Opinion ID: 2419846
Heading Depth: 1
Heading Rank: 3

Heading: Ingersoll-Rand's Appeal

Text: The court of appeals held that Ingersoll-Rand's claim for attorney's fees was a compulsory counterclaim that Ingersoll-Rand should have brought in Valero I; and, therefore, res judicata barred the claim in Valero II. We disagree. Res judicata prevents parties and their privies from relitigating a cause of action that has been finally adjudicated by a competent tribunal. [10] Also precluded are claims or defenses that, through diligence, should have been litigated in the prior suit but were not. [11] The doctrine is intended to prevent causes of action from being split, thus curbing vexatious litigation and promoting judicial economy. [12] Res judicata, however, does not bar a former defendant who asserted no affirmative claim for relief in an earlier action from stating a claim in a later action that could have been filed as a cross-claim or counterclaim in the earlier action, unless the claim was compulsory in the earlier action. [13] Here, the court of appeals concluded that Ingersoll-Rand's claim was compulsory. But a counterclaim is compulsory only if: (1) it is within the jurisdiction of the court; (2) it is not at the time of filing the answer the subject of a pending action; (3) the claim is mature and owned by the defendant at the time of filing the answer; (4) it arose out of the same transaction or occurrence that is the subject matter of the opposing party's claim; (5) it is against an opposing party in the same capacity; and (6) it does not require the presence of third parties over whom the court cannot acquire jurisdiction. [14] A claim having all of these elements must be asserted in the initial action and cannot be asserted in later actions. [15] To meet its summary judgment burden on the affirmative defense that Ingersoll-Rand's claim was compulsory and barred by res judicata, Valero had to prove that Ingersoll-Rand's counterclaim satisfied each element above. Ingersoll-Rand asserts that its indemnity claim for attorney's fees was not compulsory because the claim could not have become mature before the trial court's rendition of summary judgment in Valero I. A claim is mature when it has accrued. [16] To determine the correct accrual date of an indemnity claim we look to the contract's indemnity provision. There are two types of indemnity agreements, those that indemnify against liabilities and those that indemnify against damages. [17] Broad language, like that in this contract, that holds the indemnitee harmless against all claims and liabilities evidences an agreement to indemnify against liability. [18] Such provisions entitle the indemnitee to recover when the liability becomes fixed and certain, as by rendition of a judgment, whether or not the indemnitee has yet suffered actual damages, as by payment of a judgment. [19] Valero's suit presented the rather anomalous situation of an indemnitor (Valero) acting concurrently as the plaintiff seeking damages from the indemnitee (Ingersoll-Rand). The more common scenario for an indemnification dispute involves three separate and distinct parties: plaintiff (party one), indemnitee (party two), and indemnitor (party three). Despite the unusual factual setting here, we find no persuasive reason not to apply the longstanding rule that a claim under a liability indemnification clause does not accrue, and thus is not mature, until the indemnitee's liability to the party seeking damages becomes fixed and certain. [20] When Ingersoll-Rand was added as a defendant in Valero I, it was entirely conceivable that Ingersoll-Rand might sustain extensive liabilities because of Valero's claims for damages. And Ingersoll-Rand, presumably, would have sought indemnification for all such liabilities under the contract's indemnity provision. Any claim Ingersoll-Rand could have asserted, however, could not have accrued until all of Ingersoll-Rand's potential liabilities to Valero became fixed and certain by rendition of a judgment. In Valero I, the trial court rendered summary judgment for Ingersoll-Rand that Valero take nothing on its claims for damages. That judgment was signed on October 25, 1991. Ingersoll-Rand's liabilities became fixed and certain at zero for Valero's tort, DTPA, and contract damages plus the total amount of attorney's fees and costs incurred in defending against Valero when summary judgment was rendered in Valero I. [21] Because Valero demonstrated no time earlier than the date of judgment in Valero I by which Ingersoll-Rand's liabilities became fixed and certain, the third element of the compulsory counterclaim rulematurity of the claimwas not satisfied. Our reasoning is bolstered by commentary on the analogous federal rule. The Texas compulsory counterclaim rule is based on Rule 13 of the Federal Rules of Civil Procedure. [22] In commenting on Federal Rule 13(a)'s condition that a claim must be mature in order to be compulsory, Professors Wright and Miller state: This exception to the compulsory counterclaim requirement necessarily encompasses a claim that depends upon the outcome of some other lawsuit and thus does not come into existence until the action upon which it is based has terminated. For example, ... a claim for contribution cannot be compulsory in the action whose judgment is the subject of the contribution suit. [23] Likewise, an indemnity claim cannot be compulsory in the action whose judgment is the subject of the indemnity suit. In a suit for either contribution or indemnity the injury upon which suit might be based does not arise until some liability is established. In this case, as in a contribution claim against a joint tortfeasor, liability could not have been established until judgment was rendered. The court of appeals relied heavily on Getty Oil v. Insurance Company of North America [24] in reaching a different conclusion. In Getty we stated: The contingent nature of these claims, however, does not preclude the operation of res judicata. We held in Barr [ v. Resolution Trust Corp. ] that [a] subsequent suit will be barred if it arises out of the same subject matter of a previous suit and which, through the exercise of diligence, could have been litigated in a prior suit. 837 S.W.2d at 631. Getty could have asserted its present claims in the [previous] suit, with