Team Promotions, Inc., (APPELLANT/CROSS-APPELLEE) v. Scotland Golf, Inc. f/k/a Golfing Tease, Inc., (APPELLEE/CROSS-APPELLANT)--Appeal from 131st Judicial District Court of Bexar County

MEMORANDUM OPINION

No. 04-03-00618-CV

TEAM PROMOTIONS, INC.,

Appellant

v.

SCOTLAND GOLF, INC.,

Appellee

From the 131st Judicial District Court, Bexar County, Texas

Trial Court No. 2002-CI-02643

Honorable John Specia, Judge Presiding

Opinion by: Sandee Bryan Marion, Justice

Sitting: Paul W. Green, Justice

Karen Angelini, Justice

Sandee Bryan Marion, Justice

Delivered and Filed: September 8, 2004

AFFIRMED

Appellant and cross-appellee, Team Promotions, Inc. (hereinafter "Team") appeals from a summary judgment in favor of appellee and cross-appellant, Scotland Golf, Inc. (hereinafter "Scotland"). The trial court granted Scotland's motion as to Team's claims and granted Team's motion as to Scotland's claims. Both parties complain of the trial court's judgment.

BACKGROUND

In July of 1997, Team and its president, Bruce Gore, entered into a contract (the Asset Purchase Agreement, hereinafter "APA") with Scotland to sell its golf club business. Scotland later sued Team and Gore on claims of breach of contract and common-law fraud. The jury did not find Team liable for Gore's fraudulent conduct, but it did find that Gore fraudulently induced Scotland into the contract. Accordingly, on June 11, 2001, the trial court rendered judgment against Gore in favor of Scotland. On August 21, 2001, Team demanded that Scotland pay Team's attorneys' fees pursuant to an indemnity provision contained in the APA. Scotland refused. Team then sued Scotland seeking attorneys' fees. Scotland answered and brought a counterclaim against Team for satisfaction of its judgment against Gore based on a joint and several liability clause contained within the indemnity provision in the APA. Both parties moved for summary judgment. In its motion, Team sought affirmative relief on its claim for attorney's fees and it argued that Scotland's counterclaim for satisfaction of the judgment against Gore based on the provisions of the APA was barred by res judicata. In Scotland's motion, it sought affirmative relief on its counterclaim, and it also argued Team was not entitled to its claim for attorneys' fees. The trial court (1) denied Team's motion for summary judgment and (2) granted Scotland's motion for summary judgment on Team's claims, but (3) denied Scotland's motion as to Scotland's own counterclaim. Both parties appeal the trial court's judgment.

When both sides move for summary judgment and the trial court grants one motion and denies the other, we review both sides' summary judgment evidence and determine all questions presented. FM Properties Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). Accordingly, we will render the judgment the trial court should have rendered. Id. When a trial court's order does not specify the grounds it relied upon when granting the summary judgments, we will affirm the trial court's judgment if any of the summary judgment grounds are meritorious. Id.

SCOTLAND'S COUNTERCLAIM

Scotland argues the trial court erred in denying its motion for summary judgment based on its joint and several liability counterclaim because the APA obligates Team to compensate Scotland for its losses regardless of fault on the part of Team, Gore, or both parties. The APA states that "Seller [Team] and Shareholder [Gore], jointly and severally, agree to indemnify . . . Buyer [Scotland] from . . . losses . . . resulting from any misrepresentation, breach of warranty, or nonfulfillment of any agreement on the part of Seller or Shareholder." Scotland argues the conjunctive nature of the word "and" and the disjunctive nature of the word "or" enables it to recover from either Team or Gore based on either party's conduct and regardless of the degree of culpability attributed to Team in the original trial. Team argues the doctrine of res judicata bars Scotland from relitigating the joint and several liability claim under the APA because Scotland had unsuccessfully litigated these claims in the previous suit. We agree with Team.

Res judicata bars a party from attempting to relitigate a claim or cause of action that a competent tribunal has finally adjudicated. Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 206 (Tex. 1999). In addition, res judicata precludes a party from litigating related matters that they should have diligently litigated in the prior suit. Id. However, the doctrine of res judicata does not preclude a former defendant who failed to state an affirmative claim in the original action from affirming a claim in a later action that they could have filed as a cross-claim or counterclaim in the earlier action, unless that claim was compulsory in the original suit. Id. A counterclaim is compulsory if: (1) it stands within the trial court's jurisdiction; (2) at the time of filing the answer; it is not the subject of a pending action; (3) at the time the answer is filed, the claim must be mature and possessed by the defendant; (4) the claim must derive from the same transaction that is the subject matter of the opposition's claim; (5) the claim must be asserted against the opposing party in the same capacity; and (6) to be adjudicated, the claim does not require the presence of third parties over whom the trial court has no jurisdiction. Tex. R. Civ. P. 97(a), (d); Ingersoll-Rand Co., 997 S.W.2d at 207. A party must bring a claim that meets these criteria forward in the initial proceeding and the party cannot assert that claim in a subsequent proceeding. Id.

Here, Scotland's counterclaim satisfies all of the requisites for a compulsory counterclaim, thus barring Scotland from relitigating it. Further, Scotland as plaintiff in the previous suit, brought affirmative claims for relief against both Team and Gore, but did not assert its claim for joint and several liability, which was clearly available to it. Although Scotland frames its claim as an indemnity claim that did not accrue until the trial court's final judgment, we view this as nothing more than impermissible claim-splitting. See Ingersoll-Rand Co., 997 S.W.2d at 212. Accordingly, we conclude the trial court did not err in denying Scotland's motion for summary judgment and granting Team's motion for summary judgment.

TEAM'S ATTORNEYS' FEES

Team argues that the trial court erred in denying its claim for attorneys' fees because Scotland (1) did not present any summary judgment evidence to support its affirmative defenses and (2) did not controvert the affidavits supporting Team's summary judgment motion.

In its motion for summary judgment, Team argued that the terms of the indemnity provision in the contract entitled it to attorneys' fees for defending the original suit. Scotland argues that Team cannot enforce the indemnity provision against it because the jury in the original suit determined Team's president, Gore, fraudulently induced Scotland to enter into the contract. We agree with Scotland. A party is not bound by a contract procured by fraud. See Formosa Plastics Corp. USA v. Presidio Engineers and Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998); see also Empire & Assoc., Inc. v. Texas Contractors Rentals, Sales &Supplies, Inc., 567 S.W.2d 578, 580 (Tex. Civ. App.--Waco 1978, writ ref'd n.r.e.). Fraud in the inducement is fatal to a contract and is a defense against the enforcement of such contract. Anderson, Greenwood & Co. v. Martin, 44 S.W.3d 200, 209 (Tex. App.--Houston [14th Dist.] 2001, pet. denied); Roberts v. Tipton, 562 S.W.2d 921, 923 (Tex. Civ. App.--Waco 1978, no writ). Scotland attached, as part of its summary judgment motion, a copy of the trial court's judgment against Gore finding that he fraudulently induced Scotland into the contract. Team should not be allowed to enforce the contract against Scotland, the victim of the fraud, when judgment has been entered that Team's President fraudulently induced the contract. Therefore, we conclude the trial court did not err by denying Team's claims for recovery of its attorneys' fees.

CONCLUSION

We affirm the trial court's judgment.

Sandee Bryan Marion, Justice