Core v CBNA (2015) "Account Stated" - Citibank-sponsored Cause of Action for Litigating Credit Card Collection Cases in Texas Pays Off

LEGAL DOCTRINE DESIGNED BY CITIBANK ATTORNEYS FOR COLLECTION OF DEFAULTED CONSUMER DEBT YIELDS DIVIDENDS AS OTHER TEXAS COURTS OF APPEALS FOLLOW PRECEDENT SET BY DALLAS COURT OF APPEALS IN 2008   

What to do when you don't win all of your cases ... such as a contract case when you can't find the contract, or some of the essential terms went missing because they were on a separate schedule? Citibank has shown the way: You create your own cause of action. Voila! 

-- A cause of action that does not require proof of the missing contract and its terms.  

   

citibank logo at retail bank branch  

Citibank lost a credit card collection case in 2005 on all three theories it had asserted – breach of contract, sworn account, and quantum meruit -- and then endeavored to change the legal landscape by persuading the Dallas Court of Appeals to adapt then-existing precedents governing common-law suits on account to make them amenable for its own purposes, i.e. judicial collection of bank debt. See  Dulong v. Citibank (S.D.), N.A., 261 S.W.3d 890 (Tex. App.-Dallas 2008, no pet.)(Citibank was not required to produce a written agreement to recover on account-stated theory) -- CONTRA -- Tully v. Citibank (South Dakota), N.A., 173 S.W.3d 212 (Tex.App.-Texarkana 2005, no pet.) (credit card not a sworn account because no title to personal property passes from the bank to the cardholder).   

Several of the fourteen intermediate courts of appeals in Texas have since followed suit, most recently the Corpus Christi and Eastland Courts of Appeal, both acting for the Fort Worth Court of Appeals in cases transferred to them by the Texas Supreme Court in the name of docket equalization. See TEX. GOV'T CODE ANN. § 73.001. 

• ROSE CORE v. CITIBANK (SOUTH DAKOTA), N.A. NOW MERGED INTO CITIBANK, N.A, No. 11-13-00040-CV (Tex.App.- Eastland [11th Dist.] February 27, 2015, motion for rehearing filed)(Op by Justice John M. Bailey)(case transferred from Second Court of Appeals in Fort Worth)  
• MARC R. CORE v. CITIBANK, N.A., No. 13-12-00648-CV (Tex.App.- Corpus Christi, Edinburg [13th Dist.], April 9, 2015, no pet h.) (Opinion by Justice Rodriguez)(also on transfer from 2nd COA in Fort Worth). 
• SCOTT WALKER v. CITIBANK, N.A. No. 11-13-00042-CV (Tex.App.- Eastland [11th Dist.], Feb. 27, 2015) (Op. by retired Justice Terry McCall, sitting by assignment) (case transferred from the 2nd Court of Appeals).  

Interestingly, the Fort Worth Court of Appeals had not signed on to Citibank’s revamp of the law governing suits on account under Texas common law. See Morrison v. Citibank (South Dakota) N.A., 02-07-00130-CV, 2008 WL 553284 (Tex.App.-Fort Worth Feb. 28, 2008, no pet.) (mem. op.) (per curiam)(reversing judgment on account stated theory involving debt suit on ten credit card accounts on factual sufficiency ground and declining to decide whether account stated is a viable theory of recovery in a suit to collect a credit card debt).  
   

CITIBANK FASHIONS ITS OWN LEGAL THEORY TO EASE CREDITOR'S BURDEN OF PROOF IN COLLECTION CASES: PROOF OF CARDMEMBER AGREEMENT RENDERED OPTIONAL 

  

Having lost in Tully, Citibank - then known as Citibank (South Dakota) N.A. - embarked on a different litigation strategy. It would urge the judges in the thousands of cases filed in the trial trial courts around the state, and the justices in the much smaller set that reached the courts of appeals, to accept the idea that a debt claim based on a customer's failure to make payments as required under the terms of a credit card agreement could be litigated as something other than a breach of contract: as a common-law suit on account. 

A credit card account, after all, is an account. And since there are periodic account statements, it's a stated account. To make it sound more authoritative, and to tie the proposed alternative legal theory into the legal tradition governing suits on account by merchants, the word order was flipped: Account Stated.

Under Dallas Court of Appeals opinions, Citibank is not required to prove the
contract when it invokes the "account stated" theory as an alternative
theory of recovery 

But a suit on account at common law had historically involved sales transactions between the plaintiff and the defendant rather than purely financial transactions involving a bank that is -- by definition -- not a merchant. An open account would become a stated account when merchants would strike a balance as to the net payment due by one to the other based on debits and credits associated with their mutual transactions, and a suit on account stated would be based on the amount resulting from the accounting and agreed-to by the parties as correct and owed by one to the other. 

Rule 185 of the CPRC, the sworn account rule,  merely provided an expedited mechanism for presenting such a claim. Rule 185 is not a rule of substantive law. See Rizk v. Fin. Guardian Ins. Agency, Inc., 584 S.W.2d 860, 862 (Tex.1979); A & J Printing, Inc. v. DSP Enter., L.L.C., 153 S.W.3d 676, 682 (Tex.App.-Dallas 2004, no pet.). Rather, it is a rule of procedure regarding the evidence necessary to establish a prima facie right of recovery. See Rizk, 584 S.W.2d at 862; A & J Printing, 153 S.W.3d at 682.

Under rule 185 of the Texas Rules of Civil Procedure, when an action is founded on an open account on which a systematic record has been kept and is supported by an affidavit, the account shall be taken as prima facie evidence of the claim, unless the party resisting the claim files a written denial under oath. See Tex. R. Civ. P. 185; Panditi v. Apostle, 180 S.W.3d 924, 926 (Tex. App.-Dallas 2006, no pet.). A defendant resisting a suit on a sworn account must comply with the rules of pleading and timely file a verified denial or he will not be permitted to dispute the receipt of the services or the correctness of the charges. See TEX.R. CIV. P. 93(10), 185; Vance v. Holloway, 689 S.W.2d 403, 404 (Tex.1985); A & J Printing, 153 S.W.3d at 682. If there is a proper denial, the plaintiff must prove its claim with sufficient evidence on each of the substantive elements.  

The essential elements to prove a sworn account are: (1) that there was a sale and delivery of merchandise or performance of services; (2) that the amount of the account is just, that is, that the prices were charged in accordance with an agreement or were customary and reasonable prices; and (3) that the amount is unpaid. Adams v. H & H Meat Prods., Inc., 41 S.W.3d 762, 773 (Tex. App.-Corpus Christi 2001, no pet.). See also Cass v. Stephens, 156 S.W.3d 38, 70 (Tex. App.-El Paso 2004, pet. denied); Burch v. Hancock, 56 S.W.3d 257, 264 (Tex. App.-Tyler 2001, no pet.); Tex. R. Civ. P. 185. 

SOURCE: DALLAS COURT OF APPEALS - 05-06-00216-CV - 2/23/07 

Citibank scored a major victory when it persuaded the Dallas Court of Appeals to quietly delete the sales-transaction element from the cause of action. See Dulong v. Citibank (South Dakota), N.A., 261 S.W.3d 890 (Tex. App.-Dallas 2008, no pet.).  The requirement still survives in the sworn account context under rule 185, and this is logically inconsistent because a sworn account is merely as special form of a common-law suit on account, and does not itself create a cause of action.  

Nevertheless, by now, numerous courts of appeals around Texas have endorsed Citibank's program of revamping the common law to accommodate the interests of prominent and high-volume plaintiffs in more efficient litigation with lowered proof requirements, most notably itself, but -- by extension -- benefiting other creditors suing on credit card debt likewise.  

The most recent account-stated opinions handed down by Texas appellate courts no longer even cite the old cases whence the cause of action on open account and account stated stem from. See Neil v. Agris, 693 S.W.2d 604 (Tex.App.-Houston [14th Dist.] 1985, no writ);  Continental Cas. Co. v. Dr. Pepper Bottling Co. of Texas, Inc., 416 F.Supp.2d 497, 504 (N.D.Tex. 2006); Arnold D. Kamen & Co. v. Young, 466 S.W.2d 381, 388 (Tex. Civ.App.-Dallas 1971, writ ref'd n.r.e.).

DALLAS PRECEDENT SPREADS 

At Citibank’s urging, the Dallas Court first departed from long-standing precedent as to the essential nature of a suit on account in 2008, and its erroneous holding that credit card debt owed to a bank is actionable as an account stated has since acquired the status of new precedent, -- one that has been followed in numerous subsequent case in Dallas and elsewhere. 

