Simien v Unifund's shaky premise - U.S. Comptroller of the Currency (OCC) enforcement action against Chase Bank punctures presumption of trustworthiness of credit card debt records established by Houston Court of Appeals in 2010

The Comptroller of the Currency has now fined Chase Bank $30 million dollars for robosigning and other less than kosher debt collection practices that have been known for years. See July 8, 2015 Press release here. Consent Order for the Assessment of a Civil Money Penalty here.

But meanwhile our local courts of appeals have gone out of their way to accommodate and legitimize wrongful collection conduct, and other intermediate courts around Texas (but not all) have followed their lead. In light to the regulatory actions involving robosigning, including the most recent consent order against a major bank, the time seems ripe to revisit Simien v. Unifund CCR Partners, 321 S.W.3d 235 (Tex. App.-Houston [1st Dist.] 2010, no pet.)(overruling objections to admissiblity of credit card bank records sought to be admitted through an employee testifying for debt buyer).

THE LOWERING OF EVIDENTIARY STANDARDS IN COLLECTION CASES 

This is how the issue was handled in Texas when assignees of credit card debt used dubious affidavits and documentation in credit card debt collection cases: Rather than holding debt collection plaintiffs and their attorneys to the same evidentiary standards that others have to live by, the Houston appellate courts fashioned special interest jurisprudence to accommodate debt collection firms' interest in efficient and fast-paced mass-litigation and procurement of judgments.

The First Court of Appeals (later followed by some others) simply changed the case law governing admissibility of business records to accommodate the debt collectors, and provided them with a remedy for their problems in proving their debt claims with poor documentation in the trial courts. How so? By creating new controlling precedent for admissibility of original creditor records through otherwise unqualified witnesses on the premise that the records must be trustworthy because the bank that sold the account would be violating the law -- and face penalties -- if it had not acted properly in running its business.

BANK RECORDS TRUSTWORTHY QUA BANK RECORDS

The debt buyer was therefore justified in relying on whatever documentation they had received upon purchase of portfolios of charged-off credit card accounts because those records were deemed inherently trustworthy. That exempted them from the need to actually know anything about the operations of the original creditor to put them in a position to vouch for the reliability of those records.

In other words, the Houston Court of Appeals blessed the practice of robosigning by employees of companies that bought charged-off accounts from banks such as Chase, Citibank, Capital One, GEMB, HSBC, and others. They substituted an evidentiary presumption of trustworthiness, thereby short-circuiting the safeguards for quality control that otherwise apply to use of documentary evidence in the litigation process, including authentication and hearsay.

Essentially, the justices on the court of appeals took the position that a major national bank could not possibly have done anything wrong, and that the records that the debtbuying company suing on the debt claims to have received must necessarily be trustworthy because they are business records created by a national bank. After all, if the bank were to engage in shady practices, they would face consequences.

Here is an example of a Houston appellate justice's reasoning used to affirm a judgment on a credit account sold by Chase Bank USA, N.A., citing her former colleague Elsa Alcala, who now sits on the CCA and took the lead in fashioning the precedent to lower the bar for admissibility of credit card debt records on the premise that a major bank like Citibank can do no wrong. See Simien v. Unifund CCR Partners, 321 S.W.3d 235, 240-43 (Tex. App.-Houston [1st Dist.] 2010, no pet.) (establishing alternative predicate for admissibility of business records).

Chief Justice Adele Hedges writes:

Chase's failure to keep accurate records could result in criminal or civil penalties. See Tex. Fin. Code Ann. § 392.304(a)(8) (prohibiting misrepresentations of amount of consumer debt); id. § 392.402 (providing for criminal penalties for violations of chapter 392 of Texas Finance Code); see also Fair Debt Collection Practices Act, 15 U.S.C.A. § 1692e(2)(a) (prohibiting misrepresentation of amount of debt); id. § 1692l (providing for administrative enforcement of Administrative Debt Collection Practices Act). These circumstances otherwise indicate the trustworthiness of the Chase Bank documents.[3] See Simien, 321 S.W.3d at 243-44. Accordingly, because the business-records affidavit at issue here meets the criteria for admission as business records under Texas Rule of Evidence 803(6), the trial court did not abuse its discretion in admitting these records. See id. We overrule Ainsworth's first issue.  

The OCC has now imposed penalties to the tune of $30 million on Chase Bank for practices that the Houston Court of Appeals justices simply presumed would not occur because Chase and its like would be deterred by the possibility of facing an enforcement action by regulators. And the OCC is not the only regulator whose attention Chase attracted with its dubious practices. The CFPB and a bevy of state attorneys general also took action against the bank over improper conduct.

CFPB Action against JPMorgan Chase over wrongful debt collection conduct
URL: http://www.consumerfinance.gov/blog/were-ordering-jp-morgan-chase-to-refund-50-million-and-stop-collecting-on-528000-accounts

But misconduct and illegal conduct by major financial institutions is hardly man-bites-dog news. Nor was that so when Siemien v Unifund was decided in 2009 (with a superseding opinion in 2010).

