Opinion
No. 05-07-01147-CV
Opinion Filed November 12, 2008.
On Appeal from the 14th Judicial District Court, Dallas County, Texas, Trial Court Cause No. 06-05823-A.
Before Justices WRIGHT, LANG-MIERS, and MAZZANT.
MEMORANDUM OPINION
Compass Services, Inc. appeals from a summary judgment rendered in favor of TRT Development Co.-Ccs d/b/a Omni Corpus Christi Hotel (Omni). In a single issue, Compass contends the trial court erred in granting Omni's motion for summary judgment on the ground that its lawsuit was barred by limitations. We overrule Compass's issue and affirm the trial court's judgment.
Omni contracted with Compass to perform renovation work at its Corpus Christi hotel. Compass completed the work in May of 2001. Compass modified the contract with the handwritten notation that the contract price excluded applicable remodeling taxes. Omni did not sign off on the handwritten modification. Moreover, a provision under the parties signatures provided that Compass's proposal included taxes, material, and labor. Omni made its final payment to Compass on July 24, 2001. Neither Omni nor Compass paid remodeling taxes to the State of Texas. Compass contends that it first learned that the remodeling taxes had not been paid when it was audited in July of 2004. Thus, Compass learned of the alleged breach well within the four-year statute of limitations period. On November 10, 2004, Compass sent Omni an invoice and letter requesting payment of the remodeling taxes. When Omni did not pay the invoice, Compass filed its lawsuit on January 3, 2006, more than four years after the final contract payment. Compass alleged that Omni breached the contract by failing to pay the remodeling taxes.
The standard of review for summary judgment is well settled. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense. KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). A matter is conclusively established if ordinary minds cannot differ as to the conclusion to be drawn from the evidence. Triton Oil Gas v. Marine Contractors Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982). Thus, the defendant must conclusively prove when the cause of action accrued and negate the discovery rule if pleaded or otherwise raised. KPMG, 988 S.W.2d at 748. If the movant establishes that limitations bars the action, the nonmovant must then adduce summary judgment proof raising a fact issue to avoid limitations. Id.
A breach of contract claim accrues when the contract is breached. Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002). The limitations period for a breach of contract claim is four years. Tex. Civ. Prac. Rem. Code Ann. § 16.004 (Vernon 2002). The discovery rule may apply to toll the statute of limitations until the plaintiff knew or, exercising reasonable diligence, should have known of the facts giving rise to the cause of action. HECI Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1998). Two principles apply to discovery rule cases: (1) the injury is inherently undiscoverable; and (2) the evidence of the injury is objectively verifiable. Computer Assoc. Int'l Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996). An injury is inherently undiscoverable if a party, using due diligence, would not ordinarily learn of the negligent act or omission.
Some contract breaches may be inherently undiscoverable. Such cases, however, should be rare because diligent contracting parties should generally discover any breach during the relatively long four-year limitations period provided for such claims. Via Net, U.S. v. TIG Ins. Co., 211 S.W.3d 310, 315 (Tex. 2006). Generally, contracting parties are not fiduciaries. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997). Thus, due diligence requires that each party to a contract protect its own interests. Barfield v. Howard M. Smith Co. of Amarillo, 426 S.W.2d 834, 840 (Tex. 1968). Due diligence may involve asking the other contracting party to verify contractual performance. HECI, 982 S.W.2d at 886. Failing to ask for such information is not due diligence. Id. Public records on file are sufficient to render information discoverable. See Shivers v. Texaco Exploration Production, Inc., 965 S.W.2d 727, 735 (Tex.App.-Texarkana 1998, pet. denied).
Under the tax code, remodeling work is a taxable service. Tex. Tax Code Ann. § 151.0101(a)(13) (Vernon 2008). A person subject to sales tax must file a tax report. Tex. Tax Code Ann. § 151.403(a) (Vernon 2008). The tax report must show the amount of the total receipts of a seller for the reporting period, show the amount of the taxes due for the reporting period, and be signed by the person required to file it. Tex. Tax Code Ann. § 151.406(a)(1), (4) (d) (Vernon 2008). Moreover, it is the seller's obligation to compute the sales tax imposed to be paid to the comptroller by multiplying the percentage rate of the sales tax by the total receipts of the seller from all sales of taxable services. Tex. Tax Code Ann. § 151.410 (Vernon 2008). Under the tax code, the purchaser of a taxable service may directly pay the tax to the comptroller if the purchaser applied for and obtained from the comptroller a direct payment permit issued by the comptroller and the purchaser gives to the seller a blanket exemption certificate. Tex. Tax Code Ann. § 151.417(a) 151.419(a) (Vernon 2008).
Omni moved for summary judgment solely on the ground that Compass's lawsuit was barred by limitations. Compass countered that the discovery rule applied to toll the statute of limitations. Compass contends that it first learned that the remodeling taxes had not been paid when it was audited in July of 2004. Omni's summary judgment evidence included a page printed off the comptroller's website showing that Omni was not set up for sales tax. This information is available to the public. Omni also attached excerpts from the deposition testimony of Adriana Pineda, Compass's executive vice president. Pineda testified that Compass did not report any sales tax for the Omni remodeling job. She testified that she did not know whether the law required Compass to report the taxes. She also admitted that she had not obtained the exemption certificate from Omni.
As the taxpayer, Compass was responsible for the sales tax for its taxable services. See Tex. Tax Code Ann. §§ 151.0101(a)(13) 151.403(a) (Vernon 2008). It is irrelevant that Compass thought Omni was responsible for the tax under the parties' contract. Under the law, Compass was the taxpayer responsible for filing the tax report and paying the taxes. Compass knew that it did not possess a blanket exemption certificate from Omni excusing its obligations under the tax code. As a taxpayer of a taxable service under the tax code, it was Compass's obligation to file a tax report and pay the taxes. The nonpayment of taxes that are Compass's own responsibility is not inherently undiscoverable. Compass was not diligent with respect to the payment of its own taxes or following up with Omni if it believed the payment of the taxes was Omni's responsibility under the contract. Under these circumstances, we conclude that the alleged breach of contract was not inherently undiscoverable and, thus, the discovery rule does not apply to toll the statute of limitations.
We conclude the trial court properly granted Omni's motion for summary judgment on the ground that the statute of limitations barred Compass's lawsuit. Accordingly, we overrule Compass's issue and affirm the trial court's judgment.