KCCC Properties, Inc. v. Quality Vending, Inc. ( 2010 )

NO. 07-09-00298-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL B
APRIL 29, 2010
KCCC PROPERTIES, INC., APPELLANT
v.
QUALITY VENDING, INC., APPELLEE
FROM THE 237TH DISTRICT COURT OF LUBBOCK COUNTY;
NO. 2007-540,207; HONORABLE SAM ABEL MEDINA, JUDGE
Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.
OPINION
Appellant, KCCC Properties, Inc. (KCCC), appeals a judgment following a bench
trial that reformed a deed and a compromise settlement agreement to reflect the
transfer of only one tract of land to KCCC from Quality Vending, Inc. (Quality). We
affirm the judgment of the trial court.
Factual and Procedural Background
On March 24, 2004, a lease with option to purchase was executed by KCCC,
through its President, Lester Payne, and Quality, through its officer, Jack Basden. 1 The
property subject to the lease and option to purchase was described as:
Lot 1 and the West 35 feet of Lot 2, Clutter 2nd Addition, an addition to the
City of Lubbock, Lubbock County, Texas. (Street address: 902 East 34th
Street, Lubbock[,] Texas)
On June 2, 2006, KCCC filed, in the public records of Lubbock County, Texas, a
document, bearing document number 2006022694, styled “Notice of Lease With Option
To Purchase.” The property described in the document is the same property described
in the lease with option to purchase set out above.
Subsequently, on October 19, 2006, Quality filed a declaratory judgment action
seeking to quiet title to property it owned and in which KCCC was claiming an interest. 2
KCCC filed an answer to the lawsuit in which KCCC stated that Quality had agreed to
sell the real property that was the subject of the lawsuit to KCCC. Both Quality and
KCCC described the real property at issue in the 2006 lawsuit as that property covered
by the lease with option to purchase and the Notice of Lease With Option to Purchase
filed in the deed records of Lubbock County, Texas. Before trial, the parties executed a
compromise settlement agreement and release of claims, and a special warranty deed
1
Quality denied the authority of Jack Basden to execute a lease with option to
purchase.
2
The 2006 lawsuit was number 2006-536,901, filed in the 72nd District Court of
Lubbock County, Texas.
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was drawn transferring the real property from Quality to KCCC. However, the
compromise settlement agreement, release, and deed described the property as:
Tract I:
LOT ONE (1) and the West 35 feet of LOT TWO (2), BLOCK TWO (2),
CLUTTER SECOND ADDITION to the City of Lubbock, Lubbock County,
Texas, according to the Map, Plat and/or Dedication Deed thereof
recorded in Volume 321, Page 132 of the Deed Records of Lubbock
County, Texas.
Tract II:
LOTS ONE (1) and TWO, BLOCK ONE (1), CLUTTER SECOND
ADDITION to the City of Lubbock, Lubbock County, Texas, according to
the Map, Plat and/or Dedication Deed thereof recorded in Volume 321,
Page 132 of the Deed Records of Lubbock County, Texas.
After execution of the compromise settlement agreement and release of claims, an
agreed order of dismissal was signed by the trial judge on January 24, 2007, dismissing
cause number 2006-536,901.
On August 3, 2007, Quality filed the present lawsuit to reform and/or rescind the
settlement agreement and special warranty deed. Trial was to the court without a jury
and, as a result of the trial, judgment was granted reforming the settlement agreement
and the special warranty deed. In each document, the reference to the second tract
was ordered removed and the documents were reformed to reflect the transfer of only
Tract I. The trial court filed findings of fact and conclusions of law. At the request of
KCCC, the trial court filed additional findings of fact and conclusions of law.
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KCCC appeals the judgment reforming the settlement agreement and deed.
KCCC contends that the trial court erred because it failed to apply the principals of res
judicata to give conclusive effect to the original 2006 judgment. In the alternative,
KCCC contends that the trial court erred in reforming the compromise settlement
agreement and special warranty deed because Quality was conclusively bound by the
terms of the documents. Disagreeing with KCCC, we will affirm the judgment of the trial
court.
Res Judicata
KCCC complains that the trial court failed to properly apply the law when
determining the applicability of KCCC’s claim preclusion theory of res judicata to the
facts of this case. Res judicata is a generic term that describes the effects given to final
judgments. Steger v. Muenster Drilling Co., Inc., 134 S.W.3d 359, 368 (Tex.App.—Fort
Worth 2003, pet. denied). It is normally explained as either claim preclusion (res
judicata) or issue preclusion (collateral estoppel). Id. As claim preclusion, res judicata
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 adjudicated.
