Opinion
02-21-00418-CV
02-16-2023
Resurgence Partners, LLC (organized under the law of The State of Washington) and Resurgence Partners, LLC (organized under the law of The State of Wyoming), Appellants v. Michael G. Urbach, Appellee
On Appeal from the 48th District Court Tarrant County, Texas Trial Court No. 048-325947-21
Before Kerr, Birdwell, and Wallach, JJ.
MEMORANDUM OPINION
Mike Wallach Justice
I. Introduction
This is a tale of two lawsuits filed sequentially in the same court and involving a dispute over the same $300,000. In the first lawsuit, Appellee Michael G. Urbach sued Patrick Earles for fraud. In the second lawsuit, Appellants Resurgence Partners, LLC (organized under the law of The State of Washington) (RP-WA) and Resurgence Partners, LLC (organized under the law of The State of Wyoming) (RP-WY) (collectively, Appellants) sued Urbach, seeking declarations that, among other things, they and Earles, their sole member and manager, were not liable to Urbach for fraud. Urbach filed a Rule 91a motion to dismiss in the second lawsuit, which the trial court granted.
In a single issue, Appellants complain that the trial court erred by granting Urbach's motion because they were not joined as parties in Urbach's lawsuit against Earles and because Urbach's motion did not meet Rule 91a.2's specificity requirement. We will affirm the trial court's dismissal. Urbach's motion was sufficiently specific to meet Rule 91a's requirements. On the merits of the motion, Appellants were in privity with Earles and presented the same issues in the second lawsuit as were presented in the first, preventing their recovery of declaratory relief as a matter of law.
II. Discussion
As we have previously explained with regard to Rule 91a, dismissal is appropriate if
"the [plaintiff's] allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought . . . [or] no reasonable person could believe the facts pleaded." City of Dallas v. Sanchez, 494 S.W.3d 722, 724 (Tex. 2016) (citing Tex.R.Civ.P. 91a). We review a Rule 91a motion's merits de novo because the availability of a remedy under the facts alleged is a question of law and the rule's factual-plausibility standard is akin to a legal-sufficiency review. Id.
If a claimant's factual allegations in his pleadings, taken as true, and the reasonable inferences to be drawn from those allegations do not entitle the claimant to the relief sought, then the claim has no basis in law. Fiamma Statler, LP v. Challis, No. 02-18-00374-CV, 2020 WL 6334470, at *8 (Tex. App.-Fort Worth Oct. 29, 2020, pet. denied) (mem. op.). For example, the petition might allege too few facts to show a viable, legally cognizable right to relief, or the petition might allege additional facts that, if true, bar recovery (i.e., the plaintiff pleads himself out of court). Id. Rule 91a limits a court's factual inquiry to the plaintiff's pleadings, but it does not so limit the court's legal inquiry. Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., 595 S.W.3d 651, 656 (Tex. 2020).Teel v. Autonation Motors, LLC, No. 02-20-00419-CV, 2022 WL 123217, at *1 (Tex. App.-Fort Worth Jan. 13, 2022, no pet.) (mem. op.). We begin our analysis with a review of the allegations in Appellants' petition.
A. Appellants' allegations
In their petition, Appellants recounted a tangled web involving not only themselves, Urbach, and Earles but also Giancarlo De Lio and his company Moseda Technologies, Inc., which later became Reliq Health Technologies, Inc. The following facts have been garnered from Appellants' petition and are taken as true for purposes of Rule 91a. See id.
In June 2015, De Lio d/b/a "Care Kit Health Corp." induced RP-WA to enter into a contract under which RP-WA furnished business consulting services in exchange for shares of stock in Care Kit, a company that did not exist until November 2015. De Lio falsely represented to RP-WA that he had acquired the ownership of or rights to a new and revolutionary healthcare software and that he wanted to join forces to market and sell licenses to use the software and split the proceeds. From June 2015 onward, RP-WA provided "valuable business consultation services" to De Lio and his various businesses and transferred money to De Lio based on his representations that Care Kit needed capital for research and development expenses.
In March 2016, Moseda (which became Reliq) and RP-WA entered a joint venture marketing agreement under which they would split the net profits realized from the software-licensing sales.
