Thursday, February 7, 2008

Consumer prevails in credit card suit

Judge Bradshaw-Hull's summary judgment for debt collector reversed, along with attorney's fees. Plaintiff failed to prove terms of the contract (credit card agreement) including interest rate, and apparently tried to fast-track to judgment using sworn-account procedure which does not apply in this context. As is typical in these types of cases, debt collector did a shoddy job making its case and effective lawyering on the part of consumer's counsel made a difference in the outcome (at least on appeal). As an additional bonus, consumer will have a new judge on remand as Hon. Bradshaw-Hull has since moved on to district court.

Williams v. Unifund CCR Partners Assignee of CitiBank (Tex.App.- Houston [1st Dist.] Feb. 7, 2008)(Keyes)(consumer credit card debt suit, judgment reversed, sworn account, attorney's fees)
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS: Opinion by Justice KeyesBefore Justices Taft, Keyes and Alcala01-06-00927-CV Edward Williams v. Unifund CCR Partners Assignee of CitiBank
Appeal from County Civil Court at Law No 3 of Harris County (Judge Lynn Bradshaw-Hull)
Collection attorneys: Jeffrey Chen, Stephanie Peel Briggs
Consumer's attorney: Ernestine W. Dansby


Appellant, Edward Williams, appeals the trial court's order that granted appellee's, Unifund CCR Partners Assignee of Citibank's (Unifund), motion for summary judgment. In five issues, Williams contends that (1) Unifund's summary judgment evidence was insufficient to establish that an agreement existed between them; (2) Unifund's claim was barred by the statute of limitations; (3) Unifund's summary judgment evidence was insufficient to establish the proper finance charges; (4) Unifund's summary judgment evidence was insufficient to establish its right to recover interest at a rate of 19.8% and statutory attorney's fees; and (5) Unifund failed to establish its right to recover on a sworn account.

We reverse and remand.


Citibank (South Dakota), N.A. (Citibank) and Williams entered into a credit agreement allowing Williams to receive cash advances and to purchase goods and services. Williams made charges and payments on the account, and interest rates between 20.15-22.4% were reported on his statements. Williams then quit making payments and the account was closed on January 12, 2001. Williams then made several more payments, and his statements reflected that Citibank granted him deferment credits and an interest rate of 5%. The statements from Citibank reported that Williams's last payment was received on October 15, 2001. The last statement from Citibank was dated June 13, 2002 and reflected a balance of $7,895.00 and an interest rate of 19.8%. The last statement in the record is from Unifund to Williams, reflecting that Unifund had purchased the account from Citibank on June 29, 2005, and that Williams's account balance at that time was $14,153.90. Unifund filed this lawsuit on August 19, 2005.

Unifund filed a motion for summary judgment that did not state a specific theory of recovery. Unifund's summary judgment evidence included the above mentioned statements and three affidavits. The affidavit of Angela Freckman, the designated agent of Unifund, attested that Unifund and Williams entered into an agreement that allowed Williams to receive cash advances and to purchase goods and services, that Williams failed to make payments due on the account, and that the unpaid amount of Williams's account was $14,153.90, exclusive of interest, attorney's fees and court costs. Freckman attested in her affidavit that a copy of the agreement was attached and that the attached account was the original, true and correct account. No copy of the agreement was attached--only copies of the statements.

Unifund also submitted the affidavit of Bharati Lengade, the media supervisor of Unifund, who attested:

There is due and payable from [Williams] . . . the amount of $14,153.90 (principal balance in the amount of $7,895.00 plus interest up through 06/29/2005 in the amount of $6,258.90). By the terms of the agreement between the defendant and the original creditor, interest is accruing from the aforesaid date at the rate of 19.80 percent per annum. This balance reflects any payments, credits or offsets made since the account was charged off.

The final affidavit provided by Unifund was an affidavit from its attorney attesting that Unifund had incurred attorney's fees in the amount of $4,717.97.

Williams's reply evidence consisted of a copy of his first amended original answer denying the agreement with Unifund and raising the affirmative defense of statute of limitations and his own affidavit, which stated:

I deny the agreement made the basis of this lawsuit.

[Unifund] did not give me notice and proof of its claim thirty (30) days prior to filing this law suit as alleged.

[Unifund] is not entitled to recover in the capacity in which it sues because I had no agreement with [Unifund].

The trial court granted Unifund's motion for summary judgment, stating that it was "of the opinion that [Unifund's] cause of action [was] founded upon a sworn account (numbered 5424180098219659), or a claim for a liquidated money demand based upon an agreement between the parties and that no material issue of fact exists in this cause." The trial court awarded Unifund a judgment in the amount of $14,153.90 and interest at the rate of 19.8% from June 30, 2005 until the date of the judgment, and 18% interest from the date of the judgment until the debt was paid. The trial court also awarded Unifund attorney's fees and costs in the amount of $4,717.97 with interest at the court rate of 7.75% per annum until paid.


