                                    In The

                              Court of Appeals
                   Ninth District of Texas at Beaumont
                         ____________________
                            NO. 09-17-00333-CV
                         _______________________

OFFSHORE EXPRESS, INC., OFFSHORE SPECIALTY FABRICATORS,
     LLC, OFFSHORE INTERNATIONAL GROUP, OFFSHORE
  SHIPBUILDING, INC., AVID, LLC, AVID AIR, LLC, FAIRWAYS,
    INC., FAIRWAYS EXPLORATION AND PRODUCTION, LLC,
   PISCO PORTON, LLC, AND FS AIR SERVICE, INC., Appellants

                                      V.

      KLEIN INVESTIGATIONS AND CONSULTING, A DIVISION
              OF KLEIN INVESTMENTS, INC., Appellee


                   On Appeal from the 60th District Court
                         Jefferson County, Texas
                       Trial Cause No. B-199,953-A


                        MEMORANDUM OPINION

      Appellants Offshore Express, Inc.; Offshore Specialty Fabricators, LLC;

Offshore International Group; Offshore Shipbuilding, Inc.; Avid, LLC; Avid Air,

LLC; Fairways, Inc.; Fairways Exploration and Production, LLC; Pisco Porton,

LLC; and FS Air Service, Inc. appeal from the trial court’s Severed Default

                                      1
Judgment rendered in favor of Appellee Klein Investigations and Consulting, a

Division of Klein Investments, Inc. Appellants also bring an interlocutory appeal of

the trial court’s denial of its Motion to Dismiss Plaintiff’s Motion for Sanctions

Under the Texas Citizens Participation Act (“TCPA”). We reverse and remand in

part and we dismiss in part.

                               Procedural Background

      Appellee filed its original petition in cause number B-199,953 against eleven

defendants: the ten defendants who were parties to this appeal and one defendant

Kallop Enterprises, LLC (“Kallop”) who is not a party to this appeal. In the original

petition, Appellee claimed that the defendants were liable to the Appellee “jointly as

a single enterprise, for breach of contract.” Appellee attached a copy of a “Client

Services Agreement” to the petition, which states “This agreement is between Klein

Investigations and Consulting/Klein Investments, Inc. and The William Kallop

Companies, The William Kallop Family Fairways, Inc., Offshore Express Entities,

as well as any Kallop organization assigned by William Kallop (herein referred to

as the ‘client’)[.]” The agreement provided for payments of a retainer and stated that

$120,000 would be paid twice a year for years one through five and $160,000 would

be paid twice a year for years six through ten. The petition alleged that, under the

agreement, Appellee provided various services, including investigation, security,

                                          2
and asset monitoring. According to the petition, the defendants “conducted their

business with Plaintiff as a joint or single enterprise comprised collectively of all

Defendants, who are all related companies operating as a single enterprise.”

Appellee sought actual and consequential damages and attorney’s fees, for a total

monetary recovery of $604,026.

      On May 22, 2017, Appellee filed a Notice of Filing Return of Service, which

stated that the defendants were “served via certified mail, return receipt requested

on May 11, 2017[.]” The Notice included attachments that included a page entitled

“USPS Tracking Results” and it also included copies of eleven citations and returns

of service. The returns of service were filled out by a private process server and

included a statement that service was made on each defendant on May 8, 2017, and

the returns were signed and executed by the process server on May 9, 2017. On June

8, 2017, Kallop filed a motion to quash service, alleging it had not been served and

that the return of service was invalid, as well as a motion to transfer venue.

