Court Opinion

ID: 4325250
Source: CourtListenerOpinion
Date Created: 2018-10-27 07:29:37.006216+00
Date Added: 2024-06-11T14:46:34.450112
License: Public Domain

In the
          Court of Appeals
  Second Appellate District of Texas
           at Fort Worth
        ___________________________

             No. 02-18-00094-CV
        ___________________________

        MCMC AUTO LTD., Appellant

                       v.

           SIDECARS, INC., Appellee

     On Appeal from the 153rd District Court
             Tarrant County, Texas
         Trial Court No. 153-285175-16

Dissenting Memorandum Opinion by Justice Birdwell
                  DISSENTING MEMORANDUM OPINION

       The resolution of this appeal turns on one question: When did the contract

and tort claims asserted by MCMC Auto Ltd. against SideCars, Inc. accrue?

Unfortunately, the majority’s opinion does not, with any specificity, answer the

question. Rather, with explicit reliance on what “MCMC knew” from October 2010

and November 2010 rulings by a Travis County district court in SideCars’s suit against

the Texas Department of Insurance (the Department), the majority holds that “all of

MCMC’s causes of action accrued” on a nebulous date that was “no later than

November 2010.” Majority op. at 13–14. MCMC’s knowledge was not as fixed as the

majority characterizes because the 2010 rulings upon which the majority relies

remained challenged and uncertain until the exhaustion of SideCars’s appellate

remedies in 2014. 1 I would hold that the unsettled and pending question of the

legality of SideCars’s collateral protection program—a question upon which MCMC’s

injury and the validity of its claims wholly depended—delayed the accrual of

limitations until the illegality became certain. Because the majority does not so hold, I

dissent.

       1
        In addition to the rulings by the Travis County district court, the majority
relies on MCMC’s knowledge in 2010 that the “Department had concluded that
SideCars [was] engaging in the unauthorized business of insurance.” Majority op. at
13. But as explained below, the record establishes that the Department and the Texas
Office of Consumer Credit Commissioner (OCCC) treated that conclusion as
preliminary and unsettled and deferred acting upon the conclusion until the resolution
of appeals in SideCars’s litigation against the Department.

                                           2
      As the majority recognizes, a cause of action accrues when a “wrongful act

causes some legal injury.” Valdez v. Hollenbeck, 465 S.W.3d 217, 229 (Tex. 2015); see

PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P’ship, 146 S.W.3d 79, 93 (Tex. 2004)

(stating that limitations runs upon a “wrongful injury”). But what happens when

whether a defendant’s act was wrongful and whether a plaintiff was injured turns

upon the resolution of a pending legal proceeding? Answering that question, Texas

courts have held that when the certainty of a plaintiff’s injury and the validity of a

plaintiff’s cause of action hinge upon the resolution of a pending legal proceeding

involving the same or similar parties, limitations does not run until the final resolution

of the related proceeding.

      For example, in Hughes v. Mahaney & Higgins, our supreme court considered

whether limitations had run in a legal malpractice case during the pendency of appeals

in the underlying suit in which the malpractice allegedly occurred. 821 S.W.2d 154,

155 (Tex. 1991). There, the plaintiffs alleged that their attorney’s malpractice had

caused a court of appeals to conclude that they lacked standing to seek termination of

a parent’s parental rights. Id. at 156. But the plaintiffs waited to file the malpractice

suit until they unsuccessfully sought the supreme court’s review of the court of

appeals’s decision on standing in the termination suit. Id. When the plaintiffs filed

the malpractice suit, the attorney sought summary judgment on limitations. Id.

