Thursday, December 19, 2013

Comment on Labeau v. GE Capital Retail Bank - Deemed admissions used against bank customer

Current rules give unfair advantage to mass-litigation attorneys targeting Texas consumers

Labeau v. GE Retail Bank formerly GE Money Bank


This case has an important lesson, and a sad one: Don't try to help your spouse with litigation (unless you are a lawyer).

Husband was sued on a credit card, but did not get himself together to file his own paperwork, or thought the wife would do a better job being his advocate in addition to mounting her own defense. They were both named as defendants.

Creditor, GE Capital Retail Bank (formerly GEMB), filed motion for summary judgment based on deemed admissions, which was granted over the objection of the debtor's spouse. The Fort Worth Court of Appeals affirmed on appeal, pointing out the incompetence of the defense under the current rules governing litigation.

Some of these rules are bad rules, and the Supreme Court, and Texas Legislature (to the extent that's required), should change them. Why are they bad? Because they are out of sync with reality and lend themselves to abuse and deception, on a massive scale.

Unauthorized practice of law: Can't afford a lawyer. Out of luck. Family member can't help you. Is not allowed to help you!

The official purposes of the Unauthorized Practice of Law Committee (UPLC), and the law under which it operates, is to protect the public from substandard legal representation. But many people can't get a lawyer, good or otherwise, because they can't afford one. In the case of debtors, that's why they are in default in the first instance.

The rule that prohibits family members from helping family members in court punishes what the law otherwise recognizes as a duty (at least to some extent), namely that spouses take care of each other, not to mention a moral obligation and the right thing to do.

While trial judges condone many other procedural and evidentiary errors if there is no objection (you have to be an attorney, or be well-versed in law to make the right one), trial judges do enforce the rule that family members are not allowed to advocate on behalf of one of their own. They enforce that rule, while remaining silent on many others unless a competent lawyer raises the issue, such as pleading deficiencies, hearsay exceptions, and objections to incompetent or otherwise defective affidavits. This does not mean they are being mean. Some may very well stop non-lawyers in their tracks in good faith because what they are doing may also subject them to the possibility of criminal prosecution, though that's a stretch. Be that as it may, family members will typically not be allowed to speak for other family members in court (except as witnesses), and may not sign court-filed papers on their behalf. It's a big no-no, and courts of appeals have harped on it time and again.

This case is  no exception. Spouse, rather than defendant, signed motion for continuance and did not ask for withdrawal of deemed admissions. At least, this time the panel opinion did not go so far as to suggest that the spouse may have committed a crime.

Deemed admission: Perversion of a tool for lawyers to streamline litigation 

Deemed admissions result from failure to answer requests for admissions. The original purpose of that rule that authorizes Requests for Admissions is to allow litigants to reduce the number of issue for trial by disposing of those that are not really contested or not worth arguing about.

But requests for admissions are these days mostly used for an entirely different purpose: To trap unrepresented litigants who are known to be unlikely to respond. After all, they get these requests from an attorney suing them, -- an attorney who may even have stated in a letter or in the pleadings themselves that any information will be used for debt collection purposes. Sounds like another well-known phrase: Anything you say may be used against you. the Miranda warning. This one is known to the public from myriad cop and crime shows on TV. So why would average unsophisticated telly-watching folk who find themselves the target of a lawsuit respond  to request for information when they have just been warned that everything they say will be used against them?

What the lay defendants don't know or appreciate is how their failure to respond will be used against them, and that judgment can be entered on deemed admissions even if default judgment cannot be entered after they have filed an answer (or written a letter to the judge).

A modest proposal: Abolish the deemed admissions rule, and replace it with a rule authorizing the filing of stipulations signed by both parties or their attorneys.

The Texas Supreme Court should abolish or change the deemed admissions rule because it was being intentionally misused by attorneys engaging in mass-litigation against individuals most of whom will not hire legal counsel. Debt collection attorneys know how to exploit the current rules and use them for purposes for which they were not intended. Additionally, the rule allows them the get Defendants to admit (by doing nothing) facts that even the debt collection attorney knows to be false, or does not care if they are false.

Modest changes to benefit the lawyerless masses, but only in JP and family courts so far

The Supreme Court has recently promulgated new rules for justice court. Among those is a rule that allows family members to act on behalf of defendants in debt suits filed in those courts, though it requires the judge's permission, and the "representation" is limited. The operative word is "assisted".

Additionally, the Supreme Court has taken note that large numbers of people try to get divorced without a lawyer, many no doubt because they cannot afford one. The highest court, over the vociferous objections of the Family bar, thus promulgated pro se forms to help those unrepresented litigants.

The rules of procedure for county and district court should also be amended to make them more user-friendly, rather than giving an unfair advantage to debt collectors engaging in mass litigation. The debt collectors' tactics can be effectively countered only by those defendants who can afford to mount a defense with counsel, or become legally savvy extremely quickly. It only takes a little over 50 days to end up with deemed admissions; and only 30 if they are served under rule 21a. A typical pro se litigant would not know that, and most probably won't trust the debt collection attorney telling him or her as much. And a month is hardly enough for even a college-educated lay person to become legally savvy.

Even a three-year law school education, followed by bar exam passage, does not make freshly licensed attorneys ready for litigation. If left without supervision, they will predictable make numerous mistakes. How can the general public be expected to know how deemed admission operate and how to undo the damage once the relentless operation of the rule has inflicted it?

Here is the tale of LaBeau, as told by the court of appeals: 

LaBeau did not respond to the motion for summary judgment, but his wife attached to the June 5, 2012 motion for continuance (which bore only her signature) a document entitled "Facts to be Admitted or Denied." She admitted making the agreement with Lowe's Home Improvement, stated that Lowe's "third partied" the agreement with GE Capital, and denied the amounts due and owing. She also claimed she had sent two checks to Lowe's, one for $1,350 and one for $1,800, and that she had attempted to resolve the matter in good faith.
Even if the motion for continuance could be construed as a motion to withdraw the deemed admissions, it was filed by LaBeau's wife rather than LaBeau.[3] See Tex. R. Civ. P. 7. There is nothing in the record from LaBeau asking the trial court to withdraw the deemed admissions or otherwise responding to the motion for summary judgment.[4] See Unifund CCR Partners v. Weaver, 262 S.W.3d 796, 797-98 (Tex. 2008). Accordingly, we conclude and hold that the trial court did not err by granting summary judgment, and we overrule LaBeau's second issue.