In April 2016, Reliq (acting through De Lio) represented to RP-WA, Urbach (a potential RP-WA investor), and others in a conference call that it owned the software. De Lio described the "potential revenues that could be generated by the sales and/or licensing of Reliq's Software Product." Earles, RP-WA's manager, verbally offered to sell to Urbach a 20% share of RP-WA's share of the net profits from the Reliq software marketing program and a membership interest in RP-WA for a total of $300,000, and he delivered to Urbach a membership agreement that Urbach would have to execute and return to Earles to become a member. Earles also told Urbach that RP-WA would soon become inactive, that RP-WA would assign all of its assets to a yet-to-be-formed entity, RP-WY, and that the $300,000 should be wired to the soon-to-be-created RP-WY.
In May 2016, RP-WY was created, Earles (as RP-WA's manager) executed a general assignment of RP-WA's assets to RP-WY, and Urbach transferred $300,000 to RP-WY's bank account. Urbach did not return an executed membership agreement to Earles.
Half a year later, in December 2016, Reliq and RP-WY entered the software marketing contract under which RP-WY was to locate clients in South Texas with whom Reliq would enter the licensing agreements. RP-WY performed, but Reliq never paid RP-WY for its efforts. RP-WY stopped performing after it learned that Reliq had received $450,000 in licensing fees from the South Texas clients but had failed or refused to deliver the software and had refused to refund the $450,000 to the clients. Both RP-WA and RP-WY "sustained actual damages and large economic losses as a direct result" of Reliq and De Lio's fraudulent misrepresentations.
Urbach sued Earles, alleging that Earles had defrauded him of his $300,000 investment, and he sued De Lio and Reliq as Earles's co-defendants, but he did not sue Appellants "even though Earles ha[d] complained of Urbach's failure to join these two entities as party defendants to Urbach's suit." Urbach subsequently settled with De Lio and Reliq and dismissed them from his lawsuit without prejudice, and he refused to respond to Earles's discovery request for details of the settlement agreement. According to Appellants, in his lawsuit, Urbach argued that he was entitled to learn what became of his $300,000, which Appellants assert "has thus created a contract dispute regarding the control of the funds that have been placed into the Wells Fargo bank account formerly held by" RP-WY.
In June 2021, Appellants sued Urbach, Reliq, and De Lio. From De Lio and Reliq, Appellants sought monetary relief, but from Urbach, they sought solely non-monetary relief in the form of a declaratory judgment "for the purpose of settling a contract dispute" and their attorney's fees under the Uniform Declaratory Judgments Act (DJA). See Tex. Civ. Prac. & Rem. Code Ann. § 37.002(a). Appellants asked the trial court for the following declarations about their interactions with Urbach, which we have consolidated:
• that Urbach has never been a member of RP-WA or RP-WY;
• that RP-WA had offered to sell Urbach a "security" as defined by the Texas Securities Act (TSA) or Washington Securities Act (WSA) and that the terms of the TSA or WSA apply to or are incorporated into that security;
• that RP-WA did not violate the TSA or WSA because it made no misrepresentations of material fact in connection with the offer and did not omit any fact necessary to render the offer not misleading;
• that the rights assigned from RP-WA to RP-WY on May 3, 2016, were burdened by Urbach's right to purchase a 20% interest;
• that before or after RP-WA assigned its assets to RP-WY, Urbach did not accept the offer to buy a portion of RP-WA's right to share in Reliq's net
profits ("the referenced asset/security owned by RP-WA"), and they did not make a contract with each other for the sale and purchase of any security within the meaning of that term under either the TSA or WSA;
• that RP-WY did not renew the offer to Urbach for the right to share in Reliq's profits or extend a new offer and, therefore, RP-WY neither offered to sell nor sold any security to Urbach, and they did not make a contract with each other for the purchase and sale of any security;
• that Urbach timely redeemed RP-WA's offer but no authorized representative of either RP-WA or RP-WY (i.e., Earles) ever represented or promised Urbach that Reliq and RP-WA or its assignee would make net profits;
• that RP-WA and RP-WY had worked extremely diligently to make the joint venture marketing agreement with Moseda and then Reliq financially successful;
• that Earles-Appellants' sole member-loaned more than $100,000 of his personal funds to one or the other of Appellants or both to fund them while they "were working to achieve financial success";
• that the funds transferred and deposited by Urbach into RP-WY's bank account belong to and have always belonged to RP-WY since their transfer;
• that RP-WY has always been free to spend its financial resources without consulting Urbach or securing his approval;
• that RP-WA fully complied with the TSA and WSA in connection with its offer to sell a portion of its right to share in the net profits, if any, that might be realized from the joint venture marketing agreement; and
• that the reason why the joint-venture marketing agreement failed to generate any net profits was due to De Lio and Reliq's fraud.
