Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

Need a little legal ammo? Search for caselaw on legal theories and defenses here:

Loading...

Monday, December 22, 2014

Governmental immunity from suit and statutory exception for some contract claims against local government entities


GOVERNMENTAL IMMUNITY AND LIMITED WAIVER UNDER THE LOCAL GOVERNMENT CODE 

Governmental immunity has two components: immunity from liability and immunity from suit. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). Immunity from suit is a bar to the suit in its entirety. Id. When a governmental entity enters into a contract, it waives immunity from liability; however, that waiver of liability does not establish waiver of immunity from suit. For there to be waiver of immunity from suit, the Legislature must specifically provide for the waiver. See Tooke, 197 S.W.3d at 332-33 (requiring clear and unambiguous language for waiver of governmental immunity).

Texas Local Government Code Section 271.152, entitled "Waiver of Immunity to Suit for Certain Claims," provides:

A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.
Tex. Local Gov't Code § 271.152 (West 2005) (Emphasis added).

Section 271.151 defines "governmental entity" as "a political subdivision of this State . . . including a . . . public school district." Tex. Local Gov't Code § 271.151(3) (West 2005); see also Witchita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 694 n.3 (Tex. 2003); Gatesco Q.M., Ltd. v. City of Houston, 333 S.W.3d 338, 348 n.7 (Tex. App.-Houston [14th Dist.] 2010, no pet.).

Section 271.151(2) defines "contract subject to this subchapter" as:
a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity."
Tex. Loc. Gov't Code § 271.151(2) (West 2005) (Emphasis added).
Section 271.153, entitled "Limitation on Adjudication Awards," provides the total amount of money awarded in a breach-of-contract action brought against a governmental entity is limited to "the balance due and owed by the local governmental entity under the contract . . . ." Tex. Loc. Gov't Code § 271.153(a) (West 2005) (Emphasis added). Thus, the party seeking to establish waiver must allege a local governmental entity is involved, the entity entered into a contract subject to the subchapter, and the adjudication involves the breach of that contract.

SOURCE: FOURTEENTH COURT OF APPEALS - 14-13-00882-CV - 11/6/2014

WAIVER OF GOVERNMENTAL IMMUNITY UNDER SECTION 271.152

TEX. LOC. GOV'T CODE ANN. § 271.152 (West, Westlaw through 2013 3d C.S.).

Under section 271.152 of the Texas Local Government Code, "A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract . . . ." Id. "`Contract subject to this subchapter' means a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity." Id. § 271.151(2) (West, Westlaw through 2013 3d C.S.). "Local governmental entity" includes public school districts such as BISD. Id. § 271.151(3)(B). By entering into a written contract stating the essential terms of an agreement to provide insurance services, a government entity waives its immunity from suit. Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 327 (Tex. 2006).

SOURCE: CORPUS CHRISTI COURT OF APPEALS - No. 13-11-00270-CV - 4/30/2014




Sunday, December 21, 2014

Novation defined (2014 Dallas Court of Appeals case)


WHAT IS A NOVATION IN A CONTRACTUAL RELATIONSHIP?

A novation is the substitution of a new agreement in place of an existing agreement between the parties. Goldman v. Olmstead, 414 S.W.3d 346, 358 (Tex. App.-Dallas 2013, pet. denied); In re B.N.L.-B., 375 S.W.3d 557, 562 (Tex. App.-Dallas 2012, no pet.). "A novation occurs if a contract evidences an intention to relinquish and extinguish pre-existing claims and rights of action; in lieu of the old obligation, a party accepts the promise of performance of the new obligation instead of the performance itself." Fulcrum Cent. v. AutoTester, Inc., 102 S.W.3d 274, 277 (Tex. App.-Dallas 2003, no pet).

ELEMENTS OF PROOF FOR NOVATION

To establish a novation, the party must prove: (1) a previous valid obligation; (2) an agreement of the parties to a new contract; (3) the extinguishment of the old contract; and (4) the validity of the new contract. Goldman, 414 S.W.3d at 358. The substitution of a new agreement occurs when a later agreement is so inconsistent with a former agreement that the two cannot subsist together. B.N.L.-B., 375 S.W.3d at 562-63. "In the absence of inconsistent provisions, `a second contract will operate as a novation of a first contract only when the parties to both contracts intend and agree that the obligations of the second shall be substituted for and operate as a discharge of the obligations of the first.'" Fulcrum Cent., 102 S.W.3d at 277. Whether a subsequent agreement works a novation of an earlier agreement is a question of intent. Id. The parties must have clearly intended a novation and a novation is never presumed. White v. Harrison, 390 S.W.3d 666, 675 (Tex. App.-Dallas 2012, no pet.).

SOURCE: DALLAS COURT OF APPEALS - 05-12-01719-CV - 7/30/2014



Saturday, December 20, 2014

Res Judicata (2014 caselaw snips)


Res judicata (14th Court of Appeals Houston)

A party claiming the affirmative defense of res judicata must prove (1) a prior final determination on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a second action based on the same claims as were or could have been raised in the first action. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010); McNeil Interests, Inc. v. Quisenberry, 407 S.W.3d 381, 387 (Tex. App.-Houston [14th Dist.] 2013, no pet.).

