Dewey Weaver v. Texas Capital Bank N.A.
PUBLISHED OPINION FILED. [10-10835 Reversed and Rendered] Judge: JES , Judge: FPB , Judge: CH Mandate pull date is 11/07/2011 [10-10835]
Date Filed: 10/17/2011
IN THE UNITED STATES COURT OF APPEALS
United States Court of Appeals
FOR THE FIFTH CIRCUIT
October 17, 2011
Lyle W. Cayce
TEXAS CAPITAL BANK N.A.,
Appeal from the United States District Court
for the Northern District of Texas
Before SMITH, BENAVIDES, and HAYNES, Circuit Judges.
This is an appeal from a grant of a summary judgment in favor of PlaintiffAppellee Dewey Weaver (“Weaver”), and a denial of a cross-motion for summary
judgment filed by Defendant-Appellant Texas Capital Bank N.A. (“Texas
We REVERSE and RENDER judgment in favor of Defendant-
Appellant Texas Capital.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff-Appellee Weaver was a member of SL Management, a Louisiana
company that bought and sold real estate in Texas. Between October 2004 and
September 2006, SL Management obtained loans from Texas Capital in the form
of four promissory notes totaling $978,719. The notes were secured by eleven
Date Filed: 10/17/2011
tracts of land in Tarrant County, Texas, and Weaver and his business partner,
Walter Dootson, executed personal guaranties of payment on each of the
The guaranties unconditionally committed Weaver and
Dootson to satisfy SL Management’s debt on the promissory notes.
On January 16, 2008, SL Management filed a Chapter 11 bankruptcy
petition in the Northern District of Texas. Texas Capital appeared as a creditor
in SL Management’s bankruptcy suit and filed an unobjected-to proof of claim
On March 6, 2008, SL Management filed its plan of
reorganization. This plan classified Texas Capital as a Class 10 creditor.
Section 5.11 of SL Management’s bankruptcy plan provided:
The Debtor shall sell [Texas Capital’s collateral properties] to The
Champions Group, or its designee [ ], pursuant to that certain
Motion to Sell [ ] filed with the Court on March 6, 2008. It is
anticipated that the sale of these properties will occur prior to the
Effective Date and that [Texas Capital] will have no remaining
claim in Debtor’s estate. In the event the Court does not approve
the Sale Motion or if any of [Texas Capital’s collateral properties]
are not purchased by Champions as required by Sale Motion, the
Debtor shall upon the Effective Date surrender all Debtor’s interest
[in Texas Capital’s collateral properties] to the Class 10 creditor
under 11 U.S.C. [§] 1129(b)(2)(iii) in full satisfaction of the Class 10
claims. To the extent the Court after notice and hearing determines
that the cumulative value of the properties to be surrendered to
[Texas Capital] under this Plan is less than the cumulative amount
of the Allowed Texas Secured Claim, any deficiency shall be treated
as a Class 12 claim and paid in accordance with the Class 12
treatment. Class 10 shall not have a Class 11 Claim. Class 10 is
impaired under this Plan.
Under the bankruptcy plan, Class 12 claimants were to be paid by Weaver in an
amount fully satisfying their claims, up to $500,000. The bankruptcy plan also
contained a provision stating that the plan would be the “exclusive remedy for
payment of any claims or debt so long as the [p]lan is not in default,” which
Date Filed: 10/17/2011
Weaver claims enjoined Texas Capital from separately suing to collect on the
Thus, as to Texas Capital, SL Management’s bankruptcy plan provided,
first, that SL Management would attempt to sell the properties in Tarrant
County with which Texas Capital had secured the promissory notes, and second,
if that sale did not occur, that all of the secured properties would be surrendered
to Texas Capital in “full satisfaction of the Class 10 claims” by the Effective Date
of the plan.
Should the bankruptcy court determine, however, that “the
cumulative value of the properties to be surrendered . . . is less than the
cumulative amount of the [claim],” then any deficiency would be treated as a
Class 12 claim and would be paid by Weaver “in the amount necessary for full
and complete satisfaction” of the claim.
