Marilyn McKeithan v. Bradford M. Condit ( 2013 )

NUMBER 13-10-00226-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
MARILYN MCKEITHAN, Appellant,
v.
BRADFORD M. CONDIT, Appellee.
On appeal from the 117th District Court
of Nueces County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Benavides and Longoria
Memorandum Opinion by Justice Longoria
Marilyn McKeithan appeals a final judgment awarding Bradford M. Condit
$37,584 in damages for breach of contract, $20,000 in exemplary damages for fraud,
$23,033 in attorney’s fees, and $299 in court costs. In four issues, McKeithan argues
the following: (1) the evidence is insufficient to support a judgment for fraud; (2) Condit
is not entitled to recover both breach of contract damages and fraud damages, in
violation of the one satisfaction rule; (3) the evidence is insufficient to support the
damages award for breach of contract in the amount of $37,584; and (4) the evidence is
insufficient to support the award of attorney’s fees in the amount of $23,033.
For the reasons set forth below, we reverse the trial court’s judgment in part.
See TEX. R. APP. P. 43.2(d). Specifically, we reverse the trial court’s award of
exemplary damages in the amount of $20,000 because we conclude that the evidence
is insufficient to prove that McKeithan committed fraud by making a material
representation that was false. In addition, we reverse the award of attorney’s fees in the
amount of $23,033 because we conclude that the evidence is insufficient to prove that
$23,033 was reasonable and necessary. We remand for a new trial on the fraud claim
and request for attorney’s fees. See id. In all other respects, we affirm the trial court’s
judgment. See TEX. R. APP. P. 43.2(a).
I. BACKGROUND
In late 2008, McKeithan hired Condit to assist in defending her in a lawsuit
arising out of a foreclosure and suit on a promissory note. After losing at trial,
McKeithan hired two new lawyers. In May 2009, Condit withdrew from the case. Then,
he filed the instant suit against McKeithan for unpaid attorney’s fees. Condit later
amended his suit to add a cause of action for fraud, alleging in relevant part as follows:
Plaintiff provided goods and services by way of legal representation to
Defendant. After 30 days written demand, Defendant has failed to pay the
debt of $47,320.00. Additionally, Defendant committed fraud when she
falsely represented to Plaintiff that she would pay for his services and
expenses that he advanced, when in fact she had no intention of doing so.
Plaintiff would not have provided the services he did but for Defendant's
2
misrepresentations which was a producing and/or proximate cause of
Plaintiff’s damages. When such representations were made they were
made with the intent to induce Plaintiff into providing legal services. Such
conduct entitles Plaintiff to recover exemplary damages.
On June 1, 2009, McKeithan filed a pro se answer in the nature of a general
denial. She subsequently amended her pleadings to add causes of action against
Condit including breach of fiduciary duties. On December 31, 2009, Condit filed a
motion for sanctions, requesting that the trial court prohibit McKeithan from testifying at
trial. On January 8, 2010, the trial court held a hearing on the motion during which the
court remarked as follows:
[McKeithan] failed to respond to discovery, failed to appear at several
noticed depositions, failed to appear at the court-ordered deposition and
failed to appear for mediations ordered by this Court, so I will strike her
pleadings . . . and . . . [she] will not be allowed to present testimony - - not
be allowed to present evidence . . . . It will be a very short trial.
The court did not subsequently enter an order striking McKeithan’s pleadings.
On August 19, 2010, the case was called for trial. McKeithan did not appear. 1
The court held a bench trial. Condit was the only witness. He testified in relevant part
that he “agreed to continue the [legal] representation of” McKeithan based on her
representation “that she did not have the funds to pay” his attorney’s fees in advance in
one “lump sum” but would instead pay “on a monthly basis.” He testified that he
“subsequently . . . found out that she [had] lied to . . . [him].” He testified that he later
“learned that in fact she had [subsequently] paid . . . [a second attorney] a lump sum in
excess of $20,000.” He also testified that she paid a third attorney an amount “in
1
A post-answer default “constitutes neither an abandonment of the defendant’s answer nor an
implied confession of any issues thus joined by the defendant’s answer.’” Stoner v. Thompson, 578
S.W.2d 679, 682 (Tex. 1979).
3
excess of $8,000 in a lump sum.” “Needless to say,” he testified, “I was the victim of her
fraud is my allegation[] in the pleadings and what I’m testifying to the Court today. I
would not have represented Ms. McKeithan, had I known the true facts about what she
was telling me.” According to Condit, he “expended in excess of 200 hours in the
defense of that case [on behalf of McKeithan,] . . . which comes out to, at $185 an hour,
. . . $37,584.”
