Tuesday, July 9, 2013

Breach of contract and account stated in the alternative


The Texas pleading rules permit a plaintiff to sue on several different theories of recovery, even if the theories are based on the same set of underlying facts and are mutually exclusive or incompatible. All a plaintiff has to do to avoid contradictions, and their possible use by the opposing party for judicial admissions purposes, is to plead the theories in the alternative. Not all debt collection firms active in Texas pursue multiple theories of recovery. Those that do typically plead in the alternative with separate paragraphs for each theory. The factual allegations may be in a separate paragraph, and thus apply to both. Some debt collection attorneys, however, take a scattershot approach and also include theories that are not legally viable for collection of a credit card debt, such as unjustenrichment and quantum meruit (both of which are equitable theories), and sworn account, which is a subspecies of a suit on account.

There is little incentive for defense counsel to attack the non-viable theories (with special exceptions), unless the plaintiff also bases a motion for summary judgment on these additional theories, or includes them as alternative bases when it moves for summary judgment for breach of contract or some other theory that has been found acceptable to pursue the debt (--> account stated, but also see critique of account stated theory for credit card debt collection).      


When the trial court grants a creditor’s traditional motion for summary judgment based on two (or more) theories of recovery – such as breach of contract and account stated, a common combination -- and the written order does not say which one was the successful one, the losing defendant will have to challenge both bases. If he or she attacks only one ground for summary judgment, the appeal will have virtually no chance of success regardless of whether the other ground is valid or not. The error will have been waived by the appellant’s failure to raise it and brief it.

If both grounds are appealed and properly briefed, the appellate panel has a choice. The justices will consider both bases behind closed doors, or even at oral argument (if any), but they can affirm the summary judgment even if the Plaintiff has not met its burden to prove all essential elements of caused of action; and the court need not go into the matter in its opinion. A single valid basis for summary judgment is enough to affirm it.    

In Catilla v. Citibank the debtor challenged the summary judgment rendered against her on the alternative theories of breach of contract and account stated. Since one cause of action is sufficient to support a judgment for debt, and since the court of appeals affirmed the summary judgment for breach of contract, the court did not reach the account-stated theory. The court therefore did not address the cardholder's arguments challenging the trial court’s award of summary judgment on that basis.

It is not the first and only time a court of appeals declined to rule on the merits of an alternative theory of recovery, or the adequacy of the evidence to support each of its essential elements.

In Busch v Hudson & Keyse the Fourteenth Count of Appeals in Houston did not reach breach of contract as a basis for judgment because it affirmed it based on the theory of account stated, which it expressly endorsed as a proper theory for the collection of a credit card debt, citing to cases from other courts of appeals. 


Example from outside the credit card/consumer debt collection context: Dallas Court of Appeals opinion in Pegasus v. CSX Pegasus Transportation Group, Inc. v CSX Transportation Inc. (Aug. 14, 2013)(The other theories were breach of contract and quantum meruit. The opinion also rejects the argument that account stated was not viable based there had been an express contract between the parties because that contract had expired and the debt claim related to services performed after expiration). 

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