SOURCE: HOUSTON COURT OF APPEALS -  14-13-00113-CV - 7/15/2014

Res Judicata Doctrine (First Court of Appeals 2014)

The doctrine of res judicata bars parties from collaterally attacking a prior final judgment. Matthews Constr. Co. v. Rosen, 796 S.W.2d 692, 694 (Tex. 1990). A party seeking dismissal of a suit based on res judicata must prove (1) the existence of a prior final judgment on the merits by a court of competent jurisdiction, (2) identity of parties or those in privity with them, and (3) a subsequent action based on the same claims that were or could have been raised in the prior action. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010); Houtex Ready Mix Concrete & Materials v. Eagle Constr. & Envtl. Servs., L.P., 226 S.W.3d 514, 519 (Tex. App.-Houston [1st Dist.] 2006, no pet.). "[A] judgment is final for the purposes of issue and claim preclusion `despite the taking of an appeal unless what is called an appeal actually consists of a trial de novo.'" Scurlock Oil Co. v. Smithwick, 724 S.W.2d 1, 6 (Tex. 1986) (op. on reh'g) (quoting RESTATEMENT (SECOND) OF JUDGMENTS § 13 cmt. f (1982)).

Res judicata applies to persons in privity with a party to the prior judgment—that is, a person who is so connected with a party to the prior judgment that the party represented the same legal right. See Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363 (Tex. 1971). For purposes of res judicata, this identity of interest exists when: (1) the person can control an action even if he is not a party to it; (2) the party to the prior action represented the person's interests; or (3) the person is a successor-in-interest to the party in the prior action. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 653 (Tex. 1996). To determine whether res judicata bars a subsequent suit, we examine the circumstances of each case to identify any interests the parties may share. See Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 800-01 (Tex. 1992).

SOURCE: FIRST COURT OF APPEALS IN HOUSTON -

Res Judicata (Corpus Christi Court of Appeals) 

Res judicata prevents the relitigation of a claim or cause of action that has been finally adjudicated, as well as matters that, with the use of diligence, should have been litigated in the prior suit. Barr v. Resolution Trust Corp. ex rel. Sunbelt Fed. Sav., 837 S.W.2d 627, 628 (Tex. 1992). To be entitled to res judicata, the moving party must establish: (1) a prior final judgment on the merits was rendered by a court of competent jurisdiction; (2) the parties are identical or in privity; (3) the pending action is based on the same claims that were raised or could have been raised in the previous action. Id.

SOURCE: CORPUS CHRISTI COURT OF APPEALS- 13-12-00452-CV  5/29/2014



Offensive use of Collateral Estoppel doctrine by the Plaintiff against the Defendant


When the Plaintiff invokes collateral estoppel 

In seeking to invoke the doctrine of collateral estoppel, a party must establish three elements: (1) the facts sought to be litigated in the second action were fully and fairly litigated, (2) those facts were essential to the judgment in the prior action, and (3) the issue is identical to an issue in the prior action. Tex. Dep't of Pub. Safety v. Petta, 44 S.W.3d 575, 579 (Tex. 2001).

When collateral estoppel is being used offensively, as it is here, the plaintiff uses the doctrine to estop a defendant from relitigating an issue that the defendant litigated and lost in prior litigation. Yarbrough's Dirt Pit, Inc. v. Turner, 65 S.W.3d 210, 216 (Tex. App.-Beaumont 2001, no pet.).

A trial court has broad discretion in determining whether to allow a plaintiff to use collateral estoppel offensively. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331 (1979); see also Scurlock Oil Co. v. Smithwick, 724 S.W.2d 1, 7 (Tex. 1986) (citing Parklane Hosiery with approval); Goldstein v. Comm'n for Lawyer Discipline, 109 S.W.3d 810, 812-13 (Tex. App.-Dallas 2003, pet. denied). A trial court abuses its discretion only when its action is arbitrary and unreasonable, without reference to guiding rules or principles. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991).

In determining whether to apply collateral estoppel offensively, the trial court must consider the Parklane Hosiery factors. See Parklane Hosiery Co., 439 U.S. at 329-30; Yarbrough's Dirt Pit, 65 S.W.3d at 216. The first factor is whether application of the doctrine will tend to increase litigation by allowing a plaintiff to "wait and see" before filing suit instead of joining in the prior litigation. See Parklane Hosiery, 439 U.S. at 329-330; see also Avila v. St. Luke's Lutheran Hosp., 948 S.W.2d 841, 858 (Tex. App.-San Antonio 1997, pet. denied).

Second, the trial court must determine whether the offensive use of collateral estoppel is unfair under the circumstances of the particular case. See Parklane Hosiery, 439 U.S. at 330. Under this factor, we consider the defendant's incentive in the first action to vigorously defend the suit, the foreseeability of future suits, and the availability of procedural safeguards in the second suit that were not available in the first suit. See id.; see also Goldstein, 109 S.W.3d at 812-13.

SOURCE: CORPUS CHRISTI COURT OF APPEALS- 13-12-00452-CV  5/29/2014

When res judicata defenses is based on a JP court judgment, the outcome may be a different one


Austin-based court of appeals explains that preclusive effect under res judicata doctrine is more limited when the prior judgment was rendered by justice court (which is not a court of record), and reverses the trial court's dismissal of second lawsuit in district court for lack of evidence of privity as to the plaintiffs in the first suit and the second lawsuit. 

RES JUDICATA WHEN THE FIRST JUDGMENT WAS RENDERED BY THE JUSTICE OF THE PEACE & PRIVITY FOR RES  JUDICATA PURPOSES 

Res judicata prevents parties and those in privity with them from relitigating a case that a competent tribunal has adjudicated to finality. Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 206 (Tex. 1999). Res judicata generally bars claims or defenses that, through diligence, could have been litigated in the earlier suit but were not. Id. at 206-07; Getty Oil v. Insurance Co. of N. Am., 845 S.W.2d 794, 798 (Tex. 1992). "The doctrine is intended to prevent causes of action from being split, thus curbing vexatious litigation and promoting judicial economy." Ingersoll-Rand Co., 997 S.W.2d at 207.

