Roger Koeppe and Improvements Inside and Out, Inc. v. Perry Electrical Constructors, LLC D/B/A Conroe Empire Electric

• Court: Court of Appeals of Texas
• Decided: September 26, 2024
• Docket: 09-22-00240-CV
• Status: Published

Opinion

In The

Court of Appeals

Ninth District of Texas at Beaumont

________________

NO. 09-22-00240-CV ________________

ROGER KOEPPE AND IMPROVEMENTS INSIDE AND OUT, INC., Appellants

V.

PERRY ELECTRICAL CONSTRUCTORS, LLC D/B/A CONROE EMPIRE ELECTRIC, Appellee

________________________________________________________________________

On Appeal from the 284th District Court Montgomery County, Texas Trial Cause No. 22-03-02930-CV ________________________________________________________________________

MEMORANDUM OPINION

Appellants Roger Koeppe (“Koeppe”) and Improvements Inside and Out, Inc.

(“IIO”), appeal from the trial court’s summary judgment in favor of Defendant Perry

Electrical Constructors, LLC d/b/a Conroe Empire Electric (“Perry Electrical”).

Because res judicata does not apply to a nonsuit dismissing claims without prejudice,

1 we reverse the trial court’s summary judgment and remand to the trial court for

further proceedings.

Background

In 2019, Perry Electrical was formed by its two members, WCP 2016 Trust

and IIO. Will C. Perry, as Trustee, signed on behalf of WCP 2016 Trust, and Roger

K. Koeppe, as Director/President and Chairman, signed on behalf of IIO. As a result

of the company formation, Koeppe owned ten percent of Perry Electrical and was

retained as Chief Financial Officer for Perry Electrical to handle financial and

accounting matters, among other duties.

Perry Electrical filed suit against Koeppe and IIO for breach of contract,

common law civil conversion, theft, unjust enrichment, and conspiracy. Perry

Electrical also sued Koeppe for breach of fiduciary duty, fraud, and negligence.

Perry Electrical alleged that Koeppe defrauded Perry Electrical when he entered into

a recruiting agreement with WeConnect Recruiting Services (“WeConnect”) to fill

a position for Perry Electrical and wrongfully retained $7,500 in recruiting fees.

Perry Electrical pleaded that based on Koeppe’s alleged deceit, Koeppe was

terminated from Perry Electrical in September 2020. Following his termination,

Koeppe delivered to Perry Electrical eight invoices that totaled over $83,000 that he

claimed were still owed for work he had completed. According to the Perry

Electrical’s Second Amended Petition, the invoices were in the name of Emerald

2 Sands Investment Company (“Emerald Sands”) and were dated during a period in

which Koeppe had invoiced and been paid more than $93,000 by Perry Electrical.

In response, Koeppe, IIO, and Emerald Sands filed a general denial, and

Emerald Sands, identified in the filing as an assumed name of Koeppe,

counterclaimed against Perry Electrical for breach of contract for unpaid materials,

services, and expenses. Koeppe also filed a third-party petition alleging fraud against

Karen Sable, the principal owner of WeConnect.

In December 2021, Perry Electrical filed a No-Evidence Motion for Partial

Summary Judgment Against Defendant and Counter-Plaintiff, Emerald Sands

Investment Company, arguing that Emerald Sands was not a legal entity capable of

bringing a suit in a Texas court. After the trial court granted the No-Evidence Motion

for Partial Summary Judgment, Perry Electrical voluntarily nonsuited all its claims

without prejudice by filing a Notice of Nonsuit. The trial court signed the Order of

Nonsuit, dismissing “the entire case and all claims asserted by any party therein.”

In March 2022, Koeppe and IIO filed suit against Perry Electrical for

conversion and breach of contract based on Perry Electrical’s failure to pay money

received, goods, and services that Koeppe and IIO were owed. In its answer, Perry

Electrical asserted affirmative defenses, including res judicata/claim preclusion.

Perry Electrical filed a Traditional Motion for Summary Judgment based on its

affirmative defense of res judicata/claim preclusion, arguing that all of Koeppe’s and

3 IIO’s claims were barred because they were finally disposed of by summary

judgment in the prior litigation. Koeppe and IIO filed a Response to Perry

Electrical’s Motion for Summary Judgment, arguing that the trial court’s previous

Order of Nonsuit and Order Granting No-Evidence Motion for Partial Summary

Judgment only applied to Emerald Sands. In their Response, Koeppe and IIO stated

that Koeppe is the President and sole owner of IIO. The record shows that Koeppe

and IIO also stated that Emerald Sands is an assumed name of Koeppe.

Perry Electrical filed a Reply to Koeppe’s and IIO’s Response to its Motion

for Summary Judgment and argued that it was clear that they had a chance to

adjudicate their claims, summary judgment was granted, and their claims are

precluded.

In May 2022, the trial court granted Perry Electrical’s Traditional Motion for

Summary Judgment and dismissed all claims against Perry Electrical. Koeppe and

IIO filed a Motion for New Trial and argued that the claims for breach of contract

and conversion had not been brought against Perry Electrical. The motion was

overruled by operation of law when the trial court did not rule on the motion within

seventy-five days after judgment. See Tex. R. Civ. P. 329b(c). Koeppe and IIO

appealed the trial court’s order granting summary judgment based on Perry

Electrical’s claim of res judicata.

4 Standard of Review

We review summary judgment orders de novo. Provident Life & Accident Ins.

Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). The party moving for traditional

summary judgment must establish that (1) no genuine issue of fact exists, and (2) it

is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Randall’s Food

Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). If the moving party

produces evidence entitling it to summary judgment, the burden shifts to the non-

movant to present evidence that raises a fact issue. Walker v. Harris, 924 S.W.2d

375, 377 (Tex. 1996). In determining whether there is a disputed material fact issue

precluding summary judgment, evidence favorable to the nonmovant will be taken

as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). We

review the summary judgment record “in the light most favorable to the nonmovant,

indulging every reasonable inference and resolving any doubts against the motion.”

City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005); see also Mosaic

Baybrook One, L.P. v. Simien, 674 S.W.3d 234, 252 (Tex. 2023) (citation omitted).

Analysis

In their sole issue, Koeppe and IIO argue that their claims are not barred by

res judicata/issue preclusion for several reasons. According to Koeppe and IIO, res

judicata does not apply here because the claims brought were not compulsory

counterclaims, the dismissal based on lack of standing is not a judgment on the

5 merits and cannot support res judicata, and the claims brought against Perry

Electrical are not transactionally related to those brought in the prior suit.

Koeppe and IIO argue that being defendants in the prior suit brought by Perry

Electrical alone does not bar the claims in their later suit, unless their claims qualified

as compulsory counterclaims. Koeppe and IIO argue that the claims do not qualify

as compulsory counterclaims because the claims are contractual and did not arise

from the same transaction that was the subject matter of the prior suit, and the trial

court did not render a judgment on the merits of Koeppe’s and IIO’s claims in the

prior suit.

Perry Electrical argues that the claims were properly dismissed and res

judicata was properly applied because Koeppe’s and IIO’s claims were compulsory

counterclaims in the prior suit and judgment was rendered on the merits. In its

Traditional Motion for Summary Judgment, Perry Electrical argued that res judicata

precluded Koeppe and IIO from bringing their claims of conversion and breach of

contract because Koeppe’s and IIO’s counterclaim in the prior suit included “the

same claim for the same timeframe[.]” Perry Electrical argues that those claims were

the subject of its Motion for Summary Judgment and Nonsuit which fully dismissed

all claims by all parties.

“Res judicata bars relitigation of claims that have been finally adjudicated or

that could have been litigated in [a] prior action. Igal v. Brightstar Info. Tech. Grp.,

6 Inc., 250 S.W.3d 78, 86 (Tex. 2008), superseded by statute as recognized in Prairie

View A&M Univ. v. Chatha, 381 S.W.3d 500, 518 (Tex. 2012). The policies behind

res judicata “reflect the need to bring all litigation to an end, prevent vexatious

litigation, maintain stability of court decisions, promote judicial economy, and

prevent double recovery.” Barr v. Resolution Tr. Corp., 837 S.W.2d 627, 629 (Tex.

1992). We have recognized the “fundamental rule that it is the purpose of the law to

put an end to litigation and expedite the administration of justice.” Engelman

Irrigation District v. Shields Bros., Inc., 514 S.W.3d 746, 749 (Tex. 2017) (citing

Stanolind Oil & Gas Co. v. State, 145 S.W.2d 569, 570 (Tex. 1940)).

To establish the affirmative defense of res judicata, the party must provide

proof of (1) a prior final determination on the merits by a court of competent

jurisdiction; (2) identity of parties or those in privity with them; and (3) a second

action based on the same claims as those that were or could have been raised in the

first action. Eagle Oil & Gas Co. v. TRO-X, L.P., 619 S.W.3d 699, 705-06 (Tex.

2021). The burden of proving each element of the defense rests with the party

asserting the affirmative defense of res judicata. Tex. R. Civ. P. 94; Eagle Oil & Gas

Co., 619 S.W.3d at 706.

As the party raising res judicata as an affirmative defense, Perry Electrical had

the burden to prove each element of its defense. See Tex. R. Civ. P. 94; Eagle Oil &

Gas Co., 619 S.W.3d at 706. First, Perry Electrical was required to demonstrate that

7 a court rendered a final determination on the merits of the case, and they cannot do

so. See Eagle Oil & Gas Co., 619 S.W.3d at 706. Perry filed a No-Evidence Motion

for Partial Summary Judgment against Emerald Sands in the prior lawsuit, and the

trial court granted the motion in favor of Perry Electrical and dismissed Emerald

Sand’s claims against Perry Electrical. However, Emerald Sands is not a party to the

suit made the basis of this appeal. And once the summary judgment was granted,

Perry Electrical then filed a Notice of Nonsuit as to all parties and the trial court

granted the nonsuit and dismissed the entire case and all claims asserted by any party.

But a nonsuit is not a final judgment on the merits, and res judicata does not apply.

Epps v. Fowler, 351 S.W.3d 862, 868-69 (Tex. 2011) (citing Klein v. Dooley, 949

S.W.2d 307, 307 (Tex. 1997)) (explaining that res judicata has not occurred if a party

or suit is dismissed without prejudice, or if plaintiff takes voluntary nonsuit).

Without a final judgment rendered on the merits of the prior suit, Perry Electrical

cannot establish the affirmative defense of res judicata. See Eagle Oil & Gas Co.,

619 S.W.3d at 705-06; Epps, 351 S.W.3d at 868-69.

Because no judgment on the merits was rendered in the prior suit, we conclude

the trial court erred by granting Perry Electrical’s Traditional Motion for Summary

Judgment. We sustain Koeppe’s and IIO’s sole issue, reverse the trial court’s

summary judgment granting Perry Electrical’s Traditional Motion for Summary

Judgment, and remand for further proceedings consistent with this opinion.

8 REVERSED AND REMANDED.

JAY WRIGHT Justice

Submitted on March 5, 2024 Opinion Delivered September 26, 2024

Before Golemon, C.J., Johnson and Wright, JJ.