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.

CITE FOR THE OPINION ISSUED BY THE COURT OF APPEALS IN THIS CASE

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,
v.
CITIBANK (SOUTH DAKOTA), N.A., Appellee.

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.

Before MORRISS, C.J., ROSS and CARTER, JJ.

OPINION

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. 

Wells Fargo Bank lawsuits on credit cards in Texas courts

ORIGINAL CREDITOR PROFILE: 

WELLS FARGO BANK, N.A. 

Wells Fargo Bank, N.A. is a major national bank headquartered in Sioux Falls, South Dakota. It is a prolific litigator in Texas courts. In Harris County, for example, a party search on the district clerk’s website yields more than 3000 cases filed in the county's civil district courts. A large proportion of these, however, are foreclosure cases, and some are garnishment cases that are docketed separately even though they arise from a previous lawsuit. 

This post will focus on credit card debt suit involving cards issued by Wells Fargo Bank, N.A. (“Wells Fargo” or “WFBNA”). It should be noted, however, that Wells Fargo also sues on Personal Loan Agreements, and that those lawsuits have a number of distinct characteristics. For one, the underlying contract and TILA disclosures look different. As is true of other major banks, there are other entities with similar sounding names. See FDIC listing below.    

WELLS FARGO COLLECTS ITS OWN DEBT

Like Discover Bank and American Express, Wells Fargo sues as original creditor to collect money owed on defaulted credit card accounts (rather than selling them off to debt buyers, a practice Chase Bank USA, N.A. is known for). Wells Fargo utilizes one major lawfirm to sue customers in Texas: VINCENT LOPEZ SERAFINO JENEVEIN, P.C. ("VINCENT"). Mark Rechner and Thomas Sellers are the attorneys on the pleadings.

WELLS FARGO CREDIT CARD AGREEMENTS

Wells Fargo cardmember agreements (which the bank calls customer agreements) are extremely verbose. A pro se litigant who appealed an adverse judgment recently complained that she could not make sense of it even though she had a college degree and other people of similar level of education could not understand it either. Card agreements, of course, are written by lawyers for other lawyers, especially the select number of lawyers known as judges. After all, banks want to make sure they win if they are sued by aggravated customers, not to mention hordes of them being rounded up for a class action. Cardmember agreements are carefully drafted, so as to give as much leverage to the creditor, but to also hold up in count. 

Wells Fargo, of course, might disagree, and point to the section of the contract that even offers translated versions in various languages as proof that it is very customer-oriented. -- > Bank documents in Spanish and other foreign languages. 

That said, once a WFB cardmember agreement becomes an exhibit in litigation, it offers a convenience factor that somewhat compensates for the excessive length: the sections are numbered, thus making it easier to reference them, if necessary to support an argument by the defense. Other CMAs, but contrast, are much harder to deal with, and are often not even legible because the font of the fine print is too small, and the quality of the reproduction poor. Chase and HSBC argreements are notorious for this problem. 

Wells Fargo Cardmember Agreement: Two Parts

A standard Wells Fargo credit card contract actually consists of the multiple parts: The cardmember agreement proper, which has the unwieldy title "CONSUMER CREDIT CARD CUSTOMER AGREEMENT & DISCLOSURE STATEMENT VISA® OR MASTERCARD®" (“Customer Agreement”), and an additional credit terms document that contains TILA disclosures and is referred to as "Important Terms Of Your Credit Card Account" (“Terms Document”), which is found on the enclosed letter/card carrier. A third component is also mentioned: any subsequent disclosures, but, depending on the age of the account by the time it went into default, there may not have been any such supplemental change notices. All accounts must have the additional Terms Document, however, because that document contains the credit terms that federal law requires to be set forth in writing when the account is opened, and the Wells Fargo customer agreements do not contain all of the material terms. -- > Truth in Lending Act (TILA) Disclosures 

The division of the contract into two components makes sense. The Customer Agreement is generic and covers a large segment of the customer base (possibly even all of them at a particular point in time), while the Terms Document will vary across the population of customers as it will reflect differential pricing (higher or lower interest rates and other terms) for individual segments reflecting different cardholders' creditworthiness and credit utilization patterns. The industry calls this risk-based pricing, but risk-management is not the only reason. Banks want to maximize profits by charging interest rates as high as the market (customers) will bear.   

What happened with the Terms Document? (TILA Disclosures)

The first paragraph of the Customer Agreement incorporates the Terms Document by reference, but the Terms Document itself is typically omitted when Wells Fargo moves for summary judgment. Counsel for the Defendant may thus want to point out to the court that the plaintiff has failed to prove up the essential terms of the contract, and cite the Williams v. Unifund case in support. The argument may not always carry the day, but it is legally sound under existing case law, and worth making. 

