Affirmed in Part, Reversed and Remanded in Part, and Memorandum Opinion
filed April 27, 2023.
In The
Fourteenth Court of Appeals
NO. 14-21-00340-CV
RODGER MULLEY, Appellant
V.
TEXAS CAPITAL HOLDINGS, LLC, Appellee
On Appeal from the 157th District Court
Harris County, Texas
Trial Court Cause No. 2020-38138
MEMORANDUM OPINION
Roger Mulley filed suit against Texas Capital Holdings, LLC to collect on a
promissory note. Texas Capital Holdings filed a motion for summary judgment,
which the trial court granted on the basis that both of Mulley’s claims were time-
barred, rendering judgment final. This case turns on whether the note is a negotiable
instrument that includes a “sum certain.” If not, then it is subject to a four-year statute
of limitations, and Mulley’s claim is time-barred. If the note is negotiable, then it is
subject to a six-year statute of limitations, and the claim is not time-barred. The
amount of the note is identified with words and numerals that are in conflict, so
Texas Capital Holdings moved for summary judgment on the basis that the note is
non-negotiable because it is not a promise to pay a sum certain. We conclude the
note is negotiable because “words prevail over numbers.”
Background
In November 2014, Texas Capital Holdings executed a “Twelve Month
Promissory Note” in favor of Equity Trust Company Custodian Roger Wong
Mulley. The note described the principal amount of the loan as follows: “One
Hundred Thousand and 00/100 Dollars ($ 325,000 ) . . . .” Mulley filed this lawsuit
in June 2020, alleging that Texas Capital Holdings defaulted on the note in
December 2015 and made material misrepresentations that fraudulently induced
Mulley into entering the aforementioned promissory note.
Texas Capital Holdings filed a traditional motion for summary judgment,
seeking dismissal on the basis that both of Mulley’s claims were time-barred under
a four-year statute of limitations.1 In response, Mulley argued that a six-year statute
applies because the lawsuit is an action to enforce the obligation to pay a note
payable at a definite time and that Texas Capital Holdings revived the debt.2 Texas
Capital Holdings replied that the six-year statute does not apply because the note
“does not represent a sum certain and cannot be considered a negotiable instrument.”
The trial court granted the motion for summary judgment and rendered a
1
Tex. Civ. Prac. & Rem. Code § 16.004(a) (applying four-year limitations period to actions
on a debt).
2
Tex. Bus. & Com. Code § 3.118(a) (“[A]n action to enforce the obligation of a party to
pay a note payable at a definite time must be commenced within six years after the due date or
dates stated in the note or, if a due date is accelerated, within six years after the accelerated due
date.”).
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take-nothing final judgment on Mulley’s claims.
Discussion
Mulley brings four issues on appeal challenging the trial court’s grant of
summary judgment, alleging that (1) the note is a negotiable instrument subject to a
six-year statute of limitations; (2) appellee acknowledged the debt during an email
conversation; (3) appellee’s affirmative defense was improper; and (4) the trial court
erred in refusing to grant a continuance for further discovery.
We review a summary judgment de novo. Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). To prevail on a
traditional motion for summary judgment, a movant must establish “there is no
genuine issue as to any material fact and the moving party is entitled to judgment as
a matter of law.” Tex. R. Civ. P. 166a(c). A defendant moving for summary
judgment on the affirmative defense of limitations has the burden to conclusively
establish that defense. Tex. R. Civ. P. 94; KPMG Peat Marwick v. Harrison Cnty.
Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). The defendant/movant must
prove when the claim accrued and, if the plaintiff pleads the discovery rule, then the
defendant/movant must conclusively negate it.3 See KPMG Peat Marwick, 988
S.W.2d at 748. If the defendant/movant establishes that the statute of limitations bars
the action, then the burden shifts, and the plaintiff/nonmovant must adduce
summary-judgment proof raising a fact issue in avoidance of the statute of
limitations. Id.
I. Negotiable Instrument
In his first issue, Mulley contends that the note is properly classified as a
negotiable instrument subject to a six-year, not four-year, statute of limitations.
3
Mulley has not pleaded the discovery rule.
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Therefore, we first address whether the note is a negotiable instrument that includes
a “sum certain.”
A negotiable instrument is “an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the promise
or order,” upon demand or at a definite time and is payable to order or to bearer.
Tex. Bus. & Com. Code § 3.104(a). The sum-certain requirement is designed to
provide commercial certainty in the transfer of negotiable instruments and to make
negotiable instruments the functional equivalent of money. Amberboy v. Societe de
Banque Privee, 831 S.W.2d 793, 797 (Tex. 1992); Wiggins v. Janousek, No. 14–16–
00801–CV, 2017 WL 3301395, at *3 (Tex. App.—Houston [14th Dist.] Aug. 3,
2017, no pet.) (mem. op.). This requirement is not satisfied if “one cannot determine
from the face of [the] note the extent of the maker’s liability.” FFP Mktg. Co. v.
Long Lane Master Tr., IV, 169 S.W.3d 402, 408 (Tex. App.—Fort Worth 2005, no
pet.). The sum-certain requirement applies only to the note’s principal. Tex. Bus. &
Com. Code § 3.112 cmt. 1; see also Wiggins, 2017 WL 3301395, at *3.
