Jack H. Brown & Co. v. Northwest Sign Co.
718 S.W.2d 397
Tex. App.
1986
Check Treatment

*1 should not admitted into for be evidence free,

any purpose. policy This facilitates dialogue meaningful defend between the Richardson, ant and the State. See 269-70; Robertson, S.W.2d at 582 F.2d 1367; State, Washington see also v. (Tex.Crim.App.1979). Appellant’s ground of error two sus ground

tained. effectively As this error disposes appeal, necessary of this it is not appellant’s address grounds additional

error. The of the trial court is reversed and cause is for remanded new trial. COMPANY,

JACK H. BROWN & INC., Appellant, COMPANY, NORTHWEST SIGN INC., Appellee. No. 05-85-01052-CV. Appeals

Dallas. Aug. 1986. Clark, Rosenberg, E. Steven John D. Lisa Peterson, Rehearing Dallas, Denied Oct. 1986. A. appellant. Bader, III, Dallas, T. appel-

Bertrán lee. GUITTARD, C.J.,

Before and HOWELL STEWART, JJ. GUITTARD, Chief Justice. question on this appeal whether prior suit is

judgment and the compulsory counterclaim in rule rule embodied the Texas Rules of Procedure. The Civil brought by “Signgraphics,” an as- Company, sumed of Jack H. name Brown Inc., corporation, against a Texas North- *2 denied, corporation, Sign Company, west an Idaho S.Ct. price pipe furnished for the for the of steel (1985). Signgraphics L.Ed.2d 255 then Holiday sign erection of Inn in Idaho. a brought present the suit in Texas for the special appearance filed a Northwest chal- price pipe. lenging personal jurisdiction the of the Tex- Signgraphics contends that its claim was filed a motion as court. Northwest also for compulsory not a counterclaim in the Idaho summary judgment asserting Sign- suit the pipe because sale of the was an graphics’s in claim the suit oral transaction to sepa- and by Signgraphics barred the failure of to rate the from written subcontract for in- in it as a counterclaim an Idaho sign, stallation of the on which Northwest by against Signgraphics on Northwest brought its suit in Idaho. the of Since law sign. a contract for erection of the Al- cited, proved Idaho has not been or we though the trial court overruled North- Texas, assume it is the same as the law of special appearance, west’s it awarded a 97(a) apply and rule of the Texas Rules of summary judgment to Northwest based requires Civil Procedure. This rule a upon the counterclaim rule and pleading to assert as a counterclaim ground judicata. also of res Since opposing party claim “if it agree we counterclaim out of the applies, summary judg- affirm arises transaction or occurrence rule we reaching judicata subject ment without the res that is the opposing matter of the Also, question. we do not reach North- party’s claim....” cross-point complaining of west’s Decisions under this rule little throw overruling special appearance court’s light problem determining on the what is presented only it is in because the alterna- “the transaction or occurrence that is the tive. subject opposing party’s matter of the summary judgment proof discloses only pertinent claim.” decision of the following facts. made a Supreme Court of Texas is v. Holi- Griffin Weston, operator written contract with America, day Inns 496 S.W.2d Idaho, Holiday of a Inn in to fabricate and (Tex.1973), compul- which indicates that the Holiday sign Inn supporting install a on sory counterclaim rule is broader than the pipe provided by Sign- steel to be Weston. judicata. plaintiff rule of res There the graphics then made a written subcontract previous had filed a suit for the balance sign. for with Northwest installation of the pave parking claimed on a contract to a lot subcontract, Sign- In accordance with the and the defendant had counterclaimed for graphics sign, made the Weston had but Recovery breach of the same contract. obtaining difficulty pipe. the steel North- in parties was denied to both the first suit. supply west then asked suit, In the second sued for the pipe. Signgraphics pipe, obtained quantum same work in meruit. The su- shipped along sign it with North- preme quantum court held that the meruit west, pipe. Northwest for the billed by res be- pipe Northwest erected the and installed cause it was considered a “different cause sign. Signgraphics pay refused to action,” 97(a) but it was barred installation, refused Northwest because it arose out of the same transac- pay pipe. for the paving parking tion—the lot—that suit, Sign- In the earlier Northwest sued subject was the matter of the defendant’s graphics in Idaho and obtained damages counterclaim for in the first suit. judgment. brought Northwest given rule Other Texas courts have giv judgment to obtained an order similarly interpretation. The rule a broad credit, ing full faith and following apply held to in the garnished Signgraphics’s bank account. Travis, cases. 