Jacpen Properties, LLC v. Waterfront Development, LLC, Charles Von Schmidt and Vacation Home Builders, Inc. ( 2020 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-18-00222-CV
__________________
JACPEN PROPERTIES, LLC, Appellant
V.
WATERFRONT DEVELOPMENT, LLC, CHARLES VON SCHMIDT AND
VACATION HOME BUILDERS, INC., Appellees
__________________________________________________________________
On Appeal from the 411th District Court
Polk County, Texas
Trial Cause No. CIV29515
__________________________________________________________________
MEMORANDUM OPINION
JacPen Properties, LLC appeals the trial court’s summary judgment in favor
of Waterfront Development, LLC, Charles Von Schmidt, and Vacation Home
Builders, Inc. (collectively “Appellees”). JacPen presents three issues on appeal
asserting: (1) the trial court erred in granting final summary judgment on the issue
of res judicata because the indemnity and/or guaranty claims raised in this lawsuit
did not ripen until after the trial court granted summary judgment against it in a prior
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lawsuit; (2) the trial court erred in granting summary judgment for Appellees
because the indemnity and guaranty claims were based on documents that provided
the broadest protections possible to JacPen and specifically allocated any risk of loss
to Appellees; and, (3) the trial court erred in granting summary judgment for
Appellees because the indemnity provision and guaranty agreement remained
enforceable by JacPen even though the underlying loan agreement was not
enforceable against the actual borrower. We affirm the trial court’s judgment.
I. Background
In 2006, Von Schmidt met Jack and Rowanne “Penny” Uselton when Von
Schmidt remodeled their home. The Useltons and Von Schmidt thereafter agreed to
partner to develop a subdivision near Lake Livingston in Polk County, Texas. Von
Schmidt formed Waterfront as the operating entity for the development, and the
Useltons formed JacPen.1 The members of Waterfront were JacPen and Vacation
Home Builders, with each owning a fifty percent interest.2
On October 1, 2008, JacPen assigned its ownership interest in Waterfront to
Von Schmidt. In addition to the Transfer and Assignment of Limited Liability
1
JacPen initially had two members, Jack and Penny Uselton. In 2007, the SEC
indicted Jack for securities fraud. Thereafter, Jack assigned his interest in JacPen to
Penny, who became the sole member.
2
Von Schmidt was the president of Vacation Home Builders, Inc.
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Company Interest, the parties executed four documents: (1) a Promissory Note; (2)
a Deed of Trust; 3 (3) Charles Von Schmidt’s Personal Guaranty Agreement; and (4)
a Loan and Security Agreement.
With JacPen as the “Lender” and Waterfront as the “Borrower,” the Loan and
Security Agreement was executed in the amount of $3,077,424.94. Von Schmidt
personally guaranteed the debt up to $1,077.424.94 in his Personal Guaranty
Agreement. The Loan and Security Agreement contained an indemnity provision
providing that
Borrower agrees to protect, indemnify, defend and save harmless
Lender and its affiliates, directors, officers, agents and employees from
and against any and all liability, expense or damage of any kind or
nature and from any suit, claims, or demands, including, without
limitation, reasonable legal fees and expenses on account of any matter
or thing or action or failure to act of the Borrower, whether in suit or
not, arising out of this Loan Agreement, the Loan, the Deed of Trust or
in connection herewith or therewith unless said suit, claim or damage
is caused by the gross negligence or willful malfeasance of Lender. This
indemnity is not intended to excuse either party from performing
hereunder. This obligation shall survive the closing of the Loan and the
repayment thereof.
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Waterfront did not execute the Deed of Trust and Security Agreement until
October 30, 2008.
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II. Procedural History
A. First Lawsuit
JacPen sued Waterfront, Von Schmidt, and Vacation Home Builders in 2014
in trial cause number CIV27570 (the “first lawsuit”). JacPen alleged in its Second
Amended Petition that on or about October 1, 2008, JacPen transferred its interest
in Waterfront to Von Schmidt, and in consideration for its interest, Waterfront
agreed to pay JacPen $3,077,424.94. JacPen claimed that Waterfront defaulted on
the payment and sued to collect the balance due under the note, including principal
and interest. JacPen expressly referenced the October 1, 2008 Promissory Note, the
Loan and Security Agreement, the Commercial Loan Agreement, and the Deed of
Trust and Security Agreement. Additionally, JacPen alleged that Von Schmidt
executed a written guaranty in the amount of $1,077,424.94 dated October 1, 2008,
and sought recovery against Von Schmidt on his guaranty.
In the first lawsuit, JacPen (1) sought payment of the promissory note owed
by Waterfront against both Von Schmidt and Vacation Home Builders, (2) alleged
that the three had commingled funds and sought to disregard the corporate entity,
and (3) claimed that the defendants were jointly and severally liable. JacPen also
sought foreclosure of all lots described in the deed of trust and security agreement,
the proceeds of which would be applied to the claimed indebtedness. JacPen prayed
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that it “recover judgment of and from Defendants for all sums due under the
Promissory Note dated October 1, 2008 in the original principal sum of
$3,077,424.94; judgment on the guaranty against Charles von Schmidt, Individually,
[and] judgment against all Defendants jointly and severally.” The trial court
ultimately granted Appellees’ Traditional Motion for Summary Judgment and
entered a Final Take-Nothing Judgment.