      On June 23, 2017, Appellee filed a motion for entry of default judgment

alleging that the defendants had been “served via certified mail, return receipt

requested on May 11, 2017[.]” According to the motion for entry of default, the

answer date had passed, and the defendants had not filed an answer. Kallop

responded to the motion and argued that the attempted service of process on the

                                          3
defendants and the returns of service on file were defective and that the plaintiff had

not properly served Kallop or the other defendants, and that neither Kallop or the

other defendants signed the contract. Following a hearing on the motion for default

judgment, plaintiff filed a memorandum with the trial court in which it stated that it

was not seeking a default judgment against Kallop. The plaintiff then filed a motion

to sever requesting that Kallop be retained as the sole defendant in cause number B-

199,953 and that the claims against the other ten defendants be severed into a new

cause number. The trial court granted the motion to sever and the claims against the

other ten defendants were severed into cause number B-199,953-A. 1 The same day,

the trial court entered a Severed Default Judgment in cause number B-199,953-A

against Appellants “jointly and severally as a single business enterprise,” and the

trial court awarded the Appellee unpaid amounts, interest, and consequential

damages totaling $562,227.30 against Appellants.

      Following entry of the severed default judgment, Appellants filed an objection

to the improper severance, arguing that “a court cannot sever claims against

defendants when (i) the injury is indivisible; (ii) a single cause of action is asserted;

and (iii) multiple defendants have the same liability.” Appellants also argued that


      1
        Appellee subsequently filed a motion to dismiss without prejudice to its
claims against Kallop Enterprises, LLC, which the trial court granted. Kallop
Enterprises, LLC is not a party to this appeal.
                                          4
the trial court severed the lawsuits without a hearing and without giving the

defendants an opportunity to respond or object. Appellants also filed a First

Amended Motion for New Trial. Appellants argued that “The Court should vacate

the void July 11, 2017, default judgment and order a new trial because (i) process

service was fatally defective; (ii) the returns of service are fatally defective; and

(iii) movants’ motion to transfer venue precluded default judgment.” In its

opposition to the motion for new trial, Appellee argued that Appellants were

properly served on May 11, 2017, but refused to appear; that Appellants had actual

knowledge of the lawsuit; that if there were defects in service, the only remedy was

a motion to quash service; and that Appellants had not met the Craddock standards

for setting aside a default judgment. After a hearing on the motion for new trial, the

trial court denied the motion. Appellants filed a notice of appeal of the default

judgment on August 18, 2017.

      On November 6, 2017, Appellants filed a Suggestion of Bankruptcy with this

Court in which they alleged

      [] On October 1, 2017, one or more of defendants filed voluntary
      petitions for relief under chapter 11 U.S.C. § 11. See, e.g., No. 17-
      35623; In re Offshore Specialty Fabricators, LLC; in the U.S.
      Bankruptcy Court for the Southern District of Texas, Houston Division.

The appellate record also includes a copy of the Voluntary Petition for Non-

Individuals Filing for Bankruptcy filed by Offshore Specialty Fabricators, LLC
                                       5
indicating that the bankruptcy was filed on October 1, 2017. On November 7, 2017,

this Court issued an order stating “This proceeding is abated for administrative

purposes only[] and will be treated as a closed case unless timely reinstated by proper

motion. See Tex. R. App. P. 8.2.”

      On December 21, 2017, Appellee then filed with the trial court a motion for

sanctions against Appellants’ attorney alleging that the suggestion of bankruptcy

was a “fraudulent pleading[]” and made to stop Appellee’s collection efforts. The

motion requested sanctions “pursuant to Tex. R. Civ. P. 11” and the trial court’s

“inherent sanctions power.” On December 27, 2017, Appellee filed a “Motion to

Dismiss Plaintiff’s Motion for Sanctions Under the Citizens Participation Act”

arguing that the motion for sanctions should be dismissed because it was based on

or related to the defendants’ exercise of the right to petition and because the trial

court could not award sanctions as requested under Rule 11 or its inherent power.

The Defendants also set a hearing on the motion to dismiss under the TCPA for

January 4, 2018. Appellee filed a motion to continue the hearing date and for

discovery. On January 4, 2018, the trial court held a “Hearing on Plaintiff[’s] Motion

to Continue Hearing Date and for Discovery on Defendants’ Motion to Dismiss

Under the TCPA -and- Defendants’ Motion to Dismiss Plaintiff’s Motion for

Sanctions Under the Citizens Participation Act (TCPA)[.]”

