Opinion filed May 27, 2010
In The
Eleventh Court of Appeals
__________
No. 11-08-00138-CV
__________
CAPROCK INVESTMENT CORP., Appellant
V.
ELTON MONTGOMERY, Appellee
On Appeal from the 32nd District Court
Nolan County, Texas
Trial Court Cause No. 16,785
OPINION
This case involves a promissory note signed by Elton Montgomery and others no longer
involved in the suit. The original petition in this case was filed in 1989, and this is the fourth
appeal.1 The note is owned by Caprock Investment Corp. In its sixth amended petition, Caprock
alleged both fraud and breach of contract causes of action against Montgomery. Both parties
1
See Caprock Investment Corp. v. FDIC, 17 S.W.3d 707 (Tex. App.—Eastland 2000, pet. denied) (Caprock I);
Montgomery First Corp. v. Caprock Investment Corp., 89 S.W.3d 179 (Tex. App.—Eastland 2002, no pet.) (Caprock II); and
Caprock Investment Corp. v. Montgomery First Corp., No. 02-04-00155-CV, 2005 WL 3118787 (Tex. App.—Fort Worth
Nov. 23, 2005, no pet.) (mem. op.) (Caprock III), for more details regarding the parties and the history of this case.
moved for summary judgment. The trial court granted Montgomery’s motion, denied Caprock’s
motion, and entered a take-nothing summary judgment. We reverse in part and affirm in part.
I. Issues
Caprock presents two issues for review. In these issues, Caprock argues that the trial
court erred in granting Montgomery’s motion for summary judgment and in denying Caprock’s.
Montgomery moved for summary judgment on the bases that res judicata barred Caprock’s claim
for breach of the note, that collateral estoppel barred Caprock’s claim for breach of the note, that
the note had been satisfied by the bankruptcy of a cosigner (Al Jonietz),2 and that there was no
evidence to support various elements of Caprock’s fraud claim. The trial court granted
Montgomery’s motion in its entirety. Caprock moved for summary judgment on its breach of
contract cause of action for the amount due under the note and also on Montgomery’s
counterclaims.
We review summary judgments de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 661 (Tex. 2005). When both sides move for summary judgment on the same issue and the
trial court grants one motion and denies the other, the appellate court considers the summary
judgment evidence presented by both sides, determines all questions presented, and may render
the judgment the trial court should have rendered on that issue. Id. In this case, both parties
moved for summary judgment on breach of contract claims.
II. Montgomery’s Motion
A. Promissory Note – Defenses.
With respect to the affirmative defenses urged by Montgomery in his motion,
Montgomery had the burden to establish his right to summary judgment by conclusively proving
each element of any of the defenses as a matter of law. See TEX. R. CIV. P. 166a(c); Havlen v.
McDougall, 22 S.W.3d 343, 345 (Tex. 2000); Rhône-Poulenc, Inc. v. Steel, 997 S.W.2d 217,
222-23 (Tex. 1999); Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996). A defendant moving
for summary judgment on an affirmative defense has the burden to conclusively establish that
defense. Rhône-Poulenc, 997 S.W.2d at 223. On appeal, the movant bears the burden of
2
We disagree with Montgomery’s contention that Caprock waived this issue; Caprock addressed the issue in its brief in
the argument regarding collateral estoppel. Furthermore, any failure by Caprock to address the issue in its response to
Montgomery’s motion for summary judgment did not waive the issue because Montgomery had the burden to establish its
defense as a matter of law. A nonmovant has no burden to respond unless the movant conclusively establishes its cause of action
or defense. Rhône-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999). A nonmovant need not have answered or
responded to the motion in the trial court to contend on appeal that the movant’s summary judgment proof is insufficient as a
matter of law. Id. at 223.
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showing that there is no genuine issue of material fact and that the movant is entitled to judgment
as a matter of law. Id.
1. Res Judicata.
Res judicata bars the relitigation of claims that have been finally adjudicated or that could
have been litigated in the prior action. Montgomery asserted in his motion that he was entitled to
summary judgment because res judicata barred Caprock’s suit on the note. Montgomery relied
upon the judgments of the trial court and the court of appeals in Caprock III, a suit filed by
Caprock against Montgomery First Corporation (MFC) in Young County, as the basis for his res
judicata defense. To establish the defense of res judicata, Montgomery must have proven each
of these elements: (1) a prior final judgment 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 were raised or could have been raised in the first action.3 Citizens Ins. Co. of Am. v.
Daccach, 217 S.W.3d 430, 449 (Tex. 2007); Caprock II, 89 S.W.3d at 185.
