RPI Denton Center, Ltd. v. Troy Brown and Albert Smith ( 2013 )

In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
No. 06-13-00035-CV
RPI DENTON CENTER, LTD., Appellant
V.
TROY BROWN AND ALBERT SMITH, Appellees
On Appeal from the 367th District Court
Denton County, Texas
Trial Court No. 2012-50206-367
Before Morriss, C.J., Carter and Moseley, JJ.
Memorandum Opinion by Chief Justice Morriss
MEMORANDUM OPINION
Troy Brown and Albert Smith guaranteed the payment by HRT, Inc., of a sixty-five-
month lease of Denton County 1 shopping center space from RPI Denton Center, Inc. After HRT
quit paying rent some two years into the lease, RPI pursued two successive suits. In the initial
suit against Brown and Smith2 for damages that RPI “has suffered and continues to suffer as a
result of their breach of the guaranty,” a default judgment was entered for damages of
$35,790.18, a sum less than the full amount of the guaranteed rentals for the remainder of the
lease. 3 In the latter suit, 4 in which RPI intended to recover another portion of the guaranteed
rentals, 5 the trial court entered a summary judgment for Brown and Smith, ruling that the second
suit was barred by res judicata and limitations. Because (1) res judicata bars the second suit and
(2) modifying the judgment was not error, we affirm the judgment of the trial court.
(1) Res Judicata Bars the Second Suit
A traditional motion for summary judgment is granted only when the movant establishes
that there are no genuine issues of material fact and that it is entitled to judgment as a matter of
1
Originally appealed to the Second Court of Appeals, this case was transferred to this Court by the Texas Supreme
Court pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001 (West 2013). We are
unaware of any conflict between precedent of the Second Court of Appeals and that of this Court on any relevant
issue. See TEX. R. APP. P. 41.3.
2
The first suit also named HRT as a party defendant, but HRT is neither a party to this appeal of the second suit nor
relevant to its resolution.
3
The default judgment also added court costs and attorney’s fees. The base sum of the judgment included rentals
accrued from March through September 2008.
4
RPI also sued a third guarantor, Mitchell Jones. When Jones failed to answer the lawsuit, an interlocutory default
judgment was taken against him May 29, 2012. Jones has not appealed.
5
The second suit sought to recover rentals accruing from October 1, 2008, through March 1, 2012.
2
law. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).
We review de novo the grant or denial of a motion for summary judgment “to determine whether
a party’s right to prevail is established as a matter of law.” Lamar Corp. v. City of Longview,
270 S.W.3d 609, 613 (Tex. App.—Texarkana 2008, no pet.); see Nash v. Beckett, 365 S.W.3d
131, 136 (Tex. App.—Texarkana 2012, pet. denied) (citing Mann, 289 S.W.3d at 848). When
both sides move for summary judgment and the trial court grants one motion and denies the
other, we review both the grant and the denial. Tex. Mun. Power Agency v. Pub. Util. Comm’n
of Tex., 253 S.W.3d 184, 192 (Tex. 2007). We therefore review the summary judgment evidence
presented by each party, determine all questions presented, and render judgment as the trial court
should have rendered. Id.; Nash, 365 S.W.3d at 136.
Res judicata is an affirmative defense under Rule 94 of the Texas Rules of Civil
Procedure. TEX. R. CIV. P. 94. An affirmative defense is defined as “a denial of the plaintiff’s
right to judgment even if the plaintiff establishes every allegation in its pleadings.” Hassell
Const. Co., Inc. v. Stature Commercial Co., Inc., 162 S.W.3d 664, 667 (Tex. App.—Houston
[14th Dist.] 2005, no pet.) (quoting Bracton Corp. v. Evans Constr. Co., 784 S.W.2d 708, 710
(Tex. App.—Houston [14th Dist.] 1990, no writ)). RPI complains that Brown and Smith failed
to rebut the summary judgment evidence RPI presented. Because Brown and Smith countered
RPI’s summary judgment motion with the affirmative defense of res judicata, it was not
necessary to rebut RPI’s summary judgment evidence. Instead, Brown and Smith’s assertion of
this affirmative defense, if successful, relieves them of liability even if all the elements of RPI’s
cause of action are established. See Moulton v. Alamo Ambulance Serv., Inc., 414 S.W.2d 444,
3
448 (Tex. 1967); Blus v. Fuselier, 55 S.W.3d 204, 211 (Tex. App.—Texarkana 2001, no pet.).
