Consumer Contracts at the Back-End: A Different Perspective on the (draft) Restatement of Consumer Law from Texas

CONSUMER CONTRACTS DON'T MATTER WHEN APPELLATE COURTS CREATE  CASELAW TO ALLOW CIRCUMVENTION 

Much of the discussion about the state of American consumer law, including the ongoing controversy over the Restatement of the Law of Consumer Contracts, and its reliance on quantitative surveys of caselaw of questionable quality, center on issues surrounding consumer contracts at the front end:

Questions such as the manner in which a contract is formed in the first instance, and how terms are later modified; whether the specific terms applicable to the transaction are disclosed to the consumer in a meaningful and understandable manner; and whether they are excessively one-sided, oppressive, or unconscionable.

CONSUMERS AS CLAIMANTS (PLAINTIFFS)

One major underlying concern is that consumers’ ability to bring claims against businesses may be jeopardized, that the scope of rights a consumer has under such a contract may be unduly limited, such as through mandatory arbitration and class-action waiver clauses, and that consumers may be prevented from vindicating their rights—including statutory rights that come into play based on the nature of the transaction--in an effective manner.

A related issue is whether consumer contracts are drafted to effectively preclude relief that could otherwise be obtained through class actions. This is obviously of great importance in instances of large-scale wrongful business conduct where the value of each claim any single consumer might have is too small to make it economically feasible to bring such claim in an individual action.

CONSUMER CONTRACTS AT THE BACK END – WHEN CONSUMERS BECOME LAWSUIT TARGETS 

Much more, however, is at stake for individuals at the back-end, when the business has a claim against a consumer, and takes the consumer to court.

And that’s where consumer contracts matter too. At least in theory.

A debt collection claim is, in essence, a breach of contract claim because the creditor’s complaint is that the consumer has defaulted, i.e. has not made periodic payments as promised, which takes two basic forms: (1) a failure to make regular installment payments as they become due under the amortization schedule of a retail installment contract or (2) a failure to make monthly minimum payments computed based on a formula contained an agreement governing open-end credit such as a credit card account. In the latter case, the minimum payment will typically consist of a percentage of the revolving balance and current finance charges, which may include other charges (such as a late fee or over-limit fee) in addition to the newly accrued interest and any past-due amount.

To prove such a breach-of-contract claim under Texas common law, a plaintiff must adduce sufficient evidence on a several essential elements: (1) a valid contract, (2) performance by the plaintiff or tender of performance, (3) breach by the defendant, and (4) damages caused by breach.

In order to obtain a judgment against a consumer, a creditor would, under long-standing caselaw, have to produce competent evidence on each element. If the creditor fails to do so, or if the proffered evidence is of questionable quality and therefore subject to evidentiary objections and exclusion, the consumer may have a viable defense to the lawsuit.

The reality, however, is different. At least in Texas, appellate courts have made it much easier for creditors to obtain judgments against former customers by relaxing conventional proof requirements in debt collection cases, and by allowing creditors to avoid the proof requirements applicable to a  breach-of-contract claim altogether, thus rendering the contract, and whatever terms it may contain, immaterial. 

CIRCUMVENTION OF PROOF REQUIREMENTS APPLICABLE TO BREACH OF CONTRACT

Starting in 2008 with an opinion issued by the Dallas Court of Appeals, Texas courts have allowed creditors to circumvent the proof requirements of a breach-of-contract claim by bringing the collection action as a common-law “account stated” claim instead, or in the alternative. See Dulong v. Citibank (South Dakota), N.A., 261 S.W.3d 890, 893 (Tex.App.-Dallas 2008, no pet.).  

"ACCOUNT STATED" ADAPTED FOR CREDIT CARD DEBT COLLECTION IN TEXAS 

  

When a creditor proceeds on an account-stated theory, it no longer has to provide even a copy of a boilerplate credit card agreement. Credit card statements alone will do.
See à The Account Stated Theory and the lowering of proof requirements in credit card debt collection cases; -->  Resurrection of account-stated for credit card debt collection in Texas.

