Wells Fargo Bank, N.A. v. Express Limousines, Inc. N/K/A Groovy Automotive I, Inc. And Charles Delmonico ( 2022 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-21-00266-CV
Wells Fargo Bank, N.A., Appellant
v.
Express Limousines, Inc. n/k/a Groovy Automotive I, Inc.;
and Charles Delmonico, Appellees
FROM THE 353RD DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-19-000248, THE HONORABLE MARIA CANTÚ HEXSEL, JUDGE PRESIDING
MEMORANDUM OPINION
Wells Fargo Bank, N.A. (Wells Fargo), appeals from the district court’s order
rendering summary judgment in favor of Express Limousines, Inc. n/k/a Groovy Automotive I,
Inc., (Groovy Automotive) and Charles Delmonico. Wells Fargo asserts that the trial court erred
by granting Groovy Automotive and Delmonico’s motion for summary judgment on the ground
that Wells Fargo’s breach of contract claim was barred by limitations. We will affirm.
BACKGROUND
This is a breach of contract case arising out of a BusinessLine Customer
Agreement (the Customer Agreement) between Groovy Automotive and Wells Fargo. In March
2003, Groovy Automotive executed and submitted a Wells Fargo Loan Application for Business
Loans, Lines of Credit or Credit Card. Wells Fargo approved the application and opened the
account that same month. The account was governed by the Customer Agreement. The
Customer Agreement provides that Groovy Automotive would be in default if it made a late
payment, if a payment was rejected for insufficient funds, or if Groovy Automotive breached
the Customer Agreement in any other way. The Customer Agreement prohibited Groovy
Automotive from exceeding the account’s credit limit, which was originally $35,000 but
increased to $68,000 in 2006, and provided that exceeding the credit limit constituted a
breach or default.
In early 2008, Groovy Automotive failed to make a payment due for January
2008. Thereafter, the account was in near continuous breach or default. In March 2009, for
example, several of Groovy Automotive’s payments were returned for insufficient funds. That
year several more payments were returned for insufficient funds and Groovy Automotive also
exceeded the credit limit. During the period from January 2008 through January 2015, the
balance due exceeded $64,000 and on multiple occasions exceeded the $68,000 credit limit. The
account was ultimately closed in October 2013. Groovy Automotive’s last charge to the account
was $143.95 in July 2012. Groovy Automotive’s last payment on the account was in August
2014. The January 2015 statement indicated that Wells Fargo had charged off the account.
On January 14, 2019, Wells Fargo sued Groovy Automotive and Delmonico,
whom it alleged was Groovy Automotive’s guarantor, for breach of contract seeking to recover
$69,543.64 in unpaid credit card debt. Groovy Automotive filed general and verified denials and
asserted, as one of its affirmative defenses, that Wells Fargo’s breach of contract claim was
barred by the statute of limitations. See Tex. Civ. Prac. & Rem. Code § 16.004(a)(3) (person
must bring suit on action for debt not later than four years after day cause of action accrues);
Dodeka, L.L.C. v. Campos, 377 S.W.3d 726, 730 (Tex. App.—San Antonio 2012, no pet.)
(statute of limitations on claim for debt based on breach of contract is four years after day cause
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of action accrues). The parties filed cross motions for summary judgment. In their motion,
Groovy Automotive and Delmonico asserted that Wells Fargo’s breach of contract claim was
barred by the statute of limitations. After a hearing, the trial court signed an order granting
Groovy Automotive and Delmonico’s motion and denying Wells Fargo’s. Wells Fargo then
perfected this appeal. On appeal, Wells Fargo asserts that (1) the trial court erred in concluding
that its breach of contract claim was barred by limitations and granting Groovy Automotive’s
motion for summary judgment, and (2) the trial court should have granted Wells Fargo’s motion
for summary judgment as to both Delmonico and Groovy Automotive.
STANDARD OF REVIEW
We review the district court’s summary judgment de novo. Valence Operating
Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life & Accident Ins. v. Knott,
128 S.W.3d 211, 215 (Tex. 2003). Summary judgment is proper when there are no disputed
issues of material fact and the movant is entitled to judgment as a matter of law. Tex. R. Civ.
