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.
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).
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)