Breaking NewsLaw.com and associated brands will be offline for scheduled maintenance Friday Feb. 26 9 PM US EST to Saturday Feb. 27 6 AM EST. We apologize for the inconvenience.

 
X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision “Prevailing party” means the “party in whose favor a judgment is rendered, regardless of the amount of damages awarded.” If multiple parties receive judgment under the cause of action, the party that received judgment on the “main issue” is the prevailing party. FACTS:This suit centers around a lease between the city of Galveston and Flagship Hotel Ltd. The leased premises consist of the Galveston Marine Park and Pier and the Flagship Hotel built on the pier. There are four issues before this court: 1. the expiration date of the lease; 2. whether the trial court erred in ruling that the provisions of the lease relating to the parties’ respective maintenance obligations were unambiguous; 3. whether the trial court erred in sustaining the city’s plea to the jurisdiction concerning Flagship’s effort to obtain declaratory relief with regard to its alleged water and sewer arrearage; and 4. whether the trial court erred in failing to award attorneys’ fees to Flagship and whether the trial court erred in awarding attorneys’ fees to the city. HOLDING:Reversed in part, rendered in part, and remanded in part for further proceedings consistent with this opinion. Flagship contends the trial court abused its discretion by failing to award attorney’s fees under Texas Civil Practice and Remedies Code �38.001. The city contends Flagship was not entitled to attorney’s fees because it was not a prevailing party on its breach of contract claim. A trial court’s award of attorney’s fees is reviewed for an abuse of discretion. Attorney’s fees are awarded under �38.001 for a breach of contract claim. “When a prevailing party in a breach of contract suit seeks attorney’s fees under �38.001, makes its proof, and meets the requirements of the section, an award of attorney’s fees is mandatory.” To recover under �38.001, a party must be a prevailing party and be awarded damages. Several courts of appeals have defined a prevailing party as the party to the suit “who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even though not to the extent of its original contention.” This definition originated from the definition in Black’s Law Dictionary. The city argues Flagship is not a prevailing party because it did not recover on the main issue. Flagship only recovered for one of the three allegations of breach of contract. The city argues that, since it successfully defended on the main issue of repairs and maintenance, Flagship did not prevail on the main issue. Black’s Law Dictionary now defines “prevailing party” as” [a] party in whose favor a judgment is rendered, regardless of the amount of damages awarded.” Black’s Law Dictionary 1145 (7th ed. 1999). This court’s research indicates courts have only considered whether a party prevailed on the main issue where both parties received judgment under the cause of action, i.e., where both parties breached the contract. If only one party prevailed, courts have concluded that party prevailed on the main issue. The court believes the main focus of its inquiry should be whether the agreement was breached, not the extent of the breach. Flagship prevailed on the breach of contract cause of action, although the extent of the breach was not as substantial as first alleged. The definitions adopted by other courts do not require the party to receive a judgment “to the extent of its original contention.” Further, while only a prevailing party may recover under �38.001, net recovery in the overall suit is not required. Determination of the prevailing party focus should be based on the success on the merits, i.e., the party who is vindicated by the trial court’s judgment. Accordingly, the court holds that “prevailing party” means the “party in whose favor a judgment is rendered, regardless of the amount of damages awarded.” If multiple parties receive judgment under the cause of action, the party which received judgment on the “main issue” is the prevailing party. Since Flagship is the only party that received a judgment under breach of contract (for recovery of sums paid by Flagship to the city for ad valorem taxes), Flagship is the prevailing party. Because Flagship also received damages ($47,322.06), it was entitled to its attorney’s fees. The city also argues Flagship was not entitled to its attorney’s fees because it failed to segregate the fees attributable to the contract cause of action from its other causes of action. A party seeking to recover attorney’s fees carries the burden of proof to establish the amount which is reasonable and necessary. The general rule is that attorney’s fees attributable to other defendants and other causes of action must be segregated. An exception to the general rule is when the claims are inseparably intertwined. The determination of whether attorney’s fees can be segregated is a question for the court. This determination requires a consideration of the substantive law necessary to establish facts to support a recovery of the multiple claims. The court holds that, in the instant case, the declaratory judgment actions were not inseparable from the breach of contract claims. Validity of the modifications of the lease, construction of the provisions relating to the parties’ respective maintenance obligations and liability for water payments are all claims that are not inseparably intertwined with the breach of contract claims. Flagship correctly points out it did segregate the breach of contract claims from the other causes of action. The city argues Flagship should further segregate fees based on the different theories of breach of contract. However, segregation based on separate theories of the same cause of action is not necessary. The breach of contract claims are not inseparable from the other claims. Because Flagship did segregate its attorney’s fees in its counsel’s affidavit, and because the city only contests this segregation on the basis of the different theories of breach of contract, Flagship’s affidavit is uncontroverted. Uncontroverted testimony by an interested witness concerning attorney’s fees may establish a fact as a matter of law. The uncontroverted affidavit establishes the reasonable and necessary attorney’s fees for the breach of contract claim as $48,862. The trial court abused its discretion in failing to award Flagship its attorney’s fees in this amount. Flagship contends the trial court erred in awarding attorney’s fees to the city. The city contends it was entitled to attorney’s fees under �38.001 (breach of contract) and �37.009 (declaratory judgment) of the Texas Civil Practice and Remedies Code. Flagship contends the city was not entitled to attorney’s fees because attorney’s fees were awarded under �38.001 and, because the city breached the contract, it was not a “prevailing party.” The order granting attorney’s fees does not state a basis for the award, and the city alleged it was entitled to attorney’s fees under ��38.001 and 37.009. Section 37.009 authorizes the trial court to award costs and “reasonable and necessary” attorney’s fees that are “equitable and just.” A party is not required to substantially prevail in order to be awarded attorney’s fees under �37.009. Thus, it is not an abuse of discretion to award attorney’s fees to a nonprevailing party if that is equitable and just under the circumstances. Flagship further contends the city cannot be awarded attorney’s fees under �37.009 because the declaratory judgment did not give rise to any new issues. When a party brings a declaratory judgment action by way of a counterclaim, and that counterclaim involves only issues already raised by the original claim, the party is not entitled to an award of attorney’s fees. However, validity of the contract modifications and liability as to water payments were issues not raised in the breach of contract claim. The declaratory judgment action therefore raised new issues. The trial court’s discretion in awarding attorney’s fees under �37.009 is limited by whether the attorney’s fees were “reasonable and necessary” as well as whether they were “equitable and just.” Further, a party is entitled only to the attorney’s fees attributable to the declaratory judgment action and must segregate such fees from the other causes of action. Here, the city failed to segregate fees attributable to the breach of contract cause of action from the cause of action seeking declaratory judgment. As discussed above, these causes are not inseparable. Therefore, the court holds the trial court abused its discretion by awarding fees based on unsegregated attorney’s fees. Unsegregated attorney’s fees however, is some evidence of segregated attorney’s fees. The court therefore reverses the trial court’s award and remands this issue to the trial court for determination, pursuant to �37.009, of the properly segregated fees, and for determination of whether an award of such fees is “equitable and just” in light of its opinion, and if so, what amount is “reasonable and necessary.” OPINION:Ross, J.; Morriss, C.J., Ross and Carter, JJ.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.