Household Finance Corporation III v. DTND Sierra Investments, LLC

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-13-00033-CV
HOUSEHOLD FINANCE CORPORATION III,
Appellant
v.
DTND SIERRA INVESTMENTS,
DTND SIERRA INVESTMENTS, LLC,
Appellee
From the 407th Judicial District Court, Bexar County, Texas
Trial Court No. 2012-CI-08367
The Honorable Antonia Arteaga, Judge Presiding
Opinion by: Marialyn Barnard, Justice
Sitting: Karen Angelini, Justice
Marialyn Barnard, Justice
Rebeca C. Martinez, Justice
Delivered and Filed: November 6, 2013
AFFIRMED IN PART, REVERSED AND REMANDED IN PART
This is a restricted appeal from a no–answer default judgment in a suit to invalidate a lien,
quiet title, and recover damages with respect to certain real property purchased by appellee DTND
Sierra Investments, LLC (“DTND”) at a homeowner’s association foreclosure sale. On appeal,
appellant Household Finance Corporation III (“Household Finance”) raises the following issues,
contending the default judgment should be reversed because: (1) DTND’s pleadings were
insufficient to state a cause of action for breach of contract, wrongful foreclosure, tortious
interference with prospective business relations, and for claims under the DTPA; (2) the damages
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awarded are not supported by the record; and (3) the attorney’s fees awarded are not supported by
the record. We affirm in part and reverse and remand in part.
BACKGROUND
DTND purchased certain real property in Bexar County, Texas at a homeowner’s
association foreclosure sale. Household Finance is the first lien holder on the property in question
based on a note and deed of trust executed by the borrower, Sean F. O’Niell. According to DTND,
because Household Finance failed to redeem the property during the statutory redemption period
after the foreclosure sale, it forfeited its interest in the subject property. See TEX. PROP. CODE
ANN. § 209.011 (West Supp. 2012) (governing right of redemption after foreclosure). Thus,
according to DTND, the title asserted by Household Finance “is defective and inferior” to the title
claim by DTND. DTND claimed that despite its superior title, it requested from Household
Finance the amount necessary to pay off the lien so it could clear the title. DTND asserted that
despite numerous requests for the “lien payoff amount,” Household Finance failed to respond.
On May 18, 2012, DTND filed suit against Household Finance. In the petition, DTND
asserted that because Household Finance failed to redeem the property as required by section
209.011 of the Property Code, Household Finance forfeited its lien. DTND claimed Household
Finance refused to provide DTND with a payoff amount, preventing DTND from clearing title and
selling the property. DTND sought to invalidate Household Finance’s lien and quiet title in favor
of DTND. DTND also sought damages based on claims for violations of the DTPA, breach of
contract, and tortious interference with prospective business relations.
Although served with citation through its registered agent, Household Finance failed to file
an answer. Thereafter, DTND filed a motion for default judgment. At the default judgment
hearing, Eric Allen Davis, the DTND investment manager, testified regarding unliquidated
damages. The total actual damages sought were $63,500.00. In addition to actual damages, DTND
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also sought punitive damages and treble damages under the DTPA. At the hearing, DTND
specifically asked the trial court for $50,000.00 in exemplary damages, and asked the court to
treble the amount of actual damages based on the DTPA for a total of $201,000.00. DTND also
asked the court to quiet title in their favor.
DTND’s attorney also testified regarding the recovery of attorney’s fees, seeking
$3,500.00. The attorney testified the amount was reasonable and necessary given the amount of
work and the type of litigation. DTND also presented an affidavit from the attorney, which was
attached to the motion for default judgment, in support of attorney’s fees.
The trial court signed an order granting default judgment in favor DTND. The trial court
awarded DTND all the damages and attorney’s fees requested, trebling the actual damages and
awarding $50,000.00 in exemplary damages. The court also rendered judgment that Household
Finance’s interest in the subject property through the deed of trust was invalid and unenforceable,
and declared DTND the sole owner in fee simple of the property.
Although served with a notice of the default judgment, Household Finance filed neither a
motion for new trial nor other postjudgment motion, nor did it file a standard notice of appeal.
Rather, it ultimately filed a notice of restricted appeal pursuant to Rule 26.1(c) of the Texas Rules
of Appellate Procedure. See TEX. R. APP. P. 26.1(c).
ANALYSIS
As noted above, in this restricted appeal, Household Finance challenges the default
judgment based on insufficient pleadings and insufficient evidence of damages and attorney’s fees.
A restricted appeal is a direct attack on a default judgment. Whitaker v. Rose, 218 S.W.3d 216,
219 (Tex. App.—Houston [14th Dist.] 2007, no pet.). To be entitled to a restricted appeal, the
appealing party must show: (1) it filed a notice of restricted appeal within six months after the
judgment was signed; (2) it was a party to the underlying suit; (3) it did not participate in the
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hearing that resulted in the judgment complained of, and did not timely file any postjudgment
motions or a request for findings of fact and conclusions of law; and (4) error is apparent on the
face of the record. Ins. Co. of State of Penn. v. Lejeune, 297 S.W.3d 254, 255 (Tex. 2009) (citing
Alexander v. Lynda’s Boutique, 134 S.W.3d 845, 848 (Tex. 2004)); In re B.H.B., 336 S.W.3d 303,
305 (Tex. App.—San Antonio 2010, pet. denied); see also TEX. R. APP. P. 26.1(c) (stating that in
restricted appeal, notice of appeal must be filed within six months of date judgment or order is
signed); TEX. R. APP. P. 30 (stating party who did not participate in hearing that resulted in
judgment complained of and who did not timely file postjudgment motions, request for findings
of fact and conclusion of law, or notice of appeal, may filed restricted appeal). An appellant must
satisfy each element of a restricted appeal because each element is mandatory and jurisdictional.
