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applying concept of "trial by consent" to motion to dismiss, but holding affirmative defenses not addressed in motion were not tried by consent because it was unclear that they "were fully discussed and tried by the parties [in their response and reply] as claimed by [movant]"
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NO. 01-10-00476-CV
02-16-2012
ADRIENNE A. HENNY, Appellant v. JPMORGAN CHASE BANK, N.A., Appellee
On Appeal from the 152nd District Court
Harris County, Texas
Trial Court Case No. 2008-40075-B
MEMORANDUM OPINION ON REHEARING
We originally issued our memorandum opinion in this appeal on June 30, 2011. Appellee, JPMorgan Chase Bank, N.A. ("Chase"), has filed a motion for rehearing. We deny the motion for rehearing, vacate our earlier judgment, withdraw our previous opinion, and issue this opinion in its place.
Adrienne A. Henny, appeals the trial court's judgment dismissing her third-party claim against Chase with prejudice. Henny raises two issues challenging the dismissal judgment.
We reverse and remand.
Background
Henny created and operated a restaurant business known as Coozan's Hot Wings & Bayou Cafe ("Coozan's"). Henny managed the business with Oscar and Denise Taylor. The business had three restaurant locations.
In September 2006, Chase loaned Coozan's $108,000.00. One year later, Chase loaned Coozan's $146,974.76. Henny signed an agreement with Chase personally guaranteeing repayment of the funds.
A conflict arose between Henny and the Taylors. As a result, the business was divided between the two interests.
On February 1, 2008, Chase sued Coozan's and Henny to recover the unpaid funds that Chase had loaned to Coozan's and which were guaranteed by Henny. Four days after Chase filed suit, on February 5, 2008, Henny sold her portion of the business to Martha and Bruce Pollock. The Pollocks signed an asset purchase agreement evidencing the sale.
On May 22, 2008, Chase obtained a summary judgment against Coozan's and Henny. The judgment awarded Chase the outstanding principal on the loans, totaling $237,160.91, plus interest, fees, court costs, and attorney's fees.
On July 1, 2008, AdvanceMe, Inc. filed suit against Coozan's and Henny. It alleged that Coozan's had contracted "to sell certain accounts and/or payment intangibles to [AdvanceMe]." AdvanceMe asserted that it had entered into three separate merchant agreements with Coozan's requiring Coozan's "to direct its credit card processor to remit to [AdvanceMe] a percentage of the cash realized from [Coozan's credit card] receivables." AdvanceMe alleged that it had paid Coozan's in full for the receivables. AdvanceMe claimed that pursuant to each merchant agreement, it became the owner of the receivables. The merchant agreements also required Coozan's "to process the receivables with a credit card processor acceptable to [AdvanceMe]." AdvanceMe claimed that Coozan's breached the merchant agreements by changing credit card processing companies without AdvanceMe's approval. It further claimed that the new, unapproved credit card processor had failed to remit the receivables, totaling $56,229.09, to AdvanceMe. The receiveable were due for remittance in October 2007 and January 2008.
AdvanceMe also alleged that Henny had signed a provision guaranteeing Coozan's performance under the merchant agreements. It asserted that Henny had failed to perform her contractual duty.
On June 19, 2009, Henny filed a third-party petition in the AdvanceMe suit, adding the Taylors, the Pollocks, and Chase as third-party defendants. The only cause of action asserted by Henny against Chase was a conspiracy claim. Henny alleged that the Pollocks and Chase had "conspired to harm [Henny] by using the money loaned by [Chase] and continu[ing] to use the funds without the knowledge of [Henny]."
Chase filed a "Motion to Dismiss, Special Exceptions, and Subject Thereto Answer, Affirmative Defenses and Counter-Claim." The filing contained a motion to dismiss. Chase argued that Henny's third-party claim against it should be dismissed for non-compliance with Rule of Civil Procedure 38, which governs third-party actions. Chase asserted,
A third party action is only proper if the third-party claim is for contribution and indemnity of the defendant for the Plaintiff's claims. . . . Henny's alleged conspiracy claim against Chase is not such an indemnity or contribution claim as the alleged conspiracy is unrelated to the unpaid credit card charges asserted by the Plaintiff in this lawsuit, which arose in 2007.
The filing also contained a general denial to the third-party claim and asserted a number of affirmative defenses. Specifically, Chase listed, without elaboration, the following affirmative defenses: "res judicata, collateral estoppel, statute of frauds, statute of limitations, consent (express and implied), ratification, waiver, unclean hands and estoppel." These defenses were expressly asserted subject to the motion to dismiss.
