in Re Household Finance Corporation III

Petition for Writ of Mandamus Denied and Memorandum Opinion filed December 11, 2008 Petition for Writ of Mandamus Denied and Memorandum Opinion filed December 11, 2008. In The Fourteenth Court of Appeals ____________ NO. 14-08-00673-CV ____________ IN RE HOUSEHOLD FINANCE CORPORATION III, Relator ORIGINAL PROCEEDING WRIT OF MANDAMUS M E M O R A N D U M   O P I N I O N On July 28, 2008, relator, Household Finance Corporation III (AHFC@), filed a petition for writ of mandamus in this court. See Tex. Gov=t Code Ann. ' 22.221 (Vernon 2004); see also Tex. R. App. P. 52. In the petition, HFC asks this court to compel the Honorable Lamar McCorkle, presiding judge of the 133rd District Court of Harris County, to enforce the February 15, 2005 rescission order. We deny the petition. Background On February 24, 2003, real party in interest, Renee K. Penick, delivered to HFC a promissory note in the amount of $88,000, which was secured by a deed of trust. On May 26, 2004, the trial court entered judgment against Penick and in favor of Hunter=s Glen Municipal Utility District on its claim for delinquent taxes. On September 7, 2004, the property was sold at a tax sale for $57,000 to Sonal Bhagia. Excess proceeds in the amount of $54,037.98 remained after deducting costs and amounts owed to Hunter=s Glen. The excess proceeds were deposited into the registry of the court. On September 20, 2004, Penick and NK Resources, Inc. entered into an agreement granting NK Resources or its attorney the authority to act on Penick=s behalf in the tax delinquency suit. On October 14, 2004, Penick, via warranty deed, assigned to NK Resources her interest in the property. Nanick Bhagia is the president of NK Resources. Sonal Bhagia, the purchaser of the property, is Nanick Bhagia=s daughter. On November 10, 2004, Penick filed a claim for excess proceeds of the tax sale in the tax case in which HFC had been served but had not made an appearance. That same day, copies of Penick=s pleading, which was signed by her attorney, John Knobelsdorf, and notice of hearing were served on HFC=s registered agent by certified mail, return receipt requested. A hearing on this claim was set for November 30, 2004. The hearing was to be conducted before the tax master. The tax master instructed Penick to reset the hearing because notice had not been sent to Foxwood Homeowners Association. The rehearing was reset for December 21, 2004. Notice of the new hearing date was sent to HFC=s registered agent by certified mail, return receipt requested on December 1, 2004. At the reset hearing (on December 21, 2004) before the tax master, Penick, Foxwood Homeowners Association, and various taxing authorities appeared. HFC did not appear at the hearing. The tax master accepted the proposed order, which, if entered, would compel the disbursement of the excess proceeds. The tax master recommended that the trial court sign the proposed disbursement order. A few weeks later, on January 3, 2005, the trial court signed the order disbursing the excess proceeds. Also, on January 3, 2005, HFC filed a petition to claim excess proceeds. On January 18, 2005, the tax master heard HFC=s petition to claim excess proceeds. HFC=s attorney called Penick=s attorney, John Knobelsdorf, from the court to inform him that the hearing was taking place.[1] By the time HFC=s attorney returned to the courtroom, the tax master had written a draft rescission order for the funds to be repaid into the registry of the court. The trial court, however, did not sign it that day. On February 8, 2005, the proceeds were disbursed when the Harris County Treasurer=s Office issued a check in the amount of $52,422.95 to MacNaughton Knobelsdorf & Co, and a check in the amount of $1,615.03 to Foxwood Homeowners Association. On February 9, 2005, John Knobelsdorf, Penick=s attorney, deposited the $52,422.95 check into his firm=s IOLTA account. Knobelsdorf then paid the proceeds to NK Resources, less his attorney=s fees. On February 15, 2005, the trial court signed the tax master=s hand-written proposed rescission order. On April 29, 2005, Penick filed a voluntary bankruptcy, and several month later received a bankruptcy discharge. On May 12, 2006, HFC filed a motion for contempt against John Knobelsdorf for violating the February 15, 2005 rescission order by refusing to return the money to the registry of the court. On April 27, 2006, Penick filed