Chi Truc Hoang v. Trevor Gilbert and Jorja Gilbert ( 2016 )

Opinion issued April 14, 2016
In The
Court of Appeals
For The
First District of Texas
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NO. 01-15-00681-CV
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CHI TRUC HOANG, Appellant
V.
TREVOR GILBERT AND JORJA GILBERT, Appellees
On Appeal from the 334th District Court
Harris County, Texas
Trial Court Case No. 2011-58137A
MEMORANDUM OPINION
In this appeal, we determine whether a hold harmless provision in a real
estate contract will support a claim for attorney’s fees. The buyers of a flood-
damaged house sued the sellers and their real estate agent for fraud, conspiracy,
and violations of the Deceptive Trade Practices Act. The real estate agent, Chi
Truc Hoang, answered and counterclaimed. Relying on a hold harmless provision
in the contract between the sellers and the buyers and the Declaratory Judgments
Act, Hoang sought the attorney’s fees that she incurred in defending the suit. A
jury rejected the buyers’ claims against Hoang, found that the buyers had breached
the hold harmless provision, and found that Hoang had incurred $230,000 in
reasonable attorney’s fees in defending against the buyers’ suit. The trial court
granted a take-nothing judgment in favor of Hoang, but declined to award
attorney’s fees based on her counterclaim. Because neither the real estate contract
nor the Declaratory Judgments Act required the trial court to award Hoang the fees
that she incurred in defending the suit, we affirm.
BACKGROUND
In October 2009, Anh Van Dan and Hong Bich Chau sold their house in
Houston to Trevor and Jorja Gilbert pursuant to an earnest money contract. Hoang
was the selling realtor, representing Dan and Chau. After buying the house, the
Gilberts discovered extensive water damage. Further investigation revealed that
Dan and Chau had made insurance claims for several flooding events, which they
had not disclosed to the Gilberts in connection with the sale.
The Gilberts sued the sellers and Hoang under various liability theories.
Hoang answered and counterclaimed for breach of contract and for declaratory
relief. She based her counterclaims on a paragraph in the closing agreement
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between the sellers and the Gilberts, contending that, although she was not a
signatory of that agreement, she was an intended third-party beneficiary of it. The
agreement provided: “the [Gilberts] release and hold [the real estate agents,
brokers, and title insurer] harmless from any and all liability” concerning the
condition of the property. Hoang also sought recovery of her attorney’s fees under
Section 37.009 of the Civil Practice and Remedies Code. TEX. CIV. PRAC. & REM.
CODE ANN. § 37.009 (West 2015).
At trial, Hoang’s counsel testified about her fees for representing Hoang on
her counterclaim and in defense of the Gilberts’ claims. The jury found the sellers
liable for statutory and common law fraud and for violating the Deceptive Trade
Practices Act, but it found Hoang not liable and that the Gilberts had breached their
agreement to hold Hoang harmless. It determined that a reasonable fee for
Hoang’s attorney was $230,000.
The Gilberts moved for judgment notwithstanding the verdict, arguing that
Hoang could not recover the fees by characterizing them as damages for breach of
contract or by pleading them as a declaratory judgment claim. They further argued
that an award of fees to Hoang would not be equitable or just. The trial court
granted the Gilberts’ motion and ordered that Hoang take nothing on her
counterclaim for attorney’s fees.
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DISCUSSION
I. Attorney’s Fees as Damages
Hoang first contends that she was entitled to recover attorney’s fees as
damages for breach of the provision to hold her harmless from any liability
concerning the condition of the property.
A. Standard of Review and Applicable Law
Rulings on motions for judgments notwithstanding the verdict are reviewed
for legal sufficiency. See 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)). When based on a question of law, we review that determination de novo.
In re Humphreys, 880 S.W.2d 402, 404 (Tex. 1994) (“[Q]uestions of law are
always subject to de novo review.”); John Masek Corp. v. Davis, 848 S.W.2d 170,
173 (Tex. App.—Houston [1st Dist.] 1992, writ denied) (providing that JNOV is
proper when legal principle precludes recovery); see also Morrell v. Finke, 184
S.W.3d 257, 290–91 (Tex. App.—Fort Worth 2005, pet. denied) (concluding that
trial court erred by denying defendants’ motion for JNOV because plaintiff’s
claims against them were barred by statute of limitations). Thus, a JNOV is proper
when a directed verdict would have been proper. See TEX. R. CIV. P. 301; Fort
Bend Cty. Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 394 (Tex. 1991); CDB
Software, Inc. v. Kroll, 992 S.W.2d 31, 35 (Tex. App.—Houston [1st Dist.] 1998,
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pet. denied). We uphold a JNOV when the evidence is conclusive, a party is
entitled to recover as a matter of law, or a legal principle precludes recovery.
Phar-Mor, Inc. v. Chavira, 853 S.W.2d 710, 713 (Tex. App.—Houston [1st Dist.]
