IN-DEPTH CIVIL SEMINAR RULE 508: DEBT CLAIM RULES

Transcription

1 TEXAS JUSTICE COURT JUDGES ASSOCIATION IN-DEPTH CIVIL SEMINAR Marriott North Round Rock, Texas May 4 5, 2015 RULE 508: DEBT CLAIM RULES Presented by: Janet Marton Senior Assistant County Attorney The Office of Vince Ryan, County Attorney Janet_Marton@ccl.hctx.net

2 RULE 508 Debt Claim Cases DEBT CLAIM RULES Rules Rule Rule 508 applies to recovery of debt by assignee, financial institution, debt collector or collection agency, or person or entity engaged in lending money at interest Rule Contents of Petition Rule Default Judgment

3 DEBT CLAIM CASE A lawsuit to recover a debt DEBT COLLECTION An action, conduct, or practice in collecting consumer debts due a creditor DEBT CLAIM Filed by certain plaintiffs: CLAIM Assignee, debt collector, collection agency, financial institution, person engaged in lending money at interest No more than $10,000 excluding statutory interest and costs, but including attorney s fees if any

4 RULE PETITION Credit Card, Revolving Credit, or Open Accounts: Account name or credit card name Account number (masked) Date of issue or origination of account, if known Date of charge-off or breach of account, if known Amount owed as of a date certain Whether plaintiff seeks ongoing interest Effective interest rate claimed Based on contract or statute Amount of interest as of a date certain

5 RULE PETITION Promissory note, promise to pay: Date and amount of original loan Whether debt was accelerated, if known Date final payment was due Amount due as of final payment date Amount owed as of a date certain Whether plaintiff seeks ongoing interest Effective interest rate claimed Based on contract or statute Amount of interest as of a date certain

6 RULE PETITION Debt assigned or transferred: Debt has been transferred or assigned Date of transfer or assignment Name of any prior holders Name or description of original creditor Petition must include basic pleading requirements set out in Rule 502.2

7 CAUSES OF ACTION Credit card debt is most frequently filed debt claim case Generally, plaintiff must establish: Valid, enforceable contract Privity between parties Performance by issuer Breach by defendant Damages to issuer or holder caused by breach

8 CAUSES OF ACTION Credit Card Debt Stated Account Transaction gives rise to debt Agreement (express/implied) fixes amount due Debtor makes promise (express/implied) to pay Open Account Transactions between the parties Debtor-creditor relation through course of dealing Account remains open Expection of further dealing

9 CAUSES OF ACTION Credit Card Debt Breach of Contract Existence of valid contract Performance by plaintiff Breach of contract by defendant Damages as result of breach Quantum Meruit Evidence may not support existence of valid contract

10 SERVICE OF PROCESS Rule Clerk must issue citation and deliver as directed by plaintiff Clerk must keep copy of citation in the court s file Authorized person effecting service must complete Return If service questionable, judge may hold hearing (Rule 503.1) ANSWER Due by end of 14 th day after day defendant served, or if Saturday, Sunday, holiday, or court closes before 5pm, next business day Must be in writing Copy to be served on plaintiff No pleading of defenses necessary (Rule 502.5)

11 STATUTE OF LIMITATIONS Suit on debt and accounts not later than 4 years after date the cause of action accrues CPRC Open or stated account not later than 4 years after date cause of action accrues Cause of action accrues on the day dealings in which the parties were interested together cease Promissory Note payable at definite time not later than 6 years after due date; Promissory Note payable on demand 6 years after demand Bus.Comm.Code 3.118

12 WHAT IS THE CAUSE OF ACTION? CONTRACT or DEBT 4 years from date cause of action accrues OPEN ACCOUNT 4 years from date dealings between parties ceased (debtor had right to borrow or pay until credit terminated) Kaldis v. Crest Finance, S.W.3d, 2015 WL (Tex.App.-Houston (1 st Dist.), 2015 Dodeka, LLC v. Campos, 377 S.W.3d 726 (Tex.App.-San Antonio), 2012

13 VENUE Rule County and precinct in which the defendant resides, or in suit on written contract that promises performance in certain place, in the county and precinct in which the contract was to be performed CPRC County and precinct in which a contract for goods, services, or loans intended primarily for personal, family, or household use was signed, or in which defendant resides Provision may not be waived in contracts for goods, services, or loans intended primarily for personal, or household use family, CPRC If suit is brought where defendant does not reside, the pleading must affirmatively show that the suit comes within an exception to venue