BANKS TRUSTWORTHY AS A MATTER OF LAW - EVEN FAILED ONES 

Not to mention that the FDIC had shut down and liquidated Washington Mutual Bank years ago because of unsound practices (and resulting lack of trustworthiness). Chase Bank acquired WaMu's credit card portfolio (and other assets) via the FDIC acting as receiver, which also included accounts originated by Providian Bank that had been assumed by WaMu before its demise by merger.

Yet the Houston Courts of Appeals found such records presumptively trustworthy, and instructed (through the precedent set in Simien and its progeny) the lower courts to overrule evidentiary objections made by consumers lucky enough to find a competent attorney to make evidentiary objections to offers of dubious records and shoddy affidavits by robosigners in credit card and other consumer debt collection cases.

The Texas Supreme Court was not asked to weigh in at the time; nor is it likely that it would have ruled differently. But the latest regulatory developments have again shown that the premise underlying Simien was wrong. It was wrong all along. -- An exercise not in legislating from the bench, but of handing down special-interest jurisprudence to ease the burdens of proof for a particular category of litigants at the expense of others. And that amounts to policymaking too: Policymaking by other means. On the back-end of the law.

Presumed Trustworthiness 

EXCERPT FROM AINSWORTH V. CACH, LLC

MEMORANDUM OPINION BY ADELE HEDGES, 

CHIEF JUSTICE, 14th COURT OF APPEALS 

Admissibility of the Business-Records Affidavit

Ainsworth challenged the admission of the business-records affidavit and supporting documentation on numerous grounds, including hearsay and that the supporting documents were unreliable and not trustworthy. The admission and exclusion of evidence are within the sound discretion of the trial court. Bayer Corp. v. DX Terminals, Ltd., 214 S.W.3d 586, 609 (Tex. App.-Houston [14th Dist.] 2006, pet. denied) (citing City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex. 1995)). The complaining party must show that the trial court erred and that such error probably resulted in an improper judgment, which usually requires a showing that the judgment turned on the challenged evidence. Id.; see also Tex. R. App. P. 44.1(a)(1) (requiring that before a judgment can be reversed on appeal it must be determined that the error probably caused rendition of an improper judgment or prevented the appellant from properly presenting the case on appeal).

A proponent of hearsay evidence bears the burden of showing that testimony fits within an exception to the general rule prohibiting admission of the hearsay evidence. Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 908 n. 5 (Tex. 2004); see also Tex. R. Evid. 802. Rule of Evidence 803(6) provides an exception to the hearsay rule for business records if the offering party shows (1) the records were made and kept in the regular course of business; (2) the business kept the records as part of its regular practice; (3) the records were made at or near the time of the event they contain; and (4) the person making the records or submitting the information had personal knowledge of the events being recorded. See Tex. R. Evid. 803(6). Business records may also be "admissible in evidence in any court in this state upon the affidavit of [a] person" who can satisfy the requirements of Rule 803(6). Tex. R. Evid. 902(10)(a).

Finally, third-party documents can become the business records of an organization and, consequently, admissible under rule 803(6), if the records are (1) incorporated and kept in the course of the testifying witness's business; (2) the business typically relies upon the accuracy of the contents of the documents; and (3) the circumstances otherwise indicate the trustworthiness of the documents. Simien v. Unifund CCR Partners, 321 S.W.3d 235, 240-41 (Tex. App.-Houston [1st Dist.] 2010, no pet.) (citing Bell v. State, 176 S.W.3d 90, 92 (Tex. App.-Houston [1st Dist.] 2004, pet. ref'd)).

The business-records affidavit, described above, meets these criteria. Hwang stated that she is the custodian of records for CACH and that it is CACH's "regular business practice to obtain, integrate and rely upon documents prepared by the original creditor of the account at issue." She further averred that CACH relies on the accuracy of the documents in its day-to-day business activities and that the records are made and maintained by individuals who have a duty to keep the record accurately at or near the time of the event that they record. Finally, one of the documents attached to the business-records affidavit is the "affidavit of sale," which is notarized. Such a notarized document is self-authenticating under the Texas Rules of Evidence. See Tex. R. Evid. 902(8).

In this document, described above, an authorized agent of Chase Bank, N.A., stated that Chase had acquired Ainsworth's account from Washington Mutual Bank, sold it to CACH in December 2008, and that the amount due on the account at the time of the sale was $4,567.07.

Chase's failure to keep accurate records could result in criminal or civil penalties. See Tex. Fin. Code Ann. § 392.304(a)(8) (prohibiting misrepresentations of amount of consumer debt); id. § 392.402 (providing for criminal penalties for violations of chapter 392 of Texas Finance Code); see also Fair Debt Collection Practices Act, 15 U.S.C.A. § 1692e(2)(a) (prohibiting misrepresentation of amount of debt); id. § 1692l (providing for administrative enforcement of Administrative Debt Collection Practices Act).

