Billy M. Copeland v. Bruce Spindler, Et Al.--Appeal from 285th Judicial District Court of Bexar County

No. 04-99-00733-CV

No. 04-99-00735-CV

Billy M. COPELAND,

Appellant

v.

Bruce SPINDLER, Thomas H. Veitch and Attorneys at Law, P.C.,

d/b/a Soules and Wallace,

Appellees

From the 285th Judicial District Court, Bexar County, Texas

Trial Court Nos. 98-CI-16373 & 99-CI-09098

Honorable Johnny Gabriel, Jr., Judge Presiding

Opinion by: Tom Rickhoff, Justice

Sitting: Tom Rickhoff, Justice

Catherine Stone, Justice

Karen Angelini, Justice

Delivered and Filed: September 29, 2000

AFFIRMED

This is an appeal from a judgment dismissing Billy M. Copeland's breach of contract claim against Bruce Spindler, Thomas H. Veitch and Attorneys at Law, P.C., d/b/a Soules and Wallace ("Soules & Wallace") with prejudice and a summary judgment rendered in favor of Soules & Wallace on Copeland's other claims. Because we hold that all of Copeland's claims against Soules & Wallace were barred by res judicata, we affirm.

BACKGROUND: FOUR LAWSUITS AND ONE APPEAL

Lawsuit Number One

In December 1994, Copeland's son, Forrest, died in Houston, Texas. Forrest had a $250,000 life insurance policy from Connecticut Mutual Life Insurance Company ("Connecticut Mutual"). Copeland filed a claim with Connecticut Mutual for the insurance proceeds. Connecticut Mutual refused to pay the claim, asserting that the policy had lapsed because Forrest did not pay the premiums in the year before his death.

Copeland asked Tammy Alsobrook, Forrest's former wife, to help him recover the insurance proceeds. Copeland and Alsobrook entered into an agreement (1) under which she would assist him in obtaining the insurance proceeds, in exchange for which Copeland would use a portion of the proceeds to pay Forrest's debt to Alsobrook's family. (2)

The insurance policy contained a disability premium waiver, under which Copeland could obtain the insurance proceeds if he could establish that Forrest became disabled before the policy lapsed. Alsobrook cooperated with Copeland by furnishing information about Forrest's disability to Connecticut Mutual, putting Connecticut Mutual on notice of Forrest's disability, and contacting one of Forrest's doctors to obtain his written confirmation of Forrest's disability. Connecticut Mutual refused to recognize Forrest's disability.

Copeland retained Soules & Wallace to represent him against Connecticut Mutual, and the parties entered into a written legal representation agreement. Soules & Wallace filed suit, on Copeland's behalf, against Connecticut Mutual. In June 1996, Copeland and Connecticut Mutual mediated the case and reached a settlement. Under the settlement, Connecticut Mutual agreed to pay $350,000 conditioned upon Alsobrook disclaiming her rights to the proceeds and releasing Connecticut Mutual from any liability. Alsobrook signed the release on the condition that the money be escrowed by Copeland's attorneys pending resolution of a dispute between her and Copeland.

After various disagreements, on November 11, 1996, Copeland fired Soules & Wallace. On November 12, 1996, Soules & Wallace resigned.

Lawsuit Number Two

Before Copeland and Soules & Wallace parted company, Soules & Wallace filed a lawsuit, on Copeland's behalf, against Alsobrook regarding the enforceability of the agreement between Copeland and Alsobrook. Copeland later retained other counsel. Neal Willard (3) intervened in lawsuit number two, asserting rights to the insurance proceeds.

Lawsuit Number Three

On November 14, 1996, Soules & Wallace filed a declaratory judgment action against Copeland, Alsobrook, and Willard to determine (1) the fees owed to Soules & Wallace, (2) Soules & Wallace's obligations to Copeland under the legal representation agreement, and (3) the distribution of the insurance proceeds. (4) Soules & Wallace alleged that, when it filed lawsuit number two, it was not aware of the agreement between Copeland and Alsobrook. Soules & Wallace contended it became aware of Alsobrook's claim based on Copeland's letter after lawsuit number one was settled. Copeland did not file a counterclaim against Soules & Wallace. All parties were represented by counsel. Lawsuits number two and three were consolidated.

The Consolidated Lawsuits

Copeland and Soules & Wallace agreed to a settlement, which resulted in a judgment ordering the payment of all fees owed to Soules & Wallace. The fees were to be paid from the insurance proceeds. Pursuant to the agreed judgment, Soules & Wallace was discharged from all further responsibility and liability for the insurance proceeds, discharged from its fiduciary duties relating to the proceeds, and released from the lawsuit. After the fees were paid to Soules & Wallace, its declaratory judgment action was severed and the balance of the insurance proceeds was deposited into the court registry. The trial court ordered that Copeland and Willard be paid from the balance of the proceeds. Lawsuit number two continued.

