Trial & Error: Tips for Trial Lawyers

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On Saturday, September 22, 2012 by Judith R. Blakeway posted in Trial & Error: Tips for Trial Lawyers
The Texas Supreme Court recently considered the difference between statutes of repose and statutes of limitation in Federal Deposit Insurance Corp. v. Lenk, 361 S.W.3d 602 (Tex. 2012). After a bank customer died intestate, a probate clerk presented false letters of administration to two banks and gained access to the deceased customer’s accounts. He was eventually arrested and convicted of stealing the funds. In the meantime, in 2003 the probate court appointed an administrator of the decedent’s estate. She made no attempt to recover the funds from the banks until 2005. When the banks refused her demand for payment, she sued them for breach of the depository agreements. The banks moved for summary judgment because she failed to timely notify the banks of the unauthorized transactions. The trial court granted summary judgment to the banks but the court of appeals reversed.

The Supreme Court reversed the court of appeal’s judgment for one bank holding that the statute of repose in Texas Business and Commerce Code Section 4.406 barred the administrator’s claim. The court did not grant the second bank’s motion for summary judgment because it failed to raise the statute of repose as an affirmative defense.

The Court reiterated the rule that a statute of repose is a substantive, rather than a procedural, limitation. This difference has several consequences:

  • A statute of limitations extinguishes the right to prosecute an accrued cause of action after a period of time. It cuts off the remedy. In contrast, a statute of repose limits the time during which a cause of action can arise and usually runs from an act of the defendant. It abolishes the cause of action after the passage of time even though the cause of action may not have yet accrued.

  • When a statute extinguishes a claim, the statute is substantive, that ruling has a preclusive effect, and a statute of limitation dismissal bars suit everywhere. In contrast, when statutes of limitation are procedural, litigants with untimely claims cannot refile their claims in the courts of that state, but they remain free to assert them in a jurisdiction that would apply a longer statute of limitations. A state court’s judgment based on its own statute of limitations does not preclude a second action in a different state where the statute of limitations is longer.

Texas has several statutes of repose that are substantive, that is, they extinguish the claim rather than merely bar the remedy:

  • A person must report an unauthorized transaction to a bank within one year of account statements being made available. Tex. Bus. & Com. Code § 4.406(f).  

  • Actions against architects, engineers and design professionals must be brought within ten years. Tex. Civ. Prac. & Rem. Code § 16.008(a).

  • Actions against persons furnishing construction must be brought within ten years after substantial completion of the improvement. Tex. Civ. Prac. & Rem. Code § 16.009(a).

  • Actions against surveyors must be brought within ten years after the survey was completed. Tex. Civ. Prac. & Rem. Code § 16.011(a)(1).

  • Actions involving products liability must be brought within fifteen years of sale of the product or, if longer, the number of years the product is warranted by the seller. Tex. Civ. Prac. & Rem. Code § 16.012(b), (c).

  • Actions involving a fraudulent conveyance must be brought within four years after the conveyance of, if later, one year after the creditor knew or should have known about the conveyance. Tex. Bus. & Com. Code § 24.010(a)(1).

  • Actions against agricultural operations must be brought no later than one year after the start of the circumstance that gave rise to a nuisance. Tex. Agric. Code § 251.004(a).

  • A healthcare liability claim must be brought no later than ten years after the date of the act or omission that gave rise to the claim. Tex. Civ. Prac. & Rem. Code § 74.251(b).
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