HouTex Ready Mix Concrete & Materials v. Eagle Construction and Environmental Services, LP

Opinion issued December 7, 2006

Opinion issued December 7,

2006

In The

Court of Appeals

For The

First District of Texas

NO. 01-05-00963-CV

HOUTEX READY MIX CONCRETE & MATERIALS, Appellant

V.

EAGLE CONSTRUCTION & ENVIRONMENTAL SERVICES, L.P.,

Appellee

On Appeal from County Civil Court at Law No. 4

Harris County,

Texas

Trial Court Cause No. 823087

O P I N I O N

Houtex

Ready Mix Concrete & Materials (“Houtex”) appeals a summary judgment and

two separate sanction awards of attorney’s fees in favor of Eagle Construction

& Environmental Services, L.P. (“Eagle”).

Houtex contends (1) the trial court erred in granting summary judgment,

(2) the trial court abused its discretion in awarding Eagle $1,500 in

attorney’s fees in the final judgment as a sanction for filing a groundless

lawsuit, and (3) the trial court abused its discretion in awarding Eagle an

additional $2,500 in interim attorney’s fees as a sanction after vacating an

earlier summary judgment. We conclude

that (1) the trial court properly granted Eagle’s motion for summary judgment

on Houtex’s breach of contract and declaratory relief claims but erred in

granting it on Houtex’s Deceptive Trade Practices Act (“DTPA”) claim, and (2)

the $2,500 sanction was within the trial court’s discretion but the $1,500

sanction was not. We therefore affirm in

part and reverse in part.

Background

In

March 2004, Houtex contracted with Eagle for Eagle to clean up the scene where

a Houtex truck had overturned on a freeway in Harris County. A dispute arose about performance and

payment. In July 2004, Eagle sued Houtex

in an Eastland County Justice of

the Peace Court , asserting breach of contract,

fraudulent inducement, fraud, misrepresentation, sworn account, unjust

enrichment, and quantum meruit. Two

months later, Houtex sued Eagle in Harris

County Civil Court at Law No. 4 in this case,

seeking declaratory relief regarding the same contract.

Houtex failed to answer or appear in

the Eastland

County

lawsuit. Eagle obtained a default

judgment against Houtex in the justice court.

Eagle then moved for summary judgment in this action, asserting that

Houtex’s claims are barred by res judicata and collateral estoppel, based on

the Eastland County Justice Court

judgment. The trial court granted

summary judgment after Houtex failed to appear at the hearing on the motion. The trial court later vacated this order, but

awarded Eagle $2,500 in attorney’s fees as a sanction for costs Eagle incurred

in attending the hearing.

Eagle amended its motion for summary

judgment and filed an additional motion for sanctions, again asserting res

judicata and collateral estoppel, and asserting that this lawsuit is

frivolous. The day before the hearing on

the motion, Houtex amended its original petition, asserting claims for breach

of contract and DTPA violations.

The trial court granted summary

judgment to Eagle and awarded it another $1,500 in attorney’s fees, as well as

appellate attorney’s fees.

Summary Judgment

Standard of Review

Our review of a summary judgment is

de novo. Provident Life & Accident Ins. Co. v. Knott , 128 S.W.3d 211,

215 (Tex.

2003). Under the traditional standard

for summary judgment, a movant has the burden to show that no genuine issue of

material fact exists and that the trial court should grant judgment as a matter

of law. Tex. R. Civ. P . 166a(c); KPMG

Peat Marwick v. Harrison County

Hous. Fin. Corp. , 988 S.W.2d 746, 748 (Tex. 1999).

We view all evidence in a light favorable to the nonmovant and indulge

every reasonable inference in the nonmovant’s favor. Provident

Life , 128 S.W.3d at 215 . A defendant

moving for summary judgment on an affirmative defense must prove each element

of its defense as a matter of law, leaving no issues of material fact. Garza

v. Exel Logistics, Inc. , 161 S.W.3d 473 , 475 n.10 (Tex. 2005).

Res judicata and collateral estoppel are affirmative defenses. Tex.