After this court’s decision in Caprock II and while this case was pending on remand to
the trial court in Nolan County, Caprock brought a separate suit against MFC in Young County,
seeking judicial foreclosure on the deeds of trust, damages for breach of contract on the deeds of
trust for failing to maintain the oil and gas properties, and the excess due under the note. Upon
motion by Montgomery, the trial court in Nolan County abated the present case pending the final
resolution of the Young County suit. The district court in the Young County suit entered a take-
nothing summary judgment in favor of MFC against Caprock based upon MFC’s defenses of res
judicata, collateral estoppel, and satisfaction of the note via the Jonietz bankruptcy. The
Fort Worth Court of Appeals in Caprock III affirmed the Young County summary judgment in
favor of MFC on the ground of res judicata only: the same rationale used by this court to reverse
the summary judgment against MFC in Caprock II.
In his motion for summary judgment in the present case, Montgomery relied upon the
Young County summary judgment and the decision of the Fort Worth Court of Appeals in
Caprock III as the basis for his entitlement to summary judgment based upon res judicata. With
respect to the second element of res judicata, Montgomery does not contend that he was a party
to the Young County suit, but he argues that he is a person in privity with a party because he is
3
We note that Caprock does not challenge the first element or otherwise argue on appeal that the judgment from the
Young County suit or the Fort Worth Court of Appeals in Caprock III is not a prior final judgment on the merits. Accordingly,
we do not address that issue.
3
the president of MFC, shares an identity of interests in the lawsuits, and is the person who
controlled the litigation in Young County. We cannot agree that Montgomery met his burden of
establishing this element of res judicata as a matter of law.
There is no general definition of privity that can be automatically applied in all res
judicata cases; the circumstances of each case must be examined. Getty Oil Co. v. Ins. Co. of N.
Am., 845 S.W.2d 794, 800 (Tex. 1992). Privity exists if the parties share an identity of interests
in the basic legal right that is the subject of litigation. Amstadt v. U.S. Brass Corp., 919 S.W.2d
644, 653 (Tex. 1996). Those in privity with a party may include persons who exert control over
the action, persons whose interests are represented by the party, or successors in interest to the
party. Getty Oil, 845 S.W.2d at 800-01.
The summary judgment evidence, the law of this case, and the prior assertions by
Montgomery lead us to conclude that res judicata does not bar the claims against Montgomery.
The summary judgment evidence establishes that MFC and others (but not Montgomery)
acquired oil and gas leases with the money borrowed from Caprock’s predecessor and that they
executed deeds of trust to secure payment of the note. Montgomery signed the deeds of trust in
his capacity as president of MFC. However, Montgomery signed the note in his individual
capacity. Montgomery did not establish as a matter of law his privity with MFC because the
summary judgment evidence indicates that their interests may not be identical in this litigation.
See Hammonds v. Holmes, 559 S.W.2d 345, 347 (Tex. 1977) (res judicata did not bar action
against employee of defendant in earlier suit where employee was sued in separate capacity in
subsequent suit).
Moreover, this court previously held, upon the urging of Montgomery and MFC in
Caprock II, that Caprock’s claims against MFC were barred by res judicata based upon an earlier
summary judgment in favor of MFC that constituted a final judgment because Caprock had not
challenged that summary judgment with respect to MFC in Caprock I. 89 S.W.3d at 185-86. In
Caprock II, the claims against Montgomery were thereby severed from those against MFC and
were remanded to the trial court for further proceedings. 89 S.W.3d at 185-87. Having
previously asserted such a position of separateness of MFC and Montgomery, which was relied
upon by this court in Caprock II, Montgomery may not now assert in this case that he is actually
in privity with MFC. See Brown v. Lanier Worldwide, Inc., 124 S.W.3d 883, 905 (Tex. App.—
Houston [14th Dist.] 2004, no pet.) (judicial estoppel may prevent a party from asserting
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defenses of res judicata or collateral estoppel); Goldman v. White Rose Distrib. Co., 936 S.W.2d
393, 398 (Tex. App.—Fort Worth 1996), vacated pursuant to settlement agreement, 949 S.W.2d
707 (Tex. 1997) (applying judicial estoppel as a trump to defense of res judicata); see also
Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d 1, 6 (Tex. 2008) (judicial estoppel,
which is actually a rule of procedure based on justice and sound public policy, precludes a party
from adopting a position inconsistent with one that it maintained successfully in an earlier
proceeding); Briscoe v. Goodmark Corp., 102 S.W.3d 714, 716 (Tex. 2003) (law of the case
doctrine); Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986) (law of the case doctrine);
Long v. Knox, 291 S.W.2d 292 (Tex. 1956) (judicial estoppel). Because Montgomery did not
establish his affirmative defense of res judicata as a matter of law, the trial court erred in granting
summary judgment in favor of Montgomery on that basis.
