Court Opinion

ID: 9662611
Source: CourtListenerOpinion
Date Created: 2023-08-23 23:14:06.924219+00
Date Added: 2024-06-11T12:27:11.638666
License: Public Domain

OPINION ON MOTION FOR REHEARING
In its Motion for Rehearing, Ma-dera Production Company contends the farmout agreement between Atlantic Rich-field Company (ARCO) and both Wagner & Brown, Limited (W & B) and C.W. Resources (CWR) was made on February 1,1996, rather than August 29, 1996. Specifically, Madera asserts that if the farm-out agreement’s effective date was August 29, 1996, then res judicata does not apply. This, Madera insists, is because the breach litigated in the federal suit is based on an option period ending May 1, 1996, rather than the judicially-recognized option period ending July 1,1997.
In its federal suit against ARCO, Ma-dera asserted that its February 1994 letter to ARCO extended the option period ending May 1, 1996 to July 1, 1997. In its judgment, the federal court agreed. The court recognized the Madera ARCO option period ended on July 1, 1997. Therefore, whether the farmout agreement occurred in February 1996 or August 1996 is of no consequence. Both dates were within the extended option period recognized by the federal court.
To prevent being barred by res judicata, Madera had an obligation to bring all claims and parties in privity in the first suit as long as they arose out of the same subject matter. As stated above, a subsequent suit will be barred by res judicata 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. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 631 (Tex.1992). Factors to consider in determining whether facts constitute a single “transaction” are “their relatedness in time, space, origin, or motivation, and whether, taken together, they form a convenient unit for trial purposes.” Restatement (Second) op Judgments § 24 cmt. b (1980); see Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 799 (Tex.1993). The claims and parties Madera now seeks to bring in state court derived from the same transaction as its federal claims. Specifically, both claims arose from the same option con*665tract; both concerned the same farmout agreement: the ARCO, W & B, and CWR agreement; both involved the same section of that agreement; and in both suits, Ma-dera sought substantially the same relief against ARCO. What we must decide is whether Madera could have, with the exercise of diligence, brought its state claims against ARCO, W & B, and CWR in its federal action.
Madera’s central contention is that res judicata cannot bar its present state claims against ARCO, W & B, and CWR because these claims did not accrue until judgment was rendered in the federal suit. That is, Madera had no actionable claim against ARCO and hence no need to raise it until the federal court created the judicially-extended option period. But, as stated above, the federal court did not create a new option period, but rather recognized the option period asserted by Madera. The August 29, 1996 alleged breach was always within the actual option period. During the federal litigation, as new parties and claims became known to Madera through the discovery process, it had an obligation to join them. From the record, it appears that is what Madera attempted to do. Madera, in its First and Second Motions for Leave to File an Amended Complaint, sought to add the same parties and claims in its federal suit that it now attempts to bring in state court. But the federal court denied the motions as untimely and without merit. In its Memorandum Opinion, the court pointed to Ma-dera’s failure to file a motion to compel discovery to obtain the necessary information to timely amend its complaint. Thus, from the record, it appears Madera’s failure to exercise due diligence prevented it from adding the new claims and parties it now seeks to bring in state court. Allowing the parties and claims to be added now in state court would provide Madera an opportunity to circumvent the determination by the federal court.
We reject Madera’s contention that the breaches complained about in the state action were unknown or could not have been known until it received the final judgment from the federal court and that its state claims are different than those litigated in the earlier federal action. Whether the farmout agreement constituted a breach in February 1996 or August 1996, both were within the option period asserted by Madera from its original complaint. Under either date, the claims were actionable in the federal suit. Madera’s failure to alternatively plead the August 1996 date in the federal action or add new parties cannot now be remedied by an action in state court. Because Madera’s state claims arose out of the same subject matter of the earlier federal suit and could have been raised there with the exercise of due diligence, Madera is barred by res judicata. Madera’s Motion for Rehearing is overruled.