Barr v. Resolution Trust Corp., 837 S.W.2d 627, 627 (Tex. 1992). To succeed with a
claim of res judicata, the proponent is required to prove three elements: 1) 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 that 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). Texas courts follow the transaction approach that bars
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subsequent lawsuits that arise out of the same subject matter as the prior lawsuit when
that subject matter could have been litigated in the prior lawsuit. Citizens Ins. Co. of
Am. v. Daccah, 217 S.W.3d 430, 449 (Tex. 2007). A determination of what constitutes
the subject matter of a suit necessarily requires an examination of the factual basis of
the claim in the prior lawsuit. Barr, 837 S.W.2d at 630. Put another way, we must
analyze the factual matters that make up the gist of the complaint. Id.
Standard of Review
Because we are required to examine the factual basis of KCCC’s claim of res
judicata, we must also take into consideration the findings of fact and conclusions of law
prepared and filed by the trial court. Findings of fact in a case tried to the court have the
same force and dignity as a jury's verdict upon questions. Anderson v. City of Seven
Points, 806 S.W.2d 791, 794 (Tex. 1991). Therefore, we evaluate the sufficiency of the
evidence to support those findings by the same standards for evaluating the legal and
factual sufficiency of the evidence to support a jury verdict. See Catalina v. Blasdel,
881 S.W.2d 295, 297 (Tex. 1994). Under the legal sufficiency standard, we must credit
evidence that supports the judgment if a reasonable fact finder could, and we must
disregard contrary evidence unless a reasonable fact finder could not. See City of
Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). Unless there is no favorable
evidence to support the challenged finding or the contrary evidence renders supporting
evidence incompetent or conclusively establishes the opposite of the finding, we must
affirm. See id. at 810–11. In reviewing the factual sufficiency of the evidence, we
consider all the evidence and will set aside the finding only if the evidence supporting
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the finding is so weak or so against the overwhelming weight of the evidence that the
finding is clearly wrong and unjust. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242
(Tex. 2001).
A trial court's conclusions of law are always reviewable. Farmers Ins. Exch. v.
Neal, 120 S.W.3d 493, 494 (Tex.App.—Texarkana 2003, no pet.); Westech Eng'g, Inc.
v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex.App.—Austin 1992, no writ).
Since a trial court has no discretion in determining what the law is or applying the law to
the facts, we review a trial court's conclusions of law de novo. See In re Humphreys,
880 S.W.2d 402, 404 (Tex. 1994). Conclusions of law "will be upheld on appeal if the
judgment can be sustained on any legal theory supported by the evidence" and, unless
erroneous as a matter of law, will not be reversed. Westech Eng'g, Inc., 835 S.W.2d at
196. In conducting a de novo review, we may reexamine legal conclusions drawn from
specific findings of fact contained in the record. Id. at 196 n.1. We exercise our own
judgment on each issue and afford no deference to the original tribunal's decision. See
Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1999).
Analysis
Our analysis begins with the trial court’s findings of fact. After hearing the
evidence, the trial court found that:
3. On March 18, 2004, Quality and KCCC Properties, Inc. (KCCC)
executed an “option to purchase real estate” described as follows:
Lot 1 and W 35’ of Lot 2, Block 2, Clutter 2nd Addition,
Lubbock County, Texas (902 E. 34th, Lubbock, TX 79404)
[This property is Tract 1 of the property conveyed to Quality
on September 21, 2000.]
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4. KCCC rented the property described in the option to purchase real
estate until June, 2006.
5. On June 6, 2006, KCCC filed for record with the Lubbock County Clerk,
in document number 2006022694, its:
Notice of Lease with Option to Purchase
Notice of Exercise of Option to Purchase
6. The June 6, 2006 documents referenced only Tract I property
previously described as follows:
Lot 1 and the West 35 feet of Lot 2, Block 2, Clutter 2nd
Addition, an addition of City of Lubbock, Lubbock County,
Texas (Street address: 902 East 34th Street, Lubbock[,]
Texas)
The trial court further found that KCCC tendered a check for $7,500 for the purchase of
the subject property, but, Quality did not negotiate the check. Subsequently, Quality
filed the 2006 lawsuit seeking to set aside the “exercise of the option to purchase.”
Finally, the trial court found, in finding of fact 10, that:
The parties discussed the issues in dispute between them and on
November 6, 2006, KCCC filed its “First Answer of Defendant,” stating that
the case had been settled in accordance with the option to purchase dated
March 24, 2004, and the Notice of Lease with Option to Purchase and
Notice of Exercise of Option to Purchase filed in the Official Public
Records of Lubbock County, Texas (document number 2006022694).
