Loren Ellis v. Edwards Abstract & Title Co.

NUMBER 13-98-578-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI

___________________________________________________________________

LOREN ELLIS

, Appellant,

v.

EDWARDS ABSTRACT & TITLE CO.

, Appellee.

___________________________________________________________________

On appeal from the 92nd District Court of Hidalgo County, Texas.

____________________________________________________________________

O P I N I O N

Before Justices Dorsey, Chavez, and Rodriguez Opinion by Justice Rodriguez

Loren Ellis, the plaintiff in the underlying suit, appeals from the awarding of a summary judgment in favor of the defendant, Edwards Abstract & Title Company, Inc, (Edwards) based on limitations. By two issues, Ellis complains the trial court erred in granting summary judgment. We affirm.

Ellis contracted for the purchase of real property containing citrus trees in 1987. Ellis purchased the property with owner financing. In connection with the purchase, Edwards performed title closing services for Ellis. According to Ellis, he told Edwards that he did not wish to provide insurance coverage on the crops for the benefit of the seller. However, the deeds of trust used to secure the notes involved in the transaction provided that the grantor of the note (i.e., Ellis, the buyer) was obligated to insure improvements on the property with the grantee of the note (i.e., the seller) as beneficiary. When Ellis inquired as to why there was no language relieving him of this requirement, he was assured by Edwards that an additional paragraph which provided the seller could only look to the land for satisfaction would ensure he was not obligated to insure for the benefit of the seller.

In 1989, the crops suffered losses due to a freeze and Ellis collected insurance for the damaged crops. On September 27, 1990, the seller demanded the insurance proceeds. Ellis refused and the seller filed suit in state court to recover the proceeds on November 16, 1990. The suit was removed to federal court and the seller obtained summary judgment against Ellis in October of 1992.

Ellis brought the underlying suit against Edwards on November 16, 1993, alleging negligence, violations of the DTPA, and intentional infliction of emotional distress based on Edwards's actions relating to Ellis's purchase of the real property. Edwards filed a motion for summary judgment, asserting Ellis's claims were barred by the statute of limitations. Ellis subsequently amended his pleadings to include a claim for breach of contract and fraud.⁽¹⁾ The trial court granted summary judgment in favor of Edwards on all claims.

By his first issue, Ellis complains summary judgment was improper because Edwards did not specifically plead limitations in a timely manner. As Ellis notes, Edwards first included limitations as a defense in its amended answer five days before the court considered the motion for summary judgment, and did so without leave of court.

Summary judgment is proper only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex. 1985). A party may obtain summary judgment by conclusively establishing an affirmative defense. See Wornick Co. v. Casas, 856 S.W.2d 732, 733 (Tex. 1993). We indulge every reasonable inference in favor of the non-movant and view evidence favorable to the non-movant as true in determining whether there is a genuine issue of material fact. See Nixon, 690 S.W.2d at 548-49.

Limitations is an affirmative defense that must be affirmatively pleaded. See Tex. R. Civ. P. 94. Generally, a party may only amend its pleadings within seven days of the date of trial with leave of court. See Tex. R. Civ. P. 63. A summary judgment hearing is considered a "trial" for purposes of rule 63. See Goswami v. Metropolitan Sav. & Loan Assoc., 751 S.W.2d 487, 490 (Tex. 1988). We must construe rule 63 liberally; where the record is silent as to whether the trial court considered the amended pleading, and there is no showing of surprise or prejudice, leave of court is presumed. See Lee v. Key West Towers, Inc., 783 S.W.2d 586, 588 (Tex. 1989); Diesel Fuel Injection Serv., Inc. v. Gabourel, 893 S.W.2d 610, 611 (Tex. App.--Corpus Christi 1994, no writ).

Edwards filed its first amended answer which affirmatively pleaded limitations on September 9, 1998. The docket sheet reflects the motion for summary judgment was submitted on September 14, 1998 and ruled on and signed September 29, 1998. Assuming the hearing on the motion was held on September 14, 1998, Edwards filed its amended pleadings within seven days of the summary judgment proceeding, and leave of court was necessary.

