                         COURT OF APPEALS
                         SECOND DISTRICT OF TEXAS
                              FORT WORTH

                              NO. 02-15-00189-CV


MATLOCK REALTY ENTERPRISE,                                          APPELLANT
INC.

                                        V.

CROWN FINANCIAL, LLC                                                  APPELLEE


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          FROM THE 348TH DISTRICT COURT OF TARRANT COUNTY
                    TRIAL COURT NO. 348-270906-14

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                        MEMORANDUM OPINION 1

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      This is an appeal from a summary judgment order dismissing with

prejudice Matlock Realty Enterprise, Inc.’s 2 wrongful foreclosure, breach of

      1
       See Tex. R. App. P. 47.4.
      2
        This is the name used in the trial court caption. In other parts of the
record (and in Matlock’s brief), its name is listed as Matlock Realty Enterprises,
Inc., Matlock Reality Enterprises, Inc., and Matlock Reality Enterprise, Inc. We
will use the name listed in the caption of the notice of appeal.
contract, and equitable estoppel suit against Crown Financial, Inc. In a single

issue, Matlock contends that the trial court erred by dismissing its claims after

determining they were barred by res judicata. We affirm.

                     Factual and Procedural Background

      In May 2012 Crown loaned Matlock $1,100,000; Matlock signed a note,

which was secured by a deed of trust on property located in Arlington, Texas.

Matlock also signed an assignment of rents, accounts receivables, licenses,

permits, and contracts as security for the note. Matlock defaulted on the note’s

monthly payments. Crown notified Matlock that it would be foreclosing on the

property under the power of sale provision in the deed of trust on December 4,

2012. Matlock filed Chapter 11 bankruptcy proceedings on December 3, 2012.

      On March 22, 2013, Crown filed a motion to lift the automatic stay in the

bankruptcy court for the purpose of completing the foreclosure sale.         The

bankruptcy court granted the motion on April 16, 2013. Crown again scheduled

the property for foreclosure under the deed of trust.      On May 15, 2013, the

bankruptcy court rendered an agreed order dismissing the bankruptcy, and the

bankruptcy was closed on May 30, 2013. The foreclosure sale took place on

June 4, 2013, and Crown purchased the property. However, Matlock had filed a

second bankruptcy proceeding on June 3, 2013.

      Crown filed a “Motion for Retroactive Annulment of the Automatic Stay” in

the bankruptcy court. In it Crown alleged that neither it nor its counsel were

aware that Matlock had filed the second bankruptcy until June 10, 2013 because


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Crown’s counsel had moved to a new office, and Matlock’s counsel had faxed

notice of the bankruptcy filing to his former office fax number. Crown asked the

bankruptcy court to ratify the sale or grant it prospective relief from the automatic

stay so that it could attempt the foreclosure sale again. On June 13, 2013, the

bankruptcy court granted the motion, ordering as follows:

             2. Crown is hereby granted relief from the automatic stay
      provisions of Section 362 of the Bankruptcy Code with respect to the
      Property as defined in the Motion.

             3. Crown is hereby authorized to exercise any and all of its
      state law and contractual rights and remedies with respect to the
      Property, including, but not limited to, the foreclosure of its lien
      thereon.

In its order, the trial court noted that “no responses or objections have been

filed . . . and the deadline for filing such responses or objections has passed.”

      On June 25, 2013, however, Matlock filed a response in which it denied

that Crown did not properly receive notice of the second bankruptcy filing and

asserted that the bankruptcy court “should not reward Crown for ignoring the

automatic stay.” After a hearing, the bankruptcy court rendered a second order.

The text of that order is as follows:

      1. The Motion is GRANTED as set forth herein.

      2. Crown is hereby granted relief from the automatic stay provisions
         of Section 362 of the Bankruptcy Code with respect to the
         Property as defined in the Motion; provided however, that this
         relief shall be effective as of the date of this order and the stay is
         not retroactively annulled so as to ratify the June 4, 2013
         Foreclosure Sale.




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      3. Crown is hereby authorized to exercise any and all of its state law
         and contractual rights and remedies with respect to the Property,
         including, but not limited to, the foreclosure of its lien thereon.