Our review of the record reveals that these findings of fact are supported by the
exhibits offered and the testimony of the witnesses. Thus, we have determined that the
evidence is legally sufficient to support the findings of fact. City of Keller, 168 S.W.3d at
810-11. From a factual sufficiency perspective, we cannot say that the evidence
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supporting the finding is so weak or so against the overwhelming weight of the evidence
that the findings are clearly wrong and unjust. Dow Chem. Co. 46 S.W.3d at 242.
When these findings, and the evidence supporting them, are applied to the law of
res judicata, we are left with the conclusion that the subject matter of the 2006 lawsuit
was limited to Tract I. Citizens Ins. Co. of Am., 217 S.W.3d at 449. This being so,
KCCC, as the proponent of res judicata, has failed to prove the third element of a claim
of res judicata, that the second action is based on the same claims that were raised or
could have been raised in the first action. Amstadt, 919 S.W.2d at 652. Accordingly,
we overrule KCCC’s first issue.
Error in Granting Reformation
By its second issue, KCCC contends that the trial court erred in granting
reformation of the deed in question because Quality was conclusively bound by the
terms of the documents previously executed between the parties. It is unclear whether
KCCC’s alternative second issue is attacking the legal sufficiency of the evidence to
support the trial court’s judgment of reformation of the deed or the trial court’s
application of the law to the facts. We will address each argument, beginning with the
second argument.
If KCCC is attacking the trial court’s application of the law to the facts as found by
the trial court, we view the issue as simply a recasting of the argument made by KCCC
in its first issue. As we have determined that issue, we will not further address that
issue.
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If KCCC is claiming that the evidence was legally insufficient to support the trial
court’s judgment, then we are left with trial court findings that have not been challenged
on appeal. These unchallenged findings are binding upon this court, unless the
contrary is established as a matter of law. McGalliard v. Kuhlmann, 722 S.W.2d 694,
696 (Tex. 1986). With that understanding, we will analyze the issue under the
standards of review for a challenge to the legal sufficiency of the evidence, as set forth
above.
Reformation of a deed
In Davis v. Grammer, 750 S.W.2d 766, 768 (Tex. 1988), the Texas Supreme
Court noted that a party is entitled to reformation of a deed upon proving that the parties
to a transaction had reached an agreement but the deed executed by the parties did not
reflect the true agreement because of mutual mistake. Previously, the Texas Supreme
Court had stated that, “Equity has jurisdiction to reform written instruments in cases of
mutual mistake, but a written contract will not be reformed in equity because of a
mistake, in the absence of fraud, unless it is mutual, that is, common to both parties,
and each under the same mistake as to its terms.” St. Paul Fire & Marine Ins. Co. v.
Culwell, 62 S.W.2d 100, 101 (Tex. 1933). Further, the Court has reaffirmed that mutual
mistake is not determined by self-serving statements of the parties’ intent, but rather
soley by objective circumstances surrounding the execution of the deed. See Myrad
Props., Inc. v. LaSalle Bank Nat’l Ass’n, 300 S.W.3d 746, 751 (Tex. 2009). Finally,
courts are authorized to award rescission to avoid unjust enrichment in cases based
upon mistakes. Id.
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Analysis
The trial court’s findings of fact, as set forth in detail in the first issue, and the
evidence reflected in the record at trial, support the proposition that the parties had
reached an agreement concerning Tract I. The record also supports the proposition
that Tract I was the only subject matter of the earlier lawsuit. Additionally, the trial court
found, and the record supports, that both parties believed that KCCC was buying only
Tract I from Quality. See St. Paul Fire & Marine Ins. Co., 62 S.W.2d at 101. Therefore,
both parties executed the deed in question under the belief that they were transferring
Tract I alone. Yet, their actions had the result of transferring Tract II to KCCC despite
the expressed desire, as found by the trial court, to transfer only Tract I. See Myrad
Properties, Inc., 300 S.W.3d at 751. According to the findings of the trial court, as
supported by the record, KCCC would be unjustly enriched if the deed was not
reformed. See id. All of these facts found by the trial court support the reformation of
the deed and are unchallenged. See McGalliard, 722 S.W.2d at 696. Therefore, we
overrule KCCC’s second issue.
Conclusion
Having overruled KCCC’s two issues, we affirm the judgment of the trial court.
Mackey K. Hancock
Justice
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