Fraudulent Inducement (Tex and Tex.App.-Houston cites)

THE NATURE OF FRAUDULENT INDUCEMENT AS A CAUSE OF ACTION & THE ELEMENTS THEREOF

A contract is subject to avoidance on the ground that it was induced by fraud. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 331 (Tex. 2011); see also Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998) (“As a rule, a party is not bound by a contract procured by fraud.”). Even a written contract containing a merger clause can be avoided for fraud in the inducement, and the parol evidence rule does not stand in the way of proof of such fraud. Italian Cowboy, 341 S.W.3d at 331. Indeed, “the law long ago abandoned the position that a contract must be held sacred regardless of the fraud of one of the parties in procuring it.” Dallas Farm Mach. Co. v. Reeves, 307 S.W.2d 233, 239 (Tex. 1957).

ELEMENTS OF FRAUD

The elements of fraud are: (1) that the speaker made a material misrepresentation (2) that he knew was false when he made it or that he made recklessly without any knowledge of its truth and as a positive assertion (3) with the intent that the other party act upon it and (4) that the other party acted in reliance on the misrepresentation and (5) suffered injury thereby. Italian Cowboy, 341 S.W.3d at 337. A representation is material if “a reasonable person would attach importance to [it] and would be induced to act on the information in determining his choice of actions in the transaction in question.” Italian Cowboy, 341 S.W.3d at 337.

ESSENTIAL ELEMENTS OF FRAUDULENT INDUCEMENT ADDITIONALLY INCLUDE PROOF OF CONTRACT TO WHICH ASSENT WAS PROCURED BY FRAUD

Fraudulent inducement is a particular species of fraud that arises only in the context of a contract and requires the existence of a contract as part of its proof. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001); Clark v. Power Mktg. Direct, Inc., 192 S.W.3d 796, 799 (Tex. App.—Houston [1st Dist.] 2006, no pet.). That is, with a fraudulent inducement claim, the elements of fraud must be established as they relate to an agreement between the parties. Haase, 62 S.W.3d at 798–99.

THE RELIANCE ELEMENT 

Fraud requires a showing of actual and justifiable reliance. Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010). In evaluating justification, the court considers whether, “given a fraud plaintiff’s individual characteristics, abilities, and appreciation of facts and circumstances at or before the time of the alleged fraud[,] it is extremely unlikely that there is actual reliance on the plaintiff’s part.” Id. (quoting Haralson v. E.F. Hutton Grp., Inc., 919 F.2d 1014, 1026 (5th Cir. 1990)). In the commercial context, the Texas Supreme Court has emphasized that “commercial tenants are entitled to rely on the fact that a landlord will not actively conceal material information.” Italian Cowboy, 341 S.W.3d at 339.

  

SOURCE: HOUSTON COURT OF APPEALS - NO. 01-09-00728-CV - 1/19/12

Sworn account suit under TRCP 185 not available for any and all types of claims involving an unpaid account

  
Suit for unpaid electrical power service may be brought as sworn account, but claim for early termination fee required proof of breach of the underlying contract, according to an opinion issued by Houston's First Court of Appeals.   
  
SUIT ON A SWORN ACCOUNT
   
Rule 185 of the Texas Rules of Civil Procedure, entitled Suit on Account, provides:
 
When any action or defense is founded upon an open account or other claim for goods, wares and merchandise, including any claim for a liquidated money demand based upon written contract or founded on business dealings between the parties, or is for personal service rendered, or labor done or labor or materials furnished, on which a systematic record has been kept, and is supported by the affidavit of the party, his agent or attorney taken before some officer authorized to administer oaths, to the effect that such claim is, within the knowledge of affiant, just and true, that it is due, and that all just and lawful offsets, payments and credits have been allowed, the same shall be taken as prima facie evidence thereof, unless the party resisting such claim shall file a written denial, under oath. A party resisting such a sworn claim shall comply with the rules of pleading as are required in any other kind of suit, provided, however, that if he does not timely file a written denial, under oath, he shall not be permitted to deny the claim, or any item therein, as the case may be. No particularization or description of the nature of the component parts of the account or claim is necessary unless the trial court sustains special exceptions to the pleadings.
 
The elements of a suit on a sworn account claim are thus (1) the sale and delivery of merchandise or performance of services; (2) that the amount of the account is “just,” that is, the prices charged are pursuant to an express agreement, or in the absence of an agreement, that the charges are usual, customary, or reasonable; and (3) that the outstanding amounts remain unpaid. E.g., Powers v. Adams, 2 S.W.3d 496, 499 (Tex. App.—Houston [14th Dist.] 1999, no pet.).
 