      4. This order is stayed until the expiration of 14 days after its entry
         pursuant to Rule 4001 (a)(3) of the Federal Rules of Bankruptcy
         Procedure. [Emphasis added.]

      Crown foreclosed on the property on September 3, 2013; once again, it

was the successful bidder at the foreclosure sale.      On September 13, 2013,

Matlock filed a motion to dismiss the second bankruptcy, alleging that although

the bankruptcy court had lifted the automatic stay, it had also allowed Matlock

until September 2, 2013 to attempt to sell the property to a third party, that

Matlock was unable to sell the property, and that Crown had foreclosed on the

property.   Crown filed a response in which it agreed to the dismissal but

requested that the order be rendered with prejudice to refiling for at least 180

days. The bankruptcy court rendered an agreed order on October 15, 2013

dismissing the proceeding with prejudice to refiling for 180 days.

      Nevertheless, on March 10, 2014, Matlock sued Crown in this state court

action for wrongful foreclosure based on the void June 4, 2013 sale. Specifically,

Matlock brought claims (1) for “equitable estoppel/unjust enrichment,” alleging

that Crown “took advantage of [Matlock] and surreptitiously foreclosed on the

Property by failing to transfer title back to [Matlock] once the June 4, 2013

foreclosure was annulled,” (2) for “breach of contract/wrongful foreclosure,”

alleging that Crown had failed to “transfer title back to [Matlock] upon the finding

that the June 4, 2013 foreclosure proceeding was improper and outside the


                                         4
express terms of the contract” and “failed to allow [Matlock] a reasonable

opportunity to cure,” (3) for injunctive relief, alleging that Crown was wrongfully

attempting to sell the property to a third party as a result of its wrongful

foreclosure, and (4) to quiet title because Crown never gave Matlock “the right to

either cure its default under the Note or sell the property prior to foreclosure by

virtue of [Crown’s] receipt of fraudulent title.”

      Crown filed a motion for summary judgment alleging that all of Matlock’s

claims are barred by res judicata because Matlock could have raised them in the

second bankruptcy proceeding before it was dismissed. The trial court granted

the summary judgment motion and dismissed Matlock’s claims with prejudice.

                                 Standard of Review

      We review a summary judgment de novo. Travelers Ins. Co. v. Joachim,

315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the

light most favorable to the nonmovant, crediting evidence favorable to the

nonmovant if reasonable jurors could, and disregarding evidence contrary to the

nonmovant unless reasonable jurors could not. Mann Frankfort Stein & Lipp

Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every

reasonable inference and resolve any doubts in the nonmovant’s favor. 20801,

Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). A defendant is entitled to

summary judgment on an affirmative defense if the defendant conclusively

proves all the elements of the affirmative defense.          Frost Nat’l Bank v.

Fernandez, 315 S.W.3d 494, 508–09 (Tex. 2010); see Tex. R. Civ. P. 166a(b),


                                            5
(c). To accomplish this, the defendant-movant must present summary judgment

evidence that conclusively establishes each element of the affirmative defense.

See Chau v. Riddle, 254 S.W.3d 453, 455 (Tex. 2008).

                    Grounds in Summary Judgment Motion

      Crown argued in its motion that (1) the parties in this suit are identical to

the parties in the bankruptcy court because Matlock’s sole asset in the

bankruptcy proceeding was the property, (2) the bankruptcy court had jurisdiction

over the claims Matlock brought in this suit under 28 U.S.C.A. § 157; (3) the

bankruptcy court’s dismissal with prejudice is a final decision on the merits and

has preclusive effect as to the issues in this suit, which could have been raised in

that proceeding, and (4) under the Fifth Circuit’s transactional test, “the operative

facts of Matlock’s claims in this case were in existence at the time its Second

Bankruptcy was dismissed with prejudice[;] Matlock could and should have

raised its claims in the bankruptcy court prior to the court’s order dismissing with

prejudice Matlock’s bankruptcy.”      Matlock attached copies of filings in both

bankruptcy court proceedings, as well as the loan documents.

