Brad Jones v. Reese Baker D/B/A Baker & Associates

Opinion issued August 22, 2023
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-22-00013-CV
———————————
BRAD JONES, Appellant
V.
REESE BAKER, D/B/A BAKER & ASSOCIATES, Appellee
On Appeal from the 281st District Court
Harris County, Texas
Trial Court Case No. 2018-02789
MEMORANDUM OPINION
Reese Baker, d/b/a Baker & Associates, sued Brad Jones to recover unpaid
attorney’s fees incurred on behalf of Jones’s company, Exquisite Designs, in its
bankruptcy proceeding. Jones claims on appeal Baker did not prove the
reasonableness and necessity of the attorney’s fees, that there were errors in the
amount of damages and prejudgment interest awarded, and that recovery of some of
the attorney’s fees was barred by limitations. For the reasons discussed below, we
reverse and remand the award of prejudgment interest, modify the judgment to
correct a calculation error in the amount of damages, and affirm the remainder of the
judgment as modified.
BACKGROUND
Exquisite Designs retained Baker to represent it in a Chapter 11 bankruptcy
proceeding in 2012. Jones, the president and sole shareholder of Exquisite Designs,
signed two agreements at that time.
He signed an engagement agreement on behalf of Exquisite Designs, detailing
the terms of Baker’s legal representation and Exquisite Designs’ payment
obligations. Under that agreement, Exquisite Designs was to pay an initial retainer
and then a monthly deposit of $750.
Jones also signed a personal guaranty agreement in his individual capacity.
Under that agreement, he agreed to be personally responsible for any debt incurred
by Exquisite Designs under the engagement agreement. Jones also waived any right
to require Baker to pursue payment from Exquisite Designs before seeking payment
from him personally.
Baker represented Exquisite Designs in its bankruptcy proceeding and
obtained the bankruptcy court’s confirmation of a Chapter 11 reorganization plan.
2
On January 23, 2014, the bankruptcy court issued an order approving Baker’s
application for attorney’s fees he had incurred up to that time. The bankruptcy
court’s order approved a total of $105,850.27 in attorney’s fees—the parties call
these the “pre-confirmation fees” because they were incurred before the bankruptcy
court’s confirmation of the reorganization plan.
As there were still ongoing issues in the bankruptcy proceeding, Baker
continued to represent Exquisite Designs. He incurred $43,012.31 in additional
attorney’s fees—the parties call these the “post-confirmation fees” because they
were incurred after the bankruptcy court’s confirmation of the bankruptcy
reorganization plan.
Baker testified at trial that he asked to withdraw from representing Exquisite
Designs because he was not being paid. He did not receive any payments after
January 2013, despite Exquisite Designs’ obligation to make monthly payments, but
he continued to represent Exquisite Designs until the bankruptcy court approved his
withdrawal in August 2014.
On June 6, 2014, after Baker had asked to withdraw but before the bankruptcy
court approved the withdrawal, Baker sent a demand letter to “Exquisite Designs c/o
Brad Jones.” The demand letter stated:
Dear Mr. Jones:
The following is a recap of the services rendered regarding your legal
issues. Demand is made for the immediate payment of our fees and
3
expenses. The amounts due to our firm are past due. If payment is not
made immediately, we will pursue actions for collection.
The demand letter then listed the amount of pre-confirmation fees, the amount of
post-confirmation fees, and the amount paid to date. Neither Exquisite Designs nor
Jones made any payments to Baker following the demand letter.
Baker filed suit in January 2018 against Jones, individually, claiming a sworn
account and breach of contract. After a bench trial, the trial court entered findings of
fact and conclusions of law. The trial court generally found that: Baker had
represented Exquisite Designs in the bankruptcy proceeding; Jones signed the
guaranty agreement agreeing to be financially responsible for Exquisite Designs’
debt; Baker had made a demand for fees in the amount of $141,612.58; Jones was
entitled to a credit of $9,750 for payments already made; and Baker timely filed suit.
The trial court concluded Jones was liable to Baker for a total of $139,612.58, and
it entered a final judgment awarding Baker that amount in unpaid attorney’s fees and
$48,717.43 in prejudgment interest. Jones now appeals.
DISCUSSION
Attorney’s Fees
In his first issue, Jones argues there is no evidence or factually insufficient
evidence to support the reasonableness and necessity of the pre-confirmation or post-
confirmation attorney’s fees.
4
Applicable Law
An attorney “may recover unpaid hourly fees for professional services
rendered” in a breach-of-contract suit. McRay v. Dow Golub Remels & Beverly, LLP,
554 S.W.3d 702, 705 (Tex. App.—Houston [1st Dist.] 2018, no pet.). A guaranty
agreement is a type of contract that creates a secondary obligation in which the
guarantor promises to be responsible for the principal’s debt. Material P’ships, Inc.
v. Ventura, 102 S.W.3d 252, 258 (Tex. App.—Houston [14th Dist.] 2003, pet.
denied); Tenneco Oil Co. v. Gulsby Eng’g, Inc., 846 S.W.2d 599, 605 (Tex. App.—
Houston [14th Dist.] 1993, writ denied).
