Corpus Christi National Bank v. John H. Garner, and Wife, Lanelle H. Garner

                                   NUMBER 13-01-005-CV

                             COURT OF APPEALS

                   THIRTEENTH DISTRICT OF TEXAS

                                CORPUS CHRISTI

___________________________________________________________________

CORPUS CHRISTI NATIONAL BANK,                                      Appellant,

                                                   v.

JOHN H. GARNER, AND WIFE,

LANELLE H. GARNER,                                                           Appellees.

___________________________________________________________________

                        On appeal from the 214th District Court

                                  of Nueces County, Texas.

__________________________________________________________________

                                   O P I N I O N

        Before Chief Justice Valdez and Justices Dorsey and Rodriguez

                                Opinion by Justice Rodriguez

  

          This is an appeal from a judgment entered in favor of appellees, John H. Garner and Lanelle H. Garner, against appellant, Corpus Christi National Bank (the Bank), on appellees= negligent misrepresentation claim.  By four issues, appellant contends:  (1)  the claim is barred by limitations; (2) the evidence is legally and factually insufficient to support a claim for negligent misrepresentation; and, (3) the trial court erred in failing to exclude testimony of a witness.  By a cross point, appellees assert the trial court erred in refusing to submit jury questions related to the existence of an informal ERISA^[1] plan and ERISA estoppel.  We reverse and render.

I.  Background

In 1974, the Bank hired John Garner as its president and chief executive officer (CEO).  In 1980, the Bank=s executive committee entered into an employment contract with Garner.  According to this 1980 commitment, Garner was to continue in the Bank=s employ, subject to health and ability to perform. It also stated he was to be entitled to various bonuses and other benefits, including a Management Security Plan (MSP), if adopted.

Mercantile Texas Corporation (Mercantile Texas) owned the Bank when the 1980 commitment was made.  The MSP was established and, in 1983, Garner and Mercantile Texas entered into an agreement confirming Garner was eligible to participate in the MSP.  Later, Mercantile Texas became MCorp and the MSP was replaced with the MCorp Executive Security Plan (ESP).  On May 28, 1986, Garner and MCorp signed an agreement showing Garner=s participation in the ESP. 

Upon his retirement on December 1, 1986, Garner began receiving retirement benefits from the Bank, as well as a yearly fee for his continued services.  In addition, Garner received monthly ESP benefits of approximately $9,000.00.  The ESP payments continued through April 1989, when MCorp filed bankruptcy.

In 1988, when MCorp began having financial difficulties, Jerry Gates, who was the Bank=s CEO and president at that time, contacted the Office of the Comptroller of Currency (OCC) and asked if the Bank could guarantee Garner=s ESP benefits.  He was told that guaranteeing such benefits would be bad banking procedure. The board decided in 1988 to guarantee Gates=s benefits, but not those of Garner.  Appellees assert that Gates=s 1988 alleged misrepresentation of Garner=s employment status to the OCC as that of a consultant resulted in the Bank=s denial of the guarantee of his ESP benefits.

On December 6, 1990, a meeting of the Bank=s board of directors was called to again consider Garner=s request that the Bank reimburse him for the ESP funds he had lost.  At that time, L. James Welder, the Bank=s counsel, informed the board he had spoken with Dennis Howell at the OCC.  According to the OCC, the Bank was prohibited from guaranteeing Garner=s ESP.  At that meeting, the Bank decided not to reimburse Garner for unpaid portions of the ESP benefits.

On March 20, 1992, appellees sued the Bank alleging breach of contract under the 1980 agreement because the Bank refused to pay Garner the value of the ESP benefits he had lost. The trial court granted the Bank=s motion for summary judgment on the basis that it did not breach the 1980 commitment.  On appeal, in Garner v. Corpus Christi Nat=l Bank, 944 S.W.2d 469, 476 (Tex. App.BCorpus Christi 1997, writ denied), this Court held that the 1980 commitment was complete within itself in every material detail. Because the Bank paid all the salary and benefits due Garner, which the 1980 commitment required it to pay, the Bank fully performed the contract and no breach of contract occurred.  Id.  This Court remanded the case for trial on appellees= fraud and misrepresentation claims finding, under liberal pleading rules, those two causes of action had been pleaded and were not disposed of by the summary judgment.  Id. at 476-77.  In our opinion, we noted:

[E]ven though [the claims for fraud and misrepresentation] may appear to have no merit in view of our disposition of the contract claim, the related claims may not be summarily disposed of absent their inclusion in the motion for summary judgment.

Id. at 476.