622 S.W.2d Bailey v. Northwest H. Brown See Co. Jack (Tex.1984), (Tex.Civ.App. 680 S.W.2d 808 cert. — Eastland n.r.e.), legal malpractice ref’d held that a version of stock were not coun claim was barred failure to assert it corporation terclaims a suit previous attorney’s Corpus suit for fees. fiduciary setting up breach of duties in Cross, Christi Bank & Trust v. 586 S.W.2d competing corporation. (Tex.Civ.App. Corpus Christi — These cases reveal no consistent test of *3 1979, n.r.e.), ref 'd similarly writ held in a is what the same “transaction or occur- against suit an accountant. Upjohn Co. v. look, therefore, rence.” We to the deci- Inc., Petro Suppliers, Chemicals 537 sions and interpreting commentaries rule 337, 340 (Tex.Civ.App. — Beaumont 13(a) of the Federal Rules of Civil Proce- 1979, n.r.e.), writ ref’d held that a seller’s dure, 97(a) from which Texas Rule is taken. unpaid claim for invoices a compulsory was leading compulsory case on against counterclaim in a suit the seller for claims is Moore v. New York Cotton Ex- bribing buyer’s agent. fraud in the Burris 593, change, 367, 46 S.Ct. 70 L.Ed. Kurtz, 347, 462 S.W.2d (Tex.Civ.App. 348 (1926), 750 in Supreme which the Court 1971, —Corpus n.r.e.), Christi writ ref’d equity construed the former pre- rule that alleged held that a suit for impropriety in ceded adopted federal rule 13. The Court a handling a retail installment contract was interpretation rule, holding broad of the by barred failure to assert the claim in a plaintiff that a claim the purloin- that was previous against suit the on the ing quotations from the defendant’s ex- Short, 532, contract. Powell v. 308 S.W.2d change compulsory was a counterclaim to 534 (Tex.Civ.App. 1958, writ), no — Amarillo plaintiff’s the suit alleging that the defend- held that a claim of prosecution malicious violating ant was by the antitrust laws giving a compul worthless check was a refusing to him furnish ticker service. The sory by payee counterclaim a suit Court said that “transaction” has a flexible collect on the check. Spivey, Connell v. meaning “may comprehend that a series of 458, 264 S.W.2d (Tex.Civ.App. 459 — El occurrences, many depending not so much 1954, writ), Paso no held that a claim for upon the immediateness of their occurrence breach of pasturing contract for cattle was Moore, logical relationship.” as their compulsory a counterclaim in a suit to re 610, 270 U.S. at 46 S.Ct. at 371. cover the balance due on the contract. Wright Professor Charles Alan hand, On the other has been “logical relationship” written that this test held not to bar a later following suit only is satisfactory method of determin Universal, cases. Reliance Sparks Inc. v. ing compulsory. whether counterclaim is Services, 890, Industrial 688 S.W.2d analyzes He suggested and discards other (Tex.App. 1985, writ ref’d n.r. — Beaumont tests, including substantially whether e.), by held that a claim buyer of mate same support evidence will or refute both rial for negligence, the seller’s after deliv counterclaim, plaintiff’s claim and the ery, in directing use of materials was not a whether the issues of fact and are law by counterclaim in a suit same, largely and whether res seller price for the of the materials. Astro would bar the suit in the ab Sign Sullivan, 420, Co. v. 518 S.W.2d sence of a counterclaim rule. (Tex.Civ.App. Corpus Christi — Wright, Estoppel by Compulso Rule: n.r.e.), ref’d held that a suit a former ry Counterclaim Under Modern Plead employee for his commissions did not arise (1954); ing, 39 Iowa L.Rev. out of the C. same transaction as an earlier Wright, FEDERAL 527- suit COURTS at employer for conversion of § (4th 1983). Wright points property by ed. Professor employee after his dis charge. compul out that a counterclaim would be States Abrasive Gulf Manufac turing, Oertel, sory under of these tests it Inc. v. 489 S.W.2d three (Tex.Civ.App. “logical would be so likewise under the [1st Dist.] — Houston n.r.e.), test, writ ref’d relationship” held that claims but that the converse corporation personal come services and con not true because some claims that claim, and, purpose therefore, coun- of