B. Current Lawsuit
Within six months of the entry of judgment against JacPen in the first lawsuit,
it initiated the present suit in trial cause number CIV29515 against the same
defendants. JacPen alleged causes of action for breach of the indemnity agreement
contained in the Loan and Security Agreement and for breach of the personal
Guaranty Agreement. JacPen alleged that the trial court in the first suit entered a
judgment in favor of the three defendants. JacPen further claimed that the
consideration recited in the Loan and Security Agreement finalizing the parties’ land
development deal before interest was $3,077,424.94, and it had been damaged in the
total amount of $4,323.560.46.
In the current suit, JacPen claimed that the cause of action for breach of the
indemnity provision contained in the Loan and Security Agreement did not accrue
until the trial court granted Appellees’ summary judgment in the first suit. JacPen
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contended that the indemnification clause is broad and “does not preclude recovery
for damages incurred as a result of suits between [the] parties[.]” Again, JacPen
sought to disregard the corporate entities and hold all three defendants liable. In the
current suit, JacPen also asserted a claim for breach of the personal Guaranty
Agreement against Von Schmidt in the amount of $1,077,424.94.
Appellees filed a Traditional Motion for Summary Judgment, which the trial
court denied. Appellees later filed an Amended Traditional Motion for Summary
Judgment, arguing JacPen’s claims in the current suit were barred by res judicata, or
in the alternative, JacPen’s suit was barred because the indemnity provision does not
apply to claims between the parties. Appellees argued further in the alternative that
even if the indemnity provision applied, they were still entitled to summary
judgment because the indemnity provision was not triggered in this case. The trial
court granted Appellees’ Amended Traditional Motion for Summary Judgment
without specifying the basis and subsequently entered a Final Summary Judgment
disposing of all claims and parties. JacPen timely appealed.
III. Standard of Review
We review a trial court’s grant of a traditional motion for summary judgment
under a de novo standard. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661
(Tex. 2005). The moving party has the burden to show with competent summary
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judgment evidence, that no genuine issue of material fact exists, and it is entitled to
summary judgment as a matter of law. See Tex. R. Civ. P. 166a(c); Mann Frankfort
Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009); Nixon v.
Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). Res judicata is an
affirmative defense. Tex. R. Civ. P. 94. When a defendant moves for summary
judgment based on an affirmative defense, it must prove all essential elements of its
defense. Chau v. Riddle, 254 S.W.3d 453, 455 (Tex. 2008). When a trial court grants
a summary judgment without specifying the basis, we will affirm if any one of the
movant’s theories has merit. See Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473
(Tex. 1995).
IV. Analysis
JacPen first contends that because the indemnity and/or guaranty claims raised
in the present suit “did not ripen until after summary judgment had been granted[,]”
they are not barred by res judicata. Res judicata, or claim preclusion, bars subsequent
actions by parties and those in privity with them on matters litigated in a previous
suit and on claims “‘which, through the exercise of diligence, could have been
litigated in a prior suit.’” Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 799
(Tex. 1992) (quoting Barr v. Resolution Trust Corp., 837 S.W.2d 627, 631 (Tex.
1992)); see also Hallco Tex., Inc. v. McMullen Cty., 221 S.W.3d 50, 58 (Tex. 2006).
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Courts apply a “transactional approach” to res judicata that requires claims arising
from the same subject matter to be litigated in a single lawsuit. Hallco, 221 S.W.3d
at 58; Barr, 837 S.W.2d at 631. Court precedent recognizes that res judicata
promotes the finality of judgments, and prevents “needless, repetitive litigation[.]”
Hallco, 221 S.W.3d at 58 (citing San Remo Hotel, L.P. v. San Francisco, 545 U.S.
323, 345 (2005); John G. and Marie Stella Kenedy Mem’l Found. v. Dewhurst, 90
S.W.3d 268, 288–89 (Tex. 2002)). A party relying on the affirmative defense of res
judicata must prove: (1) a prior final determination 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 or could have been raised in the
first action. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996).
Appellees provided the following summary judgment evidence: (1) the Loan
and Security Agreement; (2) Plaintiff’s Second Amended Petition in the first suit
filed on March 10, 2014; (3) Plaintiff’s Supplement to its Second Amended Petition
in the first suit, which included the Loan and Security Agreement, the Promissory
Note, the Deed of Trust, and Von Schmidt’s Personal Guaranty; (4) a Commercial
Loan Agreement dated April 1, 2008; (5) JacPen’s demand letters to Waterfront; (6)
the Order granting Defendants’ Traditional Summary Judgment in the first suit; (7)
the Final Judgment in the first suit; and (8) JacPen’s First Amended Petition in the
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current suit. JacPen does not dispute that a court of competent jurisdiction in the first
suit made a determination on the merits or that the parties are identical in the current
lawsuit as in the first. JacPen’s argument on appeal goes to the third element of
Appellees’ res judicata affirmative defense. Specifically, it contends that its claims
for breach of the indemnity provision in the Loan and Security Agreement and Von
Schmidt’s breach of the Personal Guaranty did not ripen until judgment was
rendered against it in the first suit. Therefore, JacPen argues the claims in the second
action could not have been raised in the first action.