On remand the case went to trial on appellees= claims of fraud, agency and negligent misrepresentation. The Bank moved for an instructed verdict at the close of plaintiffs= case and again at the close of the evidence, asserting that appellees= negligent misrepresentation claim was barred by the two-year statute of limitations as a matter of law because the alleged misrepresentation occurred in 1988, and appellees= original petition was not filed until four years later on March 20, 1992.  The trial court overruled the motions and submitted appellees= claim for negligent misrepresentation to the jury. The jury found against the Bank on the negligent misrepresentation claim.^[2]  It is from the judgment on this claim that the Bank appeals.

II.  Limitations

By its third issue, the Bank contends the trial court erred in refusing to grant its motion for instructed verdict on limitations as a matter of law.

A.  Standard of Review

The denial of a motion for directed verdict is reviewed by a legal sufficiency or no evidence standard of review.  McFarland v. Sanders, 932 S.W.2d 640, 643 (Tex. App.BTyler 1996, no writ).  A directed verdict is proper when a defect in the opponent=s pleadings makes them insufficient to support a judgment, the evidence conclusively proves the fact that establishes a party=s right to judgment as a matter of law, or the evidence is insufficient to raise an issue of fact.  See Rivera v. Herndon Marine Prods., Inc., 895 S.W.2d 430, 432 (Tex. App.BCorpus Christi 1995, writ denied); Kershner v. State Bar of Tex., 879 S.W.2d 343, 346 (Tex. App.BHouston [14th Dist.] 1994, writ denied).

B.  Analysis

An action for negligent misrepresentation must be filed within two years of the date the cause of action accrues.  See Coleman v. Rotana, Inc., 778 S.W.2d 867, 873 (Tex. App.BDallas 1989, writ denied).  The determination of when the cause of action accrues is a question of law.  Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988).  A cause of action in tort generally accrues when facts come into existence that authorize the party to seek a judicial remedy, Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514 (Tex. 1998), or, if the discovery rule applies,^[3] when the plaintiff knows or, exercising reasonable diligence, should have known of the facts giving rise to a cause of action. See Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex. 1997); Interfirst Bank-Houston N.A. v. Quintana Petroleum, 699 S.W.2d 864, 876 (Tex. App.BHouston [1st Dist.] 1985, writ ref=d n.r.e.).

Appellees= negligent misrepresentation claim is that, in 1988, the Bank, through Jerry Gates, negligently misrepresented to the OCC that Garner was a consultant to the Bank, not an employee.  They claim this 1988 alleged misrepresentation caused the Bank=s board to refuse to pay Garner for the benefits of his contract with MCorp, specifically the ESP benefits.  Gates testified that, in 1988, he was sure he told the comptroller of the OCC that Garner was a consultant.  Furthermore, in 1988, the Bank guaranteed Gates ESP benefits, but did not guarantee Garner=s benefits.

Based on the above, facts came into existence in 1988 when Gates spoke to the OCC about Garner=s status as a consultant and the Bank denied the guarantee of Garner=s ESP benefits, that authorized appellees to seek a judicial remedy for negligent misrepresentation.^[4]  See Johnson, 962 S.W.2d at 514.  Appellees did not file suit until 1992, more than two years after the cause of action accrued.  See Rivera, 895 S.W.2d at 432.  Thus, the two-year statute of limitations had run when the suit was filed in 1992.  See Coleman, 776 S.W.2d at 873.

Nonetheless, appellees argue their claim accrued later than 1988 because the Bank's conduct was in the nature of a "continuing tort.@  They urge,

[i]t is apparent from a review of the record that the misrepresentation of Garner=s employment was repeated or continuing in nature and was relied upon by Garner, the OCC, the Bank=s attorney, and the Bank committees at various times and not just once in 1988 when Gates discussed the Bank=s guarantee in 1988 with Dennis Howell of the OCC.  Most notably, Garner=s employment status was also discussed in the executive board meeting on December 6, 1990, and the months preceding that meeting.

A continuing tort, an exception to the legal injury rule above, involves both continuing wrongful conduct and continuing injury.  Upjohn Co. v. Freeman, 885 S.W.2d 538, 542 (Tex. App.BDallas 1994, writ denied); see First Gen. Realty Corp. v. Md. Cas. Co., 981 S.W.2d 495, 501 (Tex. App.BAustin 1998, pet. denied).  For a continuing tort, the cause of action accrues when the continuing wrongful acts cease. Upjohn, 885 S.w.2d at 542.  A continuing tort involves wrongful conduct inflicted over a period of time that is repeated until desisted, and each day creates a separate cause of action.  First Gen. Realty, 981 S.W.2d at 501.  The doctrine has generally been applied to cases in which the tortious conduct can be enjoined or otherwise terminated by a court.  Mitchell Energy Corp. v. Bartlett, 958 S.W.2d 430, 443 n.8 (Tex. App.BFort Worth 1997, pet. denied).  We find no Texas case law, and appellees provide us with none, that has applied the continuing tort doctrine to a negligent misrepresentation claim.