R. Civ. P . 94.

Res judicata prevents parties and those in privity with them

from relitigating a case that a competent tribunal has adjudicated to finality.

Ingersoll-Rand Co. v.

Valero Energy Corp. , 997

S.W.2d 203, 206 (Tex.

1999). Res judicata bars claims

or defenses that, through diligence, should have been litigated in the earlier

suit but were not. Id. at

206–07. “The doctrine is intended to

prevent causes of action from being split, thus curbing vexatious litigation and

promoting judicial economy.” Id.

at 207 . Res judicata requires: (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 that were raised or could have been raised in the first

action. Amstadt v. U.S. Brass Corp. , 919 S.W.2d 644, 652 (Tex. 1996); see also Jones v. First Bank of Anson , 846 S.W.2d 107, 110 (Tex.

App.—Eastland 1992, no writ) (holding that default judgment can be used to

assert res judicata); Mendez v. Haynes Brinkley & Co. , 705 S.W.2d 242 , 245–46

(Tex. App.—San Antonio 1986, writ ref’d n.r.e.) (applying collateral

estoppel after default judgment).

A party asserting collateral estoppel must establish

that (1) the facts sought to be litigated in the second action were fully and

fairly litigated in the first action, (2) those facts were essential to the

judgment in the first action, and (3) the parties were cast as adversaries in

the first action. John G. & Marie Stella Kenedy Mem’l Found. v. Dewhurst , 90 S.W.3d 268, 288 (Tex. 2002).

Judgments from justice courts, however, are not

accorded the same common law finality as judgments from other courts. Rather, section 31.005 of the Texas Civil Practice

and Remedies Code abrogates the general common law rules of res judicata and

collateral estoppel for justice courts and small claims courts. See

Harrill v. A.J.’s Wrecker Serv., Inc. , 27 S.W.3d 191, 195 (Tex. App.—Dallas

2000, pet. dism’d w.o.j.); Brown v. Henderson , 941 S.W.2d 190, 192 (Tex.

App.—Corpus Christi 1996, no writ). The statute provides:

A judgment or a determination of fact or law in a proceeding in

small claims court or justice of the peace court is not res judicata and does

not constitute a basis for estoppel by judgment in a proceeding in a county

court or statutory county court, except that the judgment rendered is binding

on the parties thereto as to recovery or denial of recovery.

Tex. Civ. Prac. &

Rem. Code Ann. § 31.005 (Vernon 1997). Texas courts have

interpreted this statute to mean that the doctrines of res judicata and

collateral estoppel only bar claims “actually litigated” in courts of limited

jurisdiction. [1] Brown , 941 S.W.2d at 192 ; Wren v. Gusnowski , 919 S.W.2d 847, 849 (Tex.

App.—Austin 1996, no writ); see also Webb

v. Persyn , 866 S.W.2d 106,

107 (Tex. App.—San Antonio 1993, no writ).

The purpose of section 31.005 “is to narrow the preclusive effect of

judgments from courts of limited jurisdiction.”

Brown , 941 S.W.2d at 192 . The statute “creates an exception to the

general rule against splitting causes of action, allowing unlitigated claims

from courts of limited jurisdiction to be tried in county courts.” Id. Thus, if the pleadings here include claims not

adjudicated in the justice court, then res judicata and collateral estoppel do

not bar those pleaded claims, and Eagle’s affirmative defenses do not support

summary judgment on them. See id.

Analysis

Houtex contends that its petition

contains breach of contract and DTPA claims that were not litigated in the Eastland County Justice Court . Eagle responds that Houtex’s amended

petition—asserting new breach of contract and DTPA claims—was not timely filed

and therefore the trial court properly disregarded it.

The Texas Rules of Civil Procedure

prohibit the filing of any pleadings, responses, or pleas within seven days of

trial, unless a party first obtains leave of the court. Tex.

R. Civ. P . 63. The trial court must

grant leave to file unless the opposing party shows surprise. Id. A summary judgment hearing is a trial for the

purposes of Rule 63. Goswami v.