Also see: Emanuel J. Turnbull, Account Stated Resurrected: The Fiction of Implied Assent in Consumer Debt Collection, 38 VT. L. REV. 339, 340 (2013) 

Several other courts of appeals have jumped on the bandwagon without re-examining the validity of the suit-on-account theory for collection of a bank debt that does not involve sale of goods or services, thus lowering the proof requirements for credit card debt plaintiffs, and depriving the defendants of any benefits that might accrue from the existence of a written contract. See, e.g., McFarland v. Citibank (S.D.), N.A., 293 S.W.3d 759, 764 (Tex. App.-Waco 2009, no pet.) ("Thus, we join our sister courts in holding that account stated, and not a suit on a sworn account, is a proper cause of action for a credit card collection suit because no title to personal property or services passes from the bank to the credit card holder."); Jaramillo v. Portfolio Acquisitions, LLC, No. 14-08-00939-CV, 2010 WL 1197669, at *7 (Tex.App.-Houston [14th Dist.] Mar. 30, 2010, no pet. h.) (mem. op.); Butler v. Hudson & Keyse, L.L.C., No. 14-07-00534-CV, 2009 WL 402329, at *3 (Tex.App.-Houston [14th Dist.] Feb. 19, 2009, no pet.) (mem. op.); also see Houle v. Capital One Bank (USA), NA., No. 08-16-00234-CV (Tex.App.- El Paso, 2018, pet. filed) (affirming summary judgment for credit card bank on two theories).

McFarland v. Citibank (South Dakota), N.A., 293 S.W.3d 759 (Tex.App.-Waco 2009, no pet.) 

  
QUANTUM MERUIT REMEDY ALSO MIS-APPROPRIATED FOR CONSUMER DEBT COLLECTION - FOR THE BENEFIT OF A VULTURE FUND, NO LESS  

One Texas court of appeals has gone so far as to bless quantum meruit as an alternative theory for the collection of a bank debt, even though quantum meruit is an equitable theory and is generally precluded when a contract governs the parties’ relationship because a suit to enforce the contract provides an adequate legal remedy.

In 2008, the Fourteenth Court of Appeals jumped on quantum meruit to accommodate a debt-buyer entity that was at that time a prolific litigant in court all around Texas, but had not adduced sufficient evidence from the original creditor to prevail on its breach-of-contract claim in the case that came before the court. See McElroy v. Unifund CCR Partners, No. 14-07-00661-CV, 2008 WL 4355276 (Tex. App.-Houston [14th Dist.] Aug. 26, 2008, no pet.) (mem. op.).

Quantum meruit generally applies only to claims based on the sale of goods or provision of services not paid for. A bank does not sell goods or services. Instead, it makes its money by charging interest on the extension of credit and on fees paid by merchants that accept their cards. Interest is not compensation of services, and the goods or services charged on a credit card are provided by third parties. These purchases are financed by the bank, rather than the bank acting as seller. The only component of a balance on a credit card account that arguably constitutes compensation for a service provided by the bank to its customer would be an annual membership fee or monthly service charge. But even that is debatable, at least under federal law governing consumer credit, including the federal definition of what constitutes finance charges.  

A memorandum opinion issued by the same Houston-based appellate court in a subsequent credit card collection case brought by a bank (rather than a debt buyer) likened the case to McElroy in that it was undisputed that “there was a credit-card agreement of some kind,” but did not take issue with the blessing of the quantum meruit doctrine for credit card debt collection. See Ayers v. Target Nat'l Bank, No. 14-11-00574-CV, 2012 WL 3043043 (Tex. App.-Houston [14th Dist.] July 26, 2012, no pet.) (mem. op.) (reversing summary judgment granted in favor of bank on breach-of-contract theory).

Ayers’ discussion of McElroy solidifies the conclusion that the quantum meruit claim had been permitted even though the breach-of-contract cause of action was available, and could have been pursued with proper evidence. By affirming the judgment for the creditor in McElrod despite the creditor’s failure to prove up the terms of the underlying credit card agreement, the Fourteenth Court of Appeals essentially condoned and excused the debt buyer’s failure to adduce the requisite type and amount of proof. It blessed the circumvention of those proof requirements through an alternative theory that had--at least until then--been inapposite and unavailable because quantum meruit is an equitable remedy incompatible with the existence of a contract governing the parties’ relationship.

But once a court of appeals makes an error of law, the same court can then defend and repeat the error by treating it as a prior ruling with the force of precedent.