An attorney has a professional responsibility not to charge an unconscionable
fee; in other words, an attorney’s fees must be reasonable. See TEX. DISCIPLINARY
RULES PROF’L CONDUCT R. 1.04(a), reprinted in TEX. GOV’T CODE, tit. 2, subtit. G,
app. A. (“A lawyer shall not enter into an arrangement for, charge, or collect an
illegal fee or unconscionable fee. A fee is unconscionable if a competent lawyer
could not form a reasonable belief that the fee is reasonable.”). Although this
professional responsibility does not create civil liability for the attorney, the
attorney’s breach-of-contract remedy for unpaid fees is subject to this requirement
that the fees be reasonable. See McRay, 554 S.W.3d at 705; see also Hoover Slovacek
LLP v. Walton, 206 S.W.3d 557, 561 n.6 (Tex. 2006) (acknowledging disciplinary
rules of conduct do not create civil liability but nonetheless imposing prohibition
5
against charging unconscionable fee to attorney’s contingent-fee agreement).
Whether attorney’s fees are reasonable and necessary is a question of fact. Rohrmoos
Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 489 (Tex. 2019).
The lodestar method of calculating attorney’s fees is an objective analysis of
whether attorney’s fees are reasonable and necessary and provides a base figure that
is “presumptively reasonable.” Id. at 496. Under the lodestar method, the court
determines the reasonable hours spent by counsel in a case and the reasonable hourly
rate for that work, then multiples the number of hours by the applicable rate. Id. at
494. This number is the base fee or lodestar. Id. The court may then adjust the
number up or down “if relevant factors indicate an adjustment is necessary.” Id.
Previously, courts in Texas employed the Arthur Andersen factors to
determine the reasonableness and necessity of attorney’s fees. See id. at 493; see
also Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex.
1997).1 But the Texas Supreme Court has made clear that the lodestar method is a
1
The Arthur Andersen factors are:
(1) the time and labor required, the novelty and difficulty of the questions
involved, and the skill required to perform the legal service properly;
(2) the likelihood . . . that the acceptance of the particular employment
will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
6
“short hand version” of the Arthur Andersen factors, and the lodestar method yields
a “base figure that reflects most Arthur Andersen factors.” Rohrmoos, 578 S.W.3d
at 496. We need not engage in a separate analysis of the Arthur Anderson factors
when we can employ the lodestar method. See id. The lodestar method has “an
expansive application [that is] to be used when evidence of reasonable hours worked
multiplied by reasonable hourly rates can provide an objective analytical framework
that is presumptively reasonable.” Id. at 495.
The fee claimant bears the burden of providing sufficient evidence of the
reasonable hours worked and a reasonable hourly rate, which includes, “at a
minimum,” evidence of: “(1) particular services performed, (2) who performed those
services, (3) approximately when the services were performed, (4) the reasonable
amount of time required to perform the services, and (5) the reasonable hourly rate
for each person performing such services.” Id. at 498. Contemporaneous billing
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers
performing the services; and
(8) whether the fee is fixed or contingent on results obtained or
uncertainty of collection before the legal services have been rendered.
Arthur Andersen, 945 S.W.2d at 818.
7
records, though not necessary, “are strongly encouraged to prove the reasonableness
and necessity of requested fees.” Id. at 502.
Standard of Review
“In an appeal of a judgment rendered after a bench trial, the trial court’s
findings of fact have the same weight as a jury’s verdict, and we review the legal
and factual sufficiency of the evidence supporting the fact findings by using the same
standards to review jury verdicts.” Ferrara v. Nutt, 555 S.W.3d 227, 235 (Tex.
App.—Houston [1st Dist.] 2018, no pet.). When, as here, a complete reporter’s
record is filed, the trial court’s findings of fact are not conclusive. Id.When a party challenges the legal sufficiency of an adverse finding on an issue
for which it did not have the burden of proof at trial, that party must demonstrate
there is no evidence to support the adverse finding. Exxon Corp. v. Emerald Oil &
Gas Co., L.C., 348 S.W.3d 194, 215 (Tex. 2011). We will sustain a no-evidence
challenge if: (1) there is a complete absence of evidence of a vital fact; (2) the court
is barred by rules of law or evidence 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
mere scintilla; or (4) the evidence conclusively establishes the opposite of the vital
fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). “More than a
scintilla of evidence exists when the evidence ‘rises to a level that would enable
reasonable and fair-minded people to differ in their conclusions.’” King Ranch, Inc.
8
v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003) (quoting Merrell Dow Pharms., Inc.
v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)).
In reviewing the legal sufficiency of the evidence, we consider the evidence
in the light most favorable to the factfinder’s decision and indulge every reasonable
inference that would support it. See Wilson, 168 S.W.3d at 822. The factfinder is the
sole judge of the credibility of the witnesses and the weight to give their testimony.
See id. at 819. We may not impose our own opinion to the contrary. Id. “The final
test for legal sufficiency must always be whether the evidence at trial would enable
reasonable and fair-minded people to reach the verdict under review.” Id. at 827.