Lawsuit Number Two Continued

Copeland sought a declaratory judgment denying Alsobrook's right to any of the insurance proceeds. Alsobrook filed a breach of contract counterclaim. The trial court concluded that Copeland and Alsobrook had entered into a binding contract, the purpose of which was to insure payment of the debt Forrest owed to the Alsobrook family. This Court affirmed the trial court's judgment. See Copeland v. Alsobrook, 3 S.W.3d 598 (Tex. App.-San Antonio 1999, pet. denied).

Lawsuit Number Four

The present appeal arises from lawsuit number four, in which Copeland sued Soules & Wallace, alleging negligence, gross negligence, breach of fiduciary duty, breach of contract, fraud, and Deceptive Trade Practices violations. Copeland was represented by Jose Guerrero. Copeland alleged Soules & Wallace was negligent and grossly negligent because it (1) did not properly train and supervise Spindler and Veitch or ensure that they knew anything about insurance law during their representation of him in lawsuit number one; (2) advised Copeland that Willard had a valid assignment against the insurance proceeds; and (3) made material misrepresentations to Copeland and took or did not take certain actions during the course of Soules & Wallace's representation of Copeland. Copeland alleged Soules & Wallace breached its fiduciary duty to him, breached its contract with him, committed fraud, and violated the DTPA by making material misrepresentations and taking or not taking certain actions during the course of Soules & Wallace's representation of Copeland. Soules & Wallace counterclaimed, asserting Copeland's DTPA claim was frivolous and the breach of contract claim was in violation of the mediated settlement agreement reached in the consolidated lawsuits.

Soules & Wallace moved for summary judgment on all claims against it. (5) On June 7, 1999, the trial court rendered summary judgment in favor of Soules & Wallace on all claims, except the breach of contract claim. The court did not state its grounds for granting summary judgment. On June 17, the trial court allowed Guerrero to withdraw and reset trial on Copeland's breach of contract claim for June 28. On June 25, Copeland's breach of contract claim was severed from the remaining claims on which Soules & Wallace obtained summary judgment. On June 28, Copeland non-suited his contract claim, leaving only Soules & Wallace's counterclaim pending. On June 29, Copeland filed a motion for continuance. The trial court denied the motion for continuance, and determined that Copeland's negligence, gross negligence, breach of fiduciary duty, breach of contract, fraud, and DTPA claims were baseless; Copeland violated various scheduling orders; and that Soules & Wallace was harmed by Copeland's actions. The court sanctioned Copeland by awarding Soules & Wallace $1.00 in fees and costs, and dismissing his breach of contract claim with prejudice. This appeal by Copeland ensued.

RES JUDICATA

One of the grounds upon which summary judgment was sought (6) was that Copeland's claims against Soules & Wallace were compulsory counterclaims barred by res judicata. Soules & Wallace argued that Copeland was required to bring his claims against it in lawsuit number three because all claims arose from the same transaction. We agree.

Texas Rule of Civil Procedure 97 provides as follows:

A pleading shall state as a counterclaim any claim within the jurisdiction of the court, not the subject of a pending action, which at the time of filing the pleading the pleader has against any opposing party, if it 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; provided, however, that a judgment based upon a settlement or compromise of a claim of one party to the transaction or occurrence prior to a disposition on the merits shall not operate as a bar to the continuation or assertion of the claims of any other party to the transaction or occurrence unless the latter has consented in writing that said judgment shall operate as a bar.

Tex. R. Civ. P. 97(a) (emphasis added). The Texas Supreme Court has recognized that the definition of res judicata is similar to the rule of compulsory counterclaims found in the Rules of Civil Procedure. See Barr v. Resolution Trust Corp., 837 S.W.2d 627, 630 (Tex. 1992). This acknowledgment indicates that where multiple disputes arise from an attorney's representation of a client, those disputes must be resolved in a single action. See id.

Copeland argues that his claims against Soules & Wallace are not barred because Soules & Wallace's motions for summary judgment did not address claims raised in his amended petition filed after the motions for summary judgment were filed. This argument is without merit. The record contains a copy of Copeland's original petition and his second amended petition. A comparison of both petitions reveals that, while additional factual allegations were added in the amended petition, the causes of action against Soules & Wallace and the individual attorneys are identical.

