Opinion
NO. 09-18-00459-CV
11-25-2020
SHAMMAH STONE, LLC, Appellant v. JOHN NAYMIK, Appellee
On Appeal from the 58th District Court Jefferson County, Texas
Trial Cause No. A-199,453
MEMORANDUM OPINION
In this appeal, we must decide whether a prior lawsuit involving these same parties prevents John Naymik, the creditor who loaned money to Shammah Stone, LLC (Shammah) through a note, from suing Shammah and judicially foreclosing on the collateral Shammah put up to secure its loan. The trial court determined that Naymik did not waive his right to foreclose on the collateral securing the loan even though Naymik and Shammah had been involved in an earlier suit, filed by Shammah, over Shammah's obligations under the note. Based on its conclusion that Naymik did not have to file his claims as compulsory counterclaims in the prior suit, the trial court signed a judgment that allows Naymik to foreclose on property Shammah put up securing its note. The trial court's judgment orders the collateral Shammah put up to secure its note "to be foreclosed and the proceeds of a foreclosure sale applied to the debt[.]" We conclude that Shammah's appeal, which seeks to overturn the trial court's judgment, lacks merit. For the reasons explained below, we affirm.
Background
On appeal, Shammah relies mainly on its argument claiming that Naymik could no longer sue and foreclose on the property it used to secure its note because, according to Shammah, Naymik's claims were mandatory counterclaims that the Texas Rules of Civil Procedure requited him assert in the earlier suit between Shammah and Naymik. But we begin with the history of Shammah's note, in which it pledged the property now at issue. Shammah signed the note in April 2013 in return for the loan Naymik extended to it for $331,000. As consideration for the loan, Shammah signed a deed of trust, securing the company's obligation to make the installment payments set out in its note. But later, Shammah defaulted on the payment obligations it had to Naymik under the note.
In response to Shammah's default, Naymik threatened to foreclose on the collateral securing the note. In November 2013, Shammah filed a preemptive suit against Naymik seeking injunctive relief to prevent Naymik from selling the property Shammah put up to secure the note. In that suit, Shammah asked the trial court to enjoin Naymik to prevent him from foreclosing on the property securing its note because the person who signed the note as Shammah's corporate representative "did not have the authority of the company to obligate the company or to pledge the company's primary asset as collateral for the note."
Before the trial court could rule on Shammah's suit seeking injunctive relief, the trustee named in the deed of trust Shammah signed sold the property through a nonjudicial foreclosure. When Naymik answered Shammah's suit, it filed a counterclaim and asked the trial court to declare Shammah's claims invalid. In his counterclaim, Naymik alleged "he rightfully and lawfully exercised his rights under the Deed of Trust and note to foreclose on his security interest in the property."
In October 2016, the trial court called the lawsuit Shammah filed against Naymik, which was assigned Cause Number E-194,952, to trial. The parties tried the disputed issues in that cause to the bench. After the trial, the trial court found Shammah in default on its note. But the trial court also found in Shammah's favor on Shammah's claim alleging that the deed of trust Shammah signed and no provisions authorizing Shammah's collateral sold by nonjudicial foreclosure—without the express authorization by a court.
As to the substitute trustee's powers under the deed of trust, it provides: "The lien of this deed of trust may be foreclosed only by court order." The trial court relied on this language when it concluded Shammah was entitled to relief nullifying the substitute trustee's actions and resulting deed of sale set aside. That said, the judgment in the first suit between Naymik and Shammah then recites that court was reinstating the deed of trust "as if the foreclosure never took effect." The judgment also recites the court, through the judgment, was restoring the parties "to their respective positions of November 5, 2013 immediately prior to the foreclosure sale without prejudice to [Naymik's rights] to seek a court order for foreclosure[.]" Neither party appealed from the final judgment the trial court signed to dispose of the prior suit, Cause Number E-194,952.
In January 2017, Naymik sued Shammah, alleging it had a right to foreclose on the collateral Shammah pledged to secure its note. In that suit, the second suit between the parties that led to the judgment at issue in this appeal, Shammah asked the trial court to order the property pledged to secure Shammah's note to be sold by judicial foreclosure.
When Shammah responded to Naymik's suit, Shammah alleged Naymik's claims were barred because he should have, but failed, to assert his claims to foreclose in Cause Number E-194,952, the first suit between the parties. Later, in the case now before us, both parties moved for summary judgment. The trial court denied both motions.