When a party challenges the factual sufficiency of an adverse finding on an
issue for which it did not have the burden of proof at trial, “we consider and weigh
all of the evidence and set aside the [judgment] only if the evidence that supports the
challenged finding is so weak as to make the judgment clearly wrong and manifestly
unjust.” Figueroa v. Davis, 318 S.W.3d 53, 59 (Tex. App.—Houston [1st Dist.]
2010, no pet.). Again, the factfinder is the sole judge of the witnesses’ credibility
and the weight to give their testimony. See Golden Eagle Archery, Inc. v. Jackson,
116 S.W.3d 757, 761 (Tex. 2003).
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Analysis
1. Pre-confirmation Fees
Jones argues that Baker provided no testimony or evidence regarding the
reasonableness or necessity of the pre-confirmation fees other than the bankruptcy
court’s order approving attorney’s fees. However, the bankruptcy court’s order is
more than a scintilla of evidence of reasonable and necessary attorney’s fees. See
Wilson, 168 S.W.3d at 810; Chapman, 118 S.W.3d at 751. The bankruptcy court’s
order states that it considered the Arthur Anderson factors2 and concluded that the
expenses Baker incurred on behalf of Exquisite Designs were “reasonable and
necessary.” The bankruptcy court determined the pre-confirmation fees were
reasonable, and even if there were error, we have no authority to review the
bankruptcy court’s order. See Owsley v. Owsley, No. 13-18-00636-CV, 2022 WL
16842689, at *6 & n.6 (Tex. App.—Corpus Christi–Edinburg Nov. 10, 2022, no
pet.) (mem. op.) (concluding appellant must pay attorney’s fees pursuant to
bankruptcy court’s order because state court has no jurisdiction to review bankruptcy
court’s error); In re C.C., No. 02-17-00058-CV, 2017 WL 4819407, at *2 (Tex.
App.—Fort Worth Oct. 26, 2017, no pet.) (mem. op.) (citing bankruptcy rules
2
The bankruptcy court’s order was issued in 2014, well before the Texas Supreme
Court’s 2019 opinion in Rohrmoos Venture v. UTSW DVA Healthcare, LLP strongly
indicating a preference for the lodestar method over the Arthur Andersen factors.
See 578 S.W.3d at 493–96.
10
regarding appeal of bankruptcy court’s order and explaining state court has no
jurisdiction to review bankruptcy court’s error). Therefore, there is legally sufficient
evidence that the pre-confirmation fees were reasonable and necessary. See Wilson,
168 S.W.3d at 810; Chapman, 118 S.W.3d at 751.
There is no evidence controverting the reasonableness or necessity of the pre-
confirmation fees as awarded in the bankruptcy court’s order, nor would we have
authority to review the order for error even if there were. See Owsley, 2022 WL
16842689, at *6 & n.6; In re C.C., 2017 WL 4819407, at *2. Thus, weighing all of
the evidence, we cannot say the finding of reasonableness and necessity is so weak
as to make the judgment clearly wrong and manifestly unjust. See Figueroa, 318
S.W.3d at 59. Therefore, there is factually sufficient evidence to support the
reasonableness of the pre-confirmation fees. See id.
2. Post-confirmation Fees
Jones also argues that Baker’s testimony regarding the invoice he provided
for post-confirmation fees was conclusory, vague, and general. He further argues
that, because the trial court rejected Baker’s proposed finding that the post-
confirmation fees were reasonable and necessary, we may not presume the trial court
made such a finding. See TEX. R. CIV. P. 299; Vickery v. Comm’n for Law.
Discipline, 5 S.W.3d 241, 253 (Tex. App.—Houston [14th Dist.] 1999, pet. denied)
(“[W]here the trial court has been specifically requested to make a particular finding
11
in support of its judgment and it fails to do so, the failure is tantamount to a refusal.
Thus, the presumption of validity will not supply by implication a missing element
that has been specifically ‘requested.’” (citation omitted)). But there is more than a
scintilla of evidence to support the reasonableness and necessity of Baker’s post-
confirmation fees, even in the absence of that presumption.
Baker offered into evidence an invoice for the post-confirmation fees. This
invoice details the particular services that were performed, including who performed
them, the date they were performed, the hourly rate for the person performing the
services, and the amount of time for each service. Thus, the invoice demonstrates
the minimum evidence sufficient to establish a base lodestar figure. See Rohrmoos,
578 S.W.3d at 496, 498. The rates charged in the invoice are the same rates stated in
the engagement agreement, and these are the rates the bankruptcy court already
determined to be reasonable. In addition, Baker testified that the bankruptcy case
“was a very difficult case,” with multiple parties raising objections and continued
activity even after the bankruptcy court confirmed the Chapter 11 reorganization
plan. He also stated that his rates were “very normal in the bankruptcy court,” “right
in line with other fees,” and “[i]n fact, . . . probably on the low side for somebody
who is board certified in both consumer and business law,” as he is.
