A bank holds a deed of trust on a homeowner’s property. The homeowner files suit to quiet title after the statute of limitations expires on the bank’s foreclosure rights. The homeowner serves the bank by serving the Texas Secretary of State under provisions governing foreign corporate fiduciaries. The bank never receives the citation because it failed to update its contact information. A default judgment is entered against the bank.
This scenario raises a question that has divided Texas courts for years. Financial institutions often act as trustees and fiduciaries while also conducting regular banking business. Multiple statutes govern service of process on these entities. When statutes overlap, which one controls? Can a plaintiff choose among alternative service methods, or must the plaintiff follow specific procedures designed for financial institutions?
The stakes are high. Improper service means no jurisdiction. Default judgments rendered without proper service must be set aside even years later. Yet the statutory landscape governing service on financial institutions is complex, with provisions scattered across multiple codes that sometimes appear to conflict.
Does serving the Secretary of State under the Estates Code satisfy the requirement to serve a financial institution’s registered agent under the Civil Practice and Remedies Code? The Texas Supreme Court’s decision in U.S. Bank National Ass’n v. Moss, 644 S.W.3d 130 (Tex. 2022), resolves this question and clarifies how financial institutions must be served in Texas.
Facts & Procedural History
Dennis Moss owned a home in Dallas County. In 2005, he refinanced his mortgage and signed a home equity deed of trust. U.S. Bank claimed ownership of that deed through an assignment made in favor of “U.S. Bank National Association as Trustee.” The bank served Moss with a notice of acceleration in 2010 but did not foreclose on his home.
In 2017, Moss sued the bank seeking to quiet title to the home. He alleged that the bank could no longer sell the property under the deed of trust because the statute of limitations had expired. The bank was domiciled in Ohio and acting as a foreign corporate fiduciary in Texas. Moss served the bank with process by serving the Secretary of State under Chapter 505 of the Texas Estates Code.
Chapter 505 provides that a foreign corporate fiduciary must appoint the Secretary as the fiduciary’s agent for service of process in actions relating to a trust, estate, fund, or other matter with respect to which the fiduciary is acting in a fiduciary capacity. The Secretary issued a Whitney certificate documenting that his office forwarded the citation by certified mail to Kristin Strong, whom the bank had designated under Chapter 505 as the person to receive process. The citation was returned to the Secretary bearing the notation “Return to Sender, No Such Number, Unable to Forward.”
The bank did not appear in the quiet-title suit. Moss moved for a no-answer default judgment in the fiduciary litigation, which the trial court granted in April 2017. Two months later, the bank learned of the default judgment. It filed a notice removing the case to federal court, arguing that removal was timely because it had not been properly served. Moss moved for remand. The federal district court granted the motion, holding that the bank had been properly served under Texas law and its removal was untimely.
On remand, the state trial court concluded it lacked jurisdiction to consider the bank’s challenge to the default judgment’s validity. The bank then filed an equitable bill of review seeking to set aside the judgment. Both parties moved for summary judgment on the bill of review. The trial court denied the bank’s motion and granted Moss’s motion. The Dallas Court of Appeals affirmed, holding that the service provisions for foreign corporate fiduciaries in the Estates Code are compatible with provisions for serving financial institutions in Section 17.028 of the Civil Practice and Remedies Code. The court concluded that service on the Secretary as the appointed agent for a foreign corporate fiduciary satisfied Section 17.028’s requirement that citation be served on the financial institution’s “registered agent.”
The Statutory Framework for Serving Financial Institutions
Section 17.028 of the Texas Civil Practice and Remedies Code addresses service on financial institutions. Subsection (b) provides that “citation may be served on a financial institution by: (1) serving the registered agent of the financial institution; or (2) if the financial institution does not have a registered agent, serving the president or a branch manager at any [Texas] office.”
The statute does not define “financial institution.” Instead, it cross-references the definition in Section 201.101 of the Texas Finance Code. That section’s definition includes a bank chartered under the laws of the United States. U.S. Bank qualifies as an “out-of-state financial institution” because it is not chartered under Texas law and has its main office in another state.
