arlington-home-inc-v-peak-environmental-consultants-inc-dba-live ( 2012 )

Affirmed in Part, Reversed and Remanded in Part, and Majority and Dissenting
Opinions filed February 28, 2012.
In The
Fourteenth Court of Appeals
NO. 14-10-01000-CV
ARLINGTON HOME, INC., Appellant
V.
PEAK ENVIRONMENTAL CONSULTANTS, INC. D/B/A LIVE OAK
ENVIRONMENTAL CONSULTANTS AND SANDION, LTD, D/B/A
COLDWELL BANKER UNITED REALTORS, Appellees
On Appeal from the 113th District Court
Harris County, Texas
Trial Court Cause No. 2006-47620
OPINION
In this tort case, appellant Arlington Home, Inc. challenges the trial court‘s entry
of a judgment notwithstanding the verdict (―JNOV‖) in favor of appellees Peak
Environmental Consultants, Inc. d/b/a Live Oak Environmental Consultants (―Live Oak‖)
and Sandion, Ltd. d/b/a Coldwell Banker United Realtors (―Coldwell Banker‖). In two
issues, Arlington challenges the trial court‘s grant of the JNOV and its award of
attorney‘s fees to Live Oak and Coldwell Banker. Although we affirm the trial court‘s
JNOV, we reverse and remand on the attorney‘s fees issues.
BACKGROUND
Naela Kaki, a Saudi Arabian woman who travels to Houston to receive cancer
treatment, signed an earnest money contract (the ―contract‖) on August 26, 2005, for
purchase of a $5.35 million house near Memorial Park in Houston. She then assigned her
rights under the contract to Arlington Home, Inc., a corporation specifically created to
purchase and own the residence. The president of Arlington was Sammy Haress. When
Kaki and her family had to return overseas, Coldwell Banker agent David Young
supervised the process of obtaining inspections for the home before closing. Because an
engineering report had revealed mold and water damage to the house in the past,
Arlington requested a mold inspection. On September 8, 2005, Young contacted Gary
Martens, a licensed mold assessment consultant who operated Live Oak. The assessment
needed to be done quickly because the contract option period expired September 13,
2005. Arlington would owe an additional $250,000 under the contract if closing did not
occur timely. Martens provided a proposal in which he stated that Live Oak would
perform the following tasks as part of his inspection:
Live Oak will perform a visual inspection of the interior areas of the
structure for the presence of mold. If visible evidence is identified, Live
Oak will collect a tape sample for submission to the laboratory for analysis.
In addition, Live Oak will collect up to ten air samples: nine samples will
be collected in the interior of the residence; a single air sample will be
collected outdoors for comparison to the indoor results. Following
collection of the samples, they will be delivered to the laboratory for
analysis. Rush turnaround time for laboratory analysis is approximately
one day.
Following the receipt of the laboratory analysis, Live Oak will issue a
report which contains the sample results and will include any
recommendations for remediation, further testing, etc.
The estimated cost for the inspection and laboratory testing services as
indicated above is estimated not to exceed $1400.00 which includes the
inspection, all sample media and equipment, 10 air samples and analysis. If
additional samples are required/requested, the additional cost of $110.00
per sample will apply. Live Oak will not exceed the number of samples
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proposed without prior authorization from the client. If less samples are
collected, we will adjust the price accordingly.
If this proposal meets with your approval, please fax us a signed copy of
this authorization letter. Live Oak will schedule sampling activities
immediately upon receipt of your authorization. At this time, we have
scheduled the sampling event for Friday morning, September 9, 2005 at
9:15 AM. Payment is due upon completion of the sampling event.
Upon our receipt of the laboratory results, we will contact you by telephone
to give a verbal report of the mold inspection. A written report, including
laboratory results will follow in a day or two. The final report for this
project will be forwarded to the address below unless otherwise instructed.
