law-discovery-rule
SJ on Limitations & Discovery Rule and a Counter
In its response to Jones's motion for summary judgment, Polk Mechanical conceded limitations would bar its
claim against Jones without the operation of the discovery rule, acknowledging:
09-0682 ROY JONES v. POLK MECHANICAL COMPANY, LLC; from Bexar County;
4th district (04-08-00509-CV, ___ SW3d ___, 07-01-09, pet. denied Oct 2009)
(limitations discovery rule, standing issue as basis for summary judgment)
Without the discovery rule, Polk Mechanical's trust fund claim against Defendant Jones accrued in July 2003,
when the trust funds held by Capstone were diverted. The parties agree that the four-year residual limitations
period applies to Polk Mechanical's trust fund claims. It is also not disputed that since Jones was not added to
this suit until September 24, 2007, without the operation of the discovery rule, the statute of limitation[s] would
bar Polk Mechanical's trust fund claim against Jones. (record citations omitted)
Although Polk Mechanical argues in its brief that Jones failed to conclusively establish the date on which Polk
Mechanical's trust fund claim accrued, it is undisputed that the latest date on which the claim accrued was in July
2003. Because Polk Mechanical did not amend its petition to add the claim against Jones until September 2007,
limitations would bar the claim unless the discovery rule applies.
"The discovery rule has been applied in limited categories of cases to defer accrual of a
cause of action until the plaintiff knew or, exercising reasonable diligence, should have
known of the facts giving rise to a cause of action." HECI Exploration Co. v. Neel, 982 S.
W.2d 881, 886 (Tex. 1998). The application of the discovery rule is generally limited to
those cases where the nature of the injury is inherently undiscoverable and the evidence
of the injury is objectively verifiable. Id. The applicability of the discovery rule is
determined categorically, i.e., not based on whether the particular injury in the case at
hand may not have been discovered but whether the injury is of a type that generally is
discoverable by the exercise of reasonable diligence. Id.
Polk Mechanical's claim against Jones arises under the Texas Construction Trust Fund Act. Under section
162.003 of the Act, a subcontractor who labors or who furnishes labor or material for the construction or repair
of an improvement on real property is a beneficiary of any trust funds paid by or received in connection with the
improvement. Tex. Prop. Code Ann. § 162.003 (Vernon 2007). A contractor, or an officer of a contractor who
receives trust funds or who has control or discretion of trust funds, is a trustee of the trust funds. Id. § 162.002.
The Act, therefore, creates a beneficiary/trustee relationship between a subcontractor and a contractor who
receives payment from a project owner. See id. In other words, the Act "imposes fiduciary responsibilities on
contractors to ensure that Texas subcontractors . . . are paid for work completed." Kelly v. Gen. Interior Constr.,
Inc., 262 S.W.3d 79, 84-85 (Tex. App.--Houston [14th Dist.] 2008, pet. granted on other grounds); In re
Faulkner, 213 B.R. 660, 666 n. 10 (Bankr. W.D. Tex. 1997) (noting that trust relationship arises under Texas law
at time payments are made to contractor for construction).
A variation to the inherently undiscoverable element arises when applying the discovery rule to a
fiduciary relationship. Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996); see also
S.V. v. R.V. , 933 S.W.2d 1, 8 (Tex. 1996). In the fiduciary context, "a person to whom a fiduciary duty is owed is
either unable to inquire into the fiduciary's actions or unaware of the need to do so." S V., 933 S.W.2d at 8.
When a trustee breaches its duty to a beneficiary, the nature of the injury is considered inherently
undiscoverable because of the fiduciary nature of the relationship. See id. However, the person owed a fiduciary
relationship still must exercise reasonable diligence "when the fact of misconduct becomes [so] apparent it can
no longer be ignored." (1) Id.; see also Computer Assocs. Int'l, 918 S.W.2d at 456; Slay v. Burnett Trust, 187 S.
W.2d 377, 394 (Tex. 1945); G. Prop. Mgmt., Ltd. v. Multivest Fin. Servs. of Tex., Inc., 219 S.W.3d 37, 48-49
(Tex. App.--San Antonio 2006, no pet.).
Because Jones owed fiduciary responsibilities to Polk Mechanical, the inherently undiscoverable requirement for
applying the discovery rule is satisfied. See S V., 933 S.W.2d at 8. Moreover, the injury in this case is objectively
verifiable as it can be objectively established through bank records and cancelled checks. See HECI Exploration
Co., 982 S.W.2d at 886. Accordingly, we hold the discovery rule applied to Polk Mechanical's claim against
Jones, and Jones was required to conclusively negate its application to be entitled to summary judgment. See
Pustejovsky, 35 S.W.3d at 646.
To conclusively negate the discovery rule, Jones was required to prove as a matter of law that there was no
genuine issue of fact about when Polk Mechanical discovered or should have discovered the nature of the
injury. See Potter, 137 S.W.3d at 704. Inquiries involving the discovery rule usually entail questions for the trier
of fact because when a plaintiff knew or should have known of an injury is generally a fact question. Childs v.
