AFFIRM; and Opinion Filed May 9, 2013.
S In The Court of Appeals Fifth District of Texas at Dallas
No. 05-11-01439-CV
LAFAYETTE ESCADRILLE, INC., Appellant V. CITY CREDIT UNION, Appellee
On Appeal from the 160th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-10-03243-L
MEMORANDUM OPINION Before Justices O'Neill, Francis, and Murphy Opinion by Justice O'Neill
Appellant Lafayette Escadrille, Inc. appeals a summary judgment granted in favor of City
Credit Union (CCU) on its claim for wrongful termination of a contract. In five issues, Lafayette
generally contends the trial court erred in granting CCU’s motion for summary judgment
because the claim was not barred by a prior suit. For the following reasons, we affirm the trial
court’s judgment.
CCU is a financial institution that offers banking services to its members. In 2003, CCU
and Lafayette entered into a contract in which Lafayette was to provide CCU with ATM and
protection services. In 2007, disputes between the parties arose, including CCU’s claim that
Lafayette was making sales tax overcharges. On June 13, 2007, CCU sent Lafayette a formal
notice of default. Lafayette did not cure the default within the thirty-days allowed for in the contract, and on September 24, 2007, CCU sent Lafayette formal “Notice of Termination of
Contract” notifying Lafayette CCU was terminating the contract effective immediately. CCU
also sent Lafayette a letter directing it to take no further action in performance of the contract, it
was to have no further access to CCU’s ATMs, and to turn over all keys and combinations
belonging to CCU. CCU cautioned Lafayette its failure to do so would be a considered a
conversion of CCU’s property
CCU then filed suit stating it had terminated the contract and seeking damages for,
among other things, the overcharges. The following day, Lafayette remitted the overpayment,
but demanded CCU pay the full unpaid balance on the agreement because the termination was
wrongful. CCU rejected the payment for the overcharges.
On September, 18, 2008, after the time for filing counterclaims had expired under the
trial court’s scheduling order, Lafayette filed a motion seeking leave to file a counterclaim for
wrongful termination of the contract. Lafayette alleged CCU would suffer no unfair surprise
because the issues raised in the counterclaim were the same issues already before the trial court
and had already been raised as defensive matters.
On May 7, 2009, CCU filed a motion for partial summary judgment on its claim for sales
tax overcharges. In the motion, CCU claimed that Lafayette’s attempt to cure the breach was too
late and it had properly terminated the contract. In its response to the motion, Lafayette claimed
CCU had neither given it proper notice of default nor an opportunity to cure before CCU
terminated the contract and filed suit. Lafayette alleged it suffered damages in the amount of the
unpaid balance remaining on the contract and sought an offset for such amount.
On June 11, 2009, the trial court granted summary judgment in favor of CCU for the
sales tax overcharges. Meanwhile, Lafayette had yet to obtain a hearing on its previously filed
motion for leave to file an amended counterclaim. The motion was heard on June 17, 2009, five
–2– days before the then June 22, 2009 trial setting. The trial court denied the motion. The trial
court stated it “may or might” reconsider the motion if the case was again reset. Lafayette
presented evidence the case could not have proceeded on June 22 because it was a non-jury week
and Lafayette had requested a jury trial.
Regardless, on June 19, 2009, CCU filed a notice of dismissal of its remaining claims.
The trial court signed an order granting the dismissal, rendering the partial summary judgment
final. According to Lafayette, CCU only dismissed the remaining claims to prevent Lafayette
from obtaining leave to amend its pleadings to assert the counter-claim. Lafayette filed a notice
of appeal, indicating it was appealing the partial summary judgment as well as the trial court’s
denial of its motion for leave to assert the counterclaim. However, Lafayette’s notice of appeal
was untimely and this Court dismissed the appeal for want of jurisdiction.
Shortly thereafter, in March 2010, Lafayette filed the instant suit for wrongful
termination of the contract, based on the same conduct it sought to raise in the prior proceedings.
