Opinion issued March 12, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-14-00571-CV
———————————
TED KALDIS A/K/A TED LEFTERIS KALDIS, Appellant
V.
CREST FINANCE, Appellee
On Appeal from the 281st District Court
Harris County, Texas
Trial Court Case No. 2012-71189
OPINION
Following a bench trial, the trial court rendered judgment against Ted Kaldis a/k/a
Ted Lefteris Kaldis for $51,012.66 in favor of Crest Finance. On appeal, Kaldis
asserts that the trial court erred when it ruled that he had not shown that Crest
Finance’s claim was barred by limitations.
We affirm.
Background
On May 25, 2007, Kaldis signed a Business Line of Credit Agreement (“the
Agreement”) with Wachovia Bank. The Agreement provided that the maximum
credit limit—that is, the maximum amount that Kaldis could have as an
outstanding balance on the account—was $50,000. Kaldis obtained funds on the
line of credit by using access checks or a debit card.
The Agreement provided that Kaldis would make a minimum monthly
payment on any outstanding balance. The Agreement also provided that, if Kaldis
did not timely make the minimum monthly payment, a late fee would be added to
the outstanding balance on the next monthly billing cycle. The late fee would
reduce the amount of credit available to Kaldis. In addition, the Agreement stated
that, upon written notice to Kaldis, Wachovia could terminate Kaldis’s right to
obtain funds or reduce the available credit limit. On proper written notice,
Wachovia could also, at its discretion, demand payment in full on the outstanding
balance from Kaldis.
Through August 2008, Kaldis made timely payments to Wachovia as
provided by the Agreement. Kaldis made his last timely payment on August 8,
2008. Kaldis’s next payment of $396.51 was due on September 5, 2008; Kaldis
did not make this payment or any payment thereafter.
Wachovia’s account statement, dated September 10, 2008, indicated that the
$396.51 was past due and needed to be paid immediately. It stated that Kaldis’s
next payment of $361.71 was due on October 5, 2008. The statement reflected that
Kaldis’s outstanding balance on the account was $49,031.92 with an available
credit line of $209.00.
Wachovia’s next account statement, dated October 13, 2008, reflected that
Kaldis had an outstanding balance of $50,207.84 with no available credit. The past
due payments, which were immediately payable, totaled $758.22. According to
the statement, another payment of $427.70 was due on November 7, 2008.
Wachovia’s account statement, dated November 11, 2008, indicated that
$1,175.92 was past due and payable immediately. Late fees and interest continued
to be assessed on the account. The statement showed that a new minimum
payment of $348.25 was due on December 6, 2008.
The November statement also informed Kaldis, under the heading
“Important Information,” as follows: “Funds access has been terminated as a result
of delinquent payment. Repayment is required as contracted. For options, call
[phone number].”
The December 10, 2008 statement also contained the “Important
Information.” In addition, the December statement reflected an outstanding
account balance of $50,887.66, past due payments totaling $1,524.17, and a new
minimum payment of $331.57, which was due January 4, 2009. The statement
also reflected that late fees and interest continued to be charged on the account.
Wachovia’s January 12, 2009 statement showed that payments totaling
$1,855,74 were past due. The statement again informed Kaldis, “Funds access has
been terminated as a result of delinquent payment. Repayment is required as
contracted. For options, call [phone number].” For the first time, the statement
informed Kaldis, “Your account is currently closed.”
The February 2009 statement also showed that the account was closed. It
reflected a balance of $51,012.66. A statement, dated March 24, 2009, indicated
that Wachovia had charged off the account.
Through a series of transactions, Kaldis’s account with Wachovia was
ultimately transferred and assigned to Crest Finance. Crest Finance filed suit
against Kaldis on December 3, 2012. Crest Finance sought to recover $51,012.66
from Kaldis, claiming that he owed that amount under the terms of the Business
Line Credit Agreement.
Kaldis answered the suit. He asserted a number of affirmative defenses,
including limitations.
The suit was tried to the bench. To support its claim, Crest Finance offered
the testimony of its corporate representative, Steve Niermann, and documentary
evidence, including the Business Line Credit Agreement and the monthly account
statements. Kaldis also testified.