Section 201.102 of the Finance Code provides that an out-of-state financial institution must file an application for registration with the Secretary of State by complying with the law relating to foreign corporations doing business in Texas. This requirement applies “notwithstanding a provision in that law that purports to limit or prohibit its applicability to financial institutions.”
The general law relating to registration of foreign corporations doing business in Texas is Chapter 9 of the Business Organizations Code. Chapter 9 requires a foreign corporation to file an application for registration with the Secretary to transact business in Texas. The application must state the name and address of the initial registered agent for service of process that Chapter 5 requires to be maintained. It must also state that the Secretary is appointed the agent of the foreign filing entity for service of process under the circumstances provided by Section 5.251.
Chapter 5 of the Business Organizations Code requires each foreign entity to designate and continuously maintain a “registered agent.” A registered agent is an agent of the entity on whom may be served any process, notice, or demand required or permitted by law to be served on the entity. The registered agent may be either an individual or an organization that meets certain requirements.
Section 5.251 provides that if the entity fails to appoint or does not maintain a registered agent in Texas, or if the registered agent cannot with reasonable diligence be found at the registered office, then the Secretary is an agent of the entity for purposes of service of process. This provision treats the Secretary as separate from any registered agent maintained by the registered entity.
Chapter 505 and Foreign Corporate Fiduciaries
Chapter 505 of the Texas Estates Code provides a separate set of agency and service rules for foreign corporate fiduciaries. A “foreign corporate fiduciary” is defined as a corporate fiduciary that does not have its main branch or a branch office in Texas. Covered fiduciaries include but are not limited to financial institutions.
Section 505.002 prevents the registration requirement in Chapter 9 of the Business Organizations Code from applying to foreign corporate fiduciaries by providing that they are “not transacting business in the state within the meaning of Section 9.001.” However, the section also states that Chapter 505 is “in addition to, and not a limitation on,” certain portions of the Finance Code including Section 201.102.
Section 505.004 requires that a foreign corporate fiduciary file with the Secretary a properly executed written instrument appointing the Secretary as the fiduciary’s agent for service of process in actions relating to a trust, estate, fund, or other matter with respect to which the fiduciary is acting in a fiduciary capacity. This provision does not refer to the Secretary as a “registered agent.”
The overlapping requirements create confusion. Foreign financial institutions acting as fiduciaries must comply with Chapter 505. They must also register with the Secretary under Chapter 9 and appoint a registered agent. The question becomes whether serving the Secretary under Chapter 505 satisfies the requirement to serve the registered agent under Section 17.028.
Whether Section 17.028 Is Mandatory or Permissive
Moss argued that Section 17.028’s use of the word “may” signals that service under that statute is permissive rather than mandatory. He contended that plaintiffs can choose alternative methods of service including service under Chapter 505.
The Texas Supreme Court rejected this argument. The court acknowledged that “may” does not mean “must” by definition. However, “may” can have different meanings depending on context. The word can introduce a permitted option that a person may choose to pursue or not. It can also introduce a list of permitted options from which a person must choose.
The court concluded that “may” in Section 17.028(b) introduces two alternative methods of service. Which method applies depends on whether the institution has a registered agent. The remainder of the statute confirms that a plaintiff must pursue the applicable method.
Subsection (d) provides: “If citation has not been properly served as provided by this section, a financial institution may maintain an action to set aside the default judgment entered against the financial institution.” This subsection shows that the Legislature intended for Section 17.028 to provide the exclusive methods of service on financial institutions. The court held that compliance with Section 17.028 is mandatory when the defendant is a financial institution.
Whether the Secretary Is a “Registered Agent” Under Section 17.028
The central question remained whether the Secretary as the bank’s appointed “agent” under Chapter 505 is also its “registered agent” for purposes of Section 17.028. Answering this question required examining all relevant statutes governing entities organized outside Texas.
The court noted that neither Chapters 5 and 9 of the Business Organizations Code, nor Chapter 505 of the Estates Code, identify the Secretary as a “registered” agent. Chapters 5 and 9 distinguish between a registered agent and the Secretary as agent. When Chapter 5 addresses circumstances where the Secretary may be served as an agent, it treats that situation as arising only when the entity fails to appoint or maintain a registered agent, or when the registered agent cannot be found.
