Williams v. Khalaf
802 S.W.2d 651 · Texas Supreme Court · 1990
Facts
In July 1980, George Khalaf and William J. Williams orally agreed to a partnership to construct and operate a country and western club, which was formalized in writing on September 9, 1980. Williams was to build the club at cost, and Khalaf was to finance it, with both sharing ownership. In late September 1980, Williams discovered Khalaf had incorporated the business on September 17, 1980, excluding Williams from ownership. Williams then left the job site, claiming he was fired, while Khalaf contended Williams wrongfully quit the project.
Procedural history
Khalaf filed suit against Williams in October 1980. Williams counterclaimed for breach of contract in October 1983, later amending in September 1986 to add a fraud claim. The trial court rendered judgment for Williams on the jury verdict for fraud, but the court of appeals reversed, holding the fraud claim was barred by a two-year statute of limitations. This court reverses the court of appeals' judgment.
Issue
The central legal question is whether Williams' counterclaim for fraud, added as an amendment to an earlier breach of contract counterclaim, was barred by the statute of limitations. Specifically, the court must determine if the applicable limitation period for fraud claims is two years or four years, and how the amended pleading saving statute applies.
Holding
The court reverses the judgment of the court of appeals. It holds that the limitation period for fraud claims is four years, not two years. The cause is remanded to the court of appeals for determination of factual sufficiency points.
Rule
The court established that the statute of limitations for fraud actions is four years. Historically, fraud was classified as a "debt" for limitations purposes, specifically a "debt not evidenced by a writing," which previously fell under a two-year statute. However, 1979 legislative amendments eliminated the distinction between debts, placing all actions for debt under a four-year statute (now section 16.004 of the Civil Practice and Remedies Code). The two-year statute (section 16.003) no longer mentions "debt." Therefore, the court adheres to its classification of fraud as a "debt," meaning it is now subject to a four-year limitation period. The special amended-pleading saving statute (section 16.068) allows an amended pleading to relate back if the original pleading was timely and the amendment relates to the same transaction or occurrence, thus saving the fraud claim.
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