On September 2, 2008, the bankruptcy court confirmed SL Management’s
bankruptcy plan. SL Management did not sell the Tarrant County properties,
and on October 13, 2008—the Effective Date of the plan—the properties were
surrendered to Texas Capital. Neither party requested a valuation of the
collateral. On December 1, 2008, Texas Capital foreclosed on the properties,
leaving a deficiency of $431,659.34, plus fees, expenses, and interest. The
bankruptcy action was closed on December 16, 2008.
Previously, on April 8, 2008—during the pendency of SL Management’s
bankruptcy case—Texas Capital filed an action in Texas state court to enforce
Section 10.3 of the bankruptcy plan provides:
Notwithstanding anything contained herein to the contrary, neither Debtor,
reorganizing Debtor, guarantors of the debtor, or any people liable on a debt
with the Debtor shall be discharged and released from any liability for claims
and debts under this Plan, however, the exclusive remedy for payment of any
claims or debt so long as the Plan is not in default shall be the Plan.
Notably, this provision does not mention Weaver, nor does it contain any language purporting
to control the filing of claims on the separate guaranty agreements.
Date Filed: 10/17/2011
the guaranty agreements between it and Weaver. Weaver was properly served,
but he did not answer or otherwise respond, and on December 15, 2008, the
Texas state court entered a default judgment against Weaver for $766,645.79,
plus fees, costs, and interest. In February 2009, Texas Capital initiated
collection proceedings against Weaver in Louisiana state court and registered
the Texas judgment, subject to a $334,986.45 credit.
In response to the collection action, on February 27, 2009, Weaver filed the
instant action in the Northern District of Texas, seeking a declaration that SL
Management’s debt to Texas Capital was fully satisfied by the surrender of
collateral, and therefore, that any liability owed on the guaranties was also
satisfied at the time of the Texas state judgment, or in the alternative, that the
Texas state default judgment was fully satisfied by the bankruptcy plan. Under
both theories, Weaver’s case is premised on an argument that since SL
Management’s underlying debt to Texas Capital is paid, no payment related to
the guaranties need be made to Texas Capital. The parties filed cross-motions
for summary judgment, and on July 23, 2009, the action was referred to the
bankruptcy court for proposed findings of fact and conclusions of law.
The district court largely adopted the bankruptcy court’s proposed
findings, and it denied Texas Capital’s motion for summary judgment and
granted in part Weaver’s motion for summary judgment. Specifically, the
district court held: (1) that the Texas state default judgment was entitled to
preclusive effect; (2) that SL Management’s surrender of the collateral properties
was presumed to be in full satisfaction of its debt to Texas Capital, and that the
Texas default judgment was also satisfied, but that Texas Capital could move to
reopen the bankruptcy case to seek a deficiency valuation hearing; (3) that the
bankruptcy plan enjoined Texas Capital from pursuing a collection action
against Weaver without establishing a default under the bankruptcy plan; and
Date Filed: 10/17/2011
(4) that the Rooker-Feldman doctrine did not deprive the court of jurisdiction.2
On August 6, 2010, the district court entered judgment, declaring that “the
default judgment obtained by [Texas Capital] against [Weaver] in Texas state
court has been fully satisfied by the plan of reorganization of SL Management.”
On August 19, 2010, Texas Capital filed a notice of appeal.
II. STANDARD OF REVIEW
We review a district court’s grant of summary judgment de novo. Holt v.
State Farm Fire & Cas. Co., 627 F.3d 188, 191 (5th Cir. 2010); Fed. R. Civ. P.
56(a). We also review a district court’s rulings on questions of law, such as res
judicata and subject matter jurisdiction, de novo. Gasch v. Hartford Accident &
Indem. Co., 491 F.3d 278, 281 (5th Cir. 2007); Test Masters Educ. Servs., Inc. v.
Singh, 428 F.3d 559, 571 (5th Cir. 2005).