After testifying, Condit told the trial court the following:
[A]nd I’m also asking, Your Honor, for a directed verdict on her
counterclaims for breach of fiduciary duties, common law fraud,
unconscionable action or course of action, and any causation of any
alleged damages that is being alleged, loss of use of funds, loss of
opportunity costs, loss of credit and damage to credit reputation, mental
anguish, or any conduct that would support an exemplary damages
award. And so, I ask the Court for a directed verdict at this time . . . for
those causes of action.
Thereafter, the trial court said the following:
[T]here is absolutely no evidence before the Court with regards to any of
the Defendant’s counterclaims, and I’m going to grant a directed verdict
against any and all direct or implied causes of action alleged by the
Defendant in the pleadings.
In its final judgment, the trial court awarded the amounts set forth above and then stated
in relevant part as follows:
The court directs a verdict on Counter-Plaintiff Marilyn McKeithan’s pled
causes of action, those being:
a. breach of fiduciary duties;
b. common law fraud;
c. unconscionable action or course of action;
d. any causation of any alleged damages, i.e,
1. Loss of use of funds
4
2. Loss of opportunity costs
3. Loss of credit and damage to credit reputation
4. Mental anguish;
e. conduct that would support exemplary damages;
and the court enters a take nothing judgment.
McKeithan now appeals the trial court’s judgment to this Court by four issues. 2
II. FRAUD
In her first issue, McKeithan contends that the evidence is legally and factually
insufficient to prove fraud. However, Condit argues that McKeithan cannot raise her
challenges to the legal and factual sufficiency of the evidence in this appeal for three
different reasons: (1) this situation amounted to a no-answer default judgment and
therefore Condit’s pleadings alone will support the judgment; (2) McKeithan waived the
challenges by failing to include them in her motion for new trial; and (3) McKeithan failed
to preserve error in the sufficiency of the evidence by failing to make a timely and
specific objection. Accordingly, we will address Condit’s arguments before proceeding
to decide the merits of McKeithan’s challenges to the legal and factual sufficiency of the
evidence to support a judgment on Condit’s fraud claim. See TEX. R. APP. P. 47.1.
A. Death Penalty Sanctions, Waiver, and Preservation of Error
1. Death Penalty Sanctions
First, Condit argues that because the trial court entered death penalty sanctions,
McKeithan is barred from challenging the sufficiency of the evidence on appeal. See
2
McKeithan filed a motion for new trial, which was denied. She then filed a timely notice of
appeal. Shortly thereafter, we were required to abate the appeal due to McKeithan’s filing for bankruptcy;
however, the bankruptcy is no longer pending. Accordingly, we reinstate the appeal and proceed to the
merits.
5
Paradigm Oil, Inc. v. Retamco Operating, Inc., 372 S.W.3d 177, 184 (Tex. 2012) (“[A]
death-penalty sanction can[] be used to adjudicate the merits of claims or defenses . . .
[if] the offending party’s [mis]conduct during discovery justifies a presumption that its
claims or defenses lack merit.”). We recognize that the trial judge did, in fact, state that
she was striking McKeithan’s pleadings; however, as set forth below, we conclude that
the trial court’s oral pronouncement is inconsistent with the manner in which the trial
court conducted the trial and also inconsistent with the final judgment the court rendered
in favor of Condit. See In re K.M.B., 148 S.W.3d 618, 622 (Tex. App.—Houston [14th
Dist.] 2004, no pet.) (“A written judgment or order controls over a trial court’s oral
pronouncement.”).
“When a trial court strikes a defendant’s answer as a discovery sanction, the
resulting default is technically post-answer, but it is also . . . similar to a no-answer
default judgment.” Paradigm Oil, 372 S.W.3d at 183–84 (“[D]efault judgments are not
all alike[,] and . . . different rules apply in different circumstances.”). “[T]he non-
answering party in a no-answer default judgment is said to have admitted both the truth
of facts set out in the petition and the defendant’s liability on any cause of action
properly alleged by those facts.” Id. at 183.
In this case, however, the trial court did not render judgment on the pleadings.
