Collections

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Defenses- Part 1

LAW OFFICES OF SAM EMERICK, P.C.

Feb. 4, 2018

 

Today’s blog will center on some of the defenses available in a breach of contract action, concerning Texas collections cases. The first area we will address often seen by Texas collection attorneys is the defense of ‘waiver’. A Waiver is defined as an intentional relinquishment of a known right and is either made expressly or indicated by conduct, that is inconsistent with an intent to claim the right. Several recent Texas Supreme Court cases construing “waiver” are as follows:

  1. Ulico Cas. Vs. Allied Pilots, 262 S.W.3d 773 (Tex. 2008);
  2. Jernigan v. Langley, 111 S.W.3d 153 (Tex. 2003)
  3. Perry Holmes v. Cull, 258 S.W.3d 580 (Tex. 2008)

Of course, the defense of waiver is fact-specific, with the court looking, not usually for an express statement by a Plaintiff that he has waived a claim, but really, conduct indicating that Plaintiff has waived his rights. One way to indicate an intent to claim a right, thereby waiving the right, would be the Plaintiff’s prolonged silence or inaction, in asserting a known right. Martin v. Birenbaum, 193 S.W.3d 677 (Tex. App. – Dallas 2006, pet. denied).

The Plaintiff’s intent is the primary factor in determining waiver, and in the absence of a clear intent expressed in words, acts, or conduct, waiver will be implied only to prevent fraud or inequitable consequences. Stowers v. Harper, 376 S.W.2d 34 (Tex. App. – Tyler 1964, writ ref’d n.r.e.).

Also, a Plaintiff may affirm a contract which has been breached, thereby waiving Plaintiff’s claim for breach of the contract, in one of two ways, such as:

  1. Showing a conscious intent to waive its claim, or
  2. Plaintiff acting to induce the Defendant’s detrimental reliance, thereby creating an estoppel situation.

There are several different fact scenarios which do not necessarily constitute waiver in Texas. The first would be Plaintiff accepting Defendant’s late performance. Another case out of the Tyler Court of Appeals held that when Plaintiff accepted late payments from Defendant, this did not clearly and unequivocally show that Plaintiff intended to relinquish its rights on prompt payment. Also in breach of contract situations, if a Plaintiff continues to perform after Defendant breaches, that is not necessarily a waiver situation. Also, where Plaintiff honestly tries to induce the Defendant to continue to perform Defendant’s obligation on the contract, this will not necessarily show a clear intent by Plaintiff to waive its rights.

We have much more to cover next week so please stay tuned for Part 2 on Defenses.

Contact Us

If you have any questions about this topic or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

 

 

What sort of defenses should I expect? What damages can I recover?

Q- what sort of defenses should I expect him to try?

Defenses sometimes asserted include Limitations, unclean hands, voluntary payment by Plaintiff, or pleading that the money is stolen money, even from a good-faith purchaser for value. Texas Bank v. Custom Leasing 498 SW2d 243 (Tyler 1973), and also ‘Unclean hands’, may include factors showing that Plaintiff’s conduct indicate a lack of good faith, or lack of ordinary care. Where Defendant shows that Plaintiff paid with full knowledge, with no acts of fraud or duress, ‘voluntary payment’ is a valid defense.

Q- what damages can I recover?

You can seek return of the property, plus actual damages. These actuals are the measure necessary to fully compensate Plaintiff for all injuries sustained, not merely the market value. Reuber Chevrolet v. Grady Chevrolet (Dallas 2009). Also recoverable are the ‘loss of value’ which includes fair market value plus interest at the highest legal rate. Khorshid v. Christian (Dallas 2008). Here, Plaintiff recovers for the time period, while he was deprived of it’s use. In some cases the ‘intrinsic value’ of the property not returned is an additional measure of damages. Lost profits are also recoverable; courts consider the particular circumstances of each case here. Bures v. 1st National (Corpus Christi 1991). Plaintiff must prove Defendant had notice of the lost profits; generally ‘Lost Profits’ is a larger subject for another Blog post.