Henny defended against the motion to dismiss by asserting as follows:
A defendant, as a third-party plaintiff, may bring into the suit any third party who is or may be liable to it or to the plaintiff for all or part of the plaintiff's claim. . . . Henny has alleged in [her] Original Petition that Chase conspired with other parties to misappropriate Henny's funds. This alleged cause of action fits [sic] directly relates to the alleged liability of Henny in the suit between Henny and AdvanceMe, Inc. Therefore, a third-party action is appropriate and required under Texas law in this matter.
A hearing was conducted on the motion to dismiss, but no record was made of the hearing. The trial court signed an interlocutory order dismissing Henny's third-party claim against Chase with prejudice. In support of dismissal, the order provided that "any claims or defenses relating to the loans made by Chase to [Coozan's], guaranteed by [Henny] should have been raised in the lawsuit" brought by Chase against Coozan's and Henny "in which Chase was awarded Final Summary Judgment, on May 22, 2008, against [Henny]." In other words, the trial court dismissed Henny's claim with prejudice based on the affirmative defenses of res judicata and compulsory joinder of a counter-claim.
Henny moved to sever the claims between Henny and Chase from the remaining claims. The trial court signed an order granting the motion to sever, making the order dismissing Henny's claim against Chase final.
Henny filed a motion for new trial, which the trial court denied. This appeal followed.
In two issues, Henny asserts that the trial court erred by granting Chase's motion to dismiss her third-party conspiracy claim based on the affirmative defenses of res judicata and compulsory joinder of a counter-claim. In its response brief, Chase raises an additional issue in which it contends that the trial court properly dismissed Henny's claim because it was not a "proper third-party claim under Texas Rule of Civil Procedure 38(a)."
Determination and Application of Appropriate Standard of Review
As a preliminary matter, we address the procedural posture of this case. The compulsory counterclaim rule and the doctrine of res judicata are affirmative defenses. Commint Technical Servs., Inc. v. Quickel, 314 S.W.3d 646, 651 (Tex. App.—Houston [14th Dist.] 2010, no pet.). An affirmative defense, or "plea in bar," operates to prohibit the assertion of a cause of action and involves the final disposition of a case. Tex. Underground, Inc. v. Tex. Workforce Comm'n, 335 S.W.3d 670, 675 (Tex. App.—Dallas 2011, no pet.) (citing Martin v. Dosohs I, Ltd., 2 S.W.3d 350, 354 (Tex. App.—San Antonio 1999, pet. denied); In re A.M., 936 S.W.2d 59, 62 (Tex. App.—San Antonio 1996, no writ)). An affirmative defense is not typically disposed of in a preliminary hearing, such as a motion to dismiss. Tex. Underground, 335 S.W.3d at 675 (citing Martin, 2 S.W.3d at 354). Rather, an affirmative defense should be raised through a motion for summary judgment or proven at trial. Id. at 676; In re D.K.M., 242 S.W.3d 863, 865 (Tex. App.—Austin 2007, no pet.); see Montgomery Cnty. v. Fuqua, 22 S.W.3d 662, 669 (Tex. App.—Beaumont 2000, pet. denied) ("Affirmative defenses are 'pleas in bar,' and do not provide a justification for summary dismissal on the pleadings.").
Although the trial court's order here indicates that it dismissed Henny's third-party claim against Chase with prejudice based on the doctrine of res judicata and the compulsory counterclaim rule, Chase did not advance these theories as grounds in a summary judgment motion. Complicating matters, Henny has not complained about the lack of a summary judgment motion on appeal.
Courts have held that "a speedy and final judgment may be obtained on the basis of matters in bar and without formality of trial on [the] merits, if the parties so agree or if summary judgment procedure is utilized." Tex. Underground, 335 S.W.3d at 675 (citing Martin, 2 S.W.3d at 354; Walker v. Sharpe, 807 S.W.2d 442, 446-47 & n.2 (Tex. App.—Corpus Christi 1991, no writ)); see Briggs v. Toyota Mfg. of Tex., 337 S.W.3d 275, 281 (Tex. App.—San Antonio 2010, no pet.). Here, there is no indication that the parties agreed to dispose of the case without trial, nor does the record show that summary judgment procedure was utilized. Nonetheless, Henny's claim against Chase was dismissed with prejudice, indicating a final disposition of the claim. If a summary judgment procedure is not utilized when a plea in bar is asserted, the reviewing court may treat a dismissal as a summary judgment because such dismissal has the same effect as entry of a take-nothing judgment. Briggs, 337 S.W.3d at 281 (citing Martin, 2 S.W.3d at 354-55; Walker, 807 S.W.2d at 446-47 & n.2). In such case, the reviewing court will evaluate the record as if summary judgment was granted to determine whether the movant satisfied its summary-judgment burden.Martin, 2 S.W.3d at 354; see Briggs, 337 S.W.3d at 281.