Martens was not informed of the size of the home, or that prior inspections had
revealed mold and water damage. Martens initially performed a visual inspection of
much of the property. While there, he discovered that the engineering report had
recommended a mold inspection and had described specific instances of water intrusion
into several areas of the home. He did not change the nature of his inspection based on
this newly discovered information. During his inspection, he was unable to gain access
to a few areas of the home, a fact not disclosed to Young or Arlington. He took seven air
samples from inside the home and one from outside the home. After receiving the results
of his samples taken during the inspection, Martens emailed Young:
Just received the lab results for the subject property. It passed. No
Stachybotrys (―toxic black mold‖) or Chaetomium spores; these are the
primary indicators of a moisture problem.
The interpretation of the lab data coupled with the observations
made at the time of the inspection indicate no significant mold
amplification expected to pose a threat to the subject property or its
occupants.
A complete written report, with copies of the laboratory results will
be issued.
(emphasis added).
Young forwarded this information to Harres. At the time that Haress received this
information, Arlington could have abandoned the contract without penalty and had its
earnest money returned. Arlington closed on the property on October 17, after a delay
due to Hurricane Rita. During remodeling of the home in November, a significant mold
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problem was discovered. Arlington spent $539,594.84 to remediate the mold in the
home.
Arlington sued Coldwell Banker and Live Oak for negligence, violations of the
DTPA, and negligent misrepresentation. Arlington also sued Coldwell Banker for breach
of fiduciary duty and sought attorney‘s fees from both Coldwell Banker and Live Oak
under the DTPA and paragraph 17 of the contract. Arlington sought actual and
consequential damages. Live Oak counterclaimed for breach of contract based on its
mold inspection proposal.
After an eight-day jury trial in October and November 2009, the jury found Live
Oak and Arlington both negligent, with Live Oak bearing 60% of the responsibility. The
jury further found that Live Oak had engaged in false, misleading, or deceptive acts, that
Arlington had relied on these acts, and that these acts were a producing cause of
Arlington‘s damages (the ―DTPA claim‖). The jury also found that Live Oak had
negligently misrepresented information to Arlington, upon which Arlington justifiably
relied, which negligent misrepresentation proximately caused injury to Arlington. The
jury found that Coldwell Banker had not breached its fiduciary duty to Arlington and
made negative findings on the questions of Coldwell Banker‘s negligence, negligent
misrepresentation and violations of the DTPA. It determined that the reasonable and
necessary costs of investigating, remediating, and repairing the mold problems with the
property was $539,594.84. The jury found reasonable and necessary attorney‘s fees for
Arlington to be $300,000; for Coldwell Banker to be $150,000; and for Live Oak,
$150,000. Finally, the jury determined that Arlington had breached its contract with Live
Oak by failing to pay Live Oak‘s fee for the mold inspection.
Live Oak filed a motion for JNOV in April 2010, to which Arlington responded.
The trial court signed a final judgment on October 4, 2010, granting Live Oak‘s JNOV
without stating the basis for its decision and ordering that Arlington take nothing. It
further ordered Arlington to pay attorney‘s fees to Live Oak, as well as the cost of the
inspection ($1,080 for inspection and $150,000 for attorney‘s fees). Finally, the trial
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court awarded Coldwell Banker attorney‘s fees of $150,000. This appeal timely
followed.
THE JNOV1
Here, Lone Oak moved for JNOV on the following grounds:
The jury‘s findings regarding DTPA liability should be disregarded because
the DTPA‘s professional services, over $500,000 transaction, and business
consumer exemptions apply, and Arlington did not prove that Live Oak
induced it to buy the home.
The jury‘s findings concerning negligent misrepresentation liability should be
disregarded because Arlington did not prove that (a) Live Oak made a
misrepresentation of a material fact and (b) Arlington relied on Live Oak‘s
report in deciding to buy the property.
The jury‘s findings of causation should be disregarded because there is no
evidence of a proliferation of mold at the time of Live Oak‘s inspection, the
proliferation of mold was discovered months after the inspection, and Live Oak
established superseding, intervening causes that Arlington failed to refute.
