Author Topic: Clifton v. American Express Centurion Bank, App. Ct. TX, 9th Dist. Beaumont, 07  (Read 2265 times)

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This case, just handed down by the TX Court of Appeals, Ninth District of TX at Beaumont, involves a defendant, Bruce Clifton, who answered, with an unsworn general denial,  the complaint in a collection lawsuit filed by AMEX.  Nonetheless, he failed to show up at court on the trial date!   As a result, AMEX was awarded a default judgment against Clifton under TX Rule 185--with no more than an Affidavit in support of the sworn complaint as proof of their case.

Clifton then appealed, contending, among other things, that AMEX failed to prove their case as required by Rule 185, did not state a claim on which relief could be granted, and that he had been denied his day in court.  The Appeals court found that AMEX had not proven their case sufficiently to support a post-answer default judgment; the trial court had improperly granted the default judgment.  The Appeals Court then vacated the lower court's decision and remanded the case.

[The attached .pdf is a PUBLIC DOCUMENT provided for the convenience of DB users.  It may be freely cited.]


In The
Court of Appeals
Ninth District of Texas at Beaumont


NO. 09-06-283 CV





On Appeal from the County Court at Law No. 2

Montgomery County, Texas

Trial Cause No. 05-05-04597-CV

This appeal arises from a post-answer default judgment against Bruce Clifton and in favor of American Express Centurion Bank. We reverse and remand.

American Express sued Clifton for recovery of a debt. In its Petition on a Verified Account, American Express alleged Clifton received a credit card from American Express, made various charges, and had a past due account that remained unpaid despite American Express's demands. American Express alleged that the net principal amount owed by Clifton was $11,839.22, and it sought attorney's fees, prejudgment interest, and court costs. American Express attached an "Affidavit of Account" to its petition.

Clifton filed an unsworn general denial and failed to appear at trial. After American Express's attorney announced ready, the trial court determined that Clifton was not present and granted American Express's request for default judgment. (1) At trial, American Express presented testimony only about attorney's fees. American Express's attorney testified that $450.00 would be reasonable attorney's fees. But, American Express subsequently submitted an affidavit alleging that $1,775.88 should be awarded as attorney's fees. Approximately two weeks later, the trial court entered judgment in American Express's favor for the principal amount of $11, 839.22 and attorney's fees of $1,775.88.

Clifton raises seven appellate issues. He contends: (1) American Express failed to state a claim upon which relief may be granted; (2) American Express failed to establish his liability; ( 3) American Express failed to establish damages; (4) American Express failed to establish attorney's fees; (5) the trial court signed a post answer default judgment in excess of what the court awarded; (6) American Express deprived him of his due process rights; and (7) the trial court erred because it did not grant his motion for new trial. We consider issues two, three, and four as complaints about the sufficiency of the evidence on liability, damages, and attorney's fees. See Tex. R. App. P. 38.1(e).

In issue one, Clifton maintains that a suit for credit card debt cannot be brought under Rule 185. Rule 185 applies to suits on sworn accounts, and authority exists to support Clifton's position that credit card debt does not fall within Rule 185's scope. (2) Clifton, however, did not raise this claim before the trial court and therefore has not preserved it for our review. See Tex. R. App. P. 33.1(a).

Therefore, assuming that a suit for credit card debt can utilize Rule 185 procedures, we consider whether there is legally sufficient evidence of Clifton's liability and damages. To do so, we determine the evidentiary effect of American Express's petition and accompanying affidavit, which, if properly filed under Rule 185, may establish prima facie evidence of the alleged debt. See Tex. R. Civ. P. 185.

Rule 185 is not a rule of substantive law. Rizk v. Financial Guardian Ins. Agency, Inc., 584 S.W.2d 860, 862 (Tex. 1979). Rather, Rule 185 is a procedural rule regarding the evidence required to establish a prima facie right of recovery in a suit on an account. See Tex. R. Civ. P. 185 (entitled " Suit on Account"); Rizk, 584 S.W.2d at 862; Northwest Park Homeowners Ass'n, Inc. v. Brundrett, 970 S.W.2d 700, 702 (Tex. App.-Amarillo1998, pet. denied). Parties may bring suits under Rule 185 on certain claims for which a systematic record has been kept. See Tex. R. Civ. P. 185; Brundrett, 970 S.W.2d at 702. The rule applies to claims founded upon: (1) open accounts; (3)

(2) other claims for goods, wares, and merchandise, including claims for liquidated money demands based on written contracts or founded on business dealings between the parties; (3) personal services rendered; (4) labor done; or (5) labor or materials furnished. See Tex. R. Civ. P. 185; Brundrett, 970 S.W.2d at 702.