Moreover, the doctrine of continuing tort, with its extension of accrual date, is rooted in a plaintiff's inability to know that the ongoing conduct is causing him injury.  Upjohn, 885 S.W.2d at 542.  When a plaintiff discovers his injury and its cause, then the rationale for extending the accrual date no longer applies, and the limitations period begins to run with his discovery.  Id.

As set out above, in 1988, Garner asked for the Bank=s guarantee of his ESP benefits but did not receive it. In 1988, Gates discussed the Bank=s guarantee of  Garner=s benefits with Howell of the OCC.  In 1988, Gates told the OCC that Garner was a consultant, not an employee.  Gates=s ESP benefits were guaranteed by the Bank at that time. Garner=s benefits were not.  Payment of Garner=s ESP benefits stopped in 1989 when MCorp filed bankruptcy. Furthermore, in December 1990, as appellees set out in their brief,

the OCC still believed the Bank was prohibited from paying any part of the ESP benefits because Garner was a consultant and not an employee. . . .  Based upon the same misrepresentation of Garner=s status, Howell [of the OCC] remained of the same opinion in December 1990 as he did in 1988, namely that the Bank could not guarantee Garner=s ESP benefits without running afoul of safe banking practices.

Appellees' attempt to use the Acontinuing tort" doctrine to evade the statute of limitations fails because appellees were aware of the injury and its cause in 1988 when Gates informed the OCC that Garner=s employment status was that of a consultant and the Bank did not guarantee his ESP benefits.  At the very latest, in 1989 when MCorp filed bankruptcy and MCorp stopped paying Garner=s ESP benefits, appellees were aware of the injury and its cause.  Thus, the rational for extending the accrual date no longer applied.  Id.  We conclude, therefore, the continuing tort doctrine is not applicable in this case and the limitations period began to run in 1988.

Because the evidence conclusively proves the alleged tortious act about which appellees complain occurred more than two years before suit was filed, appellees= claim for negligent misrepresentation is barred, as a matter of law, by the statute of limitations.  See Rivera, 895 S.W.2d 432; Kershner, 879 S.W.2d 346; see also Bhalli v. Methodist Hosp., 896 S.W.2d 207, 209 (Tex. App.BHouston [1st Dist.] 1995, writ denied).  The trial court erred in refusing to grant its motion for instructed verdict on limitations.^[5]  We sustain the Bank=s third issue.

In view of our disposition of this third issue, we need not address the Bank=s remaining issues.  Tex. R. App. P. 47.1.

III.  Garners= Cross Point

By a cross point, appellees assert the trial court erred in failing to submit their ERISA claims to the jury.  Appellees contend that both the pleadings and the evidence warranted submission of their liability theory under the ERISA informal plan doctrine and ERISA estoppel.

A.  Informal Plan under ERISA

Appellees requested the following jury question:  Did Corpus Christi National Bank as John Garner=s employer establish or maintain an informal employee pension benefit plan for the benefit of its employee, John Garner? 

Under ERISA, an employer who establishes or maintains an employee benefit plan is liable to the employee for failure to provide benefits under that plan.  29 U.S.C.A. ' 1132(a)(1)(B) (West 1999).  Furthermore, an informal plan Amay exist independent of, and in addition to, a formal plan.@  Elmore v. Cone Mills Corp., 23 F.3d 855, 861 (4th Cir. 1994).  However, the informal benefit plan about which appellees appear to be complaining is not in addition to and independent of the formal ESP plan.  It is the same plan.  Appellees argue that the ESP formal plan which they acknowledge was entered into between John Garner and MCorp, can also be the Bank=s informal ERISA Plan.  However, they present no case law to support this theory, and we find none.

Furthermore, we have already decided the issue of appellees= ERISA plan claim.  In our opinion on motions for rehearing in Garner, 944 S.W.2d at 479-80, we stated:

Appellants complain, among other things, that this Court failed to address their ERISA claims . . . .  By their fourth and fifth points of error, appellants complain that the trial court erred in granting summary judgment on their ERISA claims because appellee never moved for summary judgment on those claims and the evidence raised a fact issue thereon.

By Plaintiffs= Third Amended Original Petition, appellants specifically pleaded breach of the employment agreement.  After stating their breach of contract theory, the appellants pleaded the following:

IV.