2. Collateral Estoppel and Satisfaction.
Montgomery also asserted the defense of collateral estoppel, based upon the Young
County suit, in his motion for summary judgment. Collateral estoppel, or issue preclusion, bars
the relitigation of an issue of fact or law that was actually litigated, was determined by a valid
and final judgment, and was essential to the judgment. Tex. Dep’t of Pub. Safety v. Petta, 44
S.W.3d 575, 579 (Tex. 2001); Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 721 (Tex.
1990). Collateral estoppel applies when the parties were adversaries in the prior action and the
party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the
issue in the prior suit. Petta, 44 S.W.3d at 579; Eagle Props., 807 S.W.2d at 721.
Montgomery argued in his summary judgment that collateral estoppel constituted a bar in
this case because the issue regarding payment of the note was previously decided by the district
court in Young County, which held that the note had been paid and satisfied by the Jonietz
bankruptcy. Caprock argues on appeal that the only issue determined by a valid and final
judgment with respect to the Young County suit is that of res judicata as addressed by the court
of appeals. We agree.
The general rule is that there cannot be estoppel by alternative holdings. Johnson &
Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 522 (Tex. 1998). The supreme
court has quoted with approval the following excerpt from the RESTATEMENT (SECOND) OF
JUDGMENTS § 27, cmt. i (1982): “If a judgment of a court of first instance is based on
determinations of two issues, either of which standing independently would be sufficient to
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support the result, the judgment is not conclusive with respect to either issue standing alone.” Id.
at 522; Eagle Props., 807 S.W.2d at 722. The district court in Young County made three
separate and independent determinations that would support its judgment. Thus, the alternative
holdings in the judgment of the district court in Young County are not conclusive for purposes of
collateral estoppel.
Via the judgment of the Fort Worth Court of Appeals, the Young County suit became
conclusive as to res judicata only. Comment “o” to Section 27 of the Restatement cited above
provides in relevant part that, when the judgment of a trial court is based on a determination of
two issues either of which would be independently sufficient to support the judgment and the
appellate court upholds one of these determinations as sufficient and refuses to consider whether
or not the other is sufficient and accordingly affirms the judgment, the judgment is conclusive
only as to the first determination. The supreme court relied upon a different part of comment “o”
for its ruling in Kenneco. 962 S.W.2d at 522 (alternative findings that are actually reviewed and
affirmed by an appellate court may have preclusive effect). We hold that the judgments
stemming from the Young County suit were not conclusive as to the issue regarding payment or
satisfaction of the note by the Jonietz bankruptcy.
With respect to the collateral estoppel effect of the Jonietz bankruptcy on Caprock’s
claim against Montgomery, this court previously held in Caprock I that “the discharge of a
debtor’s obligation by operation of the Bankruptcy Code does not discharge or affect in any way
a co-maker’s liability on his obligation” and that “the issue in the bankruptcy court was the
discharge of Jonietz’ liability on the note, not that of his comakers.” 17 S.W.3d at 712, 714. Our
previous holding constitutes the law of this case, and there is nothing in the summary judgment
evidence indicating that our previous ruling was erroneous. Caprock is not estopped by the
Jonietz bankruptcy. See Quinney Elec., Inc. v. Kondos Entm’t, Inc., 988 S.W.2d 212 (Tex.
1999).4 Neither the issue of the collateral’s value nor the issue of satisfaction of the debt is
barred by collateral estoppel in this suit against Montgomery to collect on the note. The trial
court erred in granting Montgomery’s summary judgment on the grounds of collateral estoppel
and satisfaction.
4
See also RESTATEMENT (SECOND) OF JUDGMENTS §§ 49, 50 (1982). Section 49 provides that a judgment against one
person liable for a loss does not terminate a claim that the injured party may have against another person who may be liable
therefor. Section 50 provides that a satisfaction or release of judgment or other agreement terminating a judgment debtor’s
obligation does not discharge the liability of any other person liable for the loss, unless otherwise agreed, except as to any amount
actually received by the judgment creditor.