Metro. Sav. & Loan Ass’n , 751 S.W.2d

487, 490 (Tex.

1988) . “ Texas courts have

held that in the absence of a sufficient showing of surprise by the opposing

party, the failure to obtain leave of court when filing a late pleading may be

cured by the trial court’s action in considering the amended pleading.” Id .

Houtex never requested leave to file

its amended pleading and the record does not indicate that the trial court

granted leave. Neither did the trial

court refuse leave, nor did Eagle move to strike Houtex’s amended

petition. Because the record contains no

basis upon which to conclude that the trial court refused to consider Houtex’s

amended pleadings, and inasmuch as Eagle did not show surprise or prejudice, we

presume the trial court granted leave. See id.

(holding that appellate court should presume trial court granted leave to file

amended petition when record contains no basis to conclude that trial court did

not consider amended petition) .

We therefore conclude that Houtex’s breach of contract and DTPA claims

were properly before the trial court when it granted Eagle’s amended motion for

summary judgment.

The parties in the Eastland County

suit are the same as the parties in this suit, and Eagle raised the breach of

contract claim in the Eastland County

suit. Thus, the doctrine of res judicata

and section 31.005 of the Texas Civil Practice and Remedies Code bar Houtex’s

breach of contract claim, and its contract-dependent request for declaratory

relief. See Tex.

Civ. Prac. & Rem. Code Ann . § 31.005; Amstadt ,

919 S.W.2d at 652 .

The

trial court, however, erred in granting Eagle’s motion for summary judgment on

Houtex’s DTPA claim. Res judicata would usually

bar Houtex’s DTPA claim because (1) there was a prior final judgment on the

merits in the first action, (2) the parties to both actions are the same, and

(3) the second action is based on claims that could have been raised in the

first action. See Amstadt , 919 S.W.2d at 652 . In this case, however, section

31.005 limits the applicability of res judicata. Tex. Civ. Prac. & Rem. Code Ann . § 31.005.

Neither Eagle nor

Houtex asserted DTPA claims in the Eastland County

action. Because the parties did not

“actually litigate[]” any DTPA claims in the Eastland County Justice Court,

Houtex was free to assert a DTPA claim in this case. [2] See Brown , 941 S.W.2d at 192 ; Wren , 919 S.W.2d at 849 . The doctrine

of collateral estoppel does not prevent Houtex from asserting its DTPA claim in

Harris

County

for the same reason. See Brown , 941 S.W.2d at 192 ; Wren , 919 S.W.2d at 849 . The trial court therefore erred in granting

Eagle’s motion for summary judgment on Houtex’s DTPA claim.

Sanction Award of $1,500 in Attorney’s Fees in the Final Judgment

In its second issue, Houtex contends

the trial court abused its discretion in awarding Eagle $1,500 in attorney’s

fees in the final judgment. Eagle

responds that the trial court did not abuse its discretion in awarding the

sanction because Houtex filed the Harris County

action knowing that it was frivolous, in violation of Texas Rule of Civil

Procedure 13. Tex. R. Civ. P . 13.

Filing a frivolous lawsuit is litigation

misconduct subject to sanction under Rule 13.

Id. ;

Am. Transitional Care Ctrs. of Tex., Inc. v. Palacios , 46 S.W.3d 873, 878 (Tex. 2001). If a sanction order refers to a

specific rule, either by citing the rule, tracking its language, or both, we determine

whether the sanction is appropriate under that particular rule. Finlay v. Olive , 77 S.W.3d 520, 524 (Tex.

App.—Houston

[1st Dist.] 2002, no pet.) .

In this case, the trial court’s sanction order does not specify the rule

used to sanction Houtex, nor does it track the language of any rule. Eagle, however, only urged Rule 13 as a basis

for the sanction award, so we presume the trial court sanctioned Houtex under

Rule 13.

We review a trial court’s

Rule 13 sanction award for abuse of discretion. Downer v. Aquamarine Operators, Inc. , 701 S.W.2d 238 , 241–42 (Tex. 1985);

Barkhausen v.