DALLAS COURT OF APPEALS:
"CITIBANK WAS NOT REQUIRED TO PRODUCE A WRITTEN CONTRACT" 

Several sister courts of appeals have decided their own cases based on Dulong, even though they were not required to do so, and even though the Dallas court had not even acknowledged the substantive change it wrought in this area of the common law. The panel opinion, authored by Justice Richter, merely pointed out in a footnote that Dulong had not challenged the viability of an account stated cause of action in her case. 

  

The intermediate courts of appeals that have adopted the Citibank doctrine blessed by the Fifth Court of Appeals in Dulong can no longer be proven wrong because they get to say what the controlling law is, at least in their part of the State. In theory it is the prerogative of the Texas Supreme Court to determine what the common law of the state is, and whether it should be modified. With respect to collection of bank debt on “account stated” grounds, however, the supreme court has not spoken. But the older cases governing applicability and proof of an account stated have effectively been overruled by the Dallas-based court and several other appellate jurisdictions that have followed it; -- even though the Dallas Court offered no analysis and provided no reasons why the law should be changed in favor of a particular category of litigants with heavy dockets at the expense of a particular category of defendants: consumers.  

CITIBANK'S JUDICIAL LOBBYING PAYS OFF 

And Citibank did not even have to hire and pay big bucks for lobbyists to persuade the Texas Legislature to enact bank-friendly litigation to dispense with need for proof of the terms governing the account, -- even though those terms must be disclosed in writing under the Truth in Lending Act (TILA) when a consumer credit account is established. Citibank effectively got the courts to change the substance of the law and ease the burden of proving a debt collection case,  by relieving financial institutions appearing as plaintiffs from the requirement to prove the terms of the underlying contract. 
   
Copies of billing statements combined with testimony that they were mailed to the defendant will now do in most cases, and the customer's "agreement" will be inferred, rather than having to be proven, even though the notion that silence constitutes assent is generally rejected in the context of contract formation.   

Citibank may have lost many more credit card debt cases for evidentiary reasons after is suffered reversal in Tully v Citibank, but if you can persuade the courts to go with a new theory under which you do better because it lowers the burdens of proof or eliminates it altogether on a particular element, the prospects obviously look much brighter. Unsurprisingly Citibank wins virtually all of its appealed cases. It has numerous cases to its name that not only attest to its success in putting its stamp on the jurisprudence of Texas, but also control the disposition to thousands of other cases because the appellate opinion have the character of legal authority that the trial courts are not at liberty to ignore. 

  

In the meantime, other breach-of-contract plaintiffs continue to have to prove the contract on which they sue, and merchants and service providers still have to prove an agreement on price or the reasonable or customary value of the goods sold or services rendered. And those who rendered compensable services in the absence of a contract must prove the value of those services when seeking to recover in quantum meruit. 

DULONG V CITIBANK (2010): Dallas Court of Appeals deletes sale-of-goods/services elements from suit-on-account case law it cites - without acknowledging it 

Before Justices FITZGERALD, RICHTER and LANG-MIERS.

OPINION BY JUSTICE RICHTER [EXCERPT] 

A party is entitled to relief under the common law cause of action for account stated where (1) transactions between the parties give rise to indebtedness of one to the other; (2) an agreement, express or implied, between the parties fixes an amount due; and (3) the one to be charged makes a promise, express or implied, to pay the indebtedness.[2] Neil v. Agris, 693 S.W.2d 604, 605 (Tex.App.-Houston [14th Dist.] 1985, no writ); Continental Cas. Co. v. Dr. Pepper Bottling Co. of Texas, Inc., 416 F.Supp.2d 497, 504 (N.D.Tex.2006) (citing Arnold D. Kamen & Co. v. Young, 466 S.W.2d 381, 388 (Tex. Civ.App.-Dallas 1971, writ ref'd n.r.e.))[3].

Dulong contends the summary judgment evidence did not establish that Citibank had an agreement with Dulong, that Citibank owned the debt, or that she acknowledged the total amount due.[4] In support of her argument that Citibank failed to prove an agreement, Dulong points to the fact that Citibank failed to attach a cardholder agreement to the Affidavit. Because an agreement on which an account stated claim is based can be express or implied, Citibank did not have to produce a written contract as long as it could produce other evidence of the agreement between the parties to meet its burden of proof. See Neil, 693 S.W.2d at 605. An express contract arises when its terms are stated by the parties whereas an implied contract can arise from the acts and conduct of the parties. Harrison v. Williams Dental Group, P.C., 140 S.W.3d 912, 916 (Tex.App.-Dallas 2004, no pet.).

Therefore, we examine the summary judgment evidence to determine whether Citibank adduced evidence to establish the existence of an implied agreement between the parties. Citibank submitted billing statements from January 1999 to November 2006. The statements are issued to Dulong at the same billing address. There is no evidence to suggest the statements were not received. The statements reflect that when credit was available, new charges were made on the account almost every month. Payments were also made. The Affidavit states that the initial interest rate on the account is set forth on the first billing statement, and the subsequent financial terms in effect each time the card was issued are set out on each monthly statement. The credit card statements support this fact. The credit card statements also show that late fees and "over the limit" fees were periodically assessed. There is no evidence Dulong ever objected to or disputed these fees. Based on the series of transactions reflected on the account statements, it is reasonable to infer that Dulong agreed to the full amount shown on the statements and impliedly promised to pay the indebtedness.

On this record, we conclude Citibank established as a matter of law that Citibank and Dulong had an implied agreement fixing an amount due and that Dulong impliedly promised to pay Citibank the amount due. Dulong's issue is resolved against her. The judgment of the trial court is affirmed.

NEIL V AGRIS: Mailing of a bill is not enough if there is no agreement on price for the services rendered 

Neil v. Agris, 693 S.W.2d 604 (Tex.App.-Houston [14th Dist.] 1985, no writ)(overruled by Dallas Court of Appeals in Dulong without saying so)  

Before JUNELL, ROBERTSON and CANNON, JJ.

OPINION BY JUSTICE ROBERTSON

This is an appeal from a judgment entered against appellant in a suit on an account stated. In three points of error, appellant asserts there is no evidence of 1) a prior transaction by which appellant became indebted to appellee; 2) any agreement, express or implied, fixing the amount for the services; or 3) a promise, express or implied, to pay for the services. 

We reverse and render.

Suit was filed on a sworn account and, alternatively, account stated. The money allegedly due appellee resulted from professional services rendered by him to appellant following injuries received by her in an accident. She had never been previously treated by appellee. During trial, appellee elected to proceed only on an account stated.

An account stated has been defined as an agreement 1) between two persons who have had previous transactions, 2) fixing the amount due in respect of such transactions and 3) promising payment. H.G. Berning, Inc. v. Waggoner, 247 S.W.2d 570, 571 (Tex.Civ.App.—Beaumont 1952, no writ). At a minimum, appellee was required to prove 1) that professional services were rendered and 2) the prices charged were agreed to by appellant or that, in the absence of an agreement, the prices charged were usual, customary and reasonable. Eastern Dev. & Inv. v. City of San Antonio, 557 S.W.2d 823, 825 (Tex. Civ.App.—San Antonio 1977, writ ref'd n.r. e.).

In her second point of error, appellant contends that there was no evidence offered that she agreed to pay appellee $1700 for professional services. We agree.

At trial, appellee did not testify. While there was some discussion concerning appellee's affidavit attached to his motion for summary judgment on a sworn account, it was never offered or admitted. His sole attempt to prove an account stated was through his bookkeeper, who testified that she mailed appellant a bill which was never paid. There is no evidence in the record to show at the time the services were rendered or even subsequently that appellant agreed to pay $1700 to appellee for the professional services rendered. In the absence of an agreement fixing the price for the services, appellee was required to prove that the price charged for his services was usual, customary and reasonable; this he failed to do. 

We therefore sustain appellant's second point of error.

Our disposition of appellant's second point makes it unnecessary for us to pass on appellant's other points. Since appellee failed to prove an element of his cause of action at trial, appellant's motion for judgment should have been granted. We will therefore now render the judgment which the trial court should have rendered.

The judgment is reversed and here rendered that appellee take nothing.

TULLY V CITIBANK – Sworn account not a proper theory of recovery, given that were was no sale of goods or services by the creditor to the debtor 

Tully v. Citibank (South Dakota), N.A., 173 S.W.3d 212 (Tex, App. - Texarkana 2005, no pet.) 

