Tuesday, July 9, 2013

Credit card debt claim not actionable as a Sworn Account suit in Texas


... or at least it would not be proper under controlling appellate case law.  

In the courts of the State of Texas a “sworn account” refers to a debt action brought under rule 185 of the Texas Rules of Civil Procedure. The rule requires, inter alia, an affidavit as an attachment to the plaintiff’s original petition. Hence sworn account. But the rule is not actually titled “Sworn Account”, but “Suit on Account”.

The appellate case law even says that “sworn account” is not a cause of action in and of itself. Much rather, a sworn account is an alternative method for presenting a suit on account in a judicial forum. Because it is not a cause of action (substantive law), a sworn account would not be available in arbitration, which is governed by arbitration rules, rather than the TRCP. The sworn account rule merely provides an expedited procedure for presenting a suit on account because it establishes a prima facie case for the Plaintiff, and shifts the burden to the Defendant to rebut the presumption that the plaintiff is entitled to judgment.

This distinguishes a sworn account suit from most (if not all) other lawsuits. The general rule is that pleadings are not considered evidence in Texas courts. But a properly done sworn account pleading is an exception to this rule. Because it creates a presumption that the plaintiff is entitled to judgment for the amount sued for and supported by the sworn attachments, the sworn account pleading must be disputed with a sworn denial in order to neutralize the presumption. When that happens, the benefits of Rule 185 for the plaintiff no longer apply, and the claim is litigated and resolved in the normal manner just as other claims, under the same evidentiary standards.


Texas Rule of Civil Procedure 185 provides, "When any action or defense is founded upon an open account or other claim for goods, wares and merchandise, including any claim for a liquidated money demand based upon written contract or founded on business dealings between the parties, or is for personal service rendered, or labor done or labor or materials furnished, on which a systematic record has been kept, and is supported by the affidavit of the party, his agent or attorney taken before some officer authorized to administer oaths, to the effect that such a claim is, within the knowledge of affiant, just and true, that it is due, and that all just and lawful offsets, payments and credits have been allowed, the same shall be taken as prima facie evidence thereof, unless the party resisting such a claim shall file a written denial, under oath." Tex. R. Civ. P. 185.


Half a dozen courts of appeals have held that suits for collection of credit-card debt are not suits on account under Rule 185 when the card's issuer is not also the provider of the purchased goods or services. Therefore, it is immaterial whether or not an affidavit and account statement(s) are attached to the original petition. Over the years, many debt plaintiffs have nevertheless attached affidavits to their petitions, perhaps with the intent of using them for default judgment purposes. But a motion for summary judgment based on sworn account is easily thwarted by competent counsel for Defendant. Regardless of whether the formal paperwork requirements are satisfied, if the card issuer did not sell any goods – and banks don’t – the cause of action won’t work as a matter of clearly settled law irrespective of the quality of the pleadings, affidavits, and documentary evidence in the case.    


In an appeal filed in 2008 one debt buyer (Resurgence Financial LLC) tried to persuade a panel of the First Court of Appeals in Houston that the cases holding that sworn account was not a viable theory for credit card debt collection were wrongly decided. The court was not impressed. In an opinion by Justice Sherrie Radack, the justices rejected this request and offered an eminently sensible explanation: “We generally do not overrule precedent absent a compelling reason, especially when, as here, doing so would cause a split of authority between our sister court with which we exercise concurrent appellate jurisdiction.”
But the squeamishness about creating conflict with other appellate courts is not always so pronounced. For example, courts of appeals do not see eye to eye on the theory of "account stated" as legal tool for credit card debt collection, and on the criteria governing admissibility of business records and business records affidavits when the sponsoring witness is a representative of the debt buyer, rather than a custodian of records or otherwise qualified witness from the bank that issued the credit card (or other original creditor).

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