Cindy Hunt, D/B/A Value Book v. Austin Business Cards and Printing, Inc. ( 1995 )

cv4-396.hunt TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



NO. 03-94-00396-CV



Cindy Hunt, d/b/a Value Book, Appellant

v.

Austin Business Cards and Printing, Inc., Appellee



FROM THE COUNTY COURT AT LAW NO. 1 OF TRAVIS COUNTY NO. 214,459, HONORABLE STEVE RUSSELL, JUDGE PRESIDING

PER CURIAM

Cindy Hunt, d/b/a Value Book, seeks reversal of a summary judgment granted to Austin Business Cards and Printing, Inc. against her claims under the Deceptive Trade Practices Act. Tex. Bus. & Com. Code Ann. §§ 17.41-.854 (West 1987 and West Supp. 1995). We will reverse the trial court's judgment and remand the cause for further proceedings.

BACKGROUND

Hunt wished to prepare and sell coupon books. She hired ABC to print, cut, collate, and bind the books on paper she provided. ABC subcontracted with Custom Bookbinders, Inc. to bind the books. ABC printed the coupons three to a page and then sent them to CBI for binding. ABC planned to retrieve the books after they were bound and cut them into separate books.

Instead, Hunt took the books from CBI before ABC could pick them up. Hunt stated in her affidavit that she had learned that ABC had botched the job; some pages were misaligned, some were erroneously perforated, others were erroneously unperforated, and the binding was inferior. Hunt said that, because ABC had ignored her previous complaints and requests, she picked up the books from CBI to avoid further damage rather than request remedial action. According to Hunt's interrogatory responses, her associate said while taking the books that Hunt accepted the books "as is"; her associate also said that Hunt was talking to her lawyer who wanted to talk to the printers.

Donald Kelley, d/b/a Austin Business Cards & Printing, sued CBI for conversion of the books; the facts that Kelley sued, rather than the corporation, and that the corporation was not named are critical factors in this case. CBI filed a third-party petition against Hunt, claiming that she induced the release by representing that the books were her property and that Kelley had authorized the release. Hunt denied all allegations by Kelley and CBI and prayed that Kelley take nothing. She also requested that the court award her all relief to which she might be entitled. The court found that the value of the finished books to the printer was zero because too many of the books (as many as 200 out of 1,000) failed to comply with the contract. The court awarded no damages to any party and assessed costs against Kelley.

Hunt then filed this suit against ABC for deceptive trade practices and breach of contract. ABC filed a third-party action against CBI for contribution and indemnity. ABC moved for summary judgment against Hunt based on res judicata, waiver, acceptance, and breach of contract. Though Hunt alleges that the court wrote a letter stating that it would grant the second motion based on res judicata, the judgment is silent as to its basis. The court ruled that Hunt and ABC take nothing from their defendants.

DISCUSSION

Hunt raises two points of error against the judgment. By the first, she contends that the court erred by granting the motion based on res judicata. By the second, she contends that the court erred if it granted the motion on any other basis.

We review the record, taking all evidence favorable to the nonmovant as true and construing every inference and doubt in her favor, to see if no genuine issue of material fact exists and if the movant is entitled to summary judgment as a matter of law. Tex. R. Civ. P. 166a(c); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Because the judgment does not state its basis, we must affirm if any of the bases of the motion supports the judgment. Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 79 (Tex. 1989).

Res judicata

Hunt contends that res judicata does not support the judgment because she had not previously been a party to any lawsuit to which ABC or anyone privy to her cause of action against ABC was also a party. ABC replies that her claims are barred because the claims in this suit arose out of the same subject matter as the previous suit in which Hunt and ABC (and its privies) were adverse parties.

Texas has adopted the transactional approach to evaluating the preclusive effect of prior lawsuits. Getty Oil Co. v. Insurance Co. of N. Am., 845 S.W.2d 794, 798-99 (Tex. 1992); Barr v. Resolution Trust Corp., 837 S.W.2d 627, 630-31 (Tex. 1992). A judgment in an earlier suit "precludes a second action by the parties and their privies not only on matters actually litigated, but also on causes of action or defenses which arise out of the same subject matter and which might have been litigated in the first suit." Id. at 630. The court said the adoption of this standard imposed no more hardship than the extant rule on compulsory counterclaims. Tex. R. Civ. P. 97(a); Barr, 837 S.W.2d at 631. The dispute in this case is limited to whether the plaintiff in the first case was a privy of ABC for res judicata purposes.

We have no black-letter, all-inclusive definition of privity. Getty, 845 S.W.2d at 800. The term includes those who are so connected with a party to the judgment as to have such an identity of interest with that party that the party represented the same legal right. Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363 (Tex. 1971). Those in privity can include persons who exert control over the action, persons whose interests are represented by a party, and successors in interest to a party. Getty, 845 S.W.2d at 800-01.

