Arrow Marble, LLC, Arrow Mirror and Glass, Inc., and Equicap Investments, LLC v. Estate of Rodney B. Killion

Opinion issued July 1, 2014.
In The
Court of Appeals
For The
First District of Texas
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NO. 01-12-01133-CV
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ARROW MARBLE, LLC, ARROW MIRROR AND GLASS, INC, AND
EQUICAP INVESTMENTS, LLC, Appellants
V.
ESTATE OF RODNEY B. KILLION, Appellee
On Appeal from the County Court at Law No 1 & Probate Court
Brazoria County, Texas
Trial Court Case No. PR032461C
OPINION
A Texas Theft Liability Act claim brought by the Estate of Rodney B.
Killion against Equicap Investments, LLC was dismissed with prejudice for want
of prosecution. Equicap had counterclaims pending against the Estate at the time of
dismissal, including a breach-of-contract claim and a request for attorney’s fees
under the TTLA. Equicap presented evidence on its attorney’s fees at the trial of
the breach-of-contract claim, but the trial court denied the request.
In two issues, Equicap argues that (1) the trial court erred by not awarding it
attorney’s fees under the Texas Theft Liability Act and (2) the Estate waived any
objection regarding segregation of attorney’s fees by failing to object before
judgment was rendered.
We reverse and remand.
Background
Following Rodney Killion’s death, his oldest daughter, Laura Killion,
initiated proceedings to probate his will. Arrow Marble, LLC filed a plea in
intervention asserting that Rodney Killion had breached a contract between Killion
and the two other members of the Arrow Marble entity. Laura, as independent
executor of her father’s estate, filed a petition asserting claims against Arrow
Mirror and Glass, Inc. and a related entity, Equicap Investments, LLC under the
Texas Theft Liability Act. TEX. CIV. PRAC. & REM. CODE ANN. § 134.001–005
(West Supp. 2013). Arrow Mirror and Glass and Equicap filed a first amended
counterclaim requesting declaratory relief, pursuing a breach-of-contract claim
against the Estate, and asserting a claim for attorney’s fees for defense of the
TTLA claim. TEX. CIV. PRAC. & REM. CODE ANN. § 134.005(b).
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When the case was called to trial, the Estate failed to appear. The trial court
denied all relief requested by the Estate, including its TTLA claim. Equicap then
presented evidence in support of its breach-of-contract claim, alleging that Rodney
Killion breached an agreement to loan the two other members of Arrow Marble
$450,000 in exchange for being released from personal liability for the entity’s
debts.
Mark Zimmerman, Equicap’s counsel, testified briefly about his fees. He did
not offer his legal bills as evidence; nor did he review the records while testifying.
Instead, he testified that he charged $290 per hour, was aware of the content of his
legal bills, and had charged $16,500 through that day of trial. Zimmerman also
requested $8,000 for future appellate fees.
Because the Estate did not appear for trial, no one challenged this testimony.
The court-appointed attorney ad litem for Rodney Killion’s two minor children
was present, but he did not object or ask any questions regarding the fee request.
The final judgment entered by the trial court (1) orders that “all Defendants”
take nothing on their breach-of-contract claim against the Estate, (2) dismisses the
Estate’s claims, including the TTLA claim, with prejudice for want of prosecution,
and (3) orders that “no attorney fees are awarded to Mark Zimmerman [counsel for
Equicap Investments, LLC] as requested.” Equicap filed an unsuccessful motion
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for reconsideration asserting that an award of attorney’s fees was mandatory under
the TTLA because Equicap prevailed on that claim.
Equicap requests that we reverse the trial court’s judgment and render an
award of attorney’s fees equaling the $24,500 previously requested. The Estate has
not filed an appellate brief.
Attorney’s Fees Defending TTLA Claim
Equicap argues that it is entitled to recover its attorney’s fees as the
prevailing party under the Texas Theft Liability Act. TEX. CIV. PRAC. & REM.
CODE ANN. § 134.001–005.
A. Standard of review
The availability of attorney’s fees under a particular statute is a question of
law that we review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94
(Tex. 1999) (fee award is question of law); Jakab v. Gran Villa Townhouses
Homeowners Ass’n, Inc., 149 S.W.3d 863, 867 (Tex. App.—Dallas 2004, no pet.)
(noting that availability of attorney’s fees under statute is reviewed de novo).