Choice of law: SD

Although Wells Fargo Bank is associated with the West Coast, the contractual choice of law in its Customer Agreements is South Dakota. WFBNA moved its headquarters from SAN FRANCISCO, CA to SIOUX FALLS, SD in 2004. Other Wells Fargo entities are located elsewhere, including one in Texas. See FDIC list at the bottom of this page. The reason major national banks choose South Dakota is the favorable legal climate there: No limits on interest rates that may be contracted for. Citicorp, based in New York, did the same thing, and is running its credit card operation out of South Dakota through Citibank, N.A., and previously Citibank (South Dakota) N.A..  

The Wells Fargo choice-of-law paragraph states as follows: 

This Agreement and your account, as well as our rights and duties and your rights and duties regarding this Agreement and your account, will be governed by and interpreted in accordance with the laws of the United States and, to the extent applicable, the law of the State of South Dakota, regardless of where you reside or use your account at any time.

Arbitration clauses 

Wells Fargo credit card agreements contain arbitration provisions for arbitration under the FAA, though South Dakota law is also mentioned. Under the terms of the arbitration agreement, either the customer or the bank may submit a dispute to binding arbitration at any time notwithstanding that a lawsuit or other proceeding has been previously commenced. 

This clause allows WFBNA to opt for arbitration when the customer answers the debt suit with a counterclaim; or to quash a lawsuit when sued by a consumer independently, but it also allows the cardholder to assert the arbitration provisions as a defense in a debt collection suit brought by the bank against him or her.  -- > Invoking arbitration agreement whensued for credit card debt. 

This is what a typical arb agreement looks like:

Billing Disputes

Disputes about charges on account statements are handled through Wells Fargo Card Service with a PO address in Des Moines, Iowa.

Payments, however, must be sent to a different address for the same entity in Los Angeles, California.

 

TYPICAL ORIGINAL PETITION IN A WELLS FARGO SUIT ON CREDIT CARD ACCOUNT

In Texas, debt collection suits involving Wells Fargo credit card accounts are filed by VINCENT LOPEZ SERAFINO JENEVEIN, P.C., a lawfirm based in Dallas.

The standard VINCENT pleading typically ignores the choice-of-law issue, and invokes theories of recovery which are not even viable for collection of a credit card debt (which requires written credit terms under federal and state laws regulating the banking sector). 
  
Those theories are unjust enrichment and money had and received, but Wells Fargo's attorney does not move for summary judgment on those theories. Therefore; it is not worth complaining about them.  -- > equitable theories; -- > express contract preclusion of equitable claims; -- > special exceptions to challenge the opponent's pleadings

Legal fees in addition to the amount claimed as due on the account 

Attorney’s fees are typically also requested in petitions filed by VINCENT, based on a Texas statute, rather than a South Dakota one. The amount sought in the trial courts is typically moderate (less than $1,000), but much higher contingent attorney’s fees are requested should the consumer unsuccessfully appeal an adverse judgment ($5000 for each level of appeal). -- > Comparison of attorney fees claims in debt collection suits 

SUMMARY JUDGMENT MOTIONS FILED IN WELLS FARGO CREDIT CARD ACTIONS

WFBNA attorney Mark Rechner of VINCENT LOPEZ SERAFINO JENEVEIN, P.C., typically moves for summary judgment with an affidavit of a Wells Fargo representative located in Iowa (e.g., Jessica Rogers, Melissa J. Blair,Mandy E.L. Wagner); a copy of a CONSUMER CREDIT CARD CUSTOMER AGREEMENT & DISCLOSURES STATEMENT (see description above); and a few monthly account statements. There is no bill of sale as they appear in suits by assignees such as Midland Funding, LLC or CACH, LLC because WFBNA sues itself as original creditor on defaulted accounts (although there are exceptions). -- > Lawsuits by assignees on Wells Fargo bank debt 

The affidavit, which also functions as a business records affidavit, will normally recite the date of account creation, but the Customer Agreement will typically be of much more recent vintage (e.g., 2010). Typically, the TILA Disclosure document (the Terms Document as discussed above) will not be attached as a summary judgment exhibit even though the Customer Agreement states that it is part of the customer's contract with Wells Fargo Bank and is referenced numerous times in the small print.   