“Rule 185 is a procedural tool that limits the evidence necessary to establish a prima facie right to recovery on certain types of accounts.” Williams v. Unifund CCR Partners Assignee of Citibank, 264 S.W.3d 231, 234 (Tex. App.—Houston [1st Dist.] 2008, no pet.). “Rule 185 applies only to ‘transactions between persons, in which there is a sale upon one side and a purchase upon the other, whereby title to personal property passes from one to the other, and the relation of debtor and creditor is thereby created by general course of dealing . . . .’” Id. (quoting Meaders v. Biskamp, 316 S.W.2d 75, 78 (Tex. 1958) (emphasis in original)). “It does not apply to transactions between parties resting upon a special contract.” Id. (quoting Meaders, 316 S.W.2d at 78).
 
SOURCE: HOUSTON COURT OF APPEALS - FIRST DISTRICT - 01-11-00027-CV - 1/12/12
 
The trial court’s $29,615.04 award was made up of $12,994.18 for unpaid electrical service and a $16,620.86 early termination fee. A suit on a sworn account applies to the sale of electric service. See generally Rimco Enters., Inc. v. Texas Elec. Serv. Co., 599 S.W.2d 362, 365 (Tex. Civ. App.—Fort Worth 1980, writ ref’d n.r.e.).
  
While the defendants dispute here that the electric service charges were reasonable, accurate, or just, Affordable Power’s petition attached an affidavit, made on the affiant’s personal knowledge, attesting that:
 
Attached to this affidavit is the final bill and/or invoice that was sent to the listed customer. The final invoice was based on an open account with the customer for goods and/or services rendered. The final invoice is part of our systematic records, based on goods and/or services provided to the customer. A true and correct copy of the Contract Agreement with the listed customer and Terms of Service is attached as Exhibit “1” of this Petition.
 
The final invoice accurately reflects charges for goods and/or services provided. The amount of the account is just and true, it is due, the prices were charged according to a written contract with the customer and the charges are usual, customary and reasonable. The just and true amount of $29,615.04 plus interest, is currently due having been unpaid by the customer. This amount includes all lawful offsets, payments and credits.
 
Because this affidavit meets the requirements to establish a prima facie case under Rule 185, the defendants’ failure to file a verified denial would have precluded them from disputing the $12,994.18 charges for electrical service on Affordable Power’s suit on a sworn account at trial. See Vance v. Holloway, 689 S.W.2d 403, 404 (Tex. 1985).
  
For the reasons further explained below, however, we nonetheless remand Affordable Power’s claim based on unpaid electrical services to the trial court because judgment on that claim is not “separable without unfairness to the parties” from the judgment on Affordable Power’s breach of contract claim related to the termination fee, which is not supported by legally sufficient evidence. Tex. R. App. P. 44.1(b); Iron Mountain Bison Ranch, Inc. v. Easley Trailer Mfg., Inc., 42 S.W.3d 149, 162 (Tex. App.—Amarillo 2000, no pet) (“Given the intertwined nature of appellee’s promissory estoppels theory and its other theories, we remand the promissory estoppel issue for a new trial in the interest of justice.”).
 
SOURCE: HOUSTON COURT OF APPEALS - FIRST DISTRICT - 01-11-00027-CV - 1/12/12

Collateral Estoppel - The doctrine, its purpose, and its elements when invoked as a defense

    

LAWYER LINGO: What is collateral estoppel?
 
Collateral estoppel, or issue preclusion, prevents the relitigation of identical issues of fact or law that were actually litigated and essential to the final judgment in a prior suit. Texas Dep't of Public Safety v. Petta, 44 S.W.3d 575, 579 (Tex. 2001); Barr, 837 S.W.2d at 628.
 
POLICY RATIONALE
 
The doctrine is designed to promote judicial efficiency, protect parties from multiple lawsuits, and prevent inconsistent judgments by preventing any relitigation of an ultimate issue of fact. Petta, 44 S.W.3d at 579; Sysco Food Servs., 890 S.W.2d at 801.
 
ESSENTIAL ELEMENTS OF COLLATERAL ESTOPPEL AS A DEFENSE  
   
A party seeking to assert the bar of collateral estoppel must establish that (1) the facts sought to be litigated in the second action were fully and fairly litigated in the first action; (2) those facts were essential to the judgment in the first action; and (3) the parties were cast as adversaries in the first action. John G. & Marie Stella Kenedy Mem'l Found. v. Dewhurst, 90 S.W.3d 268, 288 (Tex. 2002); Indem. Ins. Co. v. City of Garland, 258 S.W.3d 262, 271 (Tex. App.-Dallas 2008, no pet.).
 