The jury‘s answers to the damages questions should be disregarded because the
―economic loss rule‖ prohibits Arlington from recovering damages in tort, and
the testimony concerning Arlington‘s alleged damages was unreliable.
The jury‘s answers to the DTPA and negligent misrepresentation questions
should be disregarded because the trial court refused Live Oak‘s request to
include questions regarding apportionment of fault.
The jury‘s findings regarding negligence were not supported by any evidence
and should be disregarded.
As noted above, the trial court granted Live Oak‘s JNOV motion without stating the
basis.
Arlington responded to Live Oak‘s JNOV motion by asserting that (a) its DTPA
claim is viable because the exemptions relied upon by Live Oak do not apply, and
Arlington presented evidence that it purchased the home based on Live Oak‘s
misrepresentations; (b) Arlington presented evidence that Live Oak misrepresented facts
upon which Arlington could justifiably rely; (c) Arlington presented evidence that the
1
Coldwell Banker did not move for JNOV because the jury found in its favor. Instead, it moved for entry
of judgment, including attorney‘s fees in the amount found by the jury.
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mold was present at the time of the inspection; (d) the economic loss rule does not bar its
tort claims; (e) the testimony regarding the remediation process used was reliable, and the
witness providing this testimony was qualified; and (f) the remediation process used by
Arlington was legal and approved by the Environmental Protection Agency (the ―EPA‖)
and the State of Texas. In its first issue on appeal, Arlington alleges that the trial court
erred by granting the JNOV. It has broken down its first issue into the following sub-
issues:
a. Arlington provided unchallenged testimony from multiple experts
that mold existed in the home when it was inspected by Live Oak,
and did not arise later. Did Arlington provide any evidence of
causation?
b. Arlington‘s claims are based on distinct tort duties, and seek only
out-of-pocket remediation costs. Are Arlington’s claims barred by
the economic loss rule?
c. Arlington provided expert evidence that its costs were reasonable,
and were incurred after a competitive bidding process. Was there
any evidence that Arlington’s remediation costs were reasonable
and necessary?
d. Arlington relied on statements of fact made about a consumer‘s
residence. Do statutory exemptions bar Arlington’s DTPA claims?
Was there any evidence that Live Oak induced Arlington to buy the
home?
e. Was there any evidence of false representations or justifiable
reliance to support the jury’s finding of negligent
misrepresentation?
f. Expert testimony established that the Sabre mold fumigation process
was effective, and that Sabre was properly licensed. Was there any
evidence to support the jury’s award of the costs of Sabre
remediation as damages?
g. Live Oak asked the court to apply the jury‘s answer to Question Two
(proportionate responsibility for negligence) to the other claims as
well. It did not object to the lack of those other questions. Was Live
Oak entitled to have the answer to Question Two applied to the other
causes of action?
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Standard of Review – The JNOV
We review a JNOV under a no-evidence standard, crediting evidence favoring the
jury verdict if reasonable jurors could and disregarding contrary evidence unless
reasonable jurors could not. Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828,
830 (Tex. 2009) (citing City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005)). We
may affirm the JNOV only if there is no evidence to support the jury‘s finding or if the
evidence establishes a contrary answer as a matter of law. Hester v. Friedkin Cos., Inc.,
132 S.W.3d 100, 105 (Tex. App.—Houston [14th Dist.] 2004, pet. denied). We must
uphold the jury‘s finding if more than a scintilla of competent evidence supports it.
Tanner, 289 S.W.3d at 830. Ultimately, the test is whether the evidence presented at trial
was sufficient for reasonable and fair-minded people to reach the verdict rendered. Id.
Finally, because the trial court did not state the grounds on which it granted the JNOV,
Arlington must refute each of the arguments made in the JNOV motion. Fort Bend Cty.
Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 394 (Tex. 1991).
