Fourteenth Court of Appeals lets debt collector who could not prove up contact  win with quantum meruit claim

Justice Bill Boyce, recent Rick Perry appointee, demonstrates willingness to reshape
existing case law in writing opinion favorable to third-party debt collectors; also holds that
attorney's fees are available when damages are recovered in quantum meruit.

McElroy v. Unifund CCR Partners (Tex.App.- Houston [1st Dist.] Aug. 26, 2008)(Boyce)
(judgment for assignee of credit original creditor in credit card debt suit affirmed, contract not proven, quantum
meruit recovery affirmed including attorney's fees, challenge to sufficiency of business records affidavit
AFFIRMED: Opinion by
Justice Bill Boyce  
Before Chief Justice Hedges, Justices Anderson and Boyce)
14-07-00661-CV   Peggy S. McElroy v. Unifund CCR Partners Assignee of America Online - Platinum
Appeal from County Civil Court at Law No 4 of Harris County
Trial Court Judge:
Roberta Anne Lloyd  

M E M O R A N D U M   O P I N I O N

Peggy C. McElroy appeals a judgment in favor of Unifund CCR Partners for unpaid credit card debt on
grounds that (1) Unifund's business records were improperly admitted into evidence based on an
affidavit from a “designated agent" rather than a custodian of records; (2) certain Unifund business
records admitted into evidence contained hearsay within hearsay; (3) Unifund failed to establish the
existence of a contract with McElroy; and (4) Unifund failed to establish viable claims for breach of
contract or quantum meruit.  

We affirm.


Unifund CCR Partners sued Peggy C. McElroy to recover unpaid debt on a credit card  account.  The
account was originally issued under the creditor name AMERICA ONLINE-PLATINUM and later
acquired by Unifund by assignment.  Unifund pleaded both breach of contract and quantum meruit.

The lawsuit was tried to the court on July 5, 2007.  Unifund called no witnesses during the trial on the
merits, relying exclusively upon evidence contained within business records provided by Unifund and its
assignors to establish McElroy's liability.  As admitted, these records included a proffering affidavit
signed by Unifund employee Angela Freckman; a signature card for the account; an affidavit signed by
Robert Watson, an employee of the assignor of the account; and more than a dozen monthly account

The trial court signed a judgment in favor of Unifund for $15,114.66, plus interest and reasonable
statutory attorneys fees.  McElroy did not request findings of fact or conclusions of law.  McElroy timely


Admission of Business Records by “Designated Agent's" Affidavit

In her first issue, McElroy contends that the trial court erred in admitting Unifund's business records into
evidence at trial over her hearsay objection.  We review a trial court's decision to admit or exclude
evidence for an abuse of discretion.  In re J.P.B., 180 S.W.3d 570, 575 (Tex. 2005).  A trial court
abuses its discretion if its decision is arbitrary, unreasonable, and without reference to guiding
principles.  See Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998).  An
appellate court must uphold the trial court's evidentiary ruling if there is any legitimate basis for the
ruling.  Id.  Moreover, we will not reverse a trial court for an erroneous evidentiary ruling unless the error
probably caused the rendition of an improper judgment.  Id.; see also Tex. R. App. P. 44.1.

At trial, Unifund offered for admission selected business records including a proffering affidavit;
McElroy's signature card for the account; an affidavit from Chase Bank, USA employee Robert Watson
describing the assignment of McElroy's account to Unifund and the account status when assigned; 13
monthly statements; and an account statement created by Unifund. McElroy objected to admission of
these records as hearsay, but the trial court admitted them under the business records exception to the
hearsay rule. See Tex. R. Evid. 803(6).

Specifically, McElroy objects on appeal to the affidavit by which Unifund sought to authenticate its
business records under the hearsay exception. See Tex. R. Evid. 902(10).  McElroy argues that the
affidavit was insufficient under Rule 902(10) because the affiant, Unifund employee Angela Freckman,
identified herself as the “designated agent” of Unifund rather than the “custodian of records."  McElroy
further asserts that Freckman lacked personal knowledge of the account as required under Rule 803
(6).  McElroy argues Freckman was not competent to lay the proper foundation required under Rule 902
(10) for the business records to qualify under the Rule 803(6) exception to the hearsay rule.  We reject
these contentions.

“'Hearsay' is a statement, other than one made by the declarant while testifying at the trial or hearing,
offered in evidence to prove the truth of the matter asserted."  Tex. R. Evid. 801(d).  The proponent of
hearsay has the burden of showing that the testimony fits within an exception to the general rule
prohibiting the admission of hearsay evidence.  Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897,
908 n. 5 (Tex. 2004).          