THE ISSUE OF IDENTITY OF PARITES, PRIVITY
   
Strict mutuality of parties is no longer required. Petta, 44 S.W.3d at 579; Richards v. Comm'n for Lawyer Discipline, 35 S.W.3d 243, 249 (Tex. App.-Houston [14th Dist.] 2000, no pet.). It is only necessary that the party against whom collateral estoppel is being asserted was a party or in privity with a party in the first action. Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 721 (Tex. 1990).
 
PRIVITY
 
“People can be in privity in at least three ways: (1) they can control an action even if they are not parties to it; (2) their interests can be represented by a party to the action; or (3) they can be successors in interest, deriving their claims through a party to the prior action.” Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 653 (Tex. 1996); see also State Farm Lloyds v. C.M.W., 53 S.W.3d 877, 886 (Tex. App.-Dallas 2001, pet. denied).
 
SOURCE: DALLAS COURT OF APPEALS - 05-10-00410-CV - 1/8/12 

What is "Money Had and Received"? It does not sound like a cause of action, but ...

 
...it functions as one under Texas case law precedents:
  
ASSUMPSIT - MONEY HAD AND RECEIVED [MHnR] AS A THEORY OF RECOVERY / REIMBURSEMENT  / RESTITUTION
 
Assumpsit For Money Had And Received
 
According to legal historians, assumpsit was developed to redress circumstances involving unjust enrichment or an implied promise to pay what in good conscience defendant was bound to pay the plaintiff. Tri-State Chem., Inc. v. Western Organics, Inc., 83 S.W.3d 189, 193-94 (Tex. App.-Amarillo 2002, pet. denied). Over time, assumpsit was divided into various categories. Id. at 194.
 
Money had and received is a category of general assumpsit to restore money where equity and good conscience require refund. Amoco Prod. Co. v. Smith, 946 S.W.2d 162, 164 (Tex. App.-El Paso 1997, no writ). “The question, in an action for money had and received, is to which party does the money, in equity, justice, and law, belong.
 
All plaintiff need show is that defendant holds money which in equity and good conscience belongs to him.” Staats v. Miller, 150 Tex. 581, 584, 243 S.W.2d 686, 687-88 (1951) (quoting 58 C.J.S., Money Received § 4a). A cause of action for money had and received is “less restricted and fettered by technical rules and formalities than any other form of action. It aims at the abstract justice of the case, and looks solely to the inquiry, whether the defendant holds money which . . . belongs to the plaintiff.” Id. (quoting United States v. Jefferson Elec. Mfg. Co., 291 U.S. 386, 402-03 (1934)).
  
AN EQUITABLE REMEDY
  
A cause of action for money had and received is not premised on wrongdoing, but “looks only to the justice of the case and inquires whether the defendant has received money which rightfully belongs to another.” Amoco, 946 S.W.2d at 164. Such an action may be maintained to prevent unjust enrichment when a party obtains money which in equity and good conscience belongs to another. Everett v. TK-Taito, L.L.C., 178 S.W.3d 844, 860 (Tex. App.-Fort Worth 2005, no pet.); J.C. Penney Co., Inc. v. Pitts, 139 S.W.3d 455, 457 n.4 (Tex. App.-Corpus Christi 2004, no pet.) (citing Staats, 243 S.W.2d at 687). In short, it is an equitable doctrine applied to prevent unjust enrichment. Everett, 178 S.W.3d at 860; Hunt v. Baldwin, 68 S.W.3d 117, 132 (Tex. App.-Houston [14th Dist.] 2001, no pet.).
 
To prove a claim for money had and received, a plaintiff must show that a defendant holds money which in equity and good conscience belongs to him. Edwards v. Mid- Continent Office Distrib., L.P., 252 S.W.3d 833, 837 (Tex. App.-Dallas 2008, pet. denied). In defending against such a claim, a defendant may present any facts and raise any defenses that would deny a claimant's right under this theory. Best Buy Co. v. Barrera, 248 S.W.3d 160, 162 (Tex. 2007) (per curiam); Hunter v. PriceKubecka, PLLC, 339 S.W.3d 795, 807 (Tex. App.-Dallas 2011, no pet.).
 
A recovery under assumpsit for money had and received does not “depend on the parties' agreement or intent but rather the law's presumption of a promise of compensation if one receiving another's money would thereby be unjustly enriched.”Amoco, 946 S.W.2d at 164.
  