Here, the parties do not dispute that Arlington and Live Oak had a contract in
which Live Oak agreed to perform a mold inspection. Live Oak performed a mold
inspection in substantial compliance with the agreement. However, because a large
proliferation of mold was later discovered in the home during a remodeling effort,
Arlington became dissatisfied with Live Oak‘s performance of the contract. Rather than
pursuing a breach of contract action, Arlington sued Live Oak for negligence, negligent
misrepresentation, and violations of the DTPA. This case requires us to determine
whether a party to a contract may ignore its contract remedies in favor of other tort or
statutory remedies. Under the unique circumstances presented in this case, we conclude
that it may not.
A. Arlington’s Negligence Claim
Texas courts have long adhered to the economic loss rule, which generally
precludes recovery in tort when the only economic loss to the plaintiff is the subject
matter of a contract. Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494–95 (Tex.
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1991). Recently, the Texas Supreme Court has clarified that there is not one ―economic
loss rule,‖ but several rules governing recovery of economic losses in various areas of the
law.2 Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 415 (Tex. 2011).
The Court traced the history of the ―economic loss rule,‖ examining several situations in
which it operated to bar recovery. See id. at 415–18. Citing Southwestern Bell
Telephone Co. v. DeLanney,3 the court reiterated that when a plaintiff seeks damages for
breach of a duty created under a contract rather than a duty imposed by law, tort damages
are precluded. Sharyland, 354 S.W.3d at 417. It further explained that the nature of the
injury most often determines what duty is breached: ―‗When the injury is only the
economic loss to the subject of a contract itself the action sounds in contract alone.‘‖ Id.
(quoting DeLanney, 809 S.W.2d at 495). The Court refined this concept:
[W]e have applied the economic loss rule only in cases involving defective
products or failure to perform a contract. In both of those situations, we
held that the parties‘ economic losses were more appropriately addressed
through statutory warranty actions or common law breach of contract suits
than tort claims.
Id.
Here, the subject matter of the contract between Live Oak and Arlington was
performance of a mold inspection. The gravamen of Arlington‘s tort complaints is that
Live Oak negligently performed its contract by failing to adjust the scope of the
inspection when it discovered additional information about a previous mold infiltration
into the home. The injury suffered by Arlington is an economic loss to the subject matter
of the contract: a proliferation of mold that should have been discovered by Live Oak
during its inspection.
In DeLanney, Bell contracted to publish DeLanney‘s advertisemennt in the Yellow
Pages. When it failed to do so, DeLanney sued Southwestern Bell for negligence.
2
We note that the Court‘s discussion of the application of the economic loss rule in Sharyland involved
parties not in contractual privity, as the parties here are. See Sharlyland Water Supply Corp. v. City of Alton, 354
S.W.3d 407, 409–411, 414–15 (Tex. 2011).
3
809 S.W.2d 493 (Tex. 1991).
8
DeLanney, 809 S.W.2d at 493–94. A jury found in favor of DeLanney on his negligence
claim. Id. The Texas Supreme Court disagreed, concluding that because Southwestern
Bell had breached a duty created by a contract, rather than a duty imposed by law, the
claim sounded only in contract. Id. at 494–95. Likewise, here, the only duty allegedly
breached by Live Oak is a duty created by a contract, rather than any duty imposed by
law. Accordingly, because Arlington‘s negligence claim sounds only in contract, the trial
court properly granted Live Oak‘s JNOV as to Arlington‘s negligence claims.
B. Arlington’s Negligent Misrepresentation Claim
In its JNOV motion, Live Oak asserted that it was entitled to judgment as a matter
of law on Arlington‘s negligent misrepresentation claim because there was no evidence
that Live Oak made a misrepresentation of a material fact. To recover on its claim for
negligent misrepresentation, Arlington had to establish, among other things, that Live
Oak supplied false information for the guidance of others. See McCamish, Martin,
Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999) (describing
elements of a negligent misrepresentation claim).