Having overruled both of LaBeau's issues, the Forth Worth Court of Appeals, in an opinion by Chief Justice Terrie Livingston, affirmed the trial court's judgment and ordered LaBeau to pay the costs of the appeal.


The decision of the Second Court of Appeals is not wrong under existing law. It is just not right. It is not right because the rules under which the appeal was decided subvert, rather than promote, the merits-based resolution of cases. But the problem is the nature of the rules themselves that permit non-merits based adjudication of cases brought against unsophisticated defendants based on deemed admissions. The remedy is their amendment by the Texas Supreme Court, -- which is the relevant rule-making "agency" with respect to rules of procedure and evidence.

Case info and link to appellate docket sheet and on-line opinion on the court's website  

Michael LaBeau v. GE Capital Retail Bank f/k/a GE Money Bank, No. 02-12-00284-CV (Tex.App. -- Fort Worth, July 16, 2012) (Opinion by Chief Justice Terrie Livingston) (click docket number).

(Click image to enlarge it)

GE Capital Retail Bank formerly known as GEMB, Appellee, was represented by Joseph Marse O'Bell, a ZWICKER AND ASSOCIATES attorney handling debt collection cases in Texas for multiple creditors.

Sunday, December 15, 2013

Sufficiency of the Pleadings: Was the bank's debt claim properly stated in plaintiff's petition?


Fair Notice Standard applies to pleadings in Texas Courts

The quality and specificity of pleadings filed by debt collection attorneys varies considerably; but even at the lower end of the spectrum, a pleading will probably pass muster in most circumstances because the pleading rules in state court are more relaxed, compared to federal court. This is true for plaintiffs as well as defendants.

Texas courts apply the fair notice standard to pleadings by the plaintiff, and do not require the defendant to admit or deny specific factual allegations in the numbered paragraphs of the Plaintiff's petition.

Nor is the defendant required to provide specific facts supporting affirmative defenses when filing an answer. The identification of the relevant defense(s) by name is generally sufficient. Rule 94 lists defenses that must be pleaded expressly, and Rule 93 specifies which matters require verified (sworn) answer.

But see -- > Requests for admissions are sometimes embedded in the pleadings, which is not proper under the rules governing pleadings and discovery, and can create confusion, but is standard practice for many collection law firms. They are rarely scolded for it.

The Bank's petition mentioned credit card account and default. Was the cause of action properly identified? 

While it was not one of the main issues in the case, the Texarkana Court of Appeals, in Tully v Citibank, addressed the issue of pleading sufficiency with respect to breach of contract. Although Citibank's attorney had not expressly pleaded breach of contract as a cause of action in the trial court, the appellate court held that it had nevertheless satisfied the fair notice standard, which applies to trial court pleadings in Texas courts.

The higher court noted that Citibank had stated in its petition that the suit was based on a credit card debt. More specifically, Citibank alleged that Tully "defaulted in making the payments required by the terms of the Card Agreement. Due to Defendant's breach of the terms of the agreement....". The "cardmember agreement" is indisputably a type of contract, and the allegation of "default" amounts to an allegation of "breach" under a contract governing extension of credit and repayment of amounts loaned. Construing the petition liberally, the court concluded that it gave fair notice that Citibank was asserting a cause of action for breach of contract. The Tully v. Citibank case stands for the proposition that a suit for collection for a credit card debt is a breach of contract suit, and is cited for this legal point, even by federal bankruptcy courts. See In re Tran, 369 B.R. 312, 317 (S.D. Tex. 2007), aff'g 351 B.R. 440, 445 (Bankr. S.D. Tex. 2006)
Under Texas law, collection of the amount due under a credit card agreement is treated as a claim for breach of a written contract. Tully v. Citibank (South Dakota), N.A., 173 S.W.3d 212, 215-220 (Tex.App.-Texarkana 2005). Thus, Texas law provides that eCast's claim is one based on a writing, therefore, to be entitled to prima facie evidentiary effect, eCast's claim must include the writing under Rule 3001(c).
Challenging the other party's pleadings with Special Exceptions  

In Texas, pleading deficiencies may be attacked through a motion by another name: Special Exceptions. The rule governing this procedure, which essentially involves a motion for an order requiring the opponent to re-plead, is rule 91 of the Texas Rules of Civil Procedure (TRCP 91). It must be read in conjunction with Rule 90, which addresses waiver of such defects in form.

Normally, it is not worth mounting this type of challenge because it requires a hearing, and the payoff, even in the best-case scenario will be meager. The debt collection case cannot be resolved favorably for the defendant based solely on special exception without the plaintiff being given an opportunity to amend and thereby correct the error. Only if an attempt at amendment would be futile, can the trial court dismiss a petition on special exceptions and close the case.

A motion for summary judgment, by contrast, can seek a final disposition. Either party can file such a motion, and when the plaintiff files one, the defendant may consider countering it with a motion for summary judgment of his or her own. Also see -- > No evidence motion for summary judgment by the defendant.

In contrast to special exceptions, a summary judgment motion does not afford the non-movant a safe harbor, or second chance, after the motion has been heard and granted (except a motion for reconsideration or a motion for a new trial, which applies generally).

Pleading sufficiency review in the default judgment context 

Sometimes, however, a defective pleading can become a controlling issue; particularly in the context of an appeal from a default judgment. Texas courts have held that the examination of the pleading as a basis for a judgment under such circumstances is more rigorous. The caselaw on this issue is supported by rule 90, which essentially says that all complaints of pleading deficiencies are waived if not made the subject of special exceptions except that the rule does not apply against a party against whom a default judgment is rendered. See TRCP 90.

This makes sense. After all, in the default judgment context, the defendant did not (by definition) appear and was not in a position to challenge the plaintiff's pleading or assert any objections.

Case in point from the Beaumont Court of Appeals 

In 2012 the Ninth Court of Appeals, sitting in Beaumont, handed down an interesting opinion on the subject of pleading sufficiency when presented with the issue after default judgment was rendered against a consumer in a case in which the plaintiff had sued two. Hankston v. Equable Ascent Financial, 382 S.W.3d 631 (Tex.App.- Beaumont - 2012).

Applying the more exacting standard applicable to review of default judgments, the court held, in an opinion written by Justice David Gaultney, that the debt buyer's pleadings did not support the various theories that the creditor's attorney urged on appeal.

Petition did not sufficiently allege elements of account-suit theories 

As for the theory of open and stated account, the petition did not include an allegation that the defendant had agreed that the balance alleged as due was correct, in addition to equivocating on how much was due by conceding that the pleaded-for amount may not reflect all payments made.