Accordingly, we initially consider whether the trial court was correct in concluding Brown and
Smith proved as a matter of law the affirmative defense of res judicata.
“Res judicata, or claims preclusion, prevents the relitigation of a claim or cause of action
that has been finally adjudicated, as well as related matters that, with the use of diligence, should
have been litigated in the prior suit.” Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex.
1992). It requires proof of three elements: (1) a prior final judgment on the merits by a court of
competent jurisdiction, (2) identity of parties or those in privity with them, and (3) a second
action based on the same claims as were raised or could have been raised in the first action.
Amstadt v. U. S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). In Barr, the high court adopted
a transactional approach to res judicata, holding:
The scope of res judicata is not limited to matters actually litigated; the judgment
in the first 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.
Barr, 837 S.W.2d at 630. 6 Additionally, the high court held that a determination of what
constitutes the same subject matter requires a factual analysis of the previous lawsuit, and any
cause of action which arises out of those same set of facts should have been litigated. Id.;
6
Res judicata is “the generic term for a group of related concepts concerning the conclusive effects given final
judgments.” Barr, 837 S.W.2d at 628. The doctrine, however, actually encompasses two different concepts:
“(1) claim preclusion (also known as res judicata); and (2) issue preclusion (also known as collateral estoppel).” Id.
In practice, claim preclusion applies to prevent “the relitigation of a claim or cause of action that has been finally
adjudicated, as well as related matters that, with the use of diligence, should have been litigated in the prior suit.”
Id. Issue preclusion, on the other hand, “prevents relitigation of particular issues already resolved in a prior suit.”
Id. Here, Brown and Smith moved for traditional summary judgment based only on the first of these concepts—i.e.,
claim preclusion.
4
Lesikar v. Rappeport, 104 S.W.3d 310, 315 (Tex. App.—Texarkana 2003, pet. denied). These
inquiries are to be made pragmatically, “giving weight to such considerations as whether the
facts are related in time, space, origin, or motivation, whether they form a convenient trial unit,
and whether their treatment as a trial unit conforms to the parties’ expectations or business
understanding or usage.” Barr, 837 S.W.2d at 631.
The parties’ primary point of contention stems from their differing view of the initial
lawsuit. RPI contends the first lawsuit was an exercise of “its right under the lease and guaranty
to recover the rental in periodic actions as it becomes due under the lease.” According to RPI,
suit was “filed . . . to recover the sum of $35,790.18” then accrued under the lease and guaranty. 7
RPI relies on Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 300
(Tex. 1997), for the proposition that “a landlord is entitled to sue for rent as it becomes due
following the tenant’s breach and abandonment” and may “reenter the premises without
accepting surrender, forfeiting the lease or being construed as ejecting the tenant.” RPI further
contends that, because Brown and Smith did not prove RPI could not institute actions for past-
due rent, their claim of res judicata could not succeed.
While Brown and Smith acknowledge that RPI was entitled to sue for rent as it became
due, they maintain that RPI failed to do so. Instead, they claim the original lawsuit sought
damages for the entire lease term. We examine the initial lawsuit in light of these contentions.
7
The lease authorized RPI to “change door locks if [HRT was] delinquent in paying rent.” Further, in the event
HRT abandoned the premises, the lease allowed RPI to permanently change the locks on the leased premises. In the
case of abandonment by HRT, the lease provides that it “shall continue in effect for so long as Landlord does not
terminate [the] Lease, and Landlord may enforce all its rights and remedies under [the] Lease, including the right to
recover the rental in periodic actions as it becomes due under [the] Lease.”
5
RPI brought its initial lawsuit “to recover damages” for breach of the “lease and personal
guaranties.” RPI claimed that Brown and Smith failed to pay the rent, operating expenses, taxes,
and insurance due and that “RPI is entitled to judgment against Brown, . . . and Smith, jointly
and severally, for the damages which RPI has suffered and continues to suffer as a result of their
breach of the Guaranty.”
The remaining allegations relate to RPI’s claimed damages. RPI alleged that the sum of
“$16,194.10 has accrued under the terms of the Lease and Guaranty but has not been paid.”
Further, RPI claimed that, “[f]or the balance of the lease term, an additional $226,098.90 will
accrue under the terms of the Lease and Guaranty.” The trial court entered a default judgment
September 29, 2008, awarding judgment in favor of RPI and against Brown and Smith in the
principal amount of $35,790.18, plus court costs and attorney’s fees in the amount of $2,500.00.