Haussecker, 974 S.W.2d 31, 44 (Tex. 1998); Cadle Co. v. Wilson, 136 S.W.3d 345, 352 (Tex. App.--Austin
2004, no pet.). However, if reasonable minds could not differ about the conclusion to be drawn from the facts in
the record, the start of the limitations period may be determined as a matter of law. Childs, 974 S.W.2d at 44;
Cadle Co., 136 S.W.3d at 352; Zacharie v. U.S. Nat. Resources, Inc., 94 S.W.3d 748, 753 (Tex. App.--San
Antonio 2002, no pet.).
Viewing the evidence in the light most favorable to Polk Mechanical, Jones failed to conclusively establish Polk
Mechanical should have known of its injury on or before September 24, 2003, or four years before the date it
added Jones to the lawsuit. The summary judgment evidence established that in September 2003 (1) Capstone
was still reassuring Polk Mechanical it would be paid, (2) Polk Mechanical had no knowledge the project owner
had paid Capstone, and (3) Polk Mechanical had no knowledge Capstone and Jones had diverted the funds. In
view of the fiduciary nature of their relationship, Polk Mechanical had no reason to make further inquiry into the
conduct of Capstone or its officers before September 24, 2003. See S.V., 933 S.W.2d at 8.
Because reasonable minds could differ about when Polk Mechanical knew or should have know of its injury,
Jones failed to conclusively negate the discovery rule.
Discovery Rule
We now turn to Joint Venture's argument that DOH failed to negate the discovery rule.
The discovery rule is a limited exception which tolls the accrual of a cause of action
which applies if, "the nature of the injury incurred is inherently undiscoverable and the
evidence of the injury is objectively verifiable." Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex.
2006), quoting Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996). Joint Venture has not
provided, and we have been unable to find Texas precedent applying the discovery rule to the statute of
limitations at issue here. Therefore, our first task is to determine whether the exception is applicable.
The discovery rule is a judicially created exception which, in certain limited
circumstances, is applied to identify when a cause of action accrues. See Moreno v. Sterling
Drug, Inc., 787 S.W.2d 348, 353 (Tex. 1990). To a great extent, the question of whether the discovery rule
applies is a matter of statutory construction. See id. As always, our goal when construing a statute is to give
effect to the Legislature's intent. Mid-Century Ins. Co. of Tex. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007). We
begin our analysis with the plain meaning of the statutory language. Id. When the plain meaning of a statute of
limitations specifies an event or date as triggering accrual, the judiciary does not have the authority to alter that
date or event by imposing the discovery exception. See Moreno, 787 S.W.2d at 353. To do so would violate the
separation between the Legislature, as statute-maker, and the judiciary, whose only task is to implement the
Legislature's intent. See F.F.P. Operating Partners, L.P. v. Duenez, 237 S.W.3d 680, 690 (Tex. 2007), citing
McIntyre v. Ramirez, 109 S.W.3d 741, 748 (Tex. 2003); see also Stiles v. Union Carbide Corp., 520 F.Supp. 865,
867-68 (S.D.Tex. 1981)(when the "Legislature has clearly and unequivocally prescribed that a cause of action
accrues on the occurrence of a specified event, the courts are without power to fashion a different rule . . . .").
The plain language of Section 33.54(a) specifically identifies, "the date that the deed executed to the purchaser
at the tax sale is filed of record;" as triggering the limitations period for an action to challenge a tax sale. See Tex.
Tax Code Ann. § 33.54(a)(1). This language is a clear and unambiguous statement of the Legislature's intent to
limit tax sale challenges to those brought within one year of the date the purchaser files his deed. Joint Venture
does not argue otherwise. Given the specific date of accrual provided in the statute, we cannot impose the
discovery rule to salvage a tax sale challenge brought outside the limitations period. See Moreno, 787 S.W.2d at
354-55; Safeway Stores, Inc. v. Certainteed Corp., 710 S.W.2d 544, 546-48 (Tex. 1986); Morrison v. Chan, 699
S.W.2d 205, 208 (Tex. 1985). Therefore, even if we assume that a genuine issue of material fact remains under
the discovery rule, it would have no impact on DOH's right to summary judgment on its limitations defense
because the exception does not apply. See KPMG Peat Marwick, 988 S.W.2d at 748 (defendant asserting
statute of limitations defense at summary judgment must negate discovery rule if it applies and has been plead
or otherwise raised).
08-0870
THE W.L. PICKENS GRANDCHILDREN'S JOINT VENTURE v. DOH OIL COMPANY, DAVID HILL AND ORVEL
HILL; from Loving County; 8th district (08‑06‑00314‑CV, ___ SW3d ___, 08‑07‑08, pet. denied Nov. 2008)(tax
sale, deed, statute of limitations, discovery rule)