their resolution being contingent on the plaintiffs' claims. [25] In all respects, we stand by Getty. But Getty's language cannot be applied without considering the case's factual context. In Getty we held that an indemnitee (Getty) was barred by res judicata from maintaining a claim against an indemnitor (NL Industries), because Getty had sought the same relief under a different theory in an earlier suit. In the earlier wrongful death suit Getty and NL were co-defendants, and Getty chose to file a permissive cross-claim against NL based on indemnification language in their contract. By taking this action Getty put itself in the same position, for purposes of res judicata, as a plaintiff filing a cause of action for damages. We specifically held this to be so in Getty. [26] As the plaintiff for res judicata purposes, Getty was subject to the general rule of res judicata that any cause of action that arises out of the same subject matter should, if practicable, be litigated in the same lawsuit. [27] In the second suit, Getty was the actual plaintiff. Its claim again involved asserting indemnity provisions as the basis for damages. Because Getty could have asserted those claims in the earlier action but did not, res judicata barred the claims. We face a different situation here. In relation to Valero, Ingersoll-Rand was a defendant only and made no affirmative claims for relief in Valero I. Ingersoll-Rand, like Getty, could have stated a permissive claim against Valero, but it did not. This fact is significant because of the rule we pointed out earlier: the doctrine of res judicata does not bar claims against the plaintiff from an earlier suit by a defendant from the earlier suit, unless the later claims were compulsory in the earlier suit. Because Ingersoll-Rand, unlike Getty, made no affirmative claims in the first suit, res judicata does not bar Ingersoll-Rand's later claims unless they were compulsory. But, as we explained earlier, the compulsory counterclaim elements were not met by Ingersoll-Rand's potential claims in Valero I. Thus, Ingersoll-Rand's claims in Valero II are not barred. As the court of appeals points out, and as we said in Getty, we have held that an indemnitee may bring a claim against an indemnitor before the judgment is assigned against the indemnitee. [28] That is indeed what Getty did. We allow such claims to be brought, in the interest of judicial economy, as an exception to the accrual rule for indemnity claims. [29] Such claims are contingent on accrual. But we have never held that an indemnitee must state such claims in the initial suit to preserve them. As we specifically noted in Getty, such claims are permissive. [30] None of the cases we cited in Getty, for the proposition that an indemnitee may file a claim for indemnification before judgment is rendered, stand for the proposition that contingent indemnity claims must be brought in the initial action. Rather, the cases cited in Getty hold that it is merely permissive for such claims to be brought before judgment in the initial action. [31] The fact that attorney's fees and costs were the only liabilities for which Ingersoll-Rand was eventually entitled to seek indemnity does not change our conclusion. It is true that a counterclaim for attorney's fees will in most cases be compulsory. [32] We do not dispute the legal basis of such a statement because a claim for attorney's fees will generally satisfy the elements of the compulsory counterclaim rule. However, an indemnity claim based on an agreement to indemnify against liabilities has different characteristics than a simple claim for attorney's fees. The attorney's fees are certain to be incurred as soon as an attorney is retained, while liabilities covered by an indemnity agreement in any given case may never be incurred depending on the outcome of the case. This difference is significant. Consider Fidelity Mutual Life Insurance Company v. Kaminsky , [33] another case upon which the court of appeals relied. In Kaminsky the court concluded that a contractual claim for attorney's fees, even though contingent on the outcome of the suit, was mature and compulsory. [34] The contractual provision on which Dr. Kaminsky relied established his contractual right to attorney's fees contingent on the result of the suit, but it did not indemnify him against other liabilities generally. It was not an indemnification agreement. Thus, the general rule that a cause of action accrues when facts come into existence that authorize the claimant to seek a judicial remedy applied in Kaminsky. [35] Dr. Kaminsky's claim for attorney's fees accrued when he first incurred fees. As we have explained, a specific accrual rule applies to claims for indemnification: an indemnity claim does not accrue until all of the potential liabilities of the indemnitee become fixed and certain. This specific rule is consistent with the general accrual rule. The facts that entitle an indemnitee to seek indemnification through suit come into existence when the indemnitee's liabilities become fixed and certain by judgment. While attorney's fees will almost always be a component of an indemnitee's total liabilities, we decline to hold that recovery for the attorney's fees component of an indemnitee's potential liability must be pursued before and separate from the remaining components. An indemnification claim does not accrue until all of the indemnitee's liabilities become fixed and certain. Because we resolve Valero's res judicata claim by applying the compulsory counterclaim rule, we need not consider Ingersoll-Rand's assertion that Valero waived, by Rule 11 agreement, [36] the right to assert res judicata. Valero also asserted in its motion for summary judgment that the four-year statute of limitations for contract claims barred Ingersoll-Rand's claims for attorney's fees. [37] To prevail on the limitations affirmative defense, Valero had the burden of conclusively proving when the cause of action accrued. [38] Ingersoll-Rand's claim did not accrue until October 25, 1991, the date that the trial court signed summary judgment in Valero I. [39] Because Ingersoll-Rand filed its claim for attorney's fees on September 16, 1994, less than four years after the trial court's judgment, the four-year statute of limitations does not bar Ingersoll-Rand's claim.