Texas law anticipates internal contradictions in both negotiable and
non-negotiable instruments and provides for the resolution of those contradictions.
Charles R. Tips Family Tr. v. PB Commercial LLC, 459 S.W.3d 147, 153 (Tex.
App.—Houston [1st Dist.] 2015, no pet.). Under the Uniform Commercial Code,
which governs negotiable instruments such as the note, “[i]f an instrument contains
contradictory terms, typewritten terms prevail over printed terms, handwritten terms
prevail over both, and words prevail over numbers.”4 Tex. Bus. & Com. Code §
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The note states it is to be governed and construed according to California law. However,
both parties cited Texas law below, and Mulley cites Texas law on appeal. Texas Capital Holdings
did not file an appellate brief. Regardless, California has also adopted this section of the UCC. See
Cal. Com. Code § 3114 (“If an instrument contains contradictory terms, typewritten terms prevail
over printed terms, handwritten terms prevail over both, and words prevail over numbers.”). Also,
limitations periods generally are procedural, so “[i]f the action is barred by the statute of limitations
of the forum court in which the lawsuit is pending, no action can be maintained even if the action
4
3.114; Charles R. Tips Family Tr., 459 S.W.3d at 153. “It is well settled that
unambiguous written words prevail over arithmetic numbers in promissory notes.”
Charles R. Tips Family Tr., 459 S.W.3d at 153 (citing cases).
The rule that written words prevail over numbers applies to the note. See id.
(citing Tex. Bus. & Com. Code § 3.114). It does not matter that the discrepancy
between the words and the numerals is large. See id. Here, the words “One Hundred
Thousand and 00/100 Dollars” control over the numerals $325,000. See id.
Accordingly, the note includes a sum certain.
Below, Texas Capital Holdings relied on two cases involving notes that are
distinguishable from the note presented here. The first case involved a note that was
not a negotiable instrument because it was a revolving line of credit and thus did not
include an unconditional promise to pay a sum certain or a fixed amount. Bank of
Am., N.A. v. Alta Logistics, Inc., No. 05–13–01633–CV, 2015 WL 505373, at *3
(Tex. App.—Dallas Feb. 6, 2015, no pet.) (mem. op.). The second case involved a
note from which “the date of cash advance [could] not easily be determined” and the
amount of interest could not be determined because it “accrue[d] on the unknown
cash-advance date.” Wiggins, 2017 WL 3301395, at *4. Neither of those scenarios
apply here. The only dispute here involves a conflict between the words and
numerals, which is resolved by statute.
We note, however, that Mulley has pleaded that he holds a note for $325,000.
He has also briefed that he holds a note for $325,000, claiming a scrivener’s error.
Applying the well-settled interpretive rule that “words prevail over numbers,” the
note held by Mulley is for $100,000 and not the higher amount of $325,000. To hold
otherwise would contradict Mulley’s argument that the note is a negotiable
is not barred in the state where the cause of action arose.” Hollander v. Capon, 853 S.W.2d 723,
727 (Tex. App.—Houston [1st Dist.] 1993, writ denied).
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instrument that includes a “sum certain.”5
Because we conclude the note includes a sum certain, it is a negotiable
instrument, and the six-year statute of limitations applies. See Tex. Bus. & Com.
Code § 3.118(a). Accordingly, the trial court erred in rendering summary judgment
in favor of Texas Capital Holdings. We sustain Mulley’s first issue and turn to
Mulley’s second issue that Texas Capital Holdings acknowledged the debt during
an email conversation in April 2020.
II. Acknowledgment of Debt
In his second issue, Mulley contends that the evidence presented conclusively
demonstrated that Texas Capital Holdings acknowledged the debt during an email
conversation in April 2020. A suit on a debt is separate from a suit on a later written
acknowledgment of the debt, and the latter is not barred by limitations merely
because the former is. DeRoeck v. DHM Ventures, LLC, 556 S.W.3d 831, 834 (Tex.
2018). The Texas Supreme Court has held that an acknowledgment must “1) be in
writing and signed by the party to be charged; 2) contain an unequivocal
acknowledgment of the justness or the existence of the particular obligation; and 3)
refer to the obligation and express a willingness to honor that obligation.” Id.
(quoting Stine v. Stewart, 80 S.W.3d 586, 591 (Tex. 2002)); see also Tex. Civ. Prac.
& Rem. Code §16.065 (“An acknowledgment of the justness of a claim that appears
to be barred by limitations is not admissible in evidence to defeat the law of
limitations if made after the time that the claim is due unless the acknowledgment is
5
“It does not matter that the discrepancy between the words and numbers here is a large
one. Neither Section 3.114 nor Texas law makes a distinction on the basis of the size of the
obligation or the significance of the conflict in terms.” Charles R. Tips Family Tr., 459 S.W.3d at
154. On the appellate record before us, neither party brought an action to reform the instrument
within four years, so no issue of equitable relief has been presented in this appeal. See CA Partners
v. Spears, 274 S.W.3d 51, 60 n.4 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (reformation
is subject to the four-year statute of limitations).