CCU filed a traditional motion for summary judgment asserting, among other things, that
Lafayette’s claim was barred under the compulsory counterclaim rule and the doctrine of res
judicata. The trial court granted CCU’s motion. This appeal followed.
In its first and second issues, Lafayette asserts that its wrongful termination claim is not
barred under the compulsory counterclaim rule or the doctrine of res judicata because the claim
was not mature at the time it filed its answer in the prior suit and because the claim did not arise
out of the same subject matter as the prior suit.
Res judicata prevents parties and their privies from re-litigating a cause of action that has
been finally adjudicated by a competent tribunal. Ingersoll-Rand Co. v. Valero Energy, Corp.,
997 S.W.2d 203, 207 (Tex. 1999). Also precluded are claims or defenses that, through diligence,
should have been litigated in the prior suit but were not. Id. The doctrine is intended to prevent
–3– causes of action from being split, thus curbing vexatious litigation and promoting judicial
economy. Id. Res judicata, however, does not bar a former defendant who asserted no
affirmative claim for relief in an earlier action from stating a claim in a later action that could
have been filed as a cross-claim or counterclaim in the earlier action, unless the claim was
compulsory in the earlier action. Id.
A counterclaim is compulsory only if: (1) it is within the jurisdiction of the court; (2) it is
not at the time of filing the answer the subject of a pending action; (3) the claim is mature and
owned by the defendant at the time of filing the answer; (4) it arose out of the same transaction
or occurrence that is the subject matter of the opposing party’s claim; (5) it is against an
opposing party in the same capacity; and (6) it does not require the presence of third parties over
whom the court cannot acquire jurisdiction. Id.
Texas follows the transactional approach to res judicata in determining what claims arise
out of the same subject matter. See Barr v. Resolution Trust Corp, 837 S.W.2d 627, 630–31
(Tex. 1992). Under the transactional approach, a judgment in a previous suit precludes a second
action by the parties on matters actually litigated and causes of action arising out of the same
subject matter that could have been litigated in the first suit. Id. at 630. Whether a transaction or
series of transactions exists is to be determined “pragmatically, 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.” Id. at 631.
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AFFIRM; and Opinion Filed May 9, 2013.
S In The Court of Appeals Fifth District of Texas at Dallas
No. 05-11-01439-CV
LAFAYETTE ESCADRILLE, INC., Appellant V. CITY CREDIT UNION, Appellee
On Appeal from the 160th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-10-03243-L
MEMORANDUM OPINION Before Justices O'Neill, Francis, and Murphy Opinion by Justice O'Neill
Appellant Lafayette Escadrille, Inc. appeals a summary judgment granted in favor of City
Credit Union (CCU) on its claim for wrongful termination of a contract. In five issues, Lafayette
generally contends the trial court erred in granting CCU’s motion for summary judgment
because the claim was not barred by a prior suit. For the following reasons, we affirm the trial
court’s judgment.
CCU is a financial institution that offers banking services to its members. In 2003, CCU
and Lafayette entered into a contract in which Lafayette was to provide CCU with ATM and
protection services. In 2007, disputes between the parties arose, including CCU’s claim that
Lafayette was making sales tax overcharges. On June 13, 2007, CCU sent Lafayette a formal
notice of default. Lafayette did not cure the default within the thirty-days allowed for in the contract, and on September 24, 2007, CCU sent Lafayette formal “Notice of Termination of
Contract” notifying Lafayette CCU was terminating the contract effective immediately. CCU
also sent Lafayette a letter directing it to take no further action in performance of the contract, it
was to have no further access to CCU’s ATMs, and to turn over all keys and combinations
belonging to CCU. CCU cautioned Lafayette its failure to do so would be a considered a
conversion of CCU’s property
CCU then filed suit stating it had terminated the contract and seeking damages for,
among other things, the overcharges. The following day, Lafayette remitted the overpayment,
but demanded CCU pay the full unpaid balance on the agreement because the termination was
wrongful. CCU rejected the payment for the overcharges.
