A Magistrate Court judge in Texas has granted a defendant’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act and the Texas Debt Collection Act because it filed a lawsuit to collect on an unpaid debt after the plaintiff alleged the stature of limitations had expired, ruling that the plaintiff’s interpretation of the type of debt — and the corresponding statute of limitations — was incorrect.
A copy of the ruling in the case of Terrell v. Ozark Capital Corp. can be accessed by clicking here.
The plaintiff took out a loan from a credit union in 2016 and stopped making payments on it in 2018. The loan was then sold to the defendant, which filed a lawsuit in 2022 to collect on the unpaid debt. The case was tried and the plaintiff prevailed, which led him to file his lawsuit, accusing the defendant of violating the FDCPA and the TDCA. The plaintiff alleges that the statute of limitations should have been four years and was judicially unenforceable when the underlying collection lawsuit was filed because the promissory note did not meet the sum-certain and unconditional-promise requirements of the Texas Business and Commerce Code. The defendant argued that the statute of limitations should be six years because the promissory note was a negotiable instrument under the code.
In looking at the terms of the agreement and existing case law in Texas, Judge Dustin M. Howell of the District Court for the Western District of Texas found nothing to substantiate the plaintiff’s claims that the promissory note was not a negotiable instrument.
“The undersigned finds that the promissory note meets the sum certain and unconditional promise requirements of a negotiable instrument,” Judge Howell wrote. “Because the promissory note is negotiable, the UCC governs, and the six-year statute of limitations to enforce the note set out in Section 3.118(a) applies. The applicable six-year statute of limitations period had not expired when Ozark filed its state court action on April 20, 2022, and the debt was judicially enforceable. Terrell, therefore, cannot meet an essential element of his FDCPA and TDCA claims for commencement of an action against him to collect a debt after the expiration of the applicable limitations period and collection of a debt that was not judicially enforceable.”