The business records exception provides that evidence meeting certain criteria should not be excluded
under the hearsay rule.  See Tex. R. Evid. 803(6).  The exception has four requirements: (1) the records
were made and kept in the course of a regularly conducted business activity; (2) it was the regular
practice of the business activity to make the records; (3) the records were made at or near the time of
the event that they record; and (4) the records were made by a person with knowledge who was acting
in the regular course of business.  In re E.A.K., 192 S.W.3d 133, 141 (Tex. App.- Houston [14th Dist.]
2006, pet. denied).  These requirements may be demonstrated at trial through an accompanying
affidavit.  See Tex. R. Evid. 902(10).  

The authenticating affiant need not be a “custodian of records" to qualify.  See Tex. R. Evid. 902(10).  
The prerequisites of Rule 803(6) may be established by a “qualified witness."  Houston Shell &
Concrete Co. v. Kingsley Constructors, Inc., 987 S.W.2d 184, 186 (Tex. App.- Houston [14th Dist.]
1999, no pet.); see also Tex. R. Evid. 803(6).  “Rule 803(6) does not require a witness laying the
predicate for introduction of a business record to be the creator of the document or even an employee
of the company keeping the subject record."  In re E.A.K., 192 S.W.3d at 142; see also Tex. R. Evid.
803(6).  An affiant may qualify as an “other qualified witness" by demonstrating personal knowledge of
the facts contained within a business record.   See Houston Shell & Concrete Co., 987 S.W.2d at 186.  
Freckman satisfied this standard because her affidavit stated that she was the designated agent of
Unifund, and that she had personal knowledge of the account in question.  Further, Freckman_s
affidavit tracked the model language of a self-authenticating affidavit because it described the creation,
collection and management of the records. See Tex. R. Evid. 902(10)(b).

McElroy also argues that Freckman's affidavit is conclusory because it fails to establish the basis for
Freckman's personal knowledge of the facts to which she testifies.  However, this argument is without
merit. See
Gellatly v. Unifund CCR Partners, No. 01-07-00552-CV, 2008 WL 2611894, at *5 (Tex. App.
- Houston [1st Dist.] July 3, 2008, no pet.) (mem. op., not designated for publication) (an affidavit
reciting business records requirements is not impermissibly conclusory).  Because this affidavit
substantially complies with the language of Rule 902(10)(b), it properly authenticates the business
records at issue. See Luxama v. State, No. 14-04-00674-CR, 2006 WL 1148483, at *10 (Tex. App-
Houston [14th Dist.] February 14, 2006, pet ref'd) (mem. op., not designated for publication) (trial court
did not abuse its discretion when admitting business records accompanied by affidavit tracking the
form provided by Rule 902(10));  Jones v. N. Woodland Hills Vill. Cmty. Ass'n, No. 14-93-00545-CV,
1994 WL 388298, at *5 (Tex. App.- Houston [14th Dist.] July 28, 1994, writ denied) (not designated for
publication) (affidavit containing only factual statements and substantially complying with Rule 902(10)
(b) model affidavit was sufficient to support admission of document);  see also Capers v. Citibank
(South Dakota), N.A., No. 05-05-01230-CV, 2006 WL 3020419,  at *3 (Tex. App.- Dallas October 25,
2006, no pet.) (mem. op., not designated for publication) (affidavit offered to authenticate business
records was not facially defective, without merit, or lacking foundation because it substantially complied
with Rule 902(10)).

McElroy further argues on appeal that Freckman's assertions of personal knowledge cannot apply to
records created by the assignors of the account in question.  An objection must be specific. McCormick
v. Tex. Commerce Bank, 751 S.W.2d 887, 890 (Tex. App.- Houston [14th Dist.] 1988, writ denied);  see
also Tex. R. Evid. 103(a)(1); Tex. R. App. P. 33.1(a)(1)(A).  An objection must identify the legal principle
the court will violate if it admits the evidence when that is not apparent from the context.  United Cab Co.
v. Mason, 775 S.W.2d 783, 785 (Tex. App.- Houston [1st Dist.] 1989, writ denied);  see also Tex. R.
Evid. 103(a)(1).  At trial, McElroy objected only to Freckman's use of the phrase “designated agent."  
Because McElroy's objection regarding personal knowledge was not raised at trial, we do not consider
it on appeal.

Under these circumstances, the trial court acted within its discretion in admitting Unifund_s business
records. See Owens-Corning Fiberglas Corp., 972 S.W.2d at 43. McElroy's first issue is overruled.

We need not address the trial court's admission of Watson's affidavit, the subject of McElroy's second
issue, because it is not necessary to determine the outcome of this case.  McElroy assails Watson's
affidavit as containing hearsay within hearsay while lacking sufficient personal knowledge to qualify for
an exception to the hearsay rule.  But even if we disregard Watson's affidavit, the unobjected-to
portions of Freckman's affidavit establish the existence of the account assignment and the validity of the
supporting records. Any asserted error in admitting Watson's affidavit was harmless.  See Tex. R. App.
Proc. 44.1(a).

