Anthony G. Petrello v. Matthew W. Prucka, Sheryl S. Prucka, Rahul Nath and Usha Nath , 2013 Tex. App. LEXIS 11960 ( 2013 )

Opinion issued September 24, 2013
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00749-CV
———————————
ANTHONY G. PETRELLO, Appellant
V.
MATTHEW W. PRUCKA, SHERYL S. PRUCKA,
RAHUL NATH, AND USHA NATH, Appellees
On Appeal from the 55th Judicial District
Harris County, Texas
Trial Court Case No. 2007-74969
OPINION
This appeal arises from extensive litigation over Anthony Petrello’s attempt
to buy a house from his former next-door neighbor, Matthew Prucka. After a
federal district court decided that his discrimination and conspiracy claims failed as
a matter of law, Petrello asserted other claims in state court related to the same
real-estate transaction. The state trial court granted summary judgment against
Petrello, holding that his claims were precluded by the final judgment in the
federal case and that they failed to satisfy the statute of frauds.
Because Petrello’s state-law claims arise from the same nucleus of operative
facts that gave rise to his federal suit—the same real-estate transaction—the
doctrine of res judicata bars him from relitigating his claims in state court. We
affirm.
Background
In 2007, Prucka, who lived on 8 Remington Lane in Houston, decided to sell
his house. Petrello lived at 10 Remington Lane, and he contends that he sought to
buy Prucka’s house to provide his severely disabled daughter Carena a place to live
with her caretakers. Petrello called Prucka and offered to pay $6.5 million for the
house. Petrello alleges that Prucka declined the offer but orally granted him a right
of first refusal with respect to future offers. Prucka contends that he agreed only to
keep Petrello informed so that he could submit an equal or higher offer if he chose.
After declining Petrello’s $6.5 million offer, Prucka listed the property for
sale at the price of $8.3 million. Rahul Nath submitted a $7.6 million offer that
included contingencies. Prucka declined Nath’s offer and informed Petrello that a
higher offer had been made. In response, Petrello increased his offer to $8.2
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million. Because Petrello’s offer was not subject to a brokerage fee, it would have
netted Prucka more than an offer of the listed price from someone else. Prucka
then called Nath, who agreed to pay the full listed price of $8.3 million. Despite
the fact that the transaction included a fee for his broker, Prucka signed a written
contract on December 5, 2007 to sell to Nath for that price. With no knowledge of
Petrello’s offer, Nath paid Prucka $75,000 in earnest money.
Two days after the contract was signed, Petrello contacted Nath. Petrello
attempted to convince Nath not to go through with purchase or else to allow
Petrello to buy the house from him. Nath refused. Four days later, Petrello sued
Prucka in state court. He alleged various state-law claims for failing to give him
the right of first refusal, including breach of contract and unjust enrichment.
Petrello also filed a notice of lis pendens against 8 Remington Lane in the Harris
County Clerk’s office.
In light of Petrello’s pending lawsuit, Prucka and Nath signed an agreement
with respect to the litigation, including the contingency that Petrello might prevail.
The sale of 8 Remington Lane closed on January 16, 2008. Eight days later, Nath
intervened in Petrello’s state-court suit.
Petrello had told Prucka that he intended to make major architectural
modifications of 8 Remington Lane to accommodate his daughter, such as the
installation of an elevator or an accessible bathroom. Prucka testified in a
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deposition that neither he nor his wife wanted the house to be renovated in that
way, preferring to sell to someone who would instead preserve its historic
architectural integrity. After the deposition, Petrello amended his petition to allege
discrimination claims under the Fair Housing Act, 42 U.S.C. §§ 3601–3619
(2006). Petrello alleged that Prucka did not want the house altered to
accommodate Carena, that he accordingly refused to sell the house to him, and that
Nath conspired with and assisted in the discrimination against Carena after closing
the sale of the property. Petrello also asserted violations of state and municipal fair
housing laws. Altogether, Petrello alleged 14 causes of action, including:
(1) discrimination under the Federal Fair Housing Act, (2) discrimination under the
Texas Fair Housing Act, (3) discrimination under the Houston Fair Housing Act,
(4) civil conspiracy to discriminate, (5) aiding and abetting discrimination,
(6) conspiracy to deprive him equal protection of laws under 42 U.S.C. §§ 1981–
1988, (7) breach of oral contract to provide the right of first refusal, (8) breach of
oral contract to sell the house, (9) estoppel, (10) constructive trust, (11) tortious
interference with contract, (12) tortious interference with business relations,
(13) breach of auction, and (14) a request for a declaratory judgment.
