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NO. 06-0677

IN THE SUPREME COURT OF TEXAS

Bobby Elledge D/B/A Elledge Construction Company and/or Elledge Construction Company, Petitioner v. Friberg-Cooper Water Supply Corporation, Respondent

From The Court of Appeals of The Second District of Texas, Fort Worth, No. 02-05-00203-CV and County Court at Law No. 1 of Wichita County, Texas No. CCL-634-04-E

RESPONSE TO PETITION FOR REVIEW

James Rasmussen State Bar No. 16554300

RASMUSSEN LAW OFFICE

1101 Scott Avenue, Suite 17 P.O. Box 8185 Wichita Falls, Texas 76307-8185 Tel. 940-761-3344 Fax 940-761-3355 Attorney for Friberg-Cooper Water Supply Corporation

TABLE OF CONTENTS INDEX OF AUTHORITIES ....................................................................... iii STATEMENT OF JURISDICTION .............................................................1 ISSUE RESTATED ......................................................................................1 STATEMENT OF FACTS............................................................................1 SUMMARY OF ARGUMENT.....................................................................1 ARGUMENT AND AUTHORITIES............................................................2 CONCLUSION AND PRAYER FOR RELIEF ..........................................10 CERTIFICATE OF SERVICE....................................................................10 APPENDIX ........................................................................................ App. A

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INDEX OF AUTHORITIES Amoco Prod. Co. v. Smith 946 S.W.2d 162 (Tex. App. ­ El Paso 1997, no writ) ......................3, 6 Autry v. Dearmon, 933 S.W.2d 182 (Tex. App. ­ Houston [14th Dist.] 1996, writ denied) 4 Burlington N. R.R. v. Southwestern Elec. Power Co., 925 S.W.2d 92, 97 (Tex. App. ­ Texarkana 1996) aff'd 966 S.W.2d 467 (Tex. 1998)...................................................................................7 Cherokee Water Co. v. Advance Oil & Gas Co., 843 S.W.2d 132 (Tex. App. ­ Texarkana 1992, writ denied) ...............5 Estate of Townes .v Townes, 867 S.W.2d 414, 419 (Tex. App. ­ Houston [14th Dist.] 1993, writ denied).....................................................................................8, 9 HECI Exploration Co. v. Neel, 982 S.W.2d 881 (Tex. 1998) ...............................................................4 Hornblower & Weeks-Hemphill, Noyes & Crane, 586 S.W.2d 582 (Tex. Civ. App. ­ Corpus Christi 1979, writ ref'd n.r.e.) ..................................................................................................5 In re K.A.F., 160 S.W.3d 923, 928 (Tex. 2005) .......................................................8 Johnson v. Lynaugh, 796 S.W.2d 705, 707 (Tex. 1990) .......................................................8 Mobil Prod. Tex. & N.m., Inc. v. Cantor, 93 S.W.3d 916 (Tex. App. ­ Corpus Christi 2002, no pet.)..................5 Mowbray v. Avery, 76 S.W.3d 663 (Tex. App. ­ Corpus Christi 2002) ..........................5, 6

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Neel v. HECI Exploration Co., 942 S.W.2d 212 (Tex. App. ­ Austin 1997, pet granted), aff'd in part and rev'd and remanded in part on other grounds, 982 S.W.2d 881 (Tex. 1998) .........................................................................................4 Stone v. First City Bank of Plano, N.A., 794 S.W.2d 537 (Tex. App. ­ Dallas 1990, writ denied) .....................3 Vickory v. Summit Nat'l Bank, 702 S.W.2d 324 (Tex. App. ­ Fort Worth 1986, writ ref'd n.r.e.) ........4 Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732 (Tex. 2001) .................................................................2 Williams v. Khalaf, 802 S.W.2d 651 (Tex. 1990) .......................................................2, 3, 9 STATUTES AND RULES Tex. Civ. Prac. & Rem. Code § 16.003 ................................................passim Tex. Civ. Prac. & Rem. Code § 16.004 ................................................passim Tex. R. App. P. 53.2 (f).................................................................................8 Tex. R. App. P. 56.1 (c) ..........................................................................3, 10