See id. Instead, the judge required Condit to offer evidence and prove all aspects of his
claims. See Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 925 (Tex. 2009) (per
curiam) (“If the defendant files an answer, as in this case, a trial court may not render
judgment on the pleadings and the plaintiff is required to offer evidence and prove all
6
aspects of its claim.”). Furthermore, the final judgment recognized that McKeithan’s
pleadings were still pending at the time of trial by identifying each of the specific causes
of action pled by McKeithan and then ordering that she take nothing by her claims
based on a directed verdict that Condit requested at trial. Based on the foregoing, we
conclude that the trial court did not strike McKeithan’s pleadings, and she may
challenge the legal sufficiency of the evidence in this appeal, as in other cases involving
a post-answer default. See Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex. 1979)
(holding that a post-answer default “constitutes neither an abandonment of the
defendant’s answer nor an implied confession of any issues thus joined by the
defendant’s answer”). Accordingly, we reject Condit’s first argument because the trial
court did not impose death penalty sanctions.
2. Waiver
Second, Condit argues that McKeithan waived these issues by failing to include
them in her motion for new trial. Rule 324 of the Texas Rules of Civil Procedure
provides in relevant part as follows:
(a) Motion for New Trial Not Required. A point in a motion for new trial
is not a prerequisite to a complaint on appeal in either a jury or a nonjury
case, except as provided in subdivision (b).
(b) Motion for New Trial Required. A point in a motion for new trial is a
prerequisite to the following complaints on appeal:
(1) A complaint on which evidence must be heard such as one of
jury misconduct or newly discovered evidence or failure to set
aside a judgment by default;
(2) A complaint of factual insufficiency of the evidence to support a
jury finding;
(3) A complaint that a jury finding is against the overwhelming
weight of the evidence;
7
(4) A complaint of inadequacy or excessiveness of the damages
found by the jury; or
(5) Incurable jury argument if not otherwise ruled on by the trial
court.
TEX. R. CIV. P. 324(a)–(b).
McKeithan’s challenge to the legal and factual sufficiency of the evidence in this
case, involving a bench trial, does not fall within any of the enumerated categories of
issues for which a motion for new trial is a prerequisite to raising the issue on appeal.
See id. Accordingly, we overrule Condit’s second argument because failure to include
these issues in a motion for new trial does not result in waiver.
3. Error Preservation
Finally, Condit argues that McKeithan failed to preserve error in the sufficiency of
the evidence by failing to make a timely and specific objection. Rule 33.1 of the Texas
Rules of Appellate Procedure provides in relevant part as follows:
(d) Sufficiency of Evidence Complaints in Nonjury Cases. In a nonjury
case, a complaint regarding the legal or factual insufficiency of the
evidence - including a complaint that the damages found by the court
are excessive or inadequate, as distinguished from a complaint that
the trial court erred in refusing to amend a fact finding or to make an
additional finding of fact - may be made for the first time on appeal in
the complaining party’s brief.
TEX. R. APP. P. 33.1(d).
McKeithan’s challenge to the legal and factual sufficiency of the evidence in this
case involving a bench trial falls directly within the specifically enumerated exception to
the error preservation rule. See id. Therefore, we overrule Condit’s argument that
McKeithan may not challenge the sufficiency of the evidence for the first time on appeal.
8
Having addressed and overruled each of Condit’s three arguments for why we should
not reach the merits of McKeithan’s challenges to the legal and factual sufficiency of the
evidence in this appeal, we proceed to address the merits of her challenges with regard
to Condit’s fraud claim.
B. Standard of Review
“When examining a legal-sufficiency challenge, we review the evidence in the
light most favorable to the challenged finding and indulge every reasonable inference
that would support it.” Bryan v. Gordon, 384 S.W.3d 908, 913 (Tex. App.—Houston
[14th Dist.] 2012, no pet.) (citing City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex.
2005)). “We credit favorable evidence if a reasonable fact finder could and disregard
contrary evidence unless a reasonable fact finder could not.” Id. “The evidence is
legally sufficient if it would enable a reasonable and fair-minded person to find the fact
under review.” Id. “The fact finder is the sole judge of witness credibility and the weight
to give their testimony.” Id.
“In a factual-sufficiency review, we consider and weigh all the evidence, both
supporting and contradicting the finding.” Id. (citing Mar. Overseas Corp. v. Ellis, 971
S.W.2d 402, 406–07 (Tex. 1998)). “We set aside the finding only if it is so contrary to
the overwhelming weight of the evidence as to be clearly wrong and unjust.” Id. (citing
Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986)). “We may not substitute our
own judgment for that of the trier of fact or pass upon the credibility of the witnesses.”
Id. “The amount of evidence necessary to affirm a judgment is far less than that
necessary to reverse a judgment.” Id. at 913–14.
9
C. Applicable Law
Fraud consists of six elements:
(1) that a material representation was made; (2) the representation was
false; (3) when the representation was made, the speaker knew it was
false or made it recklessly without any knowledge of the truth and as a
positive assertion; (4) the speaker made the representation with the intent
that the other party should act upon it; (5) the party acted in reliance on
the representation; and (6) the party thereby suffered injury.