The alleged misrepresentations in this case arise from Martens‘ email to Young, in
which he stated, with regard to the laboratory results:
―it passed‖;
no Stachybotrys (―toxic black mold‖) or Chaetomium spores;
―the interpretation of the lab data coupled with the observations made at the
time of the inspection indicate no significant mold amplification expected
to pose a threat to the subject property or its occupants.‖
Arlington directs us to nothing in the record suggesting that any of these
statements is false. Instead, Arlington relies on the opinions of several witnesses that the
mold had to have been present at the time of Live Oak‘s inspection. First, forensic
architect Dan Medley testified that the mold damage was so extensive that, in his
professional opinion, mold had been causing the wood beneath the wine and exercise
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rooms to rot for years. Second, toxicologist Dr. Mike Machen stated that mold was
present in such density and over such a wide surface that it had to have been present
when Live Oak performed its inspection in September 2005. Finally, industrial hygienist
and mold assessment contractor Robert Reda explained that the significant and
widespread mold discovered at the residence could not have formed after Live Oak‘s
inspection in September. All three of these experts relied on testing conducted a few
months after Live Oak‘s inspection and the mold damage discovered during Arlington‘s
remodel of the property.
However, it is uncontroverted that Live Oak‘s laboratory results showed no
Stachybotrys or Chaetomium spores at the home when Live Oak conducted its
inspection. Thus, there is no credible evidence that Live Oak made a misrepresentation
of an existing fact; indeed, the evidence established the contrary as a matter of law. See
Hester, 132 S.W.3d at 105. Neither Martens‘ opinion that the home ―passed‖ inspection
nor his ―interpretation‖ of his observations coupled with the lab values rises to the level
of ―existing fact‖ for purposes of a claim for misrepresentation. See Transp. Ins. Co. v.
Faircloth, 898 S.W.2d 269, 276–77 (Tex. 1995) (holding that expressions of opinion are
not actionable misrepresentations).
Accordingly, JNOV was appropriate on Arlington‘s negligent misrepresentation
claim.
C. Arlington’s DTPA Claim
Arlington asserts that JNOV was improper on its DTPA claim because it proved
that Live Oak‘s misrepresentations induced it to buy the home. To prevail on a claim for
failure to disclose under the DTPA, Arlington must have presented evidence of the
following: (1) a failure to disclose material information concerning goods or services, (2)
which was known at the time of the transaction, (3) if such failure was intended to induce
the consumer into a transaction, (4) which the consumer would not have entered had the
information been disclosed. See Tex. Bus. & Comm. Code Ann. § 17.46(b)(24); Head v.
U.S. Inspect. DFW, Inc., 159 S.W.3d 731, 744 (Tex. App.—Fort Worth 2005, no pet.).
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First, as discussed above, no misrepresentations of existing facts were made in Martens‘
email to Young. Second, and as Live Oak argued in its JNOV motion, there is no
evidence that any representations it made were intended to induce Arlington to buy the
home. See Tex. Bus. & Comm. Code Ann. § 17.46(b)(24).
Arlington directs us to the following portion of the record to support its claim that
Haress testified he was induced to buy the home because of Live Oak‘s
misrepresentation:
[Arlington‘s Attorney] Q. If we scroll to the bottom of this e-mail, and if
we can scroll out a little bit: Just received the lab results from the subject
property. It passed. No stachybotrys -- toxic black mold -- chaetomium
spores. These are the primary indicators of a moisture problem. It says:
Interpretation of lab data, coupled with observations made at the time of the
inspection, indicate no significant mold amplification expected to pose a
threat to the subject property or its occupants.
Do you see that, sir?
[Harres]A. Yes.
Q. Did you get these results before the option period expired?
A. I got the e-mail.
Q. Okay. Now, in this case you‘ve learned some facts about Live Oak‘s
inspection, right?
A. Yes, I guess.
Q. At this stage, could Arlington have backed out of its purchase of the
property?
A. I honestly do not believe that we needed to, since it passed. So --
Q. Yeah. And I guess my question is as of this date in time, could
Arlington have backed out of its purchase of the property?
A. Yes.
Q. Would Arlington have gotten its earnest money back?
A. Yes.
...