Even though an affidavit was attached to the pleading, it did not qualify as a sworn account because the affidavit did not state that the "claim is, within the knowledge of affiant, just and true...." See Tex.R. Civ. P. 185, and therefor did not meet the minimum requirements of a sworn account suit under Rule 185. Nor did the petition contain any allegation that the account was "for goods, wares and merchandise," for material furnished, for personal services rendered, or for labor done or furnished. See Tex.R. Civ. P. 185.

As for the quantum meruit claim, there was no allegation that the plaintiff provided valuable services or materials. The court also noted that a quantum meruit claim is not available when there is an express contract, as was also alleged in the petition. -- > Express contract renders recovery in quantum meruit unavailable.

But the breach of contract claim was defective too, because the plaintiff tried to impose liability on two defendants, but the body of the petition referred only to one, and did not say which one opened the account or signed the contract. Nor did it even identify the original creditor, which is an additional proof requirement for a plaintiff suing as an assignee.


Theories of recovery in Texas debt collection suits
Breach of contract as the proper theory to collect a credit card debt (Tully v. Citibank)
Account suit theories: Open account, account stated, and sworn account
Challenging default judgments after the fact: Different methods of attack 
Post-judgment motion vs. restricted appeal: Caveats 

Saturday, December 14, 2013

Credit Union loses on appeal: Hooper v. Generations Community FCU (Tex.App. 2013) (case note) (San Antonio)

Hooper vs. Generations Community FCU (Tex.App. 2013)  


This is a collection case in which a debtor ultimately prevailed because the financial institution failed to prove its cause of action. The trial court had not held the plaintiff to its burden of proof, but the San Antonio Court of Appeals did, when it reviewed what had transpired in the court below, and overturned the trial court's judgment in June 2013.

Explaining in their opinion why judgment for the credit union had to be reversed, three justices on the San Antonio Court of Appeals, all women, correctly state that a cause of action for collection of a credit card debt is a breach of contract claim, recite the essential elements of such claim, and show that the credit union had simply not proven all of those elements at trial. It lost, as it should, because the credit union's attorney had done a poor job presenting its case. As was true of Citibank when it moved for summary judgment with a dubious motion against cardholder Jack Tully in one of the first precedent-setting Texas credit card debt collection case in recent history.  


In Tully v. Citibank (Citibank v. Tully in the trial court) Citibank's attorney had a summary judgment in his client's favor reversed because two of his theories - sworn account and quantum meruit - were not legally viable for collection of a credit card debt, while the third theory, breach of contract, which was the correct theory, given the nature of the debt failed because Citibank had not proven the contractual authorization for finance charges.

The summary judgment record in Tully contained a Cardmember Agreement from Citibank, but it did not contain the interest rate disclosure information, which was presumably set forth in separate document ("card carrier") mailed with the card cards which reflected different interest rates for different categories of borrowers,  reflecting different borrower profiles, creditworthiness, and risk levels (-- > risk-based pricing based on borrower characteristics vs. market-based pricing).

The Texarkana Court of Appeals accordingly reversed the summary judgment for Citibank and sent the case back to the trial court.


In Hooper, a panel of the San Antonio Court of Appeals reviewed the propriety of judgment for the creditor entered after a bench trial. Even though the standard of review on appeal from such a judgment differs from the standard applicable to summary judgments, the substantive elements that the plaintiff has to prove are the same.

As plaintiff, the creditor has to prove (1) that a valid contract existed, (2) that the plaintiff performed or tendered performance, (3) that the defendant breached the terms of the contract, and (4) that the plaintiff suffered damages as a result of the defendant's breach.

Other intermediate courts of appeals in Texas do not disagree with the recitation of these essential elements of a breach of contract claim; nor do the even disagree with the requirement that specific contract terms must be proven for a viable breach-of-contract claim (rather than merely the abstract fact that there was some kind of contract between creditor and borrower).

But panels of justices of certain other courts of appeal (in Houston, Dallas, and Waco) have let financial institutions win without proving the underlying contract even though such a contract is always required under state and/or federal law governing credit cards and issuers of such cards. How so? -- By other means.

See --> Account Stated: an old theory turned to new use to allow creditors to win without having to prove up the loan contract.


The court of appeals' opinion in Hooper makes clear that the credit union lost because its attorney had done a poor job presenting its case at trial. It had not actually proven up the agreement referenced in the application for credit, and had not shown what the terms were that formed the basis for the allegation that Hooper breached the contract. Since the element of breach of credit agreement could only be shown with reference to the specific contractual obligation governing repayment in installments, the absence of the agreement was also fatal to the third element of a viable breach of contract cause of action, breach by nonperformance.

Holding that the evidence was legally insufficient to support the trial court's judgment, the San Antonio appellate court explains that the creditor cannot prove breach without establishing what obligations were subject to breach, i.e. the terms of the underlying loan contract.

The court sums up the deficiency in the evidence as follows:

Although there was some evidence that Hooper obtained a credit card from the Credit Union and that he used the credit card, there was no evidence establishing Hooper's specific obligations under the terms of an agreement. For example, there was no evidence regarding Hooper's obligation to repay the balance and interest on the account, including when his payments were due, where his payments were to be made, and what would transpire if he failed to make a payment in accordance with the terms of an agreement. Nor was there evidence indicating Hooper failed to comply with a particular term of an agreement, or otherwise failed to perform his obligations under an agreement. We conclude the record discloses the complete absence of evidence of the third element of the Credit Union's breach of contract claim, i.e., that Hooper breached the terms of an agreement with the Credit Union. In the absence of evidence that Hooper failed or refused to do something he promised to do under an agreement, the Credit Union failed to prove its breach of contract claim.


Both Tully v. Citibank and Hooper v. Generations Community Federal Credit Union involved insufficient proof of the terms of the underlying contract. In Tully it was lack of evidence that the interest rates on the account statements were contractually authorized because the Cardmember Agreement that Citibank attached to its motion did not actually contain the finance terms; in Hooper it was the absence of evidence of the repayment terms that the customer was alleged to have breached because the credit union never proved up the Credit Line Account Agreement and Disclosure that contained the terms under which the customer was to be held liable.

Because the element of breach by nonperformance can only be established with reference to the underlying contractual obligations, the absence of the terms document also proved fatal to the third element of the credit union's breach of contract claim. Because the credit union had not met its burden of proof at trial, the San Antonio reversed and rendered judgment for the Defendant.


Jack TULLY v CITIBANK (SOUTH DAKOTA), N.A., 173 S.W.3d 212 (Tex.App.-Texarkana 2005, no pet.)(case note)
No. 04-12-00080-CV (Tex.App. - San Antonio, June 23, 2013, no pet.)


