The Texas Estates Code requires an out-of-state fiduciary to appoint the Secretary of State as the fiduciary’s agent for service of process. The Texas Civil Practice and Remedies Code, however, states that an out-of-state financial institution must be served through its registered agent. In U.S. Bank Nat’l Ass’n, as Residential Asset Mortgage Products, Inc., Mortgage Asset-Backed Pass-Through Certificates Series 2005-EFC2 v. Moss, No. 20-0517, slip op. (Tex. Feb. 25, 2022), available at https://www.txcourts.gov/media/1453691/200517.pdf, the Texas Supreme Court clarified how the two statutes interact when an out-of-state financial institution is acting in a fiduciary capacity.
Background Facts
In U.S. Bank Nat’l v. Moss, Moss sued U.S. Bank, an Ohio corporation, in Texas state court to prevent foreclosure of his home. Moss served the Bank by serving the Secretary of State under Chapter 505 of the Estates Code. Section 505.004 of the Estates Code provides that a foreign corporate fiduciary must appoint the Secretary as the fiduciary’s agent for service of process “in an action or proceeding relating to a trust, estate, fund, or other matter within this state with respect to which the fiduciary is acting in a fiduciary capacity.” The Secretary of State then forwards process to whoever the foreign fiduciary designates.
The Bank did not receive the citation because it failed to update its Chapter 505 designation of the person the Secretary of State should forward process. Accordingly, Moss obtained a default judgment against the Bank. A few months later, the Bank learned of the default judgment and sought to set it aside because it was not properly served. The Bank argued it should have been served through its registered agent under § 17.028 of the Texas Civil Practice and Remedies Code, rather than the Secretary of State under Chapter 505 of the Estates Code. Section 17.028 applies specifically to service on financial institutions, and states that a citation “may be served on financial institution by serving the registered agent.”
The Lower Courts’ Decisions
The trial court and the Dallas Court of Appeals rejected the Bank’s argument, holding that service under the Estates Code was proper and compatible with the language in the Civil Practice & Remedies Code language.
The Supreme Court’s Analysis
The Texas Supreme Court reversed the lower courts, siding with the Bank. Moss argued that the Legislature’s choice of the word “may” in § 17.028—rather than “must” or “shall”— signaled its intent that service under section 17.028 is permissive, not mandatory. While the Court acknowledged that “may” does not mean “must,” it rejected Moss’s argument and held that the “may” in § 17.028 introduces two alternative methods of service, and which method applies depends on whether the institution has a registered agent.
In the next step of its analysis, the Court concluded that the Secretary of State was not the Bank’s registered agent under § 17.028. To reach this conclusion, the Court engaged in self-described “statutory hopscotch,” starting with an out-of-state financial institution’s obligation to apply to do business in Texas under §201.102 of the Finance Code. This section provides that “[a]n out-of-state financial institution must file an application for registration with the Secretary of State . . . by complying with [Texas law] relating to foreign corporations doing business in this state.”
The Court then turned to the law “relating to foreign corporations doing business in [Texas]:” Chapter 9 of the Business Organizations Code. Under Chapter 9, a foreign business’ application must identify the entity’s registered agent for service of process. However, if an entity fails to appoint a registered agent or the registered agent cannot be located, the Secretary of State is the entity’s agent for purposes of service of process.
The Supreme Court’s Holding
Reading these provisions together, the Court held that the Secretary of State is treated separately from any “registered agent” maintained by the foreign entity. Therefore, the Court held that the Secretary of State is not a foreign corporation’s “registered agent” as defined in the Business Organizations Code. Accordingly, in a case against an out-of-state financial institution, the Court held that service must be on the institution’s registered agent as required by section 17.028.
Practical Considerations
Texas litigants should keep in mind that service of process on the Secretary of State may be appropriate if an out-of-state financial institution does not have a registered agent, as contemplated by § 5.251 of the Business Organizations Code. Further, out-of-state or not, all businesses should implement a plan to ensure their registered agent designation is up-to-date with the relevant authorities in each state where they conduct business.