That has not happened with McElroy, but it did happen with the Dulong precedent from Dallas, which has been cited and relied upon numerous times by appellate courts since. Account Stated is routinely pleaded by some creditors in mass litigation in the trial courts. Very few such cases reach the courts of appeals these days. Some banks have also embraced the new opportunity.
Wells Fargo, for example, now pleads an account-stated count in addition to their cause of action for breach of contract.
  

RELAXATION OF PROOF REQUIREMENTS FOR BREACH OF CONTRACT ITSELF 

In addition to providing a work-around when a creditor cannot find a contract as a predicate for a breach-of-contract claim, Texas courts have also lowered the standards that generally apply in contract cases to accommodate credit card issuers and purchasers of charged-off accounts. There is now, in effect, a special interest jurisprudence for the benefit of creditors that has carved out its custom exceptions from general rules of law and procedure.

Many courts no longer hold plaintiffs to the burden of actually having to prove that a boilerplate agreement attached to a summary judgment affidavit is the agreement that was provided to the customer and subsequently accepted by card use. Instead, they consider conclusory affidavit testimony to the effect that “Exhibit A is a true and correct copy of the applicable agreement” sufficient. See, e.g., Houle v. Capital One Bank (USA), NA. No. 08-16-00234-CV (Tex.App.- El Paso, 2018, pet. filed).

One court saw no problem with the fact that the date printed on the generic agreement did not match the date referenced by the affiant as the date of contract-formation by card use, reasoning that the bank had the right to change the terms (as shown on the face of the challenged agreement) and that the defendant accepted the more recent version by continued card use. See Wakefield v. Wells Fargo Bank, N.A., No. 14-12-00686-CV, 2013 Tex. App. LEXIS 14018 (Tex. App.-Houston [14th Dist.]. Nov. 14, 2013, no pet.) (mem. op.).

Affidavit excerpt from Wakefield: Approximate Contract-formation Date 

Although, with the appellate court's help, Wells Fargo defeated the pro se appeal, the bank subsequently changed its affidavit template, which no longer includes the date of card use as a relevant contract-formation fact. See excerpt from a more recent case below:

Excerpt from Wells Fargo affidavit in a recent filing: Date of last payment reported,
but no date for contract formation by card use

CONTRACT-FORMATION PROOF IN DISPUTES OVER ARBITRATION

Interestingly, the contract-formation analysis with respect to notice of terms is much more refined when it comes to acceptance of an arbitration agreements by an employee (by continuing to work after notice) and when the which-version-is-the-controlling-contract issue surfaces in other types of  litigation involving banks and their customers. 

As for formation of an agreement to arbitrate in the employment context, see Kmart Stores of Tex., L.L.C. v. Ramirez, 510 S.W.3d 559, 565 (Tex.App.-El Paso 2016, pet. denied) (where employer provided evidence that employee had logged on to computer and received notice of arbitration agreement, employee bore burden of raising a fact issue contesting formation, which she met by filing a sworn denial of notice); Stagg Restaurants, LLC v.. Serra, No. 04-18-00527-CV (Tex.App.- San Antonio, Feb. 13, 2019, no pet.) (trial court's denial of motion to compel arbitration affirmed in interlocutory appeal where employer failed to prove notice of arbitration provision in occupational injury plan document to employee who later brought work-related injury suit).

Stagg Restaurants, LLC v. Serra, No. 04-18-00527-CV (Tex.App.- San Antonio, Feb. 13, 2019, no pet.) (holding that employer's motion to compel arbitration was properly denied because employer failed to prove that employee was given notice of arbitration provisions within occupational injury plan, and employee swore he had no notice) 

As for different sorts of bank-customer litigation, see In Re Comerica, No. 14-16-00418-CV  (Tex.App.- Houston [14^th Dist.]  Jun. 30, 2016)(concluding that “Comerica has not established that the trial court clearly abused its discretion by ordering Comerica to withdraw its application to arbitrate the claim against it with JAMS because the record contains no evidence that Comerica mailed written notice of the amended Contract and its text to [customers] or that [customers] by some other means agreed to the amended Contract with the arbitration provision.”).

In Re Comerica, No. 14-16-00418-CV  (Tex.App.- Houston [14th Dist.]  Jun. 30, 2016)
(agreement on arbitration not proven)

THIS IS THE CONTRACT THAT APPLIES TO THE DEFENDANT; TAKE MY WORD FOR IT

There are significant differences among major credit card issues on whether the credit card agreement offered as evidence in a collection suit contains any indicia that link it to a specific account or the specific account holder.

