Christopher Morice v. Equity Residential Management, LLC, as Successor to Equity Residential Properties Management Corp

Opinion issued March 1, 2012.

In The

Court of Appeals

For The

First District of Texas

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NO. 01-12-00074-CV

NO. 01-11-00490-CV

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Christopher Morice, Appellant

V.

Equity Residential Management, LLC, as successor to Equity Residential Properties Management Corp., Appellee

On Appeal from the County Civil Court at Law No. 4

Harris County, Texas

Trial Court Case No. 985323

MEMORANDUM OPINION

Equity Residential Management, LLC sued Christopher Morice for breach of a residential lease.  The trial court dismissed Equity’s claims against Morice without prejudice, based on a lease provision designating New York City as the venue for the suit, but it denied Morice’s request for attorney’s fees.  Morice appeals, contending that New York law entitles him to attorney’s fees as a prevailing party.  We affirm.[1]

Background

Morice leased a New York apartment from Equity. The lease agreement provides:

DEFAULT REMEDIES: If you fail to perform any of your obligations under this Lease, we may exercise all of our rights under this Lease, at law or in equity. . . . We can . . . recover the costs, including attorneys’ fees and court costs, which we incur to pursue such actions against you, even if we do not file formal litigation . . . .

LAWS GOVERNING THIS LEASE/VENUE: This lease shall be governed by the laws of the state in which the Building is located, and all legal action arising from this Lease shall be tried in the county where the building is located . . . .

Equity sued Morice in Harris County, where Morice now lives, alleging that Morice had defaulted on the lease and owes it more than $11,000 in unpaid rent. Morice moved to dismiss the suit based on the lease clause providing that disputes “shall be tried in the county where the Building is located.”  The trial court initially denied Morice’s motion to dismiss the case.  Morice then petitioned this court for mandamus relief from the trial court’s order.  We conditionally granted a writ of mandamus, concluding that the forum-selection clause was valid, and that the trial court had no discretion but to dismiss the case without prejudice.  See In re Morice, 01-11-00541-CV, 2011 WL 4101141 (Tex. App.—Houston [1st Dist.] Sept. 15. 2011, no pet.).  Thereafter, the trial court dismissed the lawsuit, but it denied Morice’s request for attorney’s fees. 

Discussion

Standard of Review

          We review a decision awarding or denying attorney’s fees for abuse of discretion.  Ridge Oil Co. v. Guinn Invs., Inc., 148 S.W.3d 143, 163 (Tex. 2004). A trial court abuses its discretion if it acts without reference to any guiding rules or legal principles or acts arbitrarily or unreasonably.  K–Mart Corp. v. Honeycutt, 24 S.W.3d 357, 360 (Tex. 2000) (per curiam).

Analysis

In addition to the venue provision, the lease in this case also contains a New York choice-of-law provision.  We therefore apply New York law to determine whether the trial court erred in denying Morice’s request for attorney’s fees.  See Fairmont Supply Co. v. Hooks Indus., Inc., 177 S.W.3d 529, 535 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (applying Pennsylvania law to award of attorney’s fees in breach of contract case where contract contained choice-of-law provision providing for application of Pennsylvania law).  Morice maintains that he is entitled to attorney’s fees under either New York Real Property Law § 234 or New York’s Shindler exception to the American Rule. See Shindler v. Lamb, 211 N.Y.S.2d 762, 765 (N.Y. Sup. Ct. 1959).

a. Section 234

New York Real Property Law § 234 provides in relevant part:

Whenever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord therefor shall be paid by the tenant as additional rent, there shall be implied in such lease a covenant by the landlord to pay to the tenant the reasonable attorneys’ fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease . . .

N.Y. Real Prop. Law § 234 (McKinney 2011). Section 234 thus allows a successful tenant to claim reasonable attorney’s fees if the lease agreement affords similar relief to the landlord.  Because the lease agreement in this case expressly provides that Equity can recover its attorney’s fees if incurred in a successful suit against Morice arising from a default under the lease, Morice has a concomitant right to attorney’s fees under section 234, should his defense to Equity’s suit be “successful.”  See N.Y. Real Prop. Law § 234. 

Equity does not contest the trial court’s order of dismissal. Thus, the question presented is whether that dismissal fits the definition of “successful” under the statute to trigger liability for fees.  A tenant may recover attorney’s fees under section 234 only if there is a “successful defense” of the landlord’s suit against him.  N.Y. Real Prop. Law § 234.  The New York courts have interpreted “successful” in section 234 to hinge on the “ultimate outcome of the controversy, whether or not such outcome is on the merits.” Elkins v. Cinera Realty, Inc., 402 N.Y.S.2d 432, 433 (N.Y. App. Div. 1978).   The statute requires that the tenant must be the prevailing party in a controversy that has reached its ultimate outcome. See Elkins, 402 N.Y.S.2d at 433; see also Centennial Restorations Co. v. Wyatt, 669 N.Y.S.2d 585 (N.Y. App. Div. 1998).  A controversy has reached its “ultimate outcome” when a court disposes of the case on the merits, or—although not disposed of on the merits—it cannot or will not be brought again.  See Centennial Restorations Co., 699 N.Y.S.2d at 588 (tenant entitled to attorney’s fees where landlord twice discontinued suit and law prohibited commencing suit third time); see also Park S. Assocs. v. Essebag, 487 N.Y.S.2d 252, 253-54 (N.Y. App. Div. 1984) (controversy reached ultimate outcome where landlord’s claim was dismissed in summary proceeding, landlord failed to recommence the proceeding within two years or serve proper notice to cure, and claim had become stale). 

