Saturday, March 21, 2015

A forcible detainer action is a limited-purpose proceeding in Justice Court

    
FORCIBLE DETAINER: NATURE OF ACTION IN JP COURT 
 
A forcible detainer action is a procedure to determine the right to immediate possession of real property where there was no unlawful entry. TEX. PROP. CODE ANN. § 24.002(a)(2) (West 2014); TEX. R. CIV. P. 510.1;[1] Rice v. Pinney, 51 S.W.3d 705, 709 (Tex. App.-Dallas 2001, no pet.). It is intended to be a speedy, simple, and inexpensive means to obtain possession without resort to an action on the title. Scott v. Hewitt, 90 S.W.2d 816, 818-19 (1936); Rice, 51 S.W.3d at 709. The trial court must adjudicate the right to actual possession of the property. TEX. R. CIV. P. 510.3(e).

All other claims, including questions of title, validity of a foreclosure, counterclaims, and suits against third parties are not permitted. Id. Those claims must be brought in separate suits. Id. Accordingly, the only issue in a forcible detainer action is which party has the right to immediate possession of the property. Rice, 51 S.W.3d at 709. Whether a sale of property under a deed of trust is invalid may not be determined in a forcible detainer action but must be brought in a separate suit. Scott, 90 S.W.2d at 818; Rice, 51 S.W.3d at 710 (quoting Scott).

PROOF REQUIREMENTS FOR EVICTION OF TENANT AT SUFFERANCE AFTER FORECLOSURE 

To prevail on its forcible detainer action, [the plaintiff has to] to prove (1) it owned the property by virtue of a foreclosure sale deed, (2) Defendant became a tenant at sufferance when the property was sold under the deed of trust, (3) Trans-Atlas gave Defendant notice to vacate the premises, and (4) Defendant refused to vacate the premises. See Elwell v. Countrywide Home Loans, Inc., 267 S.W.3d 566, 568-69 (Tex. App.-Dallas 2008, pet. dism'd w.o.j.); see also PROP. § 24.002 (West 2014).

FILED IN JP COURT, WITH OPTION TO APPEAL TO COUNTY COURT 

A forcible detainer suit is brought in justice court. PROP. § 24.004(a) (West 2014). The decision of the justice court may be appealed to the county court. TEX. R. CIV. P. 510.10(a). The appeal is by trial de novo, which is "a new trial in which the entire case is presented as if there had been no previous trial." TEX. R. CIV. P. 510.10(c). In the county court, a party may "plead, prove and recover his damages, if any, suffered for withholding or defending possession of the premises during the pendency of the appeal." TEX. R. CIV. P. 510.11.

The validity of a foreclosure sale may not be determined in a suit for forcible detainer but must be brought in a separate suit. TEX. R. CIV. P. 510.3(e); Scott, 90 S.W.2d at 818-19; Williams v. Bank of N.Y. Mellon, 315 S.W.3d 925, 927 (Tex. App.-Dallas 2010, no pet.). Defects in the foreclosure process or with Trans-Atlas's title are not relevant in the suit before us. See Williams, 315 S.W.3d at 927.

SOURCE: DALLAS COURT OF APPEALS - 05-14-00126-CV - 3/12/2015  

Statute of Frauds as to Real Estate - Was the Property Sufficiently Identified?


STATUTE OF FRAUDS AS TO REAL ESTATE TRANSACTIONS - SUFFICIENCY OF DESCRIPTION OR IDENTIFICATION OF THE SUBJECT PROPERTY 

Statute of Frauds and Enforeability of Asserted Right of First Refusal  

A contract for the sale of real property must comply with the statute of frauds. TEX. BUS. & COM. CODE ANN. § 26.01(a)(4) (West 2009). An option to purchase contained in a real estate lease is a contract for the sale of real property that must comply with the statute of frauds. See Matney v. Odom, 147 Tex. 26, 210 S.W.2d 980, 982 (1948). Likewise, a right-of-first-refusal on the sale of real property is unenforceable unless it satisfies the statute of frauds. See Reiland v. Patrick Thomas Props., Inc., 213 S.W.3d 431 (Tex. App.-Houston [1st Dist.] 2006, pet. denied); Jones v. Brown, No. 04-99-00775-CV, 2000 WL 1056028 (Tex. App.-San Antonio Aug. 2, 2000, no pet.)(not designated for publication).

THE CRITICAL NATURE OF ADEQUATE PROPERTY DESCRIPTION 

A contract for the sale of real property satisfies the statute of frauds only if the property description is "so definite and certain upon the face of the instrument itself, or in some other writing referred to, that the land can be identified with reasonable certainty." Matney, 210 S.W.2d at 982. When the contract at issue is an option contained within another document, it is the property to be conveyed pursuant to the option that must be identified with reasonable certainty. See Matney, 210 S.W.2d at 982; Ardmore, Inc. v. Rex Group, Inc., 377 S.W.3d 45, 57 (Tex. App.-Houston [1st Dist.] 2012, pet. denied). Whether the property description in a writing is sufficient to comply with the statute of frauds is a question of law. Dixon v. Amoco Prod. Co., 150 S.W.3d 191, 194 (Tex. App.-Tyler 2004, pet. denied).

SOURCE: SAN ANTONIO COURT OF APPEALS - 04-12-00363-CV - 3/20/2013  

The Hasketts' motion for summary judgment asserted the right-of-first-refusal is unenforceable because the description of the property subject to the right-of-first-refusal fails to furnish any means by which the property referred to can be identified with reasonable certainty. The Hasketts submitted uncontroverted summary judgment evidence that the property is located at 470 S. Main and consists of 0.557 acres, more or less, and a building that is approximately 8,210 square feet. They argue there is no information in the four corners of the lease by which the 5188 square feet "premises" in the lease could be located out of the entire property at 470 S. Main. Further, the lease does not refer to any other document from which the specific identity and location of the property subject to the right-of-first-refusal could be ascertained.