Contact Us

If you have any questions about this topic, or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

 

Defendant is Holding My Money; How Do I Get it Back?

This cause of action, in Texas collections, used to be called ‘assumpsit’. It is an equitable claim that usually should be pleaded in the alternative to another claim such as ‘conversion’ which will be discussed later.

This theory is usually applied to prevent unjust enrichment, and is based on a debt not evidenced by a writing, such as contract, promissory note, etc. So we’re talking here about an oral agreement. The theory asks whether Defendant is holding money that belongs to Plaintiff, and therefore, for Dallas collections lawyers, it is less restricted to technical rules and formalities. Staats v. Miller 243 SW2d 686 (Tex. 1951). If the money, in good conscience and equity belongs to Plaintiff, Plaintiff prevails in ‘money had and received’.

Whether Defendant has obtained the money wrongfully is irrelevant to this inquiry, wrongfulness is not the premise, but instead, the question asks whether Defendant received money, and that Plaintiff is the owner of the money, so it rightfully belongs to Plaintiff.

Q- what is what he is holding, is not exactly ‘cash’?

“Money” as used here, includes actual money itself, but also the equivalent of money such as property received as money and/or property converted into money before the lawsuit. Thus, the proceeds of a sale are included, including where parties agree beforehand to divide up proceeds from a sale, or, if property is on consignment. Very often, in Texas collections actions, this is an appropriate theory to collect on a dishonored check. It is also used when money has been paid by mistake. Also refunds being held; Tanglewood v. City of Texarkana 996 SW2d 330 (Texarkana 1999).

Damages recoverable include the amount of money being withheld, obviously, but also, upon proof of fraud and/or malice, exemplary damages are recoverable. Injunctive relief is also available, costs and interest, but not attorney’s fees. Edwards v. Mid-Continent (Dallas 2008); also Nowak v. Los Patios (San Antonio 1995).

Contact Us

If you have any questions about this topic, or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

 

What if the false statement of a Defendant was just ‘an opinion’?

An opinion may also be fraudulent if the Defendant knows that the statement of opinion is false, or if the opinion stated is based upon or supported with false statements of fact, that is intertwined with misstatements of fact, or if the opinion is based upon the Defendant’s special knowledge and the Defendant should have known that the Plaintiff was justified in relying upon Defendant’s special knowledge.

Especially in factoring litigation in Texas, a fraudulent misrepresentation may consist of a false promise by the Defendant of future performance. To prove a false promise of future performance, the factor must establish and prove that Defendant made a promise with no intention of performing it. This is not to be confused with a mere breach of contract which would be a situation where the Defendant enters into a contact and then later decides not to perform it. This theory is sometimes difficult to prove because the factor, or judgment creditor must show that the representation was sufficiently certain, and of a type that a person could reasonably and justifiably rely upon. Also, it is often difficult to show that the Defendant had no intention of performing the promises, when they made the promise. A mere breach is not sufficient to support this element. Texas courts have held that even slight circumstantial evidence of fraud, when considered with a breach of contract, is enough to find and infer intent not to perform.

Another sort of fraudulent representation is one made by conduct. Deceptive conduct is equivalent to a false statement of fact. In proving your fraud claim, the other element discussed previously, was that the false representation was made knowingly or recklessly. Again, either direct or circumstantial evidence may be alleged and proved to show that Defendant made a statement with or without knowledge of the representations truth. A “knowingly” representation is made by Defendant who is aware of the statement’s falsity or understands that it is false. A “reckless” representation is made if a Defendant makes the representation without any knowledge of its truth, and makes the representation as a positive assertion of fact. It has been stated that a representation is made recklessly when a Defendant knows that the Defendant does not have sufficient information or a basis to support the representation or if a Defendant realizes it does not know whether the representation is true or not.