At trial, Kaldis continued to assert the affirmative defense of limitations. He
claimed that Crest Finance was required to file suit within four years of when a
cause of action accrued. Kaldis asserted that Crest Finance’s claim accrued when
he missed his first payment in September 2008. Thus, Kaldis claimed that Crest
Finance’s suit was time-barred because it did not file suit until December 2012.
At the end of trial, the trial court requested briefing on the limitations issue
to determine “when does a cause of action like this [on a line of credit] accrue.” In
its briefing, Crest Finance averred that, because it had filed suit on an “open
account,” its cause of action accrued “on the day that the dealings in which the
parties were interested together ceased,” as stated in Texas Civil Practice and
Remedies Code section 16.004(c). Applying this standard, Crest Finance asserted
that its cause of action accrued no earlier than February 2009, 1 when Wachovia
closed Kaldis’s account.
In his post-trial briefing, Kaldis asserted that Crest Finance had filed a
breach of contract action for collection of a debt governed by Texas Civil Practice
1
The evidence showed that Wachovia had already closed Kaldis’s account in
January 2009.
and Remedies Code section 16.004(a)(3). Kaldis averred that, under that
provision, Crest Finance’s claim accrued when he first breached the Agreement by
failing to make his September 2008 payment. Kaldis argued that Crest Finance’s
suit is time barred because it was filed more than four years later.
Following submission of the briefing, the trial court rendered judgment
against Kaldis in favor of Crest Finance for $51,012.66. Later, at Kaldis’s request,
the trial court filed findings of fact and conclusions of law. Among its conclusions
of law, the trial court determined as follows:
2. The statute of limitations on a claim for debt based on breach of
contract is four years from the time the cause of action accrues. TEX.
CIV. PRAC. & REM. CODE § 16.004(a).
3. The statute of limitations on an action on an open account is four
years after the day that the cause of action accrues, which is “the day
that the dealings in which the parties were interested together cease.”
TEX. CIV. PRAC. & REM. CODE § 16.004(c).
4. [Kaldis] had the burden of proof on his affirmative defenses and
had the burden to establish “the date upon which dealings between the
parties ceased.” Capital One Bank, NA v Conti, 345 S.W.3d 490,492
(Tex. App.—San Antonio 2011, no pet).
5. [Kaldis] failed to meet his burden of proof to show that the dealings
between the parties ceased more than four years before the lawsuit
was filed.
6. [Crest Finance’s] claim is not barred by the statute of limitations.
This appeal followed in which Kaldis identifies two issues.
Statute of Limitations
A. The Dispute
In his first issue, Kaldis claims that the trial court erred when it determined
that Crest Finance’s claim was not barred by limitations. As they did in the trial
court, the parties dispute which limitations provision of Civil Practice and
Remedies Code section 16.004 applies to Crest Finance’s claim against Kaldis.
Section 16.004 reads, in relevant part, as follows:
(a) A person must bring suit on the following actions not later than
four years after the day the cause of action accrues:
....
(3) debt;
....
(c) A person must bring suit . . . on an open or stated account . . . not
later than four years after the day that the cause of action accrues. For
purposes of this subsection, the cause of action accrues on the day that
the dealings in which the parties were interested together cease.
TEX. CIV. PRAC. & REM. CODE ANN. § 16.004(a)(3), (c) (Vernon 2002).
Kaldis asserts that Crest Finance’s suit is a debt action, governed by section
16.004(a)(3). Kaldis avers that Crest Finance’s cause of action accrued in
September 2008, when he first missed his payment on the line of credit account.
Crest Finance counters that its suit was a suit on an open account as
provided in section 16.004(c). See id. § 16.004(c). Pursuant to that section, its
cause of action accrues “on the day that the dealings in which the parties were
interested together cease.” See id. Crest Finance asserts that Kaldis did not meet
his burden to show that it filed its lawsuit more than four years after the parties
ceased doing business. From its conclusions of law, it is apparent that the trial
court agreed with Crest Finance that this is a suit on an open account governed by
section 16.004(c).