ELEMENTS OF RES JUDICATA DEFENSE 

Res judicata "requires proof of the following elements: (1) a prior final judgment on the merits by a court of competent jurisdiction, (2) identity of parties or those in privity with them, and (3) a second action based on the same claims that were raised or could have been raised in the first action." Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). A litigant is generally not bound by a judgment in a suit to which he was not a party unless he was in privity with a party to the original suit. McGee v. McGee, 936 S.W.2d 360, 364 (Tex. App.-Waco 1996, writ denied).

SPECIAL RULE NARROWS APPLICABILITY OF RULE IN CASE OF JP COURT JUDGMENTS [Note: Small Claims courts have been abolished] 

Regardless of party or privity status, however, judgments from small-claims courts are not accorded the same common-law finality as judgments from district courts. Under section 31.004 of the Texas Civil Practice and Remedies Code,

[a] judgment or a determination of fact or law in a proceeding in a lower trial court [e.g., a small-claims court] is not res judicata and is not a basis for estoppel by judgment in a proceeding in a district court, except that a judgment rendered in a lower trial court is binding on the parties thereto as to recovery or denial of recovery.

Tex. Civ. Prac. & Rem. Code § 31.004(a); see id. § 31.004(c).

This Court has held that
[i]n the situation where a litigant brings a lawsuit in a district court subsequent to filing suit in a court of limited jurisdiction, section 31.004 of the civil practice and remedies code modifies the common law so that "res judicata bars only those claims that were actually litigated in the limited-jurisdiction court."
Kizer v. Meyer, Lytton, Alen & Whitaker, Inc., 228 S.W.3d 384, 391 (Tex. App.-Austin 2007, no pet.) (quoting Wren v. Gusnowski, 919 S.W.2d 847, 848 (Tex. App.-Austin 1996, no writ)). The purpose of section 31.004 is to narrow the preclusive effect of judgments from courts of limited jurisdiction by precluding a subsequent suit on claims actually tried in such courts but not "any other claim that could have been joined and tried but were not." Webb v. Persyn, 866 S.W.2d 106, 107 (Tex. App.-San Antonio 1993, no writ). Section 31.004 thus abrogates the common-law rules of res judicata for small-claims-court judgments and does not bar subsequent prosecution of unlitigated claims simply because they could have been litigated in the lower court. See, e.g., id.; McClendon v. State Farm Mut. Auto. Ins. Co., 796 S.W.2d 229, 232 (Tex. App.-El Paso 1990, writ denied).

Therefore, in accordance with section 31.004, if the pleadings in the underlying lawsuit here include claims not actually adjudicated in the small-claims court, then res judicata and collateral estoppel do not bar those pleaded claims even if Voges was in privity with his grandfather with respect to the prior judgment.

If Voges was in privity with his grandfather, the claims actually litigated in small-claims court would not survive even under section 31.004. Therefore, the threshold issue in this case is whether the trial court erred in dismissing Voges's claims based on a finding of privity.

PRIVITY FOR RES-JUDICATA PURPOSES 

For purposes of res judicata, the term "privity" refers to parties who (1) exert control over the original action even if they are not parties to it, (2) have interests that were represented by a party to the original action, or (3) are successors in interest who derive their claims through a party to the prior action. HECI Exploration Co. v. Neel, 982 S.W.2d 881, 890 (Tex. 1998); Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363 (Tex. 1971); McNeil Interests, Inc. v. Quisenberry, 407 S.W.3d 381, 388 (Tex. App.-Houston [14th Dist.] 2013, no pet.).

The existence of privity turns on the particular circumstances of each case, see Getty Oil, 845 S.W.2d at 800, but "privity is not established by the mere fact that persons may happen to be interested in the same question or in proving the same state of facts," Benson, 468 S.W.2d at 363; see McNeil Interests, 407 S.W.3d at 388-90 (50% ownership interest in business did not give rise to privity relationship for purposes of res judicata and owner acting in representative capacity to hire attorney and serve as corporate representative did not constitute control by owner in individual capacity).

The trial court expressly found that (1) Voges participated in the previous litigation to such a degree that he exercised control in that litigation and (2) his interests were fully represented and litigated on his behalf by his grandfather in the lower-court proceeding.

NO EVIDENCE OF PRIVITY 

The evidentiary record to support these findings, however, is nonexistent. In fact, no evidence was admitted at the dismissal hearing and no testimony was given. There is no evidence that Voges's grandfather instituted the small-claims court proceeding on Voges's behalf or in a representative capacity. Nor is there evidence that Voges himself exerted any control over the prior litigation or that he is a successor-in-interest to his grandfather. At the dismissal hearing, Campbell stated, but did not testify under oath, that Voges was present at the hearing before the small-claims court and had argued the case on his grandfather's behalf. Even if such participation could constitute sufficient "control" to bind Voges to the outcome of the prior proceeding, there is no competent evidence of that fact. The record is simply devoid of any evidence that would support a finding of privity. Accordingly, there is no evidence to support the trial court's conclusion that Voges's claims are barred by res judicata.

CONCLUSION

Because the record contains no evidence that Voges was a party to the small-claims-court litigation or in privity with a party to that proceeding, we reverse the trial court's dismissal order and remand the cause to the trial court for further proceedings.[1]

[1] We do not hold that privity cannot be established in this case; we hold only that the trial court's finding of privity is not supported by the present record.

SOURCE: AUSTIN COURT OF APPEALS - 03-14-00125-CV - 10/28/2014

Saturday, December 6, 2014

Texas Construction Fund Act


THE TEXAS CONSTRUCTION FUND ACT   
Photo of multifamily residential construction underway



The Texas Construction Fund Act is found in chapter 162 of the Texas Property Code. See TEX. PROP. CODE ANN. §§ 162.001-.033 (West, Westlaw through 2013 3d C.S.). This act "imposes fiduciary responsibilities on contractors to ensure that Texas subcontractors, mechanics, and materialmen are paid for work completed." In re Waterpoint Int'l LLC, 330 F.3d 339, 345 (5th Cir. 2003). This statute provides that construction payments are trust funds if the payments are made to a contractor or to an officer of the contractor for the improvement of specific real property. Id. § 162.001(a); see also Kelly v. Gen'l Interior Const. Inc., 262 S.W.3d 79, 85 (Tex. App.-Houston [14th Dist.]), overruled on other grounds, 301 S.W.3d 653 (Tex. 2010).