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

I’m a factoring company, and I’m not being paid; what are the elements of ‘fraud’?

We last discussed factoring agreements and breach of contract claims, in relation to Texas debt collection attorneys. Related to the factoring agreement, in collection on the contract, in the context of Texas debt Collection actions, the creditor will often discover fraud, sometimes referred as” fraudulent misrepresentation” or “fraudulent inducement”. First, let’s set forth the elements of a common law fraud cause of action, as follows:

  1. The Defendant made a material representation to the Plaintiff
  2. Such representation was false
  3. When the Defendant made such representation, he knew the representation was false; or
  4. The representation was made recklessly as a positive assertion, without Defendant’s knowledge of its truth
  5. Defendant’s made such representation, with an intent that the creditor act upon the representation
  6. Plaintiff reasonably relied upon such representation, thereby causing injury to the creditor. Exxon v. Emerald Oil 348 SW3d 194 (Tex. 2011).

More on FACTORING and BREACH OF CONTRACT, next week…

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

Can I Draft My Own Liquidated Damages Provision? Can I Use These With a ‘Bonus Provision’ Too?

Q- Is it a good idea to draft one of these Liquidated Damages provisions myself?

As would be expected, many clients, when drafting the liquidated damages provision, will specifically state in the contract, that their liquidated damages provision is not a penalty, however, you cannot depend upon the inclusion of that sort of language, though it may carry some weight with the court, but ultimately, it is for the court to determine whether or not such clause is enforceable, and will use the factors mentioned in this paper. It is also important for the parties to clearly specify exactly when it is, that the damages will begin to accrue. This is a triggering mechanism, can occur at any point that the parties specify, and the contract may of course include certain milestones, or dates, that the parties agree will be some substantial completion, or final completion.

Q- Can I use these with a ‘bonus provision’ too?

If the contract is determined to have an actual enforceable liquidated damages provision, that clause will control the amount of damages that a client may recover. It would not be uncommon for client to ask its attorney if it can waive such provision, when the client believes that it could recover more money, by seeking recovery of actual damages instead. Parties may often choose to not only include a liquidated damages provision in the contract, but also a bonus provision, which would come into effect for completing a project on time, and within budget., For instance. Both the liquidated damages clause and bonus provision, may exist, one without the other, but be aware that a court could rule that the opposite of a bonus provision is actually a prohibited penalty clause, and therefore invalidate the entire provision.

These provisions are not appropriate for all work in all projects. If the provision is tied to a critical milestone date, that’s okay, but may actually be not useful if it causes the contractor to expedite work at the end, at the expense of the quality of his work.

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

Is a ‘Liquidated Damages’ Paragraph a Good Idea in the Construction Business? And How do the Texas Courts Look at These Things?

Q- Is a ‘liquidated damages’ paragraph a good idea in the construction business?

Especially in construction cases or any case involving a specific amount of time, in which the services must be performed, liquidated damages may be a proper measure of damages. So, in Dallas debt collection, the liquidated damages clause is a stipulation, between contracting parties, which establishes in advance, the amount of damages, in the event that the contract is breached, by failing to complete a project on time. Many times these provisions as to damages will be determined on a per day basis. Because it is often very difficult, to predict at the beginning of a certain project, the amount of potential damages that would be suffered in the event that a project is delayed, it is not unusual that clients request a liquid liquidated damages provision, in order to deal with that uncertainty. This can be very helpful, because by including such a provision in the contract, the client can hold others accountable for delays in performance, without being involved in the exercise of actually proving the actual damages.

Q- How do the Texas courts look at these things?

