Swiss Ave. Bank v. Slivka

• Decision Date: 23 December 1986
• Docket Number: No. 05-85-01354-CV,05-85-01354-CV
• Citation: 724 S.W.2d 394
• Parties: SWISS AVENUE BANK, Appellant, v. Gene R. SLIVKA, Appellee.
• Court: Texas Court of Appeals

Page 394

724 S.W.2d 394

SWISS AVENUE BANK, Appellant, v. Gene R. SLIVKA, Appellee.

No. 05-85-01354-CV.

Court of Appeals of Texas Dallas.

Dec. 23, 1986.

Rehearing Denied Feb. 3, 1987.

R. Michael Farquhar, Dallas, for appellant.

John Paul Kelly, Dallas, for appellee.

Before AKIN, SCALES and CARVER ¹, JJ.

SCALES, Justice.

Swiss Avenue Bank appeals from a judgment awarding Gene R. Slivka recovery of attorney's fees that Slivka paid under protest to the Bank pursuant to the provisions of two notes and deeds of trust. The Bank contends that it is entitled to collect from Slivka the attorney's fees incurred by the Bank in a prior action. We agree. Accordingly, we reverse the judgment of the trial court.

In 1978, Slivka executed and delivered to the Bank promissory notes and deeds of trust in connection with Slivka's purchase of two tracts of land. Slivka subsequently defaulted in payment under the notes and on December 14, 1982, the Bank notified Slivka that it was accelerating maturity of the entire amount of principal and interest due. In January 10, 1983, the trustee under the deeds of trust posted notice of foreclosure sales of the two tracts of land.

Slivka filed suit to enjoin the foreclosure sales. The Bank answered by general and special denials and prayed for recovery of attorney's fees incurred in defending the suit. ² The Bank based its claim for attorney's fees on a provision of the notes which provided:

[In the event default is made in the prompt payment of this note when due or declared due, and the same is placed in the hands of an attorney for collection, or suit is brought on same, or the same is collected through any judicial proceedings whatever, then the makers hereof agree and promise to pay ten per centum (10%) additional on the amount of the principal and interest then owing as attorney's fees.

Slivka v. Swiss Avenue Bank, 653 S.W.2d 939, 943 (Tex.App.--Dallas 1983, no writ) (Slivka I). ³ The trial court denied the injunction and awarded $11,735.77 in attorney's fees to the Bank. On appeal, this court affirmed the denial of the injunction but reversed the award of attorney's fees, on the ground that, although Slivka's action to enjoin foreclosure of the properties constituted a "judicial proceeding" as contemplated by the notes, the Bank could not recover attorney's fees in that judicial proceeding "separate and apart from the amount due on the note." Id. at 943. (Emphasis omitted). We therefore held that "since, the Bank did not sue on the note and collect on the note," the condition for recovery of attorney's fees had not been met and the Bank was not entitled to recover attorney's fees in that action. Id. at 944. No appeal was taken from that decision.

The day after rendition of judgment on appeal, the Bank again notified Slivka that the Bank was accelerating the maturity of all principal and interest under the notes. The notice further demanded a sum equal to 10% of the principal and interest then owing as attorney's fees. In order to avoid foreclosure of the properties, Slivka paid the balance of principal and interest plus $12,430.83 ⁴ attorney's fees as prescribed by the 10% provision of the notes. These attorney's fees were paid under protest.

Slivka then filed this suit to recover the attorney's fees, alleging that $12,430.83 was an unreasonable charge for a notice and demand letter and that the unreasonable charge constituted a violation of the Texas Deceptive Trade Practice-Consumer Protection Act. Trial was held before the court. The court found that the $12,483.83 ⁵ charge was unreasonable and that $300 would be a reasonable attorney's fee for services rendered in collection of the notes. The court rendered judgment that Slivka recover from the Bank the attorney's fees paid under protest but awarded the Bank a reasonable attorney's fee of $300 for writing the demand letter.

In its sole point of error, the Bank contends that the trial court erred in rendering a judgment for Slivka returning the attorney's fees collected by the Bank for the work performed by the Bank's attorneys in the prior litigation. The Bank asserts that, because the notes and deeds of trust provide that Slivka will pay attorney's fees incurred in litigation concerning the notes, deeds of trust, noteholders, or trustees, it is entitled to recover from Slivka those attorney's fees incurred by the Bank in defending the prior injunction suit. Since the uncontradicted evidence shows that $12,430.83 was a reasonable fee for defending the former suit on an hourly basis without regard to the 10% provision, the Bank argues that the trial court erred in not finding such fee to be a reasonable attorney's fee for collection of the notes and in not entering a take-nothing judgment against Slivka. Slivka, however, argues that the question of whether the Bank is entitled to recover attorney's fees in defending the prior action was determined adversely to the Bank in Slivka I and, therefore, res judicata bars any attempt to re-litigate the Bank's entitlement to recover attorney's fees for defending the injunction proceeding.