Unlike final account statements from Target NB, Capital One, and Citibank, the last Wells Fargo account statement will typically not reflect acceleration of maturity; i.e. it will show an amount due on a date a few weeks after the end of the current billing cycle that is significantly less than the amount of the revolving balance (or it may show chargeoff without prior acceleration of maturity and zero balance). Additionally, the last statement will show how much of the minimum payment amount represents the past-due amount.

If the last monthly statement is deemed admissible for the truth of what is expressly set forth on it (based on the business records affidavit), it would not support the proposition that payment was due in full. If the affiant testifies otherwise, the conflict in the evidence should preclude summary judgment, in addition to raising an issue of credibility. Wells Fargo's counsel may argue in reply that the card agreement authorizes acceleration (with reference to paragraph 25 titled "DEFAULT / IMMEDIATE REPAYMENT OF BALANCE IN FULL"), but even if the contractual basis for this lender remedy is established, the conflict in the evidence should still preclude resolution of the case by summary disposition. The last statement would only support a claim for the past-due portion of the minimum payment amount as damages caused by breach consisting in cessation of monthly payments by the cardholder. 

Additionally, if there is no showing of acceleration of maturity prior to the lawsuit, defendant's counsel may assert that the presentment requirement has not been satisfied for attorney fee purposes under Chapter 38 of the Civil Practice and Remedies Code. This issue should be raised in the answer (or amended pleading) in the form of a specific denial that Plaintiff has met the conditions precedent for fee recovery.

LINKS TO PROFILES OF OTHER MAJOR CARD ISSUERS AS PLAINTIFFS

American Express debt collection suits in Texas courts

Credit card debt suits by Discover Bank

Capital One Bank suing Texas customers on defaulted credit cards

FIA Card Services N.A. suing on Bank of America credit cards 

TD Bank now bringing debt collection suits on defaulted Target credit card accounts  

FINANCIAL INSTITUTION ENTITY INFORMATION FROM OCC AND FDIC 

Wells Fargo entities listed on FDIC web site

Wells Fargo Bank, National Association: Institutional History

Wells Fargo Bank listing on the Comptroller's National Bank List
OCC website (November 2013 version)

Target Credit Card Accounts in Texas Court (now owned by TD Bank)

  
TARGET CREDIT CARD DEBT SUITS
   
UPDATE: Target National Bank does not exist any more. It was closed and liquidated  March 13, 2013. Its portfolio of credit card accounts was acquired by TD BANK.

WHO ISSUED THE TARGET CHARGE CARD? 

This may sound like a silly question, but the fine print on the customer agreement will likely prove otherwise.

Credit card debt suits involving Target cards come in several varieties, with different entities as plaintiffs. Even when Target sues as original creditor, it is not Target Corporation that's doing it. The credit operations are run through an affiliated bank. While lawsuits have typically been brought by Target National Bank ("Target NB"), sometimes a closer look at the documentation will reveal that the cardmember agreement offered as a summary judgment exhibit (or at trial) identifies the card issuer as Retailers National Bank even though the title of the document makes reference to Target. The attorney for Target NA often does not come forth with proof that the two are one and the same, or that the entity named as the Plaintiff is the successor in interest of Retailers National Bank. Arguably, this constitutes a gap in the chain of ownership or raises a fact issue as to the identity of the original creditor. In addition to litigation brought by Target National Bank itself, debt suits on Target cards are also filed by TD Bank USA, N.A. as successor. The latter's home state is Delaware.

LAW FIRMS SUING ON TARGET CREDIT CARDS IN TEXAS  

Many debt collection suits on Target credit card accounts are brought by a law firm with the unwieldy name RAUSCH, STURM, ISRAEL, ENERSON & HORNIK, LLC ("RSIEH"). The name was even too long to be deemed suitable for a domain name. The debt collection firm's web address thus uses the acronym: www.rsieh.com.

RSIEH has as many as nine Texas-licensed attorneys listed below the signature line on its filings. It represents both Target National Bank and TB Bank USA, N.A. (and other creditors, such as CITIBANK, N.A.). When it sues for TB Bank, its summary judgment evidence typically includes a copy of the ASSIGNMENT AND ASSUMPTION AGREEMENT that governs the transfer of accounts. That agreement lists three Target entities as involved parties: TARGET CORPORATION as the Parent and Depositor, TARGET RECEIVABLES, LLC as a Seller, and TARGET NATIONAL BANK, as a Seller and Depositee.

RSIEH typically does not seek attorney's fees in addition to the amount of the debt and costs of suit (filing fees and cost of service of process).