A fairly recent case discussed liquidated damages at length, and for the Texas debt collection attorney, it is worth reviewing; Polimera v. Chemtex Environmental 2011 Tex App Lexis 3886 (Beaumont 2011). In this case, the Texas Court of Appeals found a liquidated damages clause and enforceable. The court restated the standard that whether a contract was a good enforceable contract is a question of law, and whether a liquidated damages provision is enforceable, is also a question of law. Court also said that evidence regarding “the difficulty of estimating damages and whether the amount of damages is a reasonable forecast of just compensation”, must be viewed as of the time the contract was executed, and cited the Baker case, above. The court further spoke to the issue of whether it was a penalty, by saying “if the liquidated damages are proven to be disproportionate to the actual damages, the liquidated damages can be declared a penalty, and recovery were limited to actual damages.”. TXU Portfolio v. FPL Energy; 328 SW3d 580 (Dallas 2010). The Beaumont court also stated that the burden of proving that the provision was a penalty, is on the party challenging the liquidated damages clause. They went on to say that generally, when asserting this defense, that party must prove the amount of the other party’s actual damages, in order to show that the provision set forth in the agreement, was not an actual approximation of actual loss.

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

What Sort of Duties are Owed, by the Fiduciary?

The second aspect, proving breach, you first must understand what duties are owed by the fiduciary.  The duties owed generally by fiduciaries are the duty of loyalty and  utmost good faith, of candor, to refrain from self-dealing, also to act with integrity of the strictest kind, and of fair, honest dealing, and of full disclosure.  The disclosure element is important because it includes a duty to disclose all important information concerning the transaction, including matters that might influence a fiduciary to act in a manner prejudicial to the principal.

There are also specific fiduciary duties to consider.  These are usually imposed by common law or the Texas Trust Code regarding management and investment of trust assets.  Some of them are:

Fiduciary Duty1.    The duty of good faith, fair dealing, loyalty and fidelity over the trusts affairs and its principle
2.    To make the assets of the trust productive while also preserving the assets
3.    To fully disclose all material facts known to the trustee that might affect the beneficiaries rights
4.    To account to the beneficiaries for all trust transactions
5.    To properly manage, supervise and safe-guard the trust funds
6.    To refrain from self-dealing with the assets
7.    To refrain from lending funds to one’s self or one of its affiliates
8.    To invest and manage the assets as a prudent investor would considering all circumstances

Contact Us

If you have any questions about fiduciary duty or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

 

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

 

Sam Emerick, Collections Attorney

 

 

 

 

 

 

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

QUANTUM MERUIT – Part 2 of 2

This is the conclusion of my discussion from my previous post. When providing evidence that Defendant accepted the benefit provided, Plaintiff can prove acceptance w/ evidence that Defendant knew the services were being furnished, but made no objection. Colbert v. Dallas Joint 150 SW2d 771 (Tex. 1941), or as in a Corpus Christi case from 1977, that a ‘city official knew Plaintiff was installing air conditioning units, but did not object’.

Did Defendant have reasonable ‘notice’ that plaintiff expected compensation? If Plaintiff does not submit a bill for 9 years, the answer is no. Attorneys expect to be paid, so a Defendant may have notice that Plaintiff expects to be paid. Whether Defendant has “reasonable notice” will depend on what he ‘knew’ or ‘should have known’ at the time the services were provided. Tricon v. Thumann 226 SW3d 494 Houston 1st 2006, pet. denied). Plaintiff’s proof of whether payment would normally have been expected under the circumstances, by evidence of trade usage. PIC Realty v. Southfield 832 SW2d 610 Corpus 1992, no writ).

Remember Vortt, above (Sup Ct.) said Plaintiff may show it expected money or “other payment”, in a QM claim. Plaintiff may only recover money damages, even if plaintiff expected something else, at the time. The reasonable value of the services is what is paid in the community. Plaintiff can recover even if the work provided is of no value to Defendant. Shafer v. Controlled Air 742 SW2d 717 (San Antonio 1987). Prejudgment and post judgment interest is recoverable. Attorney’s fees are also recoverable under sec. 38.001 (1-3) Tx. Civ. Prac. & Rem. Code.

The statute of limitations for QM is 4 years.