In its motion for rehearing, Chase contends that this Court cannot reverse the trial court's judgment on the ground that Chase used an improper procedural device to obtain dismissal because Henny has not complained that an improper procedural device was used; that is, Henny is not seeking reversal on that ground. As a point of clarification, our focus is not on whether Chase used an improper procedural device to obtain dismissal with prejudice. Rather, given the incongruence between the motion to dismiss and the stated reasons given by the trial court for dismissal, we are reviewing the record and the case authority to determine what rules and standard of review we should apply to evaluate the dismissal judgment. See In re D.K.M., 242 S.W.3d 863, 865-66 (Tex. App.—Austin 2007, no pet.) (reversing order dismissing case on basis of affirmative defense raised in motion to dismiss rather than in motion for summary judgment, noting that it was unclear what evidence trial court reviewed, what rules and principles were applied by trial court, and what rules and standards should be applied on appeal and remanding case for hearing consistent with rules of civil procedure); Robinson v. Buckner Park, Inc., 547 S.W.2d 60, 61 n.1 (Tex. App.—Dallas 1977, writ ref'd n.r.e.) ("Although appellant does not raise on this appeal the propriety of the trial court's 'dismissal' of this cause on appellee's unsworn motion without hearing evidence and without utilizing the summary judgment process, a plea of limitation is an affirmative defense in that it goes to appellant's right to recover and cannot, therefore, be properly sustained at a preliminary hearing unless the summary judgment process is used. . . . Accordingly, we treat the 'dismissal with prejudice' as a summary judgment that plaintiff take nothing."). As discussed, we have determined that the summary judgment standard is the correct one to apply here.
Applying this standard, Chase did not establish that it was entitled to summary judgment on its affirmative defenses of res judicata and joinder of compulsory counterclaim. In its motion to dismiss, Chase did not seek dismissal of Henny's third-party conspiracy claim based on the doctrines of res judicata or compulsory counterclaim. Rather, Chase expressly sought dismissal on the ground that Henny's third-party claim did not comply with Rule of Civil Procedure 38(a).See TEX. R. CIV. P. 38(a). A summary judgment cannot be affirmed on grounds not expressly set out in the motion for summary judgment. See Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 357 (Tex. 2000); see also TEX. R. CIV. P. 166a(c) ("The motion for summary judgment shall state the specific grounds therefor."); Davis v. City of Grapevine, 188 S.W.3d 748, 765 (Tex. App.—Fort Worth 2006, pet. denied) (concluding that affirmative defense not raised in summary judgment motion cannot be considered on appeal). Thus, because they were not raised in the motion to dismiss, we cannot consider the affirmative defenses of res judicata and joinder of compulsory counterclaim in reviewing the propriety of the order dismissing with prejudice Henny's third-party claims against Chase. See Davis, 188 S.W.3d at 765. As a result, Henny's contention, albeit based on different grounds, is correct that the trial court's judgment cannot be upheld based on these affirmative defenses. See id.
Chase also asserted that Henny's claim should be dismissed because Henny had not complied with a deadline in the docket control order. However, this is not of significance to the appeal.
Trial by Consent of Affirmative Defenses
In its motion for rehearing, Chase asserts that dismissal was proper because the affirmative defenses of res judicata and compulsory joinder of a counter-claim were tried by consent. "Trial by consent may be appropriate in some limited summary judgment contexts." PAS, Inc. v. Engel, 350 S.W.3d 602, 610 (Tex. App.—Houston [14th Dist.] June 28, 2011, no pet.) (citing Roark v. Stallworth Oil & Gas Inc., 813 S.W.2d 492, 495 (Tex. 1991); Marshall v. Toys-R-Us Nytex, Inc., 825 S.W.2d 193, 195 (Tex. App.—Houston [14th Dist.] 1992, writ denied)). Chase contends "both parties briefed and argued [the affirmative defenses] in pleadings filed after Chase's initial Motion to Dismiss." See Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006) (holding that when issue is raised for first time in summary-judgment response, movant may "respond on the merits and try the issue by consent"). We disagree with Chase's contention.
