Alan W. Nalle v. Richard D. Dozier; Dirk A. Dozier; Austaco, Inc.; and Austaco II Real Estate Partners, Ltd.--Appeal from 126th District Court of Travis County

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-96-00700-CV
Alan W. Nalle, Appellant
v.
Richard D. Dozier; Dirk A. Dozier; Austaco, Inc.; and Austaco II Real Estate
Partners, Ltd., Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT
NO. 95-03468, HONORABLE MARGARET COOPER, JUDGE PRESIDING
Appellant, Alan W. Nalle, sued appellees for tortious interference with a lease agreement. Appellees moved for summary judgment based on the merits of the case as well as on the affirmative defenses of res judicata, collateral estoppel, and statute of limitations. The district court granted summary judgment in favor of appellees, and Nalle now appeals. We will affirm the judgment of the district court.

STATEMENT OF FACTS

In 1976, Jim Ray leased the property in dispute, located at 9600 North Lamar in Austin, to Taco Bell Corporation ("Taco Bell") for a twenty-year period. Taco Bell then sublet the premises to Austaco, Inc. ("Austaco"), which held a franchise to operate a Taco Bell restaurant at that location. Appellant Nalle purchased the property in 1989 and acquired all rights formerly held by Jim Ray. Under the lease agreement, Nalle's monthly compensation was the greater of the fixed sum of $1,350 or five percent (5%) of the restaurant's gross sales. (1) Austaco operated a lucrative Taco Bell restaurant on the property from the inception of the lease until April 1993, at which time it closed the restaurant and opened a new Taco Bell restaurant located nearby at 9504 North Lamar. Austaco then used Nalle's property as an equipment storage facility until Nalle executed a lease with a Golden Fried Chicken franchise.

 

PROCEDURAL BACKGROUND

This is Nalle's second suit regarding the relocation of the Taco Bell restaurant. In his original lawsuit ("first suit"), Nalle alleged that Taco Bell and Austaco had breached the lease covenant requiring Taco Bell continuously to operate one of its restaurants on the premises. Nalle sought as damages the lost percentage rentals. Nalle also sued for property damage to the building based upon breach of the repair covenant. Taco Bell and Austaco counterclaimed for wrongful termination of the lease and moved for summary judgment. The district court granted summary judgment for Taco Bell and Austaco on the breach of contract claim and severed the two remaining claims, allowing the summary judgment on the breach of contract claim to become final so that Nalle could appeal. This Court affirmed the summary judgment in favor of the defendants and held that the lease did not contain an express or implied covenant of continuous operation. See Nalle v. Taco Bell Corp., 914 S.W.2d 685 (Tex. App.--Austin 1996, writ denied).

In March 1995, Nalle filed this suit for tortious interference with the lease agreement ("second suit") against Austaco, Richard D. Dozier, Dirk A. Dozier, and Austaco II Real Estate Partners, Ltd. (2) Nalle alleged appellees interfered with the lease between himself and Taco Bell and, again, sought to recover lost percentage rentals. In the second suit, Nalle claims that "at some time unknown to him but believed to be in 1992" appellees approached Taco Bell to discuss moving the restaurant from his premises before the twenty-year lease expired. Appellees moved for summary judgment on the tortious interference claim and requested sanctions. The district court granted summary judgment in favor of appellees, severing the motion for sanctions. Nalle appeals the summary judgment in eight points of error. As we will resolve the case on the doctrine of res judicata, we will not reach the merits of Nalle's additional points of error.

 

STANDARD OF REVIEW

The standards for reviewing a motion for summary judgment are well established. (3) The movant for summary judgment has the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true. Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). The function of summary judgment is not to deprive litigants of the right to trial by jury but to eliminate patently unmeritorious claims and defenses. Gulbenkian v. Penn, 252 S.W.2d 929, 931 (Tex. 1952). When the trial court's summary judgment order does not specify the ground on which the summary judgment is granted, an appellate court will affirm the judgment if any ground stated in the motion is meritorious. Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989).