Construing Baker’s testimony in the light most favorable to the trial court’s
judgment, Wilson, 168 S.W.3d at 822, we can infer that Baker’s rates, which he
12
claimed were normal, right in line with other fees, and even on the low side, were
reasonable and that the hours he worked were necessary, given his detailed billing
records, the results he obtained—confirmation of the Chapter 11 reorganization plan,
and the complexity of the case, which he claimed “was a very difficult case.” Baker
did not use the exact words “reasonable” or “necessary” to describe his fees, but had
he merely labeled them reasonable and necessary, that testimony would have been
conclusory. Instead, Baker explained why his fees were reasonable—they were in
line with other attorney’s fees and even on the low side for someone with his
expertise—and necessary—the bankruptcy proceeding was complicated and
obtaining confirmation of a Chapter 11 reorganization plan was difficult. Thus, there
is more than a scintilla of evidence that the post-confirmation fees were reasonable
and necessary, so there is legally sufficient evidence. See Wilson, 168 S.W.3d at 810;
Chapman, 118 S.W.3d at 751.
Baker’s testimony and the invoice provide much stronger evidence supporting
the reasonableness and necessity of attorney’s fees than in cases in which the Texas
Supreme Court concluded the evidence was insufficient. See, e.g., Rohrmoos, 578
S.W.3d at 505 (reversing attorney’s fee award because attorney’s testimony that he
searched millions of emails and reviewed hundreds of thousands of papers,
“[w]ithout detail about the work done, how much time was spent on the tasks, and
how he arrived at the $800,000 sum,” lacked substance required to uphold attorney’s
13
fee award); Long v. Griffin, 442 S.W.3d 253, 255–56 (Tex. 2014) (per curiam)
(reversing attorney’s fee award where evidence in support of attorney’s fee request
“only offer[ed] generalities” and did not indicate attorneys’ time spent on specific
tasks); City of Laredo v. Montano, 414 S.W.3d 731, 736–37 (Tex. 2013) (per curiam)
(reversing attorney’s fee award because attorney’s “testimony that he spent ‘a lot of
time getting ready for the lawsuit,’ conducted ‘a lot of legal research,’ visited the
[condemned] premises ‘many, many, many, many times,’ and spent ‘countless’
hours on motions and depositions [was] not evidence of a reasonable attorney’s fee
under lodestar”); El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 763–64 (Tex. 2012)
(reversing attorney’s fee award because attorneys did not present time records and
instead “based their time estimates on generalities such as the amount of discovery
in the case, the number of pleadings filed, the number of witnesses questioned, and
the length of the trial,” which did not provide “specificity needed” to make
meaningful lodestar determination).
Jones argues that simply charging the hourly rate stated in a fee agreement is
insufficient to establish reasonableness, citing McRay v. Dow Golub Remels &
Beverly, LLP, 554 S.W.3d at 706–07. In that case, however, the law firm did not
offer any evidence that the time it billed was reasonable, and the client provided
expert testimony that the amount of attorney’s fees sought was not reasonable. Id. at
705–06. Thus, this court could not affirm summary judgment in favor of the law firm
14
because it did not conclusively establish the amount of reasonable attorney’s fees in
light of the controverting evidence. Id. at 706. The law firm then argued it did not
need to establish the reasonableness of its fees because the invoices showed the law
firm only charged the hourly rate set forth in its fee agreement. Id. This court stated
that an invoice alone was not sufficient to establish the reasonableness of the overall
fees. Id. at 706–07. In the present case, however, Baker’s testimony provided more
than an invoice alone to establish the reasonableness of his fees, and Jones provided
no evidence controverting the reasonableness.3
As for factual sufficiency, there was no evidence controverting the
reasonableness or necessity of the post-confirmation fees. Jones, representing
himself at trial, did not question the reasonableness of the rates charged or hours
worked or in any way dispute the information in the invoice. Cf. Webb v. Crawley,
590 S.W.3d 570, 581 (Tex. App.—Beaumont 2019, no pet.) (affirming implied
finding that attorney’s fees were not reasonable because associate testified she never
drafted documents for which client was billed and client was billed for more time
than associate spent on specific tasks). Thus, weighing all of the evidence, we cannot
3
The court in McRay noted that if the law firm had sued on a sworn account, it could
have established a prima facie right of recovery and would not have been required
“to adduce proof of reasonableness of the fees beyond attaching detailed invoices
as prima facie evidence of the debt.” McRay, 554 S.W.3d at 707. Here, although
Baker filed suit on a sworn account, he has not raised this argument, so we do not
consider it.
15
say the finding of reasonableness and necessity is so weak as to make the judgment
clearly wrong and manifestly unjust. See Figueroa, 318 S.W.3d at 59. Therefore,
there is factually sufficient evidence to support the reasonableness of the post-
confirmation fees. See id.Having concluded there was both legally and factually sufficient evidence to
support the reasonableness and necessity of the pre-confirmation and post-
confirmation attorney’s fees, we overrule Jones’s first issue.