P. 166(a)(c); Shell Oil Co. v. Khan, 138 S.W.3d 288, 291 (Tex. 2004). When, as here, both
parties move for summary judgment on overlapping issues and the trial court grants one motion
and denies the other, we review the summary-judgment evidence presented by both sides,
determine all questions presented, and render the judgment that the trial court should have
rendered. Texas Workers’ Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 648
(Tex. 2004); FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). When
the trial court does not specify the ground for its ruling, summary judgment must be affirmed if
any of the grounds on which judgment was sought are meritorious. State v. Nine Thousand Two
Hundred Thirty-Five Dollars & No Cents in U.S. Currency, 390 S.W.3d 289, 292 (Tex. 2013).
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Questions regarding which limitations provision applies and when a claim accrues are questions
of law. See Williams v. Khalaf, 802 S.W.2d 651, 658 (Tex. 1990) (referring to question of which
limitations statute applies as question of law); see also Exxon Corp. v. Emerald Oil & Gas Co.,
L.C., 348 S.W.3d 194, 202 (Tex. 2011) (“Normally, when a cause of action accrues is a question
of law.”).
DISCUSSION
Wells Fargo’s claim was for breach of contract.1 The statute of limitations on a
claim for debt based on breach of contract is “four years after the day the cause of action
accrues.” Tex. Civ. Prac. & Rem. Code § 16.004(a)(3); Williams v. Unifund CCR Partners
Assignee of Citibank, 264 S.W.3d 231, 234 (Tex. App.—Houston [1st Dist.] 2008, no pet.). In
Williams, the credit card debtor, Williams, stopped making payments and Citibank closed his
account on January 12, 2001. 264 S.W.3d at 232-33. Williams continued to make payments
after the date the account was closed, and his final payment was made on October 15, 2001. Id.The court concluded that the cause of action for breach of contract accrued on the date of the last
payment. Id.; see also Dodeka, 377 S.W.3d at 730 (date of last payment on credit card account
constitutes accrual date for purposes of statute of limitations in claim for breach of contract
based on credit card debt); Matkin v. American Express Centurion Bank, No. 05-17-01438-CV,
2018 WL 5816744, at *2 (Tex. App.—Dallas Nov. 7, 2018, no pet.) (mem. op.) (“A claim for
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Wells Fargo did not bring this action as an open account in any of the pleadings to the
trial court. Cf. LTD Acquisitions, LLC v. Cook, No. 04-10-00296-CV, 2011 WL 61634, at *2
(Tex. App.—San Antonio Jan. 5, 2011, no pet.) (mem. op.) (determining that although LTD did
not originally plead claim as open account, it did so in its motion to reconsider filed with trial
court, thus allowing appellate review on open account claim). Thus, legal principles governing
the accrual of an action on an open account and the associated limitations period are not
implicated in this appeal.
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breach of contract based on credit card debt accrues on the date the last payment on the account
is made.”). Here, it is undisputed that Groovy Automotive made its last payment on the account
in August 2014. Thus, Wells Fargo’s suit, filed in January 2019, was not brought within the
four-year limitations period set forth in Texas Civil Practice and Remedies Code section
16.004(a)(3). See Tex. Civ. Prac. & Rem. Code § 16.004(a)(3).
Nevertheless, relying on Holy Cross Church of God in Christ v. Wolf,
44 S.W.3d 562, 566 (Tex. 2001), Wells Fargo argues that its cause of action for breach of
contract did not accrue until March 2015 when it sent a letter to Groovy Automotive and to
Delmonico purporting to exercise its option to accelerate payment of the credit card account.
Wells Fargo’s reliance on Holy Cross Church is misplaced. In Holy Cross Church, the court
considered whether limitations barred a breach of contract claim brought by the maker of a
promissory note that included an optional acceleration clause and was secured by a deed of
trust. See id. at 564. The precise question before the court was whether the noteholder was
required to take affirmative steps towards foreclosure, in addition to serving the debtor with
notice of acceleration, to effectively accelerate a note secured by real property and thereby
trigger limitations. Id. The court began its analysis by observing that Texas Civil Practice and
Remedies Code section 16.035 provides that if a series of notes or obligations or a note or
obligation payable in installments is secured by a lien on real property, limitations does not begin
to run until the maturity date of the last note, obligation, or installment. Id. at 566 (citing Tex.
