Appeals court says 'no demonstration that ROC Funding used reasonable diligence' in serving parties in suit

By Tomas Kassahun | Dec 20, 2018

The Court of Appeals for the 1st District of Texas has reversed a trial court’s ruling against Greg Blosser and The Surrogacy Group LLC.   pexels.com

HOUSTON – The Court of Appeals for the 1st District of Texas has reversed a trial court’s ruling against Greg Blosser and The Surrogacy Group LLC, citing that there were "defects in the service effected" by ROC Funding Group.

The Appeal Court’s decision on Dec. 6, written by Justice Evelyn V. Keyes, stated that ROC Funding did not attempt to serve either Blosser or Surrogacy Group through a registered agent and that it was aware of problems with the address it provided for service on the defendants. The court reversed and remanded the decision made by the Harris County Civil Court at Law No. 2.

According to the Appeals Court, the certificate from the Secretary of State indicated that the citation forwarded to Blosser at 126 Cathedral St., Annapolis, Maryland was “returned to this office on Feb. 23, 2017,” bearing the notation “return to sender, not deliverable as addressed, unable to forward.”

The Appeals Court added that the certification also stated that “As of this date, no response has been received in this office.”

The Appeals Court said there was no indication that any attempt was made to provide notice to Blosser’s or Surrogacy Group's mailing address contained in the record — 839 Bestgate Road, Suite 400, Annapolis, Maryland.

According to the Appeals Court, the record must prove that the plaintiff used reasonable diligence in attempting to serve a defendant’s registered agent at the registered office before substituting service on the Secretary of State.

In this case, the Appeals Court said ROC Funding argued that “service through the Secretary of State is appropriate because defendants do not have a regular place of business, or a designated agent for service of process, in Texas.”

“Assuming that Blosser and Surrogacy Group were both required to designate an agent for service of process in Texas, there is no demonstration that ROC Funding used reasonable diligence in seeking to serve the defendants through such a registered agent,” the opinion stated. 

The Appeals Court concluded that Blosser and Surrogacy Group were not properly served in the suit.

“The failure of service deprived the trial court of in personam jurisdiction to enter the default judgment against Blosser and Surrogacy Group, and, thus, we need not consider their other contentions on appeal,” the opinion stated.

According to the opinion, "ROC Funding filed its original petition asserting causes of action for breach of contract, conversion, suit on Blosser’s personal guarantee and attorney’s fees."

The Appeals Court said ROC Funding alleged that it is “'a corporation that purchases future receipts from companies like [Surrogacy Group]' and that the parties “executed a Payment Rights Purchase and Sale Agreement.”

The agreement, cited by the Appeals Court, stated that “in return for the purchase amount, [ROC Funding] is entitled to receive a percentage of  [Surrogacy Group’s] future sales or receipts.”  

“ROC Funding asserted that it paid the purchase price, but Surrogacy Group failed to meet its obligations in paying a portion of its future receipts as required by the agreement,” the opinion stated.

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