The case was removed to federal court. Once there, Petrello obtained an
injunction that prevented Nath from making any improvements or major changes
to the home pending the legal proceedings, which the Fifth Circuit vacated on
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interlocutory appeal. See Petrello v. Nath, 350 Fed. App’x 887 (5th Cir. 2009). In
its opinion, the Fifth Circuit suggested that the record raised “a serious question
under 28 U.S.C. § 1367(a) whether federal supplemental jurisdiction over the
plaintiff’s state law claims is appropriate.” Id. at 889 n.1. The court stated that it
was “not clear” whether Petrello’s state-law claims were so related to the federal-
law claims as to form part of the same case or controversy, allowing for
supplemental federal jurisdiction over the related claims. Id. Nevertheless, the
Fifth Circuit also expressly acknowledged that it “need not examine federal
jurisdiction over the state law claims” in the interlocutory appeal, and thus the
court did not actually decide that issue. Id.
A lengthy discovery process ensued. Then, at a pretrial conference on the
eve of trial, Petrello orally moved to nonsuit most of his claims against the
defendants, leaving only claims related to violations of the federal, state, and
municipal fair housing laws. The federal district judge specifically asked: “what
are you going ahead on, what causes of action?” Petrello’s attorney responded that
the only remaining claims before that court were the “Fair Housing Act claims . . .
state and federal.” His attorney further stated that Petrello wished to avoid “any
potential problem that might have been hinted by the Fifth Circuit about [the
district court’s] jurisdiction,” explaining, “We don’t want to try it in state court and
it removes that issue.” The defendants did not object to Petrello’s motion for leave
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to amend his complaint and to nonsuit his other claims, and the district court orally
granted the motion. In his subsequent final pleading filed in federal court, his
“Sixth Amended Complaint,” Petrello listed only six causes of action: (1) a federal
Fair Housing Act claim, (2) a Texas Fair Housing Act claim, (3) a Houston Fair
Housing Act claim, (4) civil conspiracy to discriminate in housing sales, (5) aiding
and abetting such discrimination, and (6) conspiracy to deprive the Petrellos the
equal protection of the laws under 42 U.S.C. §§ 1981–1988.
At the time of trial Nath also had a live counterclaim before the federal
district court. Nath requested a declaration under the Texas Declaratory Judgment
Act, TEX. CIV. PRAC. & REM. CODE ANN. §§ 37.001–.011 (West 2008), that (1) the
Naths had title to 8 Remington Lane, (2) Petrello had no rights to the house, (3)
Petrello’s lis pendens was void and the title to the house was clear, and (4) the
Naths were entitled to attorney’s fees.
The case was tried to a jury which was unable to reach a verdict, and a
mistrial was declared. After the mistrial, the original federal district judge recused
himself, and the case was transferred to another judge. The federal district court
then granted judgment as a matter of law in favor of the defendants. See FED. R.
CIV. P. 50(a). Reasoning that the alleged oral agreement for the purchase and sale
of the house was unenforceable under the statute of frauds, the court held that even
after a trial Petrello had not established a prima facie case for a violation of the
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federal Fair Housing Act, the Texas Fair Housing Act, or the Houston Fair
Housing Ordinance. Petrello v. Prucka, No. H-08-1933, 2011 WL 305444 (S.D.
Tex. Jan. 27, 2011); see McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802,
93 S. Ct. 1817, 1824 (1973) (requiring discrimination claimants to meet the burden
of proving that they qualify under anti-discrimination statutes); see also 42 U.S.C.
§ 3603(b)(1) (exempting the sale of housing without the services of brokers or any
person in the business of selling houses from the Fair Housing Act). The judge
signed a document titled “Final Judgment” which stated that “the plaintiffs shall
take nothing by their federal, state and city discrimination and conspiracy claims.”
The Fifth Circuit later affirmed the district court’s judgment. Petrello v. Prucka,
484 F. App’x 939 (5th Cir. 2012), cert. denied, 133 S. Ct. 1723 (2013).
The final judgment entered by the federal district court also stated: “State
common law claims are remanded.” Similarly, the memorandum opinion and
order accompanying the final judgment stated in its conclusion that the “remaining
state law claims and any counterclaims, including the Naths’ claim to clear the title
to their house, are remanded . . . pursuant to 28 U.S.C. § 1447(c).” Although the
memorandum opinion and order made passing reference to Petrello’s claims for
breach of contract, tortious interference, aiding and abetting, and breach of auction,
the court made no reference to the pretrial nonsuit of such claims, and it did not
specifically analyze or otherwise address the continuing viability of those claims.