In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001) (citing Formosa Plastics
Corp. v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998)). Under the
common law, “an independent legal duty, separate from the existence of the contract
itself, precludes the use of fraud to induce a binding agreement.” Formosa Plastics, 960
S.W.2d at 47.
D. Discussion
In her first issue, McKeithan contends that the evidence is legally and factually
insufficient to prove Condit “was a victim of fraud.” See Tony Gullo Motors I, L.P. v.
Chapa, 212 S.W.3d 299, 304 (Tex. 2006) (“[T]he usual view is that mere breach of
contract is not fraud and that it may not be evidence of fraud.”). Condit testified in
relevant part that he “agreed to continue the [legal] representation of” McKeithan based
on her representation “that she did not have the funds to pay” his attorney’s fees in
advance in one “lump sum” but would instead pay “on a monthly basis.” He testified
that he “subsequently . . . found out that she [had] lied to . . . [him].” He then testified,
“Needless to say . . . I was the victim of her fraud is my allegation[] in the pleadings and
what I’m testifying to the Court today. I would not have represented Ms. McKeithan,
had I known the true facts about what she was telling me.”
10
After quoting the foregoing testimony in her appellate brief, McKeithan argues in
relevant part as follows:
There are two possible ways to interpret the evidence quoted above as a
supporting a claim of fraud: (1) the more likely, that Condit is claiming
McKeithan’s statement that she could not pay him a lump sum is false,
and that she could have paid him a lump sum at the time; or (2) the less
likely, that Condit is claiming McKeithan[] did not intend to honor her
promise to pay for the work he would do in the future when she promised
to do so. In either case[,] the foregoing evidence is insufficient to prove
the existence of a fraud.
With respect to the first possible interpretation, McKeithan argues in relevant part
as follows:
Accepting the evidence quoted above as accurate, it shows McKeithan
paid two other lawyers lump sum retainers when she hired them. What it
does not prove is she also had the ability to make such a lump sum
payment in December 2008. The fact McKeithan paid . . . [the other two
attorneys] lump sum retainers [roughly six] months afterwards does
nothing to prove that she could have done so months previously, in the
absence of any evidence showing she did, in fact, have the money
available at the time. The record does not show where McKeithan got this
money; abstractly she could have earned it, inherited it or even borrowed
it any time after December 2008. Because Condit has no evidence
showing McKeithan had any money to give him in December 2008, his
evidence is legally and factually insufficient to prove her statement that
she did not was a false statement about an existing fact, and so it is
insufficient to prove fraud.
In his appellate brief, Condit agrees that the representation at issue is “[t]hat . . .
[McKeithan] could not pay in a lump sum.”3 He argues that the evidence was sufficient
to prove that McKeithan “in fact could pay a lump sum because within a few months of
saying she could not pay she paid two other lawyers a lump sum of $28,000.00.”
Based on the foregoing, we conclude that the vital fact in this case is whether
McKeithan had the ability to pay Condit $37,584 in December 2008.
3
In his appellate brief, Condit identifies the underlying material representation as being “[t]hat
Appellant could not pay in a lump sum.” Condit argues that the evidence showed that the representation
was false and that McKeithan “made the representation intending to induce . . . [him] to work for her.”
11
We agree with the parties that there was no direct evidence of this vital fact at trial.
Instead, the finder of fact determined this fact based on the uncontroverted,
circumstantial evidence that McKeithan paid $28,000 to two other attorneys beginning in
May or June 2009. As set forth above, McKeithan argues that this constitutes no
evidence.
In City of Keller, the Texas Supreme Court discussed the standard of review that
appellate courts must use in cases involving purely circumstantial evidence. See City of
Keller, 168 S.W.3d at 813–15. “In such cases, we must view each piece of
circumstantial evidence, not in isolation, but in light of all the known circumstances.” Id.
at 813–14. “[W]hen the circumstantial evidence of a vital fact is meager, a reviewing
court must consider not just favorable but all the circumstantial evidence, and
competing inferences as well.” Id. at 815. “When the circumstances are equally
consistent with either of two facts, neither fact may be inferred.” Id. at 814. The
evidence is insufficient “if jurors would have to guess whether a vital fact exists.” Id.
Here, there are two different inferences that could be drawn from the fact that
McKeithan paid two others lawyers $28,000 beginning in May or June 2009: (1) she
had $28,000 in December 2008; or (2) she did not have $28,000 in December 2008.