1993, writ denied) (citing Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 227 (Tex.
1990)).
Whether Texas law recognizes a particular basis for the recovery of
attorney’s fees is a question of law that we review de novo. See Holland v. Wal-
Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999) (per curiam) (availability of
attorney’s fees under particular statute is question of law). Texas law distinguishes
between recovery of attorneys’ fees incident to recovery of other actual damages
and claims for attorneys’ fees as actual damages without any underlying finding of
actual damages. Worldwide Asset Purchasing, L.L.C. v. Rent-A-Center East, Inc.,
290 S.W.3d 554, 570 (Tex. App.—Dallas 2009, no pet.) (citing Haden v. David J.
Sacks, P.C., 222 S.W.3d 580, 597 (Tex. App.―Houston [1st Dist.] 2007) (op. on
reh’g), rev’d in part on other grounds, 266 S.W.3d 447 (Tex. 2008)). Attorney’s
fees are ordinarily not recoverable as actual damages in and of themselves. Id.;
Haden, 222 S.W.3d at 597 (citing Tana Oil & Gas Corp. v. McCall, 104 S.W.3d
80, 81–82 (Tex. 2003)). Fees may, however, be recovered as actual damages for
breach of an indemnity agreement. See, e.g., Crimson Expl., Inc. v. Intermarket
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Mgmt., LLC, 341 S.W.3d 432, 442–43 (Tex. App.—Houston [1st Dist.] 2010, no
pet.).
B. Analysis
At closing, the Gilberts and sellers executed an agreement in which the
Gilberts agreed to release and hold Hoang harmless for misrepresentations made
about the condition of the property. Hoang contends that this clause constitutes an
indemnity agreement and supplies the necessary basis for an award of attorney’s
fees as actual damages. See, e.g., Crimson, 365 S.W.2d at 432.
Even assuming that Hoang was an intended third party beneficiary of the
agreement between the sellers and the Gilberts, the trial court correctly concluded
that the agreement does not support a claim for Hoang’s recovery of her attorney’s
fees. In Dresser Industries v. Page Petroleum, Inc., the Texas Supreme Court
examined the distinction between an indemnity agreement and a release of
liability. 853 S.W.2d 505, 507–08 (Tex. 1993). The Court defined an indemnity
agreement as a promise to make the indemnitee whole against existing or future
liability, thus giving a potential cause of action to the indemnitee. Id. at 508. By
contrast, the Court defined a release agreement, or “hold harmless” agreement, as a
surrender of legal rights by which a party relinquishes any cause of action it may
have against another actor. Id. at 507–08. Thus, while an indemnity agreement
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creates a potential cause of action, a release agreement merely extinguishes a right
to one. Id.
The agreement in this case does not confer a right to sue for a recovery
under the contract and is not a promise to indemnify Hoang from suits against her.
Rather, the contract “release[d]” Hoang from liability associated with the condition
of the property. It did not use the term “indemnity” or otherwise provide that the
Gilberts had to compensate Hoang if she were sued. Under Texas law, the
provision is a release from liability, not an indemnity provision. See Dresser
Industries, 853 S.W.2d at 507–08. While the provision might serve as a defense to
a suit, it does not standing alone support an affirmative claim for relief.
Accordingly, we hold that Hoang may not recover attorney’s fees as damages for
breach of this provision. See id., 853 S.W.2d at 507–08; Haubold v. Med. Carbon
Research Inst., LLC, No. 03-11-00115-CV, 2014 WL 1018008, *7–8 & n.7 (Tex.
App.—Austin March 14, 2014, no pet.) (mem. op.) (noting that majority of
jurisdictions have declined to award attorney’s fees based on bare hold harmless
provision) (citing Noise Reduction, Inc. v. Nordam Corp., No. 90 C 6497, 1991
U.S. LEXIS 17830, at *20–21 (N.D. Ill. Dec. 6, 1991)).
Hoang cites several cases in which Texas appellate courts have upheld the
recovery of attorney’s fees in defense of a contract-related suit. See Ohio Oil Co.
v. Smith, 365 S.W.2d 621 (Tex. 1963); Crimson, 341 S.W.3d at 432; Garcia v. Sky
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Climber, Inc., 470 S.W.2d 261 (Tex. Civ. App.—Houston [1st Dist.] 1971, writ
ref’d n.r.e.). These cases are inapplicable because each case involved an indemnity
agreement, in contrast to a release of liability. See Smith, 365 S.W.2d at 623
(analyzing provision titled “Ohio Indemnified” as indemnity provision); Crimson,
341 S.W.3d at 436 (concerning provision providing that “[defendant] agrees to
indemnify and hold harmless [plaintiff]”); Garcia, 470 S.W.2d at 269–70
(construing agreement to “pay all claims and damages” as indemnity agreement).