                                          6
      On February 7, 2018, the bankruptcy court entered an Order Modifying

Automatic Stay “to allow the appeal of Cause No. 09-17-00333-CV . . . to proceed

through the conclusion of all appeals.” On February 8, 2018, Appellants filed with

this Court a motion to reinstate, which we granted on February 23, 2018.

      On February 22, 2018, the trial court entered an “Order on Plaintiffs’ Opposed

Motion to Continue Hearing Date and for Discovery on Defendants’ Motion to

Dismiss Under TCPA[.]” The order states that Appellants’ motion to dismiss under

the TCPA was denied by operation of law. The order denied “Plaintiffs’ Opposed

Motion to Continue Hearing Date and for Discovery on Defendants’ Motion to

Dismiss Under the TCPA[.]” On February 23, 2018, Appellants filed a “Notice of

Accelerated Interlocutory Appeal of the Denial of Their TCPA Motion to

Dismiss[.]”

                                  Default Judgment

      Appellants’ first four issues pertain to the default judgment rendered against

them. In their first issue, Appellants argue that the trial court’s default judgment was

void because Appellee’s defective service of process deprived the trial court of

jurisdiction over Appellants. Appellants’ second issue argues that the trial court

erred in granting default judgment because Appellants’ motion to transfer venue was

pending. Appellants’ third issue argues that the “single business enterprise” theory

                                           7
upon which the trial court granted default judgment is not a valid theory of liability.

And Appellants’ fourth issue argues that the consequential damages awarded in the

default judgment are not recoverable on a breach of contract claim.

      When a defendant has not answered, a trial court acquires jurisdiction over

that defendant solely on proof of proper service. See Tex. R. Civ. P. 107 (prohibiting

rendition of default judgment unless proof of proper service or process and return,

whether in compliance with governing rules or as ordered by court, have been on

file for ten days); In the Interest of E.R., 385 S.W.3d 552, 563 (Tex. 2012)

(explaining that if service of process is invalid, it is of no effect and cannot establish

the trial court’s jurisdiction over a party); Livanos v. Livanos, 333 S.W.3d 868, 874

(Tex. App.—Houston [1st Dist.] 2010, no pet.) (“A claim of a defect in service of

process challenges the trial court’s personal jurisdiction over the defendant.”) (citing

Furst v. Smith, 176 S.W.3d 864, 868 (Tex. App.—Houston [1st Dist.] 2005, no

pet.)). A party obtaining a default judgment must demonstrate that it complied with

the rules for service of citation to withstand a direct attack on the judgment. Ins. Co.

of State of Pa. v. Lejeune, 297 S.W.3d 254, 256 (Tex. 2009); Primate Constr., Inc.

v. Silver, 884 S.W.2d 151, 152 (Tex. 1994) (per curiam). A default judgment cannot

withstand a direct attack by a defendant who demonstrates that it was not served in



                                            8
strict compliance with the Texas Rules of Civil Procedure. See Livanos, 333 S.W.3d

at 874.

      Under the Texas Rules of Civil Procedure, citation may be served by “mailing

to the defendant by registered or certified mail, return receipt requested, a true copy

of the citation with a copy of the petition attached thereto.” Tex. R. Civ. P. 106(a)(2).

“When the citation was served by registered or certified mail as authorized by Rule

106, the return by the officer or authorized person must also contain the return receipt

with the addressee’s signature.” Tex. R. Civ. P. 107(c). “‘If the return receipt is not

signed by the addressee, the service of process is defective[.]’” PPI Tech. Servs., LP

v. Christian Operating Co., No. 09-09-00022-CV, 2009 Tex. App. LEXIS 5852, at

*3 (Tex. App.—Beaumont July 30, 2009, no pet.) (mem. op.) (quoting Bradley Wells

Corp. v. Higginbotham, No. 12-04-00114-CV, 2004 Tex. App. LEXIS 9667, at *6

(Tex. App.—Tyler Oct. 29, 2004, no pet.) (mem. op.)); see also Keeton v. Carrasco,

53 S.W.3d 13, 19 (Tex. App.—San Antonio 2001, pet. denied). Whether service

strictly complied with the rules is a question of law that we review de novo. See

Furst, 176 S.W.3d at 869-70.