To establish a prima facie case in a sworn account suit, a plaintiff must strictly comply with Rule 185. See Nguyen v. Short, How, Frels & Heitz, P.C., 108 S.W.3d 558, 562 (Tex. App.-Dallas 2003, pet. denied); Powers v. Adams, 2 S.W.3d 496, 498 (Tex. App.-Houston [14th Dist.] 1999, no pet.); Andrews v. East Tex. Med. Ctr.-Athens, 885 S.W.2d 264, 267 (Tex. App.-Tyler 1994, no writ). Under Rule 185, a plaintiff must show that its account is one to which the rule applies and for which a systematic record has been kept. See Tex. R. Civ. P. 185; Nguyen, 108 S.W.3d at 562. Further, the plaintiff must file a supporting affidavit stating that the claim is within the affiant's knowledge, that it is "just and true," that the account is due, and that the plaintiff has allowed "all just and lawful offsets, payments, and credits." Tex. R. Civ. P. 185; see Nguyen, 108 S.W.3d at 562; Powers, 2 S.W.3d at 498; Andrews, 885 S.W.2d at 267. "If properly filed, the Plaintiff's petition and affidavit supporting that petition become prima facie evidence of the debt." Andrews, 885 S.W.2d at 267. But, when "there is a deficiency in the plaintiff's sworn account, the account will not constitute prima facie evidence of the debt." Nguyen, 108 S.W.3d at 562; see Enernational Corp. v. Exploitation Eng'rs, Inc., 705 S.W.2d 749, 750 (Tex. App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.).

In this case, American Express's affidavit, when taken together with its petition, is deficient. American Express's affidavit does not state that its claim is "just and true" or that the claim is within the affiant's personal knowledge. See Tex. R. Civ. P. 185; Hou-Tex Printers, Inc. v. Marbach, 862 S.W.2d 188, 190 (Tex. App.-Houston [14th Dist.] 1993, no writ). If a party fails to attach a proper Rule 185 affidavit to its petition, then "the affidavit [is] insufficient to establish the account as prima facie evidence of the claim." Marbach, 862 S.W.2d at 190.

Further, American Express's petition states that Clifton "made various charges" and owes the net principal amount of $11,839.22. The petition, however, does not show that a systematic record was kept of the account as required by Rule 185. (4)

Thus, we conclude that American Express's affidavit and petition are insufficient to allow them to be prima facie evidence of Clifton's debt.

American Express argues that Clifton's failure to file a sworn denial as required under Rule 185 (5) precludes his standing to object to American Express's sworn account claim. Texas case law, however, is clear that when the plaintiff does not file a sufficient Rule 185 affidavit to establish its account, the defendant has no obligation to file a sworn denial. See Enernational Corp., 705 S.W.2d at 750. In such cases, the defendant's "general denial is sufficient to controvert the [plaintiff's] case." Id.; see Panditi, 180 S.W.3d at 927.

Because American Express's petition and affidavit are deficient, they do not constitute prima facie evidence of Clifton's alleged debt. Thus, we must determine if the record otherwise contains legally sufficient evidence entitling American Express to the default judgment. The test for legal sufficiency is "whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).

In this case, Clifton filed a general denial, which was sufficient to controvert American Express's case, but Clifton did not appear at trial. See Enernational Corp., 705 S.W.2d at 750. Thus, the judgment in favor of American Express was a post-answer default judgment. See Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex. 1979).

When seeking a post-answer default judgment, a plaintiff may prevail only if it offers evidence and proves its entire case, including liability and damages. See id.; Armstrong v. Benavides, 180 S.W.3d 359, 362 (Tex. App.-Dallas 2005, no pet.). The trial court cannot enter judgment on the pleadings. Stoner, 578 S.W.2d at 682. A defendant who has filed an answer with the trial court does not abandon that answer or confess any issues simply because he fails to pursue the remainder of the trial. See id.; Mays v. Pierce, 203 S.W.3d 564, 571 n.11 (Tex. App.-Houston [14th Dist.] 2006, pet. denied).

The only evidence that American Express offered at trial was testimony on attorney's fees. American Express offered no witnesses and no exhibits to prove liability or damages. In the absence of evidence on liability and damages, the evidence is legally insufficient to support the trial court's judgment. See City of Keller, 168 S.W.3d at 827 (The evidence must be sufficient to allow "reasonable and fair-minded people to reach the verdict under review.").