Ibarra v. City of Laredo, Nos. 04-11-00035-CV & 04-11-00037-CV, 2010 WL 3025709, at *4
(Tex. App.—San Antonio July 25, 2012, pet. denied) (mem. op.) (citing Serna v. Webster, 908
S.W.2d 487, 491 (Tex. App.—San Antonio 1995, no writ)).
The parties seem to agree Household Finance satisfies the first three elements: notice of
appeal filed within six months of the judgment, party to the suit, no participation in the hearing
that resulted in the judgment complained of, and no postjudgment motions or a request for findings
of fact and conclusions of law filed. See Lejeune, 297 S.W.3d at 255; B.H.B., 336 S.W.3d at 305.
Moreover, the record supports these elements. Therefore, this appeal considers whether the errors
alleged by Household Finance are apparent from the face of the record. The face of the record
includes all papers on file in the appeal, e.g., the documents in the clerk’s record and the reporter’s
record. Whitaker, 218 S.W.3d at 220.
Sufficiency of DTND’s Pleadings
In its first three issues, Household Finance contends the default judgment must be reversed
because DTND’s pleadings were insufficient to state a cause of action for violations of the DTPA,
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breach of contract, and tortious interference. Household Finance argues the allegations in DTND’s
petition are insufficient to give Household Finance notice of the actual claims against it. We
disagree.
A default judgment is proper where: (1) the plaintiff files a petition stating one or more
causes of action; (2) the petition invokes the trial court’s jurisdiction; (3) the petition gives fair
notice of the claim or claims asserted; and (4) the petition does not disclose any invalidity of the
claim on its face. Elite Door & Trim, Inc. v. Tapia, 355 S.W.3d 757, 766 (Tex. App.—Dallas
2011, no pet.) (citing Paramount Pipe & Supply Co. v. Muhr, 749 S.W.2d 491, 494 (Tex. 1988);
Oliphant Fin., LLC v. Galaviz, 299 S.W.3d 829, 834 (Tex. App.—Dallas 2009, no pet.)) (emphasis
added). The purpose of a pleading is to give fair notice of a party’s claims and the relief sought,
not to state evidence. WorldPeace v. Comm’n for Lawyer Discipline, 183 S.W.3d 451, 457 (Tex.
App.—Houston [14th Dist.] 2005, pet. denied); Bader v. Cox, 701 S.W.2d 677, 686 (Tex. App.—
Dallas 1985, writ ref’d n.r.e.). “Fair notice” exists when the opposing party can ascertain from the
pleading the nature of the claims, the basic issues in controversy, and what testimony will be
relevant to the claim. Tapia, 355 S.W.3d at 766 (citing Horizon/CMS Healthcare Corp. v. Auld,
34 S.W.3d 887, 896 (Tex. 2000)); see also TEX. R. CIV. P. 45(b) (stating pleadings shall consist of
statement of cause of action in plain and concise language); TEX. R. CIV. P. 47(a) (stating a
pleading “shall contain . . . a short statement of the cause of action sufficient to give fair notice of
the claim involved”). Fair notice is given when it provides sufficient information to allow the
opposing party to prepare a defense. Tapia, 355 S.W.3d at 766 (citing Auld, 34 S.W.3d at 897).
The fair notice standard “relieves the pleader of the burden of pleading evidentiary matters with
meticulous particularity.” Tapia, 355 S.W.3d at 766; see Bowen v. Robinson, 227 S.W.3d 86, 91
(Tex. App.—Houston [1st Dist.] 2006, pet. denied). Texas courts have long held that forcing a
party to plead his entire case with exactitude is not in harmony with the spirit of the rules governing
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pleading. See, e.g., Estate of Meniffee v. Barrett, 795 S.W.2d 810, 812 (Tex. App.—Texarkana
1990, no writ); Bader, 701 S.W.2d at 686; Rodriguez v. Yenawine, 556 S.W.2d 410, 414 (Tex.
Civ. App.—Austin 1977, no writ).
In determining whether a pleading is adequate, i.e., provides fair notice, we must determine
whether an opposing attorney of reasonable competence, on review of the pleadings, can ascertain
the nature and the basic issues of the controversy. Tapia, 355 S.W.3d at 766; Bowen, 227 S.W.3d
at 91. That an element of a claim has been omitted, is not dispositive. See Boyles v. Kerr, 855
S.W.2d 593, 601 (Tex. 1993). When, as here, no special exceptions are filed, we must liberally
construe the pleadings in favor of the pleading party. Tapia, 355 S.W.3d at 766; Auld, 34 S.W.3d
at 897.
