A.I. Credit Corporationv.Thomas

United States District Court, N.D. Texas, Dallas DivisionApr 21, 2005
Civil Action No. 3: 03-CV-0298-B (N.D. Tex. Apr. 21, 2005)

Civil Action No. 3: 03-CV-0298-B.

April 21, 2005


JANE J. BOYLE, District Judge

Before the Court is Third-Party Defendants Julian V. Movsesian and Capital Management Strategies, Inc.'s Motion for Summary Judgment (doc. 90), filed December 17, 2004. Because Thomas's claims against the Third-Party Defendants are barred by the applicable statutes of limitations, the Court GRANTS the Motion.


This suit revolves around an insurance premium financing arrangement between Plaintiff A.I. Credit Corporation ("A.I. Credit") and Defendant Philip Thomas ("Thomas"). According to Thomas, he met Third Party Defendant Julian V. Movsesian ("Movsesian") in 1998. (Thomas Aff. ¶ 6/Def. App. pp. 3-4) Movsesian and his company, Third Party Defendant Capital Management Strategies, Inc. ("CMS"), made a presentation to Thomas regarding a financing arrangement that would permit Thomas to obtain a cash advance and life insurance coverage. (Thomas Dep. p. 25/Def. App. p. 35) Movsesian allegedly promised Thomas "you don't pay anything until you die." ( Id.) In reliance on Movsesian's representations, Thomas took out a $22 million life insurance policy in order to obtain a $2 million cash advance. (Thomas Dep. p. 89/Def. App. p. 37) In January 1999, Thomas executed a Promissory Note (the "Note") for a loan of approximately $3.5 million from A.I. Credit. (Def. App. pp. 172-175) The loan was secured in part by the assignment to A.I. Credit of Thomas's rights in a life insurance policy issued by Third Party Defendant Massachusetts Mutual Life Insurance Company ("Mass Mutual"). (Thomas Dep. p. 107/Def. App. p. 44; Def. App. p. 172) Thomas and his wife, Defendant Wayne Thomas, also executed several security agreements regarding their personal investment accounts as further security for the loan. (Pl.'s First Am. Compl. Exs. F G) Finally, Thomas also executed a personal guaranty for repayment of the loan. ( Id. at Ex. E) Throughout the creation of the premium financing arrangement, Thomas's contact was with Movsesian.

In September 2000, Thomas surrendered his insurance policy with Mass Mutual, applied the amount to the loan, and assigned A.I. Credit his rights under a new insurance policy issued by American General Life Insurance Company. (Thomas Aff. ¶ 18/Def. App. pp. 8-9) In June 2001, Thomas allegedly failed to make a premium payment on his American General policy, resulting in termination of the policy. (Pl.'s First Am. Compl. ¶ 25) Thomas also failed to make an interest payment due to A.I. Credit under the Note in September 2002. ( Id.) Both events triggered the maturity date on the Note.

During this time, Thomas claims he received incorrect information regarding the grace period under the American General policy. (Thomas Aff. ¶ 22/Def. App. pp. 10-11) He also states that the invoice for the premium due in 2002 was erroneously calculated. (Thomas Aff. ¶ 23/Def. App. p. 11) Significantly, though, at no point in his First Amended Cross-claim or his Response to the Motion for Summary Judgment does Thomas allege that this misinformation constituted fraud, negligent misrepresentation, or any other cause of action.


A.I. Credit filed suit against Thomas on February 11, 2003, seeking recovery under the Note and the Guaranty, as well as a declaration regarding its security interests in Thomas's accounts. Thomas's First Amended Counterclaim and First Amended Cross-Claim (doc. 55) included counterclaims against A.I. Credit and third party claims against Movsesian, CMS, and Mass Mutual. Thomas's causes of action included fraud, violations of the Texas Insurance Code, breach of fiduciary duty, negligent misrepresentation, negligent supervision, promissory estoppel, and conspiracy. Following discovery, Movsesian and CMS moved for summary judgment on December 17, 2004. The parties have briefed the issues, and the Court now turns to the merits of the decision.