14 APPLICABILITY OF RULES Trial Setting (Rule 503.3) court will set for trial with at least 45 days notice Jury Trial Request (Rule 504.1) Demand in writing at least 14 days before trial setting, and pay $22 jury fee Pretrial Conference (Rule 503.6) Discovery (Rule 500.9) Request must be presented to judge for approval by written motion, with notice; if approved, discovery may be served Imbedded discovery no longer acceptable Discovery served with petition, or without approval order, may be disregarded

15 SUMMARY DISPOSITION (Rule 503.2) Motion sets out all facts and includes documents Defendant may file sworn written response Motion must be on file for 14 days Judge must hold hearing unless parties agree otherwise; evidence offered by parties considered Judge decides based on completeness of motion, facts and documents, and response If no genuinely disputed facts, motion granted If no evidence of an essential element of claim or defense, motion granted JUDGE MAY DEVELOP THE CASE (Rule 500.6)

16 DEFAULT JUDGMENT RULE CONTROLS Defendant fails to appear or answer Judge must promptly render default judgment if plaintiff provides required proof of damages RULES OF EVIDENCE DO NOT APPLY EVIDENCE OF DAMAGES Attached to petition and served on defendant, or Submitted after defendant fails to answer In sworn statement, or By live testimony

17 AMOUNT OF DAMAGES Account or loan issued to defendant Defendant obligated to pay Account closed or defendant breached terms All payments, credits, offsets applied Amount due and owing on a date certain DOCUMENTARY EVIDENCE MUST BE ATTACHED TO SWORN STATEMENT OF PLAINTIFF, PRIOR HOLDER OF DEBT, OR ORIGINAL CREDITOR Documents kept in the regular course of business Regular course of business for employee to make record Documents created at or near time of transaction Documents are originals or exact duplicates

18 HEARING OR NOT NO HEARING Written evidence of damages sufficient Judge must enter default judgment hearing to avoid undue expense and delay HEARING REQUIRED Evidence of damages insufficient Plaintiff may request default judgment hearing Plaintiff must appear at hearing to prove damages: In person By telephone By other electronic means

19 SWORN STATEMENT MUST BE TRUSTWORTHY May not be rejected because it is not made by original creditor May not be rejected because documents created by third party and incorporated into and relied upon by plaintiff

20 TESTIMONY REGARDING AN ACCOUNT MIGHT SHOW: That plaintiff is the owner and holder of the account or loan, and if plaintiff is not the original owner, how plaintiff acquired rights in the account or loan, and a copy of the assignment, bill of sale, or other transfer of the account or loan; That the account or loan was issued to the defendant, including a reference to the contract language identifying the defendant; That the defendant is obligated to pay the account or loan, including a reference to the contract language delineating the obligation to pay; That the defendant accepted the benefit of the account or loan, i.e. plaintiff or original creditor extended credit or made a loan to defendant; That the defendant breached the contract, by failing to pay as required; That the account was closed or charged off, or the loan was accelerated, in response to the default by defendant; That a certain balance was due at time of default or last payment, or charge off, and that defendant continues to fail and refuse to pay the balance; The interest accrued on the debt, with a reference to the contract provisions authorizing the charging of interest and the rate of interest, and the dates and rates of accrual of interest, if appropriate; That all payments, credits, and offsets were allowed to the defendant;

21 TESTIMONY REGARDING AN ACCOUNT MIGHT SHOW: As to the documents: That the contract and other evidence of amount due are true and correct copies of the original of the documents; That the documents were kept in the regular course of the plaintiff s business, and it was in the regular course of that business for an employee or representative with knowledge of the transaction to make the record or to transmit the information to be included; that the record was created at or near the time or reasonably soon thereafter; And, as to attorney s fees: That demand for payment of the amount owing was made more than 30 days prior to filing suit; and payment has not been made; The hours and reasonable fee for services

22 TRUSTWORTHINESS OF A SWORN STATEMENT Insufficient proof: Agreement without evidence of calculation of balance Creditor failed to include documents supporting damages Creditor did not show calculation of claimed damages, nor did it offer statement showing charges, payments or interest calculation Lender failed to include document establishing agreed terms of loan Sufficient proof: Agreement, methodology used to calculate balance, explanation of cost of credit, and billing statements that included past due amounts owed Affidavits failed to establish debt because: Attachments did not contain any statement of account showing past due charges, or any calculation of outstanding balance including offsets and credits Attachment showed only one page of a credit card application, but no credit agreement or other document establishing agreed terms County Real Estate Venture v. Farmers and Merchants Bank of Long Beach, 2015 WL , Tex.App.-Houston (1 Dist.), 2015

