Williams v. Khalaf

802 S.W.2d 651 · 1990

Facts

In July 1980, George Khalaf and William J. Williams orally agreed to form a partnership to construct and operate a country and western club, which was reduced to writing in September 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 left the job site, claiming he was fired, while Khalaf contended Williams wrongfully quit. Khalaf subsequently filed suit against Williams in October 1980, and Williams later filed a counterclaim for breach of contract in October 1983, followed by an amended counterclaim for fraud in September 1986, arising from the same transaction.

Issue

Does the 1979 amendment to the limitations statutes, which changed the limitation period for debt actions, mean that fraud claims are subject to a four-year statute of limitations, thereby making Williams' amended fraud counterclaim timely under the special amended-pleading saving statute (section 16.068), or is it barred by a two-year statute of limitations as the court of appeals held?

Holding

The court reversed the judgment of the court of appeals, holding that the limitations period for fraud is four years, not two. The cause is remanded to the court of appeals for determination of factual sufficiency points.

Rule

The court held that the statute of limitations for fraud claims is four years, based on the 1979 legislative amendments to the limitations statutes. These amendments eliminated the distinction between debts evidenced by a writing and other debts, listing all actions for debt under the four-year statute (now section 16.004 of the Civil Practice and Remedies Code). Historically, fraud was classified as a 'debt' for limitations purposes, and the 1979 changes effectively extended the limitation period for such debts to four years. Therefore, the special amended-pleading saving statute (section 16.068) applies to save Williams' fraud claim, as the original breach of contract claim was timely and the fraud claim arose from the same transaction.

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