The contractor or officer who receives the trust funds is considered a trustee of the funds. TEX. PROP. CODE ANN. § 162.002. The artisan, laborer, mechanic, contractor, subcontractor, or materialman who furnished labor or material for the construction or repair on the real property is considered the beneficiary of any trust funds. Id. § 162.003.

A trustee who intentionally, knowingly, or with the intent to defraud, directly or indirectly retains, uses, disburses, or otherwise diverts the funds without first fully paying current or past due obligations has misapplied the trust funds. See id. § 162.031(a). "Thus, a party who misapplies these trust funds is subject to civil liability if (1) the party breaches the duty imposed by chapter 162, (2) with the requisite scienter, and (3) the claimants are within the class of people chapter 162 was designed to protect and have asserted the type of injury chapter 162 was intended to prohibit." C & G, Inc. v. Jones, 165 S.W.3d 450, 453 (Tex. App.-Dallas 2005, pet. denied). Any officer or director who has control or direction over the funds is also a trustee of the funds and is personally liable. Id. at 453-54.

SOURCE: CORPUS CHRISTI COURT OF APPEALS - No. 13-13-00118-CV - 5/29/2014

MORE ON TEXAS TRUST FUND ACT FROM FEDERAL COURT 

The Construction Trust Fund Act ("Trust Fund Act") is found in Chapter 162 of the Texas Property Code. See TEX. PROP. CODE ANN. § 162.001 et seq.

The Trust Fund Act "imposes fiduciary responsibilities on contractors to ensure that subcontractors, mechanics and materialmen are paid for work completed." In re Waterpoint Int'l LLC, 330 F.3d 339, 345 (5th Cir.2003); accord Fidelity & Guar. Ins. Underwriters, Inc. v. Wells Fargo Bank, N.A., No. Civ. A. 04-2833, 2006 WL 870683, at *9 (S.D.Tex. Mar.31, 2006). This provision was "enacted to serve as a special protection for subcontractors and materialmen in situations where contractors or their assignees refused to pay the subcontractor or materialman for labor and materials." In re Waterpoint LLC, 330 F.3d at 345; see McCoy v. Nelson Utils. Servs., Inc., 736 S.W.2d 160, 164 (Tex.App.—Tyler 1987, writ ref'd n.r.e.).

Accordingly, construction payments constitute trust funds under Chapter 162 of the Texas Property Code if they are "made to a contractor or subcontractor or to an officer, director, or agent of a contractor or subcontractor, under a construction contract for the improvement of specific real property in this state." TEX. PROP. CODE ANN. § 162.001 (Vernon 1995 & Supp.2005); accord Argyle Mech., Inc. v. Unigus Steel, Inc., 156 S.W.3d 685, 687 (Tex.App.—Dallas 2005, no pet.); Holladay v. CW & A, Inc., 60 S.W.3d 243, 246 (Tex.App.—Corpus Christi 2001, pet. denied). In such a situation, the "contractor, subcontractor, or owner or an officer, director, or agent of a contractor, subcontractor, or owner, who receives trust funds or who has control or direction of trust funds" serves as trustee. TEx. PROP. CODE ANN. § 162.002 (Vernon 1995); accord C & G, Inc. v. Jones, 165 S.W.3d 450, 453 (Tex. App.—Dallas 2005, pet. denied); Holladay, 60 S.W.3d at 246. The artisan, laborer, mechanic, contractor, subcontractor, or materialman who labors or furnishes labor or material for the construction or repair of an improvement on specific real property located in Texas is the beneficiary of any trust funds paid or received in connection with the improvement. See TEX. PROP. CODE ANN. § 162.003 (Vernon 1995 & Supp. 2005); accord In re Waterpoint Int'l LLC, 330 F.3d at 345.

Pursuant to the Trust Fund Act, "[any] trustee who, intentionally or knowingly or with intent to defraud, directly or indirectly retains, uses, disburses, or otherwise diverts trust funds without first fully paying all current or past due obligations incurred by the trustee to the beneficiaries of the trust funds, has misapplied the trust funds." TEx. PROP. CODE ANN. § 162.031(a) (Vernon 1995); accord C & G, Inc., 165 S.W.3d at 453; Argyle Mech., Inc., 156 S.W.3d at 687; Holladay, 60 S.W.3d at 245-46. Trustees, however, are provided with an affirmative defense under the Trust Fund Act. Namely, a trustee can avoid liability for misapplication of trust funds by showing "the trust funds not paid to the beneficiaries of the trust were used by the trustee to pay the trustee's actual expenses directly related to the construction or repair of the improvement." TEX. PROP. CODE ANN. § 162.031(b); accord Holladay, 60 S.W.3d at 247; Lively v. Carpet Servs., Inc., 904 S.W.2d 868, 875 (Tex. App.—Houston [1st Dist.] 1995, writ denied). "The law interpreting section 162.031(b) does not require . . . an explicit level of proof tying particular expenditures to the improvements at issue." Holladay, 60 S.W.3d at 248. Rather, construction trust funds may be applied to overhead costs as well as other "directly related" expenses. See In re Nicholas, 956 F.2d 110, 113 (5th Cir.1992); In re Boyle, 819 F.2d 583, 586 (5th Cir.1987); Holladay, 60 S.W.3d at 248; Lively, 904 S.W.2d at 875-76; see also Op. Tex. Att'y Gen. No. J945 (1988) (affirmative defense allows paying funds for overhead and other expenses, even if not readily traceable to a particular job, so long as actually incurred). 