B. Urbach's Rule 91a motion
In his Rule 91a motion, Urbach argued that Appellants' declaratory-judgment action against him was redundant of the claims and defenses in the first-filed parallel proceeding and that a declaratory judgment would not resolve the dispute. He stated that Appellants had judicially admitted in their petition that they had received $300,000 from Urbach "in exchange for nothing," effectively conceding that they were unjustly enriched at his expense, and he highlighted the following factual allegations from their petition to support his argument that they "plainly acknowledge that the basis for their alleged dispute . . . relates to litigation conduct" in his lawsuit:
Urbach argued alternatively that the claims should be dismissed and joined in the other lawsuit for judicial efficiency because they amounted "at best, to a defense to Urbach's pending fraud claim and were a compulsory counterclaim pursuant to" Rule of Civil Procedure 97. See Tex. R. Civ. P. 97.
6.19In that same lawsuit, Urbach [and his lawyers] assert that [he] is entitled to learn what became of the moneys that were deposited into the bank account held by RP-W[Y] as though Urbach is or was a member of RP-W[Y] even though Urbach declined to take the action necessary to become a member of RP-W[Y] or RP-W[A].
6.20 The position taken by Urbach and his lawyers has thus created a contract dispute regarding the control of the funds that have been placed in the Wells Fargo bank account formerly held by RP-W[Y]. The Plaintiffs seek a declaratory judgment to resolve that dispute.
Urbach further argued that Appellants' lawsuit had no basis in fact because no reasonable person could believe that there is a "contract dispute" because of positions taken in the parallel legal proceeding. And he argued that there was no legal basis for Appellants' attorney's-fees claim because their declaratory claims for relief were a defense to and duplicative of his fraud claim against Earles.
C. Appellants' response
In response to Urbach's motion, Appellants argued that Urbach had failed to satisfy the "no basis in fact" prong because he did not deny the occurrence of any event alleged in their petition. They further argued that his motion did not contend that Texas law failed to give them the right to secure the various declarations sought in their petition, specifically, the parties' status, the identity of the funds' owner, and their nonliability to Urbach under the contract for the sale and purchase of a security. They also pointed out that Urbach's motion did not assert that they were parties in his first-filed lawsuit and that, as nonparties to Urbach's suit, they did not have a duty to file a compulsory counterclaim and their declaratory-judgment suit could not be blocked.
D. Subsequent filings and the trial court's orders
Urbach filed a reply to Appellants' response, but because Rule 91a does not allow for a reply, we do not consider it. See Tex. R. Civ. P. 91a. The trial court granted Urbach's Rule 91a motion, dismissed with prejudice Appellants' claims against Urbach, and awarded $1,475 to Urbach for his attorney's fees and costs incurred for the Rule 91a motion. Appellants filed, and the trial court granted, a motion to sever their claims against Urbach so that Appellants could immediately appeal.
Appellants filed an objection to Urbach's reply and moved to strike it. They also filed a motion to "enlarge time for filing" their response and their objection. The trial court denied these motions, but Appellants do not complain about these rulings on appeal.
E. Appellants' arguments
In their single issue, Appellants complain that the trial court erred by granting Urbach's motion because there is no pending dispute when "the parties are different" in the first and second lawsuits, citing us to Texas Liquor Control Board v. Canyon Creek Land Corp., 456 S.W.2d 891 (Tex. 1970). They also argue that his motion failed to meet Rule 91a.2's requirements because it did not make specific statements. We address the specificity complaint first.
Appellants complain that Urbach failed to note in his Rule 91a motion that he had "consistently declined to bring [them] in as a party to the related case." However, they do not state whether they sought to intervene in the related case. See Tex. R. Civ. P. 60 ("Any party may intervene by filing a pleading, subject to being stricken out by the court for sufficient cause on the motion of any party.").