DTPA Violations
As noted above, Household Finance claims DTND’s petition is inadequate to state a claim
under the DTPA. Specifically, Household Finance argues DTND’s pleading is inadequate because
the petition failed to allege: (1) DTND was a consumer or to state facts necessary to show it was a
consumer; (2) facts or elements necessary to establish Household Finance can be sued under the
DTPA, i.e., no allegations of a sale or leasing of goods or services; (3) facts or elements necessary
to establish Household Finance committed a wrongful act or a false, misleading, or deceptive act;
and (4) how DTND and Household Finance were in a consumer/debt collector relationship.
In its petition, DTND pled the facts, essentially as set forth in the “Background” section
above. Thereafter, with regard to its DTPA claim, DTND alleged:
DECEPTIVE TRADE PRACTICES
14. Plaintiff is a “consumer” as defined in Tex. Fin. Code Ann. § 392.001.
Defendant is attempting to collect a debt from an alleged debt obligation; the
purported debt is a consumer debt as defined in Tex. Fin. Code Ann. § 392.001.
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15. Plaintiff incorporates the factual allegations in Paragraphs 7 through 11
above. Plaintiff would show that Defendant, by their actions as alleged herein,
engaged in certain false, misleading and deceptive acts, practices and/or omissions
actionable under the Texas Deceptive Trade Practices – Consumer Protection Act
(Texas Business and Commerce Code, Chapter 17.41, et seq.), as alleged herein
below.
16. DTPA Violations under Other Statute. Defendant engaged in false,
misleading or deceptive acts as provided by the following “tie-in” statute, the Debt
Collection Act (Texas Finance Code, Section 293.404(a)), as follows:
§ 392.304(a)(19) In debt collection or obtaining information concerning a
consumer, a debt collector may not use a fraudulent, deceptive, or misleading
representation that employs the following practices: using another false
representation or deceptive means to collect a debt or obtain information
concerning a consumer.
Plaintiff alleges that Defendant’s actions in failing to give Plaintiff a payoff amount
to clear the lien on its property while interest and penalties accrue is a deceptive
means to collect a debt as set out in § 392.304(a)(19).
17. Producing Cause. Plaintiff would show that the acts, practices and/or
omissions complained of were the producing cause of Plaintiff’s damages more
fully described herein below.
* * *
MULTIPLE DAMAGES
26. As alleged hereinabove, Plaintiff would show that the false, misleading and
deceptive acts, practices and/or omissions complained of herein were committed
“knowingly” in that Defendant had actual awareness of the falsity, deception, or
unfairness of such acts, practices, and/or omissions.
27. Therefore, Plaintiff is entitled to recover multiple damages as provided by
17.50(b)(1) of the Texas Business and Commerce Code.
“The DTPA grants consumers a cause of action for false, misleading, or deceptive acts or
practices.” Bus. Staffing, Inc. v. Jackson Hot Oil Serv., 401 S.W.3d 224, 236 (Tex. App.—El Paso
2012, pet. denied) (quoting Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996). To
establish a DTPA claim, the plaintiff must prove: (1) it was a consumer; (2) the defendant engaged
in false, misleading, or deceptive acts, or engaged in an unconscionable action or course of action;
and (3) the deceptive act or unconscionable action was the producing cause of the plaintiff’s
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damages. Bus. Staffing, Inc., 401 S.W.3d at 236 (citing Amstadt, 919 S.W.2d 649). Section
392.404(a) of the Texas Finance Code specifically states that a violation of Chapter 392 “is a
deceptive trade practice” and actionable under the DTPA. TEX. FIN. CODE ANN. § 392.404(a)
(West 2006).
DTND entitled the section in question “Deceptive Trade Practices” and made specific
references to the statute. In addition, it cited to section 17.50 of the Act in support of a recovery
of “multiple” damages. DTND specifically pled it was a consumer under Chapter 392 of the
Finance Code and was seeking relief under the DTPA via the Finance Code. It asserted Household
Finance violated a specific provision of the Finance Code, and that the stated violation was a
producing cause of DTND’s damages. At the end of the petition, DTND stated it suffered certain
specific damages as a result of Household Finance’s action. Liberally construing the DTPA
allegations, as we must, see Tapia, 355 S.W.3d at 766; Auld, 34 S.W.3d at 897, we are compelled
to hold the pleading provides fair notice. In other words, we hold an opposing attorney of
reasonable competence would be able to ascertain the nature and the basic issues of the
controversy. See Tapia, 355 S.W.3d at 766; Bowen, 227 S.W.3d at 91.