A. Rooker-Feldman Doctrine
Defendant-Appellant Texas Capital argues that the Rooker-Feldman
doctrine deprives this Court of subject matter jurisdiction. We address this issue
first because it touches upon the jurisdiction of the Court, and we conclude that
the Rooker-Feldman doctrine does not apply.
Under the Rooker-Feldman doctrine, “federal district courts lack
jurisdiction to entertain collateral attacks on state court judgments.” Liedtke v.
State Bar of Tex., 18 F.3d 315, 317 (5th Cir. 1994). A state court judgment is
attacked for purposes of Rooker-Feldman “when the [federal] claims are
‘inextricably intertwined’ with a challenged state court judgment,” Richard v.
Hoechst Celanese Chem. Grp., Inc., 355 F.3d 345, 350 (5th Cir. 2003), or where
The district court only parted with the bankruptcy court’s recommendation on the
issue of res judicata. The bankruptcy court recommended that the Texas state default
judgment not be given any preclusive effect because, according to the bankruptcy court, that
action was filed in knowing violation of its order that “no deficiency claim” could be filed
“absent its establishment at a valuation hearing in bankruptcy court.”
Date Filed: 10/17/2011
the losing party in a state court action seeks “what in substance would be
appellate review of the state judgment.” Johnson v. De Grandy, 512 U.S. 997,
1005–06 (1994). The doctrine, however, does not preclude federal jurisdiction
over an “independent claim,” even “one that denies a legal conclusion that a
state court has reached.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544
U.S. 280, 293 (2005).
In the current suit, Weaver seeks a declaration that SL Management’s
surrender of collateral under the bankruptcy plan satisfied any debt owed on the
guaranties, and therefore, either (1) that no debt was actually owed at the time
of the Texas judgment, or (2) that the Texas judgment itself has by extension
also been fully satisfied. This is a close issue, but given that granting the
requested relief does not actually require appellate-type review or invalidation
of the Texas judgment, and also considering the narrow scope of the RookerFeldman doctrine, we conclude that the doctrine does not deprive us of
jurisdiction. See Skinner v. Switzer, 131 S. Ct. 1289, 1297 (2011) (emphasizing
narrow scope of Rooker-Feldman doctrine); Exxon Mobil, 544 U.S. at 291–93
(same). Indeed, as we have noted in other cases, the Rooker-Feldman doctrine
generally applies only where a plaintiff seeks relief that directly attacks the
validity of an existing state court judgment. See, e.g., In re Bayhi, 528 F.3d 393,
402 (5th Cir. 2008) (holding that state judgment on a student loan obligation
could not be entirely vacated); In re Reitner, 152 F.3d 341, 343–44 (5th Cir. 1998)
(finding a violation of Rooker-Feldman doctrine where a district court decision
invalidated a state judgment revoking homestead rights); United States v.
Shepard, 23 F.3d 923, 924–25 (5th Cir. 1994) (finding violation of RookerFeldman doctrine where district court invalidated state judgment confirming
validity of foreclosure sale).
In reality, Texas Capital’s arguments against federal jurisdiction are more
closely related to res judicata. Indeed, Texas Capital’s central argument is that
Date Filed: 10/17/2011
the issue of whether the surrender of the collateral properties under the
bankruptcy plan also satisfied the debt owed by Weaver on the guaranties is a
defense to payment, which Weaver should have raised in the state action. This
issue is not jurisdictional, but instead, is more appropriately resolved through
an application of res judicata. See, e.g., Exxon Mobil, 544 U.S. at 293 (explaining
that if a federal plaintiff presents some independent claim, then the law of
preclusion determines the effect of earlier judgments). Thus, we conclude that
the Rooker-Feldman doctrine is not implicated and we proceed to consider the
res judicata effect of the Texas judgment.
B. Res Judicata
As previously noted, Texas Capital’s primary argument for reversing the
district court’s judgment is that Weaver’s current claim for declaratory relief is
barred by res judicata. Specifically, Texas Capital argues that the current action
is actually a defense to payment that should have been raised in the Texas state
action and that it may not now be asserted as a separate claim for relief. The
district court ruled that the Texas default judgment must be given preclusive
effect, but it also ruled that the judgment was fully satisfied by SL
Management’s bankruptcy plan. We now conclude that Weaver’s claim for
declaratory judgment is barred by res judicata under Texas law.