1. Specificity
A Rule 91a motion must identify each cause of action to which it is addressed and "must state specifically the reasons the cause of action has no basis in law, no basis in fact, or both." Tex.R.Civ.P. 91a.2. We apply rules of civil procedure in accordance with their plain language. Mandel v. Lewisville ISD, 499 S.W.3d 65, 74 (Tex. App.-Fort Worth 2016, pet. denied). The dictionary provides two definitions of "specifically": (1) "in a specific manner: in a definite and exact way: with precision" and (2) "used to indicate the exact identity, purpose, or use of something." See
Merriam-Webster, https://www.merriam-webster.com/dictionary/specifically (last visited Feb. 13, 2023).
Urbach's Rule 91a motion identified as the motion's subject Appellants' claims for declaratory judgment (ownership of $300,000 that is the subject of both lawsuits) and attorney's fees and argued that, as a matter of law, Appellants' declaratory-judgment claims were duplicative of the $300,000 dispute with Earles (Appellants' sole member and manager) in the first-filed proceeding, making declaratory relief inappropriate. Urbach also argued that there was no factual basis for the claims when no reasonable person could believe there was a "contract dispute" between the parties as a result of his position in the first-filed suit and that there was no legal basis for Appellants' attorney's-fees request because the declaratory-judgment claim was a defense that was duplicative of Urbach's fraud claim against Earles. Because these statements identified the pertinent declaratory-judgment claims and stated specific reasons why they had no basis in law, in fact, or both, Rule 91a.2's requirements are satisfied. See Tex. R. Civ. P. 91a.2. Accordingly, we overrule this portion of Appellants' sole issue and turn to the merits of Urbach's motion.
2. No basis in law
A claim has no basis in law in two circumstances-either the petition alleges facts that negate the plaintiff's right to relief or the petition does not plead sufficient facts to supply a legal basis for the claim. See Teel, 2022 WL 123217, at *1.
a. Already pending dispute
Texas public policy does not favor the pursuit of a declaratory action when a previously filed action already addresses the same issues. In re BP Oil Supply Co., 317 S.W.3d 915, 921 (Tex. App.-Houston [14th Dist.] 2010, orig. proceeding); see 30 Tex. Jur. 3d Declaratory Relief § 7 ("A declaratory judgment is not available to settle disputes already pending before a court."). The rationale for this rule is that a declaratory-judgment action should not be available to determine and thereby collaterally estop issues already pending in a previously filed suit. Bradshaw v. White, No. 08-03-00186-CV, 2004 WL 1045469, at *4 (Tex. App.-El Paso May 6, 2004, no pet.) (mem. op.) (quoting Lavely v. Heafner, 976 S.W.2d 896, 899 (Tex. App.-Houston [14th Dist.] 1998, no pet.)).
Further, declaratory relief is not available when a pending suit involves the same parties in addition to the same issues involved in the declaratory-judgment action. See 30 Tex. Jur. 3d Declaratory Relief § 7; see also Tex. Liquor, 456 S.W.2d at 895 ("As a general rule, an action for declaratory judgment will not be entertained if there is pending, at the time it is filed, another action or proceeding between the same parties and in which may be adjudicated the issues involved in the declaratory action." (emphasis added)). The question, however, is who qualifies as the "same party" for purposes of a subsequently-filed separate declaratory judgment action and the already pending dispute.
Few cases directly address this issue, but those that do cite Texas Liquor, to which Appellants have referred us. See City of Grapevine v. CBS Outdoor, Inc., No. 02-12-00040-CV, 2013 WL 5302713, at *8 (Tex. App.-Fort Worth Sept. 19, 2013, pet. denied) (mem. op. on reh'g) (describing the rule as involving a "pending action between the same parties that might resolve the exact issues raised in the declaratory judgment" (emphases added) (citing Tex. Liquor, 456 S.W.2d at 895)); see also Feldman v. KPMG LLP, 438 S.W.3d 678, 682-83 (Tex. App.-Houston [1st Dist.] 2014, no pet.); Paulsen v. Tex. Equal Access to Just. Found., 23 S.W.3d 42, 48 (Tex. App.-Austin 1999, pet. denied); Lavely, 976 S.W.2d at 898-99.
Texas Liquor involved companion cases in which private clubs in a "dry" area sued the Texas Liquor Control Board (TLCB) for declaratory and injunctive relief to prevent TLCB from attempting to enforce a particular interpretation of the Texas Liquor Control Act: Canyon Creek sued TLCB in one case, and Oak Cliff Country Club and its president, Ben Bacon, sued TLCB in the other. 456 S.W.2d at 893. One of the cases was tried on the merits, while the other received a temporary injunction, and although the trial court and intermediate appellate court ruled in the plaintiffs' favor in both cases, the supreme court disagreed. Id.