“[F]actors to consider in determining whether facts constitute a single
‘transaction’ are ‘their relatedness in time space, origin, or motivation, and whether,
taken together, they form a convenient unit for trial purposes.’” Getty, 845 S.W.2d
at 798–99 (quoting Restatement (Second) of Judgments § 24 cmt. b (1980)).
JacPen’s claims for breach of the indemnity provision and personal guaranty arose
out of the same real estate transaction. While JacPen seeks to enforce a specific
indemnity provision in the current suit, it relies on identical documents in both suits.
Ultimately, JacPen sued the same parties in the current lawsuit seeking repayment
of the same money it claimed to have loaned Waterfront in the first lawsuit. No
matter the theory of recovery, the underlying transaction giving rise to the dispute is
the same, and the relief JacPen seeks is the same.
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Although JacPen argues that its claims for breach of the indemnity provision
and the personal guaranty did not ripen until it received a judgment against it in the
second suit, the indemnity provision it relies on was a part of the Loan and Security
Agreement that JacPen claimed Appellees breached in the first suit. Likewise, in the
first suit, JacPen litigated Von Schmidt’s liability on his personal guaranty. Although
JacPen’s theories of recovery may have been different, what it sought to recover
from Appellees and how the dispute arose in each suit was the same.
We will assume, without deciding, that the indemnity provision at issue
applied to claims between the parties. Generally, a cause of action for indemnity
accrues when “‘the indemnitee’s liability to the party seeking damages becomes
fixed and certain, generally by a judgment.’” Am. Star Energy & Minerals Corp v.
Stowers, 457 S.W.3d 427, 432–33 (Tex. 2015) (quoting Ingersoll-Rand Co. v.
Valero Energy Corp., 997 S.W.2d 203, 208 (Tex. 1999) (internal quotations
omitted)); see also Gunn v. McCoy, 554 S.W.3d 645, 677–78 (Tex. 2018). However,
an indemnitee may bring a claim against an indemnitor before a judgment—before
the cause of action accrues and before limitations begins to run. Gunn, 554 S.W.3d
at 678 (citing Stowers, 457 S.W.3d at 432–33). “[O]ur law does not require that a
judgment be fixed and payable on appeal in order to sustain a claim for indemnity.”
Id.
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While JacPen’s cause of action for indemnity may not have accrued until the
judgment, nothing precluded JacPen from bringing its indemnity claim against
Appellees in the first suit. See id. In Getty Oil, the Texas Supreme Court rejected the
argument that res judicata did not bar the appellant’s present indemnity claims
because the claims did not accrue until judgment was rendered against it in the first
suit. 845 S.W.2d at 799. The Court noted that the contingent nature of the indemnity
claim does not preclude the operation of res judicata. See id. Courts have
acknowledged that “[f]orcing the indemnity suit to wait for judgment in the liability
suit ‘would contravene the policy of the courts to encourage settlements and to
minimize litigation.’” See id. (quoting K&S Oil Well Serv., Inc. v. Cabot Corp., 491
S.W.2d 733, 739 (Tex. Civ. App.—Corpus Christi 1973, writ ref’d n.r.e.)). A
subsequent suit is barred when it arises from the same subject matter of the prior suit
and which, through the exercise of diligence could have been litigated in a previous
suit. Barr, 837 S.W.2d at 631.
With the exercise of diligence, JacPen’s indemnity claim could have been
litigated in the first suit. The claims arose out of the same set of circumstances, and
JacPen sought payment under the same agreements for the same alleged wrongs.
The law did not require JacPen to wait for a judgment before asserting its indemnity
claim. See Gunn, 554 S.W.3d at 677–78. Moreover, despite its contention otherwise
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on appeal, in the first suit, JacPen relied on Von Schmidt’s personal guaranty as a
basis for recovery and specifically requested “judgment on the guaranty against
Charles Von Schmidt[.]” Thus, we determine that the action for breach of the
indemnity provision could have been raised in the first lawsuit, and JacPen expressly
asserted a claim for breach of the Guaranty Agreement against Von Schmidt in the
first suit. See Amstadt, 919 S.W.2d at 652.
We overrule JacPen’s first issue on appeal. Having determined that Appellees’
affirmative defense of res judicata supports the trial court’s grant of summary
judgment as to all causes of action raised in the current suit, we need not address
JacPen’s remaining issues. See Provident Life & Accident Ins. Co. v. Knott, 128
S.W.3d 211, 216 (Tex. 2003) (holding that we must affirm summary judgment if any
ground presented to the trial court is meritorious).
V. Conclusion
We conclude JacPen’s claims were barred by res judicata and affirm the trial
court’s judgment.
AFFIRMED.
_________________________
CHARLES KREGER
Justice
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Submitted on July 22, 2019
Opinion Delivered January 30, 2020
Before McKeithen, C.J., Kreger and Horton, JJ.
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