Opinion ID: 6444
Heading Depth: 3
Heading Rank: 4

Heading: Point of accrual

Text: 28 The determinative issue on appeal is whether the court below measured the statutes from the appropriate reference point--i.e., whether it chose the correct point of accrual. United Postal's fraud, negligent misrepresentation, and fiduciary duty claims were based upon Stewart's alleged failure to disclose the substitution of the second liens for cash down payments. The second liens were filed in March of 1984, and the district court charged United Postal with constructive knowledge of the existence of these liens at the time they were filed of record. Thus, it concluded, the statutes of limitations ran by March of 1988, and United Postal's cross-claim filed in 1990 was simply too late. Similarly, the court below held that the contract claim--based upon Stewart's purported failure to follow Congressional's closing instructions--accrued no later than March 15, 1985, when the second lien notes were filed in the Dallas County deed records. 29 The court below correctly cited the relevant Texas authority holding that a cause of action for fraud is generally considered to accrue either when the fraud is discovered or when the facts giving rise to the fraud claim are discovered or might reasonably be discovered through reasonable diligence--the so-called discovery rule. See Mooney v. Harlin, 622 S.W.2d 83, 85 (Tex.1981); Lightfoot v. Weissgarber, 763 S.W.2d 624, 626 (Tex.App.--San Antonio 1989, writ denied). We disagree, however, with the district court that the recording date of the second liens started the limitations period. The court below principally relied upon the Texas Supreme Court's opinion in Mooney, which it interpreted as charging United Postal, the mortgage owner, with constructive knowledge of the public records concerning its property. United Postal contends that the opinion below improperly interprets Mooney to provide that a recording in the deed records constitutes a wholesale constructive notice of the contents to anyone having an interest relating to the property. Mooney involved the claims of a former girlfriend and care-giver against the estate of her lover. She did not file her lawsuit for fraud against the estate until over four years after the will had been admitted to probate. Mooney, 622 S.W.2d at 84. The Texas Supreme Court held that her claims were too late because [e]xamination of the probate records would have disclosed that the will made no bequest to the plaintiff. Id. at 85. In this context, the Texas court stated that [a] person is charged with constructive knowledge of the actual knowledge that could have been acquired by examining public records. Id. Important to the holding, however, was the fact that Texas law charges all persons interested in an estate with knowledge of the contents of the probate records. Id. (citing Salas v. Mundy, 59 Tex.Civ.App. 407, 125 S.W. 633, 636 (Amarillo 1910, writ ref'd)). Therefore, the recording of a document in public records serves as constructive notice for limitations purposes only for those persons who are under an obligation to search the records. Lightfoot, 763 S.W.2d at 627; Cox v. Clay, 237 S.W.2d 798, 804 (Tex.Civ.App.--Amarillo 1950, writ ref'd n.r.e.) ([I]t is settled by numerous decisions of our courts that [a duly recorded instrument] carries notice of its contents only to those who are bound to search for it....). 30 Once United Postal acquired its interest as assignee of Congressional, it was not required to make continuous searches of the real property records for interests subsequently secured. Biswell v. Gladney, 213 S.W. 256, 258 (Tex.Comm'n App.1919) (A mortgagee is not charged with constructive notice of a subsequently recorded deed conveying part of the land involved.); see also Cox v. Clay, 237 S.W.2d at 804 ([T]he object of all registration acts is to affect with notice only such persons as have reason to apprehend some transfer or incumbrance prior to their own, because none arising afterwards can affect them or their estate in the land.); Boucher v. Wallis, 236 S.W.2d 519, 526 (Tex.Civ.App.--Eastland 1951, writ ref'd n.r.e.) (observing that the purpose of [the Texas] recording laws is to notify subsequent purchasers ... and not to give protection to the alleged perpetrators of fraud.) (emphasis added); cf. Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903, 908 (Tex.1982) (noting that recordation gives constructive notice of facts disclosed by the documents within a chain of title to a purchaser). Thus, the recordation of the second liens after United Postal had already acquired its interests as mortgagee was not sufficient to put United Postal on notice of its potential claims against Stewart and commence the limitations period. Cox v. Clay, 237 S.W.2d at 803-04. 31 Thus concluding that the date of recordation is not the relevant focus for our accrual analysis, we must determine what facts were sufficient to put United Postal on notice of any malfeasance and when those facts were, or should have been, discovered. Doubtlessly, when United Postal learned of the existence of the second liens or of the failure to provide cash down payments at closing, its fraud and breach of fiduciary duty claims would have accrued. We agree with Stewart that United Postal's receipt of HGIC's complaint after it was filed on January 22, 1986, was sufficient to start the clock. In that pleading, HGIC set forth ample allegations of wrongdoing on Stewart's behalf and put United Postal on notice of the asserted actions and omissions which form the basis of the October 1990 cross-claim. 32 United Postal concedes that it received the complaint and that its cross-claim contained virtually the same factual allegations against Stewart as [HGIC] had alleged against Stewart [in its 1986 complaint], but argues that it did not have sufficient proof to make such allegations against Stewart until the Baker deposition in May of 1990. Without the evidence from the Baker deposition, United Postal contends that it would have risked violating Federal Rule of Civil Procedure 11 by filing a claim based upon unsubstantiated assertions. What United Postal fails to appreciate, however, is the fact that Rule 11 has absolutely nothing to do with the discovery rule. The cause of action was deferred only until United Postal acquired knowledge of the facts giving rise to its claim, not until it had sufficient facts to prove the allegations. Therefore, we conclude that United Postal was put on notice of sufficient facts as would alert it to its potential fraud claims against Stewart in January of 1986, when it received a copy of the complaint in the case at bar, and its delay in filing a claim for over four years after that date resulted in the claim being barred. 8 33 As will be discussed in greater detail in section II.B.1.a infra, we hold that the discovery rule is not applicable to negligent misrepresentation claims under Texas law and apply the general rules of accrual for negligence causes of action. 9 Because a cause of action sounding in negligence accrues at the time of the act or omission alleged to constitute negligence, Fusco v. Johns-Manville Products Corp., 643 F.2d 1181, 1183 (5th Cir. Unit A 1981), and the events giving rise to potential liability took place in late 1983, the statute ran out long before United Postal filed its cross-claim in 1990. Accordingly, the district court correctly dismissed these claims. 34