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In re Happy State Bank

Court of Appeals of Texas, Second District, Fort Worth

April 23, 2018

IN RE HAPPY STATE BANK AND SCOTTY LINDLEY RELATORS

          ORIGINAL PROCEEDING TRIAL COURT NO. CV16-0134

          PANEL: SUDDERTH, C.J.; GABRIEL and PITTMAN, JJ.

          MEMORANDUM OPINION [1]

          LEE GABRIEL JUSTICE

         In this mandamus proceeding, we are asked to determine dominant jurisdiction and venue regarding two suits pending in Parker and Taylor Counties. The Parker County trial court determined that neither dominant jurisdiction nor statutory venue provisions required abatement or transfer of the Parker County case to Taylor County. We conclude that the two suits are inherently interrelated, requiring abatement of the second-filed, Parker County suit based on dominant jurisdiction.

         I. BACKGROUND

         The procedural histories of the underlying suits are lengthy and detailed, which is true in most cases involving dominant jurisdiction. Our recitation of these histories is necessarily protracted to place our holding in the appropriate context.

         A. Indebtedness and Guaranty Agreements

         On December 30, 2013, relator Happy State Bank (HSB) and real party in interest LeClair Operating, L.L.C.[2] entered into a loan agreement under which HSB loaned LeClair $2.3 million and LeClair signed a promissory note in favor of HSB, providing that the note was secured by a deed of trust "on real property located in Taylor County, State of Texas." The note contained a choice-of-venue paragraph, stating that LeClair agreed, upon HSB's request, "to submit to the jurisdiction of the court of Taylor County" if "there is a lawsuit" and "if the transaction evidenced by this Note occurred in Taylor County." Tony Robinson, the "Managing Member and President" of LeClair, signed the promissory note. That same day several guarantors signed guaranty agreements under which they agreed to be jointly and severally liable for LeClair's repayment obligations under the note, including any renewals, extensions, or modifications of LeClair's debt. Each guaranty agreement included a choice-of-venue provision: "[T]he Guarantor hereby unconditionally submits and agrees to the jurisdiction of any appropriate Court in Taylor County, Texas, wherein venue hereunder shall exclusively lie." The initial guarantors for LeClair's note were Tony Robinson; Lori Robinson; David Deison; Nancy Deison; J. Lyndell Kirkley; Bart Dale; Jennifer Dale;[3] the Deisons' company Blest, Ltd.; Kirkley's company Sevens Corporation; and the Dales' company Bart Dale Oil & Gas, LP (BDOG).

         On March 24, 2014, LeClair and HSB entered into an amendment to the loan agreement, allowing LeClair to transfer some of its securing assets to two of its subsidiary companies-Petrol Services & Plugging, L.L.C. and Petrolchem, L.L.C.-and recognizing that the subsidiaries granted HSB security interests in those assets to secure the note. Relator Scotty Lindley, the "President Abilene Market, " signed the amendment on behalf of HSB. That same day, Petrol Services and Petrolchem executed a guaranty agreement in favor of HSB regarding LeClair's debt. As did each of the previous agreements, venue was contractually and "exclusively" set in Taylor County. Kirkley, Tony Robinson, David Deison, and Bart Dale signed the agreement as "Manager[s]" of Petrol Services and Petrolchem.

         On July 31, 2014, LeClair borrowed an additional $56, 000 from HSB to purchase a truck, which HSB acquired a security interest in. Tony Robinson signed the promissory note and the security agreement on behalf of LeClair.

         LeClair defaulted on its repayment obligations under both notes, and HSB accelerated the maturity of the indebtedness as permitted under the terms of the notes. HSB demanded payment from LeClair's guarantors to no avail.

         B. Litigation

         1. Parker County

         On February 5, 2016, LeClair and King Goen, LLC-another company Tony Robinson was a "member" of-filed suit against Tony Robinson and TSW Energy, LLC in Parker County. LeClair and King Goen alleged that "Tony Robinson and his family are owners of TSW Energy, LLC." LeClair and King Goen asserted that Tony Robinson and TSW misappropriated entity property, slandered their other members, and refused to turn over operations of wells owned by King Goen. Other than a reference to a certificate of deposit held by HSB as security for the disputed wells, LeClair and King Goen do not mention any actions or inactions by HSB or Lindley or the specific promissory notes[4] in their claims. As characterized by HSB and Lindley, this suit was an "inter-company fight."

         On October 10, 2016, LeClair and King Goen amended their petition to add David Deison, Bart Dale, and Kirkley as plaintiffs but did not amend the substance of their claims. Based on an arbitration clause contained in King Goen's membership agreement, Tony Robinson and TSW Energy moved to compel arbitration. In response, the Parker County plaintiffs summarized their claims, which again did not include any mention of HSB, Lindley, or the enforceability of the notes and guaranties. The trial court entered an agreed order granting the motion and sent the case to mediation and, if unsuccessful, to arbitration.