Household Finance’s brief makes it patently clear it understood DTND was asserting a
DTPA claim based on a violation of the Finance Code. Moreover, in its brief, Household Finance
argues defenses appropriate to DTND’s claim. Household Finance simply contends the claim is
without merit. In fact, Household Finance dedicates a good portion of its reply brief to a discussion
of how the DTPA claim lacks merit. However, to negate a default judgment based on a lack of
merit on the face of the pleadings, the petition itself must disclose the invalidity of the claim. See
Tapia, 355 S.W.3d at 766 (citing Muhr, 749 S.W.2d at 494); Galaviz, 299 S.W.3d at 834). The
face of the petition does not invalidate the DTPA claim. Rather, the possible lack of merit of the
claim is disclosed only by the argument in Household Finance’s briefing. The merit of a claim
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does not play a role in the determination of fair notice. See Tapia, 355 S.W.3d at 766 (citing Auld,
34 S.W.3d at 896); see also TEX. R. CIV. P. 45(b); TEX. R. CIV. P. 47(a). Accordingly, we overrule
Household Finance’s first issue.
Breach of Contract
Household Finance also claims DTND’s petition is inadequate to state a breach of contract
claim. Specifically, Household Finance argues DTND’s pleading is inadequate because the
petition failed to allege: (1) facts or elements necessary to establish the existence of a contract; (2)
facts or elements necessary to establish a breach of contract; and (3) damages.
As to the breach of contract claim, DTND again pled the facts, essentially as set forth in
the “Background” section above, and then alleged:
BREACH OF CONTRACT
18. Plaintiff incorporates the factual allegations in Paragraphs 7 through 11
above.
HOUSEHOLD FINANCE CORPORTION III is bound by the terms of the note
and deed of trust signed by Sean F. O’Niell. DTND Sierra Investments LLC, as
successor to the beneficial interests of Sean F. O’Niell was entitled to the rights and
beneficial interests set out in the note and deed of trust signed by Sean F. O’Niell.
HOUSEHOLD FINANCE CORPORATION III and its agents failed to give DTND
Sierra Investments LLC the payoff on the property. The failure to give the payoff
amount constituted a breach of contract.
A breach of contract claim requires that a plaintiff prove: (1) the existence of a valid
contract between the plaintiff and the defendant; (2) performance or tendered performance by the
plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as
a result of the defendant’s breach. Foley v. Daniel, 346 S.W.3d 687, 690 (Tex. App.—El Paso
2009, no pet.); Killeen v. Lighthouse Elec. Contractors, L.P., 248 S.W.3d 343, 349 (Tex. App.—
San Antonio 2007; pet. denied). A review of DTND’s petition establishes it alleged that as the
successor-in-interest to the borrower, it was entitled to the same rights afforded the borrower under
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the note, and under the note, the borrower had the right to be advised of the amount necessary to
pay off the note. DTND asserted it requested on numerous occasions that Household Finance
provide it with the amount needed to pay off the note so DTND could obtain clear title to the
property, but Household Finance breached the note by failing to provide the information. These
allegations cover the first three elements of a breach of contract claim, and clearly provide fair
notice of the basis of the claim.
Admittedly, a damage allegation is not specifically included in the breach of contract
section of the petition. But, as previously noted, toward the end of the petition, DTND pled for
damages based the actions or omissions of Household Finance as “described hereinabove.” Thus,
we hold DTND set forth all elements of its breach of contract claim, and certainly set forth the
claim with sufficient specificity to advise an opposing attorney of reasonable competence of the
nature and the basic issues of the controversy. See Tapia, 355 S.W.3d at 766; Bowen, 227 S.W.3d
at 91.
Household Finance’s brief establishes its understanding of the breach of contract claim,
raising numerous defenses in opposition to the claim. As with the DTPA claim, Household
Finance dedicates a portion of its reply brief to arguing the breach of contract claim is without
merit. Again, to reverse a default judgment based on a lack of merit on the face of the pleadings,
the petition must disclose the invalidity of the claim on its face. See Tapia, 355 S.W.3d at 766
(citing Muhr, 749 S.W.2d at 494); Galaviz, 299 S.W.3d at 834. Here, the face of the petition does
not invalidate the breach of contract claim. Rather, Household Finance attempts to do that in its
brief and reply brief. However, just as with the DTPA claim, the merit of a claim does not play a
role in the determination of fair notice. See Tapia, 355 S.W.3d at 766 (citing Auld, 34 S.W.3d at
896); see also TEX. R. CIV. P. 45(b); TEX. R. CIV. P. 47(a). A plaintiff’s ultimate lack of success
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does not equate to a failure to provide fair notice. We therefore overrule Household Finance’s
second issue.
Tortious Interference with Prospective Business Relations
Finally, with regard to lack of notice, Household Finance claims DTND’s petition is
inadequate with regard to the tortious interference claim. Specifically, Household Finance argues
DTND’s pleading is inadequate because the petition failed to allege: (1) facts necessary to establish
a reasonable probability that DTND would enter into a business relationship with a third party; (2)
facts necessary to establish Household Finance intentionally interfered with an alleged business
relationship or had actual knowledge of a prospective business relationship; (3) facts to establish
Household Finance was independently tortious; and (4) damages.
As with its other causes of action, DTND again pled the facts, essentially as set forth in the
“Background” section above, and then alleged with regard to tortious interference:
TORTIOUS INTERFERENCE WITH PROSPECTIVE BUSINESS
RELATIONS
19. Plaintiff incorporates the factual allegations in Paragraphs 7 through 11
above. Defendant tortiously interfered with the Plaintiff’s right to possess, lease
and/or dispose of the Property. Conduct by a defendant that is detrimental to a
plaintiff’s ability to sell, retain, lease or otherwise dispose of its property, as
plaintiff intended, constitutes tortious interference with a prospective contract or
prospective business relation. Surprise v. DeKock, 84 S.W.3d 378, 381–82 (Tex.