These circumstances otherwise indicate the trustworthiness of the Chase Bank documents.[3] See Simien, 321 S.W.3d at 243-44. Accordingly, because the business-records affidavit at issue here meets the criteria for admission as business records under Texas Rule of Evidence 803(6), the trial court did not abuse its discretion in admitting these records. See id.

We overrule Ainsworth's first issue.

RELATED LINKS:  07/08/2015: OCC Fines JPMorgan Chase $30 Million for Deficiencies in Debt Collection Practices and Servicemembers Civil Relief Act Compliance

Irregular service of lawsuit papers by certified mail and substituted service nixes default judgment on appeal

Sometimes something can still be done about a default judgment even when the deadline for an ordinary appeal has expired, as an appellate opinion released by Houston's First Court of Appeals last week illustrates. 

Default judgment set aside in restricted appeal based on defective service of lawsuit. Proof of service of process by certified mail lacked signature of defendant on green card and order for substituted service was not complied with. Citation and petition delivered to wrong person and affixed to incorrect door in an apartment complex. 

No presumption that defendant was properly served.        
  
A no-answer default judgment cannot withstand a direct attack by a defendant who shows that he was not served in strict compliance with the Texas Rules of Civil Procedure. Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990); Hubicki, 226 S.W.3d at 407. In contrast to the usual rule that presumptions will be made in support of a judgment, when examining a default judgment, we accord no presumption of valid issuance, service, or return of citation. Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884, 885 (Tex. 1985) (per curiam). Failure to strictly comply with the Rules of Civil Procedure renders any attempted service of process invalid and of no effect. Hubicki, 226 S.W.3d at 408; Wilson, 800 S.W.2d at 836.

Marcus Todd v. Sport Leasing & Financial Services Corp., Appellee,
NO. 01-10-00608-CV (Tex.App. - Houston [1st Dist.] Nov. 17, 2011, no pet. h.)
 

MEMORANDUM OPINION BY JUSTICE JANE BLAND

In this restricted appeal from a default judgment, Marcus Todd contends that he was not properly served with process, and thus lacked notice of the suit against him. We hold that the trial court erred in entering the default judgment because Sport Leasing & Financial Services Corporation ("Sport Leasing") did not strictly comply with the rules for service of process in the Texas Rules of Civil Procedure. We reverse the judgment of the trial court and remand for further proceedings.

BACKGROUND

In August 2006, Marcus Todd leased a 2005 BMW 530i from Nxcess Motorcars. Nxcess assigned Todd’s lease contract to Sport Leasing. In August 2009, Sport Leasing sued Todd to recover amounts due and owing under the lease agreement.

Sport Leasing attempted to serve Todd with notice of its suit at Todd’s address listed on the lease agreement: 4315 South Kirkwood #138, Houston, TX 77072 ("apartment 138"). After one unsuccessful attempt, the process server tried six times to serve Todd at his father’s apartment located in the same building ("apartment 104"). When the process server could not serve Todd in person, Sport Leasing moved for substituted service. The trial court granted Sport Leasing’s motion. It approved substituted service by: (1) delivering a copy of the citation and petition to anyone over sixteen years of age at apartment 138; or (2) attaching a copy of the citation and petition to the front door of apartment 138. The trial court did not authorize any other method or location for service. Nevertheless, when the process server issued service under the order authorizing substituted service of process at apartment 138, the process server posted the citation on apartment 104.

In addition to posting citation on apartment 104, Sport Leasing mailed a copy of the petition and citation to apartment 104, return receipt requested. Sport Leasing believed Todd lived at apartment 104 because the process server had indicated that Todd might live there instead of apartment 138. Sport Leasing certified that Todd’s last known address was apartment 104. A citation returned to Sport Leasing contained the signature of Arthur Todd, not Marcus Todd.

In March 2010, after receiving no answer to the underlying suit, Sport Leasing moved for entry of a default judgment against Todd. The trial court granted the motion, ordering Todd to pay principal and interest under the lease and Sport Leasing’s attorney’s fees. Todd never answered the suit or otherwise appeared in the trial court proceedings.

DISCUSSION

Appellate Jurisdiction

Rule 30 of the Texas Rules of Appellate Procedure provides that:

A party who did not participate—either in person or through counsel—in the hearing that resulted in the judgment complained of and who did not timely file a postjudgment motion or request for findings of fact and conclusions of law, or a notice of appeal within the time permitted by Rule 26.1(a), may file a notice of appeal within the time permitted by Rule 26.1(c).

Tex. R. App. P. 30. Todd appeals within six months of a default judgment and did not participate in the default judgment hearing or file any post-judgment motions or requests. He filed a notice of appeal within six months as required by Rule 26.1(c). Tex. R. App. P. 26.1(c). Accordingly, we determine whether error appears on the face of the record. Hubicki v. Festina, 226 S.W.3d 405, 407 (Tex. 2007) (per curiam) (citing Wachovia Bank of Del. v. Gilliam, 215 S.W.3d 848, 849 (Tex. 2007)).