a motion requesting that the trial court set aside the rescission order as void on the grounds that the trial court=s plenary power had expired when it signed the order. On May 22, 2006, the trial court denied Penick=s motion to set aside the rescission order as void. After a hearing on July 10, 2006, the trial court denied HFC=s motion for contempt. On December 12, 2006, after discovery to learn Penick=s whereabouts, HFC filed a second motion for contempt against Knobelsdorf and now Penick. On November 5, 2007, the trial court denied HFC=s second motion for contempt. On December 31, 2007, HFC filed a motion for leave to file a third party action against NK Resources and Nanick Bhagia, president of NK Resources, because Penick had signed a limited power of attorney granting NK Resources the authority to make a claim for excess proceeds in Penick=s name, and John Knobelsdorf had disbursed the excess proceeds to NK Resources. On January 14, 2008, the trial court denied HFC=s motion for leave to file a third party action against NK Resources and Bhagia. On May 8, 2008, Penick, through her attorney, John Knobelsdorf, signed an agreed order stating that HFC is entitled to the excess proceeds. That same day, HFC filed a motion to enforce the February 15, 2005 rescission order and the return of excess proceeds to the registry of the court and a motion for sanctions. The following day, Penick withdrew her consent to the agreed order because there was not a meeting of the minds. On June 2, 2008, the trial court held a hearing on HFC=s latest motion to enforce the February 15, 2005 rescission order. At the hearing, the parties presented argument regarding whether the trial court had plenary power to enforce the rescission order. After Penick argued that HFC=s two prior motions had been denied, the trial court asked AWell, why aren=t we on our way to the appellate court?@ At the end of the hearing, the trial court denied HFC=s motion to enforce the rescission order and stated, ALet=s get it to the appellate court.@ On July 28, 2008, HFC filed its petition for writ of mandamus in this court, seeking to compel the trial court to enforce the February 15, 2005 rescission order. Standard of Review To be entitled to the extraordinary relief of a writ of mandamus, the relator must show that the trial court clearly abused its discretion. In re Team Rocket, L.P., 256 S.W.3d 257, 259 (Tex. 2008) (orig. proceeding). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). Issues In its first issue, HFC asserts that the February 15, 2005 rescission order is not void because it was signed more than thirty days after the January 3, 2005 order. In its second issue, HFC then asserts that it is entitled to mandamus relief to remedy the trial court=s clear abuse of discretion in allegedly refusing to enforce the February 15, 2005 rescission order. HFC asks this court to issue a writ of mandamus compelling the trial judge to enforce the February 15, 2005 rescission order and to force the parties, individuals, and entities in question to return the proceeds to the registry of the court. Analysis Section 34.04 of the Texas Tax Code Section 34.04 sets forth the process for a party to claim the excess proceeds after a tax sale. Tex. Tax Code Ann. ' 34.04 (Vernon 2008). The portions of section 34.04 relevant to this proceeding state: (a) A person, including a taxing unit, may file a petition in the court that ordered the seizure or sale setting forth a claim to the excess proceeds. The petition must be filed before the second anniversary of the date of the sale of the property. The petition is not required to be filed as an original suit separate from the underlying suit for seizure of the property or foreclosure of a tax lien on the property but may be filed under the cause number of the underlying suit. (b) A copy of the petition shall be served, in the manner prescribed by Rule 21a, Texas Rules of Civil Procedure, as amended, or that rule's successor, on all parties to the underlying action not later than the 20th day before the date set for a hearing on the petition. * * * (e) [A]n order under this section is appealable. Id. ' 34.04(a),(b), and (e). Trial Court=s Plenary Power to Enter February 15, 2005 Rescission Order Penick argues that the February 15, 2005 rescission order is void because it was signed more than thirty days after the January 3, 2005 order disbursing the proceeds. Penick contends that the