Before MORRISS, C.J., ROSS and CARTER, JJ.

OPINION BY JUSTICE CARTER [excerpt] 

Citibank cannot collect a credit card debt through a suit on a sworn account. A suit on a sworn account is permitted only if the claim 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...." TEX.R. Civ. P. 185. "A sworn account 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—it does not mean transactions between parties resting upon special contract." Bird v. First Deposit Nat'l Bank, 994 S.W.2d 280, 282 (Tex. App.-El Paso 1999, pet. denied). Because no title to personal property passes from the bank to the cardholder, a credit card debt is not a sworn account as contemplated by Texas Rule of Civil Procedure 185. Id. Citibank was not entitled to summary judgment based on its suit on a sworn account theory.

Second, because Citibank proved the existence of an express contract, Citibank cannot recover under the theory of quantum meruit. "Quantum meruit is an equitable theory of recovery which is based on an implied agreement to pay for benefits received." Heldenfels Bros., Inc. v. City of Corpus Christi, 

832 S.W.2d 39, 41 (Tex.1992).

Third, Citibank failed to prove the amount due based on the breach of contract argument.[2] Although Tully's affidavit failed to raise a fact issue,[3] Citibank failed to prove it was entitled to summary judgment. Specifically, Citibank failed to prove that the interest rate charged was agreed on by Tully.[4] The contract introduced into evidence does not specify the interest rate that was agreed on. Further, there were no notices of interest rate increases introduced into evidence. The only evidence concerning the rate of interest are the rates specified on the copies of the monthly statements Citibank sent to Tully.[5] Citibank failed to prove its damages as a matter of law. Because a genuine issue of material fact issue exists concerning the interest rates agreed on, the trial court erred in granting summary judgment. 

BIRD V FIRST DEPOSIT NATIONAL BANK - Bank debt not actionable as suit on account 

Bird v. First Deposit Nat'l Bank,  994 S.W.2d 280, 282 (Tex. App.-El Paso 1999, pet. denied).

Before BARAJAS, C.J., LARSEN, and McCLURE, JJ.

OPINION BY JUSTICE SUSAN LARSEN [EXCERPT]

In her sole issue on appeal, Smith urges that the trial court erred in entering judgment against her because a credit card is not a sworn account as contemplated by Texas Rule of Civil Procedure 185. A sworn account 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—it does not mean transactions between parties resting upon special contract.[11] A credit card transaction is a "transaction in which a card that may be used for personal, family, or household use is used to debit an open-end account in connection with: (A) a purchase or lease of goods or services; or (B) a loan of money."[12] A cash advance, like the $3,500 extended on the credit card here, is clearly a loan.[13]

We find that a credit card issued by a financial institution does not create the sort of debtor-creditor relationship required in order to bring suit under Texas Rule of Civil Procedure 185. We reach this conclusion because no title to personal property passes from the bank to the cardholder; rather, the card evidences a line of credit extended by the bank which the cardholder may use to purchase goods and services from a third party. And where the transaction in question is a cash advance, there is no good or service involved at all, but a pure loan of money. An unpaid bank credit card account, therefore, creates a cause of action for the bank's money or credit advanced as a loan, but not for goods or services sold or delivered to the cardholder.[14] (This case does not involve a credit card issued directly by a provider of goods or services, such as a gasoline card or department store card. We therefore do not reach the question of whether that type of credit card debt is subject to collection by a suit on sworn account.) We find that a bank's credit card account is analogous to a promissory note, which has been specifically excluded from the definition of sworn account.[15] Thus, Texas Rules of Civil Procedure 93 and 185 do not apply to the bank's action here. The trial court's entry of judgment based solely upon Smith's failure to file a sworn denial of the bank's petition was incorrect. Accordingly, we find that Smith has met the fourth element required in a restricted appeal, error on the face of the record. We sustain her issue on appeal.

MAGIC CARPET COMPANY v. PHARR - Delivery of goods as element of account stated suit 

Magic Carpet Co. v. Pharr, 508 S.W.2d 696 (Tex.Civ.App.-Dallas 1974, no writ)

OPINION BY JUSTICE GUITTARD [EXCERPT] 

Although there is some question as to whether "account stated" is the proper term for establishing the amount due for goods or services furnished without previous agreement on the price, all authorities agree that proof of plaintiff's delivery of goods or rendition of services to defendant and defendant's acknowledgment of a certain sum as due to plaintiff is sufficient for a prima facie case, without other proof of price, value, quantity, or specific items. Dodson v. Watson, 110 Tex. 355, 220 S.W. 771 (1920); Alexander Marketing Co. v. Medford, 170 S.W.2d 809 (Tex. Civ.App.—Texarkana 1943, no writ); Central Nat'l Bank v. Cox, 96 S.W.2d 746 (Tex.Civ.App.—Austin 1936, writ dism'd); 6 Corbin on Contracts §§ 1305, 1310, 1312 (1962).

The "delivery receipt" signed by defendant shows that plaintiff delivered materials to defendant. Defendant's check of the same date payable to plaintiff for $1,070 is amply sufficient as an acknowledgment of the amount due in view of decisions holding that an implied acknowledgment of the amount due is sufficient. Graham v. San Antonio Machine and Supply Corp., 418 S.W.2d 303, 312 (Tex.Civ. App.—San Antonio 1967, writ ref'd n. r. e.); Wilson v. Clarke Floor Machine Co., 380 S.W.2d 768 (Tex.Civ.App.—Eastland 1964, no writ); Davis v. Gilmore, 244 S. W.2d 671 (Tex.Civ.App.—San Antonio 1951, writ ref'd); Peurifoy v. Hood Rubber Products Co., 59 S.W.2d 428 (Tex. Civ.App.—Eastland 1933, no writ). A check on which payment was later stopped was specifically held to be an acknowledgment sufficient to establish a stated account by the Supreme Court of Nebraska in Hansen v. Abbott, 187 Neb. 248, 188 N. W.2d 717 (1971). Consequently, a prima facie case was shown, and the trial court erred in rendering judgment for defendant on the ground of lack of evidence of a contractual relationship.

Does rear-ending another vehicle amount to evidence of negligence per se?

TEXAS READ-ENDER LAW (Automobile collision & Negligence) 

The mere occurrence of a rear-end collision is some evidence of negligence of the rear-ending driver but is not negligence as a matter of law. See Briones v. Sharkey, No. 04-11-00584-CV, 2012 WL 3776488, at *6 (Tex. App.-San Antonio Aug. 31, 2012, no pet.) (mem. op.); Hernandez v. Kaplan, No. 13-02-00091-CV, 2004 WL 170457, at *2 (Tex. App.-Corpus Christi Jan. 29, 2004, no pet.) (mem. op.); Stone, 994 S.W.2d at 351; Neese v. Dietz, 845 S.W.2d 311, 314 (Tex. App.-Houston [1st Dist.] 1992, writ denied); Renshaw v. Countess, 289 S.W.2d 621, 624 (Tex. Civ. App.-Fort Worth 1956, no writ). The plaintiff must prove specific acts of negligence on the part of the following driver as well as proximate cause. Neese, 845 S.W.2d at 314.

The issue of whether a rear-end collision raises an issue of negligence or establishes it as a matter of law depends on all the facts and circumstances of the particular case. Pearson v. DeBoer, Inc., 99 S.W.3d 273, 276 (Tex. App.-Corpus Christi 2003, no pet.). Whether the plaintiff succeeds in proving negligence by a preponderance of the evidence is within the jury's province to determine. Id.

SOURCE: FORT WORTH COURT OF APPEALS - No. 02-14-00248-CV - 3/5/2015

NEGLIGENCE IN THE CONTEXT OF DRIVING A MOTOR VEHICLE  

To prove negligence, a plaintiff must establish duty, breach of that duty, and damages proximately caused by the breach. Kroger Co. v. Elwood, 197 S.W.3d 793, 794 (Tex. 2006) (per curiam). Negligence is not established as a matter of law merely because the defendant's vehicle rear-ended the vehicle driven by the plaintiff. See Gaskey v. One Source Sec. and Found, No. 14-07-00850, 2009 WL 7047692, at *1 (Tex. App.-Houston [14th Dist.] Jun. 18, 2009, no pet.) (mem. op.) (citing Smith v. Cent. Freight Lines, Inc., 774 S.W.2d 411, 412 (Tex. App.-Houston [14th Dist.] 1989, writ denied)). Rather, the plaintiff must prove that the defendant's specific acts were negligent, and that they proximately caused the plaintiff's damages. See Cent. Freight, 774 S.W.2d at 412. Whether a rear-end collision resulted from negligence depends on all the facts and circumstances of the particular case. See Pearson v. DeBoer, 99 S.W.3d 273, 276 (Tex. App.-Corpus Christi 2003, no pet.)