Standard of Review

A no-answer default judgment cannot withstand a direct attack by a defendant who shows that he was not served in strict compliance with the Texas Rules of Civil Procedure. Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990); Hubicki, 226 S.W.3d at 407. In contrast to the usual rule that presumptions will be made in support of a judgment, when examining a default judgment, we accord no presumption of valid issuance, service, or return of citation. Uvalde Country Club v. Martin Linen Supply Co., 690 S.W.2d 884, 885 (Tex. 1985) (per curiam). Failure to strictly comply with the Rules of Civil Procedure renders any attempted service of process invalid and of no effect. Hubicki, 226 S.W.3d at 408; Wilson, 800 S.W.2d at 836.

Analysis

Sport Leasing attempted to serve Todd by certified mail and substituted service. In both instances, Sports Leasing failed to strictly comply with the Texas Rules of Civil Procedure. First, Sport Leasing did not serve Todd by certified mail at the correct address and his signature does not appear on the return receipt. Second, Sport Leasing did not serve Todd under the court’s order authorizing substituted service because Sport Leasing posted its notice at a different apartment number from the number identified in the order. We address the governing rules for each method in turn.

(1) Mailing to apartment 104

Rule 106 of the Texas Rules of Civil Procedure provides:

Unless the citation or an order of the court otherwise directs, the citation shall be served by any person authorized . . . by (1) delivering to the defendant, in person, a true copy of the citation with the date of delivery endorsed thereon with a copy of the petition attached thereto, or (2) mailing to the defendant by registered or certified mail, return receipt requested, a true copy of the citation with a copy of the petition attached thereto.

Tex. R. Civ. P. 106. If a defendant is served by certified mail under Rule 106(a)(2), then Rule 107 requires that "the return by the officer or authorized person must also contain the return receipt with the addressee’s signature." Tex. R. Civ. P. 107. Failure to affirmatively show strict compliance renders the attempted service of process invalid and of no effect. Uvalde Country Club, 690 S.W.2d at 885. Several Texas courts have held that process is invalid where the face of the record shows that the addressee or a person designated to receive service did not sign the green slip. See id. (holding service invalid where registered agent named "Henry Bunting, Jr." but service delivered to "Henry Bunting"); see also Sw. Sec. Serv., Inc. v. Gamboa, 172 S.W.3d 90, 93 (Tex. App.—El Paso 2005, no pet.) (concluding that service directed to registered agent named "Jesus Morales" was invalid when signed for by "Guillermo Montes"); All Commercial Floors, Inc. v. Barton & Rasor, 97 S.W.3d 723, 727 (Tex. App.—Fort Worth 2003, no pet.) (holding that return receipt signed by "Mark," with illegible last name, was invalid, given Kelly Lynn Arreola was designated to receive service for defendant); Pharmakinetics Labs., Inc. v. Katz, 717 S.W.2d 704, 706 (Tex. App.—San Antonio 2001, no pet.) (holding service of process defective when receipt card was signed by someone other than registered agent); Bronze & Beautiful, Inc. v. Mahone, 750 S.W.2d 28, 29 (Tex.App.—Texarkana 1988, no writ) (same). "If someone other than the defendant named in the citation is served with process, the court [does] not secure jurisdiction over the named defendant." P&H Transp. v. Robinson, 930 S.W.2d 857, 860 (Tex. App.—Houston [1st Dist.] 1996, writ denied).

The return receipt shows that Arthur J. Todd was served with a copy of Sport Leasing’s petition at apartment 104. The record does not indicate that Arthur Todd was authorized to accept service on behalf of Marcus Todd. Without evidence in the record supporting that Arthur Todd was authorized to accept service on Marcus Todd’s behalf, we may not presume that he was. Because Marcus Todd did not sign the return receipt and Arthur Todd was not authorized to accept service on his behalf, the record does not show that Sport Leasing strictly complied with the Rules of Civil Procedure. Accordingly, Sport Leasing did not accomplish service by mail.

(2) Substituted service under the trial court’s order

Rule 106(b) authorizes a court to order substituted service of process upon a proper showing that the plaintiff has been unable to serve the defendant through any default method listed in Rule 106(b). Tex. R. Civ. P. 106(b). When a court orders substituted service under Rule 106(b), the order itself provides the only authority for the substituted service. Berkefelt v. Jackson, No. 01-07-00526-CV, 2008 WL 4530693, at *1 (Tex. App.—Houston [1st Dist.] Oct. 9, 2008) (mem. op., not designated for publication). As a result, "any deviation from the trial court’s order necessitates a reversal of the default judgment based on service." Id. (citing Becker v. Russell, 765 S.W.2d 899, 900 (Tex. App.—Austin 1989, no writ)).