The record does not contain a motion to strike the amended pleadings, nor does it reflect whether leave of court was requested or granted. The motion for summary judgment was not granted until September 29, 1998, and the amended answer was clearly part of the record when the trial court considered the motion. Because there is no basis in the record to conclude Edward's amended answer was not considered by the trial court, and inasmuch as Edwards did not show surprise or prejudice, we presume leave of court was granted. See Lee, 783 S.W.2d at 588. Therefore, limitations was affirmatively pleaded and the court did not err in granting summary judgment. Ellis's first issue is overruled.

In his second issue, Ellis contends the trial court erred in granting summary judgment because limitations was tolled by the pendency of the suit filed against him by the seller to recover the insurance proceeds. Because the underlying suit in this case was filed within two years of the final judgment in the suit brought by the seller, Ellis maintains it was brought before the expiration of the statute of limitations.

Claims for violations of the DTPA, negligence, and intentional infliction of emotional distress have a two year statute of limitations. See Tex. Bus. & Com. Code Ann. § 17.565 (Vernon 1987); Tex. Civ. Prac. & Rem. Code Ann. § 16.003 (Vernon Supp. 2000); Dickson Const., Inc. v. Fidelity and Deposit Co. of Md., 960 S.W.2d 845, 849 (Tex. App.--Texarkana 1997, no pet.). A plaintiff may toll the statute of limitations if he affirmatively pleads the discovery rule or that the suit was tolled. See Nunez v. Caldarola, 2 S.W.3d 755, 757 (Tex. App.--Corpus Christi 1999, pet. filed).

Ellis did not plead the discovery rule, but did plead that limitations were tolled by the pendency of the seller's suit. Thus, Edwards, as the summary judgment movant, had the burden of: (1) showing when Ellis's causes of action accrued, and (2) proving the statute of limitations was not tolled and, as a matter of law, Ellis failed to file suit within the applicable statute of limitations. See Nunez, 2 S.W.3d at 757. When the movant establishes that the statute of limitations bars the action as a matter of law, the nonmovant must then provide summary judgment proof raising a fact issue in avoidance of the statute of limitations. See KPMG Peat Marwick v. Harrison County Housing Finance Corp., 988 S.W.2d 746, 748 (Tex. 1999); Nunez, 2 S.W.3d at 757.

In its motion for summary judgment, Edwards asserted Ellis's causes of action accrued when it performed the closing services for Ellis in 1987, or alternatively, by 1990, when the seller commenced litigation to recover the insurance proceeds. The question of when a cause of action accrues is a question of law for the court. See Moreno v. Sterling Drug, 787 S.W.2d 348, 351 (Tex. 1990). A cause of action accrues, and the statute of limitations commences to run, when facts come into existence that allow a claimant to seek a judicial remedy. See Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514 (Tex. 1998). This generally occurs when a wrongful act causes a legal injury even if the injury is not discovered until later and all the damages have not occurred. See S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996).

Under the discovery rule, however, a cause of action does not accrue until the plaintiff knew or in the exercise of reasonable diligence, should have known of the wrongful act and resulting injury. See id. The discovery rule applies when "the nature of the injury is inherently undiscoverable and the evidence of injury is objectively verifiable." HEC Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1999).

A cause of action complaining about professional advice is often inherently undiscoverable and may trigger the discovery rule "because of the difficulty a lay person has in knowing of the fault in the advice." Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex. 1997); see also Thomson v. Espey Huston & Assocs., Inc., 899 S.W.2d 415, 423 (Tex. App.­Austin 1995, no writ) (negligence in performance of engineering services was inherently undiscoverable). Ellis's claim in this case is based on closing services provided in a real estate transaction. Because a lay person would have difficulty in recognizing fault in the performance of these services, we conclude the injury is inherently undiscoverable. See Murphy, 964 S.W.2d at 270. Moreover, the seller prevailed in a suit against Ellis; thus, the injury flowing from the closing services is objectively verifiable. See id. at 271. Consequently, the discovery rule was applicable to Ellis's causes of action.

