TRCP 185: Credit Card Debt Claim Not Viable as Sworn Account Suit

Expedited Procedure for Suits on Sworn Account [Under Rule 185] Not Available to Collect Credit Card Debt


First Court of Appeals, in a panel opinion by its Chief Justice, Sherry Radack, adds yet another appellate case to the line of cases from Texas appeals courts, holding that a credit card debt collection suit cannot be brought as a suit on (sworn) account under rule 185 of the Texas Rules of Civil Procedure. Tex. R. Civ. P. 185

Credit card issuers typically do not sell goods or services to the consumer (third parties do), wherefore they do not have a viable suit-on-account claim, but instead a claim for breach of credit card agreement.

Debt collectors nevertheless keep trying suit-of-account theories because they often cannot come up with the underlying contract and other adequate account documentation, attempting instead to take advantage of the evidentiary benefits of the Rule 185 for proper sworn accounts, such as those brought by venders, merchants, contractors and other businesses.

Resurgence Financial, LLC v. Lawrence (Tex.App.- Houston [1st Dist.] Oct. 8, 2009)(Radack) (credit card debt suit not properly brought as sworn account suit under Rule 185, damages not proven)

HOUSTON COURT OF APPEALS EXPLAINS WHY SWORN ACCOUNT SUIT IS IMPROPER IN CREDIT CARD DEBT COLLECTION SUIT AGAINST CARDHOLDER

Applicable Law

Rule 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 claim is, within the knowledge of the affiant, just and true, that it is due, and that all just and lawful offsets, payments and credits have been allowed, the same shall be taken as prima facie evidence thereof, unless the party resisting such claim shall file a written denial, under oath. A party resisting such a sworn claim shall comply with the rules of pleading as are required in any other kind of suit, provided, however, that if he does not timely file a written denial, under oath, he shall not be permitted to deny the claim, or any item therein, as the case may be. No particularization or description of the nature of the component parts of the account or claim is necessary unless the trial court sustains special exceptions to the pleadings.

Tex. R. Civ. P. 185 (emphasis added). "Rule 185 is a procedural tool that limits the evidence necessary to establish a prima facie right to recovery on certain types of accounts." Williams v. Unifund CCR Partners, 264 S.W.3d 231, 234 (Tex. App.--Houston [1st Dist.] 2008, no pet.).

Analysis

Five courts of appeals, including this Court, have held that suits for collection of credit-card debt, when the card's issuer is not also the provider of the purchased goods or services, are not suits on account under Rule 185. See, e.g., id. at 234-35. A sixth court of appeals has noted the same rule. See Dulong v. Citibank (South Dakota), N.A., 261 S.W.3d 890, 893 n.3 (Tex. App.--Dallas 2008, no pet.) (noting that suit on sworn account is not proper for credit-card collection suit).

In Williams, we reasoned that "[r]ule 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. . . .'" Williams, 264 S.W.3d at 234 (quoting Meaders v. Biskamp, 316 S.W.2d 75, 78 (Tex. 1958)). Because "no title to personal property passes from the bank to the cardholder," we concluded that "[a]n unpaid bank credit card account . . . 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," rendering Rule 185 inapposite. Id. at 234-35.

Resurgence recognizes this authority, but contends that it was wrongly decided, urging us to overrule Williams and to depart from the holdings of our sister courts of appeals. We decline to do so. We generally do not overrule precedent absent a compelling reason, especially when, as here, doing so would cause a split of authority between our sister court with which we exercise concurrent appellate jurisdiction. See Howeth Investments, Inc. v. City of Hedwig Village, 259 S.W.3d 877, 901 (Tex. App.--Houston [1 Dist.] 2008, pet. denied) (declining to overturn 33-year-old precedent interpreting statute that would result in split with the Fourteenth Court of Appeals, when no compelling reason existed to do so).

Moreover, abrogating this holding of Williams would put into doubt far older precedent of this Court, in which we applied the same reasoning from Meaders to hold that a suit for breach of a lease for realty is not covered by Rule 185. See Meineke Discount Muffler Shops, Inc. v. Coldwell Banker Prop. Mgmt. Co., 635 S.W.2d 135, 138 (Tex. App.--Houston [1st Dist.] 1982, writ ref'd n.r.e.); accord Schorer v. Box Serv. Co., 927 S.W.2d 132, 134-35 (Tex. App.--Houston [1st Dist.] 1996, writ denied) (following this holding of Meineke, despite concurring opinion arguing that Meaders did not limit Rule 185's application).

Resurgence contends that a compelling reason to overrule Williams exists. The parties agree that the Texas Supreme Court's decision in Meaders was the ultimate source for the line of authority concerning credit-card debt and Rule 185. Accordingly, Resurgence contends that the common-law definition of a "sworn account" adopted in Meaders should not have been applied to Rule 185 because the Meaders court was not interpreting Rule 185; rather, it was interpreting an attorney's fees statute that at that time contained the term--whereas Rule 185 does not contain the term in its text, although its title at the time was "Suit on a Sworn Account." Ignoring Meaders, Resurgence then argues that the plain language of the rule is broad enough to cover credit-card suits. Specifically, it argues that a credit-card-collection suit is either an "open account" or a "claim for a liquidated money demand based upon written contract."

Resurgence ignores the language modifying these terms: the rule describes 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 . . . ." Tex. R. Civ. P. 185. Thus, a reading of the entire rule is not inconsistent with Meaders's holding.

Much of the authority on which Resurgence relies either considered statutes with language materially different from that in Rule 185 (1) or did not base the holding on Rule 185. (2) And the remaining authority on which Resurgence relies did not concern credit-card-collection suits and has not been followed by the courts considering the rule's application in that context. (3)

We conclude that Resurgence has offered no compelling reason to overrule Williams, to put into question Meineke or Schorer, or to depart from our sister courts' well-established interpretation of Meaders and Rule 185. Accordingly, we overrule Resurgence's sole issue.

CONCLUSION

We affirm the judgment of the trial court.

[footnotes omitted] Click case style to read the full text of the opinion

AFFIRM TC JUDGMENT: Opinion by Chief Justice Radack
Before Chief Justice Radack, Justices Bland and Massengale
01-08-00341-CV Resurgence Financial, L.L.C. v. James T. Lawrence
Appeal from County Civil Court at Law No 2 of Harris County
Trial Court Judge: Hon. Jacqueline Lucci Smith