The trial court authorized Sport Leasing to serve Todd by affixing a copy of the citation to the door of apartment 138 or by delivering a copy of the petition and citation to any person over the age of sixteen at apartment 138. Sport Leasing was required to follow the trial court’s instructions exactly. However, instead of affixing the citation on apartment 138 as specified in the trial court’s order, Sport Leasing posted the citation on apartment 104. Accordingly, Sport Leasing did not comply with the trial court’s order substituting service of process. Failure to strictly comply with the trial court’s order is fatal. Because Sports Leasing affixed the citation to the wrong apartment, we hold that there is error on the face of the record and that Sport Leasing did not serve Todd under Rule 106(b).

CONCLUSION

We hold that neither service attempt in this case was valid. Accordingly, we reverse the default judgment and remand the case to the trial court for further proceedings.

Jane Bland

Justice

Panel consists of Chief Justice Radack and Justices Bland and Huddle.

Lack of Diligence: After more than 4 years, continuance for further discovery was not warranted in debt collection suit brought by Citibank

After the debt collection case had been pending for longer than the limitations period, a continuance of hearing on Citibank's motion for summary judgment for the purpose of taking depositions was not warranted. So found the trial court and the court of appeals agreed. But the motion for continuance by the credit-card debtor/defendant also suffered from formal defects. It was not verified (sworn) as required.

Motion for Continuance

In his second issue,[Credit card holder/defendant] argues that the trial court erred in granting Citibank summary judgment because his motion for continuance "included an affidavit showing sufficient cause for the continuance."

We review for an abuse of discretion a trial court's decision to deny a motion for continuance. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 161 (Tex. 2004). The denial will be reversed only if the trial court acted in an arbitrary or unreasonable manner or without reference to any guiding rules or principles. BMC Software Belg., N.V. v. Marchland, 83 S.W.3d 789, 800 (Tex. 2002). The party complaining of an abuse of discretion has the burden to present a record showing the abuse. See Simon v. York Crane & Rigging Co., 739 S.W.2d 793, 795 (Tex. 1987).

When a party contends that it has not had an adequate opportunity for discovery before a summary judgment, it must file either an affidavit explaining the need for further discovery or a verified motion for continuance. Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 647 (Tex. 1996) (citing TEX. R. CIV. P. 166a(g)); see TEX. R. CIV. P. 251 ("No application for a continuance shall be heard before the defendant files his defense, nor shall any continuance be granted except for sufficient cause supported by affidavit, or consent of the parties, or by operation of law."); TEX. R. CIV. P. 252 (providing, among other things, that if motion for continuance is filed on ground of "want of testimony," movant must present affidavit "showing the materiality" of such testimony and that he "used due diligence to procure such testimony" and "stating such diligence, and the cause of failure, if known"). If a motion for continuance is not verified or supported by affidavit, an appellate court must presume that the trial court did not abuse its discretion in denying the motion. City of Houston v. Blackbird, 658 S.W.2d 269, 272 (Tex. App.-Houston [1st Dist.] 1983, writ dism'd). The affidavit or motion must describe the evidence sought, state with particularity the diligence used to obtain the evidence, and explain why the continuance is necessary. Rocha v. Faltys, 69 S.W.3d 315, 319 (Tex. App.-Austin 2002, no pet.). If these requirements are met, then the appellate court considers three non-exclusive factors in determining the propriety of a trial court's ruling on a motion for continuance: (1) the length of time the case was on file; (2) the materiality and purpose of the discovery sought; and (3) whether the party seeking the continuance exercised due diligence to obtain the discovery sought. Joe, 145 S.W.3d at 161.

It is undisputed that[Credit card holder/defendant]'s motion for continuance was not verified and was not supported by an attached affidavit. However,[Credit card holder/defendant] argues that although his motion for continuance did not contain an affidavit "per se," his motion was supported by an affidavit attached to his summary-judgment response in which he listed "the names of the employees of Citibank whom he would seek to depose."

[Credit card holder/defendant] alleged in his motion for continuance that Citibank's representatives "had been effectively non-responsive" to his discovery requests and it was "unclear" whether Citibank's counsel had the "proper want of authority to prosecute this suit." Even assuming that we could consider[Credit card holder/defendant]'s affidavit attached to his summary-judgment response, this affidavit was deficient in multiple respects. See Rocha, 69 S.W.3d at 319. Despite his assertions on appeal, the record reflects that his affidavit did not list the names of the Citibank employees that he wanted to depose, describe the anticipated testimony of these representatives, or explain how such testimony was essential to his summary-judgment response. See West v. SMG, 318 S.W.3d 430, 443-44 (Tex. App.-Houston [1st Dist.] 2010, no pet.). [Credit card holder/defendant]'s motion for continuance also failed to show that he had used due diligence in procuring the desired depositions and that such testimony was material to his summary-judgment response. See TEX. R. CIV. P. 252.