OTR first argues that the lease sufficiently describes the property to be conveyed under the right-of-first-refusal as the property being leased ("approximate[ly] . . . 5188 square feet [at] 407 S. Main Street [in] Boerne, Kendall County, Texas 78006"). It argues that anyone familiar with Boerne could identify the property referred to from the address, the identity of the owners, and identity of the lessee. We disagree. The address in the description of the premises in the lease is incorrect and the lease does not identify the owner of the property, only the lessor. See Matney, 210 S.W.2d at 983 ("It will not necessarily be inferred that he owned the land simply because he signed the lease contract as lessor."). More importantly, "a deed purporting to convey land, which describes it only by quantity and as being part of a larger tract, with nothing whereby to identify what specific portion of the larger tract is intended to be conveyed, is void for uncertainty of description." Matney, 210 S.W.2d at 983 (quoting Smith v. Sorelle, 126 Tex. 353, 87 S.W.2d 703, 705 (1935)); See Texas Builders v. Keller, 928 S.W.2d 479, 481-82 (Tex. 1996) (holding description of property as "58,333 square feet . . . at 12050 Rojas" is insufficient to identify the property with reasonable certainty where the property at that address contained 100,000 square feet and nothing in document identifies which part of the property is being referred to); Hereford v. Tilson, 145 Tex. 600, 200 S.W.2d 985, 988-89 (1947) (holding that where lease provided lessee option to purchase part of property at given location, but it could not be determined what part of the property was included without resort to parol evidence, option violated statute of frauds and would not be enforced).

OTR argues alternatively that the "premises" referred to in the right-of-first-refusal is the entire property—the land and building—at 470 S. Main, and that the property is sufficiently described by identifying the street address and the owner. We again disagree. First, nothing in the lease itself suggests the parties to lease were referring to different things when they used "premises" as opposed to "Premises." To make its argument, OTR resorts to parol evidence regarding the parties' intent. However, this intent was not expressed in the lease. Even if parol evidence established the parties knew and understood what property was intended to be conveyed, the knowledge and intent of the parties will not give validity to a contract with an insufficient property description on its face. Reiland, 213 S.W.3d at 437 (citing Morrow v. Shotwell, 477 S.W.2d 538, 540 (Tex. 1972)).

If we assume that "premises," as used in the right-of-first-refusal, refers to the entire property at 470 S. Main, the property description in the lease is still insufficient to comply with the statute of frauds. A property description consisting of a street address may be sufficient under the statute of frauds if the document also contains a statement of ownership and it is shown that the party to be charged owns only one property fitting the property description in the contract. Moudy v. Manning, 82 S.W.3d 726, 728-29 (Tex. App.-San Antonio 2002, pet. denied); see Pickett v. Bishop, 148 Tex. 207, 223 S.W.2d 222, 223-24 (1949) (holding statement of ownership in the body of the instrument is considered part of the property description). When the description of the property to be conveyed is of doubtful sufficiency, ownership is an important element. Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150, 154 (1945). The lease does not expressly identify the owner of the property and contains no statement of ownership. Ownership cannot be inferred from the mere fact that a person is a lessor of the property or contracts to sell it. Matney, 210 at 983; Wilson, 188 S.W.2d at 154. Nor may it be supplied by parol evidence. Id. The mere description of the property by its address, without any statement of ownership is insufficient.

We hold the Hasketts met their burden to establish that the statute of frauds applies to the right-of-first-refusal and the property description is insufficient as a matter of law to comply with the statute of frauds, rendering the right-of-first-refusal unenforceable.

SOURCE: SAN ANTONIO COURT OF APPEALS - 04-12-00363-CV - 3/20/2013  

STATUTE OF FRAUDS AS AFFIRMATIVE DEFENSE 

The statute of frauds is an affirmative defense, and it is waived if not pled. TEX.R.CIV.P. 94; Phillips v. Phillips, 820 S.W.2d 785, 791 (Tex. 1991).  



Friday, March 20, 2015

An action for trespass to try title ... means what?


An action for trespass to try title is "the method for determining title to lands, tenements, or other real property and the exclusive remedy for resolving competing claims to property." Parker v. Hunegnaw, 364 S.W.3d 398, 401 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (citing Tex. Prop. Code Ann. § 22.001). To succeed, a plaintiff must establish the superiority of his title and cannot prevail merely on the weakness of the defendant's title. Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004). Because Plaintiffs have alleged a valid claim for wrongful foreclosure, fraud, and promissory estoppel, each of which substantiate a superior claim to title (taking all of Plaintiffs' allegations as true), and request return of title as one form of relief, the district court erred in dismissing Plaintiffs' action for trespass to try title.

SOURCE: FIFTH CIRCUIT: Guajardo v. JP Morgan Chase Bank, NA, Court of Appeals, 5th Circuit Jan 12, 2015




Declaratory Judgments Action - When is it proper?


SUIT FOR DECLARATORY JUDGMENT IN TEXAS 

A declaratory judgment is a remedial measure that determines the rights of the parties and affords relief from uncertainty with respect to rights, status, and legal relations. See Halliburton Energy Servs., Inc. v. Axis Tech., LLC, 444 S.W.3d 251, 262 (Tex. App.-Dallas 2014, no pet.) (citing Ysasaga v. Nationwide Mut. Ins. Co., 279 S.W.3d 858, 863 (Tex. App.-Dallas 2009, pet. denied)). The Texas Uniform Declaratory Judgments Act is contained in chapter 37 of the Texas Practice and Remedies Code. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 37.001-37.011.

Under section 37.004(a) of the declaratory judgments act, "[a] person interested under a deed . . . may have determined any question of construction or validity arising under the instrument . . . and obtain a declaration of rights, status, or other legal relations thereunder." Id. § 37.004(a). Further, the act provides in part, "[n]otwithstanding Section 22.001, Property Code, a person described by Subsection (a) may obtain a determination under this chapter when the sole issue concerning title to real property is the determination of the proper boundary line between adjoining properties." Id. § 37.004(c). Additionally, section 37.009 of the act states, "In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney's fees as are equitable and just." Id. § 37.009.

Section 16.033 of the Texas Civil Practice and Remedies Code provides in part,

A person with a right of action for the recovery of real property or an interest in real property conveyed by an instrument with one of the following defects must bring suit not later than two years after the day the instrument was filed for record with the county clerk of the county where the real property is located:

. . . .
(6) acknowledgment of the instrument in an individual, rather than a representative or official, capacity;
(7) execution of the instrument by a trustee without record of the authority of the trustee or proof of the facts recited in the instrument;
(8) failure of the record or instrument to show an acknowledgment or jurat that complies with applicable law; or
(9) wording of the stated consideration that may or might create an implied lien in favor of the grantor.

Id. § 16.033(a) (West 2002). Section 16.003 does not apply to a forged instrument. Id. § 16.033(b).

A bona fide purchaser is "[a] person who acquires property in good faith, for value, and without notice of any third-party claim or interest." Fletcher v. Minton, 217 S.W.3d 755, 758 (Tex. App.-Dallas 2007, no pet.); see also TEX. PROP. CODE ANN. § 13.001 (West 2014). Status as a bona fide purchaser is an affirmative defense to a title dispute. Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001). However, the protection usually afforded to a bona fide purchaser for value without notice does not apply when such purchaser's claim is dependent upon a forged instrument. Bellaire Kirkpatrick Joint Venture v. Loots, 826 S.W.2d 205, 210 (Tex. App.-Fort Worth 1992, writ denied).
 
