Opinion
No. 04-16-00365-CV
02-22-2017
Cynthia RADDATZ, Vernon Rocchi, and Grant Rocchi, Appellants v. GEM RENTAL PROPERTIES, LLC and Gem Rentals, LLC, Appellees
MEMORANDUM OPINION
From the 225th Judicial District Court, Bexar County, Texas
Trial Court No. 2015-CI-16953
Honorable Antonia Arteaga, Judge Presiding Opinion by: Marialyn Barnard, Justice Sitting: Marialyn Barnard, Justice Patricia O. Alvarez, Justice Irene Rios, Justice AFFIRMED
Appellants Cynthia Raddatz, Vernon Rocchi, and Grant Rocchi appeal the trial court's order granting a motion for summary judgment filed by Gem Rental Properties, LLC and Gem Rentals, LLC. The order dismisses appellants' claims based on the doctrine of res judicata. The appellants contend the trial court erred in granting the summary judgment because: (1) the defendants in appellants' first lawsuit are different than the defendants in the underlying lawsuit; (2) any claim that the defendants are the same is barred by the legal doctrine of collateral estoppel; and (3) the assertion of res judicata as an affirmative defense is barred by the doctrine of judicial estoppel. We affirm the trial court's judgment.
BACKGROUND
In December of 2012, Gem Rental Properties LLC conveyed the property located at 722 E. Drexel in San Antonio, Texas (the "Property") to Vernon C. Rocchi and Cynthia J. Raddatz as husband and wife. The deed was executed by Jim Glasgow as legal representative of Gem Rental Properties, LLC. In connection with the conveyance, Rocchi and Raddatz executed a deed of trust and a mortgage agreement agreeing to make monthly payments on the $20,000 Gem Rental Properties, LLC lent Rocchi and Raddatz to purchase the Property.
On January 5, 2015, Rocchi and Raddatz filed an original petition against "JIM GLASGOW, INDIVIDUALLY and D/B/A GEM PROPERTIES" seeking injunctive relief and a restraining order to prevent "GLASGOW-GEM" from foreclosing on the Property. The petition alleged "GLASGOW-GEM" "had not been accepting or claiming the payments [Rocchi and Raddatz] tendered" by certified mail, return receipt requested.
On March 18, 2015, an original answer was filed identifying Glasgow, individually, and Gem Properties, L.L.C. as the defendants answering the lawsuit. The answer explained that Gem Rentals, L.L.C. is a Texas limited liability company, and the business with Rocchi and Raddatz "was transacted and conducted by Gem Rentals, L.L.C." The answer further asserted the petition contained a defect because Glasgow "never committed any act in his own name such as to incur personal liability." Therefore, Glasgow asserted he was not liable in the capacity in which he was sued.
The certificate of formation listed the entity's name as Gem Rental Properties LLC, and a certificate of amendment was subsequently filed amending the name to Gem Rentals, LLC.
The answer also asserted the affirmative defenses of laches and estoppel, contending "Defendants would show that GEM RENTALS, L.L.C. has already foreclosed upon the property indefinitely referred to in Plaintiffs' pleadings, and that it is too late for this Court to enjoin a foreclosure that has already occurred. Having failed to timely present their request for injunctive relief to this Court, Plaintiffs are now estopped from raising this claim."
On May 29, 2015, the trial court granted a motion to dismiss Rocchi's and Raddatz's cause of action with prejudice. In the order, the trial court found Glasgow was not liable in the capacity in which he was sued. The trial court also found "no such entity as GEM PROPERTIES exists, nor is GEM PROPERTIES the same entity as Gem Rentals, L.L.C." Finally, the trial court found Rocchi and Raddatz "failed to timely bring their cause of action" and "their claim is subject to the defense of laches." The trial court dismissed the claim with prejudice concluding "it is now too late to obtain the relief sought by Plaintiffs." Rocchi and Raddatz did not appeal the trial court's order.
On October 6, 2015, the appellants filed the underlying lawsuit against Gem Rental Properties, LLC and Gem Rentals, LLC (collectively "Gem Rentals") asserting various wrongful foreclosure claims. Gem Rentals moved for summary judgment based on the affirmative defense of res judicata, and the trial court granted the motion.
STANDARD OF REVIEW
We review a trial court's granting of a summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). To prevail on a traditional motion for summary judgment, the movant must show "there is no genuine issue as to any material fact and the [movant] is entitled to judgment as a matter of law." TEX. R. CIV. P. 166a(c); see also Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005). In reviewing a summary judgment, we take as true all evidence favorable to the non-movant, indulging every reasonable inference and resolving any doubts in the non-movant's favor. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004).