SOURCE: United States District Court, E.D. Texas, Beaumont Division. 438 F.Supp.2d 696 (2006)



Sunday, November 30, 2014

What is a gift, legally speaking


CLAIM THAT TRANSFERRED PROPERTY WAS A GIFT: ELEMENTS OF PROOF
   
“A gift is a transfer of property made voluntarily and gratuitously, without consideration.” In re Marriage of Skarda, 345 S.W.3d 665, 671 (Tex. App.—Amarillo 2011, no pet.); see also Mora v. Mora, No. 04-12-00638-CV, 2014 WL 769441, at *7 (Tex. App.—San Antonio Feb. 26, 2014, no pet.) (mem. op.); Magness v. Magness, 241 S.W.3d 910, 912 (Tex. App.—Dallas 2007, pet. denied). 
  
“The existence of a gift requires sufficient proof of: (1) intent to make a gift; (2) delivery of the property; and (3) acceptance of the property.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7; Magness, 241 S.W.3d at 912. “The intent of the donor is the principal issue in determining whether a gift was made.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7.

PRESUMPTION ARISING FROM INTER-SPOUSAL TRANSFER OF REAL PROPERTY 

“A deed for property from one spouse as grantor to the other spouse as grantee creates a rebuttable presumption that the grantee spouse received the property as separate property by gift.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7; Magness, 241 S.W.3d at 912. “The presumption may be rebutted by proof the deed was procured by fraud, accident, or mistake.” Magness, 241 S.W.3d at 912-13; see also Mora, 2014 WL 769441, at *7.  

INTERSPOUSAL GIFT - FACT ISSUE 
  
“Whether property given by one spouse to the other is a gift and the recipient’s separate property is a fact-intensive decision.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7. The trial court, as the fact-finder in this case, is the sole judge of the credibility of the witnesses and may accept or reject any or all of a witness’s testimony. In re Marriage of Skarda, 345 S.W.3d at 672; see also Mora, 2014 WL 769441, at *7; Magness, 241 S.W.3d at 913. 
   
SOURCE: SAN ANTONIO COURT OF APPEALS - 04-14-00011-CV - 11/19/2014

  

Monday, November 24, 2014

Does failure to keep promise provide basis for fraud cause of action, or is it simply a breach of contract?


It depends on whether there was intent not to perform (or no intent to ever perform) at the time the promise was made, but that may be hard to prove. Evidence of partial performance may disprove such intent. Additionally, not every promise qualifies as a contract.  

ELEMENTS OF FRAUD AS CAUSE OF ACTION IN TEXAS

To establish a cause of action for fraud, the plaintiff must demonstrate each of the following elements: (1) the defendant made a material representation; (2) the representation was false; (3) when the representation was made, the defendant knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the defendant made the representation with the intent that the plaintiff should act upon it; (5) the plaintiff acted in reliance on the representation; and (6) the plaintiff thereby suffered an injury. See Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011). If the representation is a promise of future performance, the plaintiff must further demonstrate that the defendant made the promise with no intent of performing it. See Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009) (per curiam).

Assuming the existence of an enforceable promise, the Agents argue that there is no evidence that they made the promise while having no intent to perform it. We agree.

PROMISE OF PERFORMANCE IN THE FUTURE 

A promise of future performance is actionable in fraud only if, at the time the promise was made, the promisor intended to deceive and had no intention of performing. See Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998). Showing that a party had no intent to perform "is not easy," as such matters are not usually susceptible to direct proof. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 305 (Tex. 2006). The failure to perform, standing alone, is no evidence of intent. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986). Similarly, a party's denial that a promise had been made is not legally sufficient evidence of fraudulent inducement. See Tony Gullo, 212 S.W.3d at 305; T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 222 (Tex. 1992). The claimant must present some circumstantial evidence, however slight, showing an intent to deceive. See Spoljaric, 708 S.W.2d at 435.

SOURCE: FOURTEENTH COURT OF APPEALS IN HOUSTON - No. 14-13-00730-CV 11/6/2014

[The] undisputed evidence of partial performance negated the Investor's claim of fraud. See Reyna v. First Nat'l Bank in Edinburg, 55 S.W.3d 58, 68 (Tex. App.-Corpus Christi 2001, no pet.) (holding that defendants' tender of partial payment negated any claim that they had no intention of paying for equipment); Bank One, Tex., N.A. v. Stewart, 967 S.W.2d 419, 446 (Tex. App.-Houston [14th Dist.] 1998, pet. denied) (holding there was no evidence that party made representations with intent not to perform on note when the party subsequently made payment for five years).






Tuesday, November 18, 2014

The parol evidence rule is not a rule of evidence, even though it governs admissibility of testimony


NATURE OF PAROL EVIDENCE RULES, EFFECT, AND POSSIBLE EXCEPTIONS 

The parol evidence rule is a rule of substantive law, not a rule of evidence. See Hubacek v. Ennis State Bank, 159 Tex. 166, 169, 317 S.W.2d 30, 31 (1958). When parties reduce an agreement to writing, the law of parol evidence presumes, in the absence of fraud, accident, or mistake, that any prior or contemporaneous oral or written agreements merged into the final written agreement. See DeClaire v. G&B McIntosh Family Ltd. P'ship, 260 S.W.3d 34, 45 (Tex. App.-Houston [1st Dist.] 2008, no pet.). Any provisions not set out in the writing are presumed to have been abandoned before execution of the agreement or, alternatively, they are presumed to have never been made. Id.