      In response, Matlock argued that (1) Crown provided no competent

evidence in support of its motion, (2) nothing in the bankruptcy court’s dismissal

with prejudice “liquidates [Matlock’s] claims for breach of contract or equitable

estoppel” because the bankruptcy court “merely dismissed the case with the

understanding that due to [Matlock’s] previous filings a third filing would be

subject to bad faith under Bankruptcy Code § 1112(b)”, (3) the claims could not


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have been raised in the second bankruptcy proceeding because they did not

arise until the September 3, 2013 foreclosure, and (4) Crown should not receive

the dual effect of a dismissal with prejudice and retention of title to the property

as that title is a result of the June 2013 wrongful foreclosure; in other words, “to

the extent [Crown] failed to return title to [Matlock] after the June, 2013

foreclosure, [Matlock] had no opportunity to either cure the Note by selling the

Property or providing a hard money lender to purchase the Note prior to the

September, 2013 foreclosure.”

                                 Applicable Law

      Generally, res judicata prevents a plaintiff from abandoning claims and

subsequently asserting them when the claims could have been litigated in the

prior suit. Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430, 449 (Tex. 2007).

For res judicata to apply, there must be (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. Id. The doctrine seeks to bring an end

to litigation, prevent vexatious litigation, maintain stability of court decisions,

promote judicial economy, and prevent double recovery. Id.

      Under the transactional approach followed in Texas, and also followed by

the Fifth Circuit, a subsequent suit is barred if it arises out of the same subject

matter as the prior suit, and that subject matter could have been litigated in the

prior suit. Id.; see Xitronix Corp. v. KLA-Tencor Corp., No. 03-12-00206-CV,


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2014 WL 3893082, at *3 n.4 (Tex. App.––Austin Aug. 7, 2014, pet. denied)

(mem. op.). A final judgment on an action extinguishes the right to bring suit on

the transaction, or series of connected transactions, out of which the action

arose. Citizens Ins. Co., 217 S.W.3d at 449 (quoting Barr v. Resolution Trust

Corp. ex rel. Sunbelt Fed. Sav., 837 S.W.2d 627, 631 (Tex. 1992)). Determining

the scope of the subject matter or transaction of the prior suit requires an

analysis of the factual matters that make up the gist of the complaint, without

regard to the form of action. Id. (quoting Barr, 837 S.W.2d at 630). This should

be done pragmatically, giving weight to such considerations as (1) whether the

facts are related in time, space, origin, or motivation, (2) whether they form a

convenient trial unit, and (3) whether their treatment as a trial unit conforms to

the parties’ expectations or business understanding or usage. Id. (quoting Barr,

837 S.W.2d at 630). Any cause of action which arises out of those same facts

should, if practicable, be litigated in the same lawsuit. Id. (quoting Barr, 837

S.W.2d at 630).

      A bankruptcy court has jurisdiction over a claim if it arises from a matter

related to the bankruptcy: if “the outcome of that proceeding could conceivably

have any effect on the estate being administered in bankruptcy.”        Matter of

Wood, 825 F.2d 90, 93 (5th Cir. 1987); see also 28 U.S.C.A. §§ 157(b)(2), 1334

(West 2006) (defining bankruptcy court’s jurisdiction).




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                                      Analysis

      Matlock challenges only whether the bankruptcy court’s September 2013

dismissal with prejudice was a final judgment on the merits and whether its

claims in this suit could have been brought in the bankruptcy proceeding.

      Matlock contends that the bankruptcy court’s dismissal was not final

because (1) it precluded further filings for 180 days only and (2) it did not resolve

any meritorious claims. “It is well settled within the Fifth Circuit that a ‘dismissal

with prejudice’ is generally a final judgment on all issues raised or that could

have been raised in the suit thereby dismissed,” including with respect to

bankruptcy proceedings. ASARCO, LLC v. Montana Res., Inc., 514 B.R. 168,

207 (S.D. Tex. 2013) (mem. op. and order) (emphasis added). The bankruptcy

court’s dismissal order recited that the court had considered Crown’s response to