Neither party disputes the material facts pertinent to determining whether
Crest Finance’s suit was time-barred. Rather, as discussed, the dispute centers on
whether Texas Civil Practice and Remedies Code section 16.004(a)(3) or section
16.004(c) applies. This in turn determines when Crest Finance’s claim accrued.
Thus, the critical issue to be determined here is whether this was an action on an
open account or simply an action on a debt. If it was an action on an open account,
then section 16.004(c) governs the limitations issue. See id.
B. Standard of Review
Questions regarding which limitations provision applies and when a claim
accrues are questions of law. See Williams v. Khalaf, 802 S.W.2d 651, 658 (Tex.
1990) (referring to question of which limitations statute applies as a question of
law); see also Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 202
(Tex. 2011) (“Normally, when a cause of action accrues is a question of law.”). In
addition, at least one Texas court has stated that whether an open account exists,
for purposes of determining which limitations provision to applies, presents a
question of law. See, e.g., Bank of Am. v. Jeff Taylor LLC, 358 S.W.3d 848, 861
(Tex. App.—Tyler 2012, no pet). We review questions of law de novo. See In re
Humphreys, 880 S.W.2d 402, 404 (Tex. 1994). Thus, we review de novo whether
Crest Finance’s suit was a suit on an open account as contemplated by section
16.004(c).
C. Analysis
On appeal, Kaldis asserts that Crest Finance did not pursue its claim as a suit
on an open account in either its pleadings or at trial. Rather, according to Kaldis,
Crest Finance pursued an action for debt as contemplated in section 16.004(a)(3).
Courts have held that the elements of an open account elements are (1)
transactions between parties, (2) creating a creditor-debtor relationship through
general course of dealing, (3) with the account still being open, and (4) with the
expectation of further dealings. Jeff Taylor LLC, 358 S.W.3d at 861; Capital One
Bank (USA) v. Conti, 345 S.W.3d 490, 492 (Tex. App.—San Antonio 2011, no
pet.); Eaves v. Unifund CCR Partners, 301 S.W.3d 402, 408 (Tex. App.—El Paso
2009, no pet.). In its petition, Crest Finance pled, in part, as follows:
[Kaldis] made or personally guaranteed a promissory note or business
line of credit agreement payable to the order of Wachovia Bank, N.A
(the “Note”). [Kaldis] accepted the benefits of money received from
the Note and became bound to pay Wachovia Bank, N.A under the
terms of the Note as [Kaldis] agreed. The Note and Final Charge Off
Statement are attached hereto as Exhibit “A” and incorporated herein
by reference.
Such Note is now in default. Default occurred when [Kaldis] failed to
timely and properly pay the Note and [Crest Finance] declared it in
default. Notice of nonpayment, default and intent to accelerate has
been made on [Kaldis]. The maturity of the Note has been
accelerated. [Crest Finance] is current owner and holder of the Note.
....
After the allowance of all just and lawful offsets, payments and credits
to Defendant, the balance of $51,012.66 on the Note is past due and
unpaid.
Crest Finance attached the Business Line of Credit Agreement to its petition.
It also attached the account statement from March 2009. The statement indicated
that the account balance of $51,012.66 had been charged off by Wachovia on
March 24, 2009.
When determining whether a pleading properly includes an allegation, we
must look at the pleading from the perspective of the person against whom the
pleading is made. Wilson v. Bloys, 169 S.W.3d 364, 369 (Tex. App.—Austin
2005, pet. denied) (citing Erisman v. Thompson, 167 S.W.2d 731, 733 (Tex.
1943)). In the absence of special exceptions, as here, courts must construe the
pleadings liberally in favor of the pleader. Horizon/CMS Healthcare Corp. v.
Auld, 34 S.W.3d 887, 897 (Tex. 2000). A petition is sufficient if a cause of action
reasonably may be inferred from what is stated in the petition, even if an element
of the action is not specifically alleged. Pinter v. Asafi Law Firm, No. 01–12–
00048–CV, 2012 WL 5458426, at * 3 (Tex. App.—Houston [1st Dist.] Nov. 8,
2012, no pet.) (citing Westcliffe, Inc. v. Bear Creek Const., Ltd., 105 S.W.3d 286,
292 (Tex. App.—Dallas 2003, no pet.)); see Boyles v. Kerr, 855 S.W.2d 593, 601
(Tex. 1993) (stating courts “should uphold the petition as to a cause of action that
may be reasonably inferred from what is specifically stated, even if an element of
the cause of action is not specifically alleged”).
