Service on financial institutions in Texas can be done by serving the registered agent of the financial institution; or if the financial institution does not have a registered agent, by serving the president or branch manager at any office located in Texas. Tex. Civ. Prac. & Rem. Code 17.028 (b) (1) & (2)(Supp. 2014). Service of credit unions are slightly different in that if there is no registered agent, service can be done by serving the president or vice president (as opposed to a branch manager). Tex. Civ. Prac. & Rem. Code 17.028 (c) (1) & (2)(Supp. 2014). The issue that has arisen risen in both the Dallas and El Paso Court of Appeals recently is the effectiveness of service on a financial institution by serving the Texas Secretary of State and the entry of default judgments against financial institutions. See Bank of N.Y. v. Chesapeake 34771 Land Trust, 456 S.W.3d 628 (Tex. App.-El Paso 2015, n.w.h.) and Bank of N.Y. Mellon v. Redbud 115 Land Trust, 452 S.W.3d 868 (Tex. App.- Dallas 2014, writ denied) (statute not limited to Texas institutions).
In Bank of N.Y. v. Chesapeake, the El Paso Court of Appeals reiterated that the procedure for serving financial institutions is set out in Tex. Civ. Prac. & Rem. Code 17.028. Chesapeake served Bank of N.Y. via the Texas Secretary of State and a no answer default judgment was entered against the bank. Bank of N.Y. appealed because service of process was improper and because the relief granted was not authorized by law and in excess of what was plead.
The El Paso Court of Appeals held that when there is a statutory procedure for giving notice and obtaining jurisdiction, it is generally exclusive and the form must be followed with reasonable strictness. As a result, the inquiry is not whether a defendant had actual knowledge or notice of the proceeding against him; rather the question is whether the knowledge was conveyed to him in the manner required by the statute. A party suing a financial institution in Texas must serve process on the institution in accordance with Tex. Civ. Prac. & Rem. Code 17.028; otherwise, service is ineffective. Section 17.028 is the exclusive method for serving a financial institution, foreign or domestic. See Bank of N.Y. v. Chesapeake 34771 Land Trust, 456 S.W.3d 628, 632 (Tex. App.-El Paso 2015, n.w.h.). Since the defendant in Bank of N.Y. v. Chesapeake was served via the Texas Secretary of State, the default judgment against it was overturned because the bank was not served properly in accordance with Tex. Civ. Prac. & Rem. Code 17.028. Further, the court noted that the legislature enacted Tex. Civ. Prac. & Rem. Code 17.028 to protect financial institutions from default judgments by requiring that they be served in accordance with the statute.
Service of process has to be done right and Texas courts have shown that compliance with the statute will be strictly reviewed. Both the Bank of N.Y. and Bank of N.Y. Mellon cases also demonstrate once again that specific statutory language will control over general language as is set out for service on the Texas Secretary of State. The opinions in this blog are solely the author’s and any comments, replies or suggestions may be sent to john@jrjoneslaw.com.
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