HSBC BANK v. KHYBER HOLDINGS NEVADA LIMITED LIABILITY COMPANY (2011)

MEMORANDUM OPINION

Opinion By Justice Francis

In this restricted appeal, HSBC Bank, N.A. appeals a no-answer default judgment in favor of Khyber Holdings, L.L.C. In two issues, HSBC argues (1) the trial court did not acquire jurisdiction over it because it was not properly served and (2) the default judgment is not supported by the pleadings.   We reverse the trial court's judgment and remand for further proceedings.

Khyber sued HSBC to quiet title to property.   In its petition, Khyber alleged it was the owner of a lot in Valencia II, an addition in the City of Dallas, based on a trustee's deed dated February 4, 2009 and filed of record under Document No. 200900033832.   Khyber further alleged Option One Mortgage Corporation accepted and recorded a deed of trust creating a security lien on the property on December 16, 2006.   Khyber stated the deed of trust was filed under Document No. 20070002014 in the real property records of Dallas County and was assigned to HSBC, who posted the property for foreclosure.   Khyber asserted the deed of trust under which HSBC claimed an interest was invalid and sought a judgment ordering it removed from the title of the property.

The day after the suit was filed, HSBC foreclosed the deed of trust and sold the property to itself at a nonjudicial foreclosure sale.   A substitute trustee's deed conveying the property to HSBC was recorded as Document No. 200900135536.   Khyber did not amend its pleadings to address these events.   Two days after the foreclosure sale, citation was served on HSBC by “delivering [a copy of the citation and copy of the pleading] to the registered agent for service C.T. Corporation, at 350 North St. Paul, 29 th floor, Dallas County, Dallas, Texas 75201.   Process was delivered to Dominque Sheeler, Sr. Operation Specialist.”   HSBC did not answer.

Khyber moved for default judgment.   In its motion, Khyber sought a judgment declaring both the deed of trust (No. 20070002014) and substitute trustee's deed (No. 200900135536) invalid.   Evidence attached to the motion included the substitute trustee's deed.   The trial court granted the motion and rendered judgment that (1) declared Khyber owner of the property and (2) ordered both the deed of trust and substitute trustee's deed invalid and removed both from the title of the property.   HSBC filed this restricted appeal.

A restricted appeal is a direct attack on the trial court's judgment.  Gen. Elec. Co. v. Falcon Ridge Apts., J.V., 811 S.W.2d 942, 943 (Tex.1991).   A restricted appeal must (1) be brought within six months after the trial court signs the judgment, (2) by a party to the suit, (3) who did not participate in the actual trial, and (4) the error complained of must be apparent on the face of the record.  Tex.R.App. P. 26.1(c), 30;  Norman Commc'ns v. Tex. Eastman Co., 955 S.W.2d 269, 270 (Tex.1997).   The parties do not dispute this restricted appeal satisfies the first three requirements, and the only issue is whether there is error apparent on the face of the record.

In its second issue, HSBC argues the trial court erred in granting a default judgment that did not conform to and awarded Khyber more relief than requested in the original petition.   We agree.

A default judgment must be supported by the pleadings.  Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex.1979).   A default judgment not supported by the pleadings is fundamentally erroneous.  Caruso v. Krieger, 698 S.W.2d 761, 762 (Tex.App.-Austin 1985, no writ).   Absent fair notice, a party who fails to appear at trial will not be held to have tried an unpleaded cause of action by implied consent.  Id.

Here, the allegations in Khyber's original petition relate only to the deed of trust filed of record under Document No. 20070002014.   The petition does not contain any allegations regarding the substitute trustee's deed.   Consequently, there were no pleadings to support the trial court's judgment ordering the substitute trustee's deed invalid and removing it from the title of the property.   In its brief, Khyber relies on case law requiring a plaintiff to obtain new service of process on a defaulting defendant only when the plaintiff amends its pleadings to assert a new cause of action or seek a more onerous judgment.   Khyber asserts it “did not make any onerous judgment” and “did not need new service of process for [HSBC] to move for its default judgment.”   Khyber's argument misses the point because Khyber did not amend its pleadings to add the substitute trustee's deed.   Because there were no pleadings to support judgment on the substitute trustee's deed, we conclude error exists on the face of the record.   We sustain the second issue.

In light of our disposition of the second issue, we need not address HSBC's first issue in which it complained of defective service.   Upon remand, HSBC is presumed to have entered its appearance to the term of the court at which the mandate shall be filed.   See Tex.R. Civ. P. 123.

We reverse the trial court's judgment and remand this cause to the trial court for further proceedings.

100220F.P05

MOLLY FRANCIS JUSTICE