As noted above, Citibank filed its summary-judgment motion more than four and one-half years after the case's commencement, providing [Credit card holder/defendant] more than enough time to conduct discovery and seek the aid of the trial court, if any, in compelling discovery. See Rest. Teams Int'l v. MG Secs. Corp., 95 S.W.3d 336, 339-41 (Tex. App.-Houston [1st Dist.] 2002, no pet.). Accordingly, we hold that the trial court did not abuse its discretion in denying[Credit card holder/defendant]'s motion for continuance.

We overrule[Credit card holder/defendant]'s second issue.

SOURCE: First Court of Appeals Houston - No. 01-10-00768-CV 11/10/11

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

JUDGMENT FOR HOME OWNERS' ASSOCIATION NOT VOID Bankruptcy Discharge Defense Was Not Presented to the Trial Court and WasThus Waived

In this pro-se appeal from a summary judgment in favor of a home owners' association, the Fourteenth Court of Appeals, in a panel opinion penned by a former justice sitting as a visiting judge, holds that the collection of delinquent assessments was not barred by homeowner's bankruptcy discharge. The argument was not properly presented to the trial court. As an affirmative defense, the bankruptcy discharge defense must be properly pleaded, and must be asserted in a proper response when the Plaintiff moves for summary judgment on its claim. The defendant/appellant in this case did neither. It was too late to raise the issue in a motion for new trial.

Relevant part of the opinion by Senior Justice Price follows:

Discharge in Bankruptcy

In the final issue presented on appeal, [the homeowner/appellant] claims the trial court's judgment is void because the debt he owed to Westgate was discharged in bankruptcy. However, discharge in bankruptcy is an affirmative defense that must be pleaded. See Tex. R. Civ. P. 94; Sparks v. Booth, 232 S.W.3d 853, 871 (Tex. App.- Dallas 2007, no pet.).

An affirmative defense that is not pleaded or proved, and on which findings are not obtained,
is waived and cannot be preserved by raising the affirmative defense for the first time in a motion for new trial. Hamm v. Millennium Income Fund, L.L.C., 178 S.W.3d 256, 268 (Tex. App.- Houston [1st Dist.] 2005, pet. denied).

Here, discharge in bankruptcy was not raised or even hinted-at by the pleadings. Instead, the affirmative defense was not presented to the trial court until Monk's motion for new trial, which did not preserve the issue for our review. See id. Thus, we overrule [the homeowner's] final issue.

Monk v. Westgate Homeowners' Association, Inc. (Tex.App.- Houston [14th Dist.] Aug. 11, 2009)(Price) (motion for new trial and preservation of error for appellate review, discharge in bankruptcy as affirmative defense required to be pleaded)
AFFIRMED: Opinion by Senior Justice Frank C. Price
Before Price, Justices Brock Yates and Guzman
14-07-00886-CV Joseph Monk v. Westgate Homeowners' Association, Inc.
Appeal from 270th District Court of Harris County
Trial Court Judge: Brent Gamble

Suit to Confirm FAA Arb Award Viable in State Court, Houston Appeals Court Rules

Houston Court of Appeals, in three separate opinions by Justice Frost, says that credit card issuer may bring action to confirm arbitration award entered under the Federal Arbitration Act (FAA) in credit card debt case against card holder in state court, - here one of the four county civil courts at law of Harris County. Appeals court panel finds that trial court's dismissal of creditor's action on jurisdictional ground was error, and sends the debt collection cases back to that court for further proceedings.

FIA Card Services, NA f/k/a MBNA America Bank, NA v. Horn (Tex.App.- Houston [14th Dist.] Jun. 23, 2009) (Frost) (suit to confirm arbitration award under FAA permitted in county court at law, invocation of FAA in state court is not jurisdictionally barred)
Disposition: TRIAL COURT REVERSED AND CASE REMANDED: Opinion by Justice Frost
Panel members: Justices Frost, Brown and Boyce 14-08-00024-CV FIA Card Services, N.A. fka MBNA America Bank, N.A. v. Valicia M. Horn Appeal from County Civil Court at Law No 1 of Harris County Trial Court Judge: Hon. Jack Cagle

FIA Card Srv's v. Sweet (Tex.App.- Houston [14th Dist.] Jun. 23, 2009)(Frost) (card issuer may seek confirmation of arbitration award entered under FAA in state (county) court)
Decision by court of appeals: TRIAL COURT'S JUDGMENT OF DISMISSAL REVERSED AND CASE REMANDED: Opinion by Justice Kem Thompson Frost
Panel members: Justices Frost, Brown and Boyce 14-08-00111-CV FIA Card Services, Et Al v. Gregory R. Sweet Appeal from County Civil Court at Law No 1 of Harris County Trial Court Judge: R. Jack Cagle

Palisades Acquisition XVI, LLC v. Chatman (Tex.App.- Houston [14th Dist.] Jun. 16, 2009)(Frost)(suit to confirm arbitration award under FAA erroneously dismissed by trial court on lack-of-jurisdiction grounds; Harris County county court at law found to have jurisdiction to confirm arbitration award, state-federal concurrent jurisdiction)
OUTCOME ON APPEAL: REVERSED AND REMANDED: Opinion by Justice Frost Before Justices Frost, Brown and Boyce 14-08-00108-CV Palisades Acquisition XVI, LLC v. Howard Chatman Appeal from County Civil Court at Law No 1 of Harris County

RELATED CONCEPTS AND LINKS: Application for / suit seeking confirmation of arbitration award, action to confirm arb award under FAA, which arbitration statute applies? FAA and TAA, applicability of the FAA, grounds for vacature of arbitration award under the Federal Arbitration Act.

