IHOP Realty Corp., John Baird and J. Ken Masuda v. New Braunfels Factory Outlet Center, Inc. Edward K. Kopplow And Rob Eversberg ( 1995 )

IHOP v. New Braunfels TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



NO. 03-94-00413-CV



IHOP Realty Corp., John Baird, and J. Ken Masuda, Appellants

v.

New Braunfels Factory Outlet Center, Inc.; Edward K. Kopplow; and Rob Eversberg, Appellees



FROM THE DISTRICT COURT OF COMAL COUNTY, 274TH JUDICIAL DISTRICT NO. C91-591C, HONORABLE CHARLES R. RAMSAY, JUDGE PRESIDING

PER CURIAM

On remand from this Court, the trial court held a hearing to reexamine the disposition of attorney's fees between appellants IHOP Realty Corp., John Baird, and Ken Masuda, and appellees New Braunfels Factory Outlet Center, Inc.; Edward Kopplow; and Rob Eversberg. ⁽¹⁾ See New Braunfels Factory Outlet Ctr., Inc. v. IHOP Realty Corp., 872 S.W.2d 303, 312 (Tex. App.--Austin 1994, no writ). From the trial court's judgment ordering each side to bear its own attorney's fees, IHOP, Baird, and Masuda bring two points of error. We will affirm the trial court's judgment.

BACKGROUND

The parties' dispute arose from New Braunfels' sale of part of a tract of land to IHOP to use for a restaurant. The contract for sale contained a clause prohibiting the use of the adjoining property "for any kind of family-oriented, coffee shop styled restaurant that would directly compete with IHOP's restaurant," and identifying specific objectionable restaurants. The contract also required this use restriction to be incorporated into the general warranty deed conveying the land to IHOP. The language of the restriction that appeared in the deed, however, was not identical to that in the contract, as it only prohibited "any kind of family-oriented coffee shop or restaurant that would directly compete." This latter version also appeared in the grant of easements and restrictions, or restrictive covenant, that Kopplow and Eversberg agreed to extend to the adjoining property.

When IHOP, citing the restrictive covenant, refused to consent to a sale of part of the remaining property to Cracker Barrel Old Country Store, New Braunfels sued IHOP and two of its employees, John Baird and Ken Masuda. ⁽²⁾ New Braunfels sought to void the restrictive covenant for lack of consideration; sought to reform the covenant based on mutual mistake or fraud; sought damages based on breach of contract, breach of express and implied warranties, fraud, misrepresentation, negligent misrepresentation, and negligence; requested declaratory relief; and sought attorney's fees.

IHOP denied liability and asserted the affirmative defenses of waiver and estoppel. IHOP also counterclaimed against New Braunfels seeking damages for breach of the restrictive covenant, a declaratory judgment, sanctions, and attorney's fees.

At trial, the jury agreed with New Braunfels that the difference in wording between the contract and the restrictive covenant resulted from a mutual mistake, but rejected the remainder of New Braunfels' claims. The jury's remaining findings were favorable to IHOP, including findings that both versions of the restrictive language prohibited a sale to Cracker Barrel and that New Braunfels was estopped to seek reformation of the restrictive covenant based on the mutual mistake. The trial court ordered that New Braunfels take nothing and that it pay IHOP's attorney's fees and costs.

On appeal, this Court determined that, because no evidence supported the jury's finding of estoppel, New Braunfels was entitled to have the restrictive covenant reformed to reflect the language in the contract. The Court upheld the jury's failure to find that the restrictive covenant, as reformed, permitted a sale to Cracker Barrel. We also rejected several evidentiary challenges brought by New Braunfels. This Court accordingly reversed that part of the trial court's judgment denying reformation; rendered judgment reforming the restrictive covenant; and affirmed that part of the judgment finding that the restrictive covenant, as reformed, prohibited a sale to Cracker Barrel. In light of these rulings, we remanded the portion of the cause concerning attorney's fees to the trial court for reexamination. Id. The trial court on remand did not specify the basis for its judgment ordering each side to pay its own attorney's fees.

DISCUSSION

In its first point of error, IHOP contends that the trial court erroneously failed to award it attorney's fees as the prevailing party under the parties' contract. An award of attorney's fees rests in the sound discretion of the trial court, and its judgment will not be reversed absent a clear showing that it abused its discretion. City of Austin v. Janowski, 825 S.W.2d 786, 788 (Tex. App.--Austin 1992, no writ).

An abuse of discretion implies more than an error in judgment; the trial court's decision must be arbitrary or unreasonable. Landry v. Traveler's Ins. Co., 458 S.W.2d 649, 651 (Tex. 1970). A trial court's action is unreasonable only if the court acted without reference to any guiding rules and principles. Morrow v. H.E.B., Inc., 714 S.W.2d 297, 298 (Tex. 1986); Downer v. Aquamarine Operators Inc., 701 S.W.2d 238, 241-42 (Tex. 1985), cert. denied, 476 U.S. 1159 (1986). Further, the appellate court must review the evidence in the light most favorable to the action of the trial court. Janowski, 825 S.W.2d at 788; Parks v. U.S. Home Corp., 652 S.W.2d 479, 485 (Tex. App.-- Houston [1st Dist.] 1983, writ dism'd). As long as some evidence supports the trial court, its decision is justified. Janowski, 825 S.W.2d at 788. The appellate court cannot substitute its judgment for the that of the trial court as long as the trial court did not abuse its discretion. Landry, 458 S.W.2d at 651.