SOURCE: DALLAS COURT OF APPEALS - No. 05-13-01581-CV - 1/21/2015

Thursday, March 12, 2015

Judicial Extension of Limitations Period - American Star Energy and Minerals Corporation v Stowers (Tex Feb. 27, 2015)


TEXAS SUPREME COURT LENGTHENS STATUTE OF LIMITATIONS FOR SOME CREDITORS BY RE-DEFINING POINT OF ACCRUAL  

A cause of action accrues when facts come into existence that authorize a claimant to seek a judicial remedy. At least that has been the general rule. On February 27, 2015, the Texas Supreme Court created an exception, and thereby revived a creditor's claim that had been dismissed as time-barred by the court below. 

A claim against a partner to enforce the partner's liability for partnership debt, says the Court, does not accrue when the underlying claim accrues even though the partner may be sued in addition to the partnership.
Acknowledging that the Texas Legislature has not defined accrual for this type of claim, though it has done so for other types of claims, and even citing the residual statute of limitations in the Civil Practice and Remedies Code (4 years), the Court nevertheless effectively extended the "statute" of limitations for a claim against the partner to many more years (depending on how fast the claim against the partnership is brought and how fast it is litigated to judgment) by holding that the claim for enforcement of the partners' liability on partnership debt does not accrue until judgment is entered against the partnership (plus an additional 90 days, unless an exception applies). 

It gives a whole new meaning to statutory construction: Extending the "statute" of limitations beyond the four year statute of limitations for breach of contract claims (and the residual statute of limitations for like number of years) by creating an exception to the general rule of accrual that other plaintiffs have to live by. 

American Star Energy and Minerals Corporation v Stowers (Tex Feb. 27, 2015)(Opinon by Jeff Brown).

Coverage of this case elsewhere:
Texas High Court Extends Limitations Period for Unpaid Partnership Liabilities
SCOTX rules on limitations period against partners: American Star Energy and Minerals Corp. v. Stowers

AMERICAN STAR ENERGY AND MINERALS CORPORATION, Petitioner,
v.
RICHARD "DICK" STOWERS, RICHARD W. STOWERS, FRANK K. STOWERS AND LINDA SUE JASURDA, Respondents.

No. 13-0484.
Supreme Court of Texas.

Argued October 14, 2014.
Opinion delivered: February 27, 2015.
JUSTICE BROWN delivered the opinion of the Court.
JEFFREY V. BROWN, Justice.

In this case we must decide whether Texas partnership law requires a plaintiff seeking to enforce a partner's liability for a partnership debt to sue the partner within the limitations period on the underlying claim against the partnership. Here, a judgment creditor attempted to collect from a partnership after litigating a contract claim for over a decade and a half, only to find the partnership insolvent. When the creditor sought a judgment against the individual partners, the trial court ruled the limitations period began when the underlying cause of action accrued. Because that period had passed, limitations precluded pursuit of the partners' assets. The court of appeals affirmed. 

We hold today that the limitations period against a partner generally does not commence until after final judgment against the partnership is entered. Because this action was brought within that period, we reverse the court of appeals' judgment.

Saturday, March 7, 2015

SoL tolling when pertinent public records are available to the plaintiff, but are tainted with fraud: Hooks v Samson Lone Star LP (Tex. Jan 30, 2015)

   
WHAT QUANTUM OF DILIGENCE IS (UN)REASONABLE? 

Fraud prevents the running of the statute of limitations until it is discovered, or by the exercise of reasonable diligence could have been discovered. In this January 2015 opinion in an oil & gas case over underpayment of royalties, the Supreme Court of Texas holds that when the defendant's fraudulent misrepresentations extend to the Railroad Commission record itself, earlier inconsistent filings cannot be used to establish, as a matter of law, that reasonable diligence was not exercised by the plaintiff. Under these circumstances, reasonable diligence remains a fact question. 


Hooks v. Samson Lone Star, Limited Partnership (Tex. Jan. 30, 2015)

The facts underlying the case represent a variation on the theme of fraudulent concealment in that pertinent documents themselves could be discovered, but the error in them would not be readily apparent, and would therefore not give rise to awareness of injury and get the limitations clock ticking. Declining to impose a requirement that the lessor of mineral interests go back and double-check the Railroad Commission records and compare more recent filings against earlier filings to protect the lessor's rights under the "reasonable diligence" standard, the Court reversed the court of appeals' determination that the claim was time-barred, and remanded to the lower appellate court for consideration of other issues that the court had not reached. The court limited itself to the "matter of law" issue because it does not review factual sufficiency of the evidence with respect to jury findings, which will be the Houston court of appeal's job upon remand to that court.   

OPINION BELOW: Samson Lone Star, Ltd. P’ship v. Hooks, 389 S.W.3d 409 (Tex. App.—Houston [1st Dist.] 2012).

Fraud and Limitations

Hooks' fraud claims relate to the Jefferson County Lease. This lease, which prohibited pooling, contained "offset obligations" providing that if a gas well were completed within 1,320 feet of Hooks' lease line but was not unitized with Hooks' acreage, then Samson would either drill an offset well, pay Hooks compensatory royalties, or release the offset acreage. In 2000, Samson drilled a well that bottomed about 1,186 feet from Hooks' lease, within the 1,320-foot protected zone. But, instead of complying with the original offset obligations, Samson asked Hooks to amend the Jefferson County Lease in 2001 to pool into a unit associated with the new well. In connection with this request, Samson provided Hooks with a plat that incorrectly placed the well's bottom hole outside of the protected zone. A plat with the same false information had already been filed with the Railroad Commission. Older Railroad Commission records, however, contained a directional survey and an attached plat[3] that correctly placed the bottom hole within the 1,320-foot boundary.[4] Other preliminary Railroad Commission filings demonstrated that Samson originally intended the well to bottom within 1,320 feet of Hooks' lease.

Hooks brought his fraud claims in 2007, alleging that Samson deprived Hooks of compensatory royalties by misrepresenting the well's bottom-hole location and fraudulently inducing Hooks to amend the lease and pool.

A jury found that Samson committed fraud and statutory fraud, awarding more than $20 million in damages on these claims, and the trial court rendered judgment on the jury's verdict. The court of appeals, however, reversed, holding that the four-year statute of limitations for fraud barred the claims. Id. at 428-29 (citing TEX. CIV. PRAC. & REM. CODE § 16.004(a)(4)).