B. Defendants can be prevailing parties
Section 134.005(b) of the TTLA provides that “[e]ach person who prevails
in a suit under this chapter shall be awarded court costs and reasonable and
necessary attorney’s fees.” TEX. CIV. PRAC. & REM. CODE ANN. § 134.005(b). The
award of fees to a prevailing party in a TTLA action is mandatory. Bocquet v.
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Herring, 972 S.W.2d 19, 20 (Tex. 1998) (“Statutes providing that a party ‘may
recover,’ ‘shall be awarded,’ or ‘is entitled to’ attorney fees are not
discretionary.”).
The TTLA statute does not contain a definition of “prevails” to assist in
determining who qualifies as a prevailing party. Courts have looked to the term’s
“ordinary” meaning to determine its scope for both statutory and contractual
claims. See, e.g., Epps v. Fowler, 351 S.W.3d 862, 866 (Tex. 2011) (construing
written contract to give meaning to undefined term “prevailed” while noting that
phrase “prevailing party” is given its ordinary meaning and has been explicated
through statutory interpretation by many courts).
Courts have held that the phrase “prevailing party” in section 134.005(b) of
the TTLA includes both a plaintiff successfully prosecuting a theft suit and a
defendant successfully defending against one. Peoples v. Genco Fed. Credit
Union, No. 10–09–00032–CV, 2010 WL 1797266, at *7 (Tex. App.—Waco May
5, 2010, no pet.) (mem. op.); Brown v. Kleerekoper, No. 01-11-00972-CV, 2013
WL 816393, *5 (Tex. App.—Houston [1st Dist.] March 5, 2013, pet. filed) (mem.
op.). A prevailing defendant is entitled to attorney’s fees “without any prerequisite
that the claim is found to be groundless, frivolous, or brought in bad faith.” Air
Routing Int’l Corp. (Canada) v. Britannia Airways, Ltd., 150 S.W.3d 682, 686
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(Tex. App.—Houston [14th Dist.] 2004, no pet.). Thus, Equicap’s status defending
against a TTLA claim does not prevent recovery of attorney’s fees.
We consider next whether Equicap is entitled to attorney’s fees given that
(1) Equicap lost the breach-of-contract claim it asserted against the Estate and
(2) the TTLA claim asserted against it was dismissed for want of prosecution
instead of decided based on evidence presented at trial.
C. Prevailing on portion of but not entire suit
In Moak v. Huff, No. 04–11–00184–CV, 2012 WL 566140, at *11 (Tex.
App.—San Antonio Feb. 15, 2012, no pet.) (mem. op.), the defendant lost on the
plaintiff’s DTPA claim but successfully defended against the plaintiff’s TTLA
claim. Id., 2012 WL 566140, at *1. The defendant then sought an award of
attorney’s fees under the TTLA. Id., 2012 WL 566140, at *9. The plaintiff
resisted, arguing that a person does not “prevail in a suit” unless he is the “party in
whose favor a judgment is rendered” and is “vindicated by the judgment.” Id.,
2012 WL 566140, at *10. The plaintiff maintained that the defendant had to prevail
on the entire suit to recover attorney’s fees under the TTLA. Id.
The court of appeals disagreed, holding that “a person who prevails in a
TTLA cause of action is entitled to recover the reasonable fees necessarily incurred
prosecuting or defending that cause of action, even if the party is unsuccessful on
other claims and counterclaims litigated in the same suit.” Id., 2012 WL 566140, at
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*11; see Brown, 2013 WL 816393, at *5 (holding that defendant who successfully
defended theft-of-property claim under TTLA was entitled to attorney’s fees even
if defendant did not prevail on other causes of action). Thus, Equicap’s failure to
obtain judgment on its breach-of-contract claim does not affect its recovery of
attorney’s fees as the prevailing party on the TTLA claim.
D. A defendant “prevails” if the plaintiff’s claim is dismissed with
prejudice
A party prevails if he “successfully prosecutes the action or successfully
defends against it . . . .” Johns v. Ram-Forwarding, Inc., 29 S.W.3d 635, 637–38
(Tex. App.—Houston [1st Dist.] 2000, no pet.). A defendant who has the claims
against him resolved by voluntary dismissal without prejudice generally is not
considered a prevailing party or entitled to an award of attorney’s fees. Cricket
Commc’ns, Inc. v. Trillium Indus., Inc., 235 S.W.3d 298, 311 (Tex. App.—Dallas
2007, no pet.); Travel Music of San Antonio, Inc. v. Douglas, No. 04–00–00757–
CV, 2002 WL 1058527, at *3 (Tex. App.—San Antonio May 29, 2002, pet.
denied) (mem. op., not designated for publication). This is because a dismissal
without prejudice does not materially alter the plaintiff’s legal relationship with the
defendant; the plaintiff is free to reassert his claims and may prevail against the
defendant at a later date. See Epps, 351 S.W.3d at 869.