      The supreme court held that limitations did not run during the pendency of the

appeals in the underlying suit.      Id. at 156–58.    The court gave two principles

                                            3
supporting its decision: (1) requiring the plaintiffs to pursue their malpractice claim

(which turned on an assertion that their attorney’s malpractice had resulted in their

lack of standing to pursue termination) while appealing the decision in the termination

suit (which rested on an assertion that they had standing) could have compromised

their likelihood of success in both suits,2 and (2) “the viability of the second cause of

action depend[ed] on the outcome of the first.” Id. at 157; see Apex Towing Co. v. Tolin,

41 S.W.3d 118, 118, 121–22 (Tex. 2001) (reaffirming the Hughes rule, describing the

two policy considerations supporting the rule, and explaining that those two policy

concerns “appropriately balance the competing concerns of the need to bar stale

claims and avoid prejudice to defendants yet preserve a reasonable opportunity for

plaintiffs to pursue legitimate claims”); Rogers v. Ricane Enters., 930 S.W.2d 157, 167

(Tex. App.—Amarillo 1996, writ denied) (op. on remand) (“The teaching of [Hughes]

. . . is that a statute of limitations is tolled for a second cause of action in instances

where the viability of the second cause of action necessarily depends upon the

      2
        A similar concern exists here. While MCMC was not a party to SideCars’s suit
against the Department, a suit by MCMC against SideCars for falsely representing that
the collateral protection coverage program was legal before the final resolution of that
issue in SideCars’s litigation with the Department would have equated to a premature
admission by MCMC that the premiums it collected were unauthorized and were
subject to repayment.

                                            4
outcome of the first case and the pursuit of the second suit prior to that outcome

would either be improper or result in judicial complications.”).3

       The two principles leading to the result in Hughes have led to similar decisions

before and after Hughes in circumstances unrelated to legal malpractice. For example,

in Hays v. Talley, a court of civil appeals held that limitations did not begin to run on a

suit related to a breach of a warranty of title of real property until the final resolution

of a related suit in which a court “made evident the want of any title”—the injury—in

the plaintiff who filed the claim for the breach. 161 S.W. 429, 430 (Tex. Civ. App.—

Texarkana 1913, no writ). And in Cavitt v. Amsler, a court of civil appeals held that

limitations did not run in Cavitt’s suit against a milling company that had refused to

transfer stock to him until the conclusion of an appeal in his suit against another

party, Amsler, that established his rights to title and possession of the stock. 242 S.W.
246, 248–49 (Tex. Civ. App.—Austin 1922, writ dism’d w.o.j.) (op. on reh’g). The

court explained,

             We hold that the statute of limitation was suspended during the
       appeal referred to, for the reason that, if [Cavitt] knew that the milling
       company was paying dividends to Amsler, and had filed suit against the

       3
         In asserting that MCMC does not argue for the principles from Hughes to
apply to this case, the majority reads MCMC’s briefing too narrowly. See Majority op.
at 15 n.6. MCMC argues that its injury was not certain in 2010 because “any order of
restitution from the OCCC was contingent on the outcome of SideCars’s lawsuit
against the [Department].” This argument, liberally and reasonably construed,
invokes the principles of Hughes. See First United Pentecostal Church of Beaumont v. Parker,
514 S.W.3d 214, 222 (Tex. 2017) (stating that appellate courts should construe briefs
reasonably, yet liberally).

                                             5
      company and against Amsler to recover the same, the company could
      and doubtless would have replied that the issue involved in such suit was
      the ownership of the stock claimed by both Amsler and Cavitt; that
      Cavitt could not recover dividends until he established his title to the
      stock; and that this was the issue pending in the case on appeal.

Id. (emphasis added); see also Merry Homes, Inc. v. Dao, No. 14-16-00724-CV, 2017 WL
4159206, at *3 (Tex. App.—Houston [14th Dist.] Sept. 19, 2017, no pet.) (mem. op.)

(“[C]ourts have noted that the accrual date on a claim may be delayed where the

viability of a cause of action depends upon the outcome of another case, or a legal

impediment delays the party from bringing the cause of action.”); Pease v. State, 228
S.W. 269, 270–71 (Tex. Civ. App.—San Antonio 1921, writ ref’d) (holding that

limitations in a plaintiff’s suit for salary as mayor of Corpus Christi did not accrue

until the final decision in another proceeding establishing that the defendant was not

entitled to that job); Fields v. Austin, 30 S.W. 386, 387 (Tex. Civ. App.—Dallas 1895,

writ ref’d) (holding that a cause of action for rent did not accrue until all appeals were

exhausted on a suit to determine title to land).