Looking at the evidence as a whole, there is nothing that makes it more likely than not
that she had the money in December 2008. See id. There is nothing in the record to
make one inference more reasonable or compelling than the other. See id. We
conclude that the circumstances are equally consistent with either of the facts. 4 Thus,
neither may be inferred. See id. The evidence is insufficient because the finder of fact
4
There was no evidence regarding McKeithan’s financial circumstances, such as her assets,
income, or liabilities. There was no evidence of the source or circumstances of the $28,000 in payments.
12
had to guess whether McKeithan had $28,000 in December 2008. See id. Accordingly,
the evidence is legally insufficient to establish fraud. See id. McKeithan’s first issue is
sustained. 5
III. ONE SATISFACTION RULE
In her second issue, McKeithan argues that the one satisfaction rule prohibits
Condit from recovering breach of contract damages and exemplary damages for fraud
based on the same injury (i.e., McKeithan’s failure to pay Condit as promised in the
attorney-client agreement). See TEX. CIV. PRAC. & REM. CODE ANN. § 41.001(5) (West
2008) (“‘Exemplary damages’ means any damages awarded as a penalty or by way of
punishment but not for compensatory purposes. ‘Exemplary damages’ are neither
economic nor noneconomic damages. ‘Exemplary damages’ includes punitive
damages.”); Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991) (“[T]he one
satisfaction rule applies to prevent a plaintiff from obtaining more than one recovery for
the same injury”). By sustaining McKeithan’s first issue, we negated the trial court’s
basis for awarding exemplary damages. See TEX. CIV. PRAC. & REM. CODE ANN. §
41.003(a)(1) (West 2008) (“[E]xemplary damages may be awarded only if the claimant
proves by clear and convincing evidence that the harm with respect to which the
claimant seeks recovery of exemplary damages results from . . . fraud . . . .”).
The finder of fact could only guess about how that money was acquired and whether it was available in
December 2008. On this record, it is possible that the money was acquired and available prior to
December 2008, but it is equally possible that the money was not acquired or available until after
December 2008.
5
We note that, for the same reasons, the evidence is also factually insufficient to establish fraud.
See TEX. R. APP. P. 47.1. We also note that because this case involved a post-answer default,
McKeithan’s “legal sufficiency challenge will not result in greater relief than . . . [a] new trial.” Dolgencorp
of Tex., Inc. v. Lerma, 288 S.W.3d 922, 930 (Tex. 2009).
13
Accordingly, we dismiss McKeithan’s second issue as moot. See TEX. R. APP. P. 47.1.
IV. BREACH OF CONTRACT
In her third issue, McKeithan argues that the evidence is insufficient to support
the trial court’s award of damages for breach of contract in the amount of $37,584. 6
A. Applicable Law
“The elements for a breach of express contract claim are: (1) a valid contract, (2)
the plaintiff performed or tendered performance; (3) the defendant breached the
contract, and (4) the plaintiff was damaged as a result of the breach.” Doss v.
Homecomings Fin. Network, Inc., 210 S.W.3d 706, 711 (Tex. App.—Corpus Christi
2007, pet. denied). However, “[w]hen interpreting and enforcing attorney-client fee
6
In her third issue, McKeithan does not specify whether her challenge is to the legal sufficiency
of the evidence, the factual sufficiency of the evidence, or both. We do not require the parties to use
magic words. See Benavente v. Granger, 312 S.W.3d 745, 747 (Tex. App.—Houston [1st Dist.] 2009, no
pet.) (“‘It was said in the beginning that magic in words in points of error should be as extinct as the dodo
bird.’”) (quoting Robert W. Calvert, “No Evidence” and “Insufficient Evidence” Points of Error, 38 TEX. LAW
REV. 361, 371 (1960)). Therefore, “[w]hen the party’s brief . . . [is] ambiguous, we and other courts of
appeals have looked to a party’s prayer for relief to determine what standard of review to apply.” Id. In
this case, McKeithan “prays the trial court’s judgment be in all respects REVERSED, and judgment in her
favor RENDERED.” This is consistent with a legal sufficiency challenge. See City of Univ. Park v. Van
Doren, 65 S.W.3d 240, 246–47 (Tex. App.—Dallas 2001, pet. denied) (construing appellate issue to be
legal sufficiency when appellant sought rendition); Beach v. Resolution Trust Corp., 821 S.W.2d 241, 245
(Tex. App.—Houston [1st Dist.] 1991, no writ) (holding that rendition is remedy for no evidence
challenge). However, McKeithan also “prays . . . with respect to any part of the judgment that cannot be
rendered that the case [be] REMANDED to the trial court for further proceedings in accordance with the
Court’s opinion.” This is consistent with a factual sufficiency challenge. See Glover v. Tex. Gen. Indem.