OTHER

O'Connors Texas Causes of Action (2006) p. 133 .........................................7

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STATEMENT OF JURISDICTION Petitioner asserts conflicts jurisdiction, among other things, claiming that the court of appeals' decision is contrary to this Court's opinions and the opinions of other courts of appeal. Respondent disagrees. For the reasons set forth herein, respondent contends that no conflict jurisdiction exists because all those courts that have directly analyzed the issue at hand have come to the same conclusion as the court of appeals below. ISSUE RESTATED Did the majority err in holding that unjust enrichment claims are governed by the four-year statute of limitations in Tex. Civ. Prac. & Rem. Code § 16.004 instead of the two-year statute of limitations in § 16.003? STATEMENT OF FACTS Respondent does not disagree with petitioner's basic rendition of facts but appends hereto the unjust enrichment pleadings and initial disclosure filed in this case that are applicable to some of petitioner's contentions. See App. A. SUMMARY OF ARGUMENT The opinion of the court of appeals does not conflict with any decision of either this Court or the other courts of appeal. Because of 1979 legislative amendments to Texas' statues of limitations, the appropriate limitation

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period for implied contract claims alleging an action for a debt not evidenced by writing is the four-year limitation period. See Tex. Civ. Prac. & Rem. Code § 16.004, accord Williams v Khalaf, 802 S.W.2d 651 (Tex. 1990).Those courts of appeals that have been called upon to directly confront and analyze the applicable limitation period for unjust enrichment after the 1979 statutory amendments have come to the same conclusion. Additionally, petitioner's contention that unjust enrichment claims should somehow be treated as the "taking and detaining of personal property" contradicts longstanding Texas jurisprudence placing the theory of unjust enrichment in the category of cases known as breach of implied contract. ARGUMENT AND AUTHORITIES Petitioner advances two principal complaints justifying the granting of this petition. First, petitioner claims that a conflict exists between various courts of appeals, as well as this Court's own decisions, see HECI, post, Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732 (Tex. 2001) regarding the appropriate statute of limitations for the implied contract theory of unjust enrichment. Second, petitioner would hold unjust enrichment, and presumably all implied contract claims, really exist, not as debt actions covered by the four2

year statue, but instead as causes of action for "conversion" (the taking and detaining of personal property) requiring the application of the two-year limitation period. Petitioner posits that otherwise the court of appeals' decision in this case will render the two-year statute "meaningless." Accordingly, petitioner contends that a "broader" problem exists regarding the ability of the courts of appeals to properly apply the limitation statutes of Texas. Petitioner further proclaims the court of appeals' decision "distorts" this Court's holding in Williams v. Khalaf, 802 S.W.2d 651 (Tex. 1990). For the following reasons, all of petitioners' contentions are without merit and this Court should "refuse" review and instead adopt the court of appeals opinion as binding precedent. See Tex. R. App. P. 56.1 (c). There is No Conflict of Authority A conflict of authority between the various courts of appeals is a valid reason for accepting review, if such a conflict truly existed. The cases cited, however, do not reveal the conflict touted by petitioner. Petitioner correctly observes that at least three decisions, including the opinion below, carefully analyzing the unjust enrichment limitation period, do indeed hold that the four-year statute applies. See Amoco Prod. Co. v. Smith, 946 S.W.2d 162 (Tex. App. ­ El Paso 1997, no writ), Stone v. First City Bank of Plano, N.A. 794 S.W.2d 537 (Tex. App. ­ Dallas 1990, writ