We first must decide whether our holding in Slivka I that the condition for recovery of attorney's fees under the notes had not been met in the absence of a suit on the notes is res judicata of a claim for attorney's fees in a subsequent collection action taken under the notes. ⁶ As a general rule a judgment on the merits in a suit on one cause of action is not conclusive of a subsequent suit on a different cause of action except as to issues of fact actually litigated and determined in the first suit. Griffin v. Holiday Inns of America, 496 S.W.2d 535, 538 (Tex.1973). Here, the Bank's right to recover attorney's fees under the notes and deeds of trust was not actually litigated and determined in Slivka I. Instead, the only question regarding attorney's fees which was actually litigated in Slivka I was whether, by defending the injunction proceeding, the Bank satisfied the condition of the notes which required that the notes be collected through a judicial proceeding in order to recover attorney's fees. We held in Slivka I that the condition had not been met in the absence of a claim on the notes.

There is, of course, at least one exception to the general rule stated above. See Griffin, 496 S.W.2d at 538. That exception provides that res judicata bars litigation of all issues connected with a cause of action which, with the use of diligence, might have been tried, as well as those which were actually tried. Ogletree v. Crates, 363 S.W.2d 431, 435 (Tex.1963). The Ogletree rule, however, applies only to the cause of action which was actually filed by the plaintiff and not to cross-actions which might have been filed by a defendant unless the compulsory counterclaim rule is applicable. Chandler v. Cashway Building Materials, Inc., 584 S.W.2d 950, 954 (Tex.Civ.App.--El Paso 1979, no writ). See TEX.R.CIV.P. 97. A claim for the balance due under a note secured by a deed of trust is not a compulsory counterclaim to a proceeding to enjoin foreclosure of the deed of trust securing the debt. Cf. Carter v. Gray, 125 Tex. 219, 81 S.W.2d 647, 648 (Comm'n App.1935) ("the right to recover a personal judgment for a debt secured by a lien on land and the right to have foreclosure of [the] lien are severable, and a plaintiff may elect to seek a personal judgment without foreclosing the lien, and even without a waiver of the lien"); Lazidis v. Goidl, 564 S.W.2d 453, 456 (Tex.Civ.App.--Dallas 1978, no writ) ("a holder of a secured note may sue ... on the note without resorting to the security.... a holder of a secured note may proceed against the security and then, if a deficiency exists, seek payment from the maker"); Lodal & Bain Engineers, Inc. v. Bayfield Public Utility District, 583 S.W.2d 653, 654-55 (Tex.Civ.App.--Houston [1st Dist.] 1979), rev'd on other grounds, 602 S.W.2d 262 (Tex.1980) ("a personal judgment on a debt and the right to foreclose a lien are severable and may be made the subject of two distinct causes of action"). Thus, because the Bank was not required to assert a claim for the balance due on the notes as a compulsory counterclaim in Slivka's proceeding to enjoin foreclosure of the liens, the Ogletree rule that res judicata bars litigation of all issues connected with a cause of action which, with diligence, might have been tried is inapplicable.

Moreover, the question before us was expressly reserved by this court in Slivka I. In that opinion, we stated:

We do not reach the question of whether the Bank may recover attorney's fees in any other action or by virtue of the terms and provisions of the deeds of trust and this opinion is not to be read as holding that the Bank may not hereafter recover attorney's fees as provided for in the notes and deeds of trust.

Slivka, 653 S.W.2d at 944. Res judicata will not operate to bar an action where, in the first action, the court expressly refused to decide the issue or expressly reserved the right to maintain the second action. See Chandler v. Prichard, 321 S.W.2d 891, 894 (Tex.Civ.App.--Eastland 1958, writ ref'd n.r.e.) ("the court in its judgment expressly provided that it was not passing upon [appellee's] claim; therefore, the [previous] judgment could not have been res judicata"); see also RESTATEMENT (SECOND) OF JUDGMENTS § 26(b) 1982. Accord, Equitable Fire & Marine Insurance Co. v. Bradford Builders, Inc., 174 So.2d 44, 45 (Fla.Dist.Ct.App.1965) ("to support a defense of res judicata, it must be clear that the court in the previous action intended that the disposition there was to be without right to further proceedings"); Powell Brothers Truck Lines, Inc. v. State, 177 Okl. 568, 61 P.2d 231, 233 (1936) ("a judgment or decree which expressly excepts or reserves specified rights or claims ... or the right to take further proceedings in respect to certain matters, is not a bar to a subsequent action so reserved; but, on the...