7
The next day, Nath moved in state district court to cancel the lis pendens on
8 Remington Lane. Less than a month later, Petrello filed a petition in state court.
He alleged 14 causes of action, reasserting the housing discrimination claims the
federal court had dismissed and the eight state common-law causes of action that
he had nonsuited on the eve of the federal trial. In other words, although they were
listed in a different order, Petrello’s petition in state court listed the same 14 causes
of action as had been alleged in his federal complaint before his move to nonsuit
certain claims. The state common-law causes of action re-urged by Petrello
included claims of breach of contract, estoppel, constructive trust, tortious
interference with contract and business relations, and breach of auction.
The defendants filed a motion for summary judgment, and the trial court
entered judgment against Petrello. Among other reasons, the trial court held that
Petrello’s claims were precluded because he had already litigated them in federal
court, or he was required to litigate them there as they all arose from a common
nucleus of operative facts. The court explained that the “remand” was not “an
acknowledgement that some or any state court claims exist,” but that it was
intended to resolve the few remaining matters, such as the lis pendens.
Subsequently, the defendants moved for sanctions, cancelation of the lis pendens,
and the award of attorney’s fees under the Declaratory Judgment Act. See TEX.
CIV. PRAC. & REM. CODE ANN. § 37.009 (West 2008). The trial court denied
8
sanctions, but it awarded attorney’s fees under the Declaratory Judgment Act and
canceled the lis pendens. Petrello then timely filed this appeal.
Analysis
We review a trial court’s grant of summary judgment de novo. Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). In our review, we
examine the entire record in the light most favorable to the nonmovant, indulging
every reasonable inference and resolving any doubts in the nonmovant’s favor.
City of Keller v. Wilson, 168 S.W.3d 802, 824–25 (Tex. 2005). When summary
judgment is sought and granted on multiple grounds, we will affirm the judgment
if any of the grounds on which it is based is meritorious. Joe v. Two Thirty Nine
Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004); Cadle Co. v. Bray, 264 S.W.3d
205, 210 (Tex. App.—Houston [1st Dist.] 2008, pet. denied). Asserting that a
claim is barred by res judicata is an affirmative defense. TEX. R. CIV. P. 94.
Accordingly, Prucka and Nath bore the burden of establishing each of the elements
of res judicata as a matter of law. Garcia v. Shell Oil Co., 355 S.W.3d 768, 773
(Tex. App.—Houston [1st Dist.] 2011, no pet.).
I. Res judicata
Federal law controls the determination of whether the federal district court’s
final judgment is res judicata as to the subsequent state-court proceeding. Geary v.
Tex. Commerce Bank, 967 S.W.2d 836, 837 (Tex. 1998) (per curiam); Garcia, 355
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S.W.3d at 774. Res judicata, or claim preclusion, bars the litigation of claims that
either have been litigated or should have been raised in an earlier suit. Test
Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005). Res
judicata applies when “(1) the parties are identical or in privity; (2) the judgment in
the prior action was rendered by a court of competent jurisdiction; (3) the prior
action was concluded by a final judgment on the merits; and (4) the same claim or
cause of action was involved in both actions.” Id. When successive suits seek
recovery for the same injury, “a judgment on the merits operates as a bar to the
later suit, even though a different legal theory of recovery is advanced in the
second suit.” Nilsen v. City of Moss Point, Miss., 701 F.2d 556, 564 (5th Cir.
1983) (citation omitted).
To determine whether two suits involve the same claim or cause of action,
the Fifth Circuit applies the transactional test from the Restatement (Second) of
Judgments. Test Masters, 428 F.3d at 571; Garcia, 355 S.W.3d at 774. “Under
the transactional test, a prior judgment’s preclusive effect extends to all rights of
the plaintiff with respect to all or any part of the transaction, or series of connected
transactions, out of which the original action arose.” Test Masters, 428 F.3d at
571. “[T]he critical issue is not the relief requested or the theory asserted but
whether the plaintiff bases the two actions on the same nucleus of operative facts.”
10
Agrilectric Power Partners, Ltd. v. Gen. Elec. Co., 20 F.3d 663, 665 (5th Cir.