Williams argues that Unifund's claim was barred by the statute of limitations, that Unifund did not make a proper claim on a sworn account, that Unifund's summary judgment evidence was insufficient to establish the existence of an agreement between them and the specific terms of interest rates and finance charges, and that Unifund had not proved that it was entitled to court costs and attorney's fees. Statue of Limitations

In his second issue, Williams argues that the statute of limitations barred Unifund's right to recovery. A party relying on an affirmative defense to defeat summary judgment must come forward with summary judgment evidence establishing a fact issue on each element of the affirmative defense. Suttles v. Thomas Bearden Co., 152 S.W.3d 607, 614 (Tex. App.--Houston [1st Dist.] 2004, no pet.). The statute of limitations on a claim for debt based on breach of contract is four years from the time the cause of action accrues. Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a) (Vernon 2002). Williams made his last payment on October 15, 2001, and this action commenced on August 19, 2005, which is within the four-year window. Williams did not present any summary judgment evidence contradicting these facts.

We overrule Williams's second issue.

Sworn Account

In his fifth issue, Williams argues that the trial court erred in granting summary judgment on Unifund's claim for a sworn account pursuant to Texas Rule of Civil Procedure 185. (1)

Rule 185 is a procedural tool that limits the evidence necessary to establish a prima facie right to recovery on certain types of accounts. (2) Tex. R. Civ. P. 185. 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. . . ." Meaders v. Biskamp, 316 S.W.2d 75, 78 (Tex. 1958) (emphasis in original); Bird v. First Deposit Nat'l Bank, 994 S.W.2d 280, 282 (Tex. App.--El Paso 1999, pet. denied); Hou-Tex Printers, Inc. v. Marbach, 862 S.W.2d 188, 190 (Tex. App.--Houston [14th Dist.] 1993, no writ). It does not apply to transactions between parties resting upon a special contract. Meaders, 316 S.W.2d at 78; Bird, 994 S.W.2d at 282.

A credit card issued by a financial institution is a special contract that does not create the sort of debtor-creditor relationship to bring a claim within the scope of Rule 185. See Bird, 994 S.W.2d at 282; see also Sherman Acquisition II LP v. Garcia, 229 S.W.3d 802, 807 (Tex. App.--Waco 2007, no pet.); Tully v. Citibank (South Dakota), N.A., 173 S.W.3d 212, 216 (Tex. App.--Texarkana 2005, no pet.). The Bird court reasoned:

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. Bird, 994 S.W.2d at 282. Therefore, Rule 185 is not available in a suit to recover credit card debt. The trial court erred to the extent it granted summary judgment on Unifund's claim on a sworn account.

We sustain Williams's fifth issue and hold that Unifund is not entitled to summary judgment on a sworn account under Rule 185. Although Unifund cannot prevail under Rule 185, it is important to remember that Rule 185 is merely a procedural tool that is unavailable here under established law. Williams also argues that Unifund was not entitled to summary judgment on its breach of contract theory. (3)

Breach of Contract

In his first, third, and fourth issues, Williams argues that Unifund's summary judgment evidence was insufficient to establish a valid and enforceable agreement between himself and Unifund as a matter of law and that genuine issues of material fact exist as to the applicable interest rate and finance charges. (4)

We review de novo a trial court's granting of a traditional motion for summary judgment. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). A summary judgment under Rule of Civil Procedure 166a(c) is properly granted only when the movant establishes that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Knott, 128 S.W.3d at 215-16. The movant must establish that it is entitled to summary judgment as a matter of law on each element of its cause of action. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999). Only if the movant conclusively establishes its cause of action does the burden shift to the nonmovant to respond with evidence raising a genuine issue of material fact that would preclude summary judgment. Id. at 222-23. In deciding whether there is a disputed material fact precluding summary judgment, evidence favorable to the nonmovant will be taken as true, every reasonable inference must be indulged in favor of the nonmovant, and any doubts must be resolved in favor of the nonmovant. Knott, 128 S.W.3d at 215.

To be entitled to summary judgment on its breach of contract claim, Unifund was required to prove, as a matter of law, the essential elements of such a claim: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of contract by the defendant; and (4) damages sustained as a result of the breach. Winchek v. Am. Express Travel Related Servs. Co., 232 S.W.3d 197, 202 (Tex. App.--Houston [1st Dist.] 2007, no pet.). Parties form a binding contract when the following elements are present: (1) an offer, (2) an acceptance in strict compliance with the terms of the offer, (3) meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. Id. To be enforceable, a contract must be sufficiently certain to enable a court to determine the rights and responsibilities of the parties. Id. (citing T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992)). The material terms of a contract must be agreed upon before a court can enforce the contract, and the interest rate is a material term. See T.O. Stanley Boot, 847 S.W.2d at 221 (holding that interest rate is material term in context of contract to loan money).