EXPRESS CONTRACT NORMALLY PRECLUDES RECOVERY UNDER ALTERNATIVE EQUITABLE THEORIES
   
Generally, when a valid, express contract covers the subject matter of the parties' dispute, there can be no recovery under a quasi-contract theory. Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000); McAfee, Inc. v. Agilysys, Inc., 316 S.W.3d 820, 828 (Tex. App.-Dallas 2010, no pet.). The quasi-contractual action for money had and received is a cause of action for a debt not evidenced by a written contract between the parties. See Edwards, 252 S.W.3d at 836; see also Amoco, 946 S.W.2d at 164.
  
SOURCE: DALLAS COURT OF APPEALS - 05-10-00410-CV - 1/10/12

Litigating insurer's duty to defend policy-holder

 
COVERAGE DISPUTE – INSURANCE COMPANY'S DUTY TO DEFEND

An insurer has a duty to defend when a third party sues the insured on allegations that, if taken as true, potentially state a cause of action within the coverage terms of the policy. GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 310 (Tex. 2006). Even if the allegations are groundless, false, or fraudulent, the insurer is obligated to defend. Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 491 (Tex. 2008). The duty to defend is independent from the duty to indemnify and can exist even when no obligation to indemnify is ultimately found. Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex. 1997).

THE EIGHT CORNERS RULE: Pleadings and Policy - Four corners each  

  

In determining whether an insurer has a duty to defend, we follow the eight-corners rule, also known as the complaint-allegation rule: ―an insurer’s duty to defend is determined by the third-party plaintiff’s pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations.‖ Zurich, 268 S.W.3d at 491 (quoting GuideOne, 197 S.W.3d at 308). When applying the eight-corners rule, we  construe the allegations in the pleadings liberally. Nat’l Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). We resolve all doubts regarding the duty to defend in favor of the insured. King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002). If the pleadings do not contain factual allegations sufficient to bring the case clearly within or without the coverage terms, the general rule is that the insurer is obligated to defend if there is any potential claim under the pleadings that falls within the coverage of the policy. Merchs. Fast Motor Lines, Inc., 939 S.W.2d at 141 (citing Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex. 1965)); Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848 (Tex. 1994). In the case of ambiguity in the underlying petition, the court may not read facts into the pleadings, look outside the pleadings, or ―imagine factual scenarios which might trigger coverage.‖ Merchs. Fast Motor Lines, Inc., 939 S.W.2d at 142. However, the eight-corners rule does not require us to ignore those inferences logically flowing from the facts alleged in the petition. Gen. Star Indem. Co. v. Gulf Coast Marine Assocs., Inc., 252 S.W.3d 450, 456 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (citing Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 645 (Tex. 2005) (inferring a profit motive from the insured’s leasing of her property for limestone mining even though the pleadings made no reference to any pecuniary interest)). A liability policy obligates the insurer to defend the insured  against any claim that potentially could be covered. Heyden Newport Chem. Corp., 387 S.W.2d at 26.
 
SOURCE: HOUSTON COURT OF APPEALS – 14^TH DISTRICT - 14-11-00049-CV – 1/5/12 

The limited nature of eviction proceedings in justice court (and appeals from them)

  
EVICTION SUITS ARE DIFFERENT
   
Forcible Detainer dispute can easily become moot because the only issue is the right to current possession of the premises  
   
The only issue in a forcible detainer action is the right to immediate possession, not the merits of title to the property. See Tex. R. Civ. P. 746; Marshall v. Housing Auth. of City of San Antonio, 198 S.W.3d 782, 785 (Tex. 2006). If a defendant in a forcible detainer action is no longer in possession of the premises, then an appeal from the forcible detainer judgment is moot unless the defendant asserts "a potentially meritorious claim of right to current, actual possession of the [premises]." The pendency of a claim to title to the property does not prevent the court in the forcible detainer action from determining that the plaintiff has the superior right to immediate possession of the property. Wilhelm v. Fed. Nat. Mortg. Ass'n, 349 S.W.3d 766, 768 (Tex. App.-Houston [14th Dist.] 2011, no pet.); see also Villalon v. Bank One, 176 S.W.3d 66, 70 (Tex. App.-Houston [1st Dist.] 2004, pet. denied) (mortgagee established right to immediate possession in forcible detainer action following its purchase of property at foreclosure sale, despite allegations of failure to comply with Fair Debt Collection Practice Act).

