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The Devil is in the Details: A Creditor’s Oversight Can Be a Debtor’s Saving Grace

The Devil is in the Details: A Creditor’s Oversight Can Be a Debtor’s Saving Grace

When it comes to lawsuits based on credit card debt, lines of credit, and loans, attorneys for creditors typically believe they have open-and-shut cases.  In fact, lawsuits stemming from such financial agreements and the related causes of action, including suit on a sworn account, account stated, promissory note, and breach of contract, are often resolved through a Motion for Summary Judgment.  A Motion for Summary Judgment is a request for the court to rule that the case should not go before a jury at all because there are not fact issues in the case, and as such, a jury could only rule in favor of the moving party.  A court granting summary judgment in favor of a creditor permits recovery not only for the alleged debt, but also for attorney’s fees, which often times are as much as double the amount of the underlying debt.

However, Texas courts have consistently declined to grant summary judgments in favor of creditors in light of seemingly small oversights in pleadings. Hence, a careful eye toward the creditor’s filings can lead to a defense for a debtor in an otherwise losing case.

One potential defense is the “Stranger to the Transaction” defense in a lawsuit on a sworn account.  The sworn account cause of action is popular among creditors because the account itself is “self-proving” and entitles the creditor to a judgment against a debtor.   However, the Stranger to the Transaction defense can overcome that presumption and is a viable defense when there is a discrepancy in the way the debtor is named in the petition versus the actual invoice or statement on which the lawsuit is based. For instance, if an invoice names the company and the not the individual proprietor that owns it, the creditor may not be able to recover from the individual through a Motion for Summary Judgment.

Similarly, inconsistencies in the alleged amount owed and the documentation the creditor provides the court to support a motion for summary judgment can serve as defense for a debtor.  For instance, in a lawsuit based on a promissory note, the creditor must plead facts explaining the difference between the face amount of the note and principal balance alleged, including but not limited to, a ledger sheet with all credits and offsets. Otherwise the debtor can readily dispute the amount owed and overcome summary judgment.

Improper service can also be a basis to defeat a lawsuit against a debtor, especially if the debtor is a corporation.  As an example, when serving a corporation, the proof of service must demonstrate that the person receiving service had the authority to act on the company’s behalf.  Failing to indicate that the signature on a return of service belongs to the president or other authorized officer of a company can be deemed as defective service and serve as a means by which a debtor challenges a lawsuit.

Technicalities can be powerful tools in defeating a lawsuit.  As is true with any lawsuit, debtors should immediately hire experienced counsel to help utilize the rules of law to overcome even the most hopeless case.

Author Biography:

Stacy M. Allen has served as counsel on an array of legal matters including civil and criminal law, family law, bankruptcy, and even terrorism cases.  Stacy is a proud graduate of St. Edward’s University where she graduated cum laude with a Bachelor of Arts degree in International Relations with a concentration in Latin America, and of Howard University School of Law, in Washington, DC, where she served as President of the Huver I. Brown Trial Advocacy Moot Court Team. Her current practice focuses on a variety of civil litigation and criminal law matters.