Damages
In the first part of Jones’s second issue, he argues the evidence in the record
is legally and factually insufficient to support the trial court’s calculation of
damages. He essentially argues that the trial court made a calculation error because
the sum of the attorney’s fees awarded in the bankruptcy court’s order ($105,850.27)
and the post-confirmation fees detailed in Baker’s invoice ($43,012.31), less the
amount Jones had already paid ($9,750), equals $139,112.58 and not $139,612.58,
which was the amount the trial court awarded in the final judgment.
Baker agrees that the amount of damages awarded appears to have been
miscalculated and the correct award should be $139,112.58. Appellate courts have
the power to modify a trial court’s judgment to “make the record speak the truth”
where the evidence necessary to correct the judgment appears in the record. E.g.,
Lopez v. Bailon, No. 07-14-00442-CV, 2016 WL 4158034, at *3 (Tex. App.—
16
Amarillo Aug. 4, 2016, no pet.) (mem. op.) (modifying judgment to correct
calculation error in damages award); see also TEX. R. APP. P. 43.2(b) (court of
appeals may modify trial court’s judgment and affirm as modified); Hwang v. Cap.
One Nat’l Ass’n, No. 02-22-00120-CV, 2023 WL 166434, at *6 n.19 (Tex. App.—
Fort Worth Jan. 13, 2023, pet. denied) (mem. op.) (modifying judgment to correct
calculation error in damages award). Accordingly, we modify the trial court’s
judgment to delete $139,612.58 and replace it with $139,112.58.
We sustain this part of Jones’s second issue.
Prejudgment Interest
In the second part of Jones’s second issue, he argues the evidence is legally
and factually insufficient to support the amount of prejudgment interest the trial
court awarded in the final judgment. We agree that there is error in the calculation
of prejudgment interest and will remand this issue to the trial court for a recalculation
of prejudgment interest.
Applicable Law
There are two potential sources for a trial court to award prejudgment interest:
(1) general principles of equity under the common law; and (2) an enabling statute,
such as Section 304.104 of the Finance Code. See Johnson & Higgins of Tex., Inc.
v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998). Baker’s claim in this
17
case does not fall within any enabling statute,4 so the trial court’s award of
prejudgment interest is governed by equitable principles. See Hand & Wrist Ctr. of
Houston, P.A. v. Republic Servs., Inc., 401 S.W.3d 712, 717 (Tex. App.—Houston
[14th Dist.] 2013, no pet.). Under either standard, “prejudgment interest begins to
accrue on the earlier of[:] (1) 180 days after the date a defendant receives written
notice of a claim[;] or (2) the date suit is filed.” Johnson & Higgins, 962 S.W.2d at
531. Prejudgment interest continues to accrue up to and including the day before
judgment is rendered. See Ventling v. Johnson, 466 S.W.3d 143, 153 (Tex. 2015).5
A claim is “a demand for compensation or an assertion of a right to be paid.”
Johnson & Higgins, 962 S.W.2d at 531 (quoting Robinson v. Brice, 894 S.W.2d 525,
528 (Tex. App.—Austin 1995, writ denied)). “A defendant has notice of a claim for
purposes of prejudgment interest only if the plaintiff’s written notice communicates
that the plaintiff is claiming a right to compensation and provides enough
4
Jones relies on Section 304.104 of the Finance Code in his brief, but that statute
only applies to wrongful-death, personal-injury, and property-damage cases. See
TEX. FIN. CODE § 304.101 (stating subchapter, which includes Section 304.104,
applies only to wrongful death, personal injury, or property damage cases).
However, this does not affect our analysis because the standards for calculating
prejudgment interest under the common law and under Section 304.104 are the
same. See Johnson & Higgins, 962 S.W.2d at 531 (expressly adopting legislature’s
approach to prejudgment interest and establishing same standard as Section 304.104
under common law).
5
The Texas Supreme Court cites Section 304.104 of the Finance Code for this
proposition but notes that the common law aligns with the Finance Code. Ventling,
466 S.W.3d at 153 n.14.
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information that the defendant could plausibly settle the claim without incurring
interest.” Wheelbarger v. Landing Council of Co-Owners, 471 S.W.3d 875, 892
(Tex. App.—Houston [1st Dist.] 2015, pet. denied). “[W]ritten notice that an injured
party is seeking specific compensation for a specific injury is enough.” Hudspeth v.
Enter. Life Ins. Co., 358 S.W.3d 373, 385 (Tex. App.—Houston [1st Dist.] 2011, no
pet.).
Standard of Review
Where, as here, no enabling statute controls, the decision to award
prejudgment interest falls within the trial court’s discretion. See Hand & Wrist Ctr.,
401 S.W.3d at 717. Thus, we review a trial court’s factual findings relating to
prejudgment interest for an abuse of discretion. Figueroa, 318 S.W.3d at 66; see also
Toshiba Mach. Co., Am. v. SPM Flow Control, Inc., 180 S.W.3d 761, 785 (Tex.