SOURCE; FOURTEENTH COURT OF APPEALS - 14-13-00638-CV - 2/10/2015

DRIVER FOUND NOT LIABLE FOR REAR-ENDER 

In his legal-sufficiency challenge, Laday contends that Pedraza admitted he caused the collision and some injury to Laday, contesting only the extent of the injuries, and that all elements of negligence were established without contradiction. Laday also suggests that various statements by Pedraza qualified as judicial admissions, which compelled a jury finding that Pedraza was negligent as a matter of law.

A judicial admission is a formal waiver of proof that usually arises in the pleadings or a stipulation of the parties. See Gaskey, 2009 WL 7047692, at *2 (citing Mendoza v. Fid. & Guar. Ins. Underwriters, Inc., 606 S.W.2d 692, 694 (Tex. 1980)). An admission relieves the opposing party's burden to prove an admitted fact. Id. Further, to the extent Pedraza's testimony was contrary to his position, they were quasi-admissions. Id. While they may have constituted some evidence, they were not conclusive on Pedraza. Id. Only the jury determines the weight of the alleged admissions. Id.

Laday asserts Pedraza's testimony, including his admissions, established Pedraza was at fault and his actions caused the collision. Pedraza admitted on cross-examination that the collision occurred when he failed to control the speed of his vehicle under the conditions. However, Pedraza also testified that there was heavy traffic in the area, and cars were stopping and starting as they approached the light. Additionally, Pedraza testified the roads were wet, he was approximately 20 feet behind Laday's vehicle when he started braking, and he was traveling only 10-15 miles per hour (below the posted speed limit of 35) when he slid into Laday's bumper. Pedraza also testified Laday did not appear to be injured at the scene.

Laday testified the accident caused his vehicle to hit the car front of him, and the driver of that car exited his vehicle, but did not follow Laday and Pedraza to the gas station where Laday and Pedraza discussed the collision. Further, Laday testified he had been injured in a prior accident and had obtained disability license plates, which require the note of a physician to document the disability. Laday also told the jury that Pedraza said "I'm sorry" after the accident; however, in his deposition, Laday did not mention Pedraza's alleged statement.

Laday had the burden of proving Pedraza was negligent and that his negligence was a proximate cause of the occurrence. See Kroger, 197 S.W.3d at 794. When we view the totality of the testimony, we conclude that Laday has not demonstrated the evidence conclusively established all vital facts in support of the negligence finding. See Dow Chemical, 46 S.W.3d at 241; see also Briones v. Sharkey, No. 04-11-00584-CV, 2012 WL 3776488, at *6 (Tex. App.-San Antonio, Aug. 31. 2012, no pet.) (mem. op.) (holding jury could determine the evidence did not prove negligence where there was an attack on plaintiff's veracity); Benavente v. Granger, 312 S.W.3d 745, 748-49 (Tex. App.-Houston [1st Dist.] 2009, no pet.) (concluding negligence not established even though driver testified he was at fault when he rear-ended vehicle because driver further testified he was driving more slowly than surrounding traffic); Jordan v. Sava, Inc., 222 S.W.3d 840 (Tex. App.-Houston [1st. Dist.] 2007, no pet.) (concluding jury's "no" answer to negligence question upheld where there was no evidence driver was speeding and driver testified he was traveling at the same speed as general traffic). We overrule appellant's first issue.

In his second issue, Laday contends the evidence is factually insufficient to support the final judgment. When considering a factual-sufficiency challenge to a jury's verdict, we must review and weigh all the evidence, not just the evidence supporting the verdict. Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex. 1998). When the appellant bears the burden of proof at trial, we set aside a fact finding only if it is so contrary to the great weight and preponderance of the evidence as to be clearly wrong and unjust. See Mar. Overseas Corp., 971 S.W.2d at 407. As with a legal-sufficiency challenge, we may not substitute our judgment for that of the jury. Id. The jury is the sole arbiter of the credibility of the witnesses and the weight to be given their testimony. See Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757 (Tex. 2003).

Laday asserts he established that Pedraza was operating the truck, Pedraza's truck was following him, and Pedraza rear-ended Laday's vehicle. Pedraza testified the vehicles were about halfway between intersections, and the vehicles "kept going stopping and going and stopping" and "on one of those times we went, he [Laday] stopped and I failed to stop on time . . . it was an accident." Laday testified he did not see Pedraza's truck before Laday was hit, and Laday did not hear brakes or tires squealing prior to the collision.

It is "uniquely within the jury's province to determine whether plaintiff succeeded in proving negligence by a preponderance of the evidence." See Gaskey, 2009 WL 7047692, at *3 (citing Klein v. Brown-Griffin Texas Distribs., Inc., 562 S.W.2d 910, 911 (Tex. Civ. App.-Amarillo 1978, writ ref'd n.r.e.)); see also Whinery v. Mission Petroleum Carriers, Inc., No. 07-02-0073, 2003 WL 255398, at *3-5 (Tex. App.-Amarillo Apr. 30, 2003, pet. denied) (mem. op.) (concluding finding was not against the great weight and preponderance where driver was operating vehicle below posted speed limit on wet roads and in heavy traffic).

Having considered the record, we cannot conclude that the jury's verdict was so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. See Mar. Overseas Corp., 971 S.W.2d at 407. We overrule appellant's second issue.

We affirm the trial court's judgment.

SOURCE; FOURTEENTH COURT OF APPEALS, HOUSTON - 14-13-00638-CV - 2/10/2015

A forcible detainer action is a limited-purpose proceeding in Justice Court

    
FORCIBLE DETAINER: NATURE OF ACTION IN JP COURT 
 
A forcible detainer action is a procedure to determine the right to immediate possession of real property where there was no unlawful entry. TEX. PROP. CODE ANN. § 24.002(a)(2) (West 2014); TEX. R. CIV. P. 510.1;[1] Rice v. Pinney, 51 S.W.3d 705, 709 (Tex. App.-Dallas 2001, no pet.). It is intended to be a speedy, simple, and inexpensive means to obtain possession without resort to an action on the title. Scott v. Hewitt, 90 S.W.2d 816, 818-19 (1936); Rice, 51 S.W.3d at 709. The trial court must adjudicate the right to actual possession of the property. TEX. R. CIV. P. 510.3(e).

All other claims, including questions of title, validity of a foreclosure, counterclaims, and suits against third parties are not permitted. Id. Those claims must be brought in separate suits. Id. Accordingly, the only issue in a forcible detainer action is which party has the right to immediate possession of the property. Rice, 51 S.W.3d at 709. Whether a sale of property under a deed of trust is invalid may not be determined in a forcible detainer action but must be brought in a separate suit. Scott, 90 S.W.2d at 818; Rice, 51 S.W.3d at 710 (quoting Scott).

PROOF REQUIREMENTS FOR EVICTION OF TENANT AT SUFFERANCE AFTER FORECLOSURE 

To prevail on its forcible detainer action, [the plaintiff has to] to prove (1) it owned the property by virtue of a foreclosure sale deed, (2) Defendant became a tenant at sufferance when the property was sold under the deed of trust, (3) Trans-Atlas gave Defendant notice to vacate the premises, and (4) Defendant refused to vacate the premises. See Elwell v. Countrywide Home Loans, Inc., 267 S.W.3d 566, 568-69 (Tex. App.-Dallas 2008, pet. dism'd w.o.j.); see also PROP. § 24.002 (West 2014).

FILED IN JP COURT, WITH OPTION TO APPEAL TO COUNTY COURT 

A forcible detainer suit is brought in justice court. PROP. § 24.004(a) (West 2014). The decision of the justice court may be appealed to the county court. TEX. R. CIV. P. 510.10(a). The appeal is by trial de novo, which is "a new trial in which the entire case is presented as if there had been no previous trial." TEX. R. CIV. P. 510.10(c). In the county court, a party may "plead, prove and recover his damages, if any, suffered for withholding or defending possession of the premises during the pendency of the appeal." TEX. R. CIV. P. 510.11.