In its rehearing motion, Chase described its dismissal motion as follows:
Chase filed its Motion to Dismiss, seeking to dismiss the crossclaim Henny asserted against Chase because the crossclaim was not proper under Texas Rule of Civil Procedure 38(a). Chase argued that the crossclaim was not "derivative of the plaintiff's claims against the responsible third party" because the "alleged conspiracy is unrelated to the unpaid credit card charges asserted by the Plaintiff in this lawsuit, which arose in 2007."
In support of its contention that the affirmative defenses were tried by consent, Chase cites the following language contained in Henny's response to Chase's motion for dismissal:
Henny has alleged in [her] Original Petition that Chase conspired with other parties to misappropriate Henny's funds. This alleged cause of action fits [sic] directly relates to the alleged liability of Henny in the suit between Henny and AdvanceMe, Inc. Therefore, a third-party action is appropriate and required under Texas law in this matter. As a result, Chase's Motion to Dismiss must be denied on that basis.
Chase also refers to the following assertion it made in its reply to Henny's response:
As a second ground for dismissal, Henny's attempt to join Chase by third party practice is improper as Henny does not state an impleader, i.e., an indemnity or contribution claim against Chase for the 2007 debt upon which Plaintiff is suing Henny. In fact, Chase already holds a Final Summary Judgment against Henny, signed by the 55th Judicial District Court of Harris County, Texas, on May 22, 2008 in Cause No. 2008-06676, for all amounts owing Chase by Henny . . . . Henny did not raise this alleged claim or offset against the indebtedness in the earlier action and cannot attempt to raise these claims as an impleader, months after the Chase Final Judgment has become final and non-appealable.
In the passages cited by Chase, the parties did not discuss the elements of the affirmative defenses or how they relate to the facts of the case. Rather, the language identified by Chase to support its trial-by-consent theory, when read in context, relates to Chase's original assertion that the Henny's claim against it was improper under Rule 38(a). It is less than clear that the affirmative defenses were fully discussed and tried by the parties as claimed by Chase. Henny's response and Chase's reply do not show trial by consent of the affirmative defenses identified as the bases for the dismissal. See RE/MAX of Tex., Inc. v. Katar Corp., 961 S.W.2d 324, 328 (Tex. App.—Houston [1st Dist.] 1997, pet. denied) ("[Trial by consent] is not intended to establish a general rule of practice and should be applied with care, and in no event in a doubtful situation.").
In addition, Chase asserts that in her motion for new trial, and at the hearing on that motion, Henny indicated that the parties had addressed the theories of res judicata and compulsory counterclaim before the trial court signed the dismissal order. A review of the record, however, does not support this assertion. In her new trial motion and at the corresponding hearing, Henny did not indicate that the theories of res judicata and compulsory counterclaims had been addressed or discussed before the trial court signed the dismissal order. Instead, the record shows that Henny acknowledged that the trial court's order indicates that it had dismissed her claims against Chase based on theories of res judicata and compulsory counterclaim. After acknowledging these bases, Henny argued why dismissal on those grounds was not proper. The motion for new trial proceeding does not show that the parties had addressed or discussed the affirmative defenses before the trial court signed the order. In sum, the record does not sufficiently show that the affirmative defenses of res judicata and joinder of compulsory counterclaims were tried by consent.See id.
In its motion for rehearing, Chase also asserts that "the trial court properly dismissed [Henny's] Cross-Claim against Chase because Henny's pleadings show on their face that the claim was barred." We need not discuss this argument because, as recognized by Chase in its motion for rehearing, it is contingent on a determination that the affirmative defenses had been tried by consent.
We sustain Henny's two issues to the extent and for the reasons discussed supra.
Dismissal with Prejudice for Non-Compliance with Rule 38(a)
Resolution of Henny's issues, however, does not end our inquiry regarding whether the trial court erred in dismissing with prejudice Henny's third-party claim against Chase. We also consider Chase's assertion that the trial court's judgment dismissing Henny's third-party claim with prejudice is sustainable because Henny's claim does not comply with the requirements of Rule of Civil Procedure 38(a). Chase asserted that, pursuant to Rule of Civil Procedure 38(a), the trial court correctly dismissed Henny's conspiracy claim because, procedurally, Chase was not properly joined as a third-party defendant in the AdvanceMe suit. See TEX. R. CIV. P. 38(a) (providing that defendant may bring third-party action to join party who may be liable to the defendant or to the plaintiff for all or part of the plaintiff's claims against the defendant). Chase made this assertion in its motion to dismiss in the trial court and re-asserts it on appeal.