The contract for sale between New Braunfels and IHOP requires that "the prevailing party in any legal proceeding against the other party to this contract brought under or with relation to this contract or transaction shall be additionally entitled to recover court costs and its reasonable attorney's fees from the nonprevailing party."

IHOP claims that as the prevailing party against New Braunfels in litigation under the contract, the trial court should have awarded it attorney's fees. We believe, however, that both sides prevailed in this litigation. The two principal issues in this dispute were whether the language of the restrictive covenant should be reformed and whether the language as reformed prohibited the sale to Cracker Barrel. While resolving the proposed sale to Cracker Barrel was of immediate importance in this particular suit, reforming the restrictive covenant potentially affects future dispositions of the property. This Court gave weight to the issue of reformation when we wrote in our opinion that "even if reforming the restrictive covenant would not alter the outcome of this case, we cannot say that it therefore could not affect the outcome of any case in the next thirty years, the length of time that the restrictive covenant is effective." 872 S.W.2d at 307 (emphasis in original).

In our judgment in the first appeal, we ordered New Braunfels to pay two-thirds of all costs and ordered IHOP to pay one-third. By making this division, we recognized that each side won something; the proportion of costs imposed shows that while the issue whether the sale to Cracker Barrel was prohibited was the more significant issue, the issue of reformation was also significant. Reforming the restrictive covenant, the issue on which New Braunfels prevailed, is not so insignificant that the trial court abused its discretion by failing to award attorney's fees to IHOP.

IHOP also argues under this point that the trial court erroneously failed to award it attorney's fees under the Civil Practice and Remedies Code. Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (West 1986). To recover attorney's fees under this statute, the claimant must present its claim to the opposing party, with payment for the amount due remaining untendered during the next thirty days. Id., § 38.002 (West 1986). IHOP does not show where in the record it alleged or proved presentment, nor does it assert that it presented its claim. Having failed to show its entitlement to attorney's fees under section 38.001, IHOP has not demonstrated error. We overrule point one.

In its second point of error, IHOP contends that the trial court abused its discretion by failing to award it attorney's fees under the Declaratory Judgments Act. Uniform Declaratory Judgments Act, Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (West 1986). Again, the grant or denial of attorney's fees in a declaratory judgment action lies within the discretion of the trial court, and its judgment will not be reversed on appeal absent a clear showing that it abused that discretion. Oake v. Collin County, 692 S.W.2d 454, 455 (Tex. 1985).

New Braunfels requested a declaratory judgment stating the rights and obligations of the parties, removing the ambiguity the documents presented, and removing the uncertainty and cloud that the dispute had placed on the adjoining tract. In its counterclaim, IHOP sought a declaratory judgment on two issues: (1) that the effective language of the restrictive covenant was contained in the grant and was incorporated into the deed to IHOP; and (2) that under the terms of the contract, deed, and grant, IHOP had no duty to consent to any proposed sale of the adjoining property.

The meaning of IHOP's first issue is unclear, but because the reformation this Court ordered replaced the language of the restrictive covenant with that in the contract, we cannot say that IHOP prevailed. While IHOP established that it had no duty to consent to the particular sale proposed to Cracker Barrel, it obtained no adjudication as to future sales. As discussed above, New Braunfels succeeded in having the ambiguity in the documents resolved.

An award of attorney's fees under the Declaratory Judgments Act need not be determined by who prevailed. Tanglewood Homes Ass'n, Inc. v. Henke, 728 S.W.2d 39, 45 (Tex. App.--Houston [1st Dist.] 1987, writ ref'd n.r.e.); District Judges v. Commissioners Court, 677 S.W.2d 743, 746 (Tex. App.--Dallas 1984, writ ref'd n.r.e.). A trial court does not abuse its discretion under the Act by ordering each side to pay its own attorney's fees in recognition that both sides have legitimate rights to pursue. United Interests, Inc. v. Brewington, Inc., 729 S.W.2d 897, 906 (Tex. App.--Houston [14th Dist.] 1987, writ ref'd n.r.e.). Under the circumstances, the trial court here could have considered it equitable and just that each side bear its own attorney's fees. We therefore overrule point two.

We affirm the judgment of the trial court.

Before Chief Justice Carroll, Justices Aboussie and Jones

Affirmed

Filed: July 12, 1995

Do Not Publish

1. New Braunfels Factory Outlet Center, Inc., is a corporation owned by Edward Kopplow and Rob Eversberg. We will refer to the three collectively as "New Braunfels."

2. Hereinafter, the word "IHOP" will refer to IHOP Realty Corp., John Baird, and Ken Masuda.