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in writing and is signed by the party to be charged.”).
A claim of acknowledgment does not always require an explicit promise to
pay. DeRoeck, 556 S.W.3d at 834. “[I]f the writing acknowledges the justness of the
claim, the acknowledgment imports (1) an admission that the claim is a subsisting
debt and (2) a promise to pay it, if unaccompanied by any circumstances repelling
the presumption of willingness or intention to pay.” Hanley v. Oil Capital Broad.
Ass’n, 171 S.W.2d 864, 865 (1943). The acknowledgment can come before or after
suit on the original debt is barred by limitations. Cain v. Bonner, 194 S.W. 1098,
1098 (1917). A pleading of acknowledgment must be made “upon the new promise”
and “must declare upon it as [the] cause of action, in order to avoid respondents’
plea of limitation.” Hanley, 171 S.W.2d at 866. “The correct practice is either (1) to
quote the writing alleged to constitute the new promise, or (2) to attach it to the
pleading as an exhibit.” Id.
Rule 47 requires that “[a]n original pleading which sets forth a claim for relief
. . . shall contain . . . a short statement of the cause of action sufficient to give fair
notice of the claim involved . . . .” Tex. R. Civ. P. 47(a). There is no exception for a
pleading of acknowledgment. DeRoeck, 556 S.W.3d at 835.
Here, Mulley filed this lawsuit alleging that Texas Capital Holdings defaulted
on the note in December 2015 and made material misrepresentations that
fraudulently induced Mulley into entering the aforementioned promissory note. On
the appellate record before us, there is no evidence that Mulley amended or
otherwise supplemented his pleadings to include a claim for an acknowledgment
“upon the new promise” purportedly made by Texas Capital Holdings in the April
2020 email correspondence. Therefore, Mulley cannot raise this issue for the first
time on appeal. Tex. R. App. P. 33.1. Accordingly, we overrule Mulley’s second
issue and address his third issue.
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III. Improper Affirmative Defense
In his third issue, Mulley contends that Texas Capital Holdings did not plead
its affirmative defense of statute of limitations with adequate specificity.
A party that relies on an affirmative defense must specifically plead the
defense, and, when the rules of civil procedure require, must verify the pleading by
affidavit. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 494 (Tex. 1991). A
properly pled affirmative defense, when supported by uncontroverted summary
judgment evidence, may serve as a basis for summary judgment. Id.; Johnston v.
McKinney Am., Inc., 9 S.W.3d 271, 280 (Tex. App.—Houston [14th Dist.] 1999,
pet. denied). Even an unpled affirmative defense may serve as the basis for summary
judgment when it is raised in the motion for summary judgment if the opposing party
does not object to the lack of pleading either in a written response to the motion for
summary judgment or before the rendition of judgment. Roark, 813 S.W.2d at 494.
Unpled claims or defenses that are tried by express or implied consent of the parties
are treated as if they had been raised by the pleadings. Id. at 495. A party who allows
an issue to be tried by consent and who fails to raise the lack of a pleading before
submission of the case cannot later raise the pleading deficiency for the first time on
appeal. Tex. R. Civ. P. 67.
Whether the affirmative defense is pled or unpled, the defendant must
conclusively establish all of the essential elements of the affirmative defense to be
entitled to summary judgment. Roark, 813 S.W.2d at 495. A party asserting a
limitations defense must allege it in its answer to the plaintiff’s pleadings. Tex. R.
Civ. P. 94. Statute of limitations is an affirmative defense that must be pled by a
defendant or it is waived. Id.; Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143,
155 (Tex. 2015).
In this case, Mulley pleaded two causes of action in his petition—default and
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fraudulent inducement. In response, Texas Capital Holdings filed an amended
answer asserting that “[Mulley’s] claims are barred by the applicable statute of
limitations.” As explained above, the note is a negotiable instrument, and the six-
year statute of limitations applies. See Tex. Bus. & Com. Code § 3.118(a). Therefore,
the trial court abused its discretion in granting summary judgment on Mulley’s first
claim. On the other hand, Mulley’s fraudulent inducement claim is governed by a
four-year-statute of limitations. Tex. Civ. Prac. & Rem. Code § 16.004(a)(4).
Because Mulley alleged that Texas Capital Holdings made material
misrepresentations regarding the note dated November 24, 2014, and has not pleaded
the discovery rule, the fraudulent inducement claim is barred by the statute of
limitations.
Concluding that Texas Capital Holdings properly pleaded its affirmative
defense of statute of limitations as to Mulley’s fraudulent inducement claim, we
sustain Mulley’s third issue as to the default claim only. Because we concluded that
the note is a negotiable instrument, and the six-year statute of limitations applies,
whether the trial court erred in failing to grant a continuance for further discovery is
not dispositive. See Tex. R. App. 47.1.
Conclusion
Having sustained in whole or in part, Mulley’s first and third issues, we
reverse the judgment and remand the case to the trial court for further proceedings
limited to the trial court’s grant of summary judgment on Mulley’s default claim.
/s/ Frances Bourliot
Justice
Panel consists of Chief Justice Christopher and Justices Bourliot and Spain.
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