App.—Fort Worth 2005, pet. granted, judgm’t vacated w.r.m.). “A trial court abuses
its discretion when it acts without reference to guiding rules and principles or when
it fails to analyze or apply the law properly.” Fortitude Energy, LLC v. Sooner Pipe
LLC, 564 S.W.3d 167, 188 (Tex. App.—Houston [1st Dist.] 2018, no pet.). Under
an abuse-of-discretion standard, “we will not disturb a trial court’s findings on
factual issues unless the court reasonably could have reached only one decision and
failed to do so. Nat’l Freight, Inc. v. Snyder, 191 S.W.3d 416, 427 (Tex. App.—
Eastland 2006, no pet.); see also Walker v. Packer, 827 S.W.2d 833, 839–40 (Tex.
19
1992) (orig. proceeding). However, we review de novo the trial court’s application
of the law to the facts, including the date on which prejudgment interest begins to
accrue. Toshiba, 180 S.W.3d at 785.
Analysis
Jones argues, essentially, that the trial court abused its discretion in
determining the accrual date for prejudgment interest and failed to take into account
the 180-day notice period.
The trial court did not state the accrual date for prejudgment interest for either
the pre-confirmation fees or post-confirmation fees in its findings of fact and
conclusions of law or in its final judgment. But the trial court appears to have
adopted Baker’s calculation of prejudgment interest—the amount of prejudgment
interest the trial court awarded, $48,717.43, matches the calculation Baker submitted
with his proposed final judgment:
20
Baker’s calculation calculates prejudgment interest for the pre-confirmation fees
from January 23, 2014, the date that the bankruptcy court issued the order approving
his requested attorney’s fees award. His calculation calculates prejudgment interest
for the post-confirmation fees from June 3, 2014, which is the last date he incurred
post-confirmation fees, according to the trial court’s findings of fact. Under Baker’s
calculation, both pre-confirmation fees and post-confirmation fees continued to
accrue prejudgment interest through December 31, 2020, the date the trial court
issued its findings of fact and conclusions of law.
Jones argues the trial court should have calculated prejudgment interest
beginning on the date Baker filed suit because there was no evidence in the record
that Jones, individually received written notice of Baker’s claims. Specifically, he
argues the bankruptcy court’s order awarding attorney’s fees and the June 6, 2014,
demand letter did not constitute notice of Baker’s claims. Baker does not challenge
the existence or contents of these documents, and thus there is no factual dispute, so
we must determine whether these documents constituted notice of Baker’s claims as
a matter of law. See Toshiba, 180 S.W.3d at 785–86.
We conclude the bankruptcy court’s order approving Baker’s application for
attorney’s fees does not constitute notice of Baker’s claims. A claim is “a demand
for compensation or an assertion of a right to be paid.” Johnson & Higgins, 962
S.W.2d at 531 (quoting Robinson, 894 S.W.2d at 528). The bankruptcy court’s order
21
entitled Baker to seek payment from Jones but was not in itself Baker’s demand for
payment or assertion of his right to be paid.6 The bankruptcy court’s order did not
communicate to Jones that Baker was claiming a right to compensation. See
Wheelbarger, 471 S.W.3d at 892.
A writing that only informs the other party that facts potentially giving rise to
a claim have occurred or that only indicates a contingent, future liability does not
constitute notice of a claim. See id. at 892–93; Toshiba, 180 S.W.3d at 786;
Robinson, 894 S.W.2d at 528. In Wheelbarger v. Landing Council of Co-Owners,
this court concluded an email that described meeting with an attorney, presumably
in contemplation of litigation, did not constitute notice of a claim because it “did not
make a demand that anyone pay money to anyone else.” 471 S.W.3d at 892–93. The
letter in question in Toshiba Machine Co., America v. SPM Flow Control, Inc., did
not constitute notice of a claim because it urged the recipients to avoid a future claim
by curing certain defects—it asked the recipients “to avoid a contingent, future
6
The bankruptcy court’s order states in relevant part:
[T]he relief requested in the Application [for attorney’s fees] is reasonable and
appropriate; it is therefore
ORDERED that [Baker] is awarded compensation as an administrative
expense in the Chapter 11 case in the amount of $103,180.00 for services rendered
as Chapter 11 [Exquisite Designs’] counsel in connection with this case, and that
[Baker] be reimbursed for out of pocket expenses in the amount of $2,670.27 in the
Chapter 11 case for a total amount of $105,850.27 for the period of November 5,
2012 to October 4, 2013 . . . .
22
liability” instead of asserting “an accrued, existing liability.” 180 S.W.3d at 786.
And in Robinson v. Brice, the accident report sent to the defendant’s insurer after a
car accident, even though it notified the insurer that an accident had occurred and
the plaintiff was injured, did not constitute notice of a claim because it did not
demand compensation or assert a right to be paid. 894 S.W.2d at 528. The
bankruptcy court’s order in this case similarly only would have informed Jones of
facts potentially giving rise to a claim for attorney’s fees by Baker—the order itself
was not a demand for attorney’s fees or Baker’s assertion of his right to be paid.
The June 6, 2014, demand letter, however, does constitute notice of Baker’s
claims for both pre- and post-confirmation fees. The letter unequivocally stated,
“Demand is made for the immediate payment of our fees and expenses,” and “[i]f
payment is not made immediately, we will pursue actions for collection.” The
demand letter also listed the amount of the pre-confirmation fees and post-
confirmation fees.