1994) (quoting Matter of Howe, 913 F.2d 1138, 1144 (5th Cir. 1990)).
The nucleus of operative facts in both Petrello’s federal action and his
subsequent state-court action are the same. His state-law claims, which include
breach of contract and a request for a declaratory judgment that he is entitled to the
property, arise from the same transaction—the sale of 8 Remington Lane—that
gave rise to his fair housing claims. See, e.g., Thanedar v. Time Warner, Inc., 352
Fed. App’x 891, 895, 898 (5th Cir. 2009) (employee’s termination comprised same
core set of facts for both prior lawsuit’s Title VII claims and later lawsuit’s OSHA
whistleblower and Sarbanes-Oxley retaliation claims); Harper v. AutoAlliance
Int’l, Inc., 392 F.3d 195, 209 (6th Cir. 2004) (Title VII discrimination claim, Title
VII retaliation claim, state race-discrimination claim, workers’ compensation
retaliation claim, and state-law abuse-of-process claim all arose from the same
nucleus of operative facts because they all arose from employee’s termination);
Clifton v. Warnaco, Inc., 53 F.3d 1280 (Table), 1995 WL 295863, at *8 (5th Cir.
Apr. 18, 1995) (prior suit involving breach of contract claims based on employee’s
termination barred later suit involving age and sex discrimination claims because
those claims arose from the same termination).
In each suit, Petrello (1) alleged the same oral agreement existed between
him and Prucka, (2) complained of Prucka’s sale to Nath despite his higher net
11
offer, (3) complained of the same alleged interference by Nath in his purchase of
the home, and (4) sought the same remedy of rescission of the house’s sale. The
language in the pleadings for both suits further demonstrates their similarity. See
Vines v. Univ. of La. at Monroe, 398 F.3d 700, 710 (5th Cir. 2005) (prior state
court action barred federal action involving the same language in pleadings and
same factual allegations that retired university employees were given increased
workloads, discriminated against, and eventually not rehired). The state action is
not based on a new or different factual scenario than the federal action. See Test
Masters, 428 F.3d at 572 (holding a suit based on a new set of trademark
infringement allegations was not barred by res judicata).
Accordingly, this suit and Petrello’s prior suit arise from same nucleus of
operative facts and thus constitute the same cause of action for purposes of claim
preclusion. See Agrilectric Power, 20 F.3d at 665. Petrello does not challenge that
the same parties and cause of action were involved in the prior federal case as in
this case. But he disputes whether two other elements of res judicata apply: that
the prior action was concluded by a final judgment on the merits and that a court of
competent jurisdiction rendered the prior judgment.
A. Finality
Petrello disputes the finality of the prior federal judgment because it did not
dispose of all of his claims—specifically, his state-law claims that he had
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nonsuited before the federal trial. He relies upon Del-Ray Battery Co. v. Douglas
Battery Co., 635 F.3d 725 (5th Cir. 2011), to support his argument that a judgment
lacks finality “when outstanding issues remain.” Id. at 730. Unlike the judgment
in Del-Ray Battery, however, the federal final judgment in this case left no issues
outstanding with respect to Petrello’s claims. See id. (holding that interlocutory
summary judgment order addressing only some outstanding issues was not final
judgment). Petrello had nonsuited his state common-law and declaratory-judgment
claims on the eve of a trial on claims of discrimination and conspiracy in
connection with Prucka’s sale of the house to Nath. Accordingly, the state-law
claims were in no sense outstanding or remaining at the time the federal district
court’s final judgment. Cf. FED. R. CIV. P. 41(b) (providing that generally any
dismissal “except one for lack of jurisdiction, improper venue, or failure to join a
party . . . operates as an adjudication on the merits”). Petrello chose not to pursue
them.
