Brian Deroeck, Melinda Young, and Kathryn Boykin, Co-Trustees of the Walter A. Deroeck Qtip Trust, Assignee of Texas Capital Bank National Association v. Dhm Ventures, LLC, James W. Moritz, and Nathan W. Halsey , 556 S.W.3d 831 ( 2018 )

IN THE SUPREME COURT OF TEXAS
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NO. 17-0033
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BRIAN DEROECK, MELINDA YOUNG, AND KATHRYN BOYKIN,
CO-TRUSTEES OF THE WALTER A. DEROECK QTIP TRUST,
ASSIGNEE OF TEXAS CAPITAL BANK NATIONAL ASSOCIATION, PETITIONERS,
v.
DHM VENTURES, LLC, JAMES W. MORITZ,
AND NATHAN W. HALSEY, RESPONDENTS
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ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE THIRD DISTRICT OF TEXAS
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PER CURIAM
The court of appeals held that a cause of action for acknowledgment of a debt must be
“specifically and clearly” pleaded “in plain and emphatic terms.”1 Because this holding conflicts
with Rule 47(a) of the Texas Rules of Civil Procedure, which provides that a pleading is “sufficient”
1
No. 03-15-00713-CV, 2016 WL 4270000, at *2 (Tex. App.—Austin Aug. 9, 2016) (mem. op.) (citing Siegel
v. McGavock Drilling Co., 530 S.W.2d 894, 896 (Tex. Civ. App.—Amarillo 1975, writ ref’d n.r.e.) (“[T]o recover on
the new promise to pay embraced in the acknowledgment of the previous debt, the new promise to pay must be
specifically pleaded as the cause of action in order to avoid the pleaded bar of limitation to the original debt.”), and
Canon v. Stanley, 100 S.W.2d 377, 378 (Tex. Civ. App.—El Paso 1936, no writ) (“While the original cause of action
should be set out as constituting the consideration for the new promise, the suit being upon the subsequent promise it
should be alleged in plain and emphatic terms.”)).
if it “give[s] fair notice of the claim involved,”2 we reverse and remand the case to the court of
appeals for further proceedings.
DHM Ventures, LLC borrowed $8.5 million for a real estate investment as evidenced by a
promissory note secured by a deed of trust and guaranteed by two of its principals, James Moritz and
Nathan Halsey. After the note matured on its second anniversary, it was acquired by the Walter A.
DeRoeck QTIP Trust (the “Trust”). DHM continued to make principal and interest payments for
more than four years, then stopped in December 2013, still owing $7 million in principal and more
than $58,000 in interest. The Trust’s trustees3 sued DHM, Moritz, and Halsey (collectively, the
“defendants”) seven months later.
Both sides moved for summary judgment. The defendants argued that the Trust’s claims
were barred by the four-year statute of limitations.4 In its response, the Trust stated that “to the
extent necessary and to simply avoid any limitations defense asserted by Defendants, Plaintiffs’
summary judgment evidence shows that DHM and Halsey and Moritz each acknowledged the
original debt evidenced by the Note up until December 2013 on multiple occasions.” The Trust
made a similar statement in an amended petition filed contemporaneously with the response. In both
the amended petition and the response, the statement was in a section captioned “Avoidance of
Defendants’ Limitations Defense” that also described in detail the attached evidence supporting the
2
TEX. R. CIV. P. 47(a).
3
The co-trustees are Brian DeRoeck, Melinda Young, and Kathryn Boykin.
4
TEX. CIV. PRAC. & REM. CODE § 16.004(a) (“A person must bring suit on the following actions not later than
four years after the day the cause of action accrues: . . . (3) debt . . . .”).
2
Trust’s assertion of acknowledgment. That section of the amended petition concluded: “For purposes
of this avoidance pleading, the effect of these numerous acknowledgments is to create a new promise
to pay the old debt evidenced by the Note and the loan documents.” The section in the response
added: “Such an acknowledgment of the old debt gives rise to a new claim separate from the old
debt, and the moral obligation to pay is sufficient consideration for the new promise.” But the
amended petition, like the original petition, contained a section captioned “Causes of Action” that
stated claims on the note and guaranties but not on the asserted acknowledgment. And the prayer
of the amended petition sought judgment for “[t]he unpaid principal balance and accrued interest
and other sums due to [the Trust] under the terms of the Note and [guaranties]” without mentioning
the asserted acknowledgment.
In reply to the Trust’s response to their motion for summary judgment, the defendants argued
that the Trust had not properly pleaded acknowledgment and had not produced evidence to support
such a claim or its claims on the note and guaranties. The trial court denied the Trust’s motion and
granted the defendants’ motion without stating the grounds. The court of appeals affirmed the
summary judgment, concluding that while the Trust had raised acknowledgment in response to
defendants’ motion for summary judgment, it had failed to plead acknowledgment as a cause of
action because it had not done so “specifically and clearly” and in “plain and emphatic terms.”5
A suit on a debt is separate from a suit on a later written acknowledgment of the debt, and
the latter is not barred by limitations merely because the former is. We have held that an
acknowledgment must “1) be in writing and signed by the party to be charged; 2) contain an