January 3, 2005 order is a final order because in it the trial court orders the disbursement of all of the excess proceeds. Although HFC=s counsel knew by January 18, 2005, of the January 3, 2005 order, no motion for new trial, or any other motion, was filed that would extend the trial court=s plenary power. A trial court has plenary power over its judgment until it becomes final. Fruehauf Corp. v. Carrillo, 848 S.W.2d 83, 84 (Tex. 1993) (per curiam). Plenary power refers to that period of time in which a trial court may vacate its judgment by granting a new trial, or in which it may modify or correct its judgment. In re Gillespie, 124 S.W.3d 699, 702 (Tex. App.CHouston [14th Dist.] 2003, orig. proceeding). A trial court=s plenary power is extended only by the timely filing of (1) a motion for new trial, (2) a motion to vacate, modify, or correct the judgment, (3) or any motion seeking a substantive change in the court=s judgment. Id. at 703. Only timely filed motions extend the trial court=s plenary jurisdiction. L.M. Healthcare, Inc. v. Childs, 929 S.W.2d 442, 444 (Tex. 1996) (per curiam). A party must file a motion to modify judgment and motion for new trial within thirty days from the date the trial court signed the judgment. Id. The trial court signed the February 15, 2005 rescission order more than thirty days after signing the January 3, 2005 disbursement order. To determine whether the February 15, 2005 rescission order is void, we first must ascertain whether the January 3, 2005 disbursement order is final for purposes of appeal. Penick maintains that, because HFC did not file a timely motion for new trial or other motion that would extend the trial court=s plenary power, the trial court had no jurisdiction to render the February 15 rescission order. Penick also contends that the January 3, 2005 order was appealable because section 34.04 treats disbursements orders as final. See Tex. Tax Code Ann. ' 34.04(e) (stating that Aan order under this section is appealable@). Finally, Penick asserts that the disbursement order is final because it disposed of the entire amount of excess proceeds. HFC argues that the February 15, 2005 rescission order is not void because the January 3, 2005 disbursement order does not dispose of all claims and parties because its own claim to the excess proceeds was pending in the trial court when the trial court signed the disbursement order.[2] HFC relies on this court=s opinion in Johnson v. Ameriquest Mortgage Co., No. 14-04-00121-CV, 2004 WL 1066750 (Tex. App.CHouston [14th Dist.] May 13, 2004, no pet.) (per curiam) (mem. op.). In that case, Johnson filed a claim for excess proceeds under section 34.04 of the Texas Tax Code.[3] Id. at *1. Ameriquest, a former lienholder against the foreclosed property, intervened to claim excess proceeds. Id. Johnson, claiming she had not received notice of the intervention until after the hearing before the tax master, did not give notice of the hearing to Ameriquest. Id. On the recommendation of the tax master, the trial court signed an order to disburse the excess proceeds to Johnson and to certain taxing authorities. Id. Ameriquest filed a motion to set aside the order to disburse excess proceeds, asserting that the order was interlocutory because Ameriquest had intervened to claim excess proceeds and its claim had not been disposed of in the order. Id. The tax master recommended that Ameriquest=s motion be denied, and Ameriquest appealed to the district court. Id. After a hearing, the trial court signed an order setting aside its disbursement order, and ordered Johnson to return the funds to the registry of the court. Id. This court observed that, to be final, a judgment must dispose of all claims. Id. (citing Lehmann v. Har-Con Corp., 39 S.W.3d 191, 200 (Tex. 2001)). Because the disbursement order failed to dispose of Ameriquest=s claim, it was not final, and the trial court retained plenary jurisdiction to later set aside the order. Id. (citing Nelson v. Lubbock Cent. Appraisal Dist., No. 07-02-0349-CV, 2003 WL 1987959 (Tex. App.CAmarillo April 30, 2003, no pet.) (mem. op.). Johnson=s appeal was dismissed because the order setting aside the disbursement order was interlocutory and not subject to appeal. Id. This court relied on Nelson v. Lubbock Central Appraisal District in determining that the trial court had retained plenary power to set aside the disbursement order because it failed to dispose of Ameriquest=s claim. In Nelson, following a sheriff=s sale, excess proceeds of $33,566.36 were deposited with the clerk of the court. 