Co., 619 S.W.2d 400, 401–02 (Tex. 1981) (indicating that remand for new trial is remedy for factual
insufficiency of evidence). Yet, in the context of this case, this portion of McKeithan’s prayer for relief is
also consistent with a legal sufficiency challenge because, as set forth above, this case involved a post-
answer default, which means McKeithan’s “legal sufficiency challenge will not result in greater relief than .
. . [a] new trial.” Dolgencorp, 288 S.W.3d at 930. Accordingly, McKeithan’s prayer for relief is not
dispositive in determining the nature of her challenge to the sufficiency of the evidence. See Benavente,
312 S.W.3d at 747. In circumstances such as these, courts look to the substance of the argument to
determine whether it “is more like one of factual sufficiency than of legal sufficiency.” Id. at 748. Having
reviewed McKeithan’s brief, and the arguments made therein to support her contention that the evidence
is insufficient to support the damages award for Condit’s breach of contract claim, we conclude that the
challenge is to the legal sufficiency of the evidence, not to the factual sufficiency of the evidence, because
McKeithan does not purport to demonstrate that the verdict “is so contrary to the overwhelming weight of
the evidence as to be clearly wrong and unjust,” which is required in a factual sufficiency challenge. Cain
v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam) (holding that in a factual sufficiency challenge, “the
court of appeals must consider and weigh all the evidence, and should set aside the verdict only if it is so
contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust”). Accordingly, we
confine our analysis to the legal sufficiency of the evidence. See TEX. R. APP. P. 47.1.
14
agreements, it is not enough to simply say that a contract is a contract.” Hoover
Slovacek LLP v. Walton, 206 S.W.3d 557, 560 (Tex. 2006). “There are ethical
considerations overlaying the contractual relationship.” Id. The Texas Rules of
Disciplinary Procedure prohibit “an attorney from enter[ing] into an arrangement for,
charg[ing], or collect[ing] an illegal fee or unconscionable fee.” TEX. R. DISCIPLINARY
PROC. 1.04(a). “A fee is unconscionable if a competent lawyer could not form a
reasonable belief that the fee is reasonable.” Id. The rules provide in relevant part as
follows:
(b) Factors that may be considered in determining the reasonableness
of a fee include, but not to the exclusion of other relevant factors,
the following:
(1) the time and labor required, the novelty and difficulty of
the questions involved, and the skill requisite to perform
the legal service properly;
(2) the likelihood, if apparent to the client, that the
acceptance of the particular employment will preclude
other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal
services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
circumstances;
(6) the nature and length of the professional relationship with
the client;
(7) the experience, reputation, and ability of the lawyer or
lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained
or uncertainty of collection before the legal services have
been rendered.
15
Id. 1.04(b). Finally, we note that “in reviewing an attorney’s fee award for
excessiveness, we may draw upon our common knowledge as justices of the court and
our experience as lawyers and judges.” C.M. Asfahl Agency v. Tensor, Inc., 135
S.W.3d 768, 802 (Tex. App.—Houston [1st Dist.] 2004, no pet.).
B. Discussion
In this case, Condit testified that he agreed to represent McKeithan at the
reduced rate of $185 per hour. He also testified about the general nature of the case,
which involved a foreclosure and a suit on a promissory note. He was defending
McKeithan, but he also asserted a counterclaim on her behalf. He described the case
as being “one of the most difficult cases” he has tried, despite his twenty-six years of
experience handling “2,000 lawsuits.” According to Condit, he worked in excess of 200
hours before being replaced by another lawyer. His billing records for the case were
admitted into evidence and show specific details corroborating his testimony. In terms
of his schedule, the evidence indicates that Condit was unable to work on other matters
because he was at trial in McKeithan’s case for five days and spent a sixth day
preparing for trial.
McKeithan argues that the evidence is insufficient to support the award of fees
because Condit did “nothing to connect these time entries to the Arthur Anderson
factors, or show the amounts reflected in the bill were reasonable or necessary, other
than assuring the Court that it is.” According to McKeithan, Condit offered only “his ipse
dixit that things are as he claims.” 7 She argues that there is, therefore, no evidence to
7
The term “ipse dixit” is “Latin for ‘he himself said it’ [and in this context, it means] [s]omething
asserted but not proved.” Arkoma Basin Exploration Co. v. FMF Assocs. 1990–A, Ltd., 249 S.W.3d 380,
389 n.32 (Tex. 2008) (quoting BLACK’S LAW DICTIONARY 847 (8th ed. 2004)).