The legal relationship between a plaintiff and defendant does change,
however, when the plaintiff’s claims are dismissed with prejudice. Epps, 351
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S.W.3d at 866–69. When a plaintiff’s claims are dismissed with prejudice, the
doctrine of res judicata prohibits the plaintiff from re-asserting his claims against
that defendant in a later suit. Epps, 351 S.W.3d at 867; see Mossler v. Shields, 818
S.W.2d 752, 754 (Tex. 1991) (holding that dismissal with prejudice functions as
final determination on merits); see also Williams v. TDCJ-Inst. Div., 176 S.W.3d
590, 594 (Tex. App.—Tyler 2005, pet. denied) (holding that dismissal with
prejudice has full res judicata and collateral estoppel effect).
Res judicata attaches to a dismissal with prejudice even though the
plaintiff’s claims have not been fully litigated at trial. See Epps, 351 S.W.3d at
868–69. Res judicata applies because “a dismissal or nonsuit with prejudice is
‘tantamount to a judgment on the merits,’” and the effect of res judicata in that
instance “works a permanent, inalterable change in the parties’ legal relationship to
the defendant’s benefit: the defendant can never again be sued by the plaintiff or its
privies for claims arising out of the same subject matter.” Id. at 868–69.
The TTLA claim asserted against Equicap was dismissed with prejudice, but
the basis for dismissal was specified as want of prosecution: “Accordingly, it is
ORDERED and DECREED . . . that all claims by the Estate . . . are DISMISSED
with PREJUDICE, for want of prosecution.” See TEX. R. CIV. P. 165a (permitting
dismissal of plaintiff’s claims for want of prosecution).
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A dismissal for failure to appear at trial or for want of prosecution should be
without prejudice. See Att’y Gen. v. Rideaux, 838 S.W.2d 340, 342 (Tex. App.—
Houston [1st Dist.] 1992, no writ) (“[A] trial court’s authority to dismiss cases for
want of prosecution does not confer upon it the authority to adjudicate and deny
the merits of the dismissed claim.”). An order dismissing a claim with prejudice
when only dismissal without prejudice was appropriate can be challenged through
a postjudgment motion. See El Paso Pipe & Supply v. Mountain States Leasing,
Inc., 617 S.W.2d 189, 190 (Tex. 1981). While admittedly erroneous, a dismissal
with prejudice that should have been without prejudice is not automatically void—
it is merely voidable. Id.; Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 863–64
(Tex. 2010) (holding that erroneous order dismissing case with prejudice for want
of prosecution “must be attacked directly in order to prevent the order from
becoming final . . . .”). A plaintiff must affirmatively challenge the order to avoid it
becoming a final judgment. Joachim, 315 S.W.3d at 863–64 (citing El Paso, 617
S.W.2d at 190). If the plaintiff fails to challenge the error, the order of dismissal
with prejudice becomes “a final determination on the merits for purposes of res
judicata.” Id. at 866.
The Estate did not challenge the dismissal of its TTLA claim with prejudice.
Accordingly, the dismissal is treated as a final determination on the merits and res
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judicata applies. Joachim, 315 S.W.3d at 864, 866; El Paso, 617 S.W.2d at 190;
see Mossler, 818 S.W.2d at 754; see also Williams, 176 S.W.3d at 594.
Because res judicata applies to the Estate’s TTLA claim against Equicap, the
parties’ legal relationship has changed in a manner that materially benefited
Equicap and, as such, permits Equicap to qualify as a prevailing party under the
TTLA statute. See Epps, 351 S.W.3d at 868 (stating that “we have no doubt that a
defendant who is the beneficiary of a nonsuit with prejudice would be a prevailing
party.”); cf. Doolin’s Harley-Davison, Inc. v. Young, No. 06-05-00101-CV, 2006
WL 27983, at *3 (Tex. App.—Texarkana Jan. 6, 2006, no pet.) (mem. op.)
