Opinion
No. 09-09-00377-CV
Submitted on July 7, 2010.
Opinion Delivered December 2, 2010. DO NOT PUBLISH.
On Appeal from the 9th District Court Montgomery County, Texas, Trial Cause No. 09-06-06266 CV.
Before GAULTNEY, KREGER, and HORTON, JJ.
MEMORANDUM OPINION
Nutraceutical Development Corporation appeals the trial court's judgment dismissing its suit against David P. Summers with prejudice for lack of subject matter jurisdiction. Although the trial court had subject matter jurisdiction, principles of comity support the dismissal of the suit. We affirm the judgment as modified to reflect a dismissal without prejudice.
THE NEVADA LITIGATION
David P. Summers and James Davidson filed suit in a Nevada district court against Nutraceutical, representatives of Nutraceutical, and another corporation. The plaintiffs asserted nine causes of action, including a request for declaratory and injunctive relief related to the ownership and control of Nutraceutical, a Nevada corporation.
After a bench trial, the Nevada district court made findings of fact and conclusions of law. The Nevada district court found that, among other things, (1) Nutraceutical's articles of incorporation authorized Nutraceutical to issue 75 million shares; (2) Nutraceutical issued 10.71 million shares to Summers, 13.5 million shares to Davidson, 48 million shares to Endovasc, and the remainder of the shares to other stockholders; (3) pursuant to documents filed with the Nevada Secretary of State in December 2002, Summers was Nutraceutical's only director and officer; (4) the defendants had misrepresented to the court that Endovasc had 100% stock ownership of Nutraceutical based on the 2002 stock certificate showing Endovasc as the owner of all 75 million shares; (5) and because the 2002 stock certificate was a forgery, Endovasc owns only 48 million shares and the individual defendants had wrongfully taken control of Nutraceutical. The Nevada court declared that Summers is the sole director and officer of Nutraceutical and that the rightful shareholders are entitled to receive the benefits of their Nutraceutical shares. The amended judgment incorporated the findings of fact and conclusions of law.
THE TEXAS LITIGATION
George Gordon, the purported majority shareholder, appointed one of the defendants in the Nevada suit as sole director, president, and treasurer of Nutraceutical.
Nutraceutical then sued Summers in the Texas district court below, seeking to enjoin Summers from acting as sole director and officer of the company. Specifically, Nutraceutical requested that the trial court enjoin Summers from directly or indirectly "[i]nterfering with the rights of [Nutraceutical] to pursue an appeal of the adverse ruling in the Nevada State Supreme Court[.]" Nutraceutical also requested a declaratory judgment declaring the rights of the company regarding its officers, and asked for a determination of the number of shareholders and the number of shares each shareholder owns.
The trial court signed a temporary restraining order. Summers filed a response to Nutraceutical's request for injunctive relief. The trial court did not hold an evidentiary hearing on the application for a temporary injunction, but instead met with counsel and requested the parties submit briefs regarding whether the trial court had jurisdiction over the matter in light of the Nevada judgment. After the parties submitted documents addressing the court's jurisdiction, the trial court dismissed the suit with prejudice, denied Nutraceutical's request for a temporary injunction, and dissolved the temporary restraining order against Summers.
ISSUES ON APPEAL
In issue one, Nutraceutical maintains the trial court abused its discretion and denied Nutraceutical due process by entering a final judgment dismissing Nutraceutical's case with prejudice. In issue two, Nutraceutical argues the trial court abused its discretion in denying Nutraceutical the right to have a hearing on its application for temporary injunction.
Summers argues that Nutraceutical waived any objection to the process followed by the trial court, the trial court did not deny Nutraceutical its due process rights, and the trial court did not err in dismissing the action. Summers maintains the trial court record "clearly establishes the requisite elements of res judicata and collateral estoppel, thus defeating the trial court's jurisdiction." Summers also contends, as he did in the trial court, that principles of comity support dismissal of the suit.
WAIVER
Although Neutraceutical did not complain about the process followed below, and therefore waived any complaint about the briefing process followed by the trial court to determine if the case should be dismissed, Nutraceutical did assert the trial court had jurisdiction and should not dismiss the case. Nutraceutical did not waive its complaint about the propriety of the dismissal order. See Tex. R. App. P. 33.1; see also, generally, Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443-46 (Tex. 1993) (subject matter jurisdiction).