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

OPINION BY JUSTICE EVELYN KEYES

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.

Background

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.

Analysis

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.

Conclusion

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
Justice

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.

Sanctions against out-of-state debt collector affirmed

Plaintiff's attorney was no-show for trial in debt collection suit in which defendant maintained that the alleged debt had been paid. Trial court imposed frivolous suit sanctions against Hosto & Buchan, an Arkansas law firm that sues individuals and businesses on behalf of creditors (or their alleged assignees) in Texas courts. First Court of Appeals, in opinion written by Chief Justice Radack, finds that complaint against sanctions order was not preserved for appellate review, but reforms judgment to reflect dismissal without prejudice for want of prosecution.

Midland Funding NCC-2 Corp. v. Josiah Azubogu, No. (Tex.App. - Houston [1st Dist.], Dec. 13, 2007)(Opinion by Justice Radack) (DWOP, reinstatement, appellate deadlines, sanctions for baseless suit)
Appeal from 165th District Court of Harris County (Hon. Elizabeth Ray)

MEMORANDUM OPINION

Appellant, Midland Funding NCC-2 Corp. (“Midland”), filed suit against appellee, Josiah Azubogu. The trial court dismissed the case with prejudice for want of prosecution and imposed sanctions against Midland’s law firm, Hosto & Buchan, P.L.L.C., for filing a frivolous lawsuit and failing to appear at trial. In two points of error, Midland contends the trial court erred in (1) dismissing Midland’s case with prejudice for want of prosecution and (2) awarding sanctions on its own initiative, without notice of hearing and with no countersuit asserted.

We modify the judgment, and, as modified, we affirm.

Background

Midland, represented by Hosto & Buchan, filed an original petition against Azubogu in the 165th Judicial District of Harris County, Texas on April 18, 2005. Midland claimed to be the assignee of an account in default originally owed by Azubogu. Azubogu filed an original answer on May 16, 2005, setting forth a general denial and asserting the affirmative defense that the alleged debt had been fully satisfied.

On October 14, 2005, the trial court generated a docket control order setting the date of trial at May 22, 2006. Azubogu and his counsel appeared at 10:00 A.M. on May 31, 2006, when the court coordinator called the case for trial. Neither Midland nor Midland’s counsel appeared at that time.

No one at Hosto & Buchan returned several calls made by the court coordinator. The trial court telephoned lead counsel at a number in Dallas and left two voice mail messages. The trial court also called a Little Rock, Arkansas number and reached Mr. Hosto, a named partner of the firm. Mr. Hosto was unaware of the proceedings and told the court that he was not licensed in Texas. Mr. Hosto informed the court he would send a Dallas or Houston lawyer to the court immediately.

The trial court advised Mr. Hosto that the file showed the case was being frivolously prosecuted and it planned to award sanctions under Rule 13 in the amount of $5,000 against Hosto & Buchan. The trial court also advised Mr. Hosto that it would reconsider its position if Mr. Hosto dispatched an attorney to the court immediately.

Midland’s counsel failed to timely appear. The court dismissed the case for want of prosecution, with prejudice, and awarded sanctions under Rule 13 for filing a frivolous lawsuit.

On June 7, 2006, Midland timely moved for new trial, requesting that the case be reinstated, or alternatively, that the judgment be modified to a dismissal without prejudice. Midland’s motion was not verified. Midland filed notice of its appeal on August 28, 2006.

Jurisdiction

Midland’s motion for new trial requests that the trial court (1) reinstate the case, or, alternatively, (2) reform the judgment to dismiss the case without prejudice. To seek reinstatement of a dismissed case, the movant must set forth the grounds for reinstatement in a verified motion filed with the clerk within 30 days after the dismissal order is signed. Clark v. Yarbrough, 900 S.W.2d 406, 408 (Tex. App.—Texarkana 1995, writ denied). Rule 165a(3) requires that “[a] motion to reinstate shall set forth the grounds therefor and be verified by the movant or his attorney. It shall be filed with the clerk within 30 days after the order of dismissal is signed. . . .” Tex. R. Civ. P. 165a(3) (emphasis added). A timely and proper motion to reinstate extends the trial court’s plenary jurisdiction until 30 days after the motion to reinstate is overruled. McConnell v. May, 800 S.W.2d 194, 194 (Tex. 1990). An unverified motion to reinstate, however, extends neither the trial court’s plenary power, nor the time in which to perfect an appeal. Butts v. Capitol City Nursing Home, Inc., 705 S.W.2d 696, 697 (Tex. 1986).