About seven months later, the parties submitted the matter to the trial court in an agreed statement of facts, requesting that the trial court resolve the case based on the facts in the agreed statement. The trial court accepted the parties' invitation. The court found Shammah in default, awarded Naymik damages of $397,214, and ordered the Sheriff to sell the collateral Shammah used to secure its note. Shammah exercised its right to appeal from the judgment. In its brief, Shammah argues the trial court erred in rejecting its argument that Naymik's foreclosure claims were compulsory counterclaims that he had to assert in the suit that Shammah filed against Naymik in 2013. According to Shammah, because Naymik failed to file his claims for foreclosure in the prior lawsuit, he could not pursue them in the suit he filed against Shammah in 2017.
See Tex. R. Civ. P. 263 (authorizing trial courts to decide controversies when the parties submit "an agreed statement of facts").
To simplify the math, we have rounded all monetary figures to whole numbers.
Analysis
Relying on Rule 97(a) of the Texas Rules of Civil Procedure, the compulsory counterclaim rule, Shammah argues the claims Naymik filed against it in 2017 are compulsory counterclaims. Shammah concludes that Naymik lost his right to foreclose on the collateral it put up to secure its note by failing to raise his foreclosure claims in a counterclaim in the suit Shammah filed against Naymik in 2013.
Rule 97 generally requires a defendant to file a counterclaim against a plaintiff when the counterclaim "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction[.]" Rule 97(a) exists for reasons of judicial efficiency, requiring parties to bring all the claims they have against each other when they arise out of the same transaction in one case to avoid piecemeal litigation. But as is nearly always the case, there are exceptions to the rule. Rule 815 of the Texas Rules of Civil Procedure creates the exception relevant to the argument that Shammah presented at trial and that it presents in its appeal. Rule 815 provides "[t]hese rules shall not be construed to enlarge or diminish any substantive rights or obligations of any parties to any civil action." In other words, Shammah's argument, if accepted, would require the Court to ignore Rule 815 since Naymik obtained his rights in the judgment the trial court signed to resolve the lawsuit Shammah filed against Naymik in 2013, Cause Number E-194,952.
Id. 97(a).
Id.
Id. 815.
In its brief, Shammah fails to address the effect of the provision in the judgment the trial court signed in Cause Number E-194,952 restoring the parties to their positions before the substitute trustee sold the collateral Shammah put up to secure its note. Shammah also did not address the effect of the language in that judgment stating the judgment did not prejudice Naymik's rights to seek a court ordered foreclosure. Simply put, the judgment in Cause Number E-194,952 contradicts Shammah's argument claiming that Naymik's claims, in this suit, are compulsory counterclaims that he had to pursue in the first lawsuit, Cause Number E-194,952. The judgment in Cause Number E-194,952 recites:
IT IS THEREFORE ORDERED by the court that the foreclosure sale of November 5, 2013 and the resulting Substitute Trustee's Deed, which was filed of record in the office of the County Clerk of Jefferson County, Texas as instrument number 2013036541, should be set aside; the Deed of Trust Amended 2013, which was filed of record in the office of the County Clerk of Jefferson County, Texas as instrument number 2013010563 is reinstated as if the foreclosure never took effect; and the position of the parties restored to their respective positions as of November 5, 2013 immediately prior to the foreclosure sale without prejudice to Defendant, John Naymik, to seek a court order for foreclosure of the lien of the Deed of Trust Amended 2013 as the result of any default under the Real Estate Lien Note or Deed of Trust Amended 2013.
The language in the above paragraph gave Naymik substantive rights—rights that included the right to foreclose on the collateral Shammah put up to secure its note in a future proceeding between the parties. In other words, the trial court in Cause Number E-194,952 awarded Naymik substantive rights in the judgment from which Shammah did not appeal giving Naymik rights if Shammah breached the terms of its note.
See Kaspar v. Keller, 466 S.W.2d 326, 328-29 (Tex. App.—Waco 1971, writ ref'd n.r.e.) (rejecting debtor's argument that the creditor's claims under a note were compulsory counterclaims that the creditor had to file in a prior suit brought by the debtor).
We hold the compulsory counterclaim rule, Rule 97(a), does not apply under the circumstances shown by the record before us here. For that reason, we hold the trial court did not err in concluding Naymik's claims are not compulsory counterclaims that Naymik had to assert in Cause Number E-194,952. As a result, the trial court's judgment is
AFFIRMED.
/s/_________
HOLLIS HORTON
Justice Submitted on August 10, 2020
Opinion Delivered November 25, 2020 Before McKeithen, C.J., Kreger, and Horton, JJ.