A movant for summary judgment must prove conclusively all essential elements of an affirmative defense in order to be entitled to summary judgment on the defense. Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972). Summary judgment may be obtained upon a plea of res judicata. Jones v. Nightingale, 900 S.W.2d 87, 88 (Tex. App.--San Antonio 1995, writ ref'd). In order to prevail on the defense of res judicata, the movant has the burden of producing summary judgment evidence, including verified or certified copies of the judgments and pleadings from the prior suit, that establishes the applicability of the doctrine. Id. at 88-9.

 

ANALYSIS

Res judicata, or claims preclusion, prevents the relitigation of a claim or cause of action that has been finally adjudicated, as well as related matters that, with the use of diligence, should have been litigated in the prior suit. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). The policies underlying the doctrine include the need to bring all litigation to an end, the fostering of judicial economy, and the prevention of vexatious litigation. Id. at 629. In order to be entitled to summary judgment on the defense of res judicata, appellees must prove: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) the identity of parties or those in privity with them; and (3) a second action based on the same claims as were raised or could have been raised in the first action. Amstadt v. United States Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996); see also Texas Water Rights Comm'n v. Crow Iron Works, 582 S.W.2d 768, 771 (Tex. 1979) (stating the doctrine of res judicata applies to cause of action finally determined, without appeal, between parties, on the merits, and by a competent tribunal).

The first issue we must address is whether claims severed from the first suit, still pending in the district court, prevent the summary judgment on the breach of contract claim from having res judicata effect on additional claims. We hold that the severed claims do not prohibit the operation of res judicata.

Citing no authority on point, Nalle argues res judicata does not apply to a partial summary judgment severed merely for purposes of appeal. Nalle contends that as long as any portion of the original claim arising from the transaction at issue remains pending in the trial court, it is subject to amendment. He argues, therefore, that the partial summary judgment is not entitled to res judicata effect as this would negate the right to amend the remaining portion of the first case. The Restatement of Judgments explains that, for the purpose of res judicata, a judgment may be final as to a part of an action although litigation continues as to the rest. Restatement (Second) of Judgments 13 cmt. e (1982). This Court affirmed a final summary judgment on the breach of contract claim in the first case; it is clear that res judicata would bar another suit for breach of contract even though some severed claims have yet to be litigated. The question now becomes whether the summary judgment on the breach of contract claim bars a subsequent tortious interference suit.

A subsequent suit will be barred if it arises out of the same subject matter as a previous suit and, through the exercise of diligence, could have been litigated in the prior suit. Barr, 837 S.W.2d at 631. The Texas Supreme Court has noted:

 

A determination of what constitutes the subject matter of a suit necessarily requires an examination of the factual basis of the claim or claims in the prior litigation. It requires an analysis of the factual matters that make up the gist of the complaint, without regard to the form of action. Any cause of action which arises out of those same facts should, if practicable, be litigated in the same lawsuit.

 

Id. at 630.

The "gist" of both Nalle's breach of contract and tortious interference claims is that he lost percentage rentals when the Taco Bell restaurant moved off his property. The final judgment on the breach of contract claim, therefore, bars the tortious interference claim because these suits arose out of the same subject matter and should have been brought together. (4) Furthermore, there is no doubt that Nalle could have brought the tortious interference suit when he filed the other claims. Instead, he waited to file the tortious interference suit until March 1995, approximately one month after the district court granted summary judgment against him on breach of contract and severed the remaining claims. He cannot now claim res judicata does not apply. Such a position is inconsistent with the policies underlying res judicata to promote judicial economy and bring an end to all litigation. See Barr, 837 S.W.2d at 629; Jeanes v. Henderson, 688 S.W.2d 100, 105 (Tex. 1985). A suit to recover for property damage to the vacated premises has little to do with whether Nalle's tenant had the right to move or was influenced to do so. Consequently, the pending suit does not prevent application of res judicata to this action.