TARGET CREDIT CARD AGREEMENTS AND TERMS 

Target credit card agreements are typically much shorter than other such form contracts (often only 2 pages with 3 columns each). They also differ from those of most other major card issuers in that they do not contain arbitration clauses, meaning that arbitrability is not an issue and cannot be invoked as a defense to litigation. The form agreements do, however, contain a choice of law clause stating that the agreement is governed by federal and South Dakota law.

A number of credit card issuers chose South Dakota as the relevant jurisdiction for regulatory reasons. Interest rates are not capped by usury laws in that state as long as whatever rate is charged is contractually authorized. Citibank is another major credit card issuer that located its credit card arm CITIBANK (SOUTH DAKOTA), N.A., there.

Copies of Target card agreements offered as summary judgments contain contract verbiage in fine print and are not always legible.

Target cards typically have variable interest rates for two types of balances: Purchases and Cash Advances. The APRs are shown as variable with the letter V in parenthesis. The late fee is $35.00 and a warning about this fee as a consequence of not making timely payments appears on monthly billing statements.

TARGET CREDIT CARD STATEMENTS 

In litigated cases, the account documentation submitted by Target (or on its behalf) typically reveals a key difference. Target routinely accelerates the maturity of the revolving balance on the last statement sent to the card holder. As a result, the amount shown as the minimum required payment on the last account statement ("Minimum Payment Due") matches the amount of the outstanding debt, i.e. the revolving balance. Therefore motions for summary judgment by Target containing such a final statement cannot be fought on the ground that the account documentation does not show that the amount sued for was actually due for payment in full. At best, it could be argued that contractual authorization to exercise the acceleration remedy has not been shown (if either the card agreement itself is not in the record or if there is insufficient proof of the Defendant's liability under the version attached as a summary judgment exhibit).

Unlike some other creditor (e.g. Discover Bank, Citibank) Target does not use a servicer entity to process payments. The billing statements issued for customers in Texas include payment coupons with an address for TARGET NATIONAL BANK either in Minneapolis, Minnesota or in Dallas, TX. The billing statements identify Target National Bank as an affiliate of Target Stores and requires checks to be made payable to Target National Bank.

Related topics: Cases involving Target accounts in Texas Court of Appeals

Contract-formation without signature under South Dakota, Texas, and Utah law

Credit Card Agreements as Contracts of Adhesion 

CONTRACT FORMATION UNDER FEDERAL LAW, TEXAS LAW, SOUTH DAKOTA LAW, AND UTAH  LAW 

Under federal law, the issuance of a credit card constitutes a credit offer, and the use of the card constitutes acceptance. Jones v. Citibank.

Under Texas law, if one party signs a contract, the other may accept by his acts, conduct, or acquiescence to the terms of the contract, making it binding on both parties. Id.; see also Benser v. Citibank (S.D.), N.A.,  (concluding appellant's use of credit card and payments to account showed he understood obligation to bank and contract had been formed).

Under South Dakota law the use of an accepted credit card or the issuance of a credit card agreement and the expiration of thirty days from the date of issuance without written notice from a card holder to cancel creates a binding contract.

But in Utah, the law governing entry into and enforceability of loan contracts and credit card agreements differs.

Utah has a general statute of frauds that requires loan contracts to be in writing and signed by the party to be charged. The statute does provide for a credit card exception, but for a creditor to take advantage of this exception, certain conditions have to be met.

To be enforceable under the Utah statute of frauds, the credit terms must still be in writing (thus precluding oral contracts); the document containing them must have been provided to the defendant; and the document must expressly state that the terms become effective upon use of the card or other form of account utilization. The credit card exception essentially codified contract-formation under common-law principles applicable to contract that are not signed, and are thus not executed in the traditional sense of the term. But it is also more exacting, which has implications for the creditor’s burden of proof in debt collection litigation.

When a lender or its assignee sues, it must prove up the contract language to show that it met the statutory mandate; it must prove that the card agreement was mailed or otherwise furnished to the defendant, and that the defendant utilized the account to incur debt after receiving the agreement.

Thus, under Utah law – contrary to South Dakota law – the contract does not go into effect automatically if the Defendant does not immediately use the credit card or incur debt on the account by other means.

If the credit card debt plaintiff only produces the final account statement, and that statement does not reflect any charges, and also does not reveal the origin of the revolving balance, it should be insufficient to meet the Plaintiff’s burden of proof in two respects: (1) it does not amount to evidence of card use or account use for purchases or cash advances and therefore fails to satisfy the Plaintiff’s burden with regard to the credit card exception in the statute of frauds; and (2) the statement is conclusory because it does not substantiate the derivation of the final balance (or how much of it represents interest and principal, respectively).