Williams argues that because Unifund did not submit a copy of the credit agreement signed by Williams, Unifund did not prove the existence of an agreement or any of its terms. Unifund submitted the affidavit of its designated agent, Angela Freckman, the affidavit of Unifund's media supervisor, Bharati Lengade, a statement from Unifund to Williams, and multiple statements from Citibank to Williams.

However, Unifund did not produce the actual agreement or any other document that established the agreed terms, including the applicable interest rate or the method for determining the applicability and amount of finance charges. The interest rate and other information reflected in the statements that were provided by Unifund are inconsistent, varying from 5% to 22.4%, and there is no indication of the agreement reached as to interest.

Furthermore, Unifund presented no evidence on how it calculated the interest rates and finance charges that increased Williams's account balance from the $7,895.00 he owed on the June 2002 statement to the $14,153.90 Unifund claimed in its lawsuit.

While Unifund's summary judgment evidence might indicate that the parties had reached an agreement of some kind, their evidence is not sufficient to establish the terms of a valid contract as a matter of law. See Winchek, 232 S.W.3d at 202; T.O. Stanley Boot, 847 S.W.2d at 221.

Therefore, Unifund did not meet its burden and summary judgment was inappropriate on Unifund's breach of contract theory. (5) See Knott, 128 S.W.3d at 215-16; Winchek, 232 S.W.3d at 202.

We sustain appellant's first, third and fourth issues as they relate to Unifund's failure to establish the material terms of the contract as a matter of law.

Attorney's Fees

Also in his fourth issue, Williams argues that Unifund was not entitled to attorney's fees because it did not present the account to him for payment at least 30 days prior to filing suit. See Tex. Civ. Prac. & Rem. Code Ann. § 38.002 (Vernon 1997) (providing that "payment for the just amount owed must not have been tendered before the expiration of the 30th day after the claim is presented"); see also id. § 38.001(8) (allowing party who prevails on breach of contract claim to recover reasonable attorney's fees).

To recover attorney's fees under section 38.001, a party is required to recover actual damages. Cytogenix, Inc. v. Waldroff, 213 S.W.3d 479, 489-90 (Tex. App.--Houston [1st Dist.] 2006, pet. denied) (citing Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997)). Because we reverse the trial court's award of damages to Unifund, we also reverse the award of attorney's fees without addressing Williams's arguments on this issue. See id.

We sustain appellant's fourth issue as it relates to attorney's fees.


We reverse the order of the trial court that granted summary judgment and awarded attorney's fees and remand the cause for further proceedings consistent with this opinion.

Evelyn V. Keyes

Panel consists of Justices Taft, Keyes, and Alcala.

1. Williams also argues that recovery under a theory of quantum meruit was incorrect. Unifund's original pleadings raised the theory of quantum meruit, but nothing in its motion for summary judgment, the judgment of the trial court, or Unifund's appellate brief suggests that this theory was relied on in any way.
2. Texas Rule of Civil Procedure 185 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 a 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 a claim shall file a written denial, under oath." Tex. R. Civ. P. 185.
3. In its brief, Unifund argues that it "did not seek the procedural advantages of Texas Rule of Civil Procedure 185, and [it] did not prevail on its claim under the rule."
4. Unifund argues that Williams did not properly challenge its motion for summary judgment because he did not object in the trial court. We note that we are not being asked to determine whether Unifund's evidence should have been considered by the trial court. Rather, we are asked to review whether the evidence that was before the trial court was sufficient to support its ruling. We overrule Unifund's argument because a motion for summary judgment must stand on its own merits--Williams need not have answered or responded to the motion to contend that Unifund's summary judgment proof is insufficient as a matter of law to support summary judgment. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999).
5. Unifund argues that Williams should not prevail on these issues because he did not present any contradictory evidence at trial. However, Williams's burden to present evidence showing that there is a genuine issue of material fact only arises if Unifund presents evidence sufficient to show its right to recover as a matter of law. See Rhone-Poulenc, 997 S.W.2d at 222-23.


Anonymous said...

Unifund is actually Unifund CCR Partners, a trademark registered in Ohio. The trademark is owned by Unifund CCR Partners, a general partnership registered in Delaware. The general partnership here is between Credit Card Receivables Fund, Inc. registered in Ohio, and ZB Limited Partners, a general partnership registered in Delaware. I am still working on just exactly who are the ZB partners, but it looks like they have no corporate protection. Maybe they do not need any because ZB is short for Zurich (Swiss) Bank! David G. Rosenberg, you bad boy. You or your ZB buddies haven't flown out of Lunken Field on a private jet to an offshore destination with more than $10,000 in cash and bonds on board, have you? A certain Federal Prosecutor wants to know.