      These decisions that delay a plaintiff’s obligation to file a suit until a pending

suit affecting the dispute between the parties resolves and the plaintiff’s injury with

respect to a particular defendant becomes certain serve several recognized interests.

They protect plaintiffs from the “legally untenable position of speculating about

hypothetical or potential future injuries.” Fisk v. United States, 657 F.2d 167, 171 (7th

Cir. 1981). They promote principles of standing and ripeness, which require concrete,

actual, and particularized injuries, as opposed to contingent or remote injuries. See

                                            6
Friends of the Earth, Inc. v. Laidlaw Envt’l Servs., 528 U.S. 167, 180, 120 S. Ct. 693, 704

(2000); Waco ISD v. Gibson, 22 S.W.3d 849, 852 (Tex. 2000); see also City of Anson v.

Harper, 216 S.W.3d 384, 390 (Tex. App.—Eastland 2006, no pet.) (holding that

plaintiffs’ suit concerning a city’s plan to build a landfill was not ripe because the city’s

permit application with the Texas Commission on Environmental Quality was still

pending and because “[w]hat might happen if the . . . permit application [was]

approved [did] not present a ripe controversy”).                They discourage “premature,

possibly useless, litigation.” Diaz v. Piquette, 496 So. 2d 239, 240 (Fla. Dist. Ct. App.

1986). And they avoid the possibility of conflicting results reached in different suits

litigated in different courts. See Rogers, 930 S.W.2d at 167.

       Under the narrow facts of this appeal, the decisions and principles articulated

above should compel this court to hold that limitations did not begin accruing until

the exhaustion of appeals in SideCars’s suit against the Department. In September

2010, OCCC informed MCMC that MCMC’s obligation to pay restitution to collateral

protection coverage customers was uncertain and contingent on further

developments. In a letter that OCCC sent to MCMC that month, OCCC stated,

       MCMC . . . offers a product to retail buyers described by its own
       documents as . . . collateral protection coverage . . . . MCMC . . . also
       “force places” this product on retail buyers under certain
       circumstances. . . . [I]t is unknown if the character of this product classifies it as
       an insurance product. This issue will be referred to Austin for further consideration.
       Officials in Austin will contact MCMC . . . if further information or clarification is
       necessary. [Emphasis added.]

                                                 7
      OCCC’s September 2010 letter implied, therefore, that any injury to MCMC

caused by SideCars’s collateral protection coverage program depended on a resolution

of the legal validity of that program. And OCCC’s July 2016 letter to MCMC

establishes that OCCC’s position in that regard remained under “further

consideration” until the conclusion of SideCars’s litigation with the Department. That

letter stated that OCCC had informed SideCars in October 2010 that dealers who had

used SideCars’s program would be required to pay restitution, but the letter further

stated, “As [SideCars] and [the Department] were already involved in litigation over

the legality of [SideCars’s] program, it was determined that . . . [OCCC] should refrain

from initiating further action until the completion of the judicial process.”4       In

OCCC’s October 2016 “Order to Cease and Desist, and to Make Restitution,” OCCC

expressly relied on the final ruling against SideCars in its litigation with the

Department. Likewise, in OCCC’s November 2016 “Agreed Order,” OCCC relied

on that ruling to recite that MCMC had “charged and received unauthorized

premiums in connection with the policy marketed by SideCars . . . for the period of

March 1, 2010 to August 31, 2010.”