Where, as here, a tenant is alleged to have breached a lease by abandoning the property
and ceasing to pay rental payments, the landlord can (1) maintain the lease, suing for rent as it
becomes due; (2) treat the breach as an anticipatory repudiation, repossess, and sue for the
present value of future rentals reduced by the reasonable cash market value of the property for
the remainder of the lease term; (3) treat the breach as anticipatory, repossess, release the
property, and sue the tenant for the difference between the contractual rent and the amount
received from the new tenant; or (4) declare the lease forfeited (if the lease so provides) and
relieve the tenant of liability for future rent. Austin Hill Country, 948 S.W.2d at 300; see also W.
Flavor-Seal Co. v. Kallison, 389 S.W.2d 521, 522 (Tex. App.—San Antonio 1965, no writ) (on
6
default in payment of rent, landlord may either stand on contract and sue for each month’s rent as
it falls due or may sue for all damages for breach of contract).
Brown and Smith claim that the initial lawsuit was one for anticipatory breach. They
point out that the petition specified the amount of damages already incurred, as well as the
amount of damages that would continue to accrue through the term of the lease. Under the
“Causes of Action” section of the petition, RPI “incorporated the provisions of the above
paragraphs” and asked the trial court to order Brown and Smith to pay “the damages which RPI
has suffered and continues to suffer as a result of their breach of the guaranty.” The petition
does not mention or reference a right to recover rental in periodic actions as it becomes due
under the lease. 8
In support of their position, Brown and Smith rely on Crabtree v. Southmark Commercial
Management, 704 S.W.2d 478 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.). In that
case, the tenant abandoned office space in violation of a ten-year lease and failed to make any
further payments. The landlord obtained a summary judgment in November 1984 for the
principal amount of $7,037.85 together with attorney’s fees. Id. at 479–80. The original petition
in the first suit stated,
The Defendant failed to make any further payment pursuant to the term of the
lease for the common area maintenance charges and lease charges, and after
crediting the $750.00 deposit there is a sum of at least $40,600.00 due and owing
to the Plaintiff for rentals, damages to the premises, rehabilitation of the premises
for releasing, rental adjustments and other reasonable charges.
8
This allegation was made for the first time in the second amended petition filed in the second lawsuit.
7
Id. at 480. In May 1985, the landlord obtained a second summary judgment against Crabtree in
the principal amount of $3,750.00, plus attorney’s fees. Id. at 480–81. This amount represented
the total rent due for the intervening months between the first and second suits. Id. at 481. Even
though the initial judgment awarded only a portion of the rents due under the lease term, the
petition in the first suit set forth a claim for anticipatory breach and sought recovery “for total
rent due under the remaining term of the lease.” Id. The petition in the second suit was based on
the same cause of action between the same parties. 9 Because the landlord prevailed in the first
suit as to the entire case, his cause of action merged into the judgment and dissolved. The
landlord was thus barred by the doctrine of res judicata from any recovery in the second suit. Id.
Here, although RPI did not pray for recovery of a specific dollar figure—as was the case
in Crabtree—it did allege the amount due and owing (at the time the lawsuit was filed) and
further alleged a specific dollar figure representing the value of future rental payments through
the lease term. RPI sought recovery for damages which it “has suffered and continues to suffer”
as a result of the breach. RPI simply failed to add these figures in order to allege a specific
amount of damages and failed to include them in the total amount of the default judgment in the
9
The relevant part of the original petition in the second suit stated,
The Defendant failed to make any further payment pursuant to the terms of the lease for the
common area maintenance charges; and, as a result of the Defendant’s breach, there is presently
due and owing to the Plaintiff under the terms of the lease agreement the sum of at least
$35,000.00 together with prejudgment interest on said sum, post-judgment interest for rentals,
damage to the premises, rehabilitation of the premises for re-leasing, rental adjustments, common
area maintenance charges and other charges as provided for in the lease agreement.
Crabtree, 704 S.W.2d at 481.
8
first suit. We do not believe the omission of the amounts has the effect of limiting the nature of
the first suit.
RPI contends that it did not seek damages for the entire lease term, claiming that its
reference to future damages in the initial petition was merely a factual averment. Instead, RPI
contends, the initial suit was one for periodic rent payments for part of the lease term only.