All relevant statutory schemes indicate that a foreign financial institution must register with the Secretary and appoint a registered agent whether serving as a fiduciary or not. Chapter 505 expressly provides that it is “in addition to, and not a limitation on,” certain portions of the Finance Code including Section 201.102. Section 201.102 requires an out-of-state financial institution to register with the Secretary under Chapter 9 “notwithstanding a provision that purports to limit or prohibit its applicability to financial institutions.”
The statutory landscape reveals that although the Secretary is a valid agent for service of process in some contexts, it does not occupy the role of a foreign corporation’s “registered agent” as defined in the Business Organizations Code. In a case against a foreign financial institution, service on the Secretary pursuant to Chapter 505 of the Estates Code does not constitute service on the institution’s registered agent as required by Section 17.028.
Why Lower Courts Reached the Wrong Conclusion
The federal district court and Dallas Court of Appeals concluded that service on the Secretary pursuant to Chapter 505 is equivalent to serving a financial institution’s registered agent for purposes of Section 17.028. They reasoned that because the financial institution appoints the Secretary as its agent when it acts as a foreign corporate fiduciary, serving the Secretary qualifies as serving the registered agent of the financial institution.
The Texas Supreme Court disagreed with this reasoning. None of these courts addressed how the Estates Code and Civil Practice and Remedies Code interact with the Finance Code or Business Organizations Code. Because these courts focused exclusively on the Estates and Civil Practice and Remedies Codes, they did not take into account the information to be gained from the statutory landscape as a whole.
When all relevant statutes are considered, it becomes clear that the Legislature did not consider the Secretary to be a financial institution’s “registered agent” under Section 17.028. The court acknowledged that the service scheme emerging from these statutes is neither straightforward nor ideal. The overlap between service methods in Chapter 505 and Section 17.028 renders them potentially redundant. However, the court cannot streamline administrative procedures when the plain statutory text dictates what qualifies as proper service.
The text of Section 17.028 requires service on a financial institution’s “registered agent.” The text of other statutes establishes that the Secretary is not a “registered” agent. The Business Organizations Code creates a distinct category of registered agents that foreign entities must appoint and maintain. The Secretary serves as an alternative agent only in limited circumstances where the registered agent is unavailable or cannot be found.
The Consequences of Improper Service
A default judgment is improper against a defendant who has not been served in strict compliance with the law, accepted or waived process, or entered an appearance. Because Moss’s service of the bank via the Secretary pursuant to Chapter 505 did not constitute service on the financial institution’s registered agent as required by Section 17.028, the bank was not properly served. The default judgment rendered against it had to be set aside.
The court reversed the judgment denying the bill of review, rendered summary judgment setting aside the default judgment, and remanded the case to the trial court for further proceedings on the merits of the underlying suit. This outcome meant that years of litigation over service of process resulted in the case returning to square one for trial on the original quiet title claim.
The court noted that the service dispute could have been avoided by either party. The bank had been served under Chapter 505 in other cases, so it was aware that it had not updated its designation of the person to receive process from the Secretary. Similarly, Moss was aware that citation forwarded to the bank’s Chapter 505 designee was unlikely to reach the bank. Both parties could have taken steps to ensure proper service and avoid years of procedural litigation.
The Takeaway
The U.S. Bank v. Moss decision establishes that financial institutions must be served in accordance with Section 17.028 of the Texas Civil Practice and Remedies Code. This statute provides the exclusive methods of service on financial institutions. Service on the Secretary of State under Chapter 505 of the Estates Code does not satisfy Section 17.028’s requirement that citation be served on the financial institution’s registered agent. Although the statutory scheme governing service on financial institutions is complex and involves provisions scattered across multiple codes, the plain text of these statutes distinguishes between a registered agent appointed under the Business Organizations Code and the Secretary of State serving as an agent under other circumstances. Plaintiffs suing foreign financial institutions in Texas must identify and serve the institution’s registered agent as designated in its registration with the Secretary under Chapter 9 of the Business Organizations Code. Attempting to serve the Secretary under alternative statutory provisions will not confer jurisdiction over the financial institution.
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