American Express used to rely generic agreements like other major card issuers, but years ago switched to a practice of issuing cardholder agreements that are dated, and also contain the name of the account holder (including the name of the business for business cards), the account ending digits, and the type of account. The unique identifying information is printed in the top section of the first page of the cardmember agreement, which consists of two parts. One part sets forth the account-specific pricing terms while the other part contains the standard (invariant) terms that also apply to other cardholders within the same customer segment. Those terms include a Utah choice of law clause and regularly also encompass some form of an arbitration agreement.

Discover Bank’s customer agreements do not contain information identifying accounts by numbers or customers by name, but references the version of the agreement (called “Terms Level”) within the body of the affidavit of its servicer, which is a variable data field in the template along with other case-specific data such as name of cardholder and amount of the outstanding balance for which the Bank seeks judgment.

The Customer Agreements attached by Wells Fargo Bank, by contrast, do not contain any account or customer-specific particulars. Nor does Wells Fargo even attach the “Important Terms of Your Account” document that sets forth the account-specific cost-of-credit disclosures required under the Truth in Lending Act. A number of appellate cases, even from otherwise creditor-friendly courts of appeal, hold that the creditor must prove the cost terms because they are essential contract terms, but adherence to this long-standing rule of law is also eroding.

Texas court of appeals cases that found that proof of credit terms (or derivation of balance, which requires proof of interest) was lacking or insufficient:  

Uribe v. Pharia, LLC, No. 13-13-00551-CV, 2014 WL 3555529 (Tex.App.-Corpus Christi July 17, 2014) (mem. op.) (collecting cases). 

• Williams v. Unifund CCR Partners Assignee of Citibank, 264 S.W.3d 231, 236 (Tex. App.-Houston [1st Dist.] 2008, no pet.)(holding evidence was insufficient to establish the terms of a valid contract as a matter of law where creditor failed to produce actual credit-card agreement or any other document that established the agreed terms, including the applicable interest rate or method for determining finance charges); 
• Tully v. Citibank (S.D.), N.A., 173 S.W.3d 212, 216-17 (Tex. App.-Texarkana 2005, no pet.) (holding evidence insufficient to show interest rate charged was agreed on where the only evidence was the rates specified in monthly statements);  
• Hooper v. Generations Community Federal 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); 
• Colvin v. Tex. Dow Employees Credit Union, No. 01-11-00342-CV, 2012 WL 5544950, at *6 (Tex. App.-Houston [1st Dist.] Nov. 15, 2012, no pet.) (mem. op.) (reversing summary judgment for creditor where creditor failed to offer the original agreement, monthly statements, or other evidence establishing how it calculated its alleged damages); 
• Martin v. Federated Capital Corp., No. 01-12-00116-CV, 2012 WL 4857835, at **2-3 (Tex. App.-Houston [1st Dist.] Oct. 11, 2012, no pet.) (mem. op.) (reversing summary judgment for creditor where creditor's evidence failed to explain how it calculated its damages); 
• Ayers v. Target National Bank, No. 14-11-00574-CV, 2012 WL 3043043, at **2-4 (Tex. App.-Houston [14th Dist.] July 26, 2012, no pet.) (mem. op.) (reversing summary judgment for creditor where creditor failed to present cardholder agreement and a portion of the form language on the credit-card application was illegible and form language was in Spanish); 
• Wande v. Pharia, No. 01-10-00481-CV, 2011 WL 3820774, at *5 (Tex. App.-Houston [1st Dist.] Aug. 25, 2011, no pet.) (mem. op.) (reversing summary judgment for creditor where creditor presented the cardholder agreement but important portions of the agreement were illegible, including a section entitled "Finance Charges," and creditor presented no evidence regarding the calculations it used to arrive at claimed outstanding balance); 
• Jaramillo v. Portfolio Acquisitions, LLC, No. 14-08-00939-CV, 2010 WL 1197669, at **5-6 (Tex. App.-Houston [14th Dist.] March 30, 2010, no pet.) (mem. op.) (holding evidence insufficient to establish a valid contract where card member agreement was entered into evidence, but many of its material terms were missing; "This court and its sister court have drawn a distinction between cases where a card member agreement is entered into evidence and where there is no card member agreement.")  