Hooks argues that the court of appeals erred because the statute of limitations did not begin to run until Hooks "knew or should have known of facts that in the exercise of reasonable diligence would have led to the discovery of the wrongful act." Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 216 (Tex. 2011) (quoting Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997)).

The jury found that, in the exercise of reasonable diligence, Hooks should have discovered Samson's fraud by 2007. Samson responds that, as a matter of law, reasonable diligence would have discovered the true location of the well's bottom hole in 2000 or 2001. Samson points to this Court's decisions in BP America Production Co. v. Marshall, 342 S.W.3d 59 (Tex. 2011), and Shell Oil Co. v. Ross, 356 S.W.3d 924 (Tex. 2011), where reasonable diligence required sophisticated lessors to acquaint themselves with "readily accessible and publicly available information" from Railroad Commission records. Ross, 356 S.W.3d at 929; see Marshall, 342 S.W.3d at 68-69. According to Samson, the directional survey and its associated plat, as well as filings showing the original proposed location of the well's bottom hole, should have been discovered by the exercise of reasonable diligence by 2001 at the latest, meaning that Hooks' fraud claims are barred by limitations.




We have long held that "fraud prevents the running of the statute of limitations until it is discovered, or by the exercise of reasonable diligence might have been discovered." Ruebeck v. Hunt, 176 S.W.2d 738, 739 (Tex. 1943).[5] Generally, "[c]auses of action accrue and statutes of limitation begin to run when facts come into existence that authorize a claimant to seek a judicial remedy," Emerald Oil, 348 S.W.3d at 202, but "a person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run," S.V. v. R.V., 933 S.W.2d 1, 6 (Tex. 1996). Because "fraud vitiates whatever it touches," Borderlon v. Peck, 661 S.W.2d 907, 909 (Tex. 1983), limitations does not start to run until the fraud is discovered or the exercise of reasonable diligence would discover it, Marshall, 342 S.W.3d at 69.

EXCEPTIONS TO LIMITATIONS BAR BASED ON THE DEFENDANT'S FRAUD 
ALSO APPLY TO FRAUDULENT INDUCEMENT OF A CONTRACT 

The same rule applies to claims of fraudulent inducement. Fraudulent inducement is a subspecies of fraud; "with a fraudulent inducement claim, the elements of fraud must be established as they relate to an agreement between the parties." Haase v. Glazner, 62 S.W.3d 795, 798-99 (Tex. 2001). Accordingly, the same principle applies: limitations does not start to run until the fraud with respect to the contract is discovered or the exercise of reasonable diligence would discover it.

And just when would reasonable diligence discover the wrong?[6] And who decides? Although "the date a cause of action accrues is normally a question of law," Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 623 (Tex. 2011) (per curiam), reasonable diligence is an issue of fact, Estate of Stonecipher v. Estate of Butts, 591 S.W.2d 806, 809 (Tex. 1979).[7] Nevertheless, in some circumstances, we can still determine as a matter of law that reasonable diligence would have uncovered the wrong.[8] A survey of our decisions reveals the reasons for holding, as a matter of law, that the exercise of reasonable diligence would lead to the discovery of the wrong within the statutory period.[9]

In Shell Oil Co. v. Ross, we considered untimely claims made by Ross—an attorney who "understood the oil and gas industry"—and his family that Shell had underpaid gas royalties. 356 S.W.3d at 926. Despite Shell's allegedly fraudulent representations, the Rosses had a duty to "make themselves aware of relevant information available in the public record." Id. at 928. We held that "[d]iligence is required when claimants have been `put on notice of the alleged harm of injury-causing actions.'" Id. (quoting Emerald Oil, 348 S.W.3d at 207).[10] Discrepancies in royalties paid to the Rosses on different wells put them on notice. Id. at 929. A publicly available price index illuminated the underpayments, as did General Land Office records demonstrating that Shell paid higher royalties to the State even though it owed the Rosses the same royalty. Id. Had the Rosses exercised reasonable diligence, this "[r]eadily accessible and publicly available information" would have revealed the underpayments. Id. Accordingly, as a matter of law, they did not exercise reasonable diligence.

In BP America Production Co. v. Marshall, we held that the statute of limitations was not tolled when BP fraudulently represented that it was maintaining continuous operations on a lease. 342 S.W.3d at 67-69. This case also involved a sophisticated plaintiff who "understood the oil and gas industry." Id. at 69. The public record contained two public filings with the Railroad Commission: a well log and a plugging report that contained "highly technical information." Id. at 66. Had the Marshalls read these two documents together, they would have discovered that BP was not conducting good-faith continuous operations. Id. at 69. "[A]s a matter of law, the Marshalls would have been able to discover BP's fraud th[r]ough the use of reasonable diligence." Id.

We have reached similar conclusions in other cases. For example, if the plaintiff has "actual knowledge . . . of injury-causing conduct," then this "starts the clock on the limitations period" "[i]rrespective of the potential effect of fraudulent concealment." Emerald Oil, 348 S.W.3d at 209. The availability of court records may indicate under some circumstances that reasonable diligence would have found the information. See Kerlin, 263 S.W.3d at 926.

Land title records and probate proceedings create constructive notice, "an irrebuttable presumption of actual notice," which prevents limitations from being delayed. Mooney v. Harlin, 622 S.W.2d 83, 85 (Tex. 1981); Sherman v. Sipper, 152 S.W.2d 319, 321 (Tex. 1941). These cases reveal that when there is actual or constructive notice, or when information is "readily accessible and publicly available," Ross, 356 S.W.3d at 929, then, as a matter of law, the accrual of a fraud claim is not delayed.

The present case does not fall into any of the categories where we can determine, as a matter of law, that reasonable diligence would have timely uncovered the fraud. Though Samson relies extensively on Marshall and Ross, Hooks correctly identifies an important distinction: in those cases, the public record itself was not tainted by the fraud. We have not previously considered whether reasonable diligence would uncover a correct public Railroad Commission filing when more recent filings contain false information.