  
SOURCE: HOUSTON COURT OF APPEALS – 14^th DIST – 1/5/12

Forcible Detainer Action [per Supreme Court of Texas]

The only issue in a forcible detainer action is the right to actual possession of the premises. TEX. R. CIV. P. 746; see also TEX. PROP. CODE § 24.001. Some courts of appeals have held that if a tenant fails to post a supersedeas bond pursuant to Texas Property Code Section 24.007, the appellate court lacks jurisdiction.[1] Other courts of appeals have concluded that if a tenant vacates the premises, (1) the tenant's appeal is moot because the court can no longer grant effectual relief,[2] or (2) the issue of possession is moot, but the court can still consider issues unrelated to possession.[3] At least one court of appeals has concluded that a tenant's appeal is not moot even though the tenant vacated the premises.[4]

Read more on moot appeal in eviction case from Houston …

Default on installment plan or re-payment schedule

Accrual of claim when periodic payments are required and not made under a contract and acceleration does not apply.

BREACH OF A CONTRACT REQUIRING PAYMENT IN INSTALLMENTS ENTAILS MULTIPLE CAUSES OF ACTION    

 

When the debtor/obligor defaults on a payment or re-payment schedule involving periodic installments, each missed payment gives rise to separate cause of action. Therefore, a claim for earlier missed installment payments may be time-barred, whereas a claim for more recent ones may be within the limitations period.

The limitations period for breach of contract claims is four years. TEX. CIV. PRAC. & REM. CODE ANN. § 16.051 (West 2008); Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002). "Limitations begins to run upon accrual of the cause of action." Barker v. Eckman, 213 S.W.3d 306, 311 (Tex. 2006). A breach of contract claim accrues when the contract is breached. Stine, 80 S.W.3d at 592. When recovery is sought on an obligation payable in installments, the statute of limitations runs against each installment from the time it becomes due. Hollander v. Capon, 853 S.W.2d 723, 726 (Tex. App.-Houston [1st Dist.] 1993, writ denied).

SOURCE: DALLAS COURT OF APPEALS - 05-10-00252-CV – 1/3/12 [Name of Plaintiff replaced with “PLANTIFF”]

What is a "cause of action" in Texas courts?

  
Dallas Court of Appeals cites definitions of "cause of action" in med-mal case:
 

“[C]ause of action” has been interpreted to mean “a fact or facts entitling one to institute and maintain an action, which must be alleged and proved in order to obtain relief.” In re Jorden, 249 S.W.3d 416, 421 (Tex. 2008) (orig. proceeding) (internal quotations and citations omitted).  And “cause of action” has also been defined as “[a] group of operative facts giving rise to one or more bases for suing; a factual situation that entitles one person to obtain a remedy in court from another person.” Id. (quoting Black's Law Dictionary 235 (8th ed. 2004)).

 

SOURCE: DALLAS COURT OF APPEALS - 05-10-01388-CV  - 1/6/12

Recovery of costs by plaintiff or defendant

       
RECOVERY OF COSTS BY PREVAILING PARTY IN LAWSUIT
  
As a general rule, the successful party to a suit shall recover of its adversary all costs incurred in the suit. TEX. R. CIV. P. 131. The allocation of costs is within the trial court's discretion and, absent an abuse of discretion, cannot be overturned on appeal. Labor v. Warren, 268 S.W.3d 273, 278 (Tex. App.—Amarillo 2008, no pet.) (citing Madison v. Williamson, 241 S.W.3d 145, 157 (Tex. App.—Houston [1st Dist.] 2007, pet. denied)). Section 31.007(a) of the Texas Civil Practice and Remedies Code prescribes that:

Each party to a suit shall be responsible for accurately recording all costs and fees incurred during the course of a lawsuit, if the judgment is to provide for the adjudication of such costs. If the judgment provides that costs are to be borne by the party by whom such costs were incurred, it shall not be necessary for any of the parties to present a record of court costs to the court in connection with the entry of a judgment.
  
TEX. CIV. PRAC. & REM. CODE ANN. § 31.007(a) (West 2008). "Although somewhat vague as to procedure," section 31.007(a) "clearly does not require a formal presentation of evidence of a party's costs during trial." Varner v. Howe, 860 S.W.2d 458, 466 (Tex. App.—El Paso 1993, no writ). "All that seems to be required is that the successful party present . . . an itemized list of costs and fees incurred during the lawsuit." Id.; see Labor, 268 S.W.3d at 279.
 

SOURCE: CORPUS CHRISTI COURT OF APPEALS - 13-10-00694-CV – 12/1/11