Existence of Contract

In her third issue, McElroy contends that Unifund failed to demonstrate the existence of a contract.  We
construe this as a challenge to the legal sufficiency of the evidence to support Unifund's breach of
contract claim.  When neither party requests findings of fact and conclusions of law, all fact findings
necessary to support the trial court's judgment are implied.  BMC Software Belgium, N.V. v. Marchand,
83 S.W.3d 789, 795 (Tex. 2002);  Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 52 (Tex. 2003).  
However, when the appellate record includes the reporter's and clerk's records, implied findings of fact
may be challenged based on legal sufficiency.   Sixth RMA Partners, L.P., 111 S.W.3d at 52.  In
reviewing a legal sufficiency point, we view the evidence in a light that tends to support the finding of the
disputed fact and disregard all evidence and inferences to the contrary.  Id.

To recover in a breach of contract case, Unifund must prove that (1) a valid contract existed; (2) Unifund
performed or tendered performance; (3) McElroy breached the contract; and (4) Unifund was damaged
as a result of McElroy's breach.  See Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.- Houston [14th
Dist.] 2006, pet. denied).  Parties form a binding contract when the following elements are present: (1)
an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) meeting of the minds; (4)
each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be
mutual and binding. Wal-Mart Stores, Inc. v. Lopez, 93 S.W.3d 548, 555-56 (Tex. App.-Houston [14th
Dist.] 2002, no pet.).  To be enforceable, a contract must be sufficiently certain to enable a court to
determine the rights and responsibilities of the parties. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.
W.2d 218, 221 (Tex.1992).  The material terms of a contract must be agreed upon before a court can
enforce the contract.  Id.  An applicable interest rate is a 'material term.'  See id.

At trial, Unifund did not proffer the actual agreement between the cardholder and the issuer, or any other
document that established agreed terms for the applicable interest rate or the method of determining
finance charges.  Unifund's business records reflected statements sent to McElroy, purchases made
against the account, and payments made.  In its brief, Unifund argues that this evidence establishes the
existence of a contract as a matter of law.  However, nowhere in Unifund's evidence is there an express
written agreement describing the definite, agreed terms between McElroy and AMERICA ONLINE-
PLATINUM. Unifund's business records include a copy of a signature card signed by McElroy, but this
document does not contain the missing contractual terms.

The record contains the previously described affidavits, monthly statements related to the account, and
the signature card.  There is no cardholder's agreement or other document expressly describing the
terms of the account, nor is there any discernable demonstration of McElroy's intent to be bound by a
specific agreement.  The account statements show widely varying interest rates.

Williams v. Unifund CCR Partners Assignee of Citibank, No. 01-06-00927, 2008 WL 339855 (Tex.
App.- Houston [1st Dist.] February 7, 2008, no pet.), the First Court of Appeals held that a creditor
failed to establish the existence of a contract when it failed to produce “the actual agreement or any
other document that established the agreed terms, including the applicable interest rate or the method
for determining the applicability and amount of finance charges."  Id. at *4. By contrast, in
Winchek v.
Am. Express Travel Related Svcs. Co., 232 S.W.3d 197 (Tex. App.- Houston [1st Dist.] 2007, no pet.),
the First Court of Appeals held that the creditor had met its burden to establish a contract.  Id. at 204. In
that case, the creditor admitted into evidence both a copy of the creditor's  “Personal Card Member
Agreement"and an affidavit from the creditor's Manager of Credit Operations stating,

[a]t all relevant times, Winchek was the holder of an American Express Personal Card (“The Personal
Card") that enabled her to charge items to an American Express Card Account" and that A[b]y
accepting and using the Personal Card, Winchek agreed to all of the terms and conditions set forth in
the Personal Card Member Agreement.  

Id. at 202-203.  Because the “Personal Card Member Agreement" expressly stated that retention or
use of the card demonstrated the cardholder's agreement to the terms of the “Personal Card Member
Agreement," the Court found that the cardholder's demonstrated use of the card “manifested her intent
that the contract become effective." Id. at 204.

The evidence relied upon in Winchek is absent in this case.  The circumstances here parallel those in
Williams.  While we are obliged to “view the evidence in a light that tends to support the finding of the
disputed fact and disregard all evidence and inferences to the contrary," there is no evidence in this
case to demonstrate the specific terms of the contract between McElroy and Unifund.  See Williams,
2008 WL 339855, at *4; see also T.O. Stanley Boot Co., 847 S.W.2d at 221.  That does not end the
analysis, however, because there is a potential alternative ground upon which the trial court's judgment
could be based.  