The supreme court noted that license-suspension proceedings against Canyon Creek and Oak Cliff had been pending before the TLCB when the suits were filed and that the outcome of those administrative proceedings might turn on the questions before the court. Id. at 893-94. The court stated the general same-parties-same-issues rule and then held that under all of the case's circumstances, the administrative procedures should not be circumvented or delayed "by the prosecution of a declaratory judgment action to obtain a construction of the penal statute by the civil courts." Id. at 895-96; cf. Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex., 253 S.W.3d 184, 200 (Tex. 2007) (noting Austin court's distinction between an Administrative Procedure Act appeal, which allows a trial court to rule on a particular commission order, and a declaratory-judgment action asking for a ruling on the commission's general authority to adjudicate an underlying dispute-a request that is broader than the effectiveness of one particular order and that asks for relief more expansive than the reversal of a particular commission determination).
When it dismissed the case in Texas Liquor, the supreme court did not address the fact that Bacon, Oak Cliff's president and a party to one of the two companion cases, did not have a pending administrative case. See 456 S.W.2d at 893-96. One of our sister courts noted this when it addressed a similar situation in Feldman. See 438 S.W.3d at 684 & n.2.
In Feldman, Feldman filed for a declaratory judgment of nonliability after KPMG-Canada, which had been sued in Canada for accounting malpractice, filed a third-party claim against him and his law firm in that suit for indemnity and contribution if it was held liable. Id. at 680. Feldman sued the plaintiffs in the underlying Canadian lawsuit, KPMG-Canada, and KPMG-U.S. in Texas for a declaratory judgment that none of them could sue him in a foreign country on an expired claim. Id. The trial court dismissed Feldman's declaratory-judgment claims after the defendants argued in a plea to the jurisdiction that the prior pending action would adjudicate the same issues between the parties. Id. at 680-81.
On appeal, the court noted that while a declaratory judgment may be used to assert a claim of nonliability in a contract (as opposed to a tort) case, the issue presented was whether a declaratory judgment could be used to assert a claim of nonliability in a contract case when there was already a breach-of-contract case pending in another court. Id. at 682. Because the second-filed declaratory-judgment action was a mirror image of the first-filed breach-of-contract action and because the "true" plaintiffs in the Canadian case had claims for affirmative relief in tort against KPMG-Canada, the court held that dismissal of Feldman's declaratory-judgment claims was appropriate. Id. at 683-84. In stating that when Feldman filed suit, "there was a suit pending involving the same parties," the court acknowledged that KPMG-U.S. was not a party to the Canadian suit "but the claims that Feldman asserts against it are exactly the same claims as those asserted against" KPMG-Canada, and it noted that Texas Liquor "also involved an extra party [Bacon] in the declaratory judgment that was not present in the ongoing administrative proceedings." Id. at 684 & n.2.
It is well-settled that the DJA cannot be used to seek a declaration of nonliability in tort and that such claims have "no basis in law," see In re Houston Specialty Ins. Co., 569 S.W.3d 138, 141 (Tex. 2019) (orig. proceeding), while "historically, declarations of non-liability under a contract have been among the most common suits filed under the [D]A]," MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 668 (Tex. 2009). Urbach did not move to dismiss Appellants' fraud-declaration claims on the invalid-tort-claim ground.
On the other hand, when the parties in a parallel litigation are not related, "that [declaratory-judgment] doctrine cannot squarely dispose" of the second-filed case. Paulsen, 23 S.W.3d at 48. In Paulsen, the crux of the declaratory-judgment dispute was how broadly to read Phillips v. Washington Legal Foundation, 524 U.S. 156, 118 S.Ct. 1925 (1998), in determining who owned the interest earned on an IOLTA account. Id. at 43-44, 46-47. At the time, Phillips had been remanded to the federal district court to consider IOLTA's constitutionality. Id. at 48. The Paulsen court observed,
If the facts of this case were altered only slightly, we would be required to defer to [the federal district] court's proceeding, for there is a wide body of law that would prevent us from deciding this declaratory judgment action if another action were pending between the same parties which would adjudicate the issues involved in the present action. See Tex[.] Liquor[, 456 S.W.2d at 895]; Tucker v. Graham, 878 S.W.2d 681, 683 (Tex. App.-Eastland 1994, no writ); S[.] Traffic Bureau v. Thompson, 232 S.W.2d 742, 750 (Tex. Civ. App.-San Antonio 1950, writ ref'd n.r.e.). Because the parties before us are not identical to those involved in the Phillips litigation, that doctrine cannot squarely dispose of this case. The parties before us could, however, have intervened in the Phillips suit and presented their constitutional arguments in a more direct fashion to the district court.Id. (footnote omitted).