The validity of a foreclosure sale may not be determined in a suit for forcible detainer but must be brought in a separate suit. TEX. R. CIV. P. 510.3(e); Scott, 90 S.W.2d at 818-19; Williams v. Bank of N.Y. Mellon, 315 S.W.3d 925, 927 (Tex. App.-Dallas 2010, no pet.). Defects in the foreclosure process or with Trans-Atlas's title are not relevant in the suit before us. See Williams, 315 S.W.3d at 927.

SOURCE: DALLAS COURT OF APPEALS - 05-14-00126-CV - 3/12/2015  

Statute of Frauds as to Real Estate - Was the Property Sufficiently Identified?

STATUTE OF FRAUDS AS TO REAL ESTATE TRANSACTIONS - SUFFICIENCY OF DESCRIPTION OR IDENTIFICATION OF THE SUBJECT PROPERTY 

Statute of Frauds and Enforeability of Asserted Right of First Refusal  

A contract for the sale of real property must comply with the statute of frauds. TEX. BUS. & COM. CODE ANN. § 26.01(a)(4) (West 2009). An option to purchase contained in a real estate lease is a contract for the sale of real property that must comply with the statute of frauds. See Matney v. Odom, 147 Tex. 26, 210 S.W.2d 980, 982 (1948). Likewise, a right-of-first-refusal on the sale of real property is unenforceable unless it satisfies the statute of frauds. See Reiland v. Patrick Thomas Props., Inc., 213 S.W.3d 431 (Tex. App.-Houston [1st Dist.] 2006, pet. denied); Jones v. Brown, No. 04-99-00775-CV, 2000 WL 1056028 (Tex. App.-San Antonio Aug. 2, 2000, no pet.)(not designated for publication).

THE CRITICAL NATURE OF ADEQUATE PROPERTY DESCRIPTION 

A contract for the sale of real property satisfies the statute of frauds only if the property description is "so definite and certain upon the face of the instrument itself, or in some other writing referred to, that the land can be identified with reasonable certainty." Matney, 210 S.W.2d at 982. When the contract at issue is an option contained within another document, it is the property to be conveyed pursuant to the option that must be identified with reasonable certainty. See Matney, 210 S.W.2d at 982; Ardmore, Inc. v. Rex Group, Inc., 377 S.W.3d 45, 57 (Tex. App.-Houston [1st Dist.] 2012, pet. denied). Whether the property description in a writing is sufficient to comply with the statute of frauds is a question of law. Dixon v. Amoco Prod. Co., 150 S.W.3d 191, 194 (Tex. App.-Tyler 2004, pet. denied).

SOURCE: SAN ANTONIO COURT OF APPEALS - 04-12-00363-CV - 3/20/2013  

The Hasketts' motion for summary judgment asserted the right-of-first-refusal is unenforceable because the description of the property subject to the right-of-first-refusal fails to furnish any means by which the property referred to can be identified with reasonable certainty. The Hasketts submitted uncontroverted summary judgment evidence that the property is located at 470 S. Main and consists of 0.557 acres, more or less, and a building that is approximately 8,210 square feet. They argue there is no information in the four corners of the lease by which the 5188 square feet "premises" in the lease could be located out of the entire property at 470 S. Main. Further, the lease does not refer to any other document from which the specific identity and location of the property subject to the right-of-first-refusal could be ascertained.

OTR first argues that the lease sufficiently describes the property to be conveyed under the right-of-first-refusal as the property being leased ("approximate[ly] . . . 5188 square feet [at] 407 S. Main Street [in] Boerne, Kendall County, Texas 78006"). It argues that anyone familiar with Boerne could identify the property referred to from the address, the identity of the owners, and identity of the lessee. We disagree. The address in the description of the premises in the lease is incorrect and the lease does not identify the owner of the property, only the lessor. See Matney, 210 S.W.2d at 983 ("It will not necessarily be inferred that he owned the land simply because he signed the lease contract as lessor."). More importantly, "a deed purporting to convey land, which describes it only by quantity and as being part of a larger tract, with nothing whereby to identify what specific portion of the larger tract is intended to be conveyed, is void for uncertainty of description." Matney, 210 S.W.2d at 983 (quoting Smith v. Sorelle, 126 Tex. 353, 87 S.W.2d 703, 705 (1935)); See Texas Builders v. Keller, 928 S.W.2d 479, 481-82 (Tex. 1996) (holding description of property as "58,333 square feet . . . at 12050 Rojas" is insufficient to identify the property with reasonable certainty where the property at that address contained 100,000 square feet and nothing in document identifies which part of the property is being referred to); Hereford v. Tilson, 145 Tex. 600, 200 S.W.2d 985, 988-89 (1947) (holding that where lease provided lessee option to purchase part of property at given location, but it could not be determined what part of the property was included without resort to parol evidence, option violated statute of frauds and would not be enforced).

OTR argues alternatively that the "premises" referred to in the right-of-first-refusal is the entire property—the land and building—at 470 S. Main, and that the property is sufficiently described by identifying the street address and the owner. We again disagree. First, nothing in the lease itself suggests the parties to lease were referring to different things when they used "premises" as opposed to "Premises." To make its argument, OTR resorts to parol evidence regarding the parties' intent. However, this intent was not expressed in the lease. Even if parol evidence established the parties knew and understood what property was intended to be conveyed, the knowledge and intent of the parties will not give validity to a contract with an insufficient property description on its face. Reiland, 213 S.W.3d at 437 (citing Morrow v. Shotwell, 477 S.W.2d 538, 540 (Tex. 1972)).

If we assume that "premises," as used in the right-of-first-refusal, refers to the entire property at 470 S. Main, the property description in the lease is still insufficient to comply with the statute of frauds. A property description consisting of a street address may be sufficient under the statute of frauds if the document also contains a statement of ownership and it is shown that the party to be charged owns only one property fitting the property description in the contract. Moudy v. Manning, 82 S.W.3d 726, 728-29 (Tex. App.-San Antonio 2002, pet. denied); see Pickett v. Bishop, 148 Tex. 207, 223 S.W.2d 222, 223-24 (1949) (holding statement of ownership in the body of the instrument is considered part of the property description). When the description of the property to be conveyed is of doubtful sufficiency, ownership is an important element. Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150, 154 (1945). The lease does not expressly identify the owner of the property and contains no statement of ownership. Ownership cannot be inferred from the mere fact that a person is a lessor of the property or contracts to sell it. Matney, 210 at 983; Wilson, 188 S.W.2d at 154. Nor may it be supplied by parol evidence. Id. The mere description of the property by its address, without any statement of ownership is insufficient.

We hold the Hasketts met their burden to establish that the statute of frauds applies to the right-of-first-refusal and the property description is insufficient as a matter of law to comply with the statute of frauds, rendering the right-of-first-refusal unenforceable.

SOURCE: SAN ANTONIO COURT OF APPEALS - 04-12-00363-CV - 3/20/2013  

STATUTE OF FRAUDS AS AFFIRMATIVE DEFENSE 

The statute of frauds is an affirmative defense, and it is waived if not pled. TEX.R.CIV.P. 94; Phillips v. Phillips, 820 S.W.2d 785, 791 (Tex. 1991).  

An action for trespass to try title ... means what?

An action for trespass to try title is "the method for determining title to lands, tenements, or other real property and the exclusive remedy for resolving competing claims to property." Parker v. Hunegnaw, 364 S.W.3d 398, 401 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (citing Tex. Prop. Code Ann. § 22.001). To succeed, a plaintiff must establish the superiority of his title and cannot prevail merely on the weakness of the defendant's title. Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004). Because Plaintiffs have alleged a valid claim for wrongful foreclosure, fraud, and promissory estoppel, each of which substantiate a superior claim to title (taking all of Plaintiffs' allegations as true), and request return of title as one form of relief, the district court erred in dismissing Plaintiffs' action for trespass to try title.

SOURCE: FIFTH CIRCUIT: Guajardo v. JP Morgan Chase Bank, NA, Court of Appeals, 5th Circuit Jan 12, 2015

Declaratory Judgments Action - When is it proper?

SUIT FOR DECLARATORY JUDGMENT IN TEXAS 

A declaratory judgment is a remedial measure that determines the rights of the parties and affords relief from uncertainty with respect to rights, status, and legal relations. See Halliburton Energy Servs., Inc. v. Axis Tech., LLC, 444 S.W.3d 251, 262 (Tex. App.-Dallas 2014, no pet.) (citing Ysasaga v. Nationwide Mut. Ins. Co., 279 S.W.3d 858, 863 (Tex. App.-Dallas 2009, pet. denied)). The Texas Uniform Declaratory Judgments Act is contained in chapter 37 of the Texas Practice and Remedies Code. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 37.001-37.011.

