Awalt Group, Inc. v. M Power Entertainment

• Court: Court of Appeals of Texas
• Decided: June 19, 2007
• Docket: 14-05-01208-CV
• Status: Published

Opinion

Affirmed and Memorandum Opinion filed June 19, 2007

Affirmed and Memorandum Opinion filed June 19, 2007.

In The

Fourteenth Court of Appeals

____________

NO. 14-05-01208-CV

AWALT GROUP, INC., Appellant

V.

M POWER ENTERTAINMENT, Appellee

On Appeal from the 189^th District Court

Harris County, Texas

Trial Court Cause No. 05-25775

M E M O R A N D U M    O P I N I O N

Appellant, Awalt Group, Inc. (AAwalt@), sued appellee, M Power Entertainment (AM Power@), on a sworn account.  The trial court granted M Power summary judgment because it determined the statute of limitations had run; the trial court also overruled Awalt=s special exception to the motion for summary judgment.  Awalt appeals the grant of summary judgment and the refusal to grant the special exception.  We affirm.

Factual and Procedural Background

We will set out the relevant facts in the light most favorable to Awalt; most are not disputed.  Awalt provided M Power public relations services, which were billed through June 1999.  However, M Power was experiencing financial problems and ultimately closed its doors on June 15, 1999, and terminated its relationship with vendors.  M Power was registered to do business in Delaware and Texas, but its charters were forfeited in both states.  In August 1999, M Power=s registered agent in Texas resigned.  However, M Power=s president resided in Houston at all relevant times where the corporation=s assets also were located.

M Power began to reinstate itself as a corporation in good standing with the State of Texas in 2003.  On December 24, 2003, Awalt filed this suit in federal court.  A federal magistrate judge dismissed the case due to lack of total diversity of the parties, as required under federal law.  Awalt refiled in state district court.  M Power filed a motion for summary judgment in which it asserted that Awalt=s suit was filed after the statute of limitations had expired.  Awalt responded by alleging that the statute of limitations was tolled by M Power=s Aabsence from the State@ when it no longer had a registered agent.  The trial court granted M Power=s motion for summary judgment.  The trial court also denied Awalt=s special exception, in which Awalt contended that M Power had not adequately proved when the cause of action accrued.  Awalt timely filed this appeal.

Analysis

I.        M Power was not Absent from Texas for purposes of Service

In its first issue, Awalt contends M Power was a foreign corporation, namely, a Delaware Corporation, that was absent from Texas once its registered agent resigned in August 1999.  Awalt further contends that M Power did not become present in Texas until 2003 when it was once again a corporation in good standing.  However, Awalt fails to cite any relevant authority on the question of service of process, and additionally fails to address the presence of M Power=s president in Texas at all relevant times.  Moreover, Awalt does not address the general applicability of the Business Corporation Act.  Awalt does not dispute that a four-year statute of limitations applies to a suit on a sworn account.^[1] 

Article 2.11 of the Texas Business Corporation Act governs service of process on corporations.  See Tex. Bus. Corp. Act. Ann. art. 2.11 (Vernon 2005).  That statute provides, inter alia, that the Apresident and all vice presidents of the corporation and the registered agent of the corporation shall be agents of such corporation upon whom any process, notice, or demand required or permitted by law to be served upon the corporation may be served.@  Id. art. 2.11(A).  Awalt contends that because M Power lost its certificate of authority, it was no longer Apresent@ in Texas to receive service of process.  Therefore, the statute of limitations was tolled.  See Tex. Civ. Prac. & Rem. Code ' 16.063.  However, Awalt cites no authority for that proposition. 

Further, we find article 7.12 of the Business Corporation Act to be dispositive of the issue.  See Tex. Bus. Corp. Act. Ann. art. 7.12 (Vernon 2003).  That article discusses the limited survival of a corporation after dissolution.^[2]  The Act provides, inter alia, that a dissolved corporation shall continue in its corporate existence for three years from the date of dissolution for certain purposes, including to permit the survival of any existing claim by or against the dissolved corporation.  Id. art. 7.12(A)(2).  Therefore, the Act has already addressed a situation such as this one in which a corporation ceases to do business, but there are existing claimsCthe party with the claim may bring it within three years of dissolution.  Otherwise, it is extinguished.  Id. art. 7.12(C). 