Texas courts have recognized this option for landlords for over a century. Davidson v. Hirsh,
101 S.W. 269 (Tex. Civ. App. 1907) (Landlord “had a right to stand upon the contract and sue
for the rent as it fell due. . . .”). In such a case, however, suit is brought on the contract, and not
for damages for a breach of it. Speedee Mart, Inc. v. Stovall, 664 S.W.2d 174, 177 (Tex. App.—
Amarillo 1983, no writ); Maida v. Main Bldg. of Houston, 473 S.W.2d 648, 651 (Tex. App.—
Houston [14th Dist.] 1971, no writ) (in suit for rent as it becomes due, suit is on contract and
measure of recovery is contractual rental); Davidson, 101 S.W. at 269. Here, RPI sought to
recover damages for a breach of the lease.
In support of its position that the initial suit was one for periodic rent payments, RPI also
relies on the fact that it requested—in its motion for entry of default judgment—recovery against
the defendants in the principal amount of $35,790.18. Moreover, the damage affidavit proved
damages in only that amount. Finally, RPI points to the fact that the default judgment awarded
only $35,790.18, rather than damages for the entire lease term. 10 Thus, RPI contends, the initial
suit was one for contractual rent. We disagree.
10
Default judgments have preclusive effect for purposes of res judicata. Houtex Ready Mix Concrete & Materials v.
Eagle Const. & Envtl. Servs., L.P., 226 S.W.3d 514, 519 (Tex. App.—Houston [1st Dist.] 2006, no pet.).
9
The fact that RPI proved up damages in the first lawsuit in the amount of only
$35,790.18, and hence received a judgment for that amount, is not determinative in the analysis
of whether res judicata bars RPI’s claims in the second lawsuit. As previously discussed, Texas
courts examine “the factual basis of the claim or claims in the prior litigation” that “make up the
gist of the complaint” in the res judicata analysis. Barr, 837 S.W.2d at 630. As in Crabtree, the
amount of the initial judgment here did not include all damages requested in the original petition.
Crabtree determined the initial suit was nonetheless a claim for anticipatory breach, based on the
petition. Additionally, Crabtree noted that the judgment in the initial suit recited that “the
Plaintiff is entitled to recover as to the entire case . . . . [damages awarded].” Barr, 837 S.W.2d
at 630. Here, the judgment contained somewhat similar language, stating, “This judgment
resolves all issues as to all parties and is a final and appealable judgment.” 11
Based on the foregoing analysis, we conclude that the first lawsuit was one for
anticipatory breach, seeking damages for the entire lease term. 12 The fact that the judgment did
not award the full amount of damages claimed does not change the nature of the initial pleading.
Having so determined, we examine the claims in the second lawsuit.
11
RPI summarily contends that its claims in the second lawsuit were not mature at the time of the first lawsuit. Here,
however, RPI’s claim for anticipatory breach was in existence at the time of the initial lawsuit. A party claiming
anticipatory breach of a contract must establish the following three elements: (1) absolute repudiation of the
obligation, (2) lack of just excuse, and (3) resulting damage. Berg v. Wilson, 353 S.W.3d 166, 174 n.11 (Tex.
App.—Texarkana 2011, pet. denied). HRT had ceased to pay rent for a period of four months, and the locks on the
doors of the leased premises were changed. HRT had abandoned the property. Under these facts, RPI was entitled
to sue for anticipatory breach. See Austin Hill Country, 948 S.W.2d at 300.
12
RPI apparently contends (in summary fashion) that, because it sought “actual damages” in the first lawsuit, that
suit was nothing more than a periodic action for payment. We disagree. Actual damages in a breach-of-contract
case include present and future damages. See, e.g.,United Servs. Auto. Ass’n v. Croft, 175 S.W.3d 457, 469 (Tex.
App.— Dallas 2005, no pet.).
10
RPI’s complaints against Brown and Smith in the second lawsuit are very similar to the
complaints asserted in the first. The parties in the second suit are the same, with the exception of
HRT. As in the initial suit, the second suit alleges that RPI leased space in a shopping center to
HRT for a term of sixty-five months, from November 1, 2006, through March 31, 2012. It
further alleges the amount HRT agreed to pay in rent to RPI, together with operational costs,
insurance costs, and taxes. Like the first lawsuit, the second suit alleges that Brown and Smith
guaranteed HRT’s performance of its lease obligations, including payment of rent and all other
sums payable under the terms of the lease. The suit claims HRT, Brown and Smith failed to pay
rent, operating expenses, taxes, and insurance beginning March 1, 2008, and, at that time, ceased
conducting business in the leased premises. Thereafter, RPI changed the locks on the door to the
leased premises. The suit alleged that Brown and Smith breached the guaranty by failing to pay
amounts which accrued from October 1, 2008, through the expiration of the lease term on March
31, 2012. 13 RPI prayed for damages against Brown and Smith, jointly and severally, for
damages in the amount of $240,868.46.