within Northwest’s that complusory 97(a). terclaim rule would not be un- Rule der these other tests. 39 Iowa L.Rev. at contends further that Wright suggests 272. Professor that should not be barred because purpose compelling counterclaims is on based litigation pro- to reduce the volume of after service on of a nonresi inexpensive just, speedy, mote the de- dent notice that this Court held to be insuf by barring termination of controversies re- ficient in Northwest Co. v. Jack H. litigation of the same sets of facts. 39 (Tex.Civ. Brown 677 S.W.2d Thus, L.Rev. Iowa at 263. we conclude App.—Dallas 1984), rev’d, 680 S.W.2d 808 application requires of the rule that (Tex.1984). However, sufficiency both claims concern at least some of the jurisdiction the service and the of the Idaho same facts. Plant v. Blazer Financial upheld by Supreme *4 were Court of Services, Inc., (5th 598 F.2d Texas in Northwest H. Co. v. Jack Cir.1979). (Tex.1984), Brown & S.W.2d denied, cert. 105 S.Ct. recognize “logical We rela (1985). Signgraphics 86 L.Ed.2d 255 cites tionship” provide easy test does not an authority supporting no the view that the case, every although give solution in it does ap counterclaim rule not does scope a broader to the rule than of the ply judgment. Nothing to a default in rule logical relationship other tests. There is no apply indicates that it does not to when none of the same facts are relevant judgment cases. The rule has been However, to both claims. whenever the applied to cases where former defend facts, same ormay may which not be dis ant did not file an answer because his puted, significant are logically relevant plain insurer made a settlement with the claims, “logical relationship” to both Jones, tiff. 351- Harris v. is satisfied. This test is consistent .test (Tex.Civ.App.—Eastland Supreme with the decision of the ref’d); Fireman’s Ins. Co. v. L.P. Stewart most, all, Griffin, Texas as well as not Bros., (D.C.1960). 158 A.2d We of the other Texas decisions cited. party right conclude that a has no to let an go by adverse claim default and reserve his present In the case we conclude that place counterclaim for a time and of his “logical relationship” test is satisfied. policy apply choice. The reasons own same Signgraphics’s contract with Weston to fa appeared as if he had and defended the sign bricate install the was the basic opposing Consequently, claim. we hold transaction out of which arose both the Signgraphic’s present claim is barred subcontract on which Northwest sued present present its failure to its claim as Idaho and the later oral contract on which a counterclaim in the Idaho suit. present sued in the suit. Per formance of of these both contracts was Accordingly, Signgraphics’s we overrule necessary per to enable to points cross-point of error. Northwest’s Moreover, form its contract with Weston. overruling complaining of the trial court’s performance by Signgraphics of its con special appearance presented only of its pipe necessary tract to furnish the to Consequently, in the alternative. we do perform enable Northwest to its subcon cross-point. reach the not Signgraphics. tract with Evidence of both Affirmed. of the earlier contracts is relevant to the Thus, although suit. three distinct HOWELL, J., dissenting opinion. with involved, logical contracts are there is a HOWELL, Justice, dissenting. relationship between them. We hold that Signgraphics’s stating party I In that a “has claim arose out of the trans dissent. right” subject opponent’s action or occurrence that was the no to default his action litigate necessarily punitive. are In ev- thereafter his counterclaim at Defaults instance, ery they represent the forfeiture choice,” place “a time and of his own right and to be evidence majority infers that default was the Idaho opposing heard as to the merits of the strategic a conscious and man- deliberate course, party’s every system claim. Of Signgraphics, signmak- uever the Texas regulation of human conduct must have finding, er. The trial court made no such sanctions; experience demonstrates that claim, signmaker the Idaho makes no such without reasonable sanctions and the rea- and the record this does not warrant thereof, application judicial sonable our sponte. so hold sua system collapse. squarely would This case Likewise, majority holds inference presents question of what is a reason- signmaker that the failure of the Texas signmaker’s able sanction for the Texas authority “supporting cite the rule that the Regrettably the majority default. ap- counterclaim rule does not has avoided rather than answered the core question presented by ply to this record. judgment” is a sufficient ground for an affirmance. The decision question, having properly out- harkens back to the medieval rule that if placed proper lined and in its context is writ, there be no right. there be no Where easily answered: The upon point decided, the law has not been applicable judg- claim rule is not to default obligation law, it is our to declare the ments. Neither should a default *5 simply affirm appellant granted judicata because the be res effect has over and beyond directly point. plain- no case the actual res awarded to the prevails upon tiff who default. legal analysis Sound leads to the conclu- long recognized The law has the harsh sion that neither punitive Upon and effect of defaults. de- rule, nor theory judicata of res fault, amend; may may not he applied should be to default situ- claims, not make additional not unless he ations. The courts of our nation enter a upon defaulting serves those claims myriad against impecuni- defaults defendant and obtains reason, far, ous. The frequent most thereon; may he not recover more than defaulting that a defendant fails to meet sued; may that for which he has he underlying obligation his is that he has no grounds recovery; state additional and money; the reason that he defaults is that support his evidence will not all relief defense, he has neither a nor funds to granted, the default will not as a rule be retain counsel to a defense. That entirety. modified—it will be set aside class of default is easily distinguishable These rules have been fashioned because, and is of little concern punitive courts to ameliorate the effect of entered, once a default of that class is it is majority defaults. The within decision vio- rarely and, not, contested more often than signmaker being lates them. The Idaho is plaintiff ultimately realizes little or given plead; relief it did not relief to a that nothing upon judgment. his dollar in excess of the defaulted Ida- value The subsequent- class of default is which awarded; being petition ho is relief differ- ly always contested almost mis- involves being granted; ent in relief not kind take, oversight, misunderstanding, and oth- supported by evidence received at the de- failing. hearing being er The majority human In the of in- fault assessed. well stances, pertaining established law of Texas to de- failing which leads the de- traversed faults sub silentio. personal fault failing is not the de- faulting failing defendant but is only justification theoretical ad- agent, generally defendant’s a member of majority vanced is that which it has competent protect bar certified as gleaned Wright’s from Professor statement rights public by very that the law of counterclaim system pro- litigation which has exacted the default. reduces the volume of just, speedy inexpensive