Craycom, Inc. , 178 S.W.3d 413 ,

420–21 (Tex. App.—Houston [1st Dist.] 2005, pet.

denied); Gaspard v. Beadle , 36 S.W.3d 229, 239 (Tex. App.—Houston [1st Dist.] 2001, pet. denied). Our test for abuse of discretion is whether

the trial court acted without reference to any guiding rules and

principles. Alpert v. Crain, Caton & James, P.C. , 178 S.W.3d 398, 410 (Tex.

App.—Houston

[1st Dist.] 2005, pet. denied). We

examine the entire record and will overturn a trial court’s discretionary

ruling only if the ruling is based on an erroneous view of the law or a clearly

erroneous assessment of the evidence. See

Mercedes-Benz Credit Corp. v. Rhyne ,

925 S.W.2d 664, 666 (Tex.

1996); Downer , 701

S.W.2d at 241–42.

Texas Rule of Civil Procedure 13 provides for

sanctions if a party files a pleading that is “ groundless and brought in

bad faith or groundless and brought for the purpose of harassment.” Tex.

R. Civ. P . 13. “ Groundless”

means no basis in law or fact and not warranted by a good faith argument for

the extension, modification, or reversal of existing law. Id. Rule 13 requires the trial court to hold an

evidentiary hearing to make the necessary factual determinations about the

motives and credibility of the person signing the allegedly groundless

petition. Bisby v. Dow Chem. Co. , 931 S.W.2d 18, 21 (Tex.

App.—Houston [1st Dist.] 1996, no writ).

In evaluating an allegation of a Rule 13 violation, “[c]ourts shall

presume that pleadings, motions, and other papers are filed in good

faith.” Tex. R. Civ. P. 13.

The party seeking sanctions bears the burden of overcoming the

presumption of good faith in the filing of pleadings. GTE Commc’ns Sys. Corp. v. Tanner , 856 S.W.2d 725, 731 (Tex. 1993) (orig.

proceeding). A court may not impose

sanctions under Rule 13 “except for good cause, the particulars of which must

be stated in the sanction[] order.” Id. at 730. “A trial court’s failure to specify the good

cause for sanctions in a sanction order may be an abuse of discretion.” Gaspard , 36 S.W.3d at 239 .

The purposes of the Rule

13 particularity requirement are to (1) ensure that the trial court is held

accountable and adheres to the standard of the rule; (2) require the trial

court to reflect carefully on its order before imposing sanctions; (3) inform the offending party of the particular conduct

warranting sanction, for the purpose of deterring similar

conduct in the future; and (4) enable the appellate court to review the order in light of the

particular findings made by the trial court. Alpert , 178 S.W.3d at

411 . “In reviewing

sanction[] orders, the appellate courts are not bound by a trial court’s

findings of fact and conclusions of law; rather, appellate courts must

independently review the entire record to determine whether the trial court

abused its discretion.” Am.

Flood Research, Inc. v. Jones , 192 S.W.3d 581, 583 (Tex. 2006);

see also Barkhausen ,

178 S.W.3d at 421 .

In this case, the trial court included the

sanction order in the final judgment, but failed to specify any particular

grounds for ordering the sanction, as Rule 13 requires. Tex.

R. Civ. P . 13; Alpert , 178 S.W.3d at

411 . The trial court did not file any findings

of fact and conclusions of law, and did not conduct an evidentiary hearing on

the motion for sanctions. In addition, Houtex

asserted three causes of action in this lawsuit: (1) a request for declaratory

relief, (2) a breach of contract claim, and (3) a DTPA claim. We have determined that the trial court’s

summary judgment on Houtex’s DTPA claim was improper. We therefore conclude that the record does

not support a finding that Houtex’s petition is “groundless” as defined by Rule

13. Tex.

R. Civ. P . 13. We hold that the

trial court abused its discretion in ordering sanctions against Houtex under

Rule 13.

