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Welch v. Hrabar - 110 S.W.3d 601 (Tex. App. 2003)

Rule:

For res judicata to apply, a party must establish the following elements: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a second action based on the same claims that were raised or could have been raised in the first action. For collateral estoppel to apply, a party must establish: (1) the facts sought to be litigated in the second action were fully and fairly litigated in the first action; (2) those facts were essential to the judgment in the first action; and (3) the parties were cast as adversaries in the first action. Strict mutuality of parties is no longer required. In short, res judicata prevents the relitigation of adjudicated claims or claims that could have been raised (claim preclusion) and collateral estoppel bars the relitigation of adjudicated essential facts (issue preclusion). Thus, when the issue or claim a defendant seeks to preclude was indeed raised in a prior suit, the prior tribunal must have actually determined the issue or claim on its merits for res judicata or collateral estoppel to bar the subsequent suit.

Facts:

In June 1999, several plaintiffs, including Welch, filed a tort action in the Tenth  Judicial District Court of Galveston County against their insurer, Farmers Insurance Exchange. The plaintiffs in the tort action alleged damage to their properties as a result of seismic blasting. In July 1999, Welch and Hrabar executed a “letter of understanding for independent geoscience consulting,” by which Welch and Hrabar agreed Hrabar would provide Welch with information on technical matters pertaining to Welch’s property damage claim and would charge Welch at the rate of $ 125 per hour. Two days later, they executed an addendum to the letter of understanding, which provided Hrabar, in addition to her hourly fee, would receive 10 percent of any gross settlement. By April 2000, Hrabar's invoice to Welch indicated Hrabar had performed over 415 hours of work for a total fee of $ 51,880.10. Of that amount, $ 48,705.10 remained due, according to the invoice. By letter dated April 11, 2000, Hrabar demanded payment of the amount due. When Welch was unable to pay, Hrabar filed a breach of contract action against the former and requested that she be paid attorney’s fees and additional breach of contract damages. In 2001, Hrabar filed a plea in intervention in Welch's tort suit in district court. The tort suit was decided against Welch, and the trial court denied all other relief requested and not specifically granted. Because of this, and of Hrabar’s intervention to Welch’s tort suit, the latter asserted the defenses of res judicata and collateral estoppel in Hrabar's breach of contract action. The court ruled in Hrabar’s favor and Welch appealed.

Issue:

Did res judicata or collateral estoppel preclude Hrabar from recovering breach-of-contract damages from Welch?

Answer:

No.

Conclusion:

The court held that the judgment in Welch's tort case did not preclude Hrabar's recovery on her breach-of-contract claim in the present case. Welch failed to show that the affirmative defenses of res judicata and collateral estoppel applied to Hrabar's breach of contract action. The court found that Welch did not show that the tort action judgment disposed of Hrabar’s breach of contract claim. Hrabar did not appear and did not put on evidence in Welch’s tort action and Welch was not forced to litigate the breach of contract claim in that court. There was no indication that the district court expended any resources in determining Hrabar's claim.

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