Rule 91a, a defendant who prevails on such a motion is entitled to recover costs and reasonable attorney's fees. The trial court's erroneous ruling also included an order for HMR Funding to pay $2,500 in attorney’s fees to the Best Transportation Parties under Rule 91a, further denying HMR Funding its rights. Although the majority suggests HMR Funding could seek a ruling through a motion for summary judgment, this would not allow recovery of attorney's fees nor eliminate the previously awarded $2,500. A recent Supreme Court of Texas opinion exemplifies that HMR Funding has no adequate appellate remedy to contest the trial court’s fee award.

The trial court denied Burlington's motion to dismiss under Rule 91a and ordered it to pay the Koopmanns $26,190 in attorney's fees. Burlington did not seek mandamus relief or a permissive interlocutory appeal regarding this order. Subsequently, Burlington filed a summary judgment motion concerning non-declaratory judgment claims, which the trial court granted, ruling that the Koopmanns take nothing on those claims. Both parties appealed after a final judgment was rendered. Burlington contended that the trial court erred in denying its motion to dismiss and in awarding attorney's fees, while the Koopmanns challenged the summary judgment on the non-declaratory claims. The court of appeals affirmed the summary judgment except for the breach-of-contract claim, which it reversed, and rejected Burlington's challenge to the denial of its Rule 91a motion.

Burlington sought review from the Supreme Court of Texas, which affirmed the court of appeals’ judgment regarding the breach-of-contract claim. The Supreme Court noted that Burlington's request to hold that the trial court erred in denying the motion to dismiss was moot because it had already received a favorable summary judgment. The Supreme Court also emphasized that Burlington could have pursued mandamus relief or an interlocutory appeal but failed to do so. Consequently, the court indicated that Burlington’s challenge to the denial of its Rule 91a motion was intertwined with the summary judgment, making it unable to attain appellate review of that denial unless the opposing parties appealed the trial court's judgment. The Supreme Court concluded that an appellate remedy dependent on an opponent's appeal is not an adequate remedy, thus reinforcing the binding precedent established in ConocoPhillips.

The court determined it could not review Burlington’s complaint because the court of appeals' affirmation of the summary judgment was final and not subject to review by the supreme court, due to the Koopmanns' failure to appeal. The majority opinion suggested that HMR Funding could seek an adequate appellate remedy by appealing the trial court's final judgment in its favor, irrespective of whether the Best Transportation Parties appealed. However, the ConocoPhillips court stated that if the Best Transportation Parties do not appeal, the trial court's judgment in favor of HMR Funding would be final, preventing HMR Funding from appealing the denial of its Rule 91a motion. HMR Funding was found to lack an adequate remedy on appeal and demonstrated that the trial court abused its discretion by denying its motion to dismiss as untimely. The dissenting opinion argued for granting HMR Funding's request for mandamus relief to vacate the denial of the Rule 91a motion and to address the merits of that motion. The panel consisted of Chief Justice Frost and Justices Busby and Wise, with Justice Wise holding the majority opinion.