Petrello’s voluntary dismissal of certain claims does not undermine the
finality of the federal judgment and its preclusive effect. Even when a court grants
a nonsuit without prejudice, res judicata precludes such claims from being asserted
later if they “could have been advanced in support of the cause of action on the
occasion of its former adjudication.” Davis v. Dallas Area Rapid Transit, 383 F.3d
309, 314 (5th Cir. 2004) (quoting Nilsen, 701 F.2d at 560). When later-asserted
13
claims arise from the same nucleus of operative facts as prior claims, such claims
not only could have been brought but should have been brought in the first action
to create a single, convenient trial unit. Id. at 313–14. Res judicata bars such
claims that a party failed to pursue, even if the court granted a nonsuit without
prejudice regarding them. See, e.g., Howe, 913 F.2d at 1147 n.30 (holding that res
judicata barred suit although original proceedings were dismissed without
prejudice when the plaintiffs had opportunity to bring claims in original suit). 1
1
Our conclusion that Petrello’s claims arise from a common nucleus of
operative facts implies that all of the claims could have been pursued
together in the federal trial pursuant to the federal court’s supplemental
jurisdiction. See 28 U.S.C. § 1367(a) (“Except as provided in subsections
(b) and (c) or as expressly provided otherwise by Federal statute, in any civil
action of which the district courts have original jurisdiction, the district
courts shall have supplemental jurisdiction over all other claims that are so
related to claims in the action within such original jurisdiction that they form
part of the same case or controversy under Article III of the United States
Constitution.”); City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156,
164-65, 118 S. Ct. 523, 529 (1997) (“the federal courts’ original jurisdiction
over federal questions carries with it jurisdiction over state law claims that
‘derive from a common nucleus of operative fact,’ such that ‘the relationship
between [the federal] claim and the state claim permits the conclusion that
the entire action before the court comprises but one constitutional “case.”’”
(quoting Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138
(1966)). Our conclusion in this regard does not suggest that Petrello was
required to defy a prior ruling of the Fifth Circuit. See Petrello v. Nath, 350
Fed. Appx. 887, 889 n.1 (5th Cir. 2009) (“our review of the record raises a
serious question under 28 U.S.C. § 1367(a) whether federal supplemental
jurisdiction over the plaintiff’s state law claims is appropriate”). Despite the
Fifth Circuit’s dictum questioning the exercise of supplemental jurisdiction
over these claims, the federal district court did not react by striking those
claims from the case, as it was surely obligated to do if it found its own
jurisdiction lacking. See, e.g., Steel Co. v. Citizens for a Better Env’t, 523
14
Petrello does not offer a plausible interpretation of the federal district court’s
order that the state-law claims it “remanded” specifically referred to any of
Petrello’s own claims. When the federal district court dismissed the claims related
to housing discrimination and conspiracy, Petrello had no remaining claims.
Petrello’s other claims had all been dismissed after he moved to nonsuit them.
Thus, the only claims “remaining” in the action were Nath’s state-law claims under
the Texas Declaratory Judgment Act. These were a request for a declaration that
he possessed fee simple title to the house, that the lis pendens was void, and that he
was entitled to attorney’s fees.
The fact that the district court remanded the remaining state-law claims does
not affect the finality of the federal court’s judgment. A judgment containing a
remand order is final as to those aspects of the judgment “distinct and separable
from the remand proper.” Morris v. T E Marine Corp., 344 F.3d 439, 445 (5th Cir.
U.S. 83, 95, 118 S. Ct. 1003, 1013 (1998). Had the Fifth Circuit actually
ruled there was no supplemental jurisdiction, or if the federal district court
had actually declined to exercise its supplemental jurisdiction, see 28 U.S.C.
§ 1367(c), then we would be faced with a different scenario in which it could
not be concluded that the state-law claims could have been brought in the
first action. Cf. In re Haynes & Boone, LLP, 376 S.W.3d 839, 847 (Tex.
App.—Houston [1st Dist.] 2012) (orig. proceeding) (noting the
undesirability of circumstances amounting to “jurisdictional ping-pong” due
to their tendency to “undermine public confidence in our judiciary” and
“squander private and public resources” (quoting Christianson v. Colt Indus.
Operating Corp., 486 U.S. 800, 818–19, 108 S. Ct. 2166, 2179 (1988)). But
the federal courts never so ruled. Had Petrello intended to preserve the right
to assert these claims, he could have sought and obtained a jurisdictional
ruling in the federal court. Instead, he voluntarily dismissed the claims.
15
2003) (quoting First Nat’l Bank v. Genina Marine Servs., Inc., 136 F.3d 391, 394
(5th Cir. 1998)). Here, the resolution of Petrello’s claims regarding the sale of the
house was distinct from the remanded state-law claims, such as Nath’s claim
seeking to cancel the lis pendens. Accordingly, we conclude that the federal
district court’s judgment was final in the relevant sense, that is, with respect to all
of Petrello’s claims relating to and arising from the sale of the Prucka house.