A credit card issued by a financial institution is a special contract that does not create the sort of debtor-creditor relationship to bring a claim within the scope of Rule 185. See Bird, 994 S.W.2d at 282; see also Sherman Acquisition II LP v. Garcia, 229 S.W.3d 802, 807 (Tex.App.-Waco 2007, no pet.); Tully v. Citibank (South Dakota), N.A., 173 S.W.3d 212, 216 (Tex.App.-Texarkana 2005, no pet.).

Hooper v. Generations Cmty. Fed. Credit Union, No. 04-12-00080-CV, 2013 WL 2645111, at *3 (Tex. App.-San Antonio June 12, 2013, no pet.) (mem. op.) (reversing judgment for creditor where cardholder agreement was not offered into evidence and there was no evidence establishing debtor's specific obligations under an agreement).

Last revised: 12/8/2018 

Tully vs Citibank: Credit card debt collection claim is breach of contract claim

Jack Tully v. Citibank (South Dakota), N.A., 173 S.W.3d 212 (Tex.App. - Texarkana 2005, no pet.)

Significance of the Tully v. Citibank case: What is is proper legal theory for collection and what must the creditor prove?  

In Tully v Citibank, a summary judgment in favor of Citibank was reversed on all three theories on which the motion was based (albeit for different reasons).

Breach of contract cause of action 

This  claim failed on the merits because there was no evidence on an agrement on interest rates; wherefore the bank could not meet the summary judgment standard on the first element of a viable breach of contract claim. Interest rates are one essential element of a contract involving the loaning of money.

Noncontract theories

Citibank's attorney, Anh Regent, had also pleaded sworn account and quantum meruit. Summary judgment on those theories was overturned for purely legal (rather than evidence-based) reasons:

A credit card claim is not viable as a sworn account claim because no good or services are sold by the creditor to the debtor; and the quantum meruit claim could not succeed because the presence of the contract (in the form of Citibank's cardmember agreement, albeit on without interest rate term) precluded recovery under an equitable theory because the latter are only available in the absence of a contract. -- > Equitable relief not available when legal remedy available for breach of contract.

Other rerversible error 

Attorney’s fees on appeal were not conditioned on unsuccessful appeal by consumer (i.e. successful defense of the judgment rendered in the bank’s favor) as required; and dismissal of Tully's conterclaim for usury was improper also because Citibank had not disproven that claim. Even though Citibank's home state, South Dakota, does not have usury limits on interest, another limitation on interest still applied: The rate or rates must be authorized by the parties' agreement that governs the account.

Disposition on appeal 

Because none of the legal theories on which Citibank had moved for summary judgment could support the judgment (account stated was not pleaded), it was reversed, and the case was sent back to the court that had entered the faulty judgment.

The appeal was taken from a summary judgment in favor of Citibank; not from a bench trial resulting in a final judgment. Therefore, upon its reversal as improperly granted, the appellate court remanded the case to the trial court for further proceedings consistent with the opinion. The court could not render judgment for Tully because he had not cross-moved for summary judgment in his favor.


Tully v. Citibank (South Dakota), N.A., 173 S.W.3d 212, 216 (Tex.App.-Texarkana 2005, no pet.)

Docket sheet for Cause No. 06-05-00027-CV on the Texarkana Court of Appeals' web site, which has link to on-line HTML version of the opinion in Tully v Citibank (South Dakota). N.A. by Justice Carter.

Tully v Citibank (South Dakota) N.A. - Appellate Docket Sheet 

173 S.W.3d 212 (2005)

Jack TULLY, Appellant,

No. 06-05-00027-CV.
Court of Appeals of Texas, Texarkana.
Submitted June 6, 2005.
Decided September 9, 2005.

215*215 Ron Adkison, Welborn Houston, LLP, Henderson, for appellant.
Anh H. Regent, Regent & Associates, LLP, Houston, for appellee.


Opinion by Justice CARTER.

Jack Tully appeals the granting of Citibank (South Dakota), N.A.'s motion for summary judgment for collection on a delinquent credit card debt. Citibank issued a credit card to Tully. Tully alleged that some of the charges contained in the account statements were inaccurate and that Citibank, rather than correct its statements, charged interest on the "incorrect and disputed amounts" at rates of almost twenty-five percent.[1] Citibank sued Tully alleging Tully had failed to make payments due, which had accelerated that maturity of the amounts due. Tully denied Citibank's allegations and filed a counterclaim alleging that Citibank was in bad faith and that the suit was brought for the purpose of harassment. Tully also alleged Citibank attempted to collect interest, fees, or expenses without authorization. The trial court granted Citibank's traditional motion for summary judgment.

Tully raises three issues on appeal: 1) Citibank is not entitled to summary judgment because it failed to plead or prove grounds to support the summary judgment and failed to prove there are no genuine issues of material fact; 2) Citibank is not entitled to summary judgment because it failed to prove Tully's counterclaim was pre-empted or disproved the counterclaim; and 3) the summary judgment erroneously makes an unconditional award of appellate attorney's fees. We reverse and remand this case to the trial court for proceedings consistent with this opinion.

1) Genuine Issues of Material Fact Exist Concerning the Amount of Damages Due to the Breach of Contract

In his first point of error, Tully argues the trial court erred in granting the summary judgment. Citibank's traditional motion for summary judgment argued it was entitled to summary judgment based on either a suit on a sworn account, quantum meruit, or breach of contract. Tully challenges all three of these theories. We 216*216 agree for the following reasons: a suit on a credit card debt cannot be recovered through a suit on a sworn account; because the summary judgment evidence conclusively established that a contract existed, Citibank could not recover under its quantum meruit theory; and a fact issue exists concerning the amount owed based on breach of contract.

The standards for reviewing a "traditional" motion for summary judgment are well settled. We will review this summary judgment based on the standards set forth in Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

First, Citibank cannot collect a credit card debt through a suit on a sworn account. A suit on a sworn account is permitted only if the claim 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...." TEX.R. Civ. P. 185. "A sworn account applies only to transactions between persons, in which there is a sale upon one side and a purchase upon the other, whereby title to personal property passes from one to the other, and the relation of debtor and creditor is thereby created by general course of dealing—it does not mean transactions between parties resting upon special contract." Bird v. First Deposit Nat'l Bank, 994 S.W.2d 280, 282 (Tex. App.-El Paso 1999, pet. denied). Because no title to personal property passes from the bank to the cardholder, a credit card debt is not a sworn account as contemplated by Texas Rule of Civil Procedure 185. Id. Citibank was not entitled to summary judgment based on its suit on a sworn account theory.