Interim Sanction Award of $2,500 in Attorney’s Fees

In its third issue, Houtex contends

the trial court abused its discretion in awarding Eagle $2,500 in interim

attorney’s fees as a sanction after it vacated an earlier summary judgment in

this case. Eagle responds that the

$2,500 sanction is proper because Houtex’s counsel failed to notify the court

or opposing counsel that he would not attend the hearing on Eagle’s first

motion for summary judgment, causing Eagle’s counsel to travel 720 miles round

trip to attend the hearing.

Eagle served Houtex with its first

motion for summary judgment and for sanctions on November 12, 2004. The court set a hearing on the motion for

December 7, 2004, at 9:30 a.m. On

December 6, Eagle filed its amended motion for summary judgment and for

sanctions. Counsel for Houtex allegedly

appeared in court at 8:15 a.m. on the morning of December 7 to inform the judge

that he would not be able to attend the hearing because he had a trial in Montgomery

County

at the same time. Houtex’s counsel

asserts that the court clerk told him that the case was not set for hearing on

December 7. [3] Counsel for Houtex admits that he did not

attempt to notify Eagle’s counsel that he was not going to attend the

hearing. Eagle’s counsel therefore made

the trip from Eastland County to Harris County,

only to find that Houtex was not present.

Counsel for Houtex asserts that he

was under no obligation to notify Eagle that he would not attend the summary

judgment hearing because Rule 10 of the Regional

Rules of Administration for the Second Administrative Judicial Region of Texas

requires Harris

County

courts to defer to cases in trial. Rule

10 states:

a. Attorney already in trial in another

Court.

(1) When informed that an attorney is

presently in trial, the Court will determine where and when assigned. This information will be verified upon

request of opposing counsel. The case will

be placed on hold or reset, depending upon when the attorney will be released.

(2) If the attorney is not actually in trial

as represented by the attorney or agent, the case will be tried without further

notice.

b. Attorney assigned to two Courts for the same date:

(1) It is the duty of the attorney to call the affected

Judge’s attention to all dual settings as soon as they are known.

Reg. R. Admin., 2d Admin. Jud. Reg.

10, available at

http://www.co.montgomery.tx.us/dcourts/2ndadmin/RegionalRulesofAdministration.pdf.

This rule places the burden on the attorney to contact the

court if he has a conflicting trial setting.

In this case, Houtex’s counsel contends that he attempted to comply with

Rule 10 by contacting the court clerk on the morning of the hearing and

informing her that he would not attend the hearing on the motion for summary

judgment because he was in trial in Montgomery County.

The trial court granted Eagle’s

motion for summary judgment at the December 7 hearing. The court subsequently vacated this order at

Houtex’s request, but entered a sanction awarding Eagle $2,500 in attorney’s

fees. The trial court’s sanction order

does not refer to the specific source of power used to issue the sanction, nor

did the trial court make factual findings to support the order. Because the conduct at issue does not involve

discovery proceedings or the content of a pleading, the trial court’s inherent

power appears to be the source of power for its sanction. See

Kings Park Apartments, Ltd. v. Nat’l Union

Fire Ins. Co. , 101 S.W.3d 525,

541 (Tex. App.—Houston

[1st Dist.] 2003, pet. denied).

“Texas

courts have the inherent power to sanction for an abuse of the judicial process

that may not be covered by any specific rule or statute.” Island

Entm’t, Inc. v. Castaneda , 882 S.W.2d 2, 5 (Tex. App.—Houston [1st Dist.]

1994, writ denied). Inherent power to sanction exists to the extent necessary

to deter, alleviate, and counteract bad faith abuse of the judicial

process. Id. In applying its inherent power to

impose sanctions, a trial court must make findings to support its conclusion

that the conduct complained of significantly interfered with the court’s

legitimate exercise of its core functions. Id. In reviewing

sanction orders, however, appellate courts should independently review the

entire record to determine whether the trial court abused its discretion. Am.

Flood Research , 192 S.W.3d at 583 .

Here, in Eagle’s response to Houtex’s motion to vacate, Eagle requests

“any further relief to which it is justly entitled,” should the trial court

vacate the judgment. Eagle supported its

response with an affidavit stating the facts surrounding the December 7

hearing, and the amount of costs incurred and time spent attending the

hearing.