On September, 18, 2008, after the time for filing counterclaims had expired under the
trial court’s scheduling order, Lafayette filed a motion seeking leave to file a counterclaim for
wrongful termination of the contract. Lafayette alleged CCU would suffer no unfair surprise
because the issues raised in the counterclaim were the same issues already before the trial court
and had already been raised as defensive matters.
On May 7, 2009, CCU filed a motion for partial summary judgment on its claim for sales
tax overcharges. In the motion, CCU claimed that Lafayette’s attempt to cure the breach was too
late and it had properly terminated the contract. In its response to the motion, Lafayette claimed
CCU had neither given it proper notice of default nor an opportunity to cure before CCU
terminated the contract and filed suit. Lafayette alleged it suffered damages in the amount of the
unpaid balance remaining on the contract and sought an offset for such amount.
On June 11, 2009, the trial court granted summary judgment in favor of CCU for the
sales tax overcharges. Meanwhile, Lafayette had yet to obtain a hearing on its previously filed
motion for leave to file an amended counterclaim. The motion was heard on June 17, 2009, five
–2– days before the then June 22, 2009 trial setting. The trial court denied the motion. The trial
court stated it “may or might” reconsider the motion if the case was again reset. Lafayette
presented evidence the case could not have proceeded on June 22 because it was a non-jury week
and Lafayette had requested a jury trial.
Regardless, on June 19, 2009, CCU filed a notice of dismissal of its remaining claims.
The trial court signed an order granting the dismissal, rendering the partial summary judgment
final. According to Lafayette, CCU only dismissed the remaining claims to prevent Lafayette
from obtaining leave to amend its pleadings to assert the counter-claim. Lafayette filed a notice
of appeal, indicating it was appealing the partial summary judgment as well as the trial court’s
denial of its motion for leave to assert the counterclaim. However, Lafayette’s notice of appeal
was untimely and this Court dismissed the appeal for want of jurisdiction.
Shortly thereafter, in March 2010, Lafayette filed the instant suit for wrongful
termination of the contract, based on the same conduct it sought to raise in the prior proceedings.
CCU filed a traditional motion for summary judgment asserting, among other things, that
Lafayette’s claim was barred under the compulsory counterclaim rule and the doctrine of res
judicata. The trial court granted CCU’s motion. This appeal followed.
In its first and second issues, Lafayette asserts that its wrongful termination claim is not
barred under the compulsory counterclaim rule or the doctrine of res judicata because the claim
was not mature at the time it filed its answer in the prior suit and because the claim did not arise
out of the same subject matter as the prior suit.
Res judicata prevents parties and their privies from re-litigating a cause of action that has
been finally adjudicated by a competent tribunal. Ingersoll-Rand Co. v. Valero Energy, Corp.,
997 S.W.2d 203, 207 (Tex. 1999). Also precluded are claims or defenses that, through diligence,
should have been litigated in the prior suit but were not. Id. The doctrine is intended to prevent
–3– causes of action from being split, thus curbing vexatious litigation and promoting judicial
economy. Id. Res judicata, however, does not bar a former defendant who asserted no
affirmative claim for relief in an earlier action from stating a claim in a later action that could
have been filed as a cross-claim or counterclaim in the earlier action, unless the claim was
compulsory in the earlier action. Id.
A counterclaim is compulsory only if: (1) it is within the jurisdiction of the court; (2) it is
not at the time of filing the answer the subject of a pending action; (3) the claim is mature and
owned by the defendant at the time of filing the answer; (4) it arose out of the same transaction
or occurrence that is the subject matter of the opposing party’s claim; (5) it is against an
opposing party in the same capacity; and (6) it does not require the presence of third parties over
whom the court cannot acquire jurisdiction. Id.