PAROL EVIDENCE TO BE DISREGARDED WHEN RULE APPLIES 

Evidence that violates the parol evidence rule has no legal effect and "merely constitutes proof of facts that are immaterial and inoperative." See Piper, Stiles & Ladd v. Fid. & Deposit Co. of Md., 435 S.W.2d 934, 940 (Tex. Civ. App.-Houston [1st Dist.] 1968, writ ref'd n.r.e.). Such evidence cannot be considered by the court when it construes the contract, even if the evidence is admitted without objection. See Johnson v. Driver, 198 S.W.3d 359, 364 (Tex. App.-Tyler 2006, no pet.).

WHAT EXCEPTIONS ARE THERE AND WHEN CAN THEY BE INVOKED? 

There are exceptions, however. Parol evidence may be admitted to show (1) that the contract was induced by fraud, accident, or mistake; (2) that an agreement was to become effective only upon certain contingencies; or (3) in the case of ambiguity, that the parties' true intentions differ from those expressed in the agreement. See Gonzalez v. United Bhd. of Carpenters & Joiners of Am., Local 551, 93 S.W.3d 208, 211 (Tex. App.-Houston [14th Dist.] 2002, no pet.).

Parol evidence may also be admitted under an additional exception to show collateral, contemporaneous agreements that are consistent with the underlying written agreement. See DeClaire, 260 S.W.3d at 45. However, this exception does not permit parol evidence that varies or contradicts the express or implied terms of the written agreement. Id.

SOURCE: HOUSTON COURT OF APPEALS - No. 14-13-00730-CV - 11/6/2014

ADDITIONAL CASELAW EXCERPT ON PAROL EVIDENCE RULE FROM CITED CASE: 

The parol evidence rule is a rule of substantive law. Hubacek v. Ennis State Bank, 159 Tex. 166, 317 S.W.2d 30, 31 (1958); Gonzalez v. United Bd. of Carpenters & Joiners, 93 S.W.3d 208, 211 (Tex. App.-Houston [14th Dist.] 2002, no pet.); Piper, Stiles & Ladd v. Fid. & Deposit Co., 435 S.W.2d 934, 940 (Tex.Civ.App.-Houston [1st Dist.] 1968, writ ref'd n.r.e.).

When parties reduce an agreement to writing, the law of parol evidence presumes, in the absence of fraud, accident, or mistake, that any prior or contemporaneous oral or written agreements merged into the written agreement and, therefore, that any provisions not set out in the writing were either abandoned before execution of the agreement or, alternatively, were never made and are thus excluded from consideration in interpreting the written agreement. See Hubacek, 317 S.W.2d at 31; Smith v. Smith, 794 S.W.2d 823, 827 (Tex.App.-Dallas 1990, no writ); Muhm v. Davis, 580 S.W.2d 98, 101 (Tex. Civ.App.-Houston [1st Dist.] 1979, writ ref'd n.r.e.). The terms of a promissory note cannot be contradicted or varied by parol evidence of a manner of payment other than as expressed in the note. Dameris v. Homestead Bank, 495 S.W.2d 52, 54 (Tex.Civ.App.-Houston [1st Dist.] 1973, no writ).

We review parol evidence questions de novo, as questions of law. City of Pasadena v. Gennedy, 125 S.W.3d 687, 691 (Tex.App.-Houston [1st Dist.] 2003, pet. denied). Evidence that violates the parol evidence rule has no legal effect and "merely constitutes proof of facts that are immaterial and inoperative." Piper, Stiles & Ladd, 435 S.W.2d at 940. Because all prior negotiations and agreements are presumed merged into the final agreement, parol evidence is not admissible to vary, alter, or supplement the terms of an otherwise unambiguous contract except to show (1) that the contract was induced by fraud, accident, or mistake; (2) that an agreement was to become effective only upon certain contingencies; or (3) in the case of ambiguity, that the parties' true intentions differ from those expressed in the agreement. See Messer v. Johnson, 422 S.W.2d 908, 912 (Tex.1968); Gonzalez, 93 S.W.3d at 211; Litton v. Hanley, 823 S.W.2d 428, 430 (Tex.App.-Houston [1st Dist.] 1992, no writ).

Parol evidence may also be admissible, under an additional exception, to show collateral, contemporaneous agreements that are consistent with the underlying agreement to be construed. See Hubacek, 317 S.W.2d at 31; see also Transit Enter., Inc. v. Addicks Tire & Auto Supply, Inc., 725 S.W.2d 459, 461 (Tex.App.-Houston [1st Dist.] 1987, no writ) (applying exception for collateral, consistent, contemporaneous agreements); Sherrod v. Bailey, 580 S.W.2d 24, 29 (Tex.Civ.App.-Houston [1st Dist.] 1979, writ ref'd n.r.e.) (same). But this latter exception does not permit parol evidence that varies or contradicts either the express terms or the implied terms of the written agreement. Hubacek, 317 S.W.2d at 31; Loe v. Murphy, 46*46 611 S.W.2d 449, 451-52 (Tex.Civ. App.-Dallas 1980, writ ref'd n.r.e.); NHA, Inc. v. Jones, 500 S.W.2d 940, 944-45 (Tex. Civ.App.-Fort Worth 1973, writ ref'd n.r.e.) (both citing Hubacek).





Rule 13 Sanctions Order requires findings of bad conduct to hold up on appeal


$5,000 IN SANCTIONS WITHOUT EXPLANATION IN TRIAL COURT'S ORDER REVERSED BY DALLAS COURT OF APPEALS 

After notice and a hearing, rule 13 authorizes sanctions against a party who files a pleading that is both groundless and brought in either bad faith or harassment.[3] TEX. R. CIV. P. 13. No sanctions under rule 13 may be imposed except for good cause, the particulars of which must be stated in the sanction order. Id. We review a trial court's imposition of sanctions under rule 13 for an abuse of discretion. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004); Arnold v. Life Partners, Inc., No. 05-12-00092-CV, 2013 WL 4553379, at *3 (Tex. App.-Dallas Aug. 28, 2013, pet. filed).