Further to her breach of contract argument, Hoang contends that the trial
court erred in refusing to submit an actual damages question to the jury premised
on her breach of contract claim. Hoang conceded at trial, however, that her
damages for breach of the agreement were limited to her attorney’s fees expended
in defending this suit. Because we have held that the contract does not support an
award of attorney’s fees, we hold that the trial court did not err in refusing to
submit her requested damages question.
II. Declaratory Judgment Claim
Hoang next contends that she was entitled to attorney’s fees under the Texas
Uniform Declaratory Judgments Act. See TEX. CIV. PRAC. & REM. CODE ANN.
§ 37.001 et seq. (West 2015). In particular, she relies on section 37.009, which
authorizes the trial court to award “reasonable and necessary attorney’s fees as are
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equitable and just” in cases in which it declares the rights, status or legal relations
of the parties. Id. §§ 37.002, 37.009.
The Uniform Declaratory Judgments Act (UDJA) “entrusts attorney fee
awards to the trial court’s sound discretion, subject to the requirements that any
fees awarded be reasonable and necessary, which are matters of fact, and to the
additional requirements that fees be equitable and just, which are matters of law.”
Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998); accord Indian Beach Prop.
Owners’ Ass’n v. Linden, 222 S.W.3d 682, 706 (Tex. App.—Houston [1st Dist.]
2007, no pet.); see also TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (“In any
proceeding under this chapter, the court may award costs and reasonable and
necessary attorney’s fees as are equitable and just.”). Whether an award for fees is
“equitable and just” depends on concept of fairness, in light of all the
circumstances in the case; it is thus within the trial court’s sound discretion.
Approach Res. I, L.P. v. Clayton, 360 S.W.3d 632, 639 (Tex. App.—El Paso 2012,
no pet.) (citing Ridge Oil Co., Inc. v. Guinn Invs., Inc., 148 S.W.3d 143, 162 (Tex.
2004)). Because the grant or denial of attorney’s fees is within the discretion of
the trial court, we will not disturb that decision on appeal absent an abuse of that
discretion. Oake v. Collin Cty., 692 S.W.2d 454, 455–56 (Tex. 1985); Indian
Beach, 222 S.W.3d at 706.
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A trial court does not abuse its discretion if some evidence reasonably
supports its decision. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex.
2002); Indian Beach, 222 S.W.3d at 706. Because the trial court did not specify its
grounds for denying attorney’s fees, we uphold its ruling on any basis supported by
the evidence. See Weingarten Realty Inv’rs v. Harris Cty. Appraisal Dist., 93
S.W.3d 280, 283 (Tex. App.—Houston [14th Dist.] 2002, no pet.).
A party ordinarily cannot recover under the UDJA for fees incurred in
defense of a claim for which fees are otherwise not allowed. See MBM Fin. Corp.
v. Woodlands Oper. Co., 292 S.W.3d 660, 669 (Tex. 2009) (holding that “a party
cannot use the Act as a vehicle to obtain otherwise impermissible attorney’s
fees.”). Hoang does not point to any requested ruling that declared the status of the
parties separate from her defense of the claims against her, for which fees are not
allowed under the American Rule. See id. Even assuming a basis for fees existed
under the UDJA, it was within the trial court’s discretion to determine that an
award of fees would not be equitable or just. Hoang argues that the lawsuit against
her was frivolous and the plaintiffs received a substantial recovery against the
sellers, including additional damages under the DTPA; thus, she contends, equity
and justice required the trial court to award her attorney’s fees. But Hoang did not
obtain a finding from either the trial court or the jury that the suit against her was
frivolous. She did not plead that the suit was frivolous under either the Texas Civil
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Practice & Remedies Code or the DTPA. TEX. CIV. PRAC. & REM. CODE ANN.
§ 9.001 et seq. (West 2002); TEX. BUS. & COM. CODE ANN. § 17.50(c) (West
2011). Hoang observes that she could not have made any direct misrepresentations
to the Gilberts, not having spoken to them apart from a few pleasantries, but the
Gilberts respond that some evidence at trial indicated that Hoang knew of the
flooding damage to the home and did not correct the disclosures that were made.
The sellers testified that they had notified Hoang about two of the flooding
incidents, which occurred at the time Hoang was their agent. One of the sellers’
neighbors testified that she called Hoang’s number and told someone she thought
was Hoang about the flooding. Having reviewed the record, we cannot say that the
trial court abused its discretion in declining to award attorney’s fees. See TEX. CIV.
PRAC. & REM. CODE ANN. § 37.009; Ridge Oil Co., 148 S.W.3d at 162; Butnaru,
84 S.W.3d at 211; Bocquet, 972 S.W.2d at 21.
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CONCLUSION
We hold that the real estate contract in this case does not provide a basis for
the real estate agent’s recovery of attorney’s fees. We further hold the trial court
did not abuse its discretion in denying her fees based on her declaratory judgment
claim. We therefore affirm the judgment of the trial court.
Jane Bland
Justice
Panel consists of Justices Bland, Brown, and Lloyd.
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