23 TRUSTWORTHINESS OF A SWORN STATEMENT Suit on credit card - breach of contract, account stated, quantum meruit, open account, and promissory estoppel; evidence included copy of agreement and use of card Records kept in regular course of business are exceptions to hearsay rule Duplicate record is admissible to the same extent as an original unless authenticity questioned Evidence of credit card agreement, although not original agreement, that reflected terms and acceptance of those terms by continued use of card, was sufficient Davis v. American Express bank, FSB, 2014 WL , Tex.App.-Austin, 2014

24 TRUSTWORTHINESS OF A SWORN STATEMENT A person may testify on personal knowledge to a sale and assignment without providing any documentary evidence but record of sale made more than a year after sale takes place is not at or near the time of the event Affidavit created in anticipation of litigation rather than in course of regular business activity, which casts doubt on trustworthiness Ortega v. CACH, LLC, 396 S.W.3d 622 (Tex.App.-Houston [14 th Dist.] 2013)

25 TRUSTWORTHINESS OF A SWORN STATEMENT An exception to the hearsay rule exists for business records if the offering party shows (1) the records made and kept in the regular course of business; (2) records kept as part of its regular practice; (3) the records made at or near time of the event; and (4) person making the record had personal knowledge of the events being recorded. Such a notarized document is self-authenticating (Evid. Rule 902(8)) Third party documents can become the business records of another; admissible if records are (1) incorporated and kept by successor business, (2) relying on the accuracy of the content, and (3) circumstances otherwise indicate trustworthiness of documents Failure to keep accurate records could result in criminal or civil penalties (Fin. Code ) Ainsworth v. CACH, LLC, 2012 WL (Tex.App.-Houston [14 th Dist.] 2012)

26 TRUSTWORTHINESS OF A SWORN STATEMENT Assignee sued for breach of contract, and submitted affidavit and business records Third party debt collector s employee can authenticate purchased credit card account documents despite having no personal knowledge or other showing of reliability as to the credit card company s recordkeeping practices Failure to provide translation of cardholder agreement printed in Spanish and otherwise illegible, is insufficient evidence to prove terms of agreement or debtor s intent to be bound by specific agreement. Uribe v. Pharia, LLC, 2014 WL (Tex.App.-Corpus Christi 2014)

27 TRUSTWORTHINESS OF A SWORN STATEMENT A failure by the bank to keep accurate records of its customers credit card debt could result in criminal or civil penalties (Fin. Code ) Third-party documents can become the business records of an organization if (1) documents are incorporated and kept in course of business, (2) the business relies on the accuracy of the contents of the records, and (3) circumstances otherwise indicate trustworthiness of documents Levy v. CACH, LLC, 2013 WL (Tex.App.-Houston [14 th Dist.] 2013)

28 TRUSTWORTHINESS OF A SWORN STATEMENT Credit card company is not required to produce every monthly credit card statement or documentation of changes made on the account throughout its history Language in the agreement indicating that it constitutes cardholder s agreement, without setting out customer s name, is sufficient Use of credit card constitutes customer s acceptance of the agreement and any subsequent amendments to the terms Wakefield v. Wells Fargo Bank, 2013 WL (Tex.App.-Houston [14 th Dist.] 2013)

29 TRUSTWORTHINESS OF A SWORN STATEMENT Affiant must explain how he has personal knowledge Personal knowledge requirement is satisfied when affiant identifies the position held and describes job responsibilities so that one reasonably can assume affiant would be particularly situated to have personal knowledge of the facts within the affidavit Rodriguez v. Citibank, 2013 WL (Tex.App.-San Antonio 2013)

30 JUDGMENT IF PLAINTIFF PROVES DAMAGES, JUDGE MUST RENDER JUDGMENT FOR AMOUNT PROVEN RELIEF AWARDED MUST BE SUPPORT BY PLEADINGS IF A DEFENDANT APPEARS OR FILES AN ANSWER BEFORE THE JUDGMENT IS SIGNED, THE JUDGE MUST SET THE CASE FOR TRIAL Certificate of Last Known Address Military Status Affidavit Submitted at time of default judgment, not at time of filing Notice of Judgment (Rule 503.1) Immediately mailed Provide style of case, court, description of judgment, and date signed