5
2016 WL 4270000, at *2–3.
3
unequivocal acknowledgment of the justness or the existence of the particular obligation; and 3)
refer to the obligation and express a willingness to honor that obligation.”6 A claim of
acknowledgment does not always require an explicit promise to pay. “[I]f the writing acknowledges
the justness of the claim, the acknowledgment imports (1) an admission that the claim is a subsisting
debt and (2) a promise to pay it, if unaccompanied by any circumstances repelling the presumption
of willingness or intention to pay.”7 The acknowledgment can come before or after suit on the
original debt is barred by limitations.8 A pleading of acknowledgment must be made “upon the new
promise” and “must declare upon it as [the] cause of action, in order to avoid respondents’ plea of
limitation.”9 “The correct practice is either (1) to quote the writing alleged to constitute the new
promise, or (2) to attach it to the pleading as an exhibit.”10
Rule 47 requires that “[a]n original pleading which sets forth a claim for relief . . . shall
contain . . . a short statement of the cause of action sufficient to give fair notice of the claim
involved . . . .”11 There is no exception for a pleading of acknowledgment. “A petition is sufficient
6
Stine v. Stewart, 80 S.W.3d 586, 591 (Tex. 2002); see also TEX. CIV. PRAC. & REM. CODE § 16.065 (“An
acknowledgment of the justness of a claim that appears to be barred by limitations is not admissible in evidence to defeat
the law of limitations if made after the time that the claim is due unless the acknowledgment is in writing and is signed
by the party to be charged.”).
7
Hanley v. Oil Capital Broad. Ass’n, 171 S.W.2d 864, 865 (Tex. 1943).
8
Cain v. Bonner, 194 S.W. 1098, 1098 (Tex. 1917).
9
Hanley, 171 S.W.2d at 866.
10
Id.
11
TEX. R. CIV. P. 47.
4
if it gives fair and adequate notice of the facts upon which the pleader bases his claim.”12 The key
inquiry is whether the opposing party “can ascertain from the pleading the nature and basic issues
of the controversy and what testimony will be relevant.”13
In Hanley v. Oil Capital Broadcasting Ass’n, Hanley claimed he had sufficiently pleaded an
acknowledgment cause of action.14 He alleged in his petition that he performed services for Oil
Capital and that Oil Capital had agreed to pay the fees.15 Oil Capital had never before complained
of the fees and had acknowledged the validity of the debt in letters saying it would make payment
soon.16 Hanley argued he could base his theory of acknowledgment on the admission in this letter.17
Hanley never used the word “acknowledgment” in his petition.18 We held “this was a sufficient
notice to the respondents that Hanley intended to rely on the letters as a new promise in order to
avoid the operation of the statute and that no further allegation in that regard was necessary.”19
“Moreover,” we said, “any other holding would be contrary to both the letter and the spirit of Rule
No. 47, Texas Rules of Civil Procedure.”20
12
Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 897 (Tex. 2000) (quoting Roark v. Allen, 633
S.W.2d 804, 810 (Tex. 1982)).
13
Id. at 896.
14
171 S.W.2d at 865.
15
Id.
16
Id.
17
Id.
18
Id. at 866.
19
Id.
20
Id.
5
In the present case, the Trust’s amended petition used the word “acknowledgment[],” unlike
the petition in Hanley. The amended petition also detailed the evidence on which the Trust relied
for its contention that the defendants had acknowledged their debt within four years of the Trust’s
filing suit. That evidence, attached as exhibits as Hanley instructs (though that might not have been
necessary), included emails, checks, bank statements, and tax returns. The petition summarized:
Defendants each specifically acknowledged the debt evidenced by the Note and
related loan documents. Further, they show a willingness to pay the Note. Also, the
exhibits make reference to and acknowledge the obligation evidenced by the Note
and the amount owed is susceptible of ready ascertainment. For purposes of this
avoidance pleading, the effect of these numerous acknowledgments is to create a new
promise to pay the old debt evidenced by the Note and the loan documents.
Defendants argue that the assertion of acknowledgment and detailing of supporting evidence
did not properly plead a claim because they were in a section of the amended petition captioned
“Avoidance of Defendants’ Limitations Defense.” But “avoidance” merely characterized the
function of an acknowledgment claim and did not suggest that no claim was being asserted. The
“avoidance” was not to defeat the limitations defense to the suit on the original debt. That suit was
still barred. The “avoidance” was the statement of a separate claim not barred by limitations—the
only point of asserting acknowledgment.
Defendants also argue that the Trust’s failure to list acknowledgment in the “Causes of
Action” section and in the prayer of its amended petition show that it did not intend to plead
acknowledgment as a cause of action. But neither failure kept the amended petition from being
“sufficient to give fair notice”—Rule 47’s standard—that the Trust was asserting a claim on the
6
defendants’ acknowledgment. As we have held, pleading facts sufficient to put an opponent on
notice of a claim is sufficient, even if the claim is never actually named.21
The Trust’s amended petition was fair notice to the defendants of its claim on their
acknowledgment and thus satisfied Rule 47. The court of appeals erred in requiring a higher
standard. We therefore grant the Trust’s petition for review, and without hearing oral argument,22
reverse the court of appeals’ judgment and remand the case to that court to consider the parties’
other arguments on appeal.
Opinion delivered: June 22, 2018
21
Sw. Bell Tel. Co. v. Garza, 164 S.W.3d 607, 616–17 (Tex. 2004) (facts pleaded were enough to alert the
opposing party that a discrimination claim was being brought despite the absence of the word “discrimination” in the
pleading); Steves Sash & Door Co. v. Ceco Corp., 751 S.W.2d 473, 476 (Tex. 1988) (the factual allegations in the
pleading should have alerted the defendant of the plaintiff’s claims regardless of the plaintiff’s failure to specifically
mention the cause of action).
22
See TEX. R. APP. P. 59.1.
7