Under section 37.004(a) of the declaratory judgments act, "[a] person interested under a deed . . . may have determined any question of construction or validity arising under the instrument . . . and obtain a declaration of rights, status, or other legal relations thereunder." Id. § 37.004(a). Further, the act provides in part, "[n]otwithstanding Section 22.001, Property Code, a person described by Subsection (a) may obtain a determination under this chapter when the sole issue concerning title to real property is the determination of the proper boundary line between adjoining properties." Id. § 37.004(c). Additionally, section 37.009 of the act states, "In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney's fees as are equitable and just." Id. § 37.009.

Section 16.033 of the Texas Civil Practice and Remedies Code provides in part,

A person with a right of action for the recovery of real property or an interest in real property conveyed by an instrument with one of the following defects must bring suit not later than two years after the day the instrument was filed for record with the county clerk of the county where the real property is located:

. . . .
(6) acknowledgment of the instrument in an individual, rather than a representative or official, capacity;
(7) execution of the instrument by a trustee without record of the authority of the trustee or proof of the facts recited in the instrument;
(8) failure of the record or instrument to show an acknowledgment or jurat that complies with applicable law; or
(9) wording of the stated consideration that may or might create an implied lien in favor of the grantor.

Id. § 16.033(a) (West 2002). Section 16.003 does not apply to a forged instrument. Id. § 16.033(b).

A bona fide purchaser is "[a] person who acquires property in good faith, for value, and without notice of any third-party claim or interest." Fletcher v. Minton, 217 S.W.3d 755, 758 (Tex. App.-Dallas 2007, no pet.); see also TEX. PROP. CODE ANN. § 13.001 (West 2014). Status as a bona fide purchaser is an affirmative defense to a title dispute. Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001). However, the protection usually afforded to a bona fide purchaser for value without notice does not apply when such purchaser's claim is dependent upon a forged instrument. Bellaire Kirkpatrick Joint Venture v. Loots, 826 S.W.2d 205, 210 (Tex. App.-Fort Worth 1992, writ denied).
 
SOURCE: DALLAS COURT OF APPEALS - No. 05-13-01581-CV - 1/21/2015

Judicial Extension of Limitations Period - American Star Energy and Minerals Corporation v Stowers (Tex Feb. 27, 2015)

TEXAS SUPREME COURT LENGTHENS STATUTE OF LIMITATIONS FOR SOME CREDITORS BY RE-DEFINING POINT OF ACCRUAL  

A cause of action accrues when facts come into existence that authorize a claimant to seek a judicial remedy. At least that has been the general rule. On February 27, 2015, the Texas Supreme Court created an exception, and thereby revived a creditor's claim that had been dismissed as time-barred by the court below. 

A claim against a partner to enforce the partner's liability for partnership debt, says the Court, does not accrue when the underlying claim accrues even though the partner may be sued in addition to the partnership.

Acknowledging that the Texas Legislature has not defined accrual for this type of claim, though it has done so for other types of claims, and even citing the residual statute of limitations in the Civil Practice and Remedies Code (4 years), the Court nevertheless effectively extended the "statute" of limitations for a claim against the partner to many more years (depending on how fast the claim against the partnership is brought and how fast it is litigated to judgment) by holding that the claim for enforcement of the partners' liability on partnership debt does not accrue until judgment is entered against the partnership (plus an additional 90 days, unless an exception applies). 

It gives a whole new meaning to statutory construction: Extending the "statute" of limitations beyond the four year statute of limitations for breach of contract claims (and the residual statute of limitations for like number of years) by creating an exception to the general rule of accrual that other plaintiffs have to live by. 

American Star Energy and Minerals Corporation v Stowers (Tex Feb. 27, 2015)(Opinon by Jeff Brown).

Coverage of this case elsewhere:
Texas High Court Extends Limitations Period for Unpaid Partnership Liabilities
SCOTX rules on limitations period against partners: American Star Energy and Minerals Corp. v. Stowers

AMERICAN STAR ENERGY AND MINERALS CORPORATION, Petitioner,
v.
RICHARD "DICK" STOWERS, RICHARD W. STOWERS, FRANK K. STOWERS AND LINDA SUE JASURDA, Respondents.

No. 13-0484.

Supreme Court of Texas.

Argued October 14, 2014. Opinion delivered: February 27, 2015.

JUSTICE BROWN delivered the opinion of the Court.

JEFFREY V. BROWN, Justice.

In this case we must decide whether Texas partnership law requires a plaintiff seeking to enforce a partner's liability for a partnership debt to sue the partner within the limitations period on the underlying claim against the partnership. Here, a judgment creditor attempted to collect from a partnership after litigating a contract claim for over a decade and a half, only to find the partnership insolvent. When the creditor sought a judgment against the individual partners, the trial court ruled the limitations period began when the underlying cause of action accrued. Because that period had passed, limitations precluded pursuit of the partners' assets. The court of appeals affirmed. 

We hold today that the limitations period against a partner generally does not commence until after final judgment against the partnership is entered. Because this action was brought within that period, we reverse the court of appeals' judgment.

SoL tolling when pertinent public records are available to the plaintiff, but are tainted with fraud: Hooks v Samson Lone Star LP (Tex. Jan 30, 2015)

   
WHAT QUANTUM OF DILIGENCE IS (UN)REASONABLE? 

Fraud prevents the running of the statute of limitations until it is discovered, or by the exercise of reasonable diligence could have been discovered. In this January 2015 opinion in an oil & gas case over underpayment of royalties, the Supreme Court of Texas holds that when the defendant's fraudulent misrepresentations extend to the Railroad Commission record itself, earlier inconsistent filings cannot be used to establish, as a matter of law, that reasonable diligence was not exercised by the plaintiff. Under these circumstances, reasonable diligence remains a fact question. 

Hooks v. Samson Lone Star, Limited Partnership (Tex. Jan. 30, 2015)

The facts underlying the case represent a variation on the theme of fraudulent concealment in that pertinent documents themselves could be discovered, but the error in them would not be readily apparent, and would therefore not give rise to awareness of injury and get the limitations clock ticking. Declining to impose a requirement that the lessor of mineral interests go back and double-check the Railroad Commission records and compare more recent filings against earlier filings to protect the lessor's rights under the "reasonable diligence" standard, the Court reversed the court of appeals' determination that the claim was time-barred, and remanded to the lower appellate court for consideration of other issues that the court had not reached. The court limited itself to the "matter of law" issue because it does not review factual sufficiency of the evidence with respect to jury findings, which will be the Houston court of appeal's job upon remand to that court.   

OPINION BELOW: Samson Lone Star, Ltd. P’ship v. Hooks, 389 S.W.3d 409 (Tex. App.—Houston [1st Dist.] 2012).

Fraud and Limitations

Hooks' fraud claims relate to the Jefferson County Lease. This lease, which prohibited pooling, contained "offset obligations" providing that if a gas well were completed within 1,320 feet of Hooks' lease line but was not unitized with Hooks' acreage, then Samson would either drill an offset well, pay Hooks compensatory royalties, or release the offset acreage. In 2000, Samson drilled a well that bottomed about 1,186 feet from Hooks' lease, within the 1,320-foot protected zone. But, instead of complying with the original offset obligations, Samson asked Hooks to amend the Jefferson County Lease in 2001 to pool into a unit associated with the new well. In connection with this request, Samson provided Hooks with a plat that incorrectly placed the well's bottom hole outside of the protected zone. A plat with the same false information had already been filed with the Railroad Commission. Older Railroad Commission records, however, contained a directional survey and an attached plat[3] that correctly placed the bottom hole within the 1,320-foot boundary.[4] Other preliminary Railroad Commission filings demonstrated that Samson originally intended the well to bottom within 1,320 feet of Hooks' lease.

Hooks brought his fraud claims in 2007, alleging that Samson deprived Hooks of compensatory royalties by misrepresenting the well's bottom-hole location and fraudulently inducing Hooks to amend the lease and pool.

A jury found that Samson committed fraud and statutory fraud, awarding more than $20 million in damages on these claims, and the trial court rendered judgment on the jury's verdict. The court of appeals, however, reversed, holding that the four-year statute of limitations for fraud barred the claims. Id. at 428-29 (citing TEX. CIV. PRAC. & REM. CODE § 16.004(a)(4)).