Second, because Citibank proved the existence of an express contract, Citibank cannot recover under the theory of quantum meruit. "Quantum meruit is an equitable theory of recovery which is based on an implied agreement to pay for benefits received." Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex.1992). The doctrine of quantum meruit requires the plaintiff to establish: "1) valuable services and/or materials were furnished, 2) to the party sought to be charged, 3) which were accepted by the party sought to be charged, and 4) under such circumstances as reasonably notified the recipient that the plaintiff, in performing, expected to be paid by the recipient." Id. However, the summary judgment evidence establishes the existence of a contract between the parties. In general, recovery under quantum meruit is limited to only when there is no express contract covering the services or materials furnished. Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex.1990)Academy Corp. v. Interior Buildout & Turnkey Constr., Inc., 21 S.W.3d 732, 741 (Tex.App.-Houston [14th Dist.] 2000, no pet.). Because the summary judgment evidence established the existence of a contract as a matter of law, Citibank cannot recover under the theory of quantum meruit.

Third, Citibank failed to prove the amount due based on the breach of contract argument.[2] Although Tully's affidavit 217*217 failed to raise a fact issue,[3] Citibank failed to prove it was entitled to summary judgment. Specifically, Citibank failed to prove that the interest rate charged was agreed on by Tully.[4] The contract introduced into evidence does not specify the interest rate that was agreed on. Further, there were no notices of interest rate increases introduced into evidence. The only evidence concerning the rate of interest are the rates specified on the copies of the monthly statements Citibank sent to Tully.[5] Citibank failed to prove its damages as a matter of law. Because a genuine issue of material fact issue exists concerning the interest rates agreed on, the trial court erred in granting summary judgment.
When a trial court's order granting summary judgment does not specify the ground or grounds relied on for the ruling, summary judgment will be affirmed on appeal if any of the theories advanced are meritorious. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex.1993). Citibank, though, failed to prove it was entitled to summary judgment concerning any of the three theories advanced in its motion for summary judgment. A credit card debt is not a sworn account. Since the summary judgment evidence proved the existence of a contract, Citibank was not entitled to collect on its quantum meruit theory. Because Citibank failed to prove Tully agreed to the interest rates Citibank charged, Citibank failed to prove 218*218 its amount of damages under the breach of contract theory. We sustain Tully's first point of error. We decline to address the remaining arguments advanced by Tully because the above arguments are dispositive.

2) Citibank Failed To Disprove Tully's Counterclaim

In his second point of error, Tully argues Citibank failed to prove that his counterclaim was pre-empted or otherwise invalid. Tully argues the interest charged was usurious under Texas law. In the alternative, Tully argues Citibank has failed to prove that the interest charged is authorized by South Dakota Law.
Tully argues that, under Texas law, a charge of interest in excess of ten percent is in most cases considered usurious.[6] However, the National Bank Act pre-empts state usury laws. Marquette Nat'l Bank v. First Omaha Serv. Corp., 439 U.S. 299, 313, 99 S.Ct. 540, 58 L.Ed.2d 534 (1978)see Smiley v. Citibank, 517 U.S. 735, 744, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996) (holding that late fees were interest under the National Bank Act). The National Bank Act provides that national banks may charge interest "at the rate allowed by the laws of the State ... where the bank is located, or...."[7] Assuming that Citibank is a national bank located in South Dakota,[8] Citibank has proven as a matter of law that Texas usury law is pre-empted and that it may charge interest at the rate authorized by South Dakota.

However, merely proving that Texas usury laws are pre-empted by federal law does not establish that the charges were authorized. Tully's counterclaim was not limited to Texas usury laws; the counterclaim was that the interest rates were not authorized. If Texas usury laws are pre-empted, Tully argues Citibank has failed to prove that the interest rates are authorized under South Dakota law. Although Citibank did not respond to this argument on appeal, Citibank argued to the trial court that Section 54-3-1.1 of the South Dakota Codified Laws authorized the interest in this case. Section 54-3-1.1 of the South Dakota Codified Laws provides as follows:
Unless a maximum interest rate or charge is specifically established elsewhere in the code, there is no maximum interest rate or charge, or usury rate restriction between or among persons, corporations, limited liability companies, 219*219 estates, fiduciaries, associations, or any other entities if they establish the interest rate or charge by written agreement. A written agreement includes the contract created by § 54-11-9.
S.D. CODIFIED LAWS § 54-3-1.1 (2005). Even if no other maximum rate is established elsewhere in the laws of South Dakota, Citibank has failed to show that the interest rate is authorized. Section 54-3-1.1 only applies if the parties "establish the interest rate or charge by written agreement." Id. The summary judgment evidence lacks any evidence as to the interest rate authorized by the credit card contract. The contract introduced into evidence does not specify the interest rate that was agreed on.[9] There were no notices of interest rate increases introduced into evidence. When no interest rate is provided in the agreement, South Dakota law limits the maximum interest rate to considerably less than the rates charged by Citibank. See S.D. CODIFIED LAWS §§ 51A-12-13, 54-3-4, 54-3-5 (2005). We note that a credit card issuer may change the terms of the card agreement on sufficient written notice to the cardholder. S.D. CODIFIED LAWS § 54-11-10 (2005). The summary judgment evidence, though, contains no written notices specifying the interest rates other than the copies of the statements. There are genuine issues of material fact concerning whether the interest rates Citibank charged Tully are authorized by South Dakota law.

Because Citibank failed to prove the contractual interest rate, Citibank has failed to prove it was entitled to summary judgment. We sustain Tully's second point of error. Because we find the above issue dispositive, we decline to address Tully's remaining arguments contained in his second point of error.

3) The Trial Court Erred in Awarding Unconditional Appellate Attorney's Fees

In his third point of error, Tully argues the trial court erred in not conditioning the award of attorney's fees in the event of an appeal on the success of that appeal. An award for attorney's fees should be conditioned on a successful appeal. Westech Eng'g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 205 (Tex.App.-Austin 1992, no writ). While the award of attorney's fees being conditioned on a successful appeal is probably implied in the trial court's judgment, we reform the judgment to reflect that Citibank is only eligible to receive attorney's fees if the appeal is successful. See J.C. Penney Life Ins. Co. v. Heinrich, 32 S.W.3d 280, 290 (Tex.App.-San Antonio 2000, pet. denied).