Petrello’s own treatment of the federal district court’s judgment also
supports this conclusion that the judgment is final. Petrello did not question its
finality when he appealed the judgment to the Fifth Circuit, which generally can
only hear appeals from final judgments. See John G. & Marie Stella Kennedy
Mem’l Found. v. Mauro, 21 F.3d 667, 670 (5th Cir. 1994) (upholding jurisdiction
to review judgment dismissing plaintiff’s federal claims although the district court
remanded parts of the case to state court); RESTATEMENT (SECOND) OF JUDGMENTS
§ 13 cmt. g (“[T]hat the parties were fully heard, that the court supported its
decision with a reasoned opinion, that the decision was subject to appeal or was in
fact reviewed on appeal, are factors supporting the conclusion that the decision is
final for the purpose of preclusion.”). Finality for purposes of res judicata is
generally the same as finality for purposes of appellate review. RESTATEMENT
(SECOND) OF JUDGMENTS § 13 cmt. b. Further, in his briefing and correspondence
16
with the trial court, Petrello explicitly acknowledged that the district court rendered
final judgment on the merits.
B. Competent jurisdiction
Petrello also argues that the prior judgment was not rendered by a court of
competent jurisdiction because the district court purportedly declined to exercise
its supplemental jurisdiction over his state-law claims when it “remanded” them.
This argument is inconsistent with Petrello’s voluntary dismissal of such claims
prior to the federal trial, and Petrello gives no reason why that nonsuit should be
considered ineffective. Because the voluntarily dismissed claims were not part of
the federal case at the time of the federal judgment, they could not have been
remanded upon the dismissal of Petrello’s “discrimination and conspiracy claims.”
In the alternative, Petrello contends that the federal court used the “remand”
language to decline to exercise supplemental jurisdiction over the “state common
law claims.” As we conclude that federal district court was not specifically
referencing Petrello’s claims, it necessarily could not have specifically declined to
exercise jurisdiction over the claims and thereby preserve them against the res
judicata bar. See Vines v. Univ. of La. at Monroe, 398 F.3d 700, 712 (5th Cir.
2005) (“Absent an express reservation, res judicata applies to bar a second suit.”).
Thus, res judicata bars Petrello’s state suit, as the trial court correctly
concluded.
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II. Attorneys’ fees
Petrello also challenges the trial court’s award of attorney’s fees to the
defendants. The trial court awarded Prucka $152,000 in fees and $30,000 in costs,
and it awarded Nath $73,000 in fees and $27,000 in costs. The court awarded
contingent attorney’s fees in the amount of $50,000 for appeal to the court of
appeals and $25,000 for appeal to the Supreme Court of Texas. Petrello argues
that the trial court erred by awarding attorney’s fees based on a post-judgment
motion supported by affidavits, rather than requiring evidence to be presented at a
pre-judgment hearing. Additionally, he argues that the attorney’s fees awarded
were not properly segregated and included $40,000 in unrecoverable costs.
A. Proof by affidavit
We review a trial court’s award of attorney’s fees under the Declaratory
Judgments Act for an abuse of discretion. Hot-Hed, Inc. v. Safehouse Habitats
(Scotland), Ltd., 333 S.W.3d 719, 733 (Tex. App.—Houston [1st Dist.] 2010, pet.
denied). “A trial court abuses its discretion when it reaches a decision so arbitrary
and unreasonable as to constitute a clear and prejudicial error of law.” Id. When a
movant includes a prayer for attorney’s fees in its summary-judgment motion, an
attached affidavit is testimony that may be considered as proof of the attorney’s
fees incurred. Owen Elec. Supply, Inc. v. Brite Day Constr., Inc., 821 S.W.2d 283,
288 (Tex. App.—Houston [1st Dist.] 1991, writ denied); see Gaughan v. Nat’l
18
Cutting Horse Ass’n, 351 S.W.3d 408, 423 (Tex. App.—Fort Worth 2011, pet.
denied). To create a fact issue, the nonmovant must file a counter-affidavit
contesting the reasonableness of the movant’s attorney’s fee claim. See TEX. CIV.
PRAC. & REM. CODE ANN. § 18.001(b) (West 2008). Unless a controverting
affidavit is filed, an affidavit as to the amount of attorney’s fees is presumed
reasonable. Id.; Hunsucker v. Fustok, 238 S.W.3d 421, 432 (Tex. App.—Houston
[1st Dist.] 2007, no pet.). The party intending to controvert a claim in the
attorney’s fees affidavit must file a counter-affidavit no later than 30 days after
receipt of the affidavit. TEX. CIV. PRAC. & REM. CODE ANN. § 18.001(e).
