Williams v. Khalaf

802 S.W.2d 651, 34 Tex. Sup. Ct. J. 133, 1990 Tex. LEXIS 144, 1990 WL 194034
CourtTexas Supreme Court
DecidedNovember 28, 1990
DocketC-8467
StatusPublished
Cited by247 cases

This text of 802 S.W.2d 651 (Williams v. Khalaf) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Williams v. Khalaf, 802 S.W.2d 651, 34 Tex. Sup. Ct. J. 133, 1990 Tex. LEXIS 144, 1990 WL 194034 (Tex. 1990).

Opinion

OPINION ON MOTION FOR REHEARING

RAY, Justice.

Our prior opinion is withdrawn and the following substituted. We overrule respondent’s motion for rehearing.

This is a statute of limitations case in which a counterclaim for breach of contract was amended to include a claim for fraud involving the same underlying transaction or occurrence. The trial court rendered judgment for the counterclaimant on the jury verdict for fraud. The court of appeals reversed and rendered, holding that the statute extending the statute of limitations for the filing of amended pleadings involving the same transaction or occurrence did not apply because of a “relation back” theory. The court of appeals held the amended pleading merely “related back” to the original counterclaim date, at which .time fraud causes of action were barred by the two-year statute of limitations. 763 S.W.2d 868 (1988). Because the court of appeals erred by overlooking 1979 amendments to the limitations statutes that make the limitation period for fraud four years, we reverse the judgment of the court of appeals and remand the cause to that court for determination of factual sufficiency points.

*653 Facts and Procedural History

In July 1980 George Khalaf and William J. Williams agreed orally to be in partnership to construct and operate a country and western club. The agreement was reduced to writing and signed by the parties on September 9, 1980. Williams was to build the club at cost, and Khalaf was to finance the construction. Both would share in the ownership of the business. Williams continued construction of the club until he discovered in the latter part of September that Khalaf had incorporated the business on September 17, 1980, and had excluded Williams from ownership. Williams left the job site saying he had been fired. Kha-laf contended that Williams had wrongfully quit the construction project.

Khalaf filed suit against Williams in October 1980. Khalaf pleaded Williams’ allegedly wrongful conduct in the transaction on the alternative legal theories of breach of contract, fraud, constructive fraud, conversion, and breach of fiduciary duty.

Williams initially filed only a general denial, but in October 1983 he filed a counterclaim asserting a cause of action for breach of contract. The amended pleading was filed well within the four-year statute of limitations 1 which applies to breach of contract actions. In September 1986 Williams filed an amended pleading asserting for the first time a cause of action for fraud arising out of the same transaction and based on the same facts. Khalaf responded to this amended pleading with an affirmative pleading alleging, in part, that the fraud cause of action was barred by limitations.

Trial was to a jury which generally answered the submitted issues favorably for Williams but unfavorably for Khalaf. The jury found Khalaf breached the contract and committed fraud. The jury found zero damages for breach of contract but over $180,000 damages for the fraud. No limitations issues were submitted to the jury.

The trial court rendered judgment for Williams on the jury verdict for $181,-229.85, plus attorney’s fees and costs. Khalaf appealed. The court of appeals reversed and rendered judgment that Williams take nothing, holding that his fraud counterclaim pleading was barred by an unspecified provision of the two-year statute of limitations. The court of appeals also held that a special amended-pleading saving statute did not save Williams’ claim for fraud. The court of appeals applied a “relation back” rule to conclude that in the saving statute one tested whether the newly-pleaded cause of action would have been barred when the pleading for the first cause of action (breach of contract) was filed.

Statute of Limitations for Fraud

The special amended-pleading saving statute is section 16.068 of the Civil Practice and Remedies Code, which was formerly codified as article 5539b of the Revised Civil Statutes. It provides:

If a filed pleading relates to a cause of action, cross action, counterclaim, or defense that is not subject to a plea of limitation when the pleading is filed, a subsequent amendment or supplement to the pleading that changes the facts or grounds of liability or defense is not subject to a plea of limitation unless the amendment or supplement is wholly based on a new, distinct, or different transaction or occurrence.

Tex.Civ.Prac. & Rem.Code Ann. § 16.068 (Vernon 1986).

The court of appeals apparently assumed that a fraud pleading would have been barred by some two-year statute of limitations if it had been filed in 1983 as the original counterclaim. The court of appeals reasoned that under a “relation back theory” the fraud cause of action arising from the same transaction was barred. Under section 16.068, the amended pleading for fraud is clearly not time-barred even under such a relation back theory if the limitations period for fraud is also four years. The court of appeals cited no provision of the limitations statute for its assumption that fraud is barred in two years. If the court of appeals was wrong on that assumption, then whether the “relation back theory” applies is immaterial. We express no opinion on the “relation back *654 theory” adopted by the court of appeals because we hold the court’s underlying assumption that fraud claims are barred in two years is erroneous.

There is no limitations statute expressly applying to “fraud,” “deceit,” “misrepresentation” or any similar term. This court in early decisions held that a suit for fraud is considered, for limitations purposes, an action on a debt. Gordon v. Rhodes & Daniel, 102 Tex. 300, 301-302, 116 S.W. 40, 41-42 (1909). This court wrote in unequivocal terms:

It [the case] is an action for money recoverable as damages for a fraud, such as would always have been maintainable at law without the necessity of applying to equity for relief. It is an action for a “debt,” as that word in the statutes of limitations has been interpreted, and hence it is governed by the two-years statute.

Id. at 302, 116 S.W. at 42.

This determination was consistent with this court’s practice of selecting the common law term for a cause of action of those enumerated in the statutes of limitation that is most analogous to the modern counterpart. Id. at 301, 116 S.W. at 41.

On motion for rehearing, several amici have questioned the validity of Gordon v. Rhodes & Daniel. They argue, primarily based on this court’s opinion in First National Bank v. Levine, 721 S.W.2d 287 (Tex.1986), that fraud is a “tort” and as such is a “trespass” for purposes of the statute of limitations. 2 They rely on our analysis of the development of the common law in Levine, because the law of torts developed from the “trespass” action of English common law.

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Cite This Page — Counsel Stack

Bluebook (online)
802 S.W.2d 651, 34 Tex. Sup. Ct. J. 133, 1990 Tex. LEXIS 144, 1990 WL 194034, Counsel Stack Legal Research, https://law.counselstack.com/opinion/williams-v-khalaf-tex-1990.