Matlock’s motion to dismiss.       In that response, which was filed after the

September 2013 foreclosure sale, Crown requested the 180-day limitation on

refiling “or, alternatively, that if [Matlock] files a subsequent bankruptcy case, the

automatic stay shall not apply to Crown’s right to foreclose its lien on the

Property.” Crown also alleged that Matlock

      has indicated to Crown that it may attempt to set aside the Second
      Foreclosure Sale [in September 2013] on technical grounds. While
      Crown believes that [Matlock’s] objections to the Second
      Foreclosure Sale are groundless, in the unlikely event that [Matlock]
      is able to have the Second Foreclosure Sale set aside within the
      next 180 days, it should not be allowed to immediately re-file for
      bankruptcy relief yet again in order to frustrate Crown’s efforts to re-
      post the Property for foreclosure by requiring Crown to obtain relief
      from the automatic stay a third time. [Matlock] has already


                                          9
      commenced two bankruptcy cases in the past 10 months and should
      not be allowed to frustrate Crown’s efforts to exercise its state law
      rights and remedies with respect to the Property by filing a third
      bankruptcy case. Dismissal of [Matlock’s] case with prejudice for
      180 days or, alternatively, limiting the scope of the automatic stay in
      any future case filed by [Matlock] is warranted to put an end to
      [Matlock]’s “revolving door approach to bankruptcy.”

Thus, the validity of the September 2013 foreclosure sale was at issue during the

second bankruptcy proceeding.

      The bankruptcy court had already granted Crown’s motion to lift the stay

specifically to allow the foreclosure sale to take place.    As relief in this suit,

Matlock not only sought special and compensatory damages, it sought an

injunction prohibiting Crown from selling the property to a third party and

rescission of the September foreclosure sale to quiet title in its name. Because

Matlock’s “very existence and all of its income and reorganization prospects

derive[d] from the” property, the claims asserted in this suit relate to the

bankruptcy; thus, the bankruptcy court would have had jurisdiction to consider

them. In re George West 59 Inv., Inc., 526 B.R. 650, 652–54 (N.D. Tex. 2015)

(mem. op.); cf. Wood, 825 F.2d at 94 (holding that although post-petition claims

generally are not dischargeable in bankruptcy, they can be if they “affect the

estate”).

      Matlock further contends that it could not have brought its claims before

the dismissal order because they did not arise until the actual foreclosure on

September 4, 2013.       Specifically, Matlock argues that it could not have

reorganized as a single-asset entity in a Chapter 11 bankruptcy proceeding after


                                        10
losing ownership of the property in the September foreclosure; thus, its “remedy,

thereafter, was to fight the foreclosure and the effects of same in state [c]ourt

which it ultimately did by filing this suit.” But Matlock’s claims do flow from the

void June foreclosure: under our fair-notice-pleading standard, Matlock’s claims

allege that Crown’s failure to transfer title back to Matlock after the June

foreclosure thwarted its attempts to remediate the default to avoid the September

foreclosure, thus rendering the September foreclosure wrongful. See Tex. R.

Civ. P. 45, 47; Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993) (op. on reh’g).

The operative facts underlying this claim are the same facts that were in

existence when Matlock filed its motion to dismiss in the bankruptcy court. And

this is the type of claim that can be brought in a bankruptcy proceeding because

a recovery could potentially restore the sole asset of the debtor. See George

West 59 Inv., 526 B.R. at 653–54.

      Accordingly, we conclude and hold that the record here shows that Matlock

could have raised the claims alleged in this suit in its second bankruptcy

proceeding and that the bankruptcy court’s dismissal order was a final judgment

on the merits. Therefore, we further conclude and hold that the trial court did not

err by granting summary judgment for Crown dismissing Matlock’s claims on the

ground that they are barred by res judicata. We overrule Matlock’s sole issue.

      Moreover, having reviewed and considered Crown’s motion for appellate

sanctions under rule 45, and Matlock’s response, we deny the motion. See Tex.

R. App. P. 45.


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                                 Conclusion

     Having overruled Matlock’s sole issue on appeal, we affirm the trial court’s

judgment.


                                                 /s/ Terrie Livingston

                                                 TERRIE LIVINGSTON
                                                 CHIEF JUSTICE

PANEL: LIVINGSTON, C.J.; DAUPHINOT and GARDNER, JJ.

DELIVERED: February 4, 2016




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