As a preliminary matter, we will address Plaintiff-Appellee Weaver’s
argument that the Texas state judgment is void because it was obtained in
violation of a bankruptcy stay, and it is, therefore not entitled to any preclusive
effect. According to Weaver, section 10.3 of the bankruptcy plan enjoined
collection efforts against guarantors so long as the bankruptcy plan was not in
default. First, it is not clear from the language of the bankruptcy plan that
collection efforts against third-parties were actually enjoined. However, even
assuming the bankruptcy plan has this effect, actions taken in violation of an
injunction are not void. Suntex Dairy v. Bergland, 591 F.2d 1063, 1068 (5th Cir.
Date Filed: 10/17/2011
1979) (“An injunction decree operates in personam, and an act done in violation
of an injunction is not a nullity.”).3 Moreover, Weaver waived his argument that
the Texas judgment is void, because he failed to cross-appeal the district court’s
ruling on this issue. Although an appellee may argue any ground available to
support affirmance of a judgment, he may not argue for a ruling that would
expand his legal rights. Castellano v. Fragozo, 352 F.3d 939, 960 (5th Cir. 2003)
(en banc) (finding that issue not raised on a cross-appeal could still be presented
where it merely argued an alternative ground to affirm and did not request
expansion of rights under the judgment). The district court expressly recognized
the validity of the judgment; should it now be found void, Weaver would regain
the right to dispute his obligation to make payment on the judgment or even on
the underlying guaranties.
Given that the Texas state default judgment is not void, we will now
consider its preclusive effect. In determining the preclusive effect of an earlier
state court judgment, federal courts apply the preclusion law of the state that
rendered the judgment. Marrese v. Amer. Acad. of Orthopaedic Surgeons, 470
U.S. 373, 381 (1985); Conn. Bank of Comm. v. Congo, 309 F.3d 240, 248 (5th Cir.
Further, as a guarantor, Weaver is not entitled to the protections of a debtor’s
automatic stay. 11 U.S.C. § 362(a). Automatic-stay provisions generally only protect the
debtor and very rarely extend to protect third parties. See Arnold v. Garlock, Inc., 278 F.3d
426, 436 (5th Cir. 2001). Here, Texas Capital sought a judgment against Weaver, not against
any of the assets of SL Management, and there is no indication that a judgment against
Weaver is functionally one against SL Management. See Reliant Energy Servs., Inc. v. Enron
Can. Corp., 349 F.3d 816, 825 (5th Cir. 2003) (stating bankruptcy stay may protect third party
defendant where “judgment against the third-party defendant will in effect be a judgment or
finding against the debtor” (quotation marks omitted)); In re HSM Kennewick, L.P., 347 B.R.
569, 571 (Bankr. N.D. Tex. 2006) (“Section 362(a)(3) implements a stay of any action, whether
against the debtor or third parties, that seeks to obtain or exercise control over the property
of the debtor.”).
Date Filed: 10/17/2011
2002); 28 U.S.C. § 1738. Because the judgment at issue is from a Texas state
court, Texas preclusion law applies.4
Under Texas law, default judgments have preclusive effect for purposes of
claim preclusion. Houtex Ready Mix Concrete & Materials v. Eagle Const. &
Envtl. Servs., L.P., 226 S.W.3d 514, 519 (Tex. App.—Houston [1st Dist.] 2006,
no pet.); see also Moyer v. Mathas, 458 F.2d 431, 434 (5th Cir. 1972) (noting that
a prior “judgment is no less res judicata because it was obtained by default,
absent any proof of fraud, collusion, or lack of jurisdiction.”).5 Claim preclusion,
or res judicata, bars assertion of a claim in a subsequent case when: (1) there
is a prior final judgment on the merits by a court of competent jurisdiction; (2)
the parties in the second action are the same or in privity with those in the first
action; and (3) the second action is based on the same claims as were raised or
could have been raised in the first action. Igal v. Brightstar Info. Tech. Grp.,
Inc., 250 S.W.3d 78, 86 (Tex. 2008). “This approach mandates that a defendant
bring as a counterclaim any claim arising out of the transaction or occurrence
that is the subject matter of the opposing party’s suit.” State & Cnty. Mut. Fire
Ins. Co. v. Miller, 52 S.W.3d 693, 696 (Tex. 2001); Ingersoll-Rand Co. v. Valero
Energy Corp., 997 S.W.2d 203, 206–07 (Tex. 1999) (stating that res judicata
precludes the assertion of all “claims or defenses that, through diligence, should
In determining state law, federal courts look to final decisions of the state’s highest
court. Transcon. Gas Pipe Line Corp. v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992).
