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Texas Justices Revisit Implied-Revocation Rule In Debt Row

Jan 18, 2022

Law360 (January 18, 2022, 10:03 PM EST) -- The Texas Supreme Court has ruled a bank's agreement with a debt collector to collect more than $7 million from a client impliedly revoked any outstanding settlement offers, in a case that asked the court to explore for only the second time a doctrine it adopted 75 years ago.

In a 38-page opinion released Friday, the state's high court revisited the implied-revocation doctrine it adopted through its 1947 opinion in Antwine v. Reed. In that case, the court held that an outstanding offer to sell a piece of land was revoked when the potential buyer learned the seller had engaged in "some act inconsistent" with the offer.

Justice John Phillip Devine clarified in Friday's opinion that the doctrine is not limited to offers involving the sale of land and, therefore, applies to the dispute between South State Bank NA and Kyle Tauch, which the judge noted was only the second case to ever come before the Texas Supreme Court in which the implied-revocation doctrine has been invoked.

The court also held that a third party — in this case, debt collector Virginia Angel — and not the bank, can give notice of an inconsistent act that impliedly revokes an outstanding offer.

"Revocation by inconsistent action is firmly rooted in contract law without limitation to any specific contractual context," Justice Devine wrote for the court. "The touchstone of the doctrine is inconsistency, and that standard is met here."

The dispute between South State Bank and Tauch dates back to 2012, when the bank secured a final judgment against Tauch in South Carolina for roughly $4.6 million plus interest. The bank domesticated the judgment in Harris County District Court in 2015, according to Friday's opinion.

After the judgment was domesticated, Tauch and a South State Bank senior vice president, James Holden, began negotiating potential settlements over email. In April 2016, Tauch offered the bank $1 million to settle the debt, which at the time had grown to more than $6 million, but the bank rejected the offer, according to court documents.

In an April 11, 2016, email, Holden told Tauch the bank would accept $2 million to settle the debt, adding that Tauch should let him know "as quickly as possible as the bank will likely be look[ing] at other collection alternatives," according to the opinion. Tauch didn't immediately reply.

Then on April 13, 2016, Holden, on the bank's behalf, executed an agreement assigning the judgment to Angel for collection. The agreement had an effective date of April 14, 2016, according to court documents.

After the agreement was signed on April 13, Angel's attorneys notified Tauch's attorneys of the deal that same day. This prompted Tauch to finally respond to Holden's April 11 email accepting the $2 million settlement agreement offer.

Tauch argues that because the bank's agreement with Angel had an effective date of April 14, the bank's counteroffer was still valid when Tauch emailed Holden accepting it on April 13. Tauch has refused to pay Angel, which forced the debt collector to file suit against him in Houston court in May 2016.

A Harris County District Court judge disagreed with Tauch's argument and entered summary judgment in favor of Angel in 2017, according to court records.

But the Fourteenth Court of Appeals in Houston reversed that judgment when in July 2019 a split panel agreed with Tauch, holding the implied-revocation doctrine was not satisfied because he accepted the bank's counteroffer before its agreement with Angel became effective.

The state Supreme Court rebuked that finding Friday, holding that the core inquiry is whether the bank took an action inconsistent with the settlement offer, not whether there was a presently enforceable contract.

"Under our precedent … the relevant inquiry is not 'whether the bank took action that would prevent the offer from materializing into a contract' but whether 'a reasonable person, in the position of the offeree, would regard the offer as withdrawn,'" the court held.

Matthew Storey of Adams and Reese LLP, representing Angel and the bank, told Law360 in a statement Tuesday that he is pleased with the state Supreme Court's decision. 

"This is an important clarification of Texas contracts law," he said. 

Counsel for Tauch didn't immediately respond to requests for comment. 

Justice Debra Lehrmann didn't participate in the court's opinion.

Angel and the bank are represented by Matthew D. Storey of Adams and Reese LLP, Richard A. Schwartz, Nolan C. Knight and Claire Carroll of Munsch Hardt Kopf & Harr PC and Dale Wainwright and Elizabeth "Heidi" G. Bloch of Greenberg Traurig LLP.

Tauch is represented by Wanda McKee Fowler of Wright Close & Barger LLP and Anthony T. Golz, Roger D. Townsend and Charles W. Getman of Cokinos Young.

The case is Virginia Angel et al. v. Kyle Tauch, case number 19-0793, in the Supreme Court of Texas.

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