16
support the award of damages for breach of contract in the amount of $37,584. See
Turner v. KTRK Television, Inc., 38 S.W.3d 103, 117 (Tex. 2000) (stating that the “test
for ‘no evidence’ rule is whether reasonable minds could differ on an issue of vital fact”).
We disagree.
“An attorney's testimony about the reasonableness of his or her own fees is not
like other expert witness testimony.” Garcia v. Gomez, 319 S.W.3d 638, 641 (Tex.
2010). “Although rooted in the attorney’s experience and expertise, it also consists of
the attorney’s personal knowledge about the underlying work and its particular value to
the client.” Id. According to the Texas Supreme Court, “[t]he testimony is similar to that
of a property owner whose personal knowledge qualifies him to give an opinion about
his own property’s value.” Id. (citing State v. Cent. Expressway Sign Assocs., 302
S.W.3d 866, 874 (Tex. 2009); Gulf States Utils. Co. v. Low, 79 S.W.3d 561, 566 (Tex.
2002)). “The attorney’s testimony is not objectionable as merely conclusory because
the opposing party, or that party’s attorney, likewise has some knowledge of the time
and effort involved and if the matter is truly in dispute, may effectively question the
attorney regarding the reasonableness of his fee.” Id. “[W]here the testimony of an
interested witness is not contradicted by any other witness, or attendant circumstances,
and the same is clear, direct and positive, and free from contradiction, inaccuracies, and
circumstances tending to cast suspicion thereon, it is taken as true, as a matter of law.”
Id. at 642.
In this case, the award of attorney’s fees as breach of contract damages was not
based merely on a conclusory statement that a reasonable fee was $37,584, as
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McKeithan suggests. The evidence established an agreed hourly rate of $185, which
went uncontested as a reasonable hourly rate for Condit based on his professional
experience, qualifications, and reputation in the community. Condit’s time records were
admitted into evidence, and they substantiate his testimony that he spent in excess of
200 hours in representing McKeithan. We are also mindful that “the court may draw
upon its common knowledge and experience” in determining the reasonableness of the
rate. Moreno v. Reliable Insulation, Inc., 217 S.W.3d 769, 772 (Tex. App.—Dallas
2007, no pet.). Based on the foregoing, we conclude that the evidence is legally
sufficient to support the award of breach of contract damages in the amount of $37,584.
See Ford Motor Co. v. Garcia, 363 S.W.3d 573, 580 (Tex. 2012) (“[A] reasonable hourly
rate multiplied by the number of hours spent performing necessary services . . . yields a
reasonable fee.”). Accordingly, McKeithan’s third issue is overruled.
V. ATTORNEY’S FEES
In her fourth issue, McKeithan argues that the evidence is legally and factually
insufficient to support the trial court’s award of attorney’s fees to Condit for prosecution
of this suit. See TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(1), (8) (West 2008) (“A
person may recover reasonable attorney’s fees from an individual or corporation, in
addition to the amount of a valid claim and costs, if the claim is for . . . (1) rendered
services . . . or (8) an oral or written contract.”).
A. Applicable Law
“As a general rule, the party seeking to recover attorney’s fees carries the burden
of proof.” Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10 (Tex. 1991). “In order to
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show the reasonableness and necessity of attorney’s fees, the plaintiff is required to
show that the fees were incurred while suing the defendant sought to be charged with
the fees on a claim which allows recovery of such fees.” Id. “A recognized exception to
this duty to segregate arises when the attorney’s fees rendered are in connection with
claims arising out of the same transaction and are so interrelated that their “prosecution
or defense entails proof or denial of essentially the same facts.” Id. at 11. “Therefore,
when the causes of action involved in the suit are dependent upon the same set of facts
or circumstances and thus are intertwined to the point of being inseparable, the party
suing for attorney’s fees may recover the entire amount covering all claims.” Id.
B. Discussion
At trial, Condit testified that he “spent in excess of 58 hours” on this case. As
noted above, he also testified that his discounted hourly rate is $185. Fifty-eight hours
at an hourly rate of $185 is $10,730. The trial court awarded $23,033. Ostensibly, the
basis for this award was Condit’s testimony, “I think a 40 percent contingency fee
contract or contract basis is reasonable and fair, and that would be $23,303.”