Civ. Prac. & Rem. Code § 16.035). The court noted that this statute modifies the general rule
that a claim accrues, and limitations begins to run on each installment when it becomes due.
The court next observed that when a note or deed of trust secured by real property contains
an optional acceleration clause, the debtor’s default does not “ipso facto start limitations running
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on the note. Rather, the action accrues only when the holder actually exercises its option to
accelerate.” Id. Thus, unless the noteholder actually exercises the option to accelerate the
note, limitations does not begin to run until the maturity date of the last note, obligation, or
installment. Id.; see also Arshad v. American Express Bank, FSB, 580 S.W.3d 798, 807 (Tex.
App.—Houston [14th Dist.] 2019, no pet.) (“Accelerated maturity is associated with notes that
are initially contemplated to extend over a period of months or years, such as those used
with installment notes.”). The court ultimately held that an optional acceleration clause can be
effectively exercised without the noteholder’s taking affirmative steps towards foreclosure, and
that the clear and unequivocal notice of intent to accelerate and notice of acceleration is enough
to conclusively establish acceleration. Holy Cross Church, 44 S.W.3d at 574. And, in that
context, the date of the acceleration of the note established the date the cause of action accrued
and, consequently, the date the limitations period began to run. See Moreno v. Sterling Drug,
Inc., 787 S.W.2d 348, 351 (Tex. 1990) (limitations period begins to run when cause of action
accrues and date of accrual is question of law).
In this case, as stated above, the cause of action for breach of contract accrued on
the date of Groovy Automotive’s last payment, August 2014, and therefore the limitations period
began to run on that date, not on the date that Wells Fargo sent notice of acceleration. See
Moreno, 787 S.W.2d at 351. The court’s analysis in Holy Cross Church is inapposite to this case
because in that case acceleration of the note triggered the accrual of the noteholder’s cause of
action, which, in turn, commenced the limitations period. Here, the breach of contract claim
accrued on the date of Groovy Automotive’s last payment and did not require that Wells Fargo
provide notice of acceleration. Put differently, in this breach of contract case, exercise of an
option to accelerate had no relationship to the date the cause of action accrued and thus no
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bearing on when the limitations period commenced. See Arshad, 580 S.W.3d at 807 (“Credit-
card indebtedness is not the type of debt to which acceleration of maturity applies.”). Even in
the context of a note payable in installments secured by a deed of trust, which was the type of
instrument at issue in Holy Cross, acceleration is not relevant once the note has matured under
its own terms. If the note has matured, the limitations period commences at that time, and the
creditor may not revive its rights to foreclose by purporting to accelerate a note that has already
matured. See Financial Freedom Senior Funding Corp. v. Horrocks, 294 S.W.3d 749, 754-56
(Tex. App.—Houston [14th Dist.] 2009, no pet.) (when reverse mortgage provided that entire
debt was due on death of borrower, note matured and limitations began to run when borrower
died, and creditor’s belated effort to provide notice and accelerate debt had no effect on running
of limitations period); CA Partners v. Spears, 274 S.W.3d 51, 64-67 (Tex. App.—Houston [14th
Dist.] 2008, pet. denied) (when last installment was due in January of 2000, limitations began to
run on that date, and subsequent actions of creditor in demanding payment and purporting to
accelerate debt had no effect on running of limitations period and could not revive claim).
Similarly in this case, because the cause of action for breach of contract accrued—and
limitations began to run—when Groovy Automotive made its last payment, even under the
reasoning of Holy Cross Church, Wells Fargo’s subsequent acceleration notice had no effect on
the limitations period and could not revive the breach of contract claim.
CONCLUSION
The trial court properly concluded that Wells Fargo’s breach of contract claim
was barred by the four-year statute of limitations in Texas Civil Practice and Remedies Code
section 16.004(a)(3). We therefore affirm the trial court’s order granting Groovy Automotive
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and Delmonico’s motion for summary judgment and denying Wells Fargo’s motion for
summary judgment.
__________________________________________
Chari L. Kelly, Justice
Before Chief Justice Byrne, Justices Triana and Kelly
Affirmed
Filed: August 3, 2022
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