Kaldis implies that, because Crest Finance is suing for his failure to tender
payment under the terms of the Agreement, this is an action for debt and not an
action on an open account. We disagree.
The fact that the parties’ dealings were governed by an express contract, the
Business Line of Credit Agreement, does not convert this into an action for debt.
As the Supreme Court of Texas stated long ago: An “open account,” in the context
of the statute of limitations, “evidently has reference to dealings between
persons . . . from which, by contract, express or implied, the receiver becomes the
debtor.” McCamant v. Batsell, 59 Tex. 363, 368 (Tex. 1883) (emphasis added).
Citing McCamant, the Tyler Court of Appeals, in determining whether a claim was
a suit on an open account for limitations purposes, stated: “We see no reason to
hold that an express contract forecloses the existence of an open account for
limitations purposes under Section 16.004(c).” Jeff Taylor, 358 S.W.3d at 857.
Construing the petition liberally, and given the course of dealings between Kaldis
and Wachovia pursuant to the Business Line of Credit Agreement, as will be
discussed infra, Kaldis could have reasonably inferred that Crest Finance’s petition
alleged a cause of action based on an open account.
Crest Finance’s pursuit of a claim on an open account became even more
apparent at trial. While cross-examining Crest Finance’s corporate representative,
Steve Niermann, Kaldis’s counsel sought to establish that Crest Finance’s cause of
action accrued in September 2008:
[Kaldis’s counsel:] All right. So on September 6th, then, the account
went into default, did it not?
[Niermann:] Not necessarily. You have the right to revolve your
account . . . . You have the right to revolve the account. It was not
closed until January or February of 2009 and charged off in March of
2009. Because every time we’re late with a card doesn’t mean our
credit card is cutoff and terminated. The lender has the right to
revolve it. That’s why they call it revolving credit.
....
Q. And so when those [minimum monthly payments] weren’t paid
timely then technically this account went into default, didn’t it?
A. When you say “technically,” I don’t know what you mean. Under
the terms of the account, it was an open revolving business line of
credit. A line of credit is different from an installment long-term
where you are paying the same amount month after month where each
of the payments has its own statute of limitations.
Revolving means that you can revolve the balance to the following
month and pay an interest penalty and a late fee penalty probably,
maybe an over the limit penalty, but you get to put it to the next
month. That is your choice.
After a while you are going to be demanded that you pay more, and
that is going to probably be about six months down the line.
(Emphasis added.)
As stated by the Fifth Circuit Court of Appeals in determining a limitations
issue under Texas law, an open account “allows for parties with frequent dealings
to credit and debit the account without settling it.” Sunshine Traders of El Paso,
Inc. v. Dolgencorp, Inc., 219 Fed. Appx. 375, 377 (5th Cir. 2007). This is also
what Niermann indicated in his testimony. It was apparent from his testimony that
Crest Finance was seeking to recover funds due on an open account not on a
simple debt.
Other evidence at trial also indicated that Crest Finance was litigating a
claim on an open account. As stated, the elements of an open account are (1)
transactions between the parties, (2) creating a creditor-debtor relationship through
the general course of dealing, (3) with the account still being open, and (4) with the
expectation of further dealing. Jeff Taylor, 358 S.W.3d at 861; Conti, 345 S.W.3d
at 492; Eaves, 301 S.W.3d at 408.
As discussed, the evidence at trial showed that, in May 2007, Wachovia
issued a business line of credit to Kaldis, and Kaldis obtained funds under the
credit line. Kaldis made payments on the account to Wachovia until September
2008. Thus, the evidence showed transactions between the parties through the
course of dealing and a creditor-debtor relationship between Wachovia and Kaldis,
which was extended to Crest Finance when it later purchased Kaldis’s account.