We sustain Clifton's issues two and three as they relate to the legal insufficiency of the evidence on liability and damages. "When a legal insufficiency point is sustained, the reviewing court generally renders judgment in favor of the party bringing the point of error." Flores v. Brimex Ltd. Partnership, 5 S.W.3d 816, 821 (Tex. App.-San Antonio 1999, no pet.) (citing Thorp v. Adair & Myers, 809 S.W.2d 306, 308 (Tex. App.-Houston [14th Dist.] 1991, no writ)). "However, an exception is made in cases involving default judgments because the facts have not been fully developed." Armstrong v. Benavides, 180 S.W.3d 359, 364 (Tex. App.-Dallas 2005, no pet.) (citing Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 86 (Tex. 1992); United States Fire Ins. Co. v. Carter, 473 S.W.2d 2, 3 (Tex. 1971)). Furthermore, "the case can be remanded when the interests of justice require a new trial for further development of the facts." Flores, 5 S.W.3d at 821. Here, we believe the interests of justice are better served by remanding this case. Accordingly, we reverse the trial court's judgment and remand this cause to the trial court for further proceedings consistent with this opinion.





Submitted on May 3, 2007

Opinion Delivered September 6, 2007

Before Gaultney, Kreger, and Horton, JJ.

1. Prior to the the trial court's decision, American Express's attorney and the court had the following discussion:

Court: What says the Defendant, Bruce Clifton? Any answer from Bruce Clifton? No answer. What is your suggestion we do this morning?

Counsel: Request default judgment be entered in our favor, your Honor.

Court: Is it a liquidated case?

Counsel: Yes.

Court: Do you have a judgment?

Counsel: No. Actually they filed answers and discovery so I expected them to be ready for trial today so -

Court: Request is granted. Default judgment entered in the amount of the damages requested in the pleadings.

2. See Tully v. Citibank (S. D.), N.A., 173 S.W.3d 212, 216 (Tex. App.-Texarkana 2005, no pet.) (finding bank could not collect credit card debt through suit on a sworn account); Bird v. First Deposit Nat'l Bank, 994 S.W.2d 280, 282 (Tex. App.-El Paso 1999, pet. denied) (finding "that a credit card issued by a financial institution does not create the sort of debtor-creditor relationship required in order to bring suit under Texas Rule of Civil Procedure 185"); see also Landaverde v. Centurion Capital Corp., No. 14-06-00712-CV, 2007 WL 1848698, at *1 (Tex. App.-Houston [14th Dist.] June 28, 2007, no pet.) (mem. op.).

In contrast, breach of contract is a recognized cause of action available to collect a credit card debt. See Tully, 173 S.W.3d at 216-17. In this case, American Express did not allege breach of contract.

Under an "open account" transaction, a seller does not receive cash for goods sold or services rendered but rather extends credit to the buyer. MBank El Paso Nat'l Ass'n v. Featherlite Corp., 792 S.W.2d 472, 475 (Tex. App.-El Paso 1990, writ denied). The resulting contractual obligation owed by the buyer to the seller is an "account receivable." Chester v. Jones, 386 S.W.2d 544, 547 (Tex. Civ. App.-Tyler 1965), writ dism'd, 391 S.W.2d 722 (Tex.1965); see Featherlite Corp., 792 S.W.2d at 475.

Texas appellate courts have found sufficient compliance with Rule 185 when the plaintiff's pleadings included statements or invoices. See Panditi v. Apostle,180 S.W.3d 924, 927 (Tex. App.-Dallas 2006, no pet.) (billing statements); Powers, 2 S.W.3d at 499 (itemized monthly statements of legal services reflecting offsets, payments, and credits); Enernational Corp., 705 S.W.2d at 750-51 (dated invoices appearing to show dates when services were rendered).

While not including statements or invoices with its petition and affidavit, American Express's appendix to its appellate brief contains copies of various records related to Clifton's account. We, however, may not consider such records in our review of this appeal. See Guajardo v. Conwell, 46 S.W.3d 862, 864 (Tex. 2001); WorldPeace v. Comm'n for Lawyer Discipline, 183 S.W.3d 451, 465 n.23 (Tex. App.-Houston [14th Dist.] 2005, pet. denied) (An appellate court "cannot consider documents attached as appendices to briefs and must consider a case based solely upon the record filed.").

5. To overcome the prima facie evidentiary effect of a sworn account petition that complies with Rule 185, a defendant must file "a written denial, under oath." Tex. R. Civ. P. 185; see
Nguyen v. Short, How, Frels & Heitz, P.C., 108 S.W.3d 558, 562 (Tex. App.-Dallas 2003, pet. denied).