Hooks argues that the court of appeals erred because the statute of limitations did not begin to run until Hooks "knew or should have known of facts that in the exercise of reasonable diligence would have led to the discovery of the wrongful act." Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 216 (Tex. 2011) (quoting Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997)).

The jury found that, in the exercise of reasonable diligence, Hooks should have discovered Samson's fraud by 2007. Samson responds that, as a matter of law, reasonable diligence would have discovered the true location of the well's bottom hole in 2000 or 2001. Samson points to this Court's decisions in BP America Production Co. v. Marshall, 342 S.W.3d 59 (Tex. 2011), and Shell Oil Co. v. Ross, 356 S.W.3d 924 (Tex. 2011), where reasonable diligence required sophisticated lessors to acquaint themselves with "readily accessible and publicly available information" from Railroad Commission records. Ross, 356 S.W.3d at 929; see Marshall, 342 S.W.3d at 68-69. According to Samson, the directional survey and its associated plat, as well as filings showing the original proposed location of the well's bottom hole, should have been discovered by the exercise of reasonable diligence by 2001 at the latest, meaning that Hooks' fraud claims are barred by limitations.

We have long held that "fraud prevents the running of the statute of limitations until it is discovered, or by the exercise of reasonable diligence might have been discovered." Ruebeck v. Hunt, 176 S.W.2d 738, 739 (Tex. 1943).[5] Generally, "[c]auses of action accrue and statutes of limitation begin to run when facts come into existence that authorize a claimant to seek a judicial remedy," Emerald Oil, 348 S.W.3d at 202, but "a person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run," S.V. v. R.V., 933 S.W.2d 1, 6 (Tex. 1996). Because "fraud vitiates whatever it touches," Borderlon v. Peck, 661 S.W.2d 907, 909 (Tex. 1983), limitations does not start to run until the fraud is discovered or the exercise of reasonable diligence would discover it, Marshall, 342 S.W.3d at 69.

EXCEPTIONS TO LIMITATIONS BAR BASED ON THE DEFENDANT'S FRAUD 
ALSO APPLY TO FRAUDULENT INDUCEMENT OF A CONTRACT 

The same rule applies to claims of fraudulent inducement. Fraudulent inducement is a subspecies of fraud; "with a fraudulent inducement claim, the elements of fraud must be established as they relate to an agreement between the parties." Haase v. Glazner, 62 S.W.3d 795, 798-99 (Tex. 2001). Accordingly, the same principle applies: limitations does not start to run until the fraud with respect to the contract is discovered or the exercise of reasonable diligence would discover it.

And just when would reasonable diligence discover the wrong?[6] And who decides? Although "the date a cause of action accrues is normally a question of law," Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 623 (Tex. 2011) (per curiam), reasonable diligence is an issue of fact, Estate of Stonecipher v. Estate of Butts, 591 S.W.2d 806, 809 (Tex. 1979).[7] Nevertheless, in some circumstances, we can still determine as a matter of law that reasonable diligence would have uncovered the wrong.[8] A survey of our decisions reveals the reasons for holding, as a matter of law, that the exercise of reasonable diligence would lead to the discovery of the wrong within the statutory period.[9]

In Shell Oil Co. v. Ross, we considered untimely claims made by Ross—an attorney who "understood the oil and gas industry"—and his family that Shell had underpaid gas royalties. 356 S.W.3d at 926. Despite Shell's allegedly fraudulent representations, the Rosses had a duty to "make themselves aware of relevant information available in the public record." Id. at 928. We held that "[d]iligence is required when claimants have been `put on notice of the alleged harm of injury-causing actions.'" Id. (quoting Emerald Oil, 348 S.W.3d at 207).[10] Discrepancies in royalties paid to the Rosses on different wells put them on notice. Id. at 929. A publicly available price index illuminated the underpayments, as did General Land Office records demonstrating that Shell paid higher royalties to the State even though it owed the Rosses the same royalty. Id. Had the Rosses exercised reasonable diligence, this "[r]eadily accessible and publicly available information" would have revealed the underpayments. Id. Accordingly, as a matter of law, they did not exercise reasonable diligence.

In BP America Production Co. v. Marshall, we held that the statute of limitations was not tolled when BP fraudulently represented that it was maintaining continuous operations on a lease. 342 S.W.3d at 67-69. This case also involved a sophisticated plaintiff who "understood the oil and gas industry." Id. at 69. The public record contained two public filings with the Railroad Commission: a well log and a plugging report that contained "highly technical information." Id. at 66. Had the Marshalls read these two documents together, they would have discovered that BP was not conducting good-faith continuous operations. Id. at 69. "[A]s a matter of law, the Marshalls would have been able to discover BP's fraud th[r]ough the use of reasonable diligence." Id.

We have reached similar conclusions in other cases. For example, if the plaintiff has "actual knowledge . . . of injury-causing conduct," then this "starts the clock on the limitations period" "[i]rrespective of the potential effect of fraudulent concealment." Emerald Oil, 348 S.W.3d at 209. The availability of court records may indicate under some circumstances that reasonable diligence would have found the information. See Kerlin, 263 S.W.3d at 926.

Land title records and probate proceedings create constructive notice, "an irrebuttable presumption of actual notice," which prevents limitations from being delayed. Mooney v. Harlin, 622 S.W.2d 83, 85 (Tex. 1981); Sherman v. Sipper, 152 S.W.2d 319, 321 (Tex. 1941). These cases reveal that when there is actual or constructive notice, or when information is "readily accessible and publicly available," Ross, 356 S.W.3d at 929, then, as a matter of law, the accrual of a fraud claim is not delayed.

The present case does not fall into any of the categories where we can determine, as a matter of law, that reasonable diligence would have timely uncovered the fraud. Though Samson relies extensively on Marshall and Ross, Hooks correctly identifies an important distinction: in those cases, the public record itself was not tainted by the fraud. We have not previously considered whether reasonable diligence would uncover a correct public Railroad Commission filing when more recent filings contain false information.

In December 2000, Samson submitted a plat to the Railroad Commission as part of an application to pool. The plat was signed by Glenn Lanoue, Samson's landman, and dated November 16, 2000, certifying that it was "a true and correct plat based on the best of my knowledge." The plat had a label stating "Proposed Well Location," but, unlike some earlier plats in the record, the individual data on this plat were not themselves also marked as "proposed." The plat gave "X" and "Y" coordinates for the well's bottom-hole location, the distance of the well from various survey lines, and the well's surface location along with the bottom hole's location relative to the surface. Trial testimony established that this data is internally consistent, placing the well's bottom hole more than 1,320 feet from Hooks' lease line even though the well actually bottomed within the 1,320-foot protected zone. When Lanoue was asked where he obtained the bottom hole's distance from the survey lines, he testified that he created them himself.[11]

Samson later provided a plat with the same information to Hooks in connection with Samson's request to amend the lease and allow pooling. Samson argues the plat was ambiguous and indefinite, creating a need for Hooks, an experienced oil and gas lessor, to investigate further. On the plat is the notation "1400' ± scaled," but trial testimony presented different interpretations of what points this distance measured between. Elsewhere, the plat expressly states that the bottom-hole location is "1400' ± scaled' FEL Unit." Testimony indicated that "FEL" means "from the eastern line" of the pooled unit. Another testified that taking the notation literally would be unreasonable because if the well truly bottomed about 1,400 feet from the eastern line of the unit, as opposed to Hooks' lease line, it would be very close to Hooks' lease, perhaps even within it.

Months earlier, a directional survey performed by an independent surveyor and an accompanying plat were filed with the Railroad Commission. Some information on the directional survey clearly contradicts the Lanoue plat discussed above, and Samson urges that the information on the survey could have easily been used to estimate the bottom hole's true location. Hooks argues that it would take an expert to interpret the survey and pinpoint its location.

We cannot say that, as a matter of law, Hooks should have discovered the accurate information when the more recent filing falsely conveyed that the well had been completed outside the protected zone. Although reasonable diligence should examine readily available information in the public record, it may stop at more recent filings with the Railroad Commission, without needing to double-check more recent filings against earlier filings.

This accords with our prior decisions. We have held that "fraud vitiates whatever it touches," Borderlon, 661 S.W.2d at 909, in this case, the public record. We have held that not all Railroad Commission records create constructive notice, HECI Exploration Co., 982 S.W.2d at 886, meaning that, in some circumstances, Railroad Commission filings may exist that one is not charged with discovering. We have held that fraudulent concealment is "an equitable doctrine that . . . is fact-specific." Marshall, 342 S.W.3d at 67. And we have held that "a person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run." S.V., 933 S.W.2d at 6. Though reasonable diligence should lead to information in the public record, here, the fraudulent information itself taints the public record. To require, as a matter of law, that Hooks double-check the more recent filings against earlier filings is a higher burden than reasonable diligence requires.