      OCCC’s letters and orders before and after the resolution of SideCars’s

litigation with the Department establish that MCMC’s obligation to repay premiums

depended on a final resolution of SideCars’s contest to the Department’s claim that

      4
       OCCC’s June 2015 letter to MCMC contained similar language.

                                           8
SideCars’s collateral protection coverage program was illegal. Until the exhaustion of

appeals in SideCars’s suit against the Department, SideCars, OCCC, and MCMC all

considered the legality of SideCars’s collateral protection program and MCMC’s

liability for return of the premiums to be uncertain and contested.

      Finally, and most importantly, the merits of every claim that MCMC has

asserted against SideCars wholly depended on the outcome in SideCars’s suit. See

Hughes, 821 S.W.2d at 157 (“Limitations are tolled for the second cause of action

because the viability of the second cause of action depends on the outcome of the

first.”). A final resolution in SideCars’s suit against the Department that declared the

legality of SideCars’s program would have signified that SideCars committed no

wrongful act and would have foreclosed MCMC’s claims of breach of contract, fraud,

fraudulent inducement, fraud by nondisclosure, negligent misrepresentation, and

violation of the Texas Insurance Code.5 See KPMG Peat Marwick v. Harrison Cty. Hous.

Fin. Corp., 988 S.W.2d 746, 749 (Tex. 1999) (stating that accrual depends upon a

plaintiff’s knowledge of a “wrongfully caused injury”).

      5
        I disagree, therefore, with the majority’s conclusion that MCMC’s injury was
not “contingent upon a future event.” Majority op. at 15. MCMC’s live pleading
indicates that it bases all of its claims on the illegality of SideCars’s program and on
SideCars’s representations and warranties that the program was legal, each of which
hinged on the final resolution of SideCars’s suit against the Department.

                                           9
       SideCars argues, and the majority appears to reason, that limitations accrued at

some point in 20106 because MCMC knew at that time of the Department’s

preliminary conclusion that SideCars’s program “was unauthorized,” knew of the

“exact extent of the top limit of its damages,” and knew of the ruling by the trial court

in SideCars’s case against the Department. But SideCars contested the Department’s

conclusion and the trial court’s ruling through the litigation and appellate processes

and did not itself have fixed, final knowledge of the program’s illegality until 2014. We

should not hold that the Department’s or the Travis County district court’s

preliminary opinions of illegality bound MCMC to immediately litigate its claims

against SideCars when SideCars refused to be bound by those same opinions. Rather,

we should conclude that limitations principles cannot support allowing SideCars to

benefit from the state of uncertainty of the legality of its program caused by its

ultimately meritless suit contesting the Department’s preliminary opinion of illegality.

See Conoco, Inc. v. Amarillo Nat’l Bank, 14 S.W.3d 325, 327 (Tex. App.—Amarillo 2000,

no pet.) (stating that accrual dates should not lead to “individual injustices”).

       For all of these reasons, under the legal principles discussed above, I would

hold that limitations did not begin to run on MCMC’s claims against SideCars until

2014, when the illegality of SideCars’s collateral protection coverage program—the

       Similar to the majority’s statement that limitations accrued “no later than
       6

November 2010,” SideCars proposes five dates in 2010 when limitations might have
accrued.

                                            10
axis of the alleged wrong upon which all of MCMC’s claims depend—went from

contested and unsettled to fixed and certain, therefore substantiating MCMC’s legal

injury.7 See Hughes, 821 S.W.2d at 157; Cavitt, 242 S.W. at 248–49; Hays, 161 S.W. at

430. I would therefore hold that MCMC filed its suit within the limitations periods

corresponding to each of its claims and that the trial court erred by granting summary

judgment for SideCars. Because the majority reaches the opposite conclusion, I

dissent.

                                                    /s/ Wade Birdwell

                                                    Wade Birdwell
                                                    Justice

Delivered: October 25, 2018

      I would hold that limitations began to run in 2014, when MCMC’s legal injuries
       7

became fixed and evident, even though some damages, including OCCC’s later demand
for MCMC to repay premiums as a result of the resolution of SideCars’s case against
the Department, had not occurred at that time.

                                         11