A cause of action accrues under the discovery rule when a claimant should know of his injury, not when the injury becomes certain. See Murphy, 964 S.W.2d at 271 (cause of action based on tax advice accrued when IRS issued a deficiency notice, and not when litigation in tax court concluded); Zidwell v. Bird, 692 S.W.2d 550, 556-57 (Tex. App.­Austin 1985, no writ) (cause of action accrues when there is risk of harm, not when harm is finally established). In the present case, Ellis's causes of action did not accrue on the date of the final judgment in the seller's suit. Rather, Ellis discovered or should have discovered he could be required to pay the insurance proceeds to the seller either when he received the demand letter from them on September 27, 1990, or when the seller filed suit on November 16, 1990. Therefore, the applicable two year statutes of limitations expired no later than November 16, 1992. Because Ellis filed suit on November 16, 1993, one year beyond this date, limitations barred his claims for negligence, DTPA, and intentional infliction of emotional distress.

Our inquiry, however, does not end there. We must determine whether the statute of limitations was tolled. Ellis asserts the suit brought by the seller to recover the insurance proceeds tolled limitations in the underlying suit in this case because, if he had filed the underlying suit during the pendency of the seller's suit, he would have been forced to make inconsistent arguments. That is, he would have had to argue the contract did not require him to insure the crops for the benefit of the seller in the suit filed by the seller, while maintaining the contract did so provide in the underlying suit against Ellis. Ellis observes that limitations is tolled where a litigant would be forced to assume conflicting positions in two contemporaneous suits, citing Hughes v. Mahaney & Higgins, 821 S.W.2d 154, 156-57 (Tex. 1991),. The supreme court, however, has expressly limited Hughes to attorney malpractice claims. See Murphy, 964 S.W.2d at 272 (Hughes does not hold limitations is tolled whenever litigant is forced to take inconsistent positions, but is limited to attorney malpractice actions that would "require the client to file a malpractice claim against the lawyer representing him in another case[,] [which] would necessarily make it virtually impossible for the lawyer to continue his representation").

Ellis further contends limitations was tolled because he was precluded from exercising a legal remedy by the pendency of the seller's suit, and cites a string of cases in support thereof.⁽²⁾ Ellis argues he was precluded from filing the underlying suit because he had no cause of action against Edwards until the court determined Ellis was liable to the seller for the insurance proceeds. We have already observed that Ellis's causes of action accrued by the seller's filing of the lawsuit to recover the insurance proceeds. Thus, Ellis was not forced to wait for a final disposition before bringing the underlying suit.

In addition, having to assume inconsistent contentions in two contemporaneous lawsuits is not commensurate with preclusion from exercising a legal remedy. Cf. Murphy, 964 S.W.2d at 272. The cases cited by Ellis deal largely with legal impediments to litigation such as an injunction or a bankruptcy stay. See e.g., Cavitt v. Amsler, 242 S.W. 246, 249 (Tex. Civ. App.­Austin 1922, writ dism'd w.o.j.) (suit prevented by injunction); Peterson v. Texas Commerce Bank-Austin, N.A., 844 S.W.2d 291, 293-94 (Tex. App.­Austin 1992, no writ) (litigation prevented by bankruptcy stay). There was no such legal impediment preventing Ellis from suing Edwards during the pendency of the seller's suit. Moreover, the supreme court in Murphy noted that "[a]lthough prosecuting both the tax suit and the malpractice suit at the same time would have required plaintiffs to take inconsistent positions, they could have avoided this by requesting the court to abate the malpractice case pending resolution of the tax suit." Murphy, 964 S.W.2d at 272.