When there is no ruling by the state’s highest court, the federal court must determine what
the highest court of the state would decide. Id. While decisions of intermediate state
appellate courts provide persuasive guidance, they are not controlling. Matheny v. Glen Falls
Ins. Co., 152 F.3d 348, 354 (5th Cir.1998).
Additionally, to the extent that the bankruptcy court’s confirmation of SL
Management’s bankruptcy plan and the Texas state decision are inconsistent with each other,
the “last-in-time” rule dictates that where “there are two prior inconsistent judgments, only
the last judgment has estoppel effect.” Reimer v. Smith, 663 F.2d 1316, 1327 (5th Cir. 1981);
Browning v. Navarro, 887 F.2d 553, 563 (5th Cir. 1989) (stating “last-in-time” rule is law in
Texas); see also Restatement (Second) of Judgments § 15.
Date Filed: 10/17/2011
have been litigated in the prior suit but were not”); In re Erlewine, 349 F.3d 205,
210 n.5 (5th Cir. 2003) (“In the Texas courts, the doctrine of res judicata . . . bars
litigation of all issues connected with a cause of action or defense which, with the
use of diligence, might have been tried in the prior suit.” (quotation omitted)).
Texas courts have interpreted this rule as only barring prior defendants from
asserting claims in a later action that were compulsory counterclaims in the
prior suit. Ingersoll-Rand, 997 S.W.2d at 207 (stating any claims that would be
compulsory counter-claims must be brought by defendant or be barred due to res
judicata); Pagosa Oil & Gas, L.L.C. v. Marrs & Smith P’ship, 323 S.W.3d 203,
216 (Tex. App.—El Paso 2010, pet. denied) (same); Pinebrook Props., Ltd. v.
Brookhaven Lake Prop. Owners Ass’n, 77 S.W.3d 487, 496 (Tex. App.—
Texarkana 2002, pet. denied) (same).6
Given that it is not disputed that there is a prior final judgment issued by
a court of competent jurisdiction and that the parties are identical in both
actions, the only remaining issue in question is whether this action is based on
the same claims that were raised in the first.7 In determining whether two
actions are sufficiently related for purposes of res judicata and the compulsory
counterclaim rule, Texas follows a transactional approach. Ingersoll-Rand, 997
S.W.2d at 206–07 (Tex. 1999); Barr v. Resolution Trust Corp., 837 S.W.2d 627,
630–31 (Tex. 1992) (stating definition of transaction in compulsory counterclaim
Under Texas Rule of Civil Procedure 97(a), a compulsory counterclaim is “any claim
within the jurisdiction of the court, not the subject of a pending action, which at the time of
filing the pleading the pleader has against any opposing party, if it arises out of the
transaction or occurrence that is the subject matter of the opposing party’s claim and does not
require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction.” Tex. R. Civ. P. 97(a).
Additionally, none of the other requirements in the compulsory counterclaim rule are
at issue. It is not disputed that the Texas state court had jurisdiction over the current claim
for declaratory relief, that this claim was not the subject of a separate pending action, and that
assertion of this claim in state court did not require the presence of unavailable third parties.
See Tex. R. Civ. P. 97(a).
