law-fraudulent-concealment-tolling-of-limitations | summary judgment based on limitations | statute of limitations |
accrual of claim | discovery rule |
Shah v. Moss, 67 S.W.3d 836, 841 (Tex. 2001) (fraudulent concealment tolls limitation)
Kerlin v. Sauceda, 263 S.W.3d 920, 925 (Tex. 2008) (fraudulent concealment will not bar limitations when plaintiff
could have discovered wrong through exercise of reasonable diligence).
Contract claim is governed by a four-year statute of limitations. Tex. Civ. Prac. & Rem. Code Ann. § 16.051
(Vernon 2008); Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002). The limitations period begins to run when a
contract is breached. Stine, 80 S.W.3d at 592. However, a defendant’s fraudulent concealment of the breach tolls
the statute of limitations until the fraud is discovered or should have been discovered with reasonable diligence.
Kerlin, 263 S.W.3d at 925.
HOUSTON CASE LAW ON FRAUDULENT CONCEALMENT AS TOLLING THEORY
Generally, a defendant’s fraudulent concealment of wrongdoing will toll the running of limitations. Kerlin v.
Sauceda, 263 S.W.3d 920, 925 (Tex. 2008) (citing Shah v. Moss, 67 S.W.3d 836, 841 (Tex. 2001)); see also
Seureau v. ExxonMobil Corp., 274 S.W.3d 206, 228 (Tex. App.—Houston [14th Dist.] 2008, no pet.) (“[T]he
fraudulent-concealment doctrine is an affirmative defense to limitations that resembles equitable estoppel”). To
prove fraudulent concealment, a plaintiff must show that the defendant actually knew a wrong occurred, had a
fixed purpose to conceal the wrong, and did conceal the wrong. Shah, 67 S.W.3d at 841; see also Seureau, 274 S.
W.3d at 228 (stating that plaintiff must demonstrate defendant had “(1) actual knowledge that a wrong occurred,
(2) a duty to disclose the wrong, and (3) a fixed purpose to conceal the wrong”); Santanna Natural Gas v. Hamon
Operations, 954 S.W.2d 885, 890 (Tex. App.—Austin 1997, pet. denied) (defining elements of fraudulent
concealment as “first, actual knowledge by the defendant that a wrong has occurred, and second, a fixed purpose
to conceal the facts necessary for the plaintiff to know that it has a cause of action”). Accordingly, the “gist of the
fraudulent concealment defense is the defendant’s active suppression of the truth or its failure to disclose the truth
when it is under a duty to speak.” Hay v. Shell Oil Co., 986 S.W.2d 772, 778 (Tex. App.—Corpus Christi 1999, pet.
denied).
Importantly, however, fraudulent concealment will not “bar limitations when the plaintiff discovers the wrong or
could have discovered it through the exercise of reasonable diligence.” Kerlin, 263 S.W.3d at 925; see also Shah,
67 S.W.3d at 841 (“Fraudulent concealment tolls limitations until the plaintiff discovers the fraud or could have
discovered the fraud with reasonable diligence.”). Determining when a plaintiff knew or reasonably should have
known of the cause of action is normally a question of fact. Santanna Natural Gas, 954 S.W.2d at 892.
A party should discover a defendant’s fraudulent concealment when the party learns of facts, conditions, or
circumstances which would cause a reasonably prudent person to make inquiry, which, if pursued, would lead to
discovery of the fraud. Borderlon v. Peck, 661 S.W.2d 907, 909 (Tex. 1983). “Knowledge of such facts is in law
equivalent to knowledge of the cause of action.” Id.
[We] hold that the trial court did not err in denying Shell’s motions for a directed verdict and for judgment
notwithstanding the verdict on the ground that the evidence is legally insufficient to show that Shell fraudulently
concealed its underpayment of royalties to the Rosses.
[We] hold that the evidence is legally sufficient to support the jury’s finding that the Rosses should, “in the exercise
of reasonable diligence, have discovered that Shell failed to pay royalty in accordance with the Reuss Lease” for
reasons “other than the ‘weighted average/blended price’ issue” in “2002.”
Having concluded that the Rosses could not have reasonably discovered Shell’s fraudulent concealment based on
public records at the Land Office, we further conclude that these public records did not create an irrebuttable
presumption of notice. Therefore, the proposed instruction was inapplicable to the situation presented by the
evidence in this case. Accordingly, we hold that the trial court did not err in not submitting Shell’s proposed
instruction on constructive notice.