With regard to the third and fourth elements, the court in Eaves—a case in
which the court determined that a credit card account was an “open account”—
analyzed what it means for an account to be open with the expectation of further
dealings:
We further find that the account was still open with the expectation of
further dealing. Eaves contends that those elements are not met as
Lutz testified that Unifund Partners does not currently hold an open
account for him, and that there was no expectation that Unifund
Partners would ever loan him a dime. At its core, Eaves’ argument
would force creditors to keep credit available to nonpaying debtors
and allow those debtors to continue debiting their accounts after
having defaulted. We decline to accept Eaves’ argument.
....
Once a debtor defaults on his account, although the debtor may not be
able to withdraw on the account, his obligation to pay still remains.
Here, although Eaves defaulted on his account with Citibank, he still
maintained his obligation to pay the debt; therefore, the account was
still open with the expectation of further dealings, that is, that Eaves
would tender the amount owed.
Eaves, 301 S.W.3d at 409.
Here, the evidence showed that, even after Wachovia closed the account in
January 2009, and then charged the account off in March 2009, Kaldis was still
obligated to pay the full amount owed.2 Thus, as discussed in Eaves, the account
2
Niermann testified regarding the meaning of term “charge off” as follows:
A. A charge-off is when my business or any other business represents to the
IRS that a debt is uncollectible and they are going to take a charge, an
remained “open” with the expectation of further dealings, that is, that Kaldis would
tender the amount owed. See id.
We also note that the evidence—specifically, the September 10, 2008
account statement—showed that, even after he first failed to make his monthly
payment, Kaldis still had available credit with Wachovia. Similarly, the October
2008 account statement showed that Wachovia expected Kaldis to make his
minimum monthly payment and also pay the past due amounts owed, along with
late fees and interest, as required by the Business Line Credit Agreement. The
account statements from November and December 2008 indicated that that
“repayment is required as contracted” and provided a telephone number for Kaldis
to call “for options.” In other words, the evidence showed that, even after Kaldis
did not make his monthly payments, the account remained open and indicated
expectations of further dealings between the parties.
expense, against revenues to reduce their overall income. That’s all it
means. It is a tax mechanism as between the business and the IRS.
Q. Does a charge-off mean that the debtor doesn’t have to pay the loan
back?
A. No, it doesn’t affect the contract law because the charge-off is related to
taxation. And in accounting it is also related to whether you continue to
run interest on a debt. Because once you charge it off, you also close the
account, which is different, but it is usually done at the same time. So that
interest quits running, otherwise you would have charged off debts which
continue to accrue interest. . . .
When determining whether an open account exists for purposes of
limitations, some courts have examined whether a term of the parties’ agreement
remains “open”; that is, subject to modification See Jeff Taylor, 358 S.W.3d at
860–61 (discussing whether an open term is a necessary element to show an open
account). For example, in Conti, the court stated that “[a] credit card may be
considered an open account because, under a credit card agreement, the terms of
repayment remain subject to modification, and the parties exchange credits and
debits until either party settles the balance and closes the account.” See Conti, 345
S.W.3d at 491–92. The Jeff Taylor court observed, “By this statement, the [Conti]
court appears to acknowledge that the payment terms of a credit card are not fixed
and certain, but it does not incorporate an open term as an element of an open
account.” Jeff Taylor, 358 S.W.3d at 861 (citing Conti, 345 S.W.3d at 491–92).
Similarly, here, as noted in Conti, under the Business Line of Credit
Agreement, “the terms of repayment remain subject to modification, and the
parties exchange credits and debits until either party settles the balance and closes
the account.” Conti, 345 S.W.3d at 491–92 (citing Eaves, 301 S.W.3d at 409).
Significantly, the Agreement stated that, upon written notice to Kaldis, Wachovia
could terminate Kaldis’s right to obtain funds or reduce the available credit limit.
Wachovia could also, at its discretion, demand payment in full on the outstanding
balance from Kaldis and change the terms of payment. In these respects, the terms
of the account remained “open.” See Jeff Taylor, 358 S.W.3d at 864 (concluding
that, because amount of payment fluctuated based on other events, payment terms
remained open).