In this case, the defendants included a prayer for attorney’s fees in their
summary-judgment motion, and they submitted affidavits supporting the award.
Petrello did not file a counter-affidavit challenging these fees as unreasonable.
Instead, he argues that the issue of the reasonableness and necessity of Declaratory
Judgment Act attorney’s fees must be submitted to the jury, relying upon Bocquet
v. Herring, 972 S.W.2d 19 (Tex. 1998), and Fuqua v. Oncor Elec. Delivery Co.,
315 S.W.3d 552 (Tex. App.—Eastland 2010, pet. denied). Petrello’s cases do not
stand for the proposition he advances.2 While attorney’s fees are an issue for the
2
In Bocquet, the Supreme Court noted that the issue of whether attorney’s
fees are reasonable is “generally” a “question of fact for the jury’s
determination.” Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). But
when the trial court decides a case as a matter of law, as here, a party’s
uncontroverted affidavits establish the reasonable amount of attorney’s fees
19
jury in cases in which the jury is the factfinder, Bocquet, 972 S.W.2d at 21, an
affidavit can establish the reasonableness of attorney’s fees for summary judgment
purposes. Gaughan, 351 S.W.3d at 423. When no controverting affidavit is filed,
mere criticism of the amount of attorney’s fees sought does not create a fact issue
and the trial court may grant summary judgment on the amount of attorney’s fees.
Id. at 423–24; Merch. Ctr., Inc. v. WNS, Inc., 85 S.W.3d 389, 397 (Tex. App.—
Texarkana 2002, no pet.); see also Hunsucker, 238 S.W.3d at 432 (holding it is an
abuse of discretion not to award fees when party submitted uncontroverted
affidavit establishing reasonableness of fees).
B. Segregation of fees
Petrello next argues that the trial court erred by awarding attorney’s fees that
had not been segregated. The question of the need to segregate fees is a question
of law, which we review de novo. Tony Gullo Motors, Inc. v. Chapa, 212 S.W.3d
as a matter of law as well. Hunsucker v. Fustok, 238 S.W.3d 421, 432 (Tex.
App.—Houston [1st Dist.] 2007, no pet.). And unlike the scenario in Fuqua,
Petrello raised no fact question on the issue of the reasonableness of
attorney’s fees. Fuqua v. Oncor Elec. Delivery Co., 315 S.W.3d 552, 559–
60 (Tex. App.—Eastland 2010, pet. denied). There, the party requesting
fees asked the trial court to determine the issue over the objection of the
opposing party, which requested a jury trial on the issue. Id. at 560. Petrello
never raised a fact question because he failed to comply with the provision
of TEX. CIV. PRAC. & REM. CODE ANN. § 18.001 requiring a controverting
affidavit to contest the issue. See Merch. Ctr., Inc. v. WNS, Inc., 85 S.W.3d
389, 397 (Tex. App.—Texarkana 2002, no pet.) (holding reasonableness of
attorney’s fees under Declaratory Judgment Act is fact question, but clear,
direct, and uncontroverted evidence of fees is taken as true as matter of law
when opposing party has not rebutted such evidence).
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299, 312–13 (Tex. 2006). Parties seeking attorney’s fees must “segregate fees
between claims for which they are recoverable and claims for which they are not.”
Id. at 311. But when legal services advancing both recoverable and unrecoverable
claims are intertwined, legal services need not be segregated. Id. A claim is not
disallowed because it does “double service,” but a claimant must segregate fees if
any attorney’s fees relate solely to a claim for which fees are unrecoverable. Id. at
313. The party seeking to recover attorney’s fees carries the burden of
demonstrating that fee segregation is not required. CA Partners v. Spears, 274
S.W.3d 51, 82 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (citing Hong
Kong Dev., Inc. v. Nguyen, 229 S.W.3d 415, 455 (Tex. App.—Houston [1st Dist.]
2007, no pet.)). “[T]he evidence of the amount of recoverable attorney’s fees is
sufficiently segregated if, for example, the attorney testifies that a given percentage
of the drafting time would have been necessary even if the claim for which
attorney’s fees are not recoverable had not been asserted.” Id.