2003 WL 1987959, at *1. Silverman filed a petition to claim excess proceeds. Id. Subsequently, the Secretary of Veterans Affairs filed a motion to claim excess proceeds. Id. The trial court heard Silverman=s claim for the full amount of the excess proceeds, and the Secretary=s claim for $24,980.88. Id. at *2. The trial court granted the Secretary=s claim and ordered that the clerk of the court issue payment for $24,980.88. Id. The order did not address the distribution of the remaining balance of $8,585.48 in excess proceeds. Id. The Nelson court held that the order was interlocutory because it did not dispose of Silverman=s claim or direct the distribution of the balance of the excess funds; therefore, the appeal was dismissed for want of jurisdiction. Id. Penick asserts that HFC=s reliance on Johnson is misplaced because HFC, unlike Ameriquest, received two notices regarding the hearings on Penick=s claim for excess proceeds. Penick further points out that, in the January 3, 2005 disbursement order, unlike the disbursement order in Nelson, the trial court disbursed all of the excess proceeds. We reject Penick=s distinctions. First, the fact that HFC received notice of both the original and reset hearing dates is not material to this issue. Instead, HFC=s claim for excess proceeds was pending when the trial court signed the January 3, 2005 disbursement order. We conclude that the January 3, 2005 disbursement order did not dispose of HFC=s pending claim. We are bound by this court=s prior opinion in Johnson. Accordingly, we conclude that the January 3, 2005 disbursement order did not dispose of all pending claims to the excess proceeds and is not a final, appealable order. Service of HFC=s Petition Pursuant to Rules 8 and 21a In its second issue, HFC then asserts that it is entitled to mandamus relief to remedy the trial court=s clear abuse of discretion in allegedly refusing to enforce the February 15, 2005 rescission order. Penick contends that the February 15, 2005 rescission order was obtained by defective service, i.e., without notice to Penick=s attorney, even though Penick=s petition, which was signed by her attorney, had been filed in the trial court. Under section 34.04(b), A[a] copy of the petition shall be served, in the manner prescribed by Rule 21a, Texas Rules of Civil Procedure, as amended, or that rule=s successor, on all parties to the underlying action not later than the 20th day before the date set for a hearing on the petition.@ Tex. Tax Code Ann. ' 34.04(b). Rule 21a of the Texas Rules of Civil Procedure, which is referenced in section 34.04(b), provides for service on a party=s attorney of record as an acceptable method of service: Every notice required by these rules, and every pleading, plea, motion, or other form of request required to be served under Rule 21, other than the citation to be served upon the filing of a cause of action and except as otherwise expressly provided in these rules, may be served by delivering a copy to the party to be served, or the party=s duly authorized agent or attorney of record, . . . Tex. R. Civ. P. 21a. Moreover, pursuant to Rule 8 of the Texas Rules of Civil Procedure, A[a]ll communications from the court or other counsel with respect to a suit shall be sent to the attorney in charge.@ Loffland Bros. Co. v. Downey, 822 S.W.2d 249, 251 (Tex. App.CHouston [1st Dist.] 1991, orig. proceeding) (citing Tex. R. Civ. P. 8) (emphasis added).[4] Therefore, when a party is represented by counsel who has made an appearance, rules 8 and 21a, when applied together, require that all communications be sent to the party=s attorney. Morin v. Boeker, 122 S.W.3d 911, 914 (Tex. App.CCorpus Christi 2003, no pet.). The certificate of service on HFC=s petition states that it was served on Penick as Apro se defendant@ via certified mail, return receipt requested at two addresses in Aurora, Colorado. Foxwood Homeowners= Association and the various taxing authorities were served through their respective attorneys of record. On January 18, 2005, the tax master heard HFC=s petition to claim excess proceeds. It was at this hearing that HFC=s counsel learned, from another attorney, of Penick=s claim to the excess proceeds, the December 21, 2004 hearing, and the prior January 3, 2005 order. HFC=s attorney then called Penick=s