In December 2000, Samson submitted a plat to the Railroad Commission as part of an application to pool. The plat was signed by Glenn Lanoue, Samson's landman, and dated November 16, 2000, certifying that it was "a true and correct plat based on the best of my knowledge." The plat had a label stating "Proposed Well Location," but, unlike some earlier plats in the record, the individual data on this plat were not themselves also marked as "proposed." The plat gave "X" and "Y" coordinates for the well's bottom-hole location, the distance of the well from various survey lines, and the well's surface location along with the bottom hole's location relative to the surface. Trial testimony established that this data is internally consistent, placing the well's bottom hole more than 1,320 feet from Hooks' lease line even though the well actually bottomed within the 1,320-foot protected zone. When Lanoue was asked where he obtained the bottom hole's distance from the survey lines, he testified that he created them himself.[11]

Samson later provided a plat with the same information to Hooks in connection with Samson's request to amend the lease and allow pooling. Samson argues the plat was ambiguous and indefinite, creating a need for Hooks, an experienced oil and gas lessor, to investigate further. On the plat is the notation "1400' ± scaled," but trial testimony presented different interpretations of what points this distance measured between. Elsewhere, the plat expressly states that the bottom-hole location is "1400' ± scaled' FEL Unit." Testimony indicated that "FEL" means "from the eastern line" of the pooled unit. Another testified that taking the notation literally would be unreasonable because if the well truly bottomed about 1,400 feet from the eastern line of the unit, as opposed to Hooks' lease line, it would be very close to Hooks' lease, perhaps even within it.

Months earlier, a directional survey performed by an independent surveyor and an accompanying plat were filed with the Railroad Commission. Some information on the directional survey clearly contradicts the Lanoue plat discussed above, and Samson urges that the information on the survey could have easily been used to estimate the bottom hole's true location. Hooks argues that it would take an expert to interpret the survey and pinpoint its location.

We cannot say that, as a matter of law, Hooks should have discovered the accurate information when the more recent filing falsely conveyed that the well had been completed outside the protected zone. Although reasonable diligence should examine readily available information in the public record, it may stop at more recent filings with the Railroad Commission, without needing to double-check more recent filings against earlier filings.

This accords with our prior decisions. We have held that "fraud vitiates whatever it touches," Borderlon, 661 S.W.2d at 909, in this case, the public record. We have held that not all Railroad Commission records create constructive notice, HECI Exploration Co., 982 S.W.2d at 886, meaning that, in some circumstances, Railroad Commission filings may exist that one is not charged with discovering. We have held that fraudulent concealment is "an equitable doctrine that . . . is fact-specific." Marshall, 342 S.W.3d at 67. And we have held that "a person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run." S.V., 933 S.W.2d at 6. Though reasonable diligence should lead to information in the public record, here, the fraudulent information itself taints the public record. To require, as a matter of law, that Hooks double-check the more recent filings against earlier filings is a higher burden than reasonable diligence requires.

Samson argues that the directional survey is the "gold standard," and that the fraudulent plat was filed to show unit lines for pooling purposes, not to provide the exact location of the well's bottom hole. Samson observes that, in some situations, Texas law mandates directional surveys performed by independent surveyors, see 16 TEX. ADMIN. CODE §§ 3.11(c)(2)(A); 3.12 (Tex. R.R. Comm'n), and asserts that Hooks should have known this and looked for the survey to establish the bottom hole's true location. Samson also argues that because Lanoue told Hooks the well was about 1,500 feet from the lease line, but then sent Hooks a plat indicating the bottom hole was about 1,400 feet away, very close to the protected zone, these inconsistencies should have caused Hooks to inquire further.

None of these arguments avail.

Had Hooks gone to the Railroad Commission, the more recent filing would have been a plat with the same inaccurate information, placing the well's bottom hole beyond the protected zone. Hooks is not required, as a matter of law, to double-check it against the earlier directional survey. To the extent some information on the Lanoue plat is unclear, a careful reader could have examined other information on the plat (e.g., the "X" and "Y" coordinates, distances from lease lines, and location of the bottom hole relative to the surface) to resolve any ambiguity, determining that the plat placed the bottom hole outside the protected zone. Indeed, Hooks presented testimony that this plat clearly placed the bottom hole outside of the protected zone. Thus, though Samson's arguments regarding potential ambiguities on the plat, and the availability and superiority of the directional survey, may be appropriate for the factfinder to consider when determining whether reasonable diligence would have uncovered the fraud, they do not establish that, as a matter of law, Hooks did not exercise reasonable diligence.

Amicus Texas Oil and Gas Association suggests that holding for Hooks will encourage litigants to guise their breach-of-contract claims as fraud claims to avoid the statute of limitations. We disagree.

To establish fraudulent inducement, "the elements of fraud must be established as they relate to an agreement between the parties." Haase, 62 S.W.3d at 798-99. Many breach-of-contract cases do not implicate the elements of fraud. Only when fraud is established with regard to the contract may fraudulent inducement be established, and, in any case, the suit is based on the fraud itself rather than a breach of contract. Moreover, because fraudulent concealment may toll the statute of limitations for contract claims, no incentive will exist to recast them as fraud claims.

We hold that when the defendant's fraudulent misrepresentations extend to the Railroad Commission record itself, earlier inconsistent filings cannot be used to establish, as a matter of law, that reasonable diligence was not exercised. Under these circumstances, reasonable diligence remains a fact question. The factfinder, no doubt, may consider the failure to examine older records when determining whether reasonable diligence was exercised, but their availability is not enough to establish that reasonable diligence was not exercised as a matter of law.

Because the court of appeals mistakenly concluded that the date by which Hooks reasonably should have discovered Samson's fraud was a question of law, it did not reach Samson's other arguments concerning Hooks' fraudulent inducement claims. See 389 S.W.3d at 428-30. These include the factual and legal sufficiency of the evidence with regard to common-law fraud, statutory fraud, and damages for fraud, as well as the factual sufficiency of the evidence regarding when Hooks, by the exercise of reasonable diligence, would have discovered the fraud.

We remand these issues for the court of appeals' consideration.

SOURCE: TEXAS SUPREME COURT - HOOKS v. SAMSON LONE STAR, LIMITED PARTNERSHIP N/K/A SAMSON LONE STAR LLC, No. 12-0920 (Tex. Jan 30, 2015) (Opinion by Justice John P. Devine) (click hyper-linked case style to read entire opinion in pdf).

Footnotes:

[4] Although the plat correctly placed the bottom hole within the protected zone, some data on the plat does not completely correspond to data on a later correct plat.

[5] See also Emerald Oil, 348 S.W.3d at 216; Marshall, 342 S.W.3d at 68; Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996); Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 517 (Tex. 1988).