Tucker and Southern Traffic have no bearing on the same-parties-same-issues question because they address other DJA rules. Tucker involved a statutory claim brought in the same lawsuit with a duplicative declaratory-judgment claim. 878 S.W.2d at 683. Southern Traffic's only issue was the liability or relief sought by the parties. 232 S.W.2d at 750-51 ("[T]he nature of the action is not a cause for declaratory relief, but is defined by the subject-matter of the accrued cause of action.").
The plaintiffs in Paulsen were an attorney and several banking associations, and the defendant was the Texas Equal Access to Justice Foundation. Id. at 43. In a footnote, the court noted that the attorney was not a party to the Phillips case but had been involved in it to the extent that he had drafted amicus curiae briefs tendered to the Fifth Circuit; that the Foundation was a party to the ongoing Phillips litigation; and that the banking associations were not. Id. at 48 n.4; cf. Furr v. Hall, 553 S.W.2d 666, 675 (Tex. App.-Amarillo 1977, writ ref'd n.r.e.) (declining to apply same-parties-same-issues rule when the record did not reflect that the same parties were involved in both a sibling-inheritance dispute and a pending merger-opposition case or that adjudication of the grounds of the sibling's opposition to the merger would adjudicate the ultimate issues in the sibling-inheritance dispute).
In another case referencing Texas Liquor's same-parties-same-issues rule, one of our sister courts observed that a possible rationale for the rule
is that a declaratory judgment action should not be available to determine and thereby collaterally estop issues already pending in a previously filed suit. Conversely, if the issues asserted in a declaratory judgment action would have no such effect, the rationale for prohibiting the declaratory judgment action would not seem to apply. This would suggest that the same approach for determining identity of parties and issues should be applied to the declaratory action prohibition as is applied for purposes of collateral estoppel. An issue is barred by collateral estoppel if: (1) the facts sought to be litigated in one action were fully and fairly litigated in a prior action; (2) those facts were essential to the judgment in the prior action; and (3)the parties were cast as adversaries in the prior action or the party against whom collateral estoppel is being asserted was a party to the prior litigation or is in privity with such a party.Lavely, 976 S.W.2d at 899 n.4 (emphasis added). Although the circumstances of each case must be examined, generally, parties are in privity for purposes of collateral estoppel when: (1) they control an action even if they are not parties to it; (2) their interests are represented by a party to the action; or (3) they are successors in interest, deriving their claims through a party to the prior action. HECI Expl. Co. v. Neel, 982 S.W.2d 881, 890 (Tex. 1998).
"Privity . . . expresses the idea that as to certain matters and in certain circumstances persons who are not parties to an action but who are connected with it in their interests are affected by the judgment with reference to interests involved in the action, as if they were parties." Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363 (Tex. 1971). A person who is not a party but who controls an action is bound by the adjudication of litigated matters as if he were a party where he has a proprietary or financial interest in the judgment or in the determination of a question of fact or of law with reference to the same subject matter or transaction. Id. at 363-64.
Accordingly, if a party is in privity with one of the parties to the previously-filed lawsuit-like Bacon, the president of the Oak Cliff Country Club, in Texas Liquor, or the American branch of the accounting firm in Feldman-then the same-parties-same-issues rule applies, and dismissal of the declaratory-judgment claims is appropriate. If, on the other hand, there is no privity, then-as in Paulsen-the rule does not apply.