      The Texas Supreme Court requires strict compliance with the rules for service

of citation and proper service must affirmatively appear on the record for a default

judgment to withstand direct attack. See LeJeune, 297 S.W.3d at 256 (citing Primate

                                           9
Constr., Inc., 884 S.W.2d at 152); Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990);

Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884, 885 (Tex. 1985);

Barker CATV Constr., Inc. v. Ampro, Inc., 989 S.W.2d 789, 792 (Tex. App.—

Houston [1st Dist.] 1999, no pet.). If strict compliance is not shown, the service of

process is invalid and of no effect. Uvalde Country Club, 690 S.W.2d at 885. We

make no presumptions of valid issuance, service, or return of citation when

examining a default judgment. Id. Strict compliance with the rules, however, does

not require “‘obeisance to the minutest detail.’” Ortiz v. Avante Villa at Corpus

Christi, Inc., 926 S.W.2d 608, 613 (Tex. App.—Corpus Christi 1996, writ denied)

(quoting Herbert v. Greater Gulf Coast Enters., Inc., 915 S.W.2d 866, 871 (Tex.

App.—Houston [1st Dist.] 1995, no writ)). If the record as a whole, including the

petition, citation, and return, shows that the citation was served on the defendant in

the suit, service of process will not be invalidated. Regalado v. State, 934 S.W.2d

852, 854 (Tex. App.—Corpus Christi 1996, no writ); Ortiz, 926 S.W.2d at 613;

Payne & Keller Co. v. Word, 732 S.W.2d 38, 41 (Tex. App.—Houston [14th Dist.]

1987, writ ref’d n.r.e.). “Actual notice to a defendant, without proper service, is not

sufficient to convey upon the court jurisdiction to render default judgment against

him.” See Wilson, 800 S.W.2d at 836 (citing Harrell v. Mexico Cattle Co., 11 S.W.

863, 865 (1889)); see also Hubicki v. Festina, 226 S.W.3d 405, 408 (Tex. 2007);

                                          10
Ross v. Nat’l Ctr. for the Emp’t of the Disabled, 197 S.W.3d 795, 798 (Tex. 2006)

(citing Caldwell v. Barnes, 154 S.W.3d 93, 97 n.1 (Tex. 2004); Wilson, 800 S.W.2d

at 837). 2

       Here, Appellee filed a Notice of Filing Return of Service in which the

Appellee alleged that each defendant was “served via certified mail, return receipt

requested on May 11, 2017[.]” In the Returns of service, completed by the process

server and filed of record with the clerk of court on May 22, 2017, the process server

states that the citation was served on each defendant “in person” on May 8, 2017. In

the exhibit attached to the Notice of Filing Return of Service there is a document

titled “USPS Tracking Results” and it is attached as an exhibit to the motion for

default judgment. According to the USPS Tracking Results document, an item was

“Delivered, Front Desk/Reception” and “Your item was delivered to the front desk

or reception area at 10:38 am on May 11, 2017 in HOUSTON, TX 77040[,]” but the

document does not include the delivery address or the name of any addressee. The

record does not include copies of any “green cards” (USPS Form 3811) establishing

the date of delivery of the certified mail and there is no name of the person(s)

accepting the delivery. See Tex. R. Civ. P. 107(c). Therefore, the record does not


       2
       We note that no further service is required on a defendant who has made an
appearance. See Tex. R. Civ. P. 120. The Appellee does not contend that Appellants
made an appearance prior to the entry of the default judgment.
                                        11
show strict compliance with the Texas Rules of Civil Procedure for service of

process and return of service. Based on the record before us, we conclude that the

trial court erred in rendering a default judgment. See In re E.R., 385 S.W.3d at 563;

Livanos, 333 S.W.3d at 874.