The trial court granted summary judgment on the bases of preclusion of
claims and the statute of frauds—defenses that would equally defeat Petrello’s
Declaratory Judgment Act claims and his various state-law claims for which
attorney’s fees are unrecoverable. When the services necessary to defend a claim
for which fees are available also advance an argument against a claim for which
fees are not recoverable, “then the exception to the general fee-segregation rule
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applies, and the amount of time or money that was reasonable to expend in
performing the service need not be segregated among the claims it advanced.” In
re Lesikar, 285 S.W.3d 577, 585 (Tex. App.—Houston [14th Dist.] 2009, orig.
proceeding); see also Bencor, Inc. v. Variable Annuity Life Ins. Co., No. 01-09-
00094-CV, 2011 WL 1330818, at *9 (Tex. App.—Houston [1st Dist.] Apr. 7,
2011, pet. denied) (mem. op.) (holding prevailing party could recover declaratory
judgment attorney’s fees “when it raised the defense of res judicata as to both the
breach of contract claim and the claim for declaratory relief”). In support of their
request for fees, the defendants presented affidavits from their attorneys and
supporting documents to the trial court supporting the conclusion that the fees were
reasonable and intertwined with the defense of Petrello’s Declaratory Judgment
Act claims. Accordingly, we conclude that the trial court did not abuse its
discretion in its attorney’s fees award.
C. Unrecoverable costs
Finally, Petrello contests the trial court’s award of “almost $40,000 in
unrecoverable costs” to the Prucka and Nath. He contends that the costs were not
recoverable because Texas law does not generally permit the recovery of litigation
expenses, such as photocopies and exhibit preparation, as “costs.” See, e.g., TEX.
R. CIV. P. 140 (“No fee for a copy of a paper not required by law or these rules to
be copied shall be taxed in the bill of costs.”).
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The manner of assessing costs is left largely to the trial court’s discretion.
Shaikh v. Aerovias de Mexico, 127 S.W.3d 76, 82 (Tex. App.—Houston [1st Dist.]
2003, no pet.). “Costs” usually refers to “fees and charges required by law” to be
paid to the courts or some of their officers, and the amount is fixed by statute or the
court’s rules. Id. Generally, expenses incurred in prosecuting or defending a
lawsuit are not recoverable as costs, unless permitted by a statute or rule. Sterling
Bank v. Willard M, L.L.C., 221 S.W.3d 121, 125 (Tex. App.—Houston [1st Dist.]
2006, no pet.). Whether a particular expense is permitted by statute or rule to be
recoverable as a cost is a question of law, which we review de novo. Ferry v.
Sackett, 204 S.W.3d 911, 912 (Tex. App.—Dallas 2006, no pet.).
Here, the Declaratory Judgment Act grants discretion to the trial court to
“award costs and reasonable and necessary attorney’s fees as are equitable and
just.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (West 2008); see also
Bocquet, 972 S.W.2d at 21 (holding section 37.009 entrusts awards to sound
discretion of trial court). When the Declaratory Judgment Act provides for the
recovery of costs, other rules limiting the award of costs, such as the Texas Rules
of Civil Procedure, do not control. W. Beach Marina, Ltd. v. Erdeljac, 94 S.W.3d
248, 270 (Tex. App.—Austin 2002, no pet.); see also Bocquet, 972 S.W.2d at 21
(limitations on trial court’s discretion to make awards under section 37.009 found
in statute’s language). The general rule relied upon by Petrello that litigation
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expenses cannot be assessed as costs stems from the Texas Rules of Civil
Procedure. See, e.g., Shaikh, 127 S.W.3d at 82. No such limitation is found in the
Declaratory Judgment Act, which instead allows the court to award both costs and
attorney’s fees so long as the award is equitable and just. TEX. CIV. PRAC. & REM.
CODE ANN. § 37.009; Martin v. Cadle Co., 133 S.W.3d 897, 906–07 (Tex. App.—
Dallas 2004, pet. denied).
Petrello does not argue that the award of costs connected to defending his
lawsuit was either inequitable or unfair. Therefore, we overrule this issue. See
Martin, 133 S.W.3d at 907 (overruling appellant’s challenge to section 37.009
award when he does not argue award inequitable or unjust); W. Beach Marina, 94
S.W.3d at 270 (same).
Conclusion
As the trial court’s grant of summary judgment on the ground of res judicata
was meritorious, we need not address Petrello’s other issues to affirm the
judgment. Two Thirty Nine Joint Venture, 145 S.W.3d at 157. We affirm the
judgment of the trial court.
Michael Massengale
Justice
Panel consists of Justices Keyes, Massengale, and Brown.
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