Here, Urbach sued Earles, Appellants' member-manager, for fraud involving the $300,000 that Urbach sent to RP-WY's bank account. Appellants then sued Urbach for declarations that neither they nor Earles were liable to Urbach for fraud. Because Earles was Appellants' member-manager, he was in privity with Appellants in the same way that Bacon was in privity with the Oak Cliff Country Club in Texas Liquor or that the American branch of the accounting firm was in privity with the Canadian branch of the accounting firm in Feldman. See Neel, 982 S.W.2d at 890; see also Benson, 468 S.W.2d at 363-64; Lavely, 976 S.W.2d at 899 n.4. Accordingly, the same-parties-same-issues rule applies, and we overrule this portion of Appellants' sole issue.
b. No termination of the controversy
As argued by Urbach in his Rule 91a motion, the supreme court has stated that a trial court only has discretion to enter a declaratory judgment "so long as it will serve a useful purpose or will terminate the controversy between the parties." Bonham State Bank v. Beadle, 907 S.W.2d 465, 468 (Tex. 1995) (allowing declaratory judgment action for a right to offset the $75,000 judgment obtained by Beadle against the bank against the $1.65 million judgment obtained by the bank against Beadle in the third out of four lawsuits between the parties). The DJA is "often preventative in nature," with a remedial-not coercive-purpose. Allstate Ins. Co. v. Irwin, 627 S.W.3d 263, 269 (Tex. 2021) (noting that what the appellee sought to establish through declaratory relief were the prerequisites for and existence of an uninsured motorist claim under the policy, not a matured breach-of-contract claim).
In their petition, Appellants complained that Urbach had failed or had refused to respond to Earles's discovery request for details of his settlement agreement with De Lio and Reliq in the first suit and that Urbach's insistence in the first suit on learning what happened to the $300,000 "has thus created a contract dispute regarding the control of the . . . funds . . . placed into the Wells Fargo bank account formerly held by RP-W[Y]." In addition to fraud declarations, Appellants also sought a declaration that there was no contract between RP-WY and Urbach, that Appellants had worked diligently, that Appellants' sole member (Earles) had loaned the companies more than $100,000, and that the funds transferred by Urbach belong to RP-WY without the necessity of consulting Urbach or securing his approval to spend them.
It is unclear whether Appellants were raising an offset issue in this request, but a declaratory judgment action is an appropriate vehicle for the offset of two final judgments. Bonham State Bank, 907 S.W.2d at 468. Neither lawsuit has concluded in a final judgment at this point. See id. at 470.
We have found no cases that allow a discovery dispute in a parallel case to give rise to a previously nonexistent contract claim. See 30 Tex. Jur. 3d Declaratory Relief § 23 ("The standing requirement in actions for declaratory judgment limits subject-matter jurisdiction to cases involving a distinct injury to the plaintiff."). It is unclear from their petition how Appellants have suffered a distinct injury from Urbach's refusal to comply with Earles's discovery requests and, in turn, how that refusal created a judicial controversy that would be resolved by Appellants' requested declarations. See Sw. Elec. Power Co. v. Lynch, 595 S.W.3d 678, 685 (Tex. 2020) (restating that a declaratory judgment is appropriate only if a justiciable controversy exists as to the rights and status of the parties and the controversy will be resolved by the declaration sought). Further, there is no indication that any of the remaining requested declarations would serve a useful purpose or terminate the controversy between Urbach and Earles in the first-filed suit. See Bonham State Bank, 907 S.W.2d at 468. Accordingly, because Appellants failed to plead sufficient facts to entitle them to relief or to show that a declaration would terminate the controversy between the parties, the trial court did not err by granting the remainder of Urbach's Rule 91a motion on these claims. We overrule this portion of Appellants' sole issue.
c. No attorney's fees
Because-as set out above-there is no legal basis to support their declaratory-judgment action, Appellants' DJA-based attorney's-fees claim likewise has no legal or factual basis. See MBM Fin. Corp., 292 S.W.3d at 669 ("[T]he rule is that a party cannot use the [D]A] as a vehicle to obtain otherwise impermissible attorney's fees."); GR Fabrication, LLC v. Swan, No. 02-19-00242-CV, 2020 WL 2202325, at *11 (Tex. App.-Fort Worth May 7, 2020, no pet.) (mem. op.) (stating that attorney's fees are not recoverable on a fraud claim); see also HECI Expl. Co. v. Clajon Gas Co., 843 S.W.2d 622, 639 (Tex. App.-Austin 1992, writ denied) (explaining general rule prohibiting filing of a declaratory-judgment claim just to recover attorney's fees applies both in the same proceeding or in an already pending, completely separate proceeding between the parties). We overrule the remainder of Appellants' sole issue.
III. Conclusion
Having overruled Appellants' sole issue, we affirm the trial court's judgment.