App.—Corpus Christi 2002, no writ) (court held that defendant’s posting signs and
calling prospective buyers interfered with plaintiff’s effort to dispose of their
property as they intended as plaintiffs had intended to keep the property for the use
and benefit of the children, but were forced to sell quickly at less than fair market
value due to defendants’ conduct).
20. The defendant’s conduct as alleged herein has prevented Plaintiff from
entering inter [sic] an agreement to sell the property to exact Plaintiff’s equity.
Texas has long recognized the tort of interference with prospective business relations. Wal-
Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 712–13 (Tex. 2001). Although the Texas Supreme
Court has never set forth the elements for this claim, see Prudential Ins. Co. of Am. v. Fin. Review
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Servs., Inc., 29 S.W.3d 74, 78 (Tex. 2000), several appellate courts have. See, e.g., Tex. Integrated
Conveyor Sys., Inc. v. Innovative Conveyor Concepts, Inc., 300 S.W.3d 348, 367 (Tex. App.—
Dallas 2009, pet. denied); Labor v. Warren, 268 S.W.3d 273, 278 (Tex. App.—Amarillo 2008, no
pet.); Tex. Disposal Sys. Landfill, Inc. v. Waste Management Holdings, Inc., 219 S.W.3d 563, 590
(Tex. App.—Austin 2007, pets. denied); Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 860 (Tex.
App.—Houston [14th Dist.] 2001, pets. denied). These courts hold that to establish a claim for
tortious interference with prospective business relations, a plaintiff must show: (1) a reasonable
probability that the parties would have entered into a business relationship; (2) an intentional,
malicious intervention or an independently tortious or unlawful act performed by the defendant
with a desire to prevent the relationship or with the knowledge the interference was likely to occur
as a result of its conduct; (3) lack of privilege or justification for the defendant’s actions; and (4)
actual harm or damages suffered by the plaintiff as a result of the defendant’s interference, i.e., the
defendant’s actions prevented the relationship. Labor, 268 S.W.3d at 278.
Clearly, DTND did not plead each of these elements. However, DTND specifically
identified the cause of action and described the basis for the allegation: by failing to provide DTND
with the information necessary to pay off the existing lien, Household Finance prevented DTND
from leasing or selling the property. Moreover, DTND cited a case from the Corpus Christi Court
of Appeals that held the plaintiffs did not have to specifically use the terms “prospective contract”
or “business relationship” in their pleading to state a cause of action for tortious interference with
contract or business relations. See Surprise v. DeKock, 84 S.W.3d 378, 380–82 (Tex. App.—
Corpus Christi 2002, no pet.). Rather, it was sufficient that they claimed the defendants interfered
with their right to dispose of their real property. Id. According to the court of appeals, the plaintiffs
had stated a claim for tortious interference with business relations, and in fact were entitled to
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recover on that claim where the evidence established the defendants interfered with the plaintiffs’
efforts to sell their real property. Id.
Based on DTND’s allegations, as well as its citation to a particular case that held there was
a right to recover based on an interference with the sale of real property, we hold the petition
provided fair notice of the tortious interference claim. DTND set forth the claim with sufficient
specificity that an opposing attorney of reasonable competence would be able to ascertain the
nature and the basic issues of the controversy. See Tapia, 355 S.W.3d at 766; Bowen, 227 S.W.3d
at 91.
Admittedly, DTND failed to include a specific damage allegation in the tortious
interference section of the petition. However, as previously indicated, toward the end of the
petition, DTND pled for damages based on the actions or omissions of Household Finance as
“described hereinabove.” Thus, we find DTND set forth all elements of its tortious interference
claim, and certainly set forth the claim with sufficient specificity to allow an opposing attorney of
reasonable competence to ascertain the nature and the basic issues of the controversy. See Tapia,
355 S.W.3d at 766; Bowen, 227 S.W.3d at 91.
And again, Household Finance’s brief establishes its understanding of the claim, noting
possible defenses to it. As stated with regard to the other claims, the petition does not, on its face,
negate the viability of the tortious interference claim – Household Finance attempts to do that in
its briefing. The merit of a claim does not play a role in the determination of fair notice. See
Tapia, 355 S.W.3d at 766 (citing Auld, 34 S.W.3d at 896); see also TEX. R. CIV. P. 45(b); TEX. R.
CIV. P. 47(a). Accordingly, we overrule Household Finance’s third issue.
Oral Argument
We note that, at oral argument, it became apparent that contrary to the arguments and
authorities in the original brief, Household Finance was claiming the record established the
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invalidity of the claims in the petition. However, the law in this regard specifically states that a
default judgment is proper unless the invalidity of the claim in question is established by the face
of the petition, not the record as a whole. See Tapia, 355 S.W.3d at 766 (citing Muhr, 749 S.W.2d
at 494; Galaviz, 299 S.W.3d at 834). Based on our review of the petition, we hold the claims
appear viable on their face. Moreover, even considering the record in its entirety, there is nothing
to disclose the alleged invalidity of DTND’s claims. Rather, only if we go behind the petition and
review the underlying merits in light of substantive law are any potential invalidities exposed.