FUTURE POST: THE LOWERING OF EVIDENTIARY STANDARDS IN CONSUMER DEBT COLLECTION CASES 

[ forthcoming ]

"Money Had and Received" claim in debt suit pleadings

Money Had and Received? - What is that supposed to mean?  

This is an oddly phrased common-law theory that allows a plaintiff to sue for the return of money that was received by someone who was not entitled to it. Like other common-law theories and remedies that are equitable in character, the judicial precedents upon which this legal theory rests do not allow it to be used for collection of a debt that represents money advanced or disbursed as a loan, or credit extended based on a contract or formal agreement.

If pleaded in a credit card debt suit, this theory may therefore be attacked as nonapplicable under the express-contract preclusion of equitable claims.

NATURE OF MONEY HAD AND RECEIVED AS A THEORY OF RECOVERY 
AND ESSENTIAL ELEMENTS THEREOF 

A cause of action for money had and received is not premised on wrongdoing, but looks only to the justice of the case. The critical issue is whether the defendant has received money which rightfully belongs to another. Such an action may be maintained to prevent unjust enrichment when a party obtains money which in equity and good conscience belongs to another. In short, it is an equitable doctrine applied to prevent unjust enrichment.

To prove a claim for money had and received, the plaintiff must show that a defendant holds money which in equity and good conscience belongs to the plaintiff. In defending against such a claim, a defendant may present any facts and raise any defenses that would deny a claimant's right under this theory.
Generally, when a valid, express contract covers the subject matter of the parties' dispute, there can be no recovery under a quasi-contract theory.

The quasi-contractual action for money had and received is a cause of action for a debt not evidenced by a written contract between the parties.

EXPRESS CONTRACT AND CLAIM FOR EQUITABLE RELIEF INCOMPATIBLE 

Because a credit card collection suit is always based on an underlying contract between lender and cardholder that specifies interest rate and other terms, money had and received is not a proper theory of recovery for collection of a debt incurred on a credit card.

That does not mean that debt collection attorneys do not invoke their theory in pleadings

See sample from pleading filed by Mark Rechner, a debt collection attorney with VINCENT LOPEZ SERAFINO JENEVEIN, P.C. in Dallas, in petition on behalf of Wells Fargo Bank NA:

This blawg post on money had and received as a legal theory of recovery in Texas was last modified or updated on March 14, 2014; January 21, 2014.

TEXAS CASELAW CLIP: MONEY-HAD-AND-RECEIVED CLAIM 

Money Had and Received claim under Texas law (caselaw snip)

A money had and received claim is "`equitable in nature'" and "`belongs conceptually to the doctrine of unjust enrichment.'" Fowler v. U.S. Bank Nat'l Ass'n, 2 F. Supp. 3d 965, 983 (S.D. Tex. 2014) (Lake, J.) (quoting Best Buy Co. v. Barrera, 248 S.W.3d 160, 162 (Tex. 2007), and Edwards v. Mid-Continent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex. App.—Dallas 2008, pet. denied)). To establish a claim for money had and received, Bryant must show that the "defendants hold money which in equity and good conscience belongs to him." Id. at 983.

Under Texas law, unjust enrichment "characterizes the result of failing to make restitution or benefits received under circumstances giving rise to an implied or quasi-contract." TransAmerica Natural Gas Corp. v. Finkelstein, 933 S.W.2d 591, 600 (Tex. App.—San Antonio 1996, writ denied). The purpose for the claim is to prevent unconscionable loss to the payor and unjust enrichment to the payee. Bryan v. Citizens Nat'l Bank in Abilene, 628 S.W.2d 761, 763 (Tex. 1982). An unjust enrichment claim "is based on quasi-contract and is unavailable when a valid, express contract governing the subject matter of the dispute exists." Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 454 (5th Cir. 2001) (applying Texas law); see also Finkelstein, 933 S.W.2d at 600.

Unjust Enrichment as a legal theory in collection litigation

UNJUST ENRICHMENT AS A THEORY OF RECOVERY 
   
    Is it a viable cause of action for collection of a debt? 
   