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denied), see also Vickory v. Summit Nat'l Bank, 702 S.W.2d 324 (Tex. App. ­ Fort Worth 1986, writ ref'd n.r.e.). A close examination of those cases cited by petitioner for the opposite proposition, however, simply do not establish the required conflicting authority. The first case, Neel v. HECI Exploration Co. 942 S.W.2d 212 (Tex. App. ­ Austin 1997, pet. granted) is the antecedent opinion to H E C I Exploration Co. v. Neel, 982 S.W.2d 881 (Tex. 1998). The court of appeals in its decision below explained that in HECI (the supreme court case), "both the two-year and the four-year had expired when suit in HECI was filed. Therefore, it was unnecessary to determine which statute applied." Accordingly, the HECI decision was based on other grounds and the limitation language of HECI was properly characterized as dictum. See Petition for Review App. A. The second alleged conflicting decision, Autry v. Dearman, 933 S.W.2d 182 (Tex. App. ­ Houston [14th Dist.] 1996, writ denied) never addressed unjust enrichment but instead involved a cause of action for conversion. There, the court of appeals held "under the facts of this case, we hold that TEIA's claim is one for conversion. Conversion is the wrongful exercise of dominion and control over another's property in denial of, or inconsistent with, his rights." Id. The court of appeals went on to correctly

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observe: "conversion, the only applicable cause of action under these facts, is governed by the two-year statute of limitations." Id. The third decision, Cherokee Water Co. v. Advance Oil & Gas Co., 843 S.W.2d 132 (Tex. App. ­ Texarkana 1992, writ denied) was specifically discussed by the court of appeals below which observed that Cherokee "cited to cases that hold that the pre-1979 version of the two-year statute of limitations applied to actions for debts not evidenced by a writing, such as suits for money had and received or suits for unjust enrichment." See Petition for Review App. A. The court of appeals correctly noted, however, that "the court in Cherokee Water [did not] ...[address] the 1979 amendments." Id. The fourth decision, Hornblower & Weeks-Hemphill, Noyes & Crane, 586 S.W.2d 582 (Tex. Civ. App. ­ Corpus Christi 1979, writ ref'd n.r.e.) was a decision handed down before the effective date of the 1979 statutory amendments. Thus, Hornblower conflicts with nothing. Hornblower simply set forth the authority existing at the time it was issued and does not conflict any current authority. Finally, petitioner cites Mobil Prod. Tex. & N.M. Inc. v. Cantor, 93 S.W.3d 916 (Tex. App. ­ Corpus Christi 2002, no pet.) and Mowbray v. Avery. 76 S.W.3d 663 (Tex. App. ­ Corpus Christi 2002). Both of these

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decisions, however, cite the dictum of HECI as controlling authority for the proposition that the two-year statute is applicable. These decisions simply read too much into the language of the HECI decision and fail to adequately analyze the impact of the 1979 amendments to the theory of unjust enrichment. Once again the HECI court's unjust enrichment language was unnecessary to the analysis and outcome of the HECI case. The 1979 amendments to the statutes of limitations, when correctly interpreted, eliminate any purported conflict. See Amoco, supra. Unjust enrichment, like quantum meruit and money had and received claims are all implied contract theories basing their validity on the equitable creation of an implied contract. As contract claims they properly fall within the four-year statute. See Tex. Civ. Prac. & Rem. Code § 16.004. It has been repeatedly held that unjust enrichment is a theory existing under implied contract and not an independent cause of action (although courts and practitioners often incorrectly denominate unjust enrichment as an independent cause of action). See Amoco Production Co. v. Smith, 946 S.W.2d 162 (Tex. App. El Paso, 1997, no writ) ("unjust enrichment is not an independent cause of action"), Mowbray v. Avery, 76 S.W.3d 663 (Tex. App. ­ Corpus Christi 2002) ("unjust enrichment is not an independent cause of action"