Even though the trial court's order expressly indicates that dismissal was based on res judicata and compulsory joinder principles, we can, in the interest of judicial economy, uphold the trial court's ruling if it is otherwise supported by the record. In short, we will uphold a correct result reached by the trial court even if it was reached for the wrong reason. See Hawthorne v. Guenther, 917 S.W.2d 924, 931 (Tex. App.—Beaumont 1996, writ denied); City of Corsicana v. Herod, 768 S.W.2d 805, 814 (Tex. App.—Waco 1989, no writ); see also Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996) (holding that, when trial court expressly states ground on which it granted summary judgment, court of appeals must consider that ground and may consider other grounds trial court did not rule on in interest of judicial economy). Hence, we can determine whether a failure by Henny to comply with Rule of Civil Procedure 38, which sets forth the procedural requirements for third-party practice, is a proper basis to uphold the trial court's judgment dismissing Henny's claim with prejudice.
Dismissal with prejudice constitutes adjudication on the merits and operates as if the case had been fully tried and decided. Mullins v. Estelle High Sec. Unit, 111 S.W.3d 268, 273 (Tex. App.—Texarkana 2003, no pet.) (citing Mossler v. Shields, 818 S.W.2d 752, 754 (Tex. 1991)). An order dismissing a case with prejudice has full res judicata and collateral estoppel effect, barring subsequent relitigation of the same causes of action or issues between the same parties. SeeBarr v. Resolution Trust Corp., 837 S.W.2d 627, 630-31 (Tex. 1992). Thus, the trial court's dismissal with prejudice of Henny's claim against Chase operates as an adjudication on the merits with full res judicata and collateral estoppel effects.
Dismissal for failure to comply with the procedural requirements of Rule 38(a) is not a dismissal on the merits, but rather an exercise of the trial court's discretion in a procedural matter. See Oistad v. Baker & Hostetler, L.L.P., No. 01-05-00493-CV, 2006 WL 488594, at *3 (Tex. App.—Houston [1st Dist.] Mar. 2, 2006, no pet.) (mem. op.). Stated differently, dismissal of a claim on the ground that it is not a proper third-party claim is a determination only that the merits of the claim could not be brought in the lawsuit for procedural reasons; it is not a determination on the merits of the claim. See Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration & Prod., Inc., 234 S.W.3d 679, 695 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (holding that dismissal of claims to enforce clause requiring litigation in another forum is determination that merits of claims should be determined elsewhere; therefore, enforcement of forum-selection clause is nonmerits basis for dismissal); Dick Poe Motors, Inc. v. DaimlerChrysler Corp., 169 S.W.3d 478, 485 (Tex. App.—El Paso 2005, no pet.) (concluding that dismissal for want of prosecution is not trial on the merits, and therefore dismissal with prejudice is improper). Thus, we conclude that the trial court's judgment dismissing Henny's claim with prejudice cannot be upheld on the ground that the claim is not a proper third-party claim in the AdvanceMe suit.
In its motion for rehearing, Chase points out that Henny never complained that dismissal with prejudice under Rule 38 was improper. However, Henny was required to challenge only those grounds identified in the trial court's dismissal order. The trial court did not identify Rule 38 as a basis for its dismissal with prejudice. We addressed Chase's Rule 38 argument, in the interest of judicial economy, to determine only whether such ground could uphold the trial court's judgment, which it does not. See Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996). Chase also asserts, "Even if one assumes that the trial court relied on an improper procedural vehicle to enter judgment, the trial court's Dismissal Order cannot be reversed because it did not result in an improper judgment." Chase cites Rule of Appellate Procedure 44.1(a)(1) to support this proposition. As discussed supra, we are not reversing the trial court's judgment because Chase used "an improper procedural vehicle." Our reversal is premised on (1) Chase's failure to raise its affirmative defenses in the trial court before the judgment was signed; (2) our determination that the record does not show that Chase's affirmative defenses were tried by consent; and (3) our determination that the only ground raised by Chase in its dismissal motion cannot support the judgment rendered; that is, it cannot support a dismissal with prejudice.
Conclusion
We reverse the judgment of the trial court and remand the case for further proceedings.
Chase is in no way prejudiced by this opinion from raising its affirmative defenses or its Rule 38 assertions in the trial court on remand.
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Laura Carter Higley
Justice
Panel consists of Justices Keyes, Higley, and Bland.