      Because we conclude that the default judgment was improper because the

record fails to reflect strict compliance with the service of process rules, we need not

address the Craddock factors. See Fid. & Guar. Ins. Co. v. Drewery Constr. Co.,

Inc., 186 S.W.3d 571, 574 (Tex. 2006) (per curiam) (Craddock factors must be met

only if the defendant against whom a default judgment was entered was properly

served but did not appear). Additionally, because we conclude that the default

judgment was improper, we need not address Appellants’ remaining issues two,

three, and four. See Tex. R. App. P. 47.1. We sustain Appellants’ first issue on

appeal, reverse the Severed Default Judgment, and remand to the trial court for

proceedings consistent with this opinion.

                        Motion to Dismiss Under the TCPA

      Appellants’ fifth and sixth issues address whether the trial court properly

dismissed Appellants’ motion to dismiss brought under the TCPA. Appellants’ fifth

issue argues that Appellants showed, by a preponderance of the evidence, that

Appellee’s motion for sanctions was based on Appellants’ exercise of the right to

                                          12
petition. Appellants’ sixth issue argues that Appellee failed to marshal clear and

specific evidence of a prima facie case for each essential element of its motion for

sanctions.

      Generally, we have appellate jurisdiction over an interlocutory appeal of a

denial of a motion to dismiss filed under section 27.003 of the Texas Civil Practice

and Remedies Act. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(12) (West

Supp. 2018)3 (citing Tex. Civ. Prac. & Rem. Code Ann. § 27.003 (West 2015)).

Even so, we must review sua sponte issues affecting the trial court’s subject matter

jurisdiction. See M.O. Dental Lab v. Rape, 139 S.W.3d 671, 673 (Tex. 2004).

Whether a trial court has subject-matter jurisdiction is a question of law we review

de novo. See Tex. Nat. Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 855

(Tex. 2002). Subject-matter jurisdiction is fundamental, it may be raised for the first

time on appeal without the usual requirements for preservation of error or

assignment of error. See Tex. Ass’n of Bus. v. Tex. Air Contr. Bd., 852 S.W.2d 440,

445 (Tex. 1993) (appellate court’s subject matter jurisdiction may be raised by the

court sua sponte).




      3
        We cite the current version of the statute as subsequent amendments do not
affect our disposition.
                                         13
      A trial court retains plenary power over its judgment until that judgment

becomes final for appellate purposes. Tex. R. Civ. P. 329b; Lehmann v. Har-Con

Corp., 39 S.W.3d 191, 200 (Tex. 2001); Fruehauf Corp. v. Carrillo, 848 S.W.2d 83,

84 (Tex. 1993) (per curiam). A judgment is final for purposes of appeal if it disposes

of all claims and parties then before the trial court. Lehmann, 39 S.W.3d at 195, 200,

205. In addition, a court of appeals acquires appellate jurisdiction over all parties to

the judgment or order challenged once any party perfects an appeal by filing a notice

of appeal. Tex. R. App. P. 25.1(b).

      The trial court’s order of July 11, 2017, granted the default judgment in trial

cause number B-199,953-A. Therein the trial court stated, “This is a Severed Final

Judgment that disposes of all issues and all parties that are subject to this Severed,

Default Final Judgment. Any relief not granted herein is expressly denied.” On

August 9, 2017, Appellants filed a First Amended Motion for New Trial requesting

that the default judgment be set aside, within the timeframe provided for by Rule

329b(a). See Tex. R. Civ. P. 329b(a) (a motion for new trial must be filed within

thirty days of the complained-of judgment) On August 18, 2017, the trial court

denied Appellants’ motion for new trial. Defendants filed a notice of appeal the same

day, and this Court acquired appellate jurisdiction over the parties at that time. See



                                          14
Tex. R. App. P. 25.1(b). We abated the appeal solely for administrative purposes

after Appellants filed a Suggestion of Bankruptcy.