[6] Hooks and amicus Cardwell, Hart & Bennett, LLP cite cases stating that if there is a fraudulent misrepresentation, it is no defense that proper inquiry might have revealed the truth. See, e.g., Buchanan v. Burnett, 119 S.W. 1141, 1142 (Tex. 1909); Labbe v. Corbett, 6 S.W. 808, 811 (Tex. 1888); Mitchell v. Zimmerman, 4 Tex. 75, 79-80 (1849). These cases, however, stand for the general proposition that one may be liable for fraud even if it could be discovered by due diligence; they do not hold that limitations is extended even if due diligence would reveal the fraud. Also, at least one amicus, Cardwell, Hart & Bennett, LLP, invokes a lessee's implied covenant to act as a reasonably prudent operator. But we held in HECI Exploration Co. v. Neel that "[i]mplied covenants do not dispense with the need for royalty owners to exercise due diligence in enforcing their contractual rights, express or implied, within the statutory limitations period." 982 S.W.2d 881, 887 (Tex. 1998).

[7] See also Shah v. Moss, 67 S.W.3d 836, 846 (Tex. 2001) ("To avoid summary judgment on limitations grounds, Moss must have raised a fact issue to support his fraudulent-concealment assertion."); Hurlbut v. Gulf Atl. Life Ins. Co., 749 S.W.2d 762, 766 (Tex. 1987) ("[W]e agree that whether the plaintiffs knew or should have known of the fraud . . . raises a fact issue. . . ."); Borderlon, 661 S.W.2d at 909 ("A fact issue exists whether, in the exercise of reasonable diligence, Borderlon knew, or should have known . . ., that the presence of the foreign object in her abdomen gave rise to a cause of action against Dr. Peck."); Cherry v. Victoria Equip. & Supply, Inc., 645 S.W.2d 781, 782 (Tex. 1983) ("The ultimate duty to weigh the evidence, determine credibility and decide if fraudulent concealment actually existed rests upon the trier of fact."); Ruebeck, 176 S.W.2d at 740 ("What will constitute reasonable diligence to discover fraud and when the fraud might have been discovered by the exercise of such diligence are necessarily questions which must be determined from all the facts and circumstances in evidence in each particular case. When, under the facts in evidence, reasonable minds might differ on such issues, the findings of the jury thereon are binding on the appellate court.").

[8] See, e.g., Etan Indus., 359 S.W.3d at 623 ("On these facts, we hold as a matter of law that the estoppel effect of the alleged fraudulent concealment ended in December 2002 at the latest. By that date, the Lehmanns were apprised of facts, conditions, and circumstances sufficient to cause a reasonable person to make inquiry that would lead to the discovery of the concealed cause of action."); Ross, 356 S.W.3d at 929 ("Because the Rosses could have discovered Shell's alleged fraud through the use of reasonable diligence, we hold that, as a matter of law, the doctrine of fraudulent concealment cannot apply to toll the statute of limitations."); Marshall, 342 S.W.3d at 69 ("[A]s a matter of law, the Marshalls would have been able to discover BP's fraud through the use of reasonable diligence."); Kerlin v. Sauceda, 263 S.W.3d 920, 926 (Tex. 2008) ("As a matter of law, the Ballis could have discovered the existence of any claims before limitations expired through the exercise of reasonable diligence.").

[9] Hooks denies relying on the discovery rule or fraudulent concealment. Although fraudulent concealment allows the statute of limitations to be tolled for causes of action besides fraud itself, the standard of reasonable diligence remains the same: "Fraudulent concealment only tolls the running of limitations until the fraud is discovered or could have been discovered with reasonable diligence." Marshall, 342 S.W.3d at 67. Consequently, cases discussing fraudulent concealment are relevant to the meaning of reasonable diligence.

[10] Samson and Hooks dispute whether parties must be put on notice of potential harm before they have a duty to exercise reasonable diligence, as well as whether Hooks was on notice. We need not reach these questions here. Instead, we decide the case by assuming, without deciding, that Hooks should exercise reasonable diligence.

BLOG POSTS ON THIS CASE BY OTHERS:
Texas Supreme Court Rules for Mineral Owner in Hooks v. Samson  (Oil & Gas Lawyer Blog)
How Much Due Diligence is Due? CASE STUDY: HOOKS V. SAMSON LONE STAR, LTD (Manning Wolfe)
Hooks v. Samson: A Bold Prediction on Overcoming the Discovery Rule (Soden Abraham) (written and published prior to Tex. Sup. Ct.'s decision in this case)






Accrual of claim for breach of fiduciary duty, and exceptions - Discovery Rule found inapplicable (2015 San Antonio CoA case)


FOUR-YEAR STATUTE OF LIMITATIONS FOR BREACH OF FIDUCIARY DUTY  

A person bringing a claim for breach of fiduciary duty must file suit not later than four years after the day the cause of action accrues. TEX. CIV. PRAC. & REM. CODE ANN. § 16.004(a)(5) (West 2002).

ACCRUAL RULE 

Generally, when a cause of action accrues is a question of law. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003). "[A] cause of action accrues and the statute of limitations begins to run when facts come into existence that authorize a party to seek a judicial remedy." Id. "In most cases, a cause of action accrues when a wrongful act causes a legal injury, regardless of when the plaintiff learns of that injury or if all resulting damages have yet to occur." Id. However, two exceptions may defer accrual of a claim: the discovery rule and the doctrine of fraudulent concealment.

SUMMARY JUDGMENT ON LIMITATIONS - WHAT DOES IT TAKE TO PREVAIL WHEN THE DISCOVERY RULE HAS BEEN PLEADED?  

"A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense." KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). "Thus, the defendant must (1) conclusively prove when the cause of action accrued, and (2) negate the discovery rule, if it applies and has been pleaded or otherwise raised, by proving as a matter of law that there is no genuine issue of material fact about when the plaintiff discovered, or in the exercise of reasonable diligence should have discovered the nature of its injury." Id.

Thus, if the plaintiff pleads the discovery rule as an exception to limitations, the movant must negate that exception as well by proving as a matter of law that either (1) the discovery rule does not apply or (2) there is no genuine issue of material fact about when the plaintiff discovered or, in the exercise of reasonable diligence, should have discovered the nature of the alleged injury. Howard v. Fiesta Texas Park Show, Inc., 980 S.W.2d 716, 719 (Tex. App.-San Antonio 1998, pet. denied). If the movant establishes that the statute of limitations bars the action, the respondent must then adduce summary judgment proof raising a fact issue in avoidance of the statute of limitations. KPMG, 988 S.W.2d at 749.

THE DISCOVERY RULE AS A COUNTER TO LIMITATIONS 

The discovery rule is "a very limited exception to statutes of limitations." Shell Oil Co. v. Ross, 356 S.W.3d 924, 929 (Tex. 2011) (citation omitted). It applies to instances in which the nature of the plaintiff's injury is "inherently undiscoverable and the evidence of injury is objectively verifiable." BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 65-66 (Tex. 2011) (citation omitted).