 

I. Final Judgment

Appellees included in their summary judgment proof the Order Denying Motion for New Trial And Modifying Summary Judgment And Order Of Severance entered in the first suit. In its order, the district court severed (1) the issue of whether there was a wrongful termination of the lease, (2) the defendant's entitlement to any damages and attorney's fees stemming from the counterclaim, and (3) any right Nalle might have to recover under the repair covenant in the lease. Except for the severed matters, the district court decreed that Nalle take nothing on any and all other claims against defendants. By severing the remaining claims, the district court made the summary judgment on the breach of contract claim final. See Hall v. City of Austin, 450 S.W.2d 836, 837-38 (Tex. 1970) (stating a severance divides the lawsuit into separate, independent causes and a subsequent judgment which disposes of all parties and issues in one of the severed causes is final and appealable).

 

II. Privity

Nalle contends that res judicata does not bar the second suit against the Doziers and Austaco II because these defendants were not parties to the first suit and because they cannot establish privity with either of the original defendants. We disagree and hold that the Doziers and Austaco II are in privity with original defendant Austaco.

According to the Texas Supreme Court, parties can be in privity in at least three ways: (1) they can control an action even if they are not parties to it; (2) their interests can be represented by a party to the action; or (3) they can be successors in interest, deriving their claims through a party to the prior action. Amstadt, 919 S.W.2d at 653. However, since there is no general definition of privity that can be applied automatically in all res judicata cases, the circumstances of each case must be examined. Getty Oil Co. v. Insurance Co. of North America, 845 S.W.2d 794, 801 (Tex. 1992).

Nalle maintains that the Doziers were not in privity with Austaco because they acted adversely to Austaco's interest by moving the restaurant. Appellees asserted in their motion for summary judgment that the Doziers were in privity with Austaco because Richard D. Dozier was the owner of all Austaco's stock shares and both Richard D. Dozier and Dirk A. Dozier were Austaco's chief executive officers. Consequently, they controlled and directed the conduct of Austaco in the first suit, even though they were not named parties in that action. Appellees further point out that any adverse judgment against Austaco would have impacted them. Appellees also argue Austaco II is in privity with Austaco. Austaco II is an affiliate of Austaco and is owned solely by the Dozier family. (5) Under the flexible concept of privity, we find that these circumstances compel us to conclude that Richard D. Dozier, Dirk A. Dozier, and Austaco II are in privity with Austaco for purposes of res judicata.

 

III. Same Transaction

Nalle argues the tortious interference claim does not arise from the same transaction as the claims he asserted in the first lawsuit. We hold that both the breach of contract and tortious interference suits arise out of the same transaction.

Texas has adopted the transactional approach to res judicata advocated by the Restatement of Judgments. The Restatement "provides that a final judgment on an action extinguishes the right to bring suit on the transaction, or series of connected transactions, out of which the action arose." Barr, 837 S.W.2d at 631. A transaction is determined by "`giving weight to such considerations as whether the facts are related in time, space, origin or motivation, whether they form a convenient trial unit, and whether their treatment as a trial unit conforms to the parties' expectations or business understanding or usage.'" Barr, 837 S.W.2d at 631 (citing Restatement (Second) of Judgments 24(1) (1982)).

In the first suit, Nalle sued Taco Bell and Austaco for breach of contract, claiming as damages lost percentage rentals. His specific complaint was the closing down of the Taco Bell restaurant on his property and the opening of a new Taco Bell restaurant in close proximity. Nalle argued that the lease agreement contained a provision which required Taco Bell to operate continuously one of its restaurants on his property throughout the twenty-year lease term. This Court rejected Nalle's argument and held there was no express or implied covenant of continuous operation contained in the lease. See Nalle v. Taco Bell Corp., 914 S.W.2d 685 (Tex. App.--Austin 1996, writ denied). In the present suit, Nalle once again complains about the decision to close the restaurant on his property and to open a new Taco Bell restaurant at a nearby location. The same lease is at issue, and Nalle is seeking recovery for the same damages, lost percentage rentals, that he was denied in the first suit. We cannot say that these facts are not related in time, space, origin or motivation. (6)