RES JUDICATA
In their first issue, the appellants contend the trial court erred in granting summary judgment because the defendants in the first lawsuit are different than the defendants in the underlying lawsuit. The appellants note the trial court's order dismissing the first lawsuit expressly states, "no such entity as GEM PROPERTIES exists, nor is GEM PROPERTIES the same entity as Gem Rentals, L.L.C." Gem Rentals responds "there is an identity of all parties or those in privity with them."
"For res judicata to apply, there must be: (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 that were raised or could have been raised in the first action." Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430, 449 (Tex. 2007). The appellants challenge only the second element, asserting a fact issue exists as to whether the defendants in the two lawsuits are different.
"Generally people are not bound by a judgment in a suit to which they were not parties." Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). "The doctrine of res judicata creates an exception to this rule by forbidding a second suit arising out of the same subject matter of an earlier suit by those in privity with the parties to the original suit." Id. at 652-53. "The purposes of the exception are to ensure that a defendant is not twice vexed for the same acts, and to achieve judicial economy by precluding those who have had a fair trial from relitigating claims." Id. at 653.
No general definition of privity automatically applies in all res judicata cases. Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 754, 800 (Tex. 1992). Instead, "the circumstances of each case must be examined." Id. People may be in privity if: "(1) they can control an action even if they are not parties to it; (2) their interests can be represented by a party to the action; or (3) they can be successors in interest, deriving their claims through a party to the prior action." Amstadt, 919 S.W.2d at 653. "Privity exists if the parties share an identity of interests in the basic legal right that is the subject of litigation." Id.
In this case, Glasgow, as the sole owner of Gem Rentals and as Gem Rentals's representative in the transaction with Rocchi and Raddatz, shared an identity of interests with Gem Rentals in the foreclosure which was the subject of both the first lawsuit and the underlying lawsuit. Through Glasgow, Gem Rentals controlled the first lawsuit, and its interests were represented by Glasgow in that lawsuit. In fact, the trial court recognized those interests were represented in ruling on the merits of Rocchi's and Raddatz's claim relating to the foreclosure after finding Glasgow was not liable in the capacity in which he was sued and "no such entity as GEM PROPERTIES exists." The trial court's dismissal of Rocchi's and Raddatz's claim was based on the factual assertion that Gem Rentals had already foreclosed on the Property. After the answer was filed asserting Gem Rentals had already foreclosed on the Property, Rocchi and Raddatz should have amended their petition to add the claims they sought to assert in the underlying lawsuit because those claims arose out of the same subject matter and could have been litigated in the first lawsuit. See Barr v. Resolution Trust Corp., 837 S.W.2d 627, 631 (Tex. 1992) (holding res judicata bars subsequent suit "if it arises out of the same subject matter of a previous lawsuit and which through the exercise of diligence, could have been litigated in [the] prior suit").
The appellants argue Gem Rentals should be estopped from asserting it was a party to the first lawsuit based on the answer filed in that lawsuit. In order for the doctrine of judicial estoppel or the doctrine of quasi-estoppel to apply, a party must take inconsistent positions. See Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d 1, 6 (Tex. 2008); Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000). The answer filed in the first lawsuit, however, is not inconsistent with Gem Rentals's assertion of res judicata as an affirmative defense in the underlying lawsuit. First, the answer asserted Glasgow was not liable in his individual capacity because Gem Rentals was the entity involved in the transaction with Rocchi and Raddatz. Next, the answer asserted Rocchi's and Raddatz's claim was barred by laches because Gem Rentals had already foreclosed on the property. The answer did not assert Gem Rentals was not a defendant in the first lawsuit or was not in privity with the defendants in that lawsuit. Therefore, none of the statements made in the answer are inconsistent with Gem Rentals's assertion of res judicata in the underlying lawsuit.
The appellants also argue the trial court's finding in the first lawsuit that "GEM PROPERTIES [is not] the same entity as Gem Rentals, L.L.C." prevents the issue from being relitigated under the doctrine of collateral estoppel. "The doctrine of collateral estoppel is used to prevent a party from relitigating an issue that it previously litigated and lost." Quinney Elec., Inc. v. Kondos Entm't, Inc., 988 S.W.2d 212, 213 (Tex. 1999). In the first lawsuit, however, the trial court could not and did not litigate the issue of whether an "identity of parties or those in privity with them" existed between the first lawsuit and the underlying lawsuit. Because we hold such an identity does exist under the specific circumstances of this case, we overrule the appellants' issues and affirm the trial court's judgment.
CONCLUSION
The trial court's judgment is affirmed.
Marialyn Barnard, Justice