Lastly, we note that Kaldis cites the following four cases for the proposition
that a cause of action for debt based on breach of contract accrues from the date
that a debtor first misses a payment: Dodeka, L.L.C. v. Campos, 377 S.W.3d 726,
730 (Tex. App.—San Antonio 2012, no pet.); Colvin v. Tex. Dow Emps. Credit
Union, No. 01–11–00342–CV, 2012 WL 5544950, at *9 (Tex. App.—Houston [1st
Dist.] 2012, no pet.) (mem. op.); Bicknell v. Wells Fargo Bank, N.A., No. 11–08–
00203–CV, 2010 WL 1635832, at *2 (Tex. App.—Beaumont Apr. 22, 2010, no
pet.) (mem. op.); and Williams v. Unifund CCR Partners Assignee of Citibank, 264
S.W.3d 231 (Tex. App.—Houston [1st Dist.] 2008, no pet.). However, of these
cases, only Dodeka discusses the issue of whether the suit, for limitations purposes,
had been brought as a suit on open account or as a claim for debt based on breach
of contract. Dodeka, 377 S.W.3d at 730. In the other three cases, it appears
undisputed that the actions had been brought as a suit for debt based on breach of
contract to which Texas Civil Practice and Remedies Code section 16.004(a)(3)
applied.
With respect to Dodecka, the court rejected the creditor’s claim, first made
on appeal, that it had brought a suit on an open account. Id. The court concluded
that the creditor had only pleaded breach of contract and that the claim had not
been tried by consent. Id. Signaling that the case was distinguishable, the
Dodecka court cited LTD Acquisitions, LLC v. Cook, No. 04–10–00296–CV, 2011
WL 61634, at *2 (Tex. App.—San Antonio Jan. 5, 2011, no pet.) (mem. op.). In
LTD Acquisitions, the court determined that—although the creditor had not
originally pleaded the claim as an open account—the creditor argued in its motion
to reconsider that a credit card account may be brought as an action on an open
account, thereby allowing appellate review of the open account claim. LTD
Acquisitions, 2011 WL 61634, at *2. Here, as discussed, Crest Finance sufficiently
raised and tried a suit on an open account.
We conclude that, because this was a suit on open account, the applicable
statute of limitations was Texas Civil Practice and Remedies Code section
16.004(c). See TEX. CIV. PRAC. & REM. CODE ANN. § 16.004(c). Pursuant to that
section, Crest Finance’s cause of action accrued “on the day that the dealings in
which the parties were interested together cease[d].” Id. Although Kaldis, as the
proponent of the affirmative defense of limitations, bore the burden to show when
Crest Finance’s cause of action accrued, see Woods v. William M. Mercer, Inc.,
769 S.W.2d 515, 517 (Tex. 1988), the undisputed evidence at trial showed that the
parties ceased doing business no earlier than January 2009, when the account
statement indicates Kaldis’s account was closed. See Facility Ins. Corp. v.
Employers Ins. of Wausau, 357 F.3d 508, 513 (5th Cir. 2004) (concluding, for
purposes of section 16.004(c), that limitations period for a suit concerning a
transaction on an open account does not begin running until the account is closed).
Thus, we hold that the trial court did not err by concluding that Crest Finance’s
suit, filed less than four years later, in December 2012, was not barred by
limitations. See TEX. CIV. PRAC. & REM. CODE ANN. § 16.004(c).
We overrule Kaldis’s first issue.
Suit on Sworn Account
In his second issue, Kaldis asserts that Crest Finance has failed to comply
with the requirements of Texas Rule of Civil Procedure 185 for filing a suit on a
sworn account. See TEX. R. CIV. P. 185. However, Crest Finance did not allege in
its petition, in the trial court, or in its appellate brief that this is a suit on a sworn
account under Rule 185. Nor did the trial court base its judgment on Rule 185.
Accordingly, we overrule Kaldis’s second issue.
Conclusion
We affirm the judgment of the trial court.
Laura Carter Higley
Justice
Panel consists of Justices Keyes, Higley, and Brown.