(holding that defendant was not prevailing party because matter was dismissed
without prejudice and plaintiff retained right to refile case). Accordingly, the trial
court was required to award to Equicap its attorney’s fees related to defending
against the TTLA claim. TEX. CIV. PRAC. & REM. CODE ANN. § 134.005(b)
(providing that prevailing party on TTLA claim “shall be awarded” attorney’s
fees); Brown, 2013 WL 816393, at *5. We sustain Equicap’s first issue and hold
that the trial court erred by denying Equicap’s timely request for attorney’s fees
under the TTLA, given that the trial court ordered dismissal with prejudice.
Fee Segregation
Equicap contends that the appropriate disposition of this case is to reverse
and render judgment for Equicap for the full amount of the attorney’s fees it
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requested in the trial court, which is $24,500. In doing so, Equicap argues that the
Estate has waived any argument that the fee amount requested needed to be
segregated.
A. Fee segregation is not waived
Equicap’s counsel testified that he charged $24,500 in attorney’s fees but
offered no testimony concerning the division of fees between defending the TTLA
claim and prosecuting the unsuccessful breach-of-contract claim. Equicap contends
that the absence of any objection to that testimony waived a fee segregation
argument. The Estate, however, prevailed at trial; the trial court rejected Equicap’s
breach-of-contract claim and did not award Equicap any attorney’s fees. The
Estate is not the party appealing the judgment or complaining about the fee award.
Because the trial court did not award any fees, the Estate’s failure—through non-
attendance—to request segregation does not present a vehicle by which Equicap
can maintain on appeal that it has conclusively proved its fees as a matter of law;
rather, it is Equicap who bears the burden of demonstrating that the evidence
conclusively proved its entitlement to all of its attorney’s fees, contrary to the trial
court’s judgment. Because it was entitled to fees for its defense of only part of the
claims against it, it did not.
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B. Remand to determine attorney’s fees
We have held that Equicap is entitled to an award of attorney’s fees on the
TTLA claim because it prevailed through dismissal of the Estate’s claim with
prejudice. When an award of attorney’s fees to a prevailing party is mandated by
statute, the factfinder can decide to award zero attorney’s fees only if the evidence
(1) failed to prove (a) that the attorney’s services were provided or (b) the value of
the services provided; or (2) affirmatively showed that (a) no attorney’s services
were needed or (b) that any services provided were of no value. Recognition
Commc’ns, Inc. v. Am. Auto. Ass’n, Inc., 154 S.W.3d 878, 891 (Tex. App.—Dallas
2005, pet. denied); Citibank (S.D.), N.A. v. Tran, No. 05-11-01423-CV, 2013 WL
3205878, at *6 (Tex. App.—Dallas Aug. 26, 2013, pet. denied) (mem. op.).
If there is any evidence in support of the award of fees, the factfinder does
not have discretion to award no fees. See Tony Gullo Motors I, L.P. v. Chapa, 212
S.W.3d 299, 311–14 (Tex. 2006); see also Tran, 2013 WL 3205878, at *7 (holding
that prevailing party could not be awarded zero attorney’s fees by jury when
attorney testified that he provided legal services and his testimony established that
services had value); Glenn v. Pack, No. 02-09-00204-CV, 2011 WL 167254, at *7
(Tex. App.—Fort Worth Jan. 13, 2011, no pet.) (mem. op.) (holding that jury could
not award zero attorney’s fees on breach-of-contract counterclaim when attorney
testified to some fee amount).
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A prevailing party entitled to attorney’s fees is required to “segregate fees
between claims for which they are recoverable and claims for which they are not.”
Chapa, 212 S.W.3d at 311. Failure to segregate, though, does not result in the
denial of any fee. Tran, 2013 WL 3205878, at *7 (holding that testimony of
aggregate fee was some evidence of segregated fees and, therefore, supported
remand); Glenn, 2011 WL 167254, at *7 (“[Party’s] failure to segregate fees does
not mean that he cannot recover any fees . . . .”). Rather, testimony of the full,
unsegregated amount of the fee is treated as “some evidence” of the segregated fee
amount, and remand is appropriate to determine the segregated fee amount due.
Glenn, 2011 WL 167254, at *7; Wright v. McCusker, No. 04-99-00592-CV, 2000
WL 863099, at *2 (Tex. App.—San Antonio June 28, 2000, no pet.) (mem. op., not
designated for publication).
Because the reasonableness of a fee award is a question of fact and Equicap
produced some evidence of its fees, we remand for a new trial on attorney’s fees.
Conclusion
Having sustained Equicap’s first issue, we reverse the trial court’s judgment
denying attorney’s fees and remand for a new trial on attorney’s fees.
Harvey Brown
Justice
Panel consists of Justices Keyes, Bland, and Brown.
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