Requiring both that a plaintiff's injury be inherently undiscoverable and evidence of that injury be objectively verifiable "balance the conflicting policies in statutes of limitations: the benefits of precluding stale or spurious claims versus the risks of precluding meritorious claims that happen to fall outside an arbitrarily set period." S.V. v. R.V., 933 S.W.2d 1, 6 (Tex. 1996).

The supreme court has explained that the "concern that meritorious claims will be barred is . . . taken into account in fashioning these two elements." Id. at 15. "The two elements strike the proper balance between the beneficial purposes of statutes of limitations and the real concern that a person's rights may be cut off." Id. The "preclusion of a legal remedy alone is not enough to justify a judicial exception to the statute." Id. (citation omitted). "The primary purpose of limitations, to prevent litigation of stale or fraudulent claims, must be kept in mind." Id. "

Allowing late-filed claims that are inherently undiscoverable while requiring objectively verifiable injury reduces the likelihood of injustice in cutting off valid claims while affording some protection against stale and fraudulent claims." Id.; see Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006) (explaining that the supreme court has "restricted the discovery rule to exceptional cases to avoid defeating the purposes behind the limitations statutes").

FOURTH COURT OF APPEALS FINDS DISCOVERY RULE  INAPPLICABLE IN THIS CASE 

In this case, Tommy and Harry argue that the discovery rule does not apply because (1) Mary's injury, the allegedly wrongful transfer of the mineral interests, was not inherently undiscoverable, and was in fact easily discoverable if she had simply read the deeds; and (2) the evidence of her injury is not objectively verifiable. We agree with Tommy and Harry that they have met their summary judgment burden of showing that there is no objectively verifiable evidence of Mary's injury.
San Antonio Court of Appeals 

The supreme court has explained that requiring evidence of the nature of an injury to be objectively verifiable prevents fraudulent prosecutions. See S.V., 933 S.W.2d at 6. For example, in Gaddis v. Smith, 417 S.W.2d 577, 581 (Tex. 1967), a plaintiff filed suit after the statute of limitations had run claiming that her doctors were negligent in leaving a sponge insider her body after surgery. "The presence of the sponge in her body—the injury—and the explanation for how it got there—the wrongful act— were beyond dispute." S.V., 933 S.W.2d at 7 (discussing Gaddis). "The facts upon which liability was asserted were demonstrated by direct, physical evidence." Id.

In contrast, in Robinson v. Weaver, 550 S.W.2d 18, 21 (Tex. 1977), the supreme court held there was no objectively verifiable evidence of the plaintiff's injury. In that case, a patient brought a claim against his doctors for misdiagnosis of his back condition. The supreme court explained,

Plaintiff, to prove his cause of action, faces the burden of proving both a mistake in professional judgment and that such mistake was negligent. Expert testimony would be required. Physical evidence generally is not available when the primary issue relevant to liability concerns correctness of past judgment. Unlike Gaddis v. Smith, there exists in the present case no physical evidence which in-and-of-itself establishes the negligence of some person. What physical evidence was to the cause of action alleged in Gaddis v. Smith, expert testimony is to the cause of action in the present case. Even the fact of injury is a matter of expert testimony. Robinson, 550 S.W.2d at 21. The supreme court concluded that such expert testimony could not meet the objective verification of wrong and injury necessary for application of the discovery rule. Id.; see S.V., 933 S.W.2d at 7 (discussing Robinson).

While Mary cites case law for the proposition that "[i]t is well-settled law that the discovery rule applies to almost all actions involving fiduciaries," the supreme court has explained that bringing a breach of fiduciary duty claim does not negate the necessity of the plaintiff's injury being shown through objectively verifiable evidence. In S.V., the supreme court explained that while it has "adhered to the requirement of objective verification fairly consistently in [its] discovery rule cases," it has "not always emphasized the requirement because the alleged injury was indisputable." S.V., 933 S.W.2d at 7 (emphasis added). As an example, the S.V. court cited Willis v. Maverick, 760 S.W.2d 642 (Tex. 1988), noting that the "attorney's error [was] apparent in [the] divorce decree." S.V., 933 S.W.2d at 7. The S.V. court also cited International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567 (Tex. 1963), which involved a corporation suing three of its officers and directors for breach of fiduciary duty because the officers and directors sold "their personal stock in competition with the sale of corporation stock." Holloway, 368 S.W.2d at 579; see S.V., 933 S.W.2d at 7. The S.V. court explained that in Holloway, the objectively verifiable evidence of the plaintiff's injury consisted of "stock transfer records and board meeting minutes prov[ing] officers' and directors' misdealing." S.V., 933 S.W.2d at 7.

The S.V. court also cited Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, 385-87 (1945), another fiduciary duty case involving plaintiffs suing trustees to recover alleged secret profits received by former trustees and other defendants, and to recover damages for alleged losses on improper loans of trust funds. The S.V. court explained that the objectively verifiable evidence in Slay consisted of a "paper trail detail[ing] self-dealing." S.V., 933 S.W.2d at 7. Thus, even in the context of a claim for breach of fiduciary duty, for the discovery rule to apply, there must be objectively verifiable evidence of the alleged injury.

NO OBJECTIVELY VERIFIABLE EVIDENCE 

The evidence in this case consists of deposition testimony, which is not objectively verifiable evidence, and copies of the actual deeds showing a transfer of the mineral estate from Mary to Tommy and Harry, respectively. While the deeds are evidence that Mary's mineral interests passed to her sons, they are not evidence that the mineral interests were wrongfully transferred to her sons.

Mary urges that this case is like Gaddis and the mere fact that her mineral interests were transferred shows she was injured; that is, she argues that no one would have chosen to transfer the mineral estate below market value. However, this case involved a transfer of land between a mother and her sons. Mary herself testified that she wanted to transfer her property to her sons at a price lower than market value because they were her sons and they were helping her. Put in that context, we cannot say that the same conclusion as that in Gaddis would apply to these facts.

Thus, we cannot conclude that the mere transfer of mineral interests necessarily equates to Mary having suffered from a wrongful transfer of her property.

Further, Mary agrees that at the time of the transfer of the property, there were no discussions about the mineral interests because she never thought about the mineral interests. In his deposition, Tommy agreed that there were no discussions relating to the mineral interests. Tommy testified the mineral interests never occurred to him either. Thus, Tommy and Harry met their summary judgment burden of showing there is no objectively verifiable evidence of Mary's injury, and the trial court did not err in determining that the discovery rule did not apply to this case.[2]

CONCLUSION

Because the discovery rule does not apply to this case, we affirm the trial court's judgment.