Midland’s motion for new trial is unverified; therefore, as a motion to reinstate, it is insufficient to extend the time in which to perfect an appeal. The trial court’s order became final on June 30, 2006. Under rule 26.1(a) of the Texas Rules of Appellate Procedure, a notice of appeal was required to be filed on or before July 30, 2006. Tex. R. App. 26.1(a). Even implying an extension of time, the notice of appeal could be filed no later than August 15, 2006. Midland’s notice of appeal was not filed until August 28, 2006. Thus, Midland’s notice of appeal is untimely unless its motion for new trial sought more than reinstatement of the case. See Tex. Dep’t of Transp. v. Martini, 902 S.W.2d 138, 140–41 (Tex. App.—Houston [1st Dist.] 1995, no writ) (holding that postdismissal motion need not have been verified to extend appellate timetables because it sought more relief than mere reinstatement of case).

In this case, Midland’s postdismissal motion sought two forms of relief—reinstatement of the case or, alternatively, reformation of the judgment to a dismissal without prejudice. We hold that the portion of the motion seeking reformation of the judgment is more than a motion to reinstate; it is a motion for new trial. See id. A proper motion for new trial will extend one’s appellate timetables. See Tex. R. App. 26.1(a)(1) (notice of appeal must be filed within 90 days, not 30 days, if motion for new trial filed). Because Midland’s motion for new trial extended the appellate timetable, its notice of appeal is timely and this Court has jurisdiction. Thus, we turn to the merits of the appeal.

Dismissal with Prejudice for Want of Prosecution

In issue one, Midland contends the trial court erred by dismissing its case for want of prosecution with prejudice. We agree.

When a plaintiff fails to appear and prosecute his case, the court’s only remedy is to dismiss the case. Smock v. Fischel, 207 S.W.2d 891, 892 (Tex. 1948). A judge rendering a judgment other than that authorized by Rule 165a has exceeded his jurisdiction. Lum v. Lacy, 616 S.W.2d 260, 261 (Tex. Civ. App.—Houston [1st Dist.] 1981, no writ) (citing Freeman v. Freeman, 327 S.W.2d 428, 433 (Tex. 1959)); see Burton-Lingo Co. v. Lay, 142 S.W.2d 448, 448 (Tex. Civ. App.—El Paso 1940, no writ) (holding trial court is without jurisdictional power to render any judgment against non-appearing plaintiff other than dismissal of plaintiff’s suit for want of prosecution). Dismissal for want of prosecution does not preclude the filing of another suit; therefore, dismissing a case with prejudice for want of prosecution is improper. See Willis v. Barron, 604 S.W.2d 447, 450 (Tex. App.—Tyler 1980, writ ref’d n.r.e.). If a case has been dismissed with prejudice for want of prosecution, the order of the trial court dismissing the suit must be reformed to eliminate the words “with prejudice.” Id.; Melton v. Rylander, 727 S.W.2d 299, 303 (Tex. App.—Dallas 1987, writ ref’d n.r.e.). Although the trial court had authority to dismiss Midland’s case for want of prosecution under Rule 165a, it improperly dismissed the case with prejudice.

Accordingly, we sustain Midland’s first point of error. We modify the judgment to dismiss the case for want of prosecution without prejudice.
Sanctions

In its second issue on appeal, Midland contends the award of sanctions must be reversed because the trial court (1) did not provide Hosto & Buchan with proper notice and hearing before imposing sanctions; (2) accepted evidence from Mr. Azubogu at the time of trial regarding payment of the account, and such evidence improperly formed the basis of the sanctions imposed for filing a frivolous lawsuit; (3) erred by awarding monetary sanctions on its own initiative; (4) erred by failing to state the particulars of good cause for the order of Rule 13 sanctions, and (5) lacked authority to impose sanctions for Midland’s failure to appear at trial.

Midland did not raise these complaints in its motion for new trial and cannot complain on appeal of such error, if any. See Tex. R. App. P. 33.1(a)(1)(A) (“[a]s a prerequisite to presenting a complaint for appellate review, the record must show that the complaint was made to the trial court by a timely request, objection, or motion that stated the grounds for the ruling that the complaining party sought from the trial court with sufficient specificity to make the trial court aware of the complaint”); see Sterling v. Alexander, 99 S.W.3d 793, 797 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (“We find appellant waived his objection to the trial court’s sanction because he does not cite to any place in the record nor have we identified anything in the record where he preserved his argument.”). Midland has waived any error regarding the award of sanctions and cannot now complain on appeal.

Accordingly, we overrule Midland’s second issue on appeal.

Conclusion

We modify the judgment to dismiss the case without prejudice, and, as modified, we affirm.

Sherry Radack
Chief Justice

Panel consists of Chief Justice Radack and Justices Alcala and Bland.