We turn next to the alternative quantum meruit basis for recovery.

Quantum Meruit Claim

In her fourth issue, McElroy asserts that Unifund failed to establish its right to recover on a claim of
either breach of contract or quantum meruit.  Having addressed the breach of contract claim in
answering McElroy's third issue, we construe this as a challenge to the legal sufficiency of the evidence
to support Unifund's quantum meruit claim.

Quantum meruit is an equitable remedy independent of a particular contract.  Vortt Exploration Co., v.
Chevron U.S.A., 787 S.W.2d 942, 944 (Tex. 1990).  This theory rests on an implied agreement to pay
for benefits received.  Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex.1992).  
To recover under quantum meruit, Unifund must prove that (1) valuable services were rendered or
materials furnished; (2) to McElroy; (3) which McElroy accepted, used and enjoyed; (4) under such
circumstances as reasonably notified her that Unifund (by assignment), in performing, expected to be
paid by defendant. See Vortt Exploration Co., Inc., 787 S.W.2d at 944;  Heldenfels Bros., Inc., 832 S.W.
2d at 41.  A party may recover under quantum meruit only when there is no express contract covering
the services or materials furnished.  Vortt Exploration Co., 787 S.W.2d at 944.

Unifund's business records demonstrate that AMERICA ONLINE-PLATINUM rendered a service to
McElroy by the extension of a consumer credit card account.  McElroy did not dispute the existence or
use of this account at trial, and does not do so on appeal.

We may rely on McElroy's admissions submitted to the trial court as part of Unifund's motion for
summary judgment.  See Joyner v. Alban Group, Inc., 541 S.W.2d 292, 293 (Tex. Civ. App._Houston
[1st Dist.] 1976, no writ) (admissions made by parties in response to request for admissions and filed
among papers in the case need not be introduced in evidence to be properly before trial court for
consideration);  Red Ball Motor Freight, Inc. v. Dean, 549 S.W.2d 41, 43 (Tex. Civ. App.- Tyler 1977,
writ dism'd w.o.j.).  McElroy's admissions establish that she applied for the credit card account; she
received monthly statements showing the amount of charges or cash advanced on the account; the
monthly statements “specifically advised" her of the right to dispute any error contained within the
statements; and she failed to pay amounts owed on the account.  

The monthly statements demonstrate that credit was extended for more than one year. Unifund's
business records substantiate the chain of assignment of the account from Chase Bank, USA to
Unifund.  The statements demonstrate that McElroy made at least 12 payments against her account
balance while continuing to purchase goods and services using the account over a 12-month period.  
The business records also contain a Unifund statement showing $15,114.66 due - the same amount
awarded by the trial court as damages.  This evidence supports the trial court's judgment in favor of
Unifund on the basis of a quantum meruit claim against McElroy.  See Heldenfels Bros., Inc., 832 S.W.
2d at 41; see also 2616 S. Loop L.L.C. v. Health Source Home Care, Inc., 201 S.W.3d 349, 360 (Tex.
App.- Houston [14th Dist.] 2006, no pet.) (quantum meruit was proper claim for recovery in case where
tenants received and accepted the use of property and received written demands for payment of
market rental rates in return); Coastal Chem, Inc. v. Brown, 35 S.W.3d 90, 101 (Tex. App.- Houston
[14th Dist.] 2000, pet. denied) (quantum meruit was a proper remedy for the reasonable value of
services rendered and accepted when not covered by an existing contract).

The trial court awarded $ 5,038.22 to Unifund for reasonable statutory attorney's fees.  Because
Unifund's valid quantum meruit claim is based on the rendition of services to McElroy, we affirm the
award of statutory attorney's fees in this case.  See Tex. Civ. Prac. & Rem. Code Ann. §38.001(1)
(Vernon 2008); Tuberquia v. Jamison & Harris, No. A14-91-00055-CV, 1991 WL 260344, at *2 (Tex.
App._Houston [14th Dist.] December 12, 1991, no writ) (not designated for publication) (recovery of  
statutory attorney's fees was proper under either breach of contract or quantum meruit in suit to recover
unpaid fees for services rendered); Rainbow Group, Ltd. v. Johnson, No. 03-00-00559-CV, 2002 WL
1991141, at * 9-10 (Tex. App._Austin August 30, 2002, pet. denied) (not designated for publication)
(chapter 38 allows the recovery of attorney's fees under quantum meruit based on an employee's act of
making their services available according to an employer's request).

McElroy's fourth issue is overruled.


We affirm the trial court_s judgment.

/s/      William J. Boyce


Judgment rendered and Memorandum Opinion filed August 26, 2008.

Panel consists of Chief Justice Hedges and Justices Anderson and Boyce.