Shell Oil Company v. Ross (Tex.App.- Houston [1st Dist.] Feb. 25, 2010)(Jenning)
(oil & gas law litigation - dispute over royalties, breach of contract, unjust enrichment, and fraud theories)
(fraudulent concealment as tolling theory, constructive notice based on public record)
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Jennings
Before Justices Jennings, Alcala and Higley
01-08-00713-CV Shell Oil Company, SWEPI LP d/b/a Shell Western E&P, Successor in Interest to Shell Western
E&P, Inc. v. Ralph Ross
Appeal from 133rd District Court of Harris County
Trial Court Judge: Hon. Lamar McCorkle
Dissenting Opinion by Justice Alcala in Shell Oil Co. v. Ross (would hold that lawsuit is barred by limitations
because no evidence establishes fraudulent concealment of royalty underpayment by Shell)
“As a general rule, a cause of action accrues and the statute of limitations begins to run when facts come into
existence that authorize a party to seek a judicial remedy.” Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d
211, 221 (Tex. 2003). Thus, “[a] defendant who seeks summary judgment on the basis of limitations must
conclusively prove when the plaintiff’s cause of action accrued.” Seureau v. ExxonMobil Corp., 274 S.W.3d 206,
226 (Tex. App.—Houston [14th Dist.] 2008, no pet.). The date the cause of action accrues for purposes of
limitations is a question of law. Id. In most circumstances, “a cause of action accrues when a wrongful act causes a
legal injury, regardless of when the plaintiff learns of that injury or if all resulting damages have yet to occur.” Id.;
Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990).
Wilstein v. Dernick Resources, Inc. (pdf) (Tex.App.- Houston [1st Dist.] Dec. 31, 2009)(Keyes)
(limitations and fraudulent concealment, fiduciary duty)
We conclude that Dernick breached its fiduciary duty to the Wilsteins by failing to disclose its sale of their interest in the Bradshaw
Field and that the Wilsteins were not put on constructive notice of the sale by the filing of the sale in the Kansas public records. The
trial court found that the Wilsteins discovered the sale of their interest in the Bradshaw Field following the 2002 audit of that field. This
finding is supported by the evidence. Because the Wilsteins filed their Bradshaw Field claims in 2003, their claims were not barred
by the four-year statute of limitations for breach of fiduciary duty and fraud.
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS:
Opinion by Justice Keyes
Before Justices Keyes, Alcala and Hanks
01-07-00491-CV David Wilstein, and Leonard Wilstein, Individually and as Trustee v. Dernick Resources, Inc.,
Appeal from 164th District Court of Harris County
Trial Court Judge: Hon. Martha Hill Jamison
The fraudulent concealment doctrine, however, is an affirmative defense to limitations that resembles equitable
estoppel. Seureau, 274 S.W.3d at 228. This doctrine estops a defendant from relying on limitations if he was
under a duty to make a disclosure but fraudulently concealed the existence of a cause of action from the party to
whom it belonged. Id. The accrual of a cause of action is deferred in a fraudulent concealment case until the
plaintiff discovers or should have discovered the deceitful conduct or facts giving rise to the cause of action. Earle
v. Ratliff, 998 S.W.2d 882, 888 (Tex. 1999). The fraudulent concealment doctrine defers accrual because “a
person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations
has run.” S.V. v. R.V., 933 S.W.2d 1, 6 (Tex. 1996). For the doctrine to apply, however, the plaintiff must prove the
defendant: (1) had actual knowledge of the wrong; (2) had a fixed purpose to conceal the wrong; and (3) did
conceal the wrong from the plaintiff. See Shah v. Moss, 67 S.W.3d 836, 841 (Tex. 2001). The fraudulent
concealment doctrine does not bar limitations when the plaintiff discovers the wrong or could have discovered it
through the exercise of reasonable diligence. Kerlin v. Sauceda, 263 S.W.3d 920, 925 (Tex. 2008).
A breach of a fiduciary duty of disclosure is tantamount to concealment for limitations purposes. Id. at 645; see
Seureau, 274 S.W.3d at 228 (including as additional element of fraudulent concealment doctrine “a duty to
disclose the wrong”). Thus, the statute of limitations for a breach of fiduciary duty claim does not begin to run until
the claimant “knew or should have known of facts that in the exercise of reasonable diligence would have led to the
discovery of the wrongful act.” Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997); see also Willis, 760 S.W.2d at 645
(accrual of cause of action of person to whom duty is owed is postponed until he discovers, or should discover,
material facts in issue); Seureau, 274 S.W.3d at 228 (“The estoppel effect of fraudulent concealment ends when a
party learns of facts, conditions, or circumstances that would cause a reasonably prudent person to make inquiry
which, if pursued, would lead to the discovery of the concealed cause of action.”). “When a failure to notify is the
basis for a cause of action, a plaintiff knows or should have known of the failure to notify when it knows or should
have known the facts about which it was to be notified,” and the statute of limitations begins to run at that time.
HECI Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1998).
Because the Wilsteins and Dernick were joint venturers in both the McCourt Field and the Bradshaw Field, the
fraudulent concealment doctrine applies in both cases. See Willis, 760 S.W.2d at 645 & n.2; Seureau, 274 S.W.3d
at 228. The questions, therefore, for limitations purposes are whether Dernick breached its duty of disclosure to
the Wilsteins in both cases and, if so, when the Wilsteins learned of facts, conditions, or circumstances that would
cause a reasonably prudent person to make inquiry that, if pursued, would lead to the discovery of the concealed
cause of action for the breach. See Seureau, 274 S.W.3d at 228.
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