The

affidavit of Eagle’s counsel contains sufficient evidence upon which the trial

court could have concluded that Houtex’s counsel acted in bad faith in failing

to notify opposing counsel that he would be absent from the December 7 hearing. The affidavit states that Houtex’s counsel

received notice of the December 7 hearing, which was confirmed by the trial

court orally during another hearing on November 23. Eagle’s counsel also reviewed the court’s

file on the morning of December 7, and confirmed that the hearing was set on

the court’s docket. Houtex’s counsel had

known about the Montgomery County

trial setting since October 5, yet he never raised the potential conflict. Houtex’s counsel also knew Eagle’s counsel

would be driving from Eastland to attend the Harris County hearing, but he made

no effort to inform him that he might not be available to attend, nor did he

attempt to inform him when he learned definitively that he would not be

there.

Eagle’s counsel presented

evidence that his total expenses incurred in attending the December 7 hearing

were $3,901. Specifically, the affidavit stated:

I have spent 18 hours in traveling and attending the

properly Noticed hearing on Defendant’s Motion for Summary Judgment and

preparing a response to Plaintiff’s Motion to Vacate. The reasonable attorneys’ fees for such

activities is $3,600.00 (18 hours @ $200.00/hour) plus $301.00 in travel

expenses and meals in attending the hearing.

Further, I was required to retain outside counsel on behalf of Defendant

to appear and orally respond to Plaintiff’s Motion to Vacate. This has caused additional unnecessary

expense.

By entering the sanction for Eagle in

the amount of $2,500, the trial court implicitly found that Houtex’s counsel

should have attempted to inform opposing counsel of his conflicting trial

setting. The facts in this case show

that Houtex’s counsel was aware of the conflicting trial setting many days

before the hearing, and that Eagle’s counsel had to travel a significant distance

to attend the hearing. We therefore hold

that the record contains sufficient evidence to support the sanction award.

See Am. Flood Research , 192 S.W.3d at 583 ; see also McWhorter v. Sheller , 993 S.W.2d 781, 789 (Tex. App.—Houston [14th Dist.] 1999,

pet. denied) (reversing sanction award because record contained no evidence

that attorney acted in bad faith, or that her conduct interfered with one of

court’s core functions); Onwuteaka v. Gill , 908 S.W.2d 276, 281 (Tex.

App.—Houston [1st Dist.] 1995, no writ) (reversing trial court’s sanction order

because record contained no evidence attorney acted in bad faith when he was

late to trial); Island Entm’t ,

882 S.W.2d at 5–6 (reversing sanction award because record contained no evidence that counsel acted in bad faith or

interfered with trial court’s core functions); Lawrence v. Kohl , 853 S.W.2d 697, 700 (Tex.

App.—Houston [1st Dist.] 1993, no writ) (holding trial court did not abuse its

discretion in sanctioning attorney for refusal to help rectify erroneous

order). While the trial court erred in

failing to make findings to support its sanction award, the error here does not

require reversal because the record contains sufficient evidence to support the

trial court’s sanction award, Houtex had notice of the nature of the conduct

about which Eagle complained, and the sanction order corresponds to the amount

sought for the offending conduct.

We

also note that in Eagle’s response to Houtex’s motion to vacate the summary

judgment, Eagle requested that the trial court not grant Houtex’s motion to

vacate the summary judgment. The $2,500

sanction is therefore a lesser penalty than Eagle requested, and a concession

to Eagle for the trial court’s grant of Houtex’s motion. See

Onwuteaka , 908 S.W.2d at 281 (“Before a trial court may impose the ‘death penalty’ sanction , the

record

must reflect that the court considered the availability of a lesser sanction and whether such a sanction

would fully promote compliance with the purpose for imposing the sanction .”). The trial court did not abuse its discretion

in awarding Eagle the $2,500 sanction.