Here, regarding sanctions, the trial court's judgment states only that it orders attorney's fees of $5,000 as sanctions. The court did not make the required particularized findings of good cause to support sanctions under rule 13. Failure to comply with this clear directive is an abuse of discretion. King v. First Nat'l Bank of Baird, 161 S.W.3d 661, 663 (Tex. App.-Eastland 2005, no pet.); Tex.-Ohio Gas, Inc. v. Mecom, 28 S.W.3d 129, 135 (Tex. App.-Texarkana 2000, no pet.). Thus, to the extent it ordered sanctions under rule 13, the trial court abused its discretion.
  • Footnote [3]: Rule 13 expressly provides that a general denial does not constitute a violation of the rule. TEX. R. CIV. P. 13.

COURT'S INHERENT POWER TO SANCTION AS ALTERNATIVE TO RULE 11 

Brandon argues that the sanctions can be upheld under the trial court's inherent power to impose sanctions.

A trial court has inherent power to sanction to the extent necessary to deter, alleviate, and counteract bad faith abuse of the judicial process, such as any significant interference with the court's administration of its core functions, including hearing evidence, deciding issues of fact raised by the pleadings, deciding questions of law, rendering final judgment, and enforcing its judgments. Cherry Petersen Landry Albert, 2014 WL 7076496, at *9.

When using its inherent power to sanction, the court must make findings, based on evidence, that the conduct complained of significantly interfered with the court's legitimate exercise of its core functions. Union Carbide Corp. v. Martin, 349 S.W.3d 137, 147 (Tex. App.-Dallas 2011, no pet.). The court made no such findings in this case, and thus the sanction order cannot be upheld under the court's inherent power to sanction. See id. at 148.

We sustain Gerardo's second issue.

SOURCE: DALLAS COURT OF APPEALS - 05-13-01219-CV - 10/20/2014


Saturday, November 15, 2014

The 8-corners Rule


The eight corners rule (insurance litigation)

The rule takes its name from the fact that only two documents are ordinarily relevant to the determination of the duty to defend: the policy and the pleadings of the third party claimant. GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006). Under that rule, we determine whether a liability insurer has a duty to defend by comparing the allegations within the four corners of the claimant's pleadings to the language within the four corners of the insurance policy. Nat'l Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). If the claimant's factual allegations potentially support a covered claim, the insurer must defend its insured. GuideOne Elite Ins. Co., 197 S.W.3d at 310. We give the allegations in the petition a liberal interpretation in favor of the insured. Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 643 (Tex. 2005); Gehan Homes, Ltd. v. Employers Mut. Cas. Co., 146 S.W.3d 833, 838 (Tex. App.-Dallas 2004, pet. denied). If the pleading "does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the [pleading] within the coverage of the policy." Merchs. Fast Motor Lines, 939 S.W.2d at 141. In other words, if there is doubt as to whether the claimant has pleaded a cause of action within coverage, the doubt is resolved in favor of the insured, and the insurer must defend. Id.
 
SOURCE: DALLAS COURT OF APPEALS - No. 05-07-01255-CV - 12/4/2008
 

Friday, November 7, 2014

Limitations period for defamation & single publication rule as to web-published material


LIMITATIONS PERIOD FOR DEFAMATION & SINGLE PUBLICATION RULE WHEN COMPLAINED-OF MATERIAL IS POSTED ON THE INTERNET 

Under Texas law, the statute of limitations for libel is one year after the date that the cause of action accrues. Tex. Civ. Prac. & Rem. Code Ann. § 16.002(a) (West 2002). To support their limitations ground, appellees relied on "the single publication rule," which our court has adopted in cases alleging mass media libel. See Holloway v. Butler, 662 S.W.2d 688, 690-91 (Tex. App.-Houston [14th Dist.] 1983, writ ref'd n.r.e.); see also Williamson v. New Times, Inc., 980 S.W.2d 706, 710 (Tex. App.-Fort Worth 1998, no pet.). The "single publication rule" provides,

No person shall have more than one cause of action for damages for libel . . . or any other tort founded upon any single publication or exhibition or utterance, such as any one edition or issue of a newspaper or book or magazine or any one presentation to an audience or any one broadcast over radio or television or any one exhibition of a motion picture. Recovery in any action shall include all damages for any such tort suffered by the plaintiff in all jurisdictions.
Holloway, 662 S.W.2d at 690. When the rule applies, a libel action accrues, for statute-of-limitations purposes, upon "publication." See id. at 692; see also Williamson, 980 S.W.2d at 710. Publication is complete on "the last day of the mass distribution of copies of the printed matter" because that is the day "when the publishers, editors and authors have done all they can to relinquish all right of control, title and interest in the printed matter." See Holloway, 662 S.W.2d at 692; see also Williamson, 980 S.W.2d at 710. Our court rejected the principle that each time a libelous article is brought to the attention of a third person, such as each time a libelous book, paper, or magazine is sold, a new publication has occurred, creating a separate tort. See Holloway, 662 S.W.2d at 690-91. The rationale behind the single-publication rule includes (1) preventing the assertion of stale claims, multiplicity of claims, and problems concerning apportionment of damages, conflicts of laws, and venue, and (2) the fact that the mass communication of a single defamatory statement constitutes, for all practical purposes, a single wrong. See id. at 691. A plaintiff is not limited to a single cause of action in the event the same information appears in separate printings of the same publication or in different publications. Id. at 692. The single publication rule applies strictly to multiple copies of a libelous article published as part of a single printing. Id.