attorney, John Knobelsdorf, from the hallway outside the courtroom, informing him that a hearing was taking place before the tax master on HFC=s claim to the excess proceeds. When HFC=s attorney returned to the courtroom, the tax master already had prepared the handwritten proposed order rescinding the January 3, 2005 disbursement order for the trial court=s signature. After the hearing, HFC=s counsel faxed a copy of the handwritten order to Knobelsdorf. When Penick asserted her claim, HFC had not yet appeared through counsel, and so she served her pleading on HFC=s registered agent. The pleading, in which Penick claimed the excess proceeds, was signed by Penick=s attorney. On the other hand, even though Penick already had appeared through counsel, HFC did not serve its petition on Penick=s attorney. The record of the July 10, 2006 hearing before the trial court reflects the following: MR. BEERS [Counsel for Penick=s attorney]: What happened after January 3rd is that [HFC] appeared in the tax court in January 18th but did not get notice to all of the parties. . . . * * * MR. CURRAN [Counsel for HFC]: . . . At the time I reviewed the court=s docket electronically, I reviewed everything B I ordered a copy of everything that had been imaged on the assumption that that was everything that was there. . . . [T]he Petition to Claim Excess Proceeds had not been imaged. It wasn=t on the court=s B so at that time I filed my petition B [HFC=s] Petition to Claim Excess Proceeds, completely unaware that the homeowner had filed an appearance much less a Petition to Claim the Excess Proceeds, much less that there had been a hearing conducted. . . . * * * MR. CURRAN: . . . So I filed the Petition to Claim Excess Proceeds on December 29th in complete ignorance of the fact that they had already appeared in the case, filed the petition to the claim, and actually had a hearing on it on December 24th [sic]. * * * I appear[ed] at the January 18th setting on [HFC=s] Petition to Claim the Proceeds. At that time Ms. Johnston was actually present at the motion B because she had appeared at the judgment. I had noticed her, you know, that they were in the case. That=s when she enlightened me as to all the other proceedings I had missed. I promptly went out in the hall, and called Mr. Knobelsdorf, explained what happened, what was going on, came into the court, apprised [the tax master] of all the facts. Mr. Knobelsdorf was available by telephone. . . . * * * MR. CURRAN: And if I might add, Your Honor, at the conclusion of that hearing, I faxed a copy of the proposed order that had been drafted by [the tax master] . . . HFC sent a copy of its petition to Penick at two addresses in Aurora, Colorado, but did not serve her counsel of record. There is nothing in the record reflecting any claim by Penick that she did not receive HFC=s petition at either of the two addresses to which the petition was mailed. However, even if Penick actually received HFC=s petition, such service is not effective because HFC=s petition was not served on her attorney of record. Cf. McGahey v. Daughters of Charity Health Servs. of Waco, No. 10-02-00288-CV, 2008 WL 1903300, at *1 (Tex. App.CWaco Aug. 25, 2004, no pet.) (rejecting defendant=s argument that party had received notice of reinstatement of case because, when a party is represented by counsel, notice is not effective unless served on counsel). Moreover, the fact that a copy of the handwritten order prepared by the tax master was faxed to Knobelsdorf after the January 18, 2005 hearing is not sufficient to remedy the defective service. In Trevino v. Hidalgo Publishing Company, the Corpus Christi Court of Appeals rejected the appellant=s argument that notice of a summary judgment hearing was defective because it was not served on attorney of record. 805 S.W.2d 862, 863 (Tex. App.CCorpus Christi 1991, no writ). In that case, however, the appellant=s attorney informed the court coordinator on the morning of the hearing that he was ready and would be at the hearing, but later did not appear at the hearing or request a continuance. Id. In the subsequent opinion of Morin v. Boeker, the Corpus Christi Court of Appeals stated that it would not extend the holding in Trevino beyond the particular facts of that case and explained that ATrevino holds no more than that when an attorney has actual knowledge of a hearing and declares to the court that he is ready to proceed, any allegations of improper notice are precluded. The remainder of the opinion=s language was unnecessary for the case=s disposition and thus constitutes dicta.