Nalle next contends that the tort and contract claims would not have made a convenient trial unit because of the different theories of liability. The transactional approach to res judicata does not support this position. In Barr, the Texas Supreme Court recognized the possible need for alternative pleading and encouraged the joining of different theories. See Barr, 837 S.W.2d at 631 (advising that a party could seek a trial amendment if success on one theory becomes doubtful because of developments during trial). Furthermore, the Restatement of Judgments is clear: a transaction may be single despite different harms, substantive theories, measure or kinds of relief. Restatement (Second) of Judgments 24 cmt. c (1982) (emphasis added). Multiple transactions and claims are not created even though "a number of different legal theories casting liability on an actor may apply to a given episode." Id. The only difference between the first and second lawsuits is the theory of recovery: contract in the first suit; tort in the second. Nalle cannot try for a second bite at the apple by splitting his claim between two alternative theories of recovery. Jeanes, 688 S.W.2d at 103 (Tex. 1985) (explaining that res judicata prevents prevents a plaintiff from splitting a cause of action).

 

CONCLUSION

Having satisfied their burden of introducing summary judgment evidence to establish all elements of the defense of res judicata, appellees have shown themselves entitled to the judgment. Consequently, we need not address the other grounds that might also support granting summary judgment in favor of appellees. We hold that appellant's tortious interference claim is barred by res judicata and affirm the judgment of the district court.

 

Marilyn Aboussie, Justice

Before Justices Powers, Aboussie and B. A. Smith

Affirmed

Filed: October 16, 1997

Do Not Publish

1. In an affidavit, Nalle explains that the Taco Bell restaurant consistently performed at a level far in excess of the base rent, and he includes the following sample of past and projected rentals:

 

11/1/89-10/31/90 $4,795

11/1/90-10/31/91 $5,008

11/1/91-10/31/92 $5,372

11/1/92-10/31/93 (partially projected) $5,745

11/1/93-10/31/94 (projected) $6,034

11/1/94-10/31/95 (projected) $6,355

11/1/95-10/31/96 (projected) $6,676.

2. When referring to the four parties collectively, we will refer to them as "appellees" for convenience.

3. This suit is governed by the prior summary judgment rule, Tex. R. Civ. P. 166.

4. The record does not indicate that Nalle moved to amend the severed causes to include the tortious interference claim. Nalle later moved to consolidate the two suits, but the district court denied the motion.

5. Appellees note that Austaco II could not have tortiously interfered with the lease since Austaco II was formed in November 1993 and any alleged tortious interference occurred in 1992.

6. Even the central facts are the same: 1) the execution of a lease with Taco Bell in 1976; 2) Taco Bell's subletting to Austaco; 3) Nalle's purchase of the premises in 1989; 4) Austaco's operation of a Taco Bell restaurant on Nalle's property from the inception of the lease; 5) Austaco's payment of percentage rentals from 1976 to early 1993; 6) the decision to close the restaurant on Nalle's property and move to a nearby location; 7) the closing down of the Taco Bell restaurant on Nalle's property; 8) the opening of a new Taco Bell restaurant at the nearby location; and 9) Nalle's claim that he has been deprived of percentage rentals.

Times Regular">

Nalle next contends that the tort and contract claims would not have made a convenient trial unit because of the different theories of liability. The transactional approach to res judicata does not support this position. In Barr, the Texas Supreme Court recognized the possible need for alternative pleading and encouraged the joining of different theories. See Barr, 837 S.W.2d at 631 (advising that a party could seek a trial amendment if success on one theory becomes doubtful because of developments during trial). Furthermore, the Restatement of Judgments is clear: a transaction may be single despite different harms, substantive theories, measure or kinds of relief. Restatement (Second) of Judgments 24 cmt. c (1982) (emphasis added). Mu