Texas follows the transactional approach to res judicata in determining what claims arise
out of the same subject matter. See Barr v. Resolution Trust Corp, 837 S.W.2d 627, 630–31
(Tex. 1992). Under the transactional approach, a judgment in a previous suit precludes a second
action by the parties on matters actually litigated and causes of action arising out of the same
subject matter that could have been litigated in the first suit. Id. at 630. Whether a transaction or
series of transactions exists is to be determined “pragmatically, 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.” Id. at 631. When there is a legal relationship,
such as under a lease or contract, all claims arising from that relationship arise from the same
subject matter. See Genecov Group, Inc. v. Addicks–Fairbanks Road Sand Co., 144 S.W.3d 546,
553 (Tex. App.—Tyler 2003, pet. denied); Weiman v. Addicks–Faribanks Road Sand Co., 846
S.W.2d 414, 419 (Tex.App.-Houston [14th Dist.] 1992, writ denied).
–4– Lafayette first claims the wrongful termination claim was not a compulsory counterclaim
in the first suit because it was not “mature” when it filed its original answer in that suit. Thus, it
asserts the claim is not barred by res judicata. A claim is mature when it has accrued. Ingersoll-
Rand, Co, 997 S.W.2d at 207. To show the claim was not mature, Lafayette relies on a notice of
default provision in the contract that required the parties to give notice of a default and allow the
defaulting party thirty days to cure before suit could be filed. The provision provides, “Default
of this AGREEMENT will be implied with VENDOR or CLIENT’s failure to fulfill the terms
and conditions herein. VENDOR or CLIENT shall provide written notice of default, and allow
the defaulting party 30 days to cure the default. If CLIENT request[s] termination prior to the
end of this agreement Client will be liable for the unpaid balance of the agreement.”
In the prior litigation, CCU gave Lafayette notice of default. Lafayette did not cure the
default in thirty days. CCU then sent Lafayette notice it was terminating the contract effectively
immediately and filed suit. According to Lafeyette, it could not then file a wrongful termination
claim until it gave CCU notice of default and an opportunity to cure the “default.” We disagree.
We conclude the issue of whether CCU’s termination was wrongful was fully mature after CCU
terminated the contract based on its prior notice of default to Lafayette and Lafayette’s failure to
cure the default. Moreover, given that the contract had been terminated, there was no default
that could be cured. Indeed, the notice provision states that if CCU requested termination prior
to the end of the term of the agreement, CCU would be liable for the unpaid balance of the
agreement. We conclude when CCU terminated the contract, Lafayette’s claim regarding the
termination became mature.
Lafayette next contends the wrongful termination claim was not a compulsory
counterclaim because it did not arise out of the same subject matter as the original suit. Again,
we disagree with Lafayette. The basis of Lafayette’s claim in this suit is that CCU’s termination
–5– of the contract was wrongful. To prevail, Lafayatee had to show CCU had no legal basis for
terminating the contract. CCU’s basis for terminating the contract was based in large part on
Lafayette’s breach of the same contract that was determined in the prior suit. We conclude the
wrongful termination case involves the same subject matter as the prior suit. See in re Matlock
Land, Ltd., Inc., 149 B.R. 425, 429 (E.D. Tex. 1992) (applying Texas law to conclude wrongful
termination claim should have been brought as counterclaim in prior breach of contract
proceeding). Consequently, we overrule Lafayette’s first and second issues. Because of our
resolution of these issues, we need not address Lafayette’s remaining issues. We affirm the trial
/Michael J. O'Neill/ MICHAEL J. O'NEILL JUSTICE
111439F.P05
–6– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT
LAFAYETTE ESCADRILLE, INC., On Appeal from the 160th Judicial District Appellant Court, Dallas County, Texas Trial Court Cause No. DC-10-03243-L. No. 05-11-01439-CV V. Opinion delivered by Justice O'Neill. Justices Francis and Murphy participating. CITY CREDIT UNION, Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is AFFIRMED. It is ORDERED that appellee CITY CREDIT UNION recover its costs of this appeal from appellant LAFAYETTE ESCADRILLE, INC.
Judgment entered this 9th day of May, 2013.
–7–