Jones has not disputed that the demand letter constitutes a demand for
attorney’s fees, he only argues that the demand was not made to him individually,
based on his obligations under the guaranty agreement, as opposed to Exquisite
Designs’ obligations under the engagement agreement to pay Baker’s attorney’s
fees. The demand letter, however, was addressed to “Exquisite Designs c/o Brad
Jones,” and it began with the greeting, “Dear Mr. Jones.” Jones’s argument that the
23
demand was not made to him individually, when the demand letter was addressed to
him, is unavailing. The demand letter then stated, “The following is a recap of the
services rendered regarding your legal issues,” and it went on to make a demand for
payment. Baker was the president and sole shareholder of Exquisite Designs, and he
signed the engagement agreement on behalf of Exquisite Designs. He also signed
the guaranty agreement in his individual capacity, promising the “full and prompt
payment” of all financial obligating arising under the engagement agreement. The
demand letter did not mention the guaranty agreement, but it clearly made a demand
for payment and provided enough information about Baker’s claim for attorney’s
fees to have allowed Jones to have settled the claim without incurring interest. See
Wheelbarger, 471 S.W.3d at 892 (defendant has notice of claim if written notice
communicates that plaintiff is claiming right to compensation and provides enough
information that defendant could settle claim without incurring interest). Thus, the
demand letter constitutes notice of Baker’s claims for both pre- and post-
confirmation fees.
Jones also argues there is no evidence in the record that Baker sent an invoice,
as required by the guaranty agreement. The guaranty agreement stated, “The
Guarantors agree to pay the amounts owed by Exquisite Designs to Baker &
Associates within fifteen (15) days of receipt of an invoice.” But whether Baker
24
complied with this requirement speaks to liability under the guaranty agreement and
not whether Jones received sufficient notice of Baker’s claims for attorney’s fees.
We conclude the June 6, 2014, demand letter constituted notice of Baker’s
claims for both pre- and post-confirmation fees. Therefore, prejudgment began to
accrue 180 days after that date, see Johnson & Higgins, 962 S.W.2d at 531, on
December 3, 2014, and continued to accrue until the day before the trial court entered
its final judgment, October 7, 2021. Baker’s calculation of prejudgment interest,
which the trial court apparently adopted, did not include the correct accrual date for
either pre- or post-confirmation fees, did not delay accrual by 180 days, and did not
calculate accrual until the day before the final judgment. Thus, the trial court abused
its discretion in awarding prejudgment interest.
Accordingly, we reverse the portion of the trial court’s judgment awarding
Baker $48,717.43 in prejudgment interest and remand this case to the trial court for
a recalculation of prejudgment interest. See Subsea 7 Port Isabel, LLC v. Port Isabel
Logistical Offshore Terminal, Inc., 593 S.W.3d 859, 877–78, 883 (Tex. App.—
Corpus Christi–Edinburg 2019, pet. denied) (reversing and remanding award of
prejudgment interest to trial court for recalculation because trial court abused
discretion by determining incorrect accrual date); see also Wilson v. Wilson, No. 14-
19-00767-CV, 2021 WL 2837293, at *5 (Tex. App.—Houston [14th Dist.] July 8,
2021, no pet.) (mem. op.) (reversing and remanding award of prejudgment interest
25
to the trial court for recalculation in light of modified damages award); Royal
Maccabees Life Ins. Co. v. James, 146 S.W.3d 340, 353 (Tex. App.—Dallas 2004,
pet. denied) (same).
We sustain this part of Jones’s second issue.
Limitations
Lastly, Jones argues that Baker’s pre-confirmation fees are barred by
limitations, so the trial court erred in awarding Baker these fees.
Applicable Law
A person must bring suit on a cause of action for debt not later than four years
after the day the cause of action accrues. TEX. CIV. PRAC. & REM. CODE
§ 16.004(a)(3). A cause of action generally accrues when facts come into existence
that authorize a claimant to seek a judicial remedy. Emerald Oil, 348 S.W.3d at 202.
A cause of action for breach of a promise to pay, as in a guaranty agreement, accrues
when a demand for payment has been made and refused. Chahadeh v. Regions Bank,
No. 01-15-00656-CV, 2017 WL 3261384, at *4 (Tex. App.—Houston [1st Dist.]
July 31, 2017, no pet.) (mem. op.). If the guaranty agreement permits the creditor to
sue the guarantor without first suing the principal, the statute of limitations on the
principal obligation generally does not affect the guarantor’s obligation. Id. “[A]
guarantor cannot defend an action to recover on a promise to pay by showing that
the claim against the principal is barred by the statute of limitations.” Yamin v. Conn,
26
L.P., No. 14-10-00597-CV, 2011 WL 4031218, at *6 (Tex. App.—Houston [14th
Dist.] Sept. 13, 2011, no pet.) (mem. op.).
Standard of Review
When a cause of action accrues is a question of law. Emerald Oil, 348 S.W.3d
at 202.