JURISDICTION
Res judicata bars a retrial of certain claims previously determined, and collateral estoppel precludes relitigation of certain issues already litigated. Coal. of Cities for Affordable Util. Rates v. Pub. Util. Comm'n, 798 S.W.2d 560, 562-63 (Tex. 1990).
Although these defenses may determine the merits of a claim, the defenses generally do not deprive a court of subject matter jurisdiction to decide the merit of the claim or defenses. See Dolenz v. Vail, 200 S.W.3d 338, 341 (Tex. App.-Dallas 2006, no pet.).
Subject matter jurisdiction concerns the kinds of controversies a court has the authority to resolve. Tellez v. City of Socorro, 226 S.W.3d 413, 413 (Tex. 2007) (per curiam); Davis v. Zoning Bd. of Adjustment, 865 S.W.2d 941, 942 (Tex. 1993). It is, essentially, the trial court's power to decide a case; "a court must not act without determining that it has subject-matter jurisdiction to do so[.]" Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 553-54 (Tex. 2000); see also In re G.S.G., 145 S.W.3d 351, 353 (Tex. App.-Houston [14th Dist] 2004, no pet.) (holding that trial court is required to determine sua sponte whether it has jurisdiction to hear the case). A court has subject matter jurisdiction "when the nature of the case falls within a general category of cases the court is empowered . . . to adjudicate." In re Barnes, 127 S.W.3d 843, 846 (Tex. App.-San Antonio 2003, orig. proceeding) (quoting McGuire v. McGuire, 18 S.W.3d 801, 804 (Tex. App.-El Paso 2000, no pet.)). A Texas district court is a state court of general jurisdiction and has jurisdiction over all "actions, proceedings, and remedies" except where the Texas Constitution or some "other law" confers exclusive jurisdiction elsewhere. See Tex. Const. art. V, § 8; Tex. Gov't Code Ann. § 24.007 (West 2004). Nutraceutical's petition states that its principal offices are located in Montgomery County and that Summers resides in Montgomery County. Nutraceutical petitions a district court in Montgomery County for a temporary injunction against a resident of Montgomery County, and for declaratory relief. See Tex. Civ. Prac. Rem. Code Ann. § 65.023(a) (West 2008) ("[A] writ of injunction against a party who is a resident of this state shall be tried in a district or county court in the county in which the party is domiciled."). The trial court had subject matter jurisdiction over the case.
COMITY
Although the trial court's order of dismissal erroneously states that the court lacks "subject matter jurisdiction," we should not reverse the trial court's dismissal order because of an incorrect statement of law if a correct legal theory for the dismissal order — comity, in this case — was presented to the trial court, explains the order, and is supported by the record. See Point Lookout West, Inc. v. Whorton, 742 S.W.2d 277, 278-79 (Tex. 1987). In Summers's response to Nutraceutical's request for a temporary injunction, Summers argued to the trial court that Nutraceutical's "action in obtaining a TRO and seeking a temporary injunction under the circumstances here run afoul of basic concepts of comity," and that "[t]he existing TRO, and entry of a temporary injunction, would violate this fundamental principle of constitutional law and of comity between the states." On appeal, Summers states that it raised principles of comity in the trial court and, among other arguments, asserts the trial court dismissed the case "based on the uncontroverted evidence of pending litigation and a resulting judgment in another jurisdiction involving the same factual and legal disputes between the same parties." Principles of comity were argued to the trial court, informed the trial court's decision, support the dismissal, and are argued on appeal.
This Court has said more generally in another context that "[a] trial court cannot abuse its discretion if it reaches the right result, even for the wrong reasons." Hawthorne v. Guenther, 917 S.W.2d 924, 931 (Tex. App.-Beaumont 1996, writ denied) (citing Luxenberg v. Marshall, 835 S.W.2d 136, 141-42 (Tex. App.-Dallas 1992, no writ)); see also In re Stevens, 971 S.W.2d 757, 760 (Tex. App.-Beaumont 1998, orig. proceeding).