Unjust enrichment seemingly refers to reprehensible and abusive conduct that accrues to someone’s financial advantage, but it is also the name of a legal theory that provides an equitable remedy for it occurrence, either prospectively or retrospectively. The typical remedy is in the form of restitution of the money to which the defendant  -- the party that was "enriched" -- was not entitled.  
    
The unjust enrichment theory is an equitable theory of recovery that is incompatible with a contractual relationship, and therefore not available when the parties’ dispute is governed by an express contract. 

When this theory appears as theory of recovery in a debt collection suit involving a credit card debt, it can and should be attacked on the ground that it does not apply in that context, and is simply not available as a matter of law regardless of the quality of the financial records or any other evidentiary issue.
  
UNJUST ENRICHMENT AS A CAUSE OF ACTION UNDER TEXAS LAW
  
There is some disagreement as to whether unjust enrichment even amounts to a “cause of action” in its own right, -- in the legal sense of the term. What contributes to the confusion is the fact that it rests on prior judicial decisions, and is discussed in connection with other theories such as quantum meruit, which likewise can be said to afford the plaintiff a remedy for unjust enrichment, albeit deriving from the failure to pay for valuable services. In other words, there are other causes of action that share the underlying purpose of preventing unjust enrichment.
 
The Texas courts of appeals' decisions involving claims of unjust enrichment are not consistent. Also see the theory of “money had and received” and quantum meruit.
    
There is another uncertainty also. A lawsuit premised on unjust enrichment may be subject to the two-year limitations period, rather than four-your period that applies to debt claims generally, as well as to quantum meruit. --> Statute of limitations defense.
 
It can be argued, at least in some factual contexts, that the money at issue in an unjust enrichment claim, is not in the nature of a debt, at least not debt as it is normally defined. 
 
Additionally, the theory may not even be viable if asserted independently of any other legal theory, but how this matter gets decided by the trial court may depend on where in the state the case is being litigated.    
  
TEXAS COURT OF APPEALS ARE SPLIT ON VIABILITY OF UNJUST ENRICHMENT THEORY - SUPREME COURT COULD RESOLVE THE CONFLICT, BUT WILL IT?
 
The First Court of Appeals in Houston stated in 2008 that unjust enrichment is a viable legal theory in its own right, but also said that it had not been pleaded in that case. See Pepi Corporation v Galliford, 254 S.W.3d 457 (Tex.App. - Houston [1st Dist.] 2008).

Excerpt from Pepi Corp. v Galliford re unjust enrichment theory

  
In 2014, a litigant in Forth Worth who had renovated and improved a house he believed he owned that the bank later foreclosed on, cited the appellate case from Houston to support his claim against the bank, but the Fort Worth Court of Appeals rejected it, pointing to its own prior decisions on the issue. See Davis v OneWest Bank N.A. No. 02-14-00264-CV. (Tex. App. - Fort Worth, April 9, 2015)(unjust enrichment not an independent cause of action). 

The viability of unjust enrichment as an independent cause of action is now pending in the Texas Supreme Court, a petition for review in the case from Fort Worth having been filed in May 20, 2015. For current status, see Supreme Court docket under No. 15-0381.



Texas Supreme Court asked to decide: Is unjust enrichment an independent cause of action?







The uncertain nature of the unjust enrichment theory, and its inconsistent treatment by the courts of appeals, has attracted the attention of legal scholars also.

See, e.g., George P. Roach, Unjust Enrichment in Texas: Is it a Floor Wax or Dessert Topping?,
65 Baylor Law Review 153 (2013); David Dittfurth, Restitution in Texas: Civil Liability for Unjust Enrichment, 54 S. Tex. L. Rev. 225, 238 (2012).

George P. Roach Law Review Article on Unjust Enrichment Theory under Texas Law
in Baylor Law Review (Table of Contents)

Also see -->  summary of pre-publication version of this paper.

NATURE OF UNJUST ENRICHMENT AND EQUITABLE REMEDY FOR IT 

Unjust enrichment occurs when the person sought to be charged has wrongfully secured a benefit or has passively received one which it would be unconscionable to retain.  A person is unjustly enriched when he obtains such a benefit by fraud, duress, or the taking of an undue advantage. 

The unjust enrichment doctrine applies principles of restitution to disputes where there is no actual contract and is grounded in principles of equity. 