As in Murphy, Ellis was not precluded from filing his suit against Edwards during the pendency of the litigation between him and the seller. Although he might have been required to take inconsistent positions, he could have requested the court to abate the underlying suit in this case pending resolution of the suit filed by the seller. See id.; Hunt Steed v. Steed, 908 S.W.2d 581, 585 (Tex. App.­Fort Worth 1995, writ denied). As such, the suit brought against Ellis by the seller did not toll the statute of limitations in the underlying suit.

Finally, we address Ellis's claims of fraud and breach of contract, which were added in his second and third amended petitions. These claims are subject to a four year statute of limitations. See Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a)(3), (4) (Vernon Supp. 2000); Perez v. Gulley, 829 S.W.2d 388, 390 (Tex. App.--Corpus Christi 1992, writ denied). Ellis raised these claims for the first time in 1998, approximately eight years after the seller filed suit to recover the insurance proceeds. As such, Ellis's claims for fraud and breach of contract were barred by limitations. However, an amended pleading relates back to the date of original filing if: (1) the causes of action asserted in the original petition were not barred by limitations when the original petition was filed; and (2) the amended pleading must not be entirely based on a novel transaction or occurrence.⁽³⁾ See Tex. Civ. Prac. & Rem. Code Ann. § 16.068 (Vernon 1997); Pineda v. PMI Mortgage Ins. Co., 843 S.W.2d 660, 667-78 (Tex. App.­Corpus Christi 1992), writ denied per curiam, 851 S.W.2d 191 (Tex. 1993); Tippit v. Tippit, 865 S.W.2d 624, 627 (Tex. App.­Waco 1993, no writ). Because the causes of action in the original petition were barred by limitations, the doctrine of relation-back is inapplicable, and Ellis's claims for fraud and breach of contract were therefore barred by the statute of limitations.

We hold that there was no genuine issue of material fact with respect to the tolling arguments asserted by Ellis, and that Edwards is entitled to judgment as a matter of law on the grounds that Ellis's claims for negligence, violations of the DTPA, intentional infliction of emotional distress, fraud, and breach of contract were barred by the statute of limitations. Ellis's second issue is overruled.

The judgment of the trial court is AFFIRMED.

Nelda V. Rodriguez

Justice

Do not publish.

Tex. R. App. P. 47.3.

Delivered and filed this the

11th day of May, 2000.

1. Edwards asserted these claims were barred by the statute of limitations in his reply to Ellis's response to the motion for summary judgment. The reply was filed prior to the trial court's awarding of summary judgment and was properly before the court for its consideration. See Tex. R. Civ. P. 166a(c); A.W. Wright & Assoc., P.C. v. Glover, Anderson, Chandler & Uzick, L.L.P., 993 S.W.2d 466, 473 (Tex. App.--Houston [14th Dist.] 1999, pet. denied). Edwards did not raise a new defensive theory in his reply brief; thus, there is no issue that Ellis lacked the notice of the limitations defense as to his claims for fraud and breach of contract. See Tex. R. Civ. P. 166a(c); Sanders v. Capitol Area Council, 930 S.W.2d 905, 911 (Tex. App.--Austin 1996, no writ). Rather, Edwards extended its limitations defense as set forth in its motion for summary judgment to the new causes of action raised in Ellis's second and third amended petitions.

2. See Peterson v. Texas Commerce Bank-Austin, National Assoc., 844 S.W.2d 291, 294 (Tex. App.­Austin 1992, no writ); Walker v. Hanes, 570 S.W.2d 534, 540 (Tex. Civ. App.­Corpus Christi 1978, writ ref'd n.r.e.); Doneghy v. State, 334 S.W.2d 506, 509 (Tex. Civ. App.­Amarillo 1960, writ ref'd n.r.e); Cavitt v. Amsler, 242 S.W.2d 246, 247-48 (Tex. Civ. App.­Austin 1922, writ dism'd w.o.j.). These cases explain that when a person is precluded from exercising a legal remedy because of the pendency of legal proceedings, the time during which he is so precluded should not count towards limitations.

3. This is referred to as the doctrine of "relation-back." See Tex. Civ. Prac. & Rem Code Ann. § 16.068 (Vernon 1997).