4) Conclusion

Because Citibank failed to prove the contractual amount of the interest, Citibank failed to prove there were no genuine issues of material fact concerning the amount of its damages or concerning whether the interest rates charged were authorized under South Dakota law. Therefore, the trial court erred in granting summary judgment. We reform the trial court's judgment to condition the award of attorney's fees on the success of the appeal. Because we have held that the trial court erred in granting the summary judgment, Citibank is not eligible to receive attorney's fees for this unsuccessful appeal.
220*220 We reverse and remand this case to the trial court for further proceedings consistent with this opinion.

[1] The interest rates charged vary dramatically among the statements introduced into evidence. Most of the statements reflect interest around twenty-five percent. For a couple of the statements, the interest approached seventy percent—possibly due to transaction, late, or other fees. Late fees are considered interest under South Dakota Law. S.D. CODIFIED LAWS § 51A-12-13 (2005).
[2] We note that Tully argues Citibank failed to plead breach of contract. The sufficiency of the pleadings is judged based on whether they provide the opponent with fair and adequate notice. Roark v. Allen, 633 S.W.2d 804, 809-10 (Tex.1982)see Southwestern Bell Tel. Co. v. Garza, 164 S.W.3d 607 (Tex.2004). "Fair notice" requires that "an opposing attorney of reasonable competence" can ascertain the nature and basic issues of the controversy. City of Alamo v. Casas, 960 S.W.2d 240, 251 (Tex.App.-Corpus Christi 1997, pet. denied)Daniels v. Conrad, 331 S.W.2d 411, 415 (Tex.Civ. App.-Dallas 1959, writ ref'd n.r.e.). Citibank pled in its petition that the suit was based on a credit card debt. More specifically, Citibank alleged that Tully "defaulted in making the payments required by the terms of the Card Agreement. Due to Defendant's breach of the terms of the agreement...." Liberally construed, the pleading gives fair notice that Citibank was pleading a cause of action for breach of contract.
[3] Tully contends that, at a minimum, his affidavit raises a fact issue. However, the affidavit filed by Tully was conclusory and failed to allege specific facts of a nature that could be effectively countered by Citibank. See Chhim v. Univ. of Houston, 76 S.W.3d 210, 216 (Tex. App.-Texarkana 2002, pet. denied)Haynes v. City of Beaumont, 35 S.W.3d 166, 178 (Tex. App.-Texarkana 2000, no pet.)Rizkallah v. Conner, 952 S.W.2d 580, 587 (Tex.App.-Houston [1st Dist.] 1997, no pet.).
[4] Tully argues on appeal that a genuine issue of material fact exists regarding the amount Tully owes Citibank under the contract. We note that Tully did not specifically argue that Citibank failed to prove the interest rate. However, Tully did argue to the trial court and in its second point of error that the interest was not authorized. Briefs are to be construed liberally. TEX.R.App. P. 38.9. This issue is intertwined with the second point of error concerning the counterclaim and necessarily applicable to the breach of contract claim. Further, Tully alleged a general point of error. Tully's first point of error states: Citibank cannot sue Tully for a credit card debt in a suit on a sworn account, and may not recover from Tully under any of the alternative theories it now advances. Under the Malooly rule, set out in Malooly Brothers, Inc. v. Napier, 461 S.W.2d 119 (Tex.1970), a point of error stating generally that the trial court erred by granting summary judgment authorizes review of all possible grounds of trial court error in granting the summary judgment. Plexchem Int'l, Inc. v. Harris County Appraisal Dist., 922 S.W.2d 930, 930-31 (Tex. 1996) (per curiam)see Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex.1995). In addition, "[t]he statement of an issue or point will be treated as covering every subsidiary question that is fairly included." TEX.R.App. P. 38(e). Because Tully raised a general point of error, the issue of the interest rate elsewhere in his brief, and the issue was raised at the trial court level, error was assigned for our review.
[5] Even if the bills could be construed as notice of a change of the terms of the card agreement, the change could not apply retroactively. Therefore, there would still be a fact issue as to the amount of interest owed.
[6] See TEX. FIN.CODE ANN. § 302.001(b) (Vernon Supp.2004-2005). We note, though, that Texas law may permit interest up to eighteen percent for revolving charge accounts. See TEX. FIN.CODE ANN. § 346.101 (Vernon Supp. 2004-2005).
[7] 12 U.S.C.A. § 85 (West 2001). Although Section 85 provides that, if the state provides no rate, then the interest is limited to the greater of seven percent or one percent in "excess of the discount rate on ninety-day commercial paper," the United States Supreme Court has held that, when a state allows any rate agreed on by the parties to the contract, a rate is still fixed by the state despite the lack of a maximum rate. Daggs v. Phoenix Nat'l Bank, 177 U.S. 549, 555, 20 S.Ct. 732, 44 L.Ed. 882 (1900)see Hiatt v. San Francisco Nat'l Bank, 361 F.2d 504, 507 (9th Cir.1966).
[8] Citibank argues it sufficiently proved that it was a national bank because it cited Smiley, 517 U.S. at 744, 116 S.Ct. 1730, which recognized Citibank as a national bank and because it identified itself as "Citibank (South Dakota), N.A." in its summary judgment affidavit. Only a national bank may use the word "National" in its title. 18 U.S.C.A. § 709 (West Supp.2005). For purposes of this analysis, we will assume that Citibank is a national bank located in South Dakota.

[9] We note that the contract does contain the amount of at least some of the fees charged. 

Friday, December 13, 2013

Filing an Answer to the Creditor's Original Petition in a debt collection lawsuit

Appearance by filing an answer & waiver of citation

What counts as an answer in a debt collection lawsuit and why it is important  

As a matter of due process, a plaintiff must see to it that the defendant is properly served with the lawsuit papers that tell the defendant what he or she is being for, unless the defendant waives service and appears voluntarily. Without proper service (or waiver thereof) the court does not acquire personal jurisdiction over the defendant and cannot enter a valid judgment. Any judgment rendered without jurisdiction is void.

A note on lawsuit lingo: state vs. federal courts in Texas  

In Texas state courts, the plaintiff's first pleading that is used to initiate the collection case against the defendant is called ORIGINAL PETITION rather than ORIGINAL COMPLAINT, and the document that directs the process server or peace officer (constable or sheriff) to serve it on the defendant is called a CITATION rather than a SUMMONS.

In federal court the term "civil action" is standard. In state courts, terms "Cause" (as in Cause Number) "civil case" and "suit" or "lawsuit" are more commonly used. Many courts use the abbreviation C or CV to distinguish civil from criminal cases (CR). CCL stands for Civil Court at Law and CCCL for County Civil Courts at Law in Harris County (because there are many county criminal courts of law also).