Alternatively, as a consequence of the [Bank=s] representations, the [Garners] are entitled to the benefits described in the Executive Security Plan, and , in addition, are entitled to reasonable attorney=s fees, under applicable federal law.  See Chapter 18 of Title 29 of the United States Code. [ERISA]

By its summary judgment motion, the Bank contended that it was entitled to prevail on all causes of action pleaded by the Garners. In particular, the Bank asserted that it did not breach the Executive Security Plan alleged by the Garners. Breach of that plan by failure to pay the required benefits was a necessary element of both the contract claim and the ERISA claim raised in state court.  See 29 U.S.C. ' 1132(a)(1)(B) & (e)(1); Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 n.1 (Tex. 1994).  Accordingly, the Bank was entitled to summary judgment on the ERISA claim, as well as the contract claim urged by the Garners.  The ERISA claim encompasses the state-law claim for benefits due, and accordingly is dependent upon a finding that the Bank breached its duty to provide such benefits.  If our original opinion was not sufficiently clear, we herein overrule appellants= fourth and fifth points of error.

Id.   The law of the case doctrine is intended to achieve uniformity.  Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986). Under the doctrine, matters of law previously decided by a court of last resort govern the case and will not be reviewed again.  Id. at 629.  This Court limited the remand of this case to certain issues, issues  which did not include an ERISA plan claim.  The ERISA claim involving the plan at issue was decided in our earlier opinion and will not be revisited.

B.  ERISA Estoppel

By their cross point, appellees further allege the trial court erred in refusing to submit the following estoppel issue to the jury:  Is Corpus Christi National Bank estopped from denying liability for the benefits described in the ESP?

Citing Lee v. Burkhart, 991 F.2d 1004, 1008 (2nd Cir. 1993), appellees contend they are asserting ERISA estoppel.  The Fifth Circuit, however, has never adopted ERISA estoppel and has, in fact, expressed doubt as to whether a cause of action for estoppel is cognizable under ERISA based on written statements.  McCall v. Burlington N./Santa Fe Co., 237 F.3d 506, 513 (5th Cir. 2000), cert. denied, 122 S. Ct. 57 (2001); Weir v. Fed. Asset Disposition Ass=n, 123 F.3d 281, 290 (5th Cir. 1997).  Furthermore, joining other circuits, the Fifth Circuit has determined ERISA precludes claims of promissory estoppel in suits seeking to enforce rights to pension benefits.   Degan v. Ford Motor Co., 869 F.2d 889, 895 (5th Cir. 1989) (citing Straub v. W. Union Tel. Co., 851 F.2d 1262, 1265-66 (10th Cir. 1988); Northwest Adm=rs, Inc. v. B.V. & B.R., Inc., 813 F.2d 223, 226-27 (9th Cir. 1987); Nachwalter v. Christie, 805 F.2d 956, 960 (11th Cir. 1986)).

We need not, however, consider the availability of ERISA estoppel in this case.  Even if we were to assume the cause of action is available to appellees, as set out above, we have already decided the ERISA claim involving the plan at issue, see Garner, 944 S.W.2d at 479-80, and will not revisit it. 

Thus, the trial court=s refusal to submit the proposed ERISA questions was not error.  Appellees= cross point is overruled.

IV.  Conclusion

Accordingly, the judgment of the trial court is reversed and rendered that appellees take nothing.                                                                            

NELDA V. RODRIGUEZ

Justice

Do not publish.

Tex. R. App. P. 47.3.

Opinion delivered and filed

this 10th day of October, 2002.

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^[1]Employee Retirement Income Security Act of 1974, 88 Sta. 829, as amended, 29 U.S.C.A. '' 1001-1461 (West 1999 & Supp. 2002).

^[2]The jury also found the Bank was not the ostensible agent of MCorp with regard to the ESP.  Further, it found the Bank did not commit fraud against appellees. These findings are not being challenged on appeal.

^[3]The discovery rule applies to claim of negligent misrepresentation if the injury is inherently undiscoverable and evidence of injury is objectively verifiable.  Velsicol Chem. Corp. v. Winograd, 956 S.W.2d 529, 531 (Tex. 1997).  However, appellees did not plead the discovery rule to toll the statute of limitations and have not argued it on appeal.  Thus, that matter is not before this Court.

^[4]In order to recover for a cause of action based on negligent misrepresentation, appellees were required to prove the following elements: (1) a representation was made by a defendant in the course of his business or in a transaction in which he has a pecuniary interest; (2) the defendant supplied Afalse information@ for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffered pecuniary loss by justifiably relying on the representation.  Fed. Land Bank Ass=n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991).

^[5]Appellees also argue jury question number 5 improperly instructed the jury to determine the first occurrence of negligent misrepresentation, as distinguished from the last such occurrence or all such occurrences. See Texas Pattern Jury Charges (Business, Consumer, Employment) (State Bar of Texas 2000) 102.23, at 95 (jury to answer by what date claimant should have discovered Aall the false, misleading, or deceptive acts or practices@ of defendant).  However, because we have disposed of the limitation issue based on the trial court=s error in failing to grant the directed verdict, we need not address this argument.  Tex. R. App. P. 47.1.