Q. After getting this e-mail, did you exercise your option to walk away
from this property?
A. No. We signed the option and we transferred the funds.
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This colloquy establishes that Arlington could have cancelled its purchase of the home
and had its earnest money returned at the time Haress read Martens‘ email. However,
nowhere in this record excerpt does Haress indicate that he was induced to purchase the
home by the Live Oak email. See id.
This court has recently held that there must be direct evidence of the intent to
induce under this subsection of the DTPA. See Red Roof Inns, Inc. v. Jolly, No. 14-10-
00344-CV, 2011 WL 6288147, at *8 (Tex. App.—Houston [14th Dist.] Dec. 15, 2011, no
pet. h.). Here, there is simply nothing in our record to indicate that Live Oak intended to
induce Arlington into buying the home.
Because Arlington has not directed us to any record evidence that Live Oak
intended to induce it to purchase the home, we conclude that the trial court did not err in
granting JNOV on Arlington‘s DTPA claim. Accordingly, we overrule the entirety of
Arlington‘s first issue.
ATTORNEY’S FEES
In its second issue, Arlington asserts that the trial court erred in awarding
attorney‘s fees to both Live Oak and Coldwell Banker. It breaks this issue into the two
following sub-issues:
a. The sales contract for the home had a clause awarding attorney‘s
fees to a ―prevailing party,‖ but Coldwell was not a party. Did the
trial court err by awarding Coldwell its fees?
b. Live Oak prevailed on a contract claim that required Live Oak to ask
only eight questions in the discovery process. Live Oak refused to
segregate its fees for this claim from its fees for defense of
Arlington‘s tort claims. Did the trial court err by awarding Live
Oak its fees?
We address each of these issues in turn.
Standard of Review – Award of Attorney’s Fee
Texas law prohibits recovery of attorney‘s fees unless authorized by statute or
contract. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310 (Tex. 2006). If any
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attorney‘s fees relate solely to claims for which fees are not recoverable, a claimant must
segregate recoverable from unrecoverable fees. Id. at 313. ―Intertwined facts do not
make tort fees recoverable; it is only when discrete legal services advance both a
recoverable and unrecoverable claim that they are so intertwined that they need not be
segregated.‖ Id. at 313–14. Because unsegregated fees are some evidence of what the
segregated amount should be, remand for segregation of fees may be required when at
least some of the fees at issue are attributable to claims for which attorney‘s fees are
recoverable. Id. Arlington‘s first issue concerns whether Coldwell‘s fees are recoverable
at all, while its second issue revolves around the issue whether Live Oak should have
segregated its fees.
A. Coldwell Banker’s Fees
Coldwell Banker asserts that it is entitled to attorney‘s fees under the earnest
money contract between Arlington and the seller of the home. In its brief, Coldwell
Banker discusses the various iterations of the Texas Real Estate Commission‘s form
contracts. Prior to the particular iteration of the contract at issue here, the earnest money
contract stated: ―If Buyer, Seller, Listing Broker, Other Broker or Escrow Agent is a
prevailing party in any legal proceeding brought under or with relation to this contract,
such party shall be entitled to recover from the non-prevailing party all costs of such
proceeding and reasonable attorney‘s fees.‖
The Texas Real Estate Commission form earnest money contract was
subsequently changed to provide as follows: ―The prevailing party in any legal
proceeding brought under or with respect to the transaction described in this contract is
entitled to recover from the non-prevailing party all costs of such proceeding and
reasonable attorney‘s fees.‖ This is the language covering attorney‘s fees in the operative
contract. ―Party,‖ in turn, is defined by the contract as the buyer and the seller. Coldwell
Banker was not listed as a party to the contract and did not sign the contract as a party.