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"Taking and detaining of personal property" Does Not Apply As respondent understands petitioner's second proposition, petitioner asks this Court to consider a more drastic alternative. According to petitioner, this Court must effectively redefine the nature of unjust enrichment as a "taking and detaining of personal property." By such action, petitioner asks this Court to place unjust enrichment in the same category as conversion claims that are governed by Tex. Civ. Prac. & Rem Code § 16.003. The problem with this approach is threefold; (1) unjust enrichment is by definition a theory existing in the nature of contract, (2) the legislature did not clearly express the intent to impose a two-year limitation period for contract actions of this nature and (3) this approach would require this Court to perform a wholesale change of Texas jurisprudence. Unjust enrichment has traditionally been categorized along with other related equitable theories such as quantum meruit and money had and received as implied contract claims not tort claims. See Burlington N. R.R. v. Southwestern Elec. Power Co., 925 S.W.2d 92, 97 (Tex. App. ­ Texarkana 1996) aff'd 966 S.W.2d 467 (Tex. 1998). Conversion (i.e. taking and detaining of personal property), on the other hand, is traditionally considered to be a claim sounding in tort. See O'Connors Texas Causes of Action (2006) p. 133. Apparently, according to petitioner, unjust enrichment and

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other related contract theories should now be properly considered as the "taking and detaining of personal property." It is hard to imagine a more wildly revamping of the common law. At the outset, it must be noted that petitioner waived this argument by not making this contention in the court below. The parties and the court below all understood that the theory alleged was one of unjust enrichment not conversion. The issue of conversion was not asserted or briefed. Indeed, respondents' pleadings and response to request for disclosure, see App. A, make no mention of conversion or the elements of conversion nor did the court of appeals discuss or consider this to be a case of conversion. See Petition for Review App. A, Tex. R. App. P. 53.2 (f), In re K.A.F., 160 S.W.3d 923, 928 (Tex. 2005), Johnson v. Lynaugh, 796 S.W.2d 705, 707 (Tex. 1990). Going further, respondent notes that for money to be the proper subject of an action for conversion it must be considered a specific chattel. In order to qualify as a specific chattel the money must be (1) delivered for safekeeping; (2) intended to be segregated, (3) substantially in the form in which it is received or of an intact fund, and (4) not the subject of a title claim by its keeper. See Estate of Townes .v Townes, 867 S.W.2d 414, 419

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(Tex. App. ­ Houston [14th Dist.] 1993, writ denied). In this case none of these elements exist. See App. A. This case represents the breach of an implied contract and has nothing to do with the tort of conversion. Williams v. Khalaf is the Controlling Authority In Williams, supra, this Court pointed out that the 1979 amendments to both the two-year and four-year statutes eliminated the distinction between debts evidenced by a writing and all other debts. The Court classified fraud as a species of "debt" for limitations purposes, and concluded that Tex. Civ. Prac. & Rem. Code § 16.004 now applies to a cause of action for fraud. The critical feature of the Williams opinion is the recognition of the 1979 amendments impact on all debt actions. Based on the reasoning of the Wiiliams decision implied contract actions such as unjust enrichment, quantum meruit and money had and received now all fall under the four-year statute. Id. This Court Should "Refuse" Review To the extent that any misunderstanding exists as to the appropriate statute of limitation for implied contract actions such as unjust enrichment, this Court can rectify that problem by simply refusing review. Tex. R. App.

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P. 56.1 (c) provides that the refusal of review has the same "precedential" value as an opinion of this Court. This action will clear up any possible misunderstanding regarding the unjust enrichment limitation issue. CONCLUSION AND PRAYER FOR RELIEF For the reasons stated herein, respondent requests that the Court REFUSE review in this case and allow the court of appeals decision to stand as precedent in Texas upon the issue of limitation in unjust enrichment cases. Respectfully submitted, RASMUSSEN LAW OFFICE 1101 Scott Avenue, Suite 17 P.O. Box 8185 Wichita Falls, Texas 76307-8185 Tel. 940-761-3344 Fax 940-761-3355 ______________________________ James Rasmussen State Bar No. 16554300 CERTIFICATE OF SERVICE On the _____day of ___________________, 200___, a copy of the foregoing document was served upon all opposing counsel. ______________________________ James Rasmussen

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