      On December 21, 2017, Appellee filed a Motion for Sanctions in trial cause

number B-199,953-A, and Appellants then filed a Motion to Dismiss Plaintiff’s

Motion for Sanctions Under the Citizens Participation Act. On January 4, 2018, the

trial court held a “Hearing on Plaintiff[’s] Motion to Continue Hearing Date and for

Discovery on Defendants’ Motion to Dismiss Under the TCPA -and- Defendants’

Motion to Dismiss Plaintiff’s Motion for Sanctions Under the Citizens Participation

Act (TCPA).” On February 22, 2018, the trial court entered an order in cause number

B-199,953-A explaining that Appellants’ motion to dismiss under the TCPA had

been denied by operation of law. The next day, Appellants filed a notice of

interlocutory appeal of the denial of their motion to dismiss under the TCPA. We

reinstated the appeal on February 23, 2018, after we received a motion to reinstate.

      The trial court’s plenary power terminated before the Appellee filed its

Motion for Sanctions and before the Appellants filed their motion to dismiss under

the TCPA. The order granting the severed default judgment was a final, appealable

judgment that disposed of all claims in the severed action. See Lehmann, 39 S.W.3d

at 195, 200, 205. This Court acquired appellate jurisdiction on the appeal of the

default judgment. See Tex. R. App. P. 25.1(b).

                                         15
      Any judicial action taken by the trial court after the trial court’s plenary power

expired is void. See In re Dickason, 987 S.W.2d 570, 571 (Tex. 1998) (orig.

proceeding); State ex rel. Latty v. Owens, 907 S.W.2d 484, 486 (Tex. 1995); Malone

v. Hampton, 182 S.W.3d 465, 468 (Tex. App.—Dallas 2006, no pet.) (“Judicial

action taken after the expiration of the court’s jurisdiction is a nullity, and any orders

signed outside the court’s plenary jurisdiction are void.”); see also Mapco, Inc. v.

Forrest, 795 S.W.2d 700, 703 (Tex. 1990) (defining a void judgment as one rendered

when a court has no jurisdiction over parties or subject matter, no jurisdiction to

render judgment, or no capacity to act as a court). An appellate court has no

jurisdiction to consider the merits of an appeal from a void judgment. Ins. Co. of Pa.

v. Martinez, 18 S.W.3d 844, 847 (Tex. App.—El Paso 2000, no pet.); Dallas Cty.

Appraisal Dist. v. Funds Recovery, Inc., 887 S.W.2d 465, 468 (Tex. App.—Dallas

1994, writ denied). When faced with a void judgment on appeal, the appellate court

should declare the judgment void. See State ex rel. Latty, 907 S.W.2d at 486 (citing

Fulton v. Finch, 346 S.W.2d 823, 827 (Tex. 1961)).

      We conclude that the trial court lost plenary power over trial cause number B-

199,953-A after Appellants appealed the default judgment, and the denial of the

motion to dismiss under the TCPA from which Appellants’ purport to bring an

interlocutory appeal is void for lack of jurisdiction. See id. Because we lack

                                           16
jurisdiction to consider the merits of an appeal from a void judgment, we dismiss the

interlocutory appeal (Appellants’ fifth and sixth issues) related to the motion to

dismiss under the TCPA. See Martinez, 18 S.W.3d at 847.

      REVERSED AND REMANDED IN PART; DISMISSED IN PART.




                                                    _________________________
                                                       LEANNE JOHNSON
                                                             Justice


Submitted on November 5, 2018
Opinion Delivered December 13, 2018

Before McKeithen, C.J., Horton and Johnson, JJ.




                                         17