Conclusion

We

hold that the trial court (1) properly granted summary judgment on Houtex’s

breach of contract and declaratory relief claims, (2) erred in granting summary

judgment on Houtex’s DTPA claim, (3) abused its discretion in ordering

sanctions against Houtex under Rule 13 for filing a groundless lawsuit, and (4)

did not abuse its discretion in ordering the sanction against Houtex for its

counsel’s failure to notify opposing counsel that he would not be attending the

summary judgment hearing. We therefore

affirm the trial court’s judgment with regard to Houtex’s breach of contract

and declaratory relief claims. We also

affirm the trial court’s interim sanction order of $2,500. We reverse the trial court’s judgment with

regard to Houtex’s DTPA claim and the Rule 13 sanction order, and remand for

further proceedings.

Jane

Bland

Justice

Panel consists of Chief Justice Radack

and Justices Alcala and Bland.

[1] Texas Civil Practice and Remedies Code section 31.004

is similar to section 31.005, and Texas

courts have interpreted it in the same manner.

Tex. Civ. Prac. & Rem. Code

Ann . § 31.004 (Vernon 1997); Lopez v. Sulak , 76

S.W.3d 597, 606 (Tex.

App.—Corpus Christi 2002, no pet.) (holding that under section 31.004, judgment

in justice court granting landlord possession in forcible detainer action is

not res judicata of tenant’s trespass to try title suit in district court); Webb v. Persyn , 866 S.W.2d 106, 107 (Tex. App.—San

Antonio 1993, no writ) (holding that section 31.004 allows parties to bring any

claim in district court that was not actually litigated in county court action

arising from same set of facts); McClendon

v. State Farm Mut. Auto. Ins. Co. , 796 S.W.2d 229, 232 (Tex.

App.—El Paso 1990, writ denied) ( holding

that under section 31.004, judgment in subrogation suit for property damage in

county court at law was not res judicata to personal injury suit later filed in

district court).

Section 31.004 provides:

(a) A judgment or a determination of fact

or law in a proceeding in a lower trial court is not res judicata and is not a

basis for estoppel by judgment in a proceeding in a district court, except that

a judgment rendered in a lower trial court is binding on the parties thereto as

to recovery or denial of recovery.

(b) This section does not apply to a judgment in probate, guardianship, mental

health, or other matter in which a lower trial court has exclusive subject

matter jurisdiction on a basis other than the amount in controversy.

(c) For the purposes of this section, a “lower trial court” is a small claims

court, a justice of the peace court, a county court, or a statutory county

court.

Tex. Civ. Prac. & Rem. Code Ann . § 31.004.

[2] Litigants may appeal justice court judgments to

county or district court, where the court hears the matter de novo. Tex.

R. Civ. P. 574b. Texas Rule of

Civil Procedure 574a, which addresses appeals of justice court judgments, provides:

Either party may plead any new matter in

the county or district court which was not presented in the court below, but no

new ground of recovery shall be set up by the plaintiff, nor shall any set-off

or counterclaim be set up by the defendant which was not pleaded in the court

below. The pleading thereof shall be in

writing and filed in the cause before the parties have announced ready for

trial.

Tex. R. Civ. P. 574a.

Texas

courts have noted that Rule 574a has little practical effect in light of Civil

Practice and Remedies Code sections 31.004 and 31.005. See

Harrill v. A.J.’s Wrecker Serv., Inc. ,

27 S.W.3d 191, 195 (Tex. App.—Dallas 2000, pet. dism’d w.o.j.). While Rule 574a prevents a party from

bringing a “new ground of recovery” in the de novo appeal of the justice court

judgment, sections 31.004 and 31.005 allow a party to circumvent Rule 574a by

bringing the new claim in a separate action in county court or district court. See

id. ;

Wren v. Gusnowski ,

919 S.W.2d 847, 849 (Tex. App.—Austin 1996, no writ) (holding that res judicata

effect of judgment rendered in justice court extends only to claims actually

litigated in justice court and does not bar unlitigated claims simply because

they could have been litigated in lower court) .

[3] The record contains no evidence of this conversation

and the trial court refused to hear testimony from the clerk on this

issue.