Household Finance may be correct that DTND’s claims lack merit. Any absence of merit,
however, becomes apparent only when the claims are substantively reviewed based on applicable
law; the absence of merit, if any, does not appear on the face of the petition. Accordingly, if this
is the argument Household Finance attempted to raise in its brief, we hold it does not entitle
Household Finance to a reversal of the default judgment.
Insufficient Evidence of Damages
In its fourth issue, Household Finance contends the evidence is legally and factually
insufficient to support the damages awarded by the trial court in the default judgment. Specifically,
Household Finance contends the evidence put forth by DTND in support of damages was
speculative and conclusory. Household Finance further contends there was nothing to establish
the damage witness had personal knowledge or a sufficient foundation for his testimony.
When a plaintiff obtains a default judgment against a non-answering defendant on a claim
for unliquidated damages, all factual allegations in the petition are deemed admitted, except for
the amount of damages. Paradigm Oil, Inc. v. Retamco Operating, Inc., 242 S.W.3d 67, 72 (Tex.
App.—San Antonio 2007, pet. denied) (citing Morgan v. Compugraphic Corp., 675 S.W.2d 729,
731 (Tex. 1984); Argyle Mech., Inc. v. Unigus Steel, Inc., 156 S.W.3d 685, 687 (Tex. App.—
Dallas 2005, no pet.) (citing Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 83 (Tex.1992);
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Arenivar v. Providian Nat’l Bank, 23 S.W.3d 496, 497 (Tex. App.—Amarillo 2000, no pet.)).
When a claim for unliquidated damages is alleged in a default judgment, the trial court must hear
evidence on the damages. Argyle Mech., Inc., 156 S.W.3d at 687 (citing Holt Atherton Indus., 835
S.W.2d at 83; TEX. R. CIV. P. 243). This court has held, in the context of an award of unliquidated
damages after a no-answer default judgment, that “[t]he damages must be ascertainable in some
manner other than by mere speculation or conjecture, and by reference to some fairly definite
standard, established experience, or direct inference from known facts.” Paradigm Oil, Inc., 242
S.W.3d at 72 (quoting A.B.F. Freight Sys., Inc. v. Autstrian Imp. Servs., Inc., 798 S.W.2d 606, 615
(Tex. App.—Dallas 1990, writ denied)); see also Tate v. Goins, Underkofler, Crawford &
Langdon, 24 S.W.3d 627, 635 (Tex. App.—Dallas 2000, pet. denied). Damages that are purely
conjectural or speculative are too uncertain to be ascertained and cannot be recovered. Tate, 24
S.W.3d at 635.
On appeal, the defendant against whom a no-answer default judgment has been taken may
challenge the legal and factual sufficiency of the evidence to support any award of unliquidated
damages. Paradigm Oil, Inc., 242 S.W.3d at 72; Argyle Mech., Inc., 156 S.W.3d at 687. An
appellate court will sustain a legal sufficiency or “no evidence” challenge if the record shows: (1)
a complete absence of a vital fact; (2) rules of law or evidence bar the court from giving weight to
the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no
more than a scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact.
City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). The appellate court must consider the
evidence in the light most favorable to the judgment and indulge every reasonable inference that
supports it. Id. at 822. Evidence is legally sufficient if it would enable reasonable and fair-minded
people to reach the verdict under review. Id. at 827. In its review, the appellate court must credit
favorable evidence if a reasonable factfinder could, and disregard contrary evidence unless a
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reasonable factfinder could not. See id. In reviewing a factual sufficiency challenge, we examine
all the evidence to determine if the evidence supporting the finding is so weak or the evidence to
the contrary is so overwhelming that the judgment should be set aside and a new trial ordered.
Thomas v. Martinez, 217 S.W.3d 680, 683 (Tex. App.—Dallas 2007, pet. stricken); Dawson v.
Briggs, 107 S.W.3d 739, 748 (Tex. App.—Fort Worth 2003, no pet.). We will reverse only if the
finding is against the great weight and preponderance of the evidence as to be manifestly unjust.
Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). In a restricted appeal, the scope of review is
limited to the “face of the record,” which consists of all the papers on file in the appeal, including
the reporter’s record. Jackson v. Gutierrez, 77 S.W.3d 898, 902 (Tex. App.—Houston [14th Dist.]
2002, no pet.).
At the default judgment hearing, DTND presented Eric Allen Davis, the DTND investment
manager, to provide evidence of its alleged damages. Davis testified that as the investment
manager, he oversaw the purchase of investment properties and assessed such properties for
income potential and disposition. Davis stated DTND purchased the subject property in July 2011
at “the HOA foreclosure auction.” As to damages, the testimony, in its entirety, was as follows:
Q. Okay. Could you please tell the Court a little bit about your actual damages
starting out with all the out-of-pocket expenses associated with the failure of the
bank to give us – to give DTND a purchase price[?]