In contrast, a controversy has not reached its “ultimate outcome” when the action is dismissed without prejudice, but the record indicates that the landlord may refile it.  See Elkins, 402 N.Y.S.2d at 433 (holding that controversy has no ultimate outcome because case was dismissed but landlord later refiled it); see  also R & O Mgmt. Corp. v. Ahmad, 819 N.Y.S.2d 382, 383 (N.Y. App. Term 2006) (tenants not entitled to attorney’s fees based on the dismissal of landlord’s petition without prejudice).  Thus, under the statute, a tenant may claim attorney’s fees when (1) a landlord discontinues a proceeding, and the applicable law does not permit the landlord to recommence the proceeding; or (2) a court dismisses a case on procedural grounds, and some evidence demonstrates that the landlord does not contemplate further action against the tenant. 

Applying these principles, the trial court properly refused to award attorney’s fees to Morice.  The court dismissed Equity’s claims without prejudice because the lease agreement required that the parties try the case in a different forum.   Nothing in the trial court’s ruling prevents Equity from pursuing its claims in New York.  Further, Morice adduced no evidence to demonstrate that Equity does not intend to pursue the case, nor does he point to any legal impediment to refiling the suit.  Compare Park S. Assocs., 487 N.Y.S.2d at 254 (holding that landlord should not be permitted to “postpone indefinitely the ‘ultimate outcome’” and deny tenant attorney’s fees where trial court dismissed landlord’s petition two years earlier and landlord had made no effort to recommence suit), with R & O Mgmt. Corp., 819 N.Y.S.2d at 383 (dismissal without prejudice not enough to show tenant was prevailing party at the “ultimate outcome”).

Relying on 25 East 83 Corp. v. 83rd Street Associates and Lisa Laser USA, Inc. v. HealthTronics, Inc., Morice responds that he is a prevailing party with respect to the central relief sought at the trial court: dismissal based on the forum selection clause.  624 N.Y.S.2d 125 (N.Y. App. Div. 1995); No. 03-10-00464-CV, 2011 WL 1237639, at *4-5 (Tex. App.—Austin Mar. 31, 2011, no pet.) (mem. op.).  But neither 25 East 83 Corp. nor Lisa Laser guide this Court’s analysis.  25 East 83 Corp. does not address whether a tenant is a prevailing party where a case is dismissed without prejudice, and Lisa Laser was decided under California law. 

Applying New York law, we hold that the trial court did not abuse its discretion in refusing to award attorney’s fees to Morice, because he has made no showing that the controversy has reached its ultimate outcome.  If the Equity prevails in later proceedings arising from the same lease dispute, “it would be unjust to allow . . . [Morice] to recover his reasonable attorney’s fees based on the outcome of each separate stage of what is clearly one controversy.”  Elkins, 402 N.Y.S.2d at 433.  If Morice ultimately prevails, he then may seek his fees associated with the Texas proceeding.

b. Shindler Exception

Morice alternatively seeks attorney’s fees under New York’s “Shindler exception” to the American Rule, which provides that “[i]f, through the wrongful act of his present adversary, a person is involved in earlier litigation with a third person in bringing or defending an action to protect his interests, he is entitled to recover the reasonable value of attorneys’ fees and other expenses thereby suffered or incurred.”  Shindler, 211 N.Y.S.2d at 765. The Shindler exception requires (1) a wrongful act by a present adversary and (2) earlier litigation with a third person. See id.  We cannot conclude that the Shindler exception applies to this case.  Morice successfully petitioned this court for a writ of mandamus compelling the trial court to dismiss Equity’s case against him based on a forum selection clause.  Although Equity did not prevail in seeking to set aside the forum selection clause, nothing in the record indicates that Equity committed a “wrongful” act in filing the suit for breach of the lease agreement in Harris County, Morice’s current place of residence. 

Conclusion

Applying New York law, we conclude that the trial court did not abuse its discretion in denying Morice’s request for attorney’s fees.  We therefore affirm the judgment of the trial court in cause number 01-12-00074-CV.  We dismiss cause number 01-11-00490-CV as moot.  All pending motions are dismissed as moot. 

                                                                      Jane Bland

                                                                      Justice

Panel consists of Justices Keyes, Bland, and Sharp.

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[1]         Cause number 01-12-00074-CV is an appeal from the final judgment of the trial court on attorney’s fees.  Cause number 01-11-00490-CV is a companion appeal related to the parties’ mandamus proceeding regarding enforcement of the forum selection clause.  As our court resolved the latter issue by granting mandamus relief, we dismiss 01-11-00490-CV as moot.