         On February 1, 2017, the Parker County plaintiffs amended their petition to add BDOG and Sevens Corporation as plaintiffs, but did not add any substantive claims. All parties, including newly added plaintiffs BDOG and Sevens Corporation, signed a letter agreement on February 21, 2017, recognizing that the previously ordered arbitration had resulted in "a comprehensive resolution of all of the disputes between and among the various parties." Although the letter agreement requested that the trial court enter an "Agreed Final Arbitration Award, " the record before this court does not reflect that the trial court has entered such an award.[5]

         2. Taylor County

         On May 1, 2017, HSB filed suit against the Robinsons, the Deisons, Kirkley, the Dales, Blest, Sevens Corporation, and BDOG-the majority of LeClair's guarantors-seeking recovery based on those guarantors' breaches of their guaranty agreements. HSB further alleged that venue was proper in Taylor County based on the venue provision in each guaranty agreement, citing the general venue rule and the permissive venue statute applicable to contracts that are to be performed in a particular county. See Tex. Civ. Prac. & Rem. Code Ann. §§ 15.002, 15.035(a) (West 2017).

         On June 2, 2017, the Deisons, Kirkley, the Dales, Blest, Sevens Corporation, and BDOG-many of the guarantors of LeClair's debts-filed counterclaims against HSB, cross-claims against the Robinsons, and third-party claims against Lindley, alleging fraud and civil conspiracy based on HSB's, the Robinsons', and Lindley's misrepresentations surrounding the execution of the guaranty agreements. See Tex. R. Civ. P. 38(a), 97(a), (e). They requested that the guaranties be "rescind[ed]."

         3. The Aftermath

         Six days after the guarantors filed their counterclaims, cross-claims, and third-party claims in Taylor County, the Parker County plaintiffs amended their petition for a third time to add Nancy Deison, Jennifer Dale, and Blest as plaintiffs, which had all been named as defendants in Taylor County. In the same amended petition, LeClair filed claims against Lindley, HSB, Lori Robinson, and the "other Defendants"-Tony Robinson, TSW Energy, and TSW Oil & Gas-for fraud and civil conspiracy and requested that the trial court "rescind the Promissory Notes."

         HSB filed a plea in abatement and an alternative motion to transfer venue. In its plea, HSB asserted that the Taylor County suit was the first-filed suit regarding the enforcement of the notes and guaranty agreements held by HSB and, therefore, acquired dominant jurisdiction over LeClair's claims filed in Parker County. In its alternative venue motion, HSB argued that mandatory venue over LeClair's claims filed in Parker County lay in Taylor County as provided in the guaranty agreements, which were major transactions that specified venue in Taylor County. See Tex. Civ. Prac. & Rem. Code Ann. § 15.020(b), (c)(2) (West 2017). Lindley filed a motion to transfer venue and alternative plea in abatement, adopting HSB's venue and plea-in-abatement arguments. The Parker County plaintiffs amended their petition for a fourth time after HSB and Lindley sought abatement or transfer of LeClair's claims, but they added no new parties or distinct claims. No party argues that the guarantor plaintiffs' claims in Parker County-the inter-company claims-were subject to the pleas in abatement or motions to transfer. Indeed, HSB and Lindley moved for abatement or transfer of only "LeClair's claims" brought against them.

         On December 11, 2017, the Parker County trial court entered an order denying HSB's and Lindley's pleas in abatement and motions to transfer venue.[6]HSB and Lindley now seek mandamus relief from the trial court's denials.

         II. STANDARD FOR RELIEF

         Mandamus relief is justified only if the trial court committed a clear abuse of discretion and the relator has no adequate remedy at law. See In re Coppola, 535 S.W.3d 506, 508 (Tex. 2017) (orig. proceeding).