Samson argues that the directional survey is the "gold standard," and that the fraudulent plat was filed to show unit lines for pooling purposes, not to provide the exact location of the well's bottom hole. Samson observes that, in some situations, Texas law mandates directional surveys performed by independent surveyors, see 16 TEX. ADMIN. CODE §§ 3.11(c)(2)(A); 3.12 (Tex. R.R. Comm'n), and asserts that Hooks should have known this and looked for the survey to establish the bottom hole's true location. Samson also argues that because Lanoue told Hooks the well was about 1,500 feet from the lease line, but then sent Hooks a plat indicating the bottom hole was about 1,400 feet away, very close to the protected zone, these inconsistencies should have caused Hooks to inquire further.

None of these arguments avail.

Had Hooks gone to the Railroad Commission, the more recent filing would have been a plat with the same inaccurate information, placing the well's bottom hole beyond the protected zone. Hooks is not required, as a matter of law, to double-check it against the earlier directional survey. To the extent some information on the Lanoue plat is unclear, a careful reader could have examined other information on the plat (e.g., the "X" and "Y" coordinates, distances from lease lines, and location of the bottom hole relative to the surface) to resolve any ambiguity, determining that the plat placed the bottom hole outside the protected zone. Indeed, Hooks presented testimony that this plat clearly placed the bottom hole outside of the protected zone. Thus, though Samson's arguments regarding potential ambiguities on the plat, and the availability and superiority of the directional survey, may be appropriate for the factfinder to consider when determining whether reasonable diligence would have uncovered the fraud, they do not establish that, as a matter of law, Hooks did not exercise reasonable diligence.

Amicus Texas Oil and Gas Association suggests that holding for Hooks will encourage litigants to guise their breach-of-contract claims as fraud claims to avoid the statute of limitations. We disagree.

To establish fraudulent inducement, "the elements of fraud must be established as they relate to an agreement between the parties." Haase, 62 S.W.3d at 798-99. Many breach-of-contract cases do not implicate the elements of fraud. Only when fraud is established with regard to the contract may fraudulent inducement be established, and, in any case, the suit is based on the fraud itself rather than a breach of contract. Moreover, because fraudulent concealment may toll the statute of limitations for contract claims, no incentive will exist to recast them as fraud claims.

We hold that when the defendant's fraudulent misrepresentations extend to the Railroad Commission record itself, earlier inconsistent filings cannot be used to establish, as a matter of law, that reasonable diligence was not exercised. Under these circumstances, reasonable diligence remains a fact question. The factfinder, no doubt, may consider the failure to examine older records when determining whether reasonable diligence was exercised, but their availability is not enough to establish that reasonable diligence was not exercised as a matter of law.

Because the court of appeals mistakenly concluded that the date by which Hooks reasonably should have discovered Samson's fraud was a question of law, it did not reach Samson's other arguments concerning Hooks' fraudulent inducement claims. See 389 S.W.3d at 428-30. These include the factual and legal sufficiency of the evidence with regard to common-law fraud, statutory fraud, and damages for fraud, as well as the factual sufficiency of the evidence regarding when Hooks, by the exercise of reasonable diligence, would have discovered the fraud.

We remand these issues for the court of appeals' consideration.

SOURCE: TEXAS SUPREME COURT - HOOKS v. SAMSON LONE STAR, LIMITED PARTNERSHIP N/K/A SAMSON LONE STAR LLC, No. 12-0920 (Tex. Jan 30, 2015) (Opinion by Justice John P. Devine) (click hyper-linked case style to read entire opinion in pdf).

Footnotes:

[4] Although the plat correctly placed the bottom hole within the protected zone, some data on the plat does not completely correspond to data on a later correct plat.

[5] See also Emerald Oil, 348 S.W.3d at 216; Marshall, 342 S.W.3d at 68; Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996); Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 517 (Tex. 1988).

[6] Hooks and amicus Cardwell, Hart & Bennett, LLP cite cases stating that if there is a fraudulent misrepresentation, it is no defense that proper inquiry might have revealed the truth. See, e.g., Buchanan v. Burnett, 119 S.W. 1141, 1142 (Tex. 1909); Labbe v. Corbett, 6 S.W. 808, 811 (Tex. 1888); Mitchell v. Zimmerman, 4 Tex. 75, 79-80 (1849). These cases, however, stand for the general proposition that one may be liable for fraud even if it could be discovered by due diligence; they do not hold that limitations is extended even if due diligence would reveal the fraud. Also, at least one amicus, Cardwell, Hart & Bennett, LLP, invokes a lessee's implied covenant to act as a reasonably prudent operator. But we held in HECI Exploration Co. v. Neel that "[i]mplied covenants do not dispense with the need for royalty owners to exercise due diligence in enforcing their contractual rights, express or implied, within the statutory limitations period." 982 S.W.2d 881, 887 (Tex. 1998).

[7] See also Shah v. Moss, 67 S.W.3d 836, 846 (Tex. 2001) ("To avoid summary judgment on limitations grounds, Moss must have raised a fact issue to support his fraudulent-concealment assertion."); Hurlbut v. Gulf Atl. Life Ins. Co., 749 S.W.2d 762, 766 (Tex. 1987) ("[W]e agree that whether the plaintiffs knew or should have known of the fraud . . . raises a fact issue. . . ."); Borderlon, 661 S.W.2d at 909 ("A fact issue exists whether, in the exercise of reasonable diligence, Borderlon knew, or should have known . . ., that the presence of the foreign object in her abdomen gave rise to a cause of action against Dr. Peck."); Cherry v. Victoria Equip. & Supply, Inc., 645 S.W.2d 781, 782 (Tex. 1983) ("The ultimate duty to weigh the evidence, determine credibility and decide if fraudulent concealment actually existed rests upon the trier of fact."); Ruebeck, 176 S.W.2d at 740 ("What will constitute reasonable diligence to discover fraud and when the fraud might have been discovered by the exercise of such diligence are necessarily questions which must be determined from all the facts and circumstances in evidence in each particular case. When, under the facts in evidence, reasonable minds might differ on such issues, the findings of the jury thereon are binding on the appellate court.").

[8] See, e.g., Etan Indus., 359 S.W.3d at 623 ("On these facts, we hold as a matter of law that the estoppel effect of the alleged fraudulent concealment ended in December 2002 at the latest. By that date, the Lehmanns were apprised of facts, conditions, and circumstances sufficient to cause a reasonable person to make inquiry that would lead to the discovery of the concealed cause of action."); Ross, 356 S.W.3d at 929 ("Because the Rosses could have discovered Shell's alleged fraud through the use of reasonable diligence, we hold that, as a matter of law, the doctrine of fraudulent concealment cannot apply to toll the statute of limitations."); Marshall, 342 S.W.3d at 69 ("[A]s a matter of law, the Marshalls would have been able to discover BP's fraud through the use of reasonable diligence."); Kerlin v. Sauceda, 263 S.W.3d 920, 926 (Tex. 2008) ("As a matter of law, the Ballis could have discovered the existence of any claims before limitations expired through the exercise of reasonable diligence.").

[9] Hooks denies relying on the discovery rule or fraudulent concealment. Although fraudulent concealment allows the statute of limitations to be tolled for causes of action besides fraud itself, the standard of reasonable diligence remains the same: "Fraudulent concealment only tolls the running of limitations until the fraud is discovered or could have been discovered with reasonable diligence." Marshall, 342 S.W.3d at 67. Consequently, cases discussing fraudulent concealment are relevant to the meaning of reasonable diligence.

[10] Samson and Hooks dispute whether parties must be put on notice of potential harm before they have a duty to exercise reasonable diligence, as well as whether Hooks was on notice. We need not reach these questions here. Instead, we decide the case by assuming, without deciding, that Hooks should exercise reasonable diligence.

BLOG POSTS ON THIS CASE BY OTHERS:
Texas Supreme Court Rules for Mineral Owner in Hooks v. Samson  (Oil & Gas Lawyer Blog)
How Much Due Diligence is Due? CASE STUDY: HOOKS V. SAMSON LONE STAR, LTD (Manning Wolfe)
Hooks v. Samson: A Bold Prediction on Overcoming the Discovery Rule (Soden Abraham) (written and published prior to Tex. Sup. Ct.'s decision in this case)