A. Okay. Out-of-pocket expenses on that were about $500.
Q. Okay. And could you please testify to the Court what your costs and
expenses were for taxes and insurance on the property and other costs associated
with maintaining the property since October 1, 2011.
A. The taxes since that date amount to about $9,500. And the other expenses
related to that were in the amount of $5,000.
Q. So that is a total of $14,500, is that correct?
A. That is correct.
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Q. Okay. And adding to that the out-of-pocket expenses, that’s a total of
$15,000, is that correct?
A. That is correct.
Q. Okay. Could you please tell the Court any and all interest or penalties that
the plaintiff has suffered as a result of the failure to allow the cure of the lien[?]
A. The interest on that would be $13, 500.
Q. And can you please tell the Court a little bit about the lost or unrealized
equity[?]
A. The rental – potential rental income of that property was approximately
$3,500 a month, amounted to $35,000.
Q. And is that for the ten months that DTND was not able to rent it because of
the clouded title by the –
A. That is correct.
Q. Okay. So to be clear, those amounts again are 15,000, 13,500, and 35,000;
is that correct?
A. That is correct.
Q. Okay. And so by your total is that 63,500 total for the – for those amounts
that you’ve testified to?
A. Yes.
We must determine whether the amounts to which Davis testified were based on something
more than mere speculation or conjecture, and were arrived at “by reference to some fairly definite
standard, established experience, or direct inference from known facts.” Paradigm Oil, Inc., 242
S.W.3d at 72 (quoting A.B.F. Freight Sys., 798 S.W.2d at 615). In other words, are the damage
amounts stated by Davis purely conjectural or speculative so that they are too uncertain to be
ascertained, prohibiting recovery? See Tate, 24 S.W.3d at 635.
In Huynh v. Vo, a case relied upon by Household Finance, the First Court of Appeals
concluded evidence of damages in a restricted appeal from a no-answer default judgment were
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legally insufficient because the plaintiff had done nothing more than state the total amount of
damages sustained. No. 01–02–00295-CV, 2003 WL 1848607, at *5 (Tex. App.—Houston [1st
Dist.] Apr. 10, 2003, no pet.) (mem. op.). In reaching its conclusion, the court relied upon the
supreme court’s holding in Holt Atherton, in which the supreme court held evidence as to damages
was legally insufficient because the plaintiff did not provide any indication of how the amount of
damages was determined. Id. (citing Holt Atherton, 835 S.W.2d at 84).
In Holt Atherton, the plaintiff sought damages for lost profits. 835 S.W.2d at 84. At trial,
the plaintiff’s attorney asked the plaintiff: “Now as a result of the defendant keeping the dozer for
eight months, did you lose out on $200,200 in lost income during that time period.” Id. The
plaintiff responded, “Yes, sir, I did.” Id. The supreme court held this testimony was legally
insufficient because it did not provide any indication of how the plaintiffs determined what their
lost profits were. Id. The court held this testimony did not provide a basis for determining whether
the damages were established with reasonable certainty or were based on pure speculation. Id.
This court reached the same conclusion with regard to similar testimony in Lefton v.
Griffith, 136 S.W.3d 271, 277 (Tex. App.—San Antonio 2004, no pet.). In Lefton, a homeowner
testified she lost $60,000 when she was forced to sell her home. Id. We first noted that as the
owner of her home, the plaintiff was clearly qualified to testify about its value. Id. (citing Porras
v. Craig, 675, S.W.2d 503, 505 (Tex. 1984)). However, because the homeowner failed to explain
how she arrived at the $60,000 figure, we held the evidence was legally insufficient. Id. (emphasis
added). This court stated it had “no way of knowing what she based her conclusion on,” and
therefore her estimate could be pure speculation. Id. Noting there can be no recovery for damages
which are speculative or conjectural, we reversed the damage award. Id. (citing Roberts v. U.S.
Home Corp., 694 S.W.2d 129, 135 (Tex. App.—San Antonio 1985, no writ) (reversing a default
judgment award for damages to credit reputation)).
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04-13-00033-CV
Based on our review of the exchange between DTND’s attorney and Davis, we hold Davis
provided the same kind of speculative evidence the supreme court found legally insufficient in
Holt Atherton, and that this court rejected in Lefton. See Holt Atherton, 835 S.W.2d at 84; Lefton,
136 S.W.3d at 277. Davis merely gave totals for out-of-pocket expenses, taxes, insurance, “other
expenses,” interest and penalties, and lost profits due to an inability to rent the property. Davis
did not explain how he came by these totals, and in some instances, exactly what the damage was
other than by general reference, e.g., out-of-pocket expenses. We hold Davis’s testimony is
conclusory, without support, and speculative. Accordingly, we hold there is legally insufficient
evidence of actual damages and sustain Household Finance’s fourth issue.
Assuming without deciding that the trial court could (1) award both treble and exemplary
damages in this matter, 1 and (2) did not err in awarding the amount of treble damages awarded, 2
if we determine there was no evidence of actual damages, these exemplary and treble damage
awards must fall. The supreme court has held that to recover exemplary damages, a plaintiff must
allege, prove, and secure findings on the existence and amount of actual damages. 3 Nabours v.