Note that in divorce cases, the terms Petitioner and Respondent are used instead of Plaintiff and Defendant. In dissolution-of-marriage cases, the petitioner is the spouse that files first, which may be the husband or the wife. Analogously, the same goes for disputes over child custody (SAPCR) that are not coupled with a divorce.

In debt collection litigation the Plaintiff is always the Creditor, which is why it is appropriate to use Plaintiff and Creditor interchangeably on this blog.

The only exception is when the consumer sues the creditor (or the creditor's attorney) for wrongdoing, such as violation of statutes prohibiting unfair debt collection practices (FDCPA, TDCA, DTPA). Most of those actions, however, are brought in federal court (or removed to federal court), except when such a cause of action is asserted as a counter-claim in a pending collection lawsuit. In that scenario, the defendant will also become a counter-plaintiff.

In a consumer debt collection suit the Defendant is always an individual, but on Amex cards and suits on business debt there will often be two defendants, one of them a business entity. In some of these cases, the individual is sued as a guarantor, rather than as a primary obligor.

Service of Citation by mail? 

A citation may also be served by certified mail, but may not be so served by the plaintiff's attorney directly. It will  have to be done through the clerk, the constable's office, or a private process server. Service by mail is rarely used in debt collection suits; except when it is order in combination with service by posting the lawsuit papers on the defendant's door pursuant to an order for substituted service under Texas Rule of Procedure 106 (Rule 106 Order).

The importance of the Defendant's answer 

Whether or not a lawsuit is answered in writing after the service of citation and original petition has important legal consequences: If the debtor was properly served (usually in person; or, if such service is unsuccessful, by attachment of a copy of the citation and petition pursuant to an order for substituted service at the address that the plaintiff has for the debtor), but does not file an answer, the debt collection attorney may move for a no-answer default judgment for the creditor. A motion for this type of default judgment does not require any proof of liability, and the amount of damages (and attorneys fees, if any are sought) may be established by affidavit. -- > Motion for default judgment;
-- > Affidavit in support of default judgment

But a no-answer default judgment cannot properly be entered against a defendant who has made an appearance in the lawsuit.

Filing an answer prevents default judgment (well, not literally, but at least it provides a valid ground for attacking a default judgment, if one is nevertheless entered). A defendant's ORIGINAL ANSWER may be filed in person or by mail (hard copy) if the defendant is not represented by an attorney, but a pro se defendant may also register to file and serve documents through the Texas eFile system at This will require a credit or debit card to pay service fees and some court costs (if applicable). Attorney are required to efile. Pro se litigants are still allowed to file hard copies. 

Filing an answer counts as an "appearance" in the lawsuit. Making an appearance in person at a hearing or trial in the case may also be sufficient, but the safer thing to do is to file an answer with the court. Why? Because the Plaintiff is not required to let the defendant know of any hearing on a motion for default judgment; should there even be one; nor is the creditor required to send the debtor a copy of the motion for default judgment if the debtor was served, but did not file an answer. Many courts will accept motions for default judgment without the need for an in-court attorney appearance, and will sign them as a matter of course as long as the formal requirements are satisfied. Some courts have a checklist and flag deficiencies. Practices vary. Court staff may call the attorney or make a notation on the online docket sheet, or both. Some judges write denied on the motion without entering a separate order. Such a denial is not a big deal. The creditor's attorney can come back and try to do better. If the case gets dismissed because it has been pending for too long -- DWOPPED, in court jargon -- it can be reinstated upon motion. DWOP stands for dismissal for want of prosecution.

Notice to the defendant must only be given to a defendant who has answered (unless a particular court has a policy that requires it even though the Texas Rules of Civil Procedure do not). The creditor's attorney may still send a notice of hearing, but the judge may grant a default judgment regardless, provided the other requirements for a default judgment are met, which includes a non-military affidavit. -- > When can the court grant a default judgment?

What counts as an answer? 

For pro se defendants, i.e. those who do not have a lawyer to handle their defense, the criteria are quite low. A short letter to the judge may be sufficient as long as it properly identifies the case (by cause number) and includes name, address, and signature, and -- at the minimum -- the words "general denial" or something that indicates that the defendant is not rolling over and playing dead.

The Texas Supreme Court has said that a defendant who timely files a pro se answer by a signed letter that identifies the parties, the case, and the defendant's current address, has sufficiently appeared by answer and deserves notice of any subsequent proceedings in the case.

That said, a letter by a family member of the defendant will likely not be sufficient because a lay person may not represent another person in court. The same goes for appearances in person at trial. This may seem very unfair, especially when the family member has more education than the defendant, or just wants to be helpful, but neither the Supreme Court, nor the Texas Legislature, has seen fit to change the rule, at least not in county court and district courts (there is now an exception for JP court).

The rules would require the defendant's answer or letter to be sent to the attorney for the creditor also (at the address shown on the petition). If that was not done, the creditor may move for default judgment unawares that an answer is on file; but the fact that the defendant has answered should preclude default judgment even if the creditor's attorney did not know about it. It still happens, but when it happens there is good cause for the default judgment to be set aside.

The judge, trial coordinator, or the clerk of the particular court, will typically examine the file to check whether or not an answer is on file. Some counties even have a system in place that involves a default judgment check-list on which all items must be satisfied and are checked off before a motion for default judgment will go to the judge (or a judge sitting by assignment) for signing. But many courts that hear routine collection cases are very busy, and there will be oversights, slip-ups, and all sorts of errors.

Unnecessary admissions in the defendant's answer 

Some pro se defendants make the mistake of making admissions in their answer, elaborate on their dire financial circumstances, and plead for mercy. Trial court judges will generally ignore the sob stories, assuming they even read the defendant's letter. Why? Because the sob stories are not relevant, at least not at the default judgment stage. What counts at that point is whether a paper signed by the defendant is on file or not. The content is generally of marginal importance. But if the defendant makes admissions on elements on which the Plaintiff's has the burden of proof, the creditor's attorney may used the admissions later as a substitute for proof of its own. -- > Judicial admissions in pleadings.

The content of the debtor's responsive pleading -- the DEFENDANT'S ORIGINAL ANSWER -- will also acquire importance if the defendant hires an attorney, or wants to counter the plaintiff's claim with an affirmative defense, such as time-bar under the four-year statute of limitations for debt claims (6 years for some promissory notes). If they defendant has already filed a narrative answer, the attorney coming into the case will file something, most likely an AMENDED ORIGINAL ANSWER that replaces the first one (not literally, but in terms of what counts as "the live pleading"). Some consumer debt defense attorneys merely file a general denial answer with one or two affirmative defenses briefly stated (such as the "applicable statute of limitations"); other include a whole litany of them, and some set forth more specific arguments why the creditor should not prevail, supported with citations to case law.