A.I. Credit subsequently amended its Complaint to include Thomas Group Holding Company, PRT Global, L.L.C., and Mrs. Thomas as defendants.

Thomas's negligent supervision claim was only brought against Mass Mutual.


Summary judgment is appropriate when the pleadings and record evidence show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). The burden is on the movant to prove that no genuine issue of material fact exists. Provident Life Accident Ins. Co. v. Goel, 274 F.3d 984, 991 (5th Cir. 2001). If the non-movant bears the burden of proof at trial, the movant may satisfy its burden by pointing to the absence of evidence to support the non-movant's case. Latimer v. Smithkline French Labs., 919 F.2d 301, 303 (5th Cir. 1990).

The non-moving party must then "come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis in original) (quoting FED. R. CIV. P. 56(e)). To determine whether a genuine issue exists for trial, the Court must view all of the evidence in the light most favorable to the non-movant, and the evidence must be sufficient such that a reasonable jury could return a verdict for the non-movant. See Chaplin v. NationsCredit Corp., 307 F.3d 368, 371-72 (5th Cir. 2002).

A. Statute of Limitations

Movsesian and CMS first move for summary judgment on the ground that all of Thomas's claims are barred by the applicable statutes of limitations. (Third Party Defs.' Br. pp. 11-12) The Court initially notes that all of Thomas's causes of action are governed by either the two-year or four-year statute of limitations as follows:

Fraud — 4 years (TEX. CIV. PRAC. REM. CODEANN. § 16.004(a)(4) (Vernon 2002 Supp. 2004))
Violations of the Texas Insurance Code — 2 years (TEX. INS. CODE ANN. § 541.162 (Vernon 2004))
Breach of Fiduciary Duty — 4 years (TEX. CIV. PRAC. REM. CODE ANN. § 16.004(a)(5))
Negligent Misrepresentation — 2 years ( HECI Exploration Co. v. Neel, 982 S.W.2d 881, 885 (Tex. 1998))
Promissory Estoppel — 4 years (TEX. CIV. PRAC. REM. CODE ANN. § 16.051)
Conspiracy — 2 years ( Sharpe v. Roman Catholic Diocese of Dallas, 97 S.W.3d 791, 795 (Tex.App. — Dallas 2003, pet. denied))

Thomas brought his third party claims against Movsesian and CMS on May 19, 2003. Thus, any action that accrued before May 19, 2001 is untimely under the two-year statute of limitations, and any action that accrued before May 19, 1999 is untimely under the four-year statute.

Movsesian and CMS produced evidence that the discussions and signing of the loan documents occurred in January 1999, which is outside both the two-year and four-year statutes of limitations. (Thomas Dep. pp. 462-63; Ex. 9-12/Third Party Defs.' App. pp. 62-63; 158-71) Although Thomas mentions facts that occurred after January 1999 in the factual portion of his Response, he makes no attempt to characterize them as creating a cause of action. Indeed, throughout his Response, Thomas does not argue that any of his claims are timely, instead relying exclusively on the discovery rule to rescue his causes of action. (Def.'s Br. pp. 8-12) Thus, because the only evidence before the Court is that Thomas's causes of action accrued prior to May 19, 1999, the Court finds that Thomas's claims will be barred by the statutes of limitation unless the discovery rule tolled the running of the statutes.

B. Discovery Rule

The discovery rule defers the accrual of a cause of action until the plaintiff knows, or should know with the exercise of reasonable diligence, the facts giving rise to his claim. Wagner Brown, Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex. 2001). The rule has been described by the Fifth Circuit and Texas courts as a "very limited exception to statutes of limitations." Colonial Penn. Ins. v. Mkt. Planners Ins. Agency, Inc., 157 F.3d 1032, 1034 (5th Cir. 1998) (internal quotes omitted); Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996). It applies only when the nature of the injury suffered by plaintiff is both inherently undiscoverable and objectively verifiable. Wagner Brown, 58 S.W.3d at 734. An injury is not "inherently undiscoverable" simply because a particular plaintiff failed to discover his injury within the applicable limitations period. Id. at 735. Rather, the focus is on the nature of the injury itself — whether it is of the type that generally is discoverable by the exercise of reasonable diligence. Id. at 734-35.