ONE OR THE OTHER: THE EXPRESS CONTRACT DEFENSE 

The doctrine of unjust enrichment applies the principles of restitution to disputes that are not governed by a contract between the parties. Therefore, when a contract addresses the matter at issue, the theory is not available under the general principle that the presence of a contract precludes relief premised on an equitable theory. --> Express contract preclusion of equitable theories and claims  
 
Generally, when a valid, express contract covers the subject matter of the parties' dispute, there can be no recovery under a quasi-contract theory, such as money had and received.  The courts reason that parties should be bound by their express agreements, and when a valid agreement already addresses the matter, recovery under an equitable theory is generally inconsistent with the express terms of the agreement.  

ADDITIONAL CASELAW CLIP ON UNJUST ENRICHMENT CLAIM WITH CITES 

Dallas Court of Appeals does not recognize unjust enrichment as cause of action



Unjust enrichment cause of action in Texas (caselaw snippet) 

Excerpt from US District Court Opinion Order with cites on Texas unjust enrichment cases



EDITORIAL NOTE: This blog post was last updated on 6/2/2015. Material on the court-of-appeals split on UNJUST ENRICHMENT as an independent theory of recovery under Texas common law, and currently-pending case in the Texas Supreme Court, was added at that time.

Quantum Meruit theory for credit card debt collection?

IS QUANTUM MERUIT A VALID LEGAL THEORY IN A DEBT SUITS SEEKING A JUDGMENT FOR A CREDIT CARD DEBT?

Quantum meruit is an equitable theory that allows someone who has furnished valuable materials or services without a contract to sue the recipient who did not pay for them. 

The definitional elements in the applicable case law clearly require provision of goods or services.

But that has not stopped credit card debt plaintiffs from invoking this theory as an alternative to breach of contract. One court of appeals, oddly, even agreed, and went against the weight of established precedent.

But the services that credit card companies provide are financial in nature, and the compensation they receive for these services are (1) discount fees paid by the merchants (usually indirectly); and (2) interest paid by cardholders who carry a balance.  Interest however, is compensation for the use of money, and not considered a payment for a service. The cardholder can typically even avoid interest charges altogether by paying the full balance each month, rather than merely the minimum payment amount. Additionally, the charging of interest has its own regulatory framework, which, at the state level, is found in the Texas Finance Code. Even if the “financial service” is deemed a compensable service, the only charges for account administration would be annual or monthly “membership” or “service” fees that accrue whether or not the card is actually used, and whether or not the account has a revolving balance.  And most credit card issuers do not even assess them, or routinely waive them if the underlying cardmember provides for such fees.  

Most importantly, however, a quantum meruit claim is only viable if there is no contract. And credit card accounts are always based on a contract because the business of banking is highly regulated by state and federal governments, and a contract (i.e. express written statement of the terms of credit to the consumer) is a regulatory requirement at both the federal and state level.  

DEFENSES TO QUANTUM MERUIT CLAIM BY DEBT COLLECTORS SUING ON CREDIT CARD DEBT

CONTRACT PRECLUDES QUANTUM MERUIT CLAIM

The Truth in Lending Act (TILA) requires written contract terms. When a credit card issuer (or its assignee) sues, the claim necessarily involves an underlying contract (whether in evidence or not), and the existence of a contract bars recovery under quantum meruit.

 CREDITOR DID NOT SELL GOODS OR PROVIDE COMPENSABLE SERVICES

A quantum meruit claim requires, at a minimum, that the claimant have furnished valuable materials or services to the party from whom it is seeking recovery. Credit card issuers do not sell goods;  nor did they provide services that meet the definition of quantum meruit under longstanding  appellate precedents.

THE CARDMEMBER/ACCOUNT AGREEMENT GOVERNS THE RELATIONSHIP BETWEEN BANK AND CUSTOMER

In general, a party may recover under the doctrine of quantum meruit only in the absence of an express contract covering the services or materials furnished. The existence of an express contract does not preclude recovery in quantum meruit for the reasonable value of services rendered and accepted which are not covered by the contract, but this exception has no application in the context of credit cards, -- at least not credit cards issued by banks which have no business dealings with their customers that would not be based on, and governed by, the applicable account agreement.  

EXCERPT FROM LEADING APPELLATE CASE:

[B]ecause 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.