Article 2.11 provides that the corporation=s president is an agent of the corporation upon whom service may be made.  Tex. Bus. Corp. Act. Ann. art. 2.11(A).  Relying on Vaughn v. Dietz, 430 S.W.2d 487 (Tex. 1968), Awalt contends it should not be forced to make service of process on the president.  Yet, that case is inapposite.  In Vaughn, the supreme court held only that a party seeking to sue an individual may toll the statute of limitations when that individual is absent from the state even though substitute service is available through the long-arm statute.  Id. at 490.  In this case, serving the president would not be substitute service under a separate rule.  Rather, like serving the registered agent, serving the president would occur under article 2.11(A) for serving an agent of the corporation. 

Finally, if M Power was not dissolved when its charter was revoked, then it continued to exist.  Awalt argues that when a corporation is not in good standing, it is no longer present in Texas.  However, there is no authority for that proposition.  Indeed, a corporation not in good standing continues to be present, but the advantage goes to the one bringing suit because that corporation can no longer defend itself in the law suit.  Regal Constr. Co. v. Hansel, 596 S.W.2d 150, 153 (Tex. Civ. App.CHouston [1st Dist.] 1979, writ ref'd n.r.e.).  Therefore, if not dissolved, M Power continued to exist and Awalt could have brought suit, serving notice upon M Power=s president or any of its vice presidents.  The undisputed testimony was that M Power=s president continued to reside in Houston and continued to function as president of the corporation.

Whether the statute governing claims for dissolved corporations applies, or, as Awalt contends, a bare analysis of whether the corporation was Apresent@ in Texas, M Power=s president was an agent of the corporation upon whom service of process could have been made.  No tolling provision operates to prolong the statute of limitations.  We overrule Awalt=s first issue.  We must now determine whether, as Awalt contends, M Power proved that the cause of action accrued in June 1999.

II.       The Evidence Shows that the Cause of Action Accrued in June 1999

In its second issue, Awalt contends no proof was presented to the trial court regarding the time for the accrual of the debt and, thus, no proof of the date on which the cause of action accrued.  As we noted above, this case is controlled by the statute governing dissolved corporations.  However, because neither party has briefed that issue and both argue from the perspective that the corporation has continued to exist, in the interests of judicial economy we address the issue of when Awalt=s claim on a sworn account accrued.  Awalt presented its argument concerning accrual of the cause of action via a special exception.

The purpose of a statute of limitations is to establish a point of repose and to terminate stale claims.  Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990).  A cause of action generally accrues at the time when facts come into existence that authorize a claimant to seek a judicial remedy.  Id.  The limitations period begins to run when the wrongful act occursChere, non-payment of owed moniesCresulting in some damage to the plaintiff.  Id. 

In this case, the evidence established that the last bill from Awalt was sent and became due in June 1999.  At that point, M Power failed to make any further payments on current and past amounts that were due.  M Power terminated its relationship with Awalt in June 1999, ceasing all dealings with Awalt.  Therefore, Awalt suffered damages due to the M Power=s wrongful act of refusing to make payment.  The limitations period began to run and, assuming the dissolution statute does not apply, expired four years later.  Awalt brought suit approximately six months too late.  We overrule Awalt=s second issue.

Conclusion

Having overruled both of Awalt=s issues, we affirm the judgment of the trial court.

/s/      J. Harvey Hudson

Justice

Judgment rendered and Memorandum Opinion filed June 19, 2007.

Panel consists of Justices Yates, Anderson, and Hudson.

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^[1]  M Power raises the issue of whether the federal magistrate judge=s ruling triggers the rule of collateral estoppel in this case, such that the issues have been decided already.  However, we need not reach that issue because the record affirmatively demonstrates all of the undisputed facts necessary to resolve this appeal.

^[2]  Neither party addressed what legally became of M Power once its certificate and charter were revoked in Texas.  It is not entirely clear that M Power=s charter was revoked.  However, viewing the facts in the light most favorable to Awalt, M Power was dissolved on February 11, 2000.  See Tex. Bus. Corp. Act. Ann. art. 7.12(F)(1); Landrum v. Thunderbird Speedway, Inc., 97 S.W.3d 756, 758 (Tex. App.CDallas 2003, no pet.) (holding that the forfeiture of a corporate charter results in a corporations dissolution).