Application of the single publication rule to internet publication

We recognize that the Holloway court defined the single publication rule to include only one cause of action for "any one broadcast over . . . television," but its discussion regarding determining when a publication has occurred focused on printed media, such as a newspaper. See id. at 690-92. Regardless, Mayfield does not challenge application of the single publication rule relative to the television broadcasts at issue; she focuses solely on the internet publication of the reports. In fact, as mentioned above, there is no evidence controverting appellees' proof that the reports were each broadcast only once on television. Thus, we need not further address the single publication rule relative to television broadcasts.

Rather, we turn to Mayfield's argument that the single publication rule should not apply when, as in the present case, a news report is posted on the publisher's webpage. Mayfield suggests a report posted on the internet has a greater potential than a report published in a newspaper or on television to remain publicly available for a long period, be repeatedly viewed, and be viewed by a wide audience. She apparently maintains that a new cause of action for libel accrues, for limitations purposes, each day that the report remains on the internet; i.e., there is a new publication and Mayfield has been defamed every day because the report remains accessible to third parties.

We have not found, and the parties do not cite, any Texas cases addressing whether the single publication rule applies to a media report posted on the internet. However, in Nationwide Bi-Weekly Administration, Inc. v. Belo Corp., 512 F.3d 137, 141-46 (5th Cir. 2007), the Fifth Circuit Court of Appeals predicted The Supreme Court of Texas would apply the rule to a report published on the internet and reject "the continuous publication rule" suggested by Mayfield—that when such a report remains constantly available on the internet, each day results in a new publication. See id. at 143 (recognizing Fifth Circuit, when applying Texas law but addressing unsettled issue, is required to follow the rule it believes the Supreme Court of Texas would adopt). The Fifth Circuit based its decision on (1) the majority view among courts, and (2) the rationale behind the rule. See id. at 142-46.

With respect to the first factor, the Fifth Circuit was persuaded by the fact that every court that had decided the issue as of that date had held the single publication rule applies to information publicly available on the internet. See id. at 144 (citing, e.g., Oja v. U.S. Army Corps of Eng'rs, 440 F.3d 1122, 1133 (9th Cir. 2006); Van Buskirk v. New York Times Co., 325 F.3d 87, 89 (2nd Cir. 2003); Mitan v. Davis, 243 F.Supp.2d 719, 724 (W.D. Ky. 2003); Churchill v. State, 378 N.J. Super. 471, 876 A.2d 311, 316 (2005); McCandliss v. Cox Enters., 265 Ga. App. 377, 593 S.E.2d 856, 858 (2004); Traditional Cat Ass'n, Inc. v. Gilbreath, 118 Cal.App.4th 392, 13 Cal.Rptr.3d 353, 361-62 (2004); Firth v. State, 98 N.Y.2d 365, 747 N.Y.S.2d 69, 775 N.E.2d 463, 466 (2002)).[6]

With respect to the second factor, the Fifth Circuit relied on the rationale behind the widespread acceptance of the single publication rule in the internet context, which consisted of the following considerations:

• The "functional similarities" between print and internet publications: "A statement electronically located on a server which is called up when a web page is accessed, is no different from a statement on a paper page in a book lying on a shelf which is accessed by the reader when the book is opened." Id. at 144 (quoting Mitan, 243 F.Supp.2d at 724); see also Kaufman v. Islamic Soc'y of Arlington, 291 S.W.3d 130, 140 (Tex. App.-Fort Worth 2009, pet. denied) (citing "functional similarities" recognized by Belo court as a factor when holding journalist author of internet article was "a member of the electronic or print media," same as one publishing through more traditional media, and thus authorized to bring interlocutory appeal from order denying summary judgment);
• More importantly, the "potential for endless retriggering of the statute of limitations, multiplicity of suits and harassment of defendants" and a corresponding chilling effect on internet communication. Belo, 512 F.3d at 145 (quoting Firth, 747 N.Y.S.2d 69, 775 N.E.2d at 466); and
• The fact that application of the rule to internet publications is consistent with the policy considerations cited by Texas courts for applying the rule to print media: to support the statute of limitation and prevent the filing of stale claims. Id. (citing Holloway, 662 S.W.2d at 691).
The Fifth Circuit further rejected arguments similar to those suggested by Mayfield in the present case. See id. at 145. Its plaintiff urged that "the publication of defamatory and private information on the web has the potential to be vastly more offensive and harmful than it might otherwise be in a more circumscribed publication." Id. The court reasoned that the concern more persons will read internet publications because they are likely accessible for a potentially indefinite period is outweighed by the competing policy interest of enforcing the statute of limitations and preventing stale claims. Id. (citing Holloway, 662 S.W.2d at 691). The court also reasoned that the concern regarding broader readership (irrespective of the temporal component) is likely relevant only to the issue of damages—not to the triggering of the statute of limitations. Id.

Although we are not bound by the Fifth Circuit's interpretation of Texas law, see Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex. 1993) Longview Bank & Trust Co. v. First Nat'l Bank of Azle, 750 S.W.2d 297, 300 (Tex. App.-Fort Worth 1988, no pet.), or its predictions about what rule The Supreme Court of Texas likely would apply, we agree with the Fifth Circuit's reasoning and hold that the single publication rule applies to a television station's news report publicly available on the internet. Accordingly, Mayfield's libel claim for each of the two reports at issue accrued on the sole date that the report was broadcast on television and posted on the station's website. Because Mayfield filed suit more than one year after each such broadcast and internet publication, her libel claim is barred by the statute of limitations.

SOURCE: HOUSTON COURT OF APPEALS - No. 14-13-00268-CV – 8/21/2014 – Mayfield v. Fullhart