The subject matter of the two suits is the same. Brown and Smith’s liability in both arise
from the same transaction or series of transactions—their guaranty of HRT’s obligations and the
failure to pay in accordance with RPI’s demands. The facts in both lawsuits are related in time,
space, origin, and motivation and, as evidenced by the allegations in RPI’s initial suit, could have
13
RPI claimed damages of $240,868.46 in the second suit. The affidavit in support of RPI’s first amended motion
for summary judgment in that suit indicated that, “after the allowance of all just and lawful payments, offsets and
credits, the sum of $207,484.70 has accrued under the terms of the Lease and Guaranty but has not been paid.”
Damages claimed in the initial suit were $16,194.10, plus damages for the balance of the lease term in the amount of
$226,098.90.
11
easily formed a convenient trial unit. “Any cause of action which arises out of those same facts
[in the prior litigation] should, if practicable, be litigated in the same lawsuit.” Id. Moreover,
where there is a legal relationship—such as under a lease or a contract—all claims arising from
that relationship will arise from the same subject matter and be subject to res judicata. Cherokee
Water Co. v. Freeman, 145 S.W.3d 809, 815 (Tex. App.—Texarkana 2004, pet. denied);
Musgrave v. Owen, 67 S.W.3d 513, 520 (Tex. App.—Texarkana 2002, no pet.).
The second suit is barred because it arises out of the same subject matter of the initial suit
and because, through the exercise of diligence, it could have been litigated in the initial suit.
Because the trial court correctly determined that RPI’s claims were barred by res judicata,
we do not address the issue of whether those same claims are barred by the statute of limitations.
(2) Modifying the Judgment Was Not Error
The summary judgments for Smith and Brown were entered by interlocutory orders
bearing different dates. An interlocutory default judgment was also rendered against Jones. On
February 1, 2013, the parties filed a stipulation regarding attorney’s fees for the purpose of
facilitating the entry of an appealable final judgment. On February 19, 2013, the trial court
entered a “Final and Appealable Summary Judgment in Favor of Defendants Troy Brown and
Albert Smith.”
Brown and Smith filed a motion to modify the judgment, claiming it indicated there were
two final judgments. 14 Brown and Smith also complained that RPI attempted to reiterate the
parties’ agreed and filed stipulation regarding attorney’s fees into the proposed final judgment,
14
The judgment declared the interlocutory default judgment against Jones a final and appealable judgment of default.
12
but made several errors in that recitation. Brown and Smith, therefore, requested that the trial
court vacate its earlier judgment and enter a modified final judgment. After a hearing, the trial
court entered its final judgment April 2, vacating the February 19 judgment and substituting the
new judgment in its stead.
The February 19 judgment included findings that the parties’ stipulated attorney’s fees
were reasonable and necessary. The April 2 judgment omitted the recitation of the parties’
attorney’s fees stipulation (including findings of reasonableness and necessity) and instead
ordered the parties to reimburse each other for fees and amounts in the stipulation, a copy of
which was attached to the judgment.
On appeal, RPI complains that, to the extent the April 2 judgment omits findings
regarding the reasonableness and necessity of the parties’ stipulated attorney’s fees, the trial
court erred in modifying the judgment. Brown and Smith contend that the stipulation itself
constitutes evidence of the reasonableness of attorney’s fees awarded. See, e.g., Hall v. Hubco,
Inc., 292 S.W.3d 22, 33 (Tex. App.—Houston [14th Dist.] 2006, pet. denied); Jackson v.
Barrera, 740 S.W.2d 67, 69 (Tex. App.—San Antonio 1987, no writ). Neither party disputes the
reasonableness or necessity of the stipulated fees. There is no disagreement presented on appeal
regarding the stipulation itself, which is incorporated into the judgment. We overrule this point
of error.
13
We affirm the judgment of the trial court.
Josh R. Morriss, III
Chief Justice
Date Submitted: September 18, 2013
Date Decided: October 1, 2013
14