6
B. Fraud.
Montgomery also asserted in his motion for summary judgment that there was no
evidence as to various elements of Caprock’s claim for fraud, including the making of a
misrepresentation with knowledge of its falsity at the time it was made. The elements of fraud
are (1) that a material representation was made; (2) the representation was false; (3) when the
representation was made, the speaker knew it was false or made it recklessly without any
knowledge of the truth and as a positive assertion; (4) the speaker made the representation with
the intent that the other party should act upon it; (5) the party acted in reliance on the
representation; and (6) the party thereby suffered injury. Aquaplex, Inc. v. Rancho La Valencia,
Inc., 297 S.W.3d 768, 774 (Tex. 2009). In response to Montgomery’s motion, Caprock
presented no summary judgment evidence showing that the representation regarding the value of
the collateral as being $180,000 was false at the time of the representation or that Montgomery
knew it was false at that time. Caprock’s summary judgment evidence merely indicated that
Montgomery was aware over fifteen months after he signed the promissory note that “the
specific properties pledged with the bank do not have enough value to come anywhere close to
equaling the liabilities to the bank.” This is no evidence of the collateral’s value at the time of
the loan or of a misrepresentation made by Montgomery at that time. Caprock, therefore, failed
to present more than a scintilla of summary judgment evidence on these elements of fraud in
response to Montgomery’s no-evidence motion. Consequently, the trial court properly granted
the motion on this basis. TEX. R. CIV. P. 166a(i).
Caprock’s first issue is sustained as to the grant of summary judgment in favor of
Montgomery on his defenses to liability on the promissory note; however, it is overruled as to
the grant of a take-nothing summary judgment in favor of Montgomery on Caprock’s fraud
claim.
III. Caprock’s Motion
In its second issue on appeal, Caprock argues that the trial court erred in denying
Caprock’s motion for summary judgment. Caprock urged in its traditional motion for summary
judgment that it was entitled to summary judgment on its breach of contract claim and that it was
also entitled to summary judgment on Montgomery’s counterclaims, which were “defensive”
counterclaims asserted for purposes of offset to negate any recovery by Caprock on its suit on the
note.
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To prevail on a breach of contract claim, a party must establish the following elements:
(1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff;
(3) breach of the contract by the defendant; and (4) damages to the plaintiff as a result of the
defendant’s breach. Eaves v. Unifund CCR Partners, 301 S.W.3d 402, 407 (Tex. App.—El Paso
2009, no pet.). Caprock presented summary judgment evidence in support of these elements. In
his response, Montgomery contended that Caprock was not entitled to summary judgment for the
following reasons: res judicata, collateral estoppel, satisfaction of the note via the Jonietz
bankruptcy, fact issues as to control and possession of the collateral, fact issues as to the amount
due on the note, and fact issues regarding Montgomery’s counterclaims. As addressed above,
Montgomery’s assertions of res judicata, collateral estoppel, and satisfaction via the Jonietz
bankruptcy fail as a matter of law. Montgomery does not otherwise contest the elements of
breach of the promissory note establishing his liability, but he does contest the amount owed.
The summary judgment evidence shows the existence of a valid promissory note signed by
Montgomery, performance by Caprock’s predecessor, and breach by Montgomery. The
summary judgment evidence is disputed as to the amount actually owed, the reasonableness of
the substituted interest rate, the amount of setoff (if any) available for the alleged
mismanagement and waste of the collateral by Caprock and its predecessors, and attorney’s fees.
The summary judgment evidence established that, except as to the amount of damages, no
genuine issue of material fact existed on Caprock’s claim for breach of contract. Thus, the trial
court should have entered summary judgment in favor of Caprock as to Montgomery’s liability
for breach of contract but not the amount of damages. Rule 166a(c) provides in part: “The
judgment sought shall be rendered forthwith if [the summary judgment evidence, pleadings,
motions, and responses] show that, except as to the amount of damages, there is no genuine issue
as to any material fact and the moving party is entitled to judgment as a matter of law” (emphasis
added). Caprock’s second issue is sustained with respect to the trial court’s failure to grant its
summary judgment motion regarding liability and is otherwise overruled.
The judgment of the trial court is affirmed as to the take-nothing judgment rendered
against Caprock on its claim for fraud. The judgment of the trial court is otherwise reversed.
Because both parties moved for summary judgment on the breach of contract claim, we render
judgment that Montgomery is liable for breach of the promissory note and that Caprock’s claim
for breach of the note is not barred by res judicata, collateral estoppel, or satisfaction. Because
8
issues of fact exist regarding damages -- the amount still due and owing under the note, the
amount of any offset that Montgomery may be entitled to, and attorney’s fees -- we remand the
cause to the trial court for a determination of these issues.
JIM R. WRIGHT
CHIEF JUSTICE
May 27, 2010
Panel consists of: Wright, C.J.,
McCall, J., and Strange, J.
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