Opinion
No. 05-03-00014-CV.
Opinion Filed March 17, 2004.
On Appeal from the County Court at Law No. 1, Dallas County, Texas, Trial Court Cause No. cc-02-10056-a.
Reverse and Remand.
Before Chief Justice THOMAS and Justices JAMES and FITZGERALD.
MEMORANDUM OPINION
This appeal involves the relationship between two lawsuits: the lawsuit on appeal and an earlier lawsuit, one involving the same parties. In both cases Lorrie Frazin, appellant here, sued William J. and Jane A. Hanley, appellees. The Hanleys moved for summary judgment in this second lawsuit, alleging that Frazin's claims were the same claims she pressed against them in the first suit or were claims she should have brought in that first suit. The trial court granted summary judgment in favor of the Hanleys, and Frazin appeals. For the reasons that follow, we reverse the trial court's judgment and remand this cause for further proceedings.
The Hanleys financed a portion of the funds used by Frazin to purchase a home. A dispute arose when Frazin attempted to refinance the home, and she disagreed with the amount calculated by the Hanleys as the payoff amount of the loan. Two days before the new loan was funded, Frazin filed a lawsuit against the Hanleys challenging the amount of the payoff, alleging fraud and deceptive trade practices. The funds were placed in escrow by the title company overseeing the refinancing transaction. The Hanleys counterclaimed against Frazin, urging breach of contract and claiming she had filed a frivolous deceptive trade practices action as well as a frivolous lawsuit under rule 13 of the Texas Rules of Civil Procedure. Frazin later added additional claims for breach of contract and mail fraud. Before trial began, Frazin voluntarily nonsuited all of her claims against the Hanleys. However, trial to the court proceeded on the Hanleys' claims against Frazin. The trial court entered judgment in favor of the Hanleys. Frazin appealed.
Meanwhile, on the day before trial of her first lawsuit, Frazin re-filed claims for fraud, deceptive trade practices, and mail fraud against the Hanleys in a second lawsuit. The Hanleys secured a transfer of this new case to the same court that had tried the first one. They answered the new lawsuit alleging, inter alia, the defenses of res judicata, collateral estoppel, and violation of rule 97 of the Texas Rules of Civil Procedure regarding compulsory counterclaims. The Hanleys then moved for summary judgment on those three grounds. The trial court granted the motion without specifying a particular ground. Frazin appealed this judgment as well. It is this second appeal that is before the Court at this time.
On February 27, 2004, this Court issued its opinion in the appeal of the first lawsuit. We concluded that the trial court had improperly excluded Frazin's expert witnesses, and we reversed the judgment and remanded the cause for further proceedings. See Frazin v. Hanley, No. 05-03-00110-CV (Tex. App.-Dallas Feb. 27, 2004, no pet. h.) [Hereinafter, " Frazin I"]. Although the discovery ruling in Frazin I does not bear directly on the issues before the Court on this appeal, the outcome of Frazin I necessarily impacts this case. Each of the Hanleys' theories for summary judgment — res judicata, collateral estoppel, and rule 97's rules concerning compulsory counterclaims — was based upon the preclusive effect of a judgment in Frazin I. "A judgment in a second case based upon the preclusive effects of a prior judgment should not stand if the first judgment is reversed." Scurlock Oil Co. v. Smithwick, 724 S.W.2d 1, 6 (Tex. 1986). Generally, only a final judgment can be res judicata. Starnes v. Holloway, 779 S.W.2d 86, 93 (Tex. App.-Dallas 1989, writ denied). Our reversal of Frazin I means that there was no final judgment, and preclusive defenses that rely on a final judgment cannot be established as a matter of law. See Berryman v. El Paso Natural Gas Co., 838 S.W.2d 610, 614 (Tex. App.-Corpus Christi 1992), rev'd on other grounds, 858 S.W.2d 362 (Tex. 1993); see also J.J. Gregory Gourmet Servs, Inc. v. Antone's Import Co., 927 S.W.2d 31, 34 (Tex. App.-Houston [1st Dist.] 1995, no writ) (when appellate court reverses first judgment, finality necessary for claim or issue preclusion is eliminated).
The Hanleys cannot, at this point in time, rely upon defenses of preclusion — whether of claims, counterclaims, or issues — to dispose of Frazin's cause of action. We reverse the trial court's judgment and remand this cause for further proceedings.