Analysis
Jones argues that Baker’s cause of action accrued in 2013 because that is when
Exquisite Designs breached the engagement agreement, and a breach of contract
claim accrues when the breach occurs.
We first note that the guaranty agreement explicitly stated Jones agreed to
waive “all defenses given to sureties or guarantors at law or in equity other than the
actual payment of the indebtedness guaranteed hereby.” “[A] statute of limitations
is an affirmative defense . . . .” Godoy v. Wells Fargo Bank, N.A., 575 S.W.3d 531,
536 (Tex. 2019) (alteration in original) (quoting Zorrilla v. Aypco Constr. II, LLC,
469 S.W.3d 143, 156 (Tex. 2015)). Baker, however, did not raise this argument in
the trial court or on appeal, but even without relying on this provision, we conclude
the statute of limitations for the pre-confirmation fees had not run when Baker filed
suit.
The engagement agreement stated that Exquisite Designs agreed to pay a
monthly deposit of $750. Baker testified that the last payment he received from
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Exquisite Designs was in January 2013, so Jones argues that Exquisite Designs
breached the engagement agreement then by not paying the monthly deposit.
Because a cause of action for breach of contract accrues when the contract is
breached, Jones argues, Baker’s cause of action accrued in January 2013, and thus
the four-year statute of limitations had run by the time Baker filed suit in January
2018.
However, Baker did not sue Exquisite Designs for its breach of the
engagement agreement. He sued Jones for Jones’s breach of the guaranty agreement,
in which Jones agreed to be fully financially responsible for Exquisite Designs’ debt.
A cause of action for breach of a promise to pay, like a guaranty agreement, accrues
when a demand for payment has been made and refused. Regions Bank, 2017 WL
3261384, at *4. Here, the record shows Baker made a demand for payment on June
6, 2014, when he sent Jones the demand letter. The operation of the statute of
limitations for a cause of action against Exquisite Designs for breach of the
engagement agreement generally does not affect a claim against Jones, as guarantor,
unless limitations also operated on the promise to pay. See id. Jones cannot rely on
the defense that limitations ran on the claim against Exquisite Designs for breach of
contract, because, as noted, the two obligations accrued at different times, and Jones
cannot defend the action asserted against him personally by showing the claim
28
against Exquisite Designs is barred by the statute of limitations. See Yamin, 2011
WL 4031218, at *6.
Jones argues the fact that Exquisite Designs was in bankruptcy proceedings
did not affect his liability as guarantor for the outstanding debts, citing Chahadeh v.
Jacinto Medical Group, P.A., 519 S.W.3d 242 (Tex. App.—Houston [1st Dist.]
2017, no pet.). In that case, Hassan Chahadeh personally guaranteed loans made to
two companies. Id. at 244. The companies defaulted on the loans and filed for
bankruptcy. Id. The lenders sued Chahadeh to collect on the guaranty agreements,
id., but Chahadeh argued the lenders could not establish his liability under the
guaranty agreements until the bankruptcy court determined the companies’ liability
on the underlying loans, id. at 248. This court determined that Chahadeh’s liability
under the guaranty agreements was a “separately enforceable obligation” such that
he may be held independently liable under the guaranty agreements regardless of the
outcome of the bankruptcy proceeding. Id.Jones argues that, similarly, Baker could have sued to enforce the guaranty
agreement as soon as Exquisite Designs missed its first monthly payment and thus
breached the engagement agreement, without regard to the bankruptcy proceeding.
Baker testified at trial that the bankruptcy court did not approve his claim for
attorney’s fees until January 23, 2014, so he did not sue to collect on the guaranty
before that time. Though Baker could have demanded payment at Exquisite Designs’
29
first breach of the monthly payment, he did not demand payment for the pre- and
post-confirmation fees until June 6, 2014, and a claim for breach of a promise to pay
accrues when a demand for payment is made and refused, not the earliest date that a
demand for payment could have been made. See Regions Bank, 2017 WL 3261384,
at *4. Further, this court in Jacinto Medical Group determined Chahadeh’s liability
as guarantor existed separately from the bankruptcy proceeding; the opinion does
not address accrual of the claim against him. See Jacinto Med. Grp., 519 S.W.3d at
248. That case does not require a different outcome here.
Because Baker’s claim for breach of the guaranty agreement did not accrue
until at least June 6, 2014, when he demanded payment from Jones, the four-year
statute of limitations for a cause of action on a debt had not run when Baker filed
suit in January 2018. See TEX. CIV. PRAC. & REM. CODE § 16.004(a)(3). Therefore,
the statute of limitations does not bar Baker’s claims against Jones. We overrule
Jones’s third issue.
CONCLUSION
We modify the trial court’s judgment to correct a calculation error by deleting
the award of $139,612.58 and replacing it with an award of $139,112.58. We reverse
the portion of the judgment that awards prejudgment interest and remand to the trial
court for a recalculation of prejudgment interest in accordance with this opinion. We
affirm the trial court’s judgment, as modified, in all other respects.
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Gordon Goodman
Justice
Panel consists of Justices Goodman, Landau, and Rivas-Molloy.
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