"Our federal system benefits from a measure of state-to-state comity, which, while not a constitutional obligation, is "a principle of mutual convenience whereby one state or jurisdiction will give effect to the laws and judicial decisions of another.'" In re AutoNation, Inc., 228 S.W.3d 663, 670 (Tex. 2007) (orig. proceeding) (quoting Gannon v. Payne, 706 S.W.2d 304, 306 (Tex. 1986)); see also Nowell v. Nowell, 408 S.W.2d 550, 553 (Tex. Civ. App.-Dallas 1966, writ dism'd) ("Comity has frequently been defined as the recognition that one sovereignty allows within its territory to the legislative, executive, or judicial act of another sovereignty, having due regard to the rights of its own citizens."). It is generally appropriate for courts to apply principles of comity "where another court has exercised jurisdiction over the matter and where the states agree about the public policy at issue." Bryant v. United Shoreline Inc. Assurance Servs., N.A., 972 S.W.2d 26, 30-31 (Tex. 1998). In applying principles of comity, a court considers whether the two suits involve the same cause of action, concern the same subject matter, involve the same issues, and seek the same relief. In re State Farm Mut. Auto. Ins. Co., 192 S.W.3d 897, 901 (Tex. App.-Tyler 2006, orig. proceeding) (citing Nowell, 408 S.W.2d at 553). "When a matter is first filed in another state, the general rule is that
Texas courts stay the later-filed proceeding pending adjudication of the first suit." In re AutoNation, Inc., 228 S.W.3d at 670.
Nutraceutical's petition sought to enjoin Summers from interfering with Nutraceutical's right to pursue an appeal in the Nevada State Supreme Court of the adverse ruling in the Nevada district court. In Nutraceutical's petition, in its brief to the trial court on jurisdiction, and in its brief on appeal, Nutraceutical states that Summers is threatening to dismiss an appeal by Nutraceutical to the Nevada Supreme Court when he is the judgment creditor and stands to gain a benefit against Nutraceutical, the judgment debtor. Nutraceutical argues it will be irreparably harmed by that action. Although Nutraceutical also argues that its suit in Texas does not interfere with the Nevada judgment but is an action "to clarify the subsequent actions of the shareholders, officers and board of directors and . . . to maintain the status quo until such time as a declaration regarding subsequent officers and directors could be established[,]" it is apparent from Nutraceutical's arguments that the Texas litigation involves essentially the same subject matter as the Nevada litigation. Nutraceutical does not adequately explain why the same arguments it makes here cannot be presented to the Nevada courts. Nevada ultimately will determine whether an appeal to the Nevada Supreme Court from a Nevada district court should be dismissed; the trial court did not abuse its discretion in refusing to take action to interfere in the litigation between the parties in Nevada. We conclude the trial court acted within its discretion in dismissing the suit. See Space Master Int'l, Inc. v. Porta-Kamp Mfg. Co., 794 S.W.2d 944, 945, 948 (Tex. App.-Houston [1st] 1990, no writ) (holding trial court did not abuse its discretion in dismissing suit for declaratory judgment without prejudice based on comity and the "unique nature of declaratory judgments," where suit involved the same parties and issues proceeding in another state court).
Under the circumstances of this case, however, the dismissal should have been without prejudice and not for lack of subject matter jurisdiction. By dismissing all of Nutraceutical's claims "with prejudice," the trial court summarily disposed of all the claims asserted and precluded Nutraceutical from reasserting them in any court, while also stating that the trial court lacked subject matter jurisdiction to enjoin a Montgomery County resident. See Shepherd v. Ledford, 962 S.W.2d 28, 32-33 (Tex. 1998); Mossler v. Shields, 818 S.W.2d 752, 754 (Tex. 1991) (dismissal with prejudice constitutes final adjudication on the merits, with full res judicata and collateral estoppel effect).
When a judgment reflects a correctable error of law which does not require a reversal of the judgment, a "court of appeals may . . . modify the trial court's judgment and affirm it as modified[.]" Tex. R. App. P. 43.2(b); see also Tex. R. App. P. 44.1(a). We modify the judgment to reflect the case is dismissed "without prejudice," and to delete the finding that the court lacked subject matter jurisdiction. As modified, the judgment is affirmed.
AFFIRMED AS MODIFIED.