@ 122 S.W.3d at 915B16 (citations omitted). We conclude that, because HFC did not serve a copy of its petition to claim excess proceeds or a notice of the January 18, 2005 hearing on Penick=s attorney of record, proper service was not accomplished in accordance with rules 8 and 21a. See Lester v. Capital Indus., Inc., 153 S.W.3d 93, 96B97 (Tex. App.CSan Antonio 2004, no pet.) (holding service of motion for summary judgment and notice of hearing on party, rather than party=s attorney of record, violated rules 8 and 21a, and lack of notice was injurious and prejudicial because nonmovant=s attorney could not file response to motion for summary judgment); Morin, 122 S.W.3d at 916 (holding, because clerk of county court mailed notice of cost to perfect appeal from justice of the peace court to parties rather than their attorney of record, rule 143a=s twenty-day period to pay costs never commenced to run, and county court erroneously dismissed appeal for failure to pay costs); Rolon v. Rolon, 907 S.W.2d 670, 671 (Tex. App.CBeaumont 1995, no pet.) (holding that, where notice of trial setting was sent to party, but not party=s attorney of record, and attorney did not received notice of setting until one or two days prior to trial date, trial court committed reversible error by trying case when appellant had to appear pro se after court insisted that attorney withdraw or go forward to trial). Because of this lack of proper service, the trial court did not abuse its discretion by declining to enforce the February 15, 2005 rescission order.[5] See Mocega v. Bradford Urquhart M.D., 79 S.W.3d 61, 64B65 (Tex. App.CHouston [14th Dist.] 2002, pet. denied) (reversing dismissal of medical malpractice action because of improper notice of dismissal hearing). Conclusion Because the January 3, 2005 disbursement order did not dispose of HFC=s claim to the excess proceeds, the trial court had plenary power to enter the February 15, 2005 order. However, because Penick=s attorney of record was not served with HFC=s petition to claim excess proceeds or the notice of the January 18, 2005 hearing pursuant to rules 8 and 21a, service was defective. Therefore, the trial court acted within its discretion by declining to enforce the February 15, 2005 order. We conclude that HFC has not established its entitlement to the extraordinary relief of a writ of mandamus.[6] Accordingly, we deny relator=s petition for writ of mandamus.[7] /s/ Kem Thompson Frost Justice Petition Denied and Memorandum Opinion filed December 11, 2008. Panel consists of Justices Frost, Seymore, and Guzman. [1] As addressed elsewhere in this opinion, Penick argues that she received no notice of HFC=s petition or the January 18, 2005 hearing, [2] HFC filed its petition on the same day the trial court signed the disbursement order. It is not known whether the trial court had signed the disbursement order before HFC filed its petition to claim excess proceeds. Penick apparently accepts HFC=s position that its petition was filed in the trial court before the trial court signed the disbursement order. [3] Section 34.04 of the Texas Tax Code provides for claims to excess proceeds: (a) A person, including a taxing unit, may file a petition in the court that ordered the seizure or sale setting forth a claim to the excess proceeds. Tex. Tax Code Ann. ' 34.04(a). [4] Rule 8 of the Texas Rules of Civil Procedure states: On the occasion of a party=s first appearance through counsel, the attorney whose signature first appears on the initial pleadings for any party shall be the attorney in charge, unless another attorney is specifically designated therein. Thereafter, until such designation is change by written notice to the court and all other parties in accordance with Rule 21a, said attorney in charge shall be responsible for the suit as to such party. Tex. R. Civ. P. 8. [5] HFC did not address this argument in its reply to Penick=s response, nor has HFC asserted that service was effected by other means or proffered any argument or record citations that would indicate proper service on Penick was accomplished. [6] Because of this disposition, it is not necessary to address Penick=s other arguments. [7] Nothing in this opinion precludes HFC from seeking another hearing on its claim after giving proper notice.