Because Thomas has pleaded the discovery rule as an exception to limitations, Movsesian and CMS bear the burden at the summary judgment stage of negating that exception by demonstrating there is no genuine issue of fact as to when Thomas discovered or should have discovered his injury. Tex. Soil Recycling, Inc. v. Intercargo Ins. Co., 273 F.3d 644, 649 (5th Cir. 2001). Thomas's specific claim regarding application of the discovery rule is that he was not aware that "A.I. Credit was not carrying the interest along with the advance of premium payments on the insurance policy." (Def.'s Br. p. 11) According to Thomas, he was not made aware of his obligation to make annual interest payments until January 2000, when he received an invoice for an interest payment. (Thomas Aff. ¶ 16/Def. App. p. 8) Movsesian and CMS respond that if Thomas had simply read the Note he signed in 1999, he would have been made aware of his payment obligations.

In examining the Note, the Court finds that the Note clearly calls for Thomas to make annual interest payments. The third paragraph of the Note, entitled "PAYMENTS," clearly states that "[t]his Note is payable in successive annual installment payments." (Def. App. p. 172) The paragraph also details when the payments are due. ( Id.) The Note further states that "failure to make any payment when due" may result in a default under the Note. ( Id. at pp. 173-74) Finally, the final paragraph of the Note states, "THE UNDERSIGNED ACKNOWLEDGES THAT BEFORE SIGNING THIS NOTE, BORROWER HAS READ THE NOTE IN ITS ENTIRETY AND RECEIVED A LEGIBLE, COMPLETELY FILLED-IN COPY OF THIS NOTE." ( Id. at p. 174) Thomas's signature is then affixed to the Note. ( Id.) Thus, the terms of the Note are clearly contrary to Movsesian's representation that Thomas would pay nothing until he died. Movsesian and CMS argue that Thomas's signature on and receipt of the Note preclude him from arguing he was unaware of the annual interest payments.

The Fifth Circuit addressed a similar situation in Martinez Tapia v. Chase Manhattan Bank, 149 F.3d 404 (5th Cir. 1998). In that case, Martinez Tapia claimed the discovery rule tolled the statute of limitations on his fraud and misrepresentation claims because he was unaware of several conditions that were part of his investment with Chase Manhattan. Id. at 409. The Fifth Circuit found, however, that Martinez Tapia had access to the conditions of his investment at the time he made it. Id. at 410. In so ruling, the Court stated,

We agree with the district court that it was incumbent on Martinez Tapia to do more than simply rely on the bald assertions and promises of Moreno and Martinez. Before he invested over two and one-half million dollars, reasonable diligence required him to read the only documents that contained the details of the offer he accepted when he purchased the Fund Units.
Id. The Court also cited with approval the Seventh Circuit's holding that "[a] written statement available to the victims of fraud that reveals that a fraud has been committed furnishes constructive or inquiry notice of the fraud, and constructive notice creates a duty of diligent inquiry." Id. at 409-10 (citing Wolin v. Smith Barney, Inc., 83 F.3d 847, 853 (7th Cir. 1996)).

The evidence, then, shows that the Note Thomas signed in January 1999 required him to make annual interest payments. Under Fifth Circuit precedent, Thomas could not "simply rely on the bald assertions and promises" of Movsesian and CMS; rather, reasonable diligence required Thomas to read the Note he signed. See id. at 410. Had he done so, he would have been made aware of the annual interest payments. (Def.'s App. p. 172) Therefore, Thomas's injury was not "inherently undiscoverable" in January 1999, and Thomas may not rely on the discovery rule to save his time-barred claims. Because all of the claims raised by Thomas accrued in January 1999, which is outside both the two-year and four-year statutes of limitations, the Court GRANTS Movsesian and CMS's Motion for Summary Judgment.


Therefore, because Thomas failed to bring his claims within the applicable statutes of limitations, the Court GRANTS the Motion for Summary Judgment filed by Movsesian and CMS and DISMISSES the third party claims Thomas brought against them.