The issue is thus whether the term ―party‖ in the attorney‘s fees provision is
limited to the parties identified and defined by the contract or whether the term includes
13
persons who were not parties to the contract but who were parties in a legal proceeding
related to the agreement. The only parties identified in the contract are the buyer and the
seller. In determining intent, we presume that the parties contracted only for themselves
and not for the benefit of third parties, unless the obligation to the third party is clearly
and fully spelled out. Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011). Nothing in
the contract suggests that the parties included the attorney‘s fees provision for the benefit
of persons other than the parties to the contract. Nothing in the contract suggests the
buyer and seller intended the word ―party‖ in the attorney‘s fees provision to include non-
parties to the contract. The provision is intended to create a mutual obligation:
whichever party loses pays the other party‘s attorney‘s fees. There is no evidence that the
buyer and seller intended also to obligate themselves unilaterally to pay attorney‘s fees to
persons who, because they were not parties to the contract, would not themselves be
obligated under the provision. Absent evidence of such intent, the term ―party‖ should be
defined by the terms of the contract itself, which identifies only the buyer and seller as
parties.
We recognize that our sister court in Austin has reached a different conclusion on
this issue. See Sierra Assoc. Group, Inc. v. Hardeman, No. 03-08-00324-CV, 2009 WL
416465, *8–10 (Tex. App.—Austin Feb. 20, 2009, no pet.) (mem. op.). However, our
position is supported by opinions from our sister courts in San Antonio and Beaumont,
whose reasoning we find to be more persuasive. See Lesieur v. Fryar, 325 S.W.3d 242,
251–253 (Tex. App.—San Antonio 2010, pet. denied); Williamson v. Guynes, No. 10-03-
0047-CV, 2005 WL 675512, *1 (Tex. App.—Waco Mar. 23, 2005, no pet.). Thus we
hold that Coldwell Banker was not entitled to recover attorney‘s fees under the terms of
the earnest money contract. Because Coldwell Banker has identified no other basis for
recovery of attorney‘s fees, we sustain Arlington‘s second issue in part.
B. Live Oak’s Fees
Arlington next asserts that Live Oak‘s attorney‘s fees should have been segregated
between fees incurred prosecuting its breach of contract claim, which are recoverable,
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and fees incurred in defending against Arlington‘s tort and DTPA claims, which are not.
Live Oak counters that ―public policy supports Live Oak receiving its right to recover
fees without segregating them because in effect Live Oak was defending against jury
nullification [by Arlington having asserted an affirmative defense to Live Oak‘s breach of
contract claim].‖ We must disagree. Even if Arlington had asserted an affirmative
defense to Live Oak‘s breach of contract claim, Live Oak would still be required to
segregate its fees in this case: ―it is only when discrete legal services advance both a
recoverable and unrecoverable claim that they are so intertwined that they need not be
segregated.‖ Tony Gullo Motors I, 212 S.W.3d at 313–14. Live Oak has not established
that discrete legal services advancing both recoverable and unrecoverable claims were
provided in this case. Absent such a showing, Live Oak was required to segregate its
fees. See id.; see also Rapid Settlements, Ltd. v. Settlement Funding, LLC, No. 14-09-
00637-CV, 2010 WL 3604182, at *4–5 (Tex. App.—Houston [14th Dist.] Sept. 9, 2010,
no pet.) (mem. op.) Accordingly, we sustain this portion of Arlington‘s second issue.
CONCLUSION
We have overruled Arlington‘s first issue in its entirety and conclude that Live
Oak was entitled to judgment notwithstanding the verdict on all of Arlington‘s claims.
However, we have sustained Arlington‘s second issue. Because Coldwell Banker was
not entitled to attorney‘s fees under the earnest money contract, we reverse the trial
court‘s award of attorney‘s fees to Coldwell Banker and render judgment that Coldwell
Banker take nothing. But because Live Oak‘s unsegregated attorney‘s fees are some
15
evidence of its segregated fees,4 we reverse and remand to the trial court for
determination of Live Oak‘s appropriate segregated attorney‘s fees.
/s/ Adele Hedges
Chief Justice
Panel consists of Chief Justice Hedges and Justices Christopher and McCally
(Christopher, J., dissenting).
4
See Tony Gullo Motors I, 212 S.W.3d. at 314.
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