Wendell Watson v. Telecheck Services, Inc., and TRS Recovery Services, Inc.

Citation: Not availableDocket: 06-09-00112-CV

Court: Court of Appeals of Texas; October 21, 2010; Texas; State Appellate Court

Original Court Document: View Document

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Wendell Watson appealed against Telecheck Services, Inc. and TRS Recovery Services, Inc. following events initiated by his gambling at Harrah's Casino, where his cash was confiscated after a dispute. In response, Watson stopped payment on a check he had written to Harrah's, prompting Harrah's to engage Telecheck to purchase the check and report Watson negatively in their database, resulting in issues with other merchants accepting his checks. Watson subsequently disputed the debt with Telecheck, which refused to remove the negative listing, leading him to file a lawsuit for defamation, emotional distress, violations of the Texas Consumer Credit Reporting Act, the Fair Debt Collection Practices Act, and claims of illegality and extrinsic fraud.

The trial court granted summary judgment in favor of Telecheck and TRS, dismissing all of Watson's claims. The appellate court affirmed the summary judgment regarding the Consumer Credit Reporting Act, noting neither defendant qualifies as a consumer reporting agency, and dismissed the claim of illegality as moot since it was not pleaded. The court also affirmed the dismissal of Watson's extrinsic fraud claim due to evidentiary issues not preserved for appeal. However, it reversed the summary judgment on other claims, remanding the case for further proceedings, citing unresolved factual issues about Watson's debt, potential malice from the defendants, and the accrual of his causes of action. The summary judgment review was conducted de novo, with the court emphasizing that any reasonable inferences must favor the nonmovant, and any meritorious theory presented to the trial court could uphold the judgment.

In Browning v. Prostok, the court affirmed summary judgment in favor of Telecheck, concluding that it does not qualify as a "consumer reporting agency" under Chapter 20 of the Texas Business and Commerce Code, which governs consumer credit reporting. The statute explicitly excludes businesses that provide only check verification or guarantee services, which applies to Telecheck. Watson's argument for Telecheck's liability under Section 20.09 was unsupported by legal authority and thus rejected. The court also noted that Chapter 20 does not extend to collection and recovery entities like TRS, reinforcing Telecheck's entitlement to judgment.

Additionally, the court addressed Watson's claim regarding the illegality of Telecheck's contracts. While Watson argued that the summary judgment was improper because Telecheck did not address this claim, the court found that Telecheck's motion sufficiently covered its defenses against the causes of action in Watson's previous petitions. Although Watson asserted in his fifth amended petition that the contracts were illegal, he failed to adequately demonstrate that this claim constituted a new cause of action. His response indicated that he aimed to clarify allegations rather than introduce entirely new claims, which included per se defamation, emotional distress, violations of the Fair Credit Reporting Act, violations of the Consumer Credit Reporting Agencies Act, and requests for exemplary damages. Consequently, the court upheld the summary judgment against Watson.

Watson's fifth amended petition explicitly lists causes of action but does not include a claim regarding the legality of Telecheck's contracts. A party cannot adopt an inconsistent position on appeal compared to their stance in the trial court, as established in relevant case law. Consequently, Watson cannot argue that Telecheck neglected to address a cause of action not pled at trial, and no illegality of contract issue was raised or ruled on, rendering this point moot.

Regarding Watson's claim of extrinsic fraud, he contends that Telecheck's omission of certain exhibits from the summary judgment motion hindered his awareness of evidence related to his criminal history. These exhibits, which Watson had previously prepared, were known to him. To preserve a complaint for appellate review, a party must timely present a specific objection to the trial court; failing to do so results in waiver of the complaint. Watson's objection to Telecheck’s evidence was filed four days after the summary judgment was signed, despite him being aware of the missing exhibits for over a month prior. Since he did not timely object, this issue is not preserved for appeal.

Finally, Watson argues that there exists a factual dispute over whether he owed a debt, which is relevant to the defense's assertion of truth in relation to his defamation claim. For a valid defamation claim, a private individual must demonstrate that the defendant published a false statement about them, which was defamatory and made with negligence regarding its truth. When a check is presented, the merchant transmits information to Telecheck for processing, which may relate to Watson's alleged debt status.

Telecheck issues a single-digit code to merchants to indicate the status of a check: a "1" signifies approval, while a "4" indicates the check maker has unpaid check-related debt. In Watson's case, Telecheck placed him on its negative database and issued a "4" code after he stopped payment on a check to Harrah’s. Telecheck needed to prove that Watson indeed had unpaid debt to support its position in the summary judgment. However, Watson has consistently denied any debt related to the Harrah’s check, claiming he stopped payment because Harrah’s confiscated the funds. Telecheck acknowledged the debt's dispute in its motion for summary judgment but failed to provide evidence to substantiate its claim, leading to the court sustaining Watson’s point of error.

Additionally, Watson challenged the summary judgment regarding Telecheck's defense of qualified privilege in his defamation claim, arguing that Telecheck did not prove the absence of malice. Qualified privilege requires the defendant to show that the statement was made without actual malice, defined as knowledge of its falsity or reckless disregard for the truth. Telecheck submitted an affidavit asserting it acted in good faith based on reliable sources. However, evidence showed Watson had repeatedly contacted Telecheck to dispute the debt, which undermined Telecheck's claim of no malice, as it indicated Telecheck did not fully investigate Watson's assertions. Thus, there is a fact issue regarding actual malice that affects the qualified privilege defense.

The trier of fact is responsible for resolving disputes regarding the publication and its circumstances. In this case, Telecheck and TRS have not conclusively shown an absence of actual malice in Watson's claims, as there is a material fact in dispute. Watson argues that the summary judgment should be overturned because Telecheck and TRS did not establish that his defamation, intentional infliction of emotional distress, and FDCPA claims were filed after the statute of limitations had expired. Libel or slander claims must be filed within one year, FDCPA claims within one year from the date of violation, and intentional infliction of emotional distress claims within two years. The discovery rule may extend the statute of limitations if the injury is inherently undiscoverable and objectively verifiable, deferring the accrual of the cause of action until the plaintiff is aware or should be aware of the facts leading to the claim.

In this instance, it is undisputed that Telecheck included Watson in its database for unpaid check-related debt around August 4, 2003. However, the record does not clarify how or when Watson became aware of this. While Watson acknowledged having checks declined in 2003, 2004, and 2005, it remains unclear whether those merchants were connected to Telecheck. Watson's earlier testimony about knowing he had been on the check database for about four years is ambiguous, leaving open the possibility that he may not have known of the negative listing until a later date. A reasonable trier of fact could conclude that Watson could not have known of Telecheck’s listing in time for the statute of limitations to begin running. Consequently, there is a material issue of fact regarding when Watson knew or should have known the relevant facts for his claims.

The court affirms the summary judgment for Watson's claims under the Consumer Credit Reporting Act and for extrinsic fraud, overrules the point of error regarding the legality of the contract as moot, and reverses and remands the summary judgment on all other claims for further proceedings.