Anonymous said...

Unifund CCR Partners is owned ZB Limited Partners registered in Delaware. ZB is short for Zises Brothes: Jay H.Zesis, Seymour W. Zesis & Selig A Zesis. Jay Zesis: (pronounced "zee-sees"), a Likud funder with his wife Nancy (now Cathy). As of 2000, Jay was President of "Friends of the Israeli Defense Forces in the United States."
Jay Zises and his brother Selig founded Integrated Resources, a hyper-leveraged tax shelter. The Zises debt pyramid blew out in 1989, defaulting on $955 million. The scheme was financed by Drexel Burnham Lambert's junk-bond kingpin Michael Milken and his family, and by those backing Milken, including Zises' former boss Saul Steinberg, and executives of Carl Lindner's dope-running United Fruit/Chiquita Banana. A Federal judge ruling on a lawsuit against Integrated said, "This case arises from the ashes of what is regarded by some as the most spectacular scam of the 1980s."
Milken and others were jailed, but the Zises brothers escaped with a fortune, bought out by Milken's cousin Stanley Zax shortly before Milken was indicted and Integrated collapsed.
Jay Zises created the Roundtable Political Action Committee, a U.S. election campaign-financing arm of the Milken clique, operating from Integrated's New York office. His brother Seymour Zises was president of the coordinating "National PAC," which operated from Washington. Run in tandem with AIPAC (American-Israel Public Affairs Committee), these are the PACs which established, in America, the pattern of dirty-money election financing which rules Israel today.
Contributors to Jay Zises' Roundtable included members of the Meshulam Riklis family. Riklis, a mobster go-between for dope-runner Robert Vesco, Vesco's lawyer Kenneth Bialkin, and the Milken group, was Ariel Sharon's personal financial angel. For years, the Zesis Brothers flew an unmarked 737 tail number N4529W, all white with a red stripe. The planes’ owners, “American Leasing Investors V-A” was a partnership between Selig A. Zises, Jay H. Zises, and Arthur H. Goldberg, a collection of New York financers. Selig Zises was the chairman of Integrated Resources, Inc., a financial services company known for creating tax shelters and a part of junk-bond king Michael Milken’s “daisy-chain” of clients. When Milken’s pyramid scheme fell apart in the late 1980s, the Zises brothers left Integrated Resources. A few months later the company defaulted on its loans and collapsed. In 1991, Goldberg and the Zises brothers cancelled their lease with EG&G Special Projects, and ownership of the plane changed to the First Security Bank of Utah. EG&G in turn began leasing the plane from the bank. On December 7, 1995, First Security Bank sold the aircraft to the Department of the Air Force. EG&G Special Projects still operates the aircraft.
In recent years, Jay Zises has been the president of “Friends of the Israeli Defense Forces,” a close friend of former Israeli Prime Minister Benjamin Netanyahu, and a major contributor to Senator Joseph Lieberman, George Bush, the Republican National Committee, and to the Club for Growth. His brother Selig Zises is now a major investor in Xenonics – a company that sells lighting systems and night vision equipment to the military and whose stock value increased many times over with the US invasion of Iraq. Selig maintains intimate ties to Washington, contributing large amounts of money to both Democratic and Republican candidates.

Anonymous said...

The transfer of Unifund proceeds from:Unifund CCR Partners,ZB Limited Partnership,ZB Linited Partners,ZB/CCR, Inc. andCredit Card Receivables Fund, Inc toAssociated Capital LP,A Cap, Inc., andAssociated Capital Offshore/L/P is managed at the offices of the Zises Brothers Jay & Selig at:767 3rd Ave Fl 16
New York, New York USA 10017-9017 This Schedule 13G is being filed jointly by
Associated Capital, L.P., a Delaware limited
partnership ("Associated"), its general partner, A
Cap, Inc., a New York Corporation ("A Cap"), Jay H.
Zises, the President and a director of A Cap, Selig
A. Zises, Vice President, Treasurer and a director of
A Cap, Nancy J. Frankel-Zises, a director, Vice
President and Secretary and the sole stockholder of A
Cap, and Associated Capital Offshore, L.P., a Cayman
Islands limited partnership ("Associated Offshore").
Associated, A Cap, Jay H. Zises, Selig A. Zises,
Nancy J. Frankel-Zises and Associated Offshore are
hereinafter sometime referred to collectively as the
"Reporting Persons". The business address of
Associated Offshore is c/o Goldman Sachs (Cayman)
Trust, Limited, P.O. Box 896, George Town, Grand
Cayman, Cayman Islands, British West Indies. The
business address of each other Reporting Person is
477 Madison Avenue, 14th Floor, New York, New York,
10022. Jay H. Zises, Selig A. Zises and Nancy J.
Frankel-Zises are each United States citizens.