McKeithan argues that the trial court erred in awarding attorney’s fees using a
contingency-fee formula, which we agree, is not allowed. 8
8
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818–19 (Tex. 1997) (“[T]he
plaintiff cannot simply ask the jury to award a percentage of the recovery as a fee because without
evidence of the factors identified in Disciplinary Rule 1.04, the jury has no meaningful way to determine if
the fees were in fact reasonable and necessary.”); see also Young v. Qualls, 223 S.W.3d 312, 314 (Tex.
2007) (per curiam) (“Although attorney’s fees in this case were awarded by the trial court rather than the
jury, the factors governing their assessment are the same and include consideration of the ‘results
obtained.’”); Cleveland v. Taylor, 397 S.W.3d 683, 702 (Tex. App.—Houston [1st Dist.] 2012, pet. denied)
(holding, in the context of a summary judgment proceeding: “Attorney’s fees cannot be awarded as a
percentage of an amount of damages based solely on the existence of a contingency fee contract. To
recover attorney’s fees from the defendant, a plaintiff must request a specific sum for the attorney fees,
not expressed as a percentage of the damages.”) (citing Arthur Andersen, 945 S.W.2d at 818–19);
Mercier v. Sw. Bell Yellow Pages, Inc., 214 S.W.3d 770, 775, 778 (Tex. App.—Corpus Christi 2007, no
pet.) (holding, in a case involving a summary judgment, that attorney’s “contentions that . . . [the plaintiff]
agreed to pay reasonable attorney’s fees and that 1/3 or $91,589.09 would be reasonable, without
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McKeithan also argues that the award must be reversed based on Condit’s
failure to segregate fees for his time on the breach of contract claim from his time on the
fraud claim, for which the recovery of attorney’s fees is not authorized. See TEX. CIV.
PRAC. & REM. CODE ANN. § 38.001(1)–(8); Tony Gullo Motors, 212 S.W.3d at 304 (“For
fraud, []he could recover economic damages, mental anguish, and exemplary damages,
but not attorney’s fees.”); Stewart Title, 822 S.W.2d at 11 (“[A]n award of attorney’s fees
erroneously based upon evidence of unsegregated fees requires a remand.”).
However, “if no one objects to the fact that the attorney’s fees are not segregated as to
specific claims, then the objection is waived.” Green International, Inc. v. Solis, 951
S.W.2d 384, 389 (Tex. 1997). Therefore, the complaint is waived because McKeithan
failed to make this objection to the trial court. See id.
We sustain McKeithan’s challenge to the sufficiency of the evidence, but to the
extent that she complains about failure to segregate fees as to specific claims, we
conclude that the error, if any, was waived by her failure to object. See id. Accordingly,
we sustain McKeithan’s fourth issue in part and overrule it in part. 9
evidence of the other factors in rule 1.04, most importantly, without evidence that the fee is reasonable for
purposes of shifting the fee to . . . [the defendant], does not prove that the fee was reasonable for
purposes of a recovery of attorney's fees from . . . [the defendant]”) (citing Arthur Andersen, 945 S.W.2d
at 818–19); Main Place Custom Homes, Inc. v. Honaker, 192 S.W.3d 604, 621 (Tex. App.—Fort Worth
2006, pet. denied) (stating, in a case involving a bench trial, that “[a] party cannot simply ask to be
awarded a percentage of the recovery as a fee because without evidence of the factors identified in rule
1.04(b), the fact[-]finder has no meaningful way to determine if the fees were in fact reasonable and
necessary”) (citing Arthur Andersen, 945 S.W.2d at 818–19); Dunn v. Southern Farm Bureau Casualty
Insurance Co., 991 S.W.2d 467, 475 (Tex. App.—Tyler 1999, pet. denied) (noting, in a case involving a
non-jury trial, that “[r]ecently, the Texas Supreme Court held that a plaintiff can no longer simply ask the
fact finder to award a percentage of the damages as attorney fees”) (citing Arthur Andersen, 945 S.W.2d
at 817–18).
9
Again, we note that in a case such as this, involving a post-answer default, the appellant’s
successful legal sufficiency challenge will entitle the appellant to a new trial, not rendition of judgment.
Dolgencorp, 288 S.W.3d at 930 (directing appellate court to “remand[] for a new trial after a post-answer
default judgment rather than rendering judgment”).
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VI. CONCLUSION
The judgment of the trial court is reversed in part and affirmed in part. We
reverse the trial court’s judgment with respect to Condit’s fraud claim and with respect to
his request for attorney’s fees. We remand the case for a new trial on the fraud claim
and the request for attorney’s fees. In all other respects, the judgment of the trial court
is affirmed.
___________________
NORA L. LONGORIA
Justice
Delivered and filed the
19th day of December, 2013.
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