The standard defenses are available: covered under an express contract; ‘unclean hands’ i.e. Plaintiff behaved unfairly; or offset, under which Defendant proves Plaintiff’s services were defective, and Defendant is entitled to an offset in order to correct the defects of the services provided. Other breach-of-contract defenses may also apply.

Promissory estoppel is often pleaded as an alternative to QM. The Texas Sup. Ct. has also suggested that “unjust enrichment” is also available as an independent cause of action. ED&F v. MV FASE 728 F. Supp. 2d 862 (S.D. Tex. 2010), although other courts limit the right to such cause of action.

Other equitable theories are possibly available for QM relief: under ‘equitable estoppel’, a Defendant is prevented from changing his position when he represented facts to, or concealed facts from, the other party, knowing that the other party would rely on the representation to its detriment. This theory arises when the other party changes its position for the worse. Sefzik v. City of McKinney 198 SW3d 884 (Dallas 22006, no. pet.) One El Paso case said equitable estoppel can only be used as a defense Kelly v. Rio Grande 128/759, but, promissory estoppel can be used as a claim or defense, also called ‘justifiable reliance’.

QUANTUM MERUIT – Part 1 of 2

Today’s Blog addresses the Texas collections issue of QUANTUM MERUIT—an equitable theory of recovery, intended to prevent unjust enrichment, when there is AN IMPLIED AGREEMENT TO PAY FOR SERVICES RECEIVED. In re Kellogg Brown 166 SW3d 732 (Tex. 2005), also Barnett v. Coppell 123 SW3d 804 (Dallas, 2003). If an express written agreement covers the transaction in dispute, quantum meruit cannot be brought or used by the Texas collections attorney, because QM is an independent theory that does not arise from a contract.

The elements of QM are as follows:

  1. Plaintiff provided valuable services or materials
  2. The services or materials were provided for Defendant
  3. Defendant accepted the services or materials
  4. Defendant had reasonable notice that Plaintiff expected compensation for the services or materials furnished Excess Underwriters v. Frank’s casing Crew 246 SW3d 42 (Tex. 2008). Upon a jury trial concerning QM, the Texas Pattern Jury Charge can be found at PJC 101.42.

A few cases have addressed situations where QM was not available. The first was LTS Group v. Woodcrest 222 SW3d 918 (Dallas 2007, no pet.) where the Dallas Court correctly ruled that “the expectation of a future business advantage or business opportunity, cannot form the basis of a cause under QM”. However, LTS was decided because of the inadequate proof provided by the furnisher of the services. The furnisher, LTS, only testified, when asked about the basis for its opinion as to the value of the services provided, that ‘most brokers get about 4%.’ The Court said that testimony constituted “no evidence” of the value of the services provided nor was it any evidence of the reasonable value of the work provided, and also quoted the M.J. Sheridan case 731/620 (Houston 1st 1987).

Word to the wise in Dallas commercial collections actions would be, make sure you prove up your QM damages, thoroughly. LTS was later cited by the Houston 1st Dist. case of Green Garden v. Schoenmann 2010 Tex App. LEXIS 8887 (Nov. 2010). In Green it was argued that a QM recovery is not available when a party provides services “merely in hopes of obtaining a future business relationship”. The Houston Court however, stated the Tx. Supreme Court view that “in certain circumstances, a party who provides services with an expectation of entering into a future business agreement may seek recovery of the value of said services” under QM if there is sufficient evidence of the remainder of the QM elements. Vortt Exploration v. Chevron 787 SW2d 942, (Tex. 1990). In Vortt, the Tx. Sup. Ct. also noted that the parties had been negotiating for 4 years to reach a joint operating agreement, and services were provided only in the expectation that such agreement would be reached. Under those circumstances a QM claim was allowed.

Also, if the service provider provides the services, for the provider’s own benefit, no QM claim will be allowed. Again, the services, and evidence about them, must be provided to the Defendant. Check back here for the conclusion of my discussion on Quantum Meruit.