motes “the controversies_ (em- determination of added).” phasis long Texas has held that it “just” against is not defaulting to assess anything beyond defendant over and precisely precisely which was claimed and put in evidence in the case wherein the

default occurred. Professor Wright’s analysis, persuasive general while as a proposition, yield must to the Texas con-

cept proper sanctions a default- ing defendant. It is to be further noted goal Professor’s stated anof inex-

pensive largely determination is inapplica- hearings

ble to defaults. Default are short summary proceedings; defaults are of- granted upon ten pleadings upon or exempt affidavit. To defaults from the compulsory counterclaim rule and from the only requires of res still but one full upon blown trial the merits. The judgment below should be reversed.

Finally, majority has neither reached nor signmaker’s ruled the Idaho con cross-point urging ditional special that its appearance improperly overruled.

cross-point should be sustained and this

action should be dismissed. U-Anchor Ad vertising, Burt, Inc. v. 553 S.W.2d 760

(Tex.1977). FIRST CITY NATIONAL BANK OF (Formerly Security BEAUMONT First Beaumont)

National Bank Brown, Jr., George W. Trustees of the Trust, Appellants, Hannah C. Phelan PHELAN, Appellee. Antoinette No. 09-85-269 CV. Appeals

Beaumont. Sept. 1986. Rehearing Denied Oct. 1986.