If a defendant wises up in time and realizes he has helped the creditor with admission in a filing with the court, he can also amend the ORIGINAL ANSWER as long as the amendment deadline has not yet passed either under the rules or under a case-specific docket control order. The general deadline is seven days before trial, but that also applies to motions for summary judgment regardless of whether or  not a trial date is set for a later time. Once the deadline has passed, leave of court must be obtained to amend pleadings, and if a judgment has already been granted, it is too late to amend. In that Johnny-come-late scenario, the Defendant would have to file a post-judgment motion, such as a motion for new trial.

Creditor's burden to prove case and Defendant's affirmative defenses 

Plaintiffs, including Creditors, must prove their case. The burden is on them, but to defend the case based on other reasons or circumstances, such as the contention that the debt is stale and no longer actionable under that statute of limitations (generally four years, in Texas) must be properly raised by the Defendant. If not, they are waived.

Affirmative defenses must be pleaded. As with a the "general denial," a short reference to the name of the affirmative defense will generally be sufficient; e.g. Plaintiff's claim is time-barred; or Defendant pleads the following affirmative defenses: statute of limitations; lack of capacity to sue, mandatory arbitration clause, etc....

Some defenses, however, require a sworn denial. The circumstance in which the need for a verified denial arises are rare (at least in credit card debt suits) and are not discussed here. -- > Verified denials; matter that require a sworn denial. --> Sworn account suit under rule 185.

Effect of filing an answer 

Under Rule 121, an answer constitutes an appearance of the defendant so as to dispense with the necessity for the issuance or service of citation upon him.” Tex. R. Civ. P. 121. Thus, if the defendant files an answer after finding a note from a process server on the door knob or somewhere in the vicinity but the citation is never actually served in person, such service is no longer required to bring the defendant before the court. The process server still has a duty to try to serve it because that is her job, but it will not matter whether she is successful or not. The defendant will have no valid complaint about not actually having been served with the citation because that would no longer be necessary. This problem sometimes comes up when the defendant hires an attorney and then relies on the attorney to handle the lawsuit. The attorney may file an answer before the defendant is served in person, and may not be aware that the defendant is served with lawsuit papers that include requests for admissions, which then may go unanswered. --> Requests for admissions and the deemed admissions problem.

Even if a general denial can be filed without having seen the pleading, the defendant will still want to know what is alleged in the petition and how much money is being sought from them. Luckily, many courts provide online access to court records in addition to docket information. Some require registration for a free account (e.g., Harris County); others do not (e.g. Galveston County, Fort Bend County, Dallas County. In some court systems it is also possible to purchase certified or uncertified copies online; others require that a request be submitted to the clerk for processing.

Efiling involves a different system and serves a different purpose. The eFiling system provides on-line access to courts (through the clerks) for submitting documents and receiving them, rather than for looking up documents passively.

How specific does the answer have to be? 

In Texas state courts, unlike federal district courts, the defendant does not have to respond to the allegations in the plaintiff's pleading point by point (and many collection lawyers don't provide many details to begin with, although there are exceptions). A GENERAL DENIAL will put all of the Plaintiff's allegations in issue, and only certain matters need to be raised expressly, a topic that goes beyond a general introduction to collection lawsuits.  -- > affirmative defenses must be pleaded; -- > conditions precedent and specific denials.

Effect of a General Denial 

A general denial is just that: a general denial of what the plaintiff has alleged in its petition. It constitutes a summary denial of each factual allegation and theory of recovery asserted by the plaintiff, accomplished with no more than two "magic" words. The effect of asserting a "general denial" is to require the plaintiff to prove its claim.

Pleadings are generally not evidence. Therefore, the creditor cannot be granted a judgment on the pleadings alone.

There are two exceptions to the rule that pleadings are just pleadings, however: (1) No-answer default judgment after proper service on the defendant; and (2) a properly pleaded Sworn Account Suit under Rule 185 that has not been neutralized with a verified denial. Verified in this context means sworn to.

Judgment on the Pleadings only? 

As for the first exception, the Creditor's unanswered and therefore uncontested pleadings only provide a basis for the court to find the defendant liable as alleged. That is not enough for a money judgment in a specific lump-sum amount. Even when the defendant has not answered at all, the Creditor must still prove the amount of damages with some evidence, typically in the form of an affidavit with attachments. The fact that a specific dollar figure (or two figures, one for principal and one for accrued interest) was stated in the ORIGINAL PETITION is not enough. That said, may Creditors attach an affidavit and other documents to their original petition to meet the requirement to prove the amount of the alleged damages (which would otherwise be considered unliquidated) at the point of inception.
As for the second exception, it no longer comes up much in collection suits on bank debt. Generally, a sworn account suit can only be brought by a "creditor" who sold goods or provided services. The  latter category includes attorneys that sue their clients for unpaid legal fees. It does not include a financial institution that made a loan or extended credit otherwise. The use of the loan proceeds or of the credit card for purchases does not entitle the financial institution to sue on sworn account because the goods or services were provided by a third party (merchant), rather than directly by the bank or credit union.

Sworn Account suit not viable for credit card and other bank debt 
A credit card debt suit should not be brought as a sworn account suit under Rule 185 because sworn account is not a proper legal theory for collecting that type of debt through the court system. While such debt collection suits are rarely filed as a sworn accounts any more, it does not mean it will never happen. When it does happen, and when the defendant does not complaint about it, the court may conclude that the error has been waived, assuming the judge even becomes aware of it, which cannot be taken for granted, esp. in courts that are very busy. The same conclusion could possibly be reached on appeal, although it may be worth arguing otherwise if the appeal is from a default judgment, where the pleadings that form the basis for the entry of judgment are scrutinized more thoroughly.
--> Pleading sufficiency and Special Exceptions.

If a default judgment is granted and it is based on a sworn account only, there may are good grounds to attack it based on a defect in the pleadings.

Even a default judgment on an otherwise valid legal theory under Texas law (breach of contract, account stated) may be attacked in a timely regular appeal or in a restricted appeal if the creditor's pleadings was defective, or arguably insufficient to meet the fair notice standard. --> Appeals from Default Judgments, Post-judgment on Default Judgment vs. Restricted Appeal, Bill of Review.


Last revised 12/8/2018