Copeland next asserts that res judicata and Rule 97(a) do not apply because Soules & Wallace's claims in lawsuit number three were severed before lawsuit number two and three were consolidated. Copeland contends that the fees sought by Soules & Wallace in lawsuit number three were for the services they rendered in lawsuit number one and the agreed judgment applied to the fees generated during the pendency of that case only. Copeland argues that a corollary to the doctrine of claims preclusion is that res judicata cannot preclude claims that are severed from the original action. Therefore, he concludes, he is barred from bringing any claims arising from lawsuit number one, but not barred from bringing any claims arising from his contract with Soules & Wallace. Copeland's argument misconstrues both the doctrine of claims preclusion as well as the claims raised by Soules & Wallace in its declaratory action.

Soules & Wallace sought to attain two primary objectives in its declaratory action: (1) a determination of its rights and obligations under the agreement it entered into with Copeland and (2) a declaration of the rights of various parties to the insurance proceeds. It is the subject matter of the first objective that we examine to determine whether res judicata applies to bar Copeland's claims.

The broad doctrine of res judicata encompasses two distinct principles: (1) res judicata, or claim preclusion; and (2) collateral estoppel, or issue preclusion. See Barr, 837 S.W.2d at 628. Because the issue in this case is Copeland's ability to bring entire claims against Soules & Wallace, we are concerned here only with the claim preclusion component of the doctrine. Texas applies the "transactional approach" to res judicata. See Getty Oil v. Insurance Co. of N. Am., 845 S.W.2d 794, 798 (Tex. 1992); Barr, 837 S.W.2d at 630. The transactional approach precludes a second action by the parties not only on matters actually litigated, but also on causes of action or defenses that arise out of the same subject matter and that might have been litigated in the first suit. See id.

To determine if the subject matter of two suits is the same, we examine the factual basis of the claim or claims in the prior litigation, regardless of the form of that action. See Barr, 837 S.W.2d at 630. Specifically, this Court must consider and weigh the extent to which the facts of the cases are related in time, space, origin, or motivation; whether the cases form a convenient trial unit; and whether their treatment as a trial unit conforms to the parties' expectations or business usage. See id. at 631 (citing Restatement (Second) of Judgments 24(2)).

In lawsuit number three, Soules & Wallace sought a judicial determination of its obligations to Copeland. In lawsuit number four, each of Copeland's claims arose from Soules & Wallace's representation of him in his attempt to obtain possession of the proceeds of Forrest's life insurance policy. Both lawsuits relate to Copeland's pursuit of the insurance proceeds. Both lawsuits form a convenient trial unit because Soules & Wallace sought a judicial determination of its obligations with regard to its representation of Copeland and Copeland sought redress for the harm Soules & Wallace allegedly caused him in the course of that representation. These matters are closely enough related to require all claims to be prosecuted in the same action. We hold that because both actions arose from the same transaction, the judicial disposition of one bars the other.

Because we hold that Copeland's claims against Soules & Wallace were compulsory counterclaims barred by res judicata, we do not reach the merits of his remaining issues on appeal

We affirm the trial court's judgment.

Tom Rickhoff, Justice

DO NOT PUBLISH

1. The agreement was based, at least in part, on a letter written by Copeland to Alsobrook in which he stated, "Let me assure you Tammy that contingent on receipt of the insurance money your mom and dad will be paid!!! You wanted this in writing so-this is in writing. Your parents will be paid what they are owed when I get the insurance money."

2. Copeland was at first under the mistaken belief that Alsobrook remained a beneficiary under the life insurance policy, despite her divorce from Forrest. Although Copeland later learned that Alsobrook was no longer a beneficiary, he agreed to pay the debt owed to Alsobrook's family.

3. When Soules & Wallace filed lawsuit number one, it did not know that Neal Willard had obtained an assigned interest from Forrest in the insurance proceeds. Willard is Copeland's nephew and Forrest's cousin.

4. An exhibit attached to Soules & Wallace's petition indicated Copeland and Willard had reached an agreement regarding Willard's assigned interest.

5. Soules & Wallace moved for summary judgment on the following grounds: (1) res judicata and the compulsory counterclaim rule; (2) statute of limitations; (3) DTPA section 17.49(f) barred Copeland's DTPA claims; (4) Copeland's contract claim was barred because it sounded in tort; (5) lack of privity as to the contract claim against Spindler and Veitch, individually; (6) professional judgment defense; (7) release; (8) collateral estoppel; and (9) Copeland was not entitled to mental anguish as a matter of law.

6. Soules & Wallace contend Copeland did not challenge all the grounds upon which summary judgment could have been granted; therefore, judgment should be affirmed on the unchallenged grounds. Copeland's final issue on appeal asserts there are issues of fact and law sufficient to defeat summary judgment. We construe this issue as raising a Malooly point of error, allowing argument as to all the possible grounds upon which summary judgment should have been denied. See Malooly Brothers, Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970).