         A. Adequate Remedy at Law

         If a trial court clearly abuses its discretion by denying a plea in abatement involving dominant jurisdiction, the appropriate remedy is by mandamus. See In re Red Dot Bldg. Sys., Inc., 504 S.W.3d 320, 322 (Tex. 2016) (orig. proceeding); In re J.B. Hunt Transp., Inc., 492 S.W.3d 287, 299-300 (Tex. 2016) (orig. proceeding); Curtis v. Gibbs, 511 S.W.2d 263, 267 (Tex. 1974) (orig. proceeding); Dall. Fire Ins. Co. v. Davis, 893 S.W.2d 288, 292 (Tex. App.-Fort Worth 1995, orig. proceeding). Similarly, mandamus is the proper remedy if the trial court clearly abuses its discretion by denying a motion to enforce a contractual, mandatory venue-selection clause. See Tex. Civ. Prac. & Rem. Code Ann. § 15.0642 (West 2017); In re Laibe Corp., 307 S.W.3d 314, 316 (Tex. 2010) (orig. proceeding); In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 231 (Tex. 2008) (orig. proceeding). See generally In re Masonite Corp., 997 S.W.2d 194, 197 (Tex. 1999) (recognizing venue rulings generally not reviewable by mandamus unless the trial court disregarded guiding principles of law, rendering mandamus appropriate remedy). Thus, we need only determine if the trial court clearly abused its discretion by denying HSB's and Lindley's pleas in abatement based on dominant jurisdiction or by denying their motions to transfer venue.[7]

         B. Clear Abuse of Discretion

         A trial court clearly abuses its discretion if its decision is so arbitrary or unreasonable that it amounts to a clear and prejudicial error of law or if it incorrectly analyzes or applies the law. In re Olshan Found. Repair Co., 328 S.W.3d 883, 888 (Tex. 2010) (orig. proceeding). We review the trial court's application of the law de novo. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding) "A trial court has no 'discretion' in determining what the law is or applying the law to the facts." Id. As such, "[w]e must . . . carefully establish the controlling legal principles at issue in this case." J.B. Hunt, 492 S.W.3d at 294. We conclude, based on controlling dominant-jurisdiction precepts, that the trial court clearly abused its discretion by denying HSB's and Lindley's pleas in abatement.

         1. Dominant Jurisdiction

         HSB, Lindley, and LeClair recognize that the trial court's dominant-jurisdiction determination was governed by a two-part inquiry: (1) whether there was an inherent interrelation between the subject matter of the Taylor and Parker County suits and (2) if so, whether an exception to dominant jurisdiction applied. See id. at 292, 294, 298. Of course, their positions diverge regarding the answers to these questions.

         a. Inherent interrelation

         Generally, the court in which suit is first filed acquires dominant jurisdiction to the exclusion of other coordinate courts. Id. at 294. "In instances where inherently interrelated suits are pending in two counties, and venue is proper in either county, [8] the court in which suit was first filed acquires dominant jurisdiction." Red Dot, 504 S.W.3d at 322. Thus, when two suits are inherently interrelated, the trial court is required to abate the second-filed suit. Id.; J.B. Hunt, 492 S.W.3d at 294. To determine if claims are inherently interrelated, triggering dominant jurisdiction, we are guided by the compulsory-counterclaim rule. See J.B. Hunt, 492 S.W.3d at 292-93; see also Tex. R. Civ. P. 97(a). A counterclaim is compulsory if the claim: (1) is within the jurisdiction of the court, (2) was not the subject of a pending action when the original suit was commenced, (3) is mature and owned by the defending party at the time the pleading is filed, (3) arose out of the same transaction or occurrence that is the subject matter of the opposing party's claim, (4) is against an opposing party in the same capacity, and (5) does not require the presence of third parties over whom the court cannot acquire jurisdiction. See Tex. R. Civ. P. 97(a); J.B. Hunt, 492 S.W.3d at 292-93.

         Thus, claims are interrelated and subject to a plea in abatement if the first-filed claims are not the subject of a pending action at the time the pleading raising those claims is filed and if the claims meet the other dictates of rule 97(a). Tex.R.Civ.P. 97(a); see J.B. Hunt, 492 S.W.3d at 293 ("[A] counterclaim is compulsory if, in addition to Rule 97(a)'s other requirements, it was not the subject of a pending action when the original suit was commenced."). LeClair asserts that its claims against HSB and Lindley are not compulsory essentially because LeClair is not a named party to the Taylor County suit and because the Taylor County court does not have personal jurisdiction over LeClair or subject-matter jurisdiction over the dispute between LeClair, HSB, and Lindley.

         For the following reasons, we conclude that LeClair's Parker County claims are compulsory counterclaims and, thus, are inherently interrelated to the first-filed, Taylor County claims. See, e.g., Cleveland v. Ward, 285 S.W. 1063, 1066 (Tex. 1926), disapproved of on other grounds by Walker, 827 S.W.2d at 842; Lamar Sav. Ass'n v. White, 731 S.W.2d 715, 716 (Tex. App.-Houston [1st Dist.] 1987, orig. proceeding) (quoting V.D. Anderson Co. v. Young, 101 S.W.2d 798, 800-01 (Tex. 1937)). See generally J.B. Hunt, 492 S.W.3d at 292-93 (discussing rule 97(a) requirements for counterclaim to be considered compulsory).

         (1) within the jurisdiction of ...


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