Longview Sav. & Loan Ass’n, 700 S.W.2d 901, 903 (Tex. 1985); see AVCO Corp., Textron
Lycoming Reciprocating Engine Div. of AVCO Corp. v. Interstate Sw., Ltd., 251 S.W.3d 632, 662
(Tex. App.—Houston [14th Dist.] 2007, pet. denied). The supreme court’s mandate has been
codified in section 41.004 of the Texas Civil Practice & Remedies Code. See TEX. CIV. PRAC. &
REM. CODE ANN. § 41.004(a) (West 2008); Interstate Sw., Ltd., 251 S.W.3d at 662.
1
Under section 41.004(b) of the Texas Civil Practice & Remedies Code, exemplary damages may not be awarded to
a claimant who elects to have his recovery multiplied under another statute. TEX. CIV. PRAC. & REM. CODE ANN.
§ 41.004(b) (West 2008).
2
Attorney’s fees are not “actual damages” subject to trebling under the DTPA. See Cain v. Pruett, 938 S.W.2d 152,
158 (Tex. App.—Dallas 1996, no writ).
3
There is an exception to this rule in the limited context of a wrongful death action for the death of an employee
covered by worker’s compensation. See Wright v. Gifford–Hill & Co., Inc., 725 S.W.2d 712, 714 (Tex. 1987). That
exception is not applicable here.
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As for treble damages under the DTPA, it is axiomatic that without a recovery of actual
damages, a plaintiff is not entitled to treble damages. See TEX. BUS. & COM. CODE ANN.
§ 17.50(b)(1), (h) (West 2011); see also St. John v. Barker, 638 S.W.2d 239, 245 (Tex. App.—
Amarillo 1982), judgment modified by Durham v. St. John, 645 S.W.2d 261 (Tex. 1983); Guerra
v. Brumlow, 630 S.W.2d 425, 430 (Tex. App.—San Antonio 1982, no writ). In the absence of
actual damages, there is nothing to treble. See Barker, 638 S.W.2d at 245; Guerra, 630 S.W.2d at
430.
The supreme court has instructed that when an appellate court sustains a no evidence point
after an uncontested hearing on unliquidated damages following a no-answer default judgment,
the appropriate disposition is a remand for a new trial on the issue of unliquidated damages. See
Holt Atherton, 835 S.W.2d at 86; Morgan, 675 S.W.2d at 734; see also Lefton, 136 S.W.3d at 280
(remanding for new trial on economic damages and mental anguish damages, but affirming
attorney fee award). The judgment as to liability must be affirmed because when a default
judgment is taken against a non-answering defendant on a claim for unliquidated damages, all
allegations of fact contained in the petition are deemed admitted except for the amount of damages.
Holt Atherton, 835 S.W.2d at 83; Morgan, 675 S.W.2d at 734; Argyle Mech., Inc., 156 S.W.3d at
687.
Insufficient Evidence of Attorney’s Fees
In its fifth and final issue, Household Finance contends the evidence is legally and factually
insufficient to support the award of attorney’s fees. Because the damage evidence is legally
insufficient, we must also reverse with regard to the award of attorney’s fees. Although a
prevailing party is entitled to recover attorney’s fees on a breach of contract claim and a DTPA
claim, both of which were asserted by DTND, the prevailing party must recover actual damages
to recover attorney’s fees. Miller v. Kennedy & Minshew, P.C., 142 S.W.3d 325, 350 (Tex. App.—
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04-13-00033-CV
Fort Worth 2003, pet. denied); see Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195,
201 (Tex. 2004) (per curiam) (breach of contract); Gulf States Utils. Co. v. Low, 79 S.W.3d 561,
567 (Tex. 2002) (DTPA). We therefore sustain Household Finance’s fifth issue.
CONCLUSION
Based on the foregoing, we hold: (1) DTND’s petition gave fair notice of its claims for
violations of the DTPA, breach of contract, and tortious interference with business relations; (2)
DTND’s petition, on its face, did not disclose the invalidity, if any, of its claims; (3) there was no
evidence to support the actual damage awards; and (4) in the absence of an actual damage award,
neither exemplary damages, treble damages nor attorney’s fees may be recovered. The supreme
court has instructed that when an appellate court sustains a no evidence point after an uncontested
hearing on unliquidated damages following a no-answer default judgment, the appropriate
disposition is a remand for a new trial on the issue of unliquidated damages. See Holt Atherton,
835 S.W.2d at 86; Morgan, 675 S.W.2d at 734; see also Lefton, 136 S.W.3d at 280 (remanding for
new trial on economic damages and mental anguish damages, but affirming attorney fee award).
The judgment as to liability must be affirmed because when a default judgment is taken against a
non-answering defendant on claim for unliquidated damages, all allegations of fact contained in
the petition are deemed admitted except for the amount of damages. Holt Atherton, 835 S.W.2d
at 83; Morgan, 675 S.W.2d at 734; Argyle Mech., Inc., 156 S.W.3d at 687.
Accordingly, we affirm the trial court’s judgment on liability, but we reverse the judgment
as to all damages and attorney’s fees and remand those issues to the trial court for a new trial.
Marialyn Barnard, Justice
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