Date Filed: 10/17/2011
and res judicata rules are “substantially similar”). To decide whether the two
lawsuits arose out of the same transaction or occurrence, several factors are
considered together, including “their relatedness in time, space, origin, or
motivation, and whether, taken together, they form a convenient unit for trial
purposes.” Getty Oil Co. v. Ins. Co. of N.A., 845 S.W.2d 794, 799 (Tex. 1992)
(quotation marks omitted) (citing Restatement (Second) of Judgments § 24
cmt.b); Crowder v. Amer. Eagle Airlines, Inc., 118 F. App’x 833, 838 (5th Cir.
2004) (per curiam) (applying Texas law). “Where there is a legal relationship,
such as [ ] a lease or contract, all claims arising from that relationship will arise
from the same subject matter and be subject to res judicata.” Sanders v.
Blockbuster, Inc., 127 S.W.3d 382, 386 (Tex. App.—Beaumont 2004, pet. denied);
see also Jones v. Sheehan, Young & Culp, P.C., 82 F.3d 1334, 1342–43 (5th Cir.
1996) (finding previous defendant cannot assert new claims related to contract
that was subject of previous suit).8
Here, not only is the current declaratory judgment action related to the
Texas action, it is brought on the same exact guaranties. Additionally, the
events leading to the Texas lawsuit—the signing of the guaranties and SL
Management’s bankruptcy—provide the same factual foundation for the instant
claim. Rather than disputing his obligation to make payment on the guaranties
in the Texas action, Weaver filed this lawsuit seeking a declaration that no
payment needed to be made because of the operation of the bankruptcy plan. In
reality, Weaver’s claim for declaratory relief is merely a defense, converted into
a cause of action, that could and should have been raised in that earlier Texas
See also South Plains Switching, Ltd. Co. v. BNSF Ry., 255 S.W.3d 690, 699–700
(Tex. App.—Amarillo 2008, pet. denied) (holding claims brought on same contract arise from
same transaction); Musgrave v. Owen, 67 S.W.3d 513, 520 (Tex. App.—Texarkana 2002, no
pet. h.) (finding all claims arising from same covenant must be asserted in original action);
Jones v. First Bank of Anson, 846 S.W.2d 107, 108–10 (Tex. App.—Eastland 1992, no writ)
(finding previous defendant is barred from bringing claims related to collection on a note when
bank previously sued for judgment on same note).
Date Filed: 10/17/2011
action. See Tex. R. Civ. P. 94 (listing “discharge in bankruptcy,” “payment,” and
“release” as affirmative defenses). Because this action and the Texas action
arose from the same transaction, the current claim needed to be raised as a
defense in that earlier suit and may not now be brought as a separate claim for
relief. See, e.g., Amer. Int’l Indus., Inc. v. Scott, --- S.W.3d ----, 2011 WL 1631764,
at *3–6 (Tex. App.—Houston [1st Dist] Apr. 28, 2011) (finding that a previous
defendant could not file suit seeking a declaratory judgment asserting a defense
to payment of a settlement agreement because the agreement was the subject
of an earlier suit); Houtex, 226 S.W.3d at 520–21 (applying res judicata to bar a
plaintiff from filing a suit for declaratory judgment on the application of a
contract that could have been asserted as a claim or defense in an earlier action
about that contract).9 Indeed, this wasteful lawsuit embodies the importance of
many of the policy rationales for res judicata, which include, among other things,
“the need to . . . prevent vexatious litigation . . . and [to] promote judicial
economy.” Barr, 837 S.W.2d at 629. Accordingly, we conclude that res judicata
bars the assertion of Plaintiff-Appellee Weaver’s claim for declaratory judgment.
For the foregoing reasons, the Court REVERSES the judgment of the
district court and RENDERS judgment in favor of Defendant-Appellant Texas
In its analysis, the district court found that the Texas judgment was entitled to
preclusive effect, but still found that the current relief could be granted. The district court’s
analysis on the effect of the state judgment seems almost backwards—instead of first
determining whether the state judgment completely precluded Weaver’s current claim, the
district court reached the merits and found that the suit was not precluded because its own
ruling did not contradict the state judgment.
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