A pre-Barr case, Hammonds v. Holmes, shows how factual differences can produce different findings on privity. 559 S.W.2d 345 (Tex. 1977). Burtis and Norma Hammonds filed suit individually and d/b/a their business partnership against Corsicana National Bank, Ed Holmes, and Zane Stites for wrongful foreclosure of a deed of trust on the Hammondses' business property. In a previous suit, the court had dismissed with prejudice the same claim by the Hammondses individually against the bank. Id. at 346. The trial court in the second suit granted summary judgment to all defendants based on res judicata. The appeals court likewise rejected the appellants' claim that the plaintiffs in the two suits were different; the court held that, even if the partnership was viewed as a separate entity, the partners sued as its representatives in the first suit. Id. at 347. The court also held that, because the plaintiffs alleged wrongdoing by Stites only in his official capacity as bank president, the former judgment barred litigation of that claim against him. The court reversed the judgment favoring Holmes because the plaintiffs alleged wrongdoing in his role as trustee aside from his role as bank vice president; the court held that this different role prevented the court from finding as a matter of law that he acted only as an agent of the bank. Id.

ABC contends that the assignment supports the implicit finding that Donald Kelley, d/b/a Austin Business Cards and Printing was a privy of Austin Business Cards and Printing, Inc. for res judicata purposes. ABC points to testimony from the trial of the first suit in which ABC vice president Keith Kelley said that ABC had assigned its claim against CBI to Donald Kelley (Keith's father and owner of forty percent of ABC's stock), that Donald Kelley was "backing the loss," and that Donald Kelley was pursuing the "legal rights" of the corporation even though the suit should have been, but was not, in the corporation's name. No written assignment is in the record.

ABC's evidence did not eliminate all dispute because it did not clearly define the breadth of the assignment. The assignment might have been, as Hunt argues, for the limited purpose of collecting damages from CBI. In that instance, Donald Kelley would not have been liable for the damages Hunt seeks in this suit. Neither would his status as a stockholder affect this result because the corporate structure ordinarily shields stockholders from this type of liability. See Tex. Bus. Corp. Act Ann. art. 2.21 (West Supp. 1995). The evidence did not establish that the corporate veil should be pierced. Under this scenario, Hunt was not required to have pleaded her related causes of action in the first suit against the non-party ABC. See Tex. R. Civ. P. 38. Construing the evidence and inferences favorably to Hunt, we find that a genuine issue of fact persists over Donald Kelley's privy status.

Because it is unclear that Donald Kelley was ABC's privy, it is unclear that res judicata bars this suit. Summary judgment on the basis of res judicata was erroneous. We sustain point one.

Other bases of the motion

By point of error two, Hunt contends that the summary judgment was erroneous if based on any of the remaining grounds of the motion--waiver, acceptance, and breach of contract. ABC contends that Hunt's admissions in response to requests for admissions conclusively establish these other grounds. See Tex. R. Civ. P. 169(2).

We evaluate the evidence against general contract law. Waiver is the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. 1987). A party who accepts and uses something made pursuant to a contract cannot ordinarily prevail on a claim that the work is worthless; however, mere acceptance and use of the product does not necessarily waive the right to recover for faults in the product. See Ketchey v. West, 326 S.W.2d 40, 42 (Tex. Civ. App.--Dallas 1959, no writ). If one party to a contract prevents another from performing the contract, the preventing party cannot recover for the prevented's failure to perform. L.H. Land Painting Co. v. S&P Constr., Inc., 516 S.W.2d 14, 16 (Tex. Civ. App.--Fort Worth 1974, writ dism'd). But, where promises have been exchanged for mutual performance, a party that commits a breach of such materiality as to indicate an intent to breach the contract thereby discharges or excuses the other party from its obligation to perform. Bernal v. Garrison, 818 S.W.2d 79, 86 (Tex. App.--Corpus Christi 1991, writ denied) (citing Glass v. Anderson, 596 S.W.2d 507, 511 (Tex. 1980)).

Hunt's discovery responses do not show the absence of a fact issue, especially when they are paired with her affidavit. Her statements in her affidavit do not necessarily contradict her admissions; instead, they can be interpreted to flesh out the admissions in ways that demonstrate fact issues. She admitted that she took the coupon books from CBI before they were finished and without ABC's permission, depriving ABC of the opportunity to complete the project. She also said that, though her agent said she took the books "as is," he also said that she was talking to her lawyer, who wanted to talk to Donald Kelley. Hunt said in her affidavit that she took the books only after ABC's poor performance had damaged the books irreparably. She said that the books were rife with misperforations and other errors. She said that, because ABC had ignored her previous complaints, she took them to prevent further damage.

The evidence shows genuine issues of material fact as to whether Hunt accepted the books intending to waive any defects or warranties and whether her termination of the project was predated by a breach of the contract by ABC that rendered proper completion impossible. We sustain point two.

CONCLUSION

Having sustained both points of error, we reverse the summary judgment of the trial court. We remand the cause for further proceedings.

Before Justices Powers, Aboussie and B. A. Smith

Reversed and Remanded

Filed: May 3, 1995

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