[1] It is undisputed that in the absence of the discovery rule, the statute of limitations bars Mary's breach of fiduciary duty claims against Tommy and Harry.

[2] Because we conclude that there is no objectively verifiable evidence of Mary's injury, we need not reach Mary's other issues of whether the nature of her injury was inherently undiscoverable and whether Mary knew or should have known of her claims more than four years before she filed suit.

SOURCE: SAN ANTONIO COURT OF APPEALS - No. 04-14-00110-CV - 2/18/2015
Opinion by Justice Karen Angelini

CASE DESCRIPTION; Discovery rule did not extend limitation period under the facts of this case decided by the Fourth Court of Appeals in February 2015; summary judgment was proper because lawsuit was brought more than four years after real-estate transaction that allegedly involved a breach of fiduciary duty.


Friday, March 6, 2015

Accrual of Indemnity Claim


WHEN DOES CLAIM FOR INDEMNIFICATION ACCRUE? 

Whether the cause of action accrues at the time a judgment is rendered or at the time the judgment is paid depends on the language of the indemnity clause. See Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 207 (Tex. 1999) ("To determine the correct accrual date of an indemnity claim we look to the contract's indemnity provision."). "There are two types of indemnity agreements, those that indemnify against liabilities and those that indemnify against damages." Id. (citations omitted). Broad language that "holds the indemnitee `harmless' against `all claims' and `liabilities' evidences an agreement to indemnify against liability." Id. "Damages indemnity agreements, on the other hand, are not as broad, and the indemnitee's right to sue does not accrue `until the indemnitee has suffered damage or injury by being compelled to pay the judgment or debt.'" Smith Int'l, Inc. v. Egle Grp., LLC, 490 F.3d 380, 389 (5th Cir. 2007) (quoting Tubb v. Bartlett, 862 S.W.2d 740, 750 (Tex. App. 1993, writ denied) (emphasis omitted)).

SOURCE: TIB v. CANYON COMMUNITY BANK, U.S. Dist. Court, ND Texas 2014


Thursday, March 5, 2015

Chapter 38 attorney's fees for work in trial court and on appeal - How to get them, or rather (not) lose them

2019-05-21 UPDATE: See 2019 Texas Supreme Court opinion in Roormoos adopting the Lodestar framework for attorney fee valuation in the fee-shifting context in Texas state courts. Rohrmoos Venture v. UTSW DVA Healthcare, LLP, No. 16-0006 (Tex. Apr. 26, 2019). Also see Barnett v. Schiro, No. 18-0278 (Tex. Apr. 26, 2019), the per curiam companion case to Rohrmoos, in which the fee award was based on Chapter 38. 

Commentary on Rohrmoos Venture attorney fee precedent: Texas Supreme Court Tells Bar and Bench to Follow the Lodestar: Available at SSRN: https://ssrn.com/abstract=3402040 or http://dx.doi.org/10.2139/ssrn.3402040; Commentary on Hill v. Shamoun & Norman: Recovery of Attorney's Fees in the Absence of a Contract in Texas: Amicus Curiae Brief on Behalf of the Public in Hill v. Shamoun & Norman, LLP544 SW3d 724 (Tex. 2018) (January 23, 2018). 
Available at SSRN: https://ssrn.com/abstract=3152327 

An award of attorney's fees in a breach-of-contract action may be mandatory in theory, but that does not mean that entitlement to them under chapter 38 of the CPRC cannot be waived, or that the proof requirements are automatically satisfied. Among other criteria (such as prior presentment), the amount of the fees sought must be shown to be both necessary and reasonable. And that requires competent evidence. Appellate attorneys fees are no exception.  

STATUTORY BASIS FOR FEE AWARD 

Texas Civil Practice and Remedies Code chapter 38, which provides: "A person may recover reasonable attorney's fees from an individual or corporation . . . if the claim is for . . . an oral or written contract." Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8) (Vernon 2008). A suit on a check is a suit on a written contract. See 1/2 Price Checks Cashed v. United Auto. Ins. Co., 344 S.W.3d 378, 386, 388 (Tex. 2011).

ELEMENTS OF PROOF 

An award of attorney's fees under section 38.001 must be supported by evidence that the fees were both reasonable and necessary. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10 (Tex. 1991), modified on other grounds by Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006); Crounse v. State Farm Mut. Auto. Ins. Co., 336 S.W.3d 717, 720 (Tex. App.-Houston [1st Dist.] 2010, pet. denied).

The reasonableness of an award of attorney's fees is generally a question of fact. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). "If attorney's fees are proper under section 38.001(8), the trial court has no discretion to deny them." Smith v. Patrick W.Y. Tam Trust, 296 S.W.3d 545, 547 (Tex. 2009).

SOME NON-TRIVIAL CAVEATS  

However, even when attorney's fees are otherwise mandated, denial is appropriate "if the evidence: (1) failed to prove (a) that any attorney's services were provided; or (b) the value of the services provided; or (2) affirmatively showed that no attorney's services were needed or that any services provided were of no value." Cale's Clean Scene Carwash, Inc. v. Hubbard, 76 S.W.3d 784, 787 (Tex. App.-Houston [14th Dist.] 2002, no pet.); see also Midland W. Bldg. L.L.C. v. First Serv. Air Conditioning Contractors, Inc., 300 S.W.3d 738, 739 (Tex. 2009). "General statements of reasonableness are insufficient to support an award of attorney's fees." Dilston House Condo. Ass'n v. White, 230 S.W.3d 714, 718 (Tex. App.-Houston [14th Dist.] 2007, no pet.).

SOURCE: STATEWIDE HYDRAULICS, INC. v. EZ MANAGEMENT GP, LLC,
No. 14-13-01049-CV (Tex.App.- Houston [14th Dist] Jan 13, 2015)




THE EVIDENCE DID NOT PASS MUSTER WITH RESPECT TO APPELLATE ATTORNEYS FEES IN THIS CASE 

Statewide and Berrospe argue that the trial court's award of appellate attorney's fees is unsupported by any evidence in the record. They assert that EZ Management did not request appellate attorney's fees and did not present evidence regarding its reasonable attorney's fees for proceedings in the court of appeals or the Texas Supreme Court.

EZ Management does not contest these assertions. Instead, it argues that the trial court's decision is supported by the testimony of Statewide's and Berrospe's counsel, who requested $25,000 in attorney's fees if the case is appealed to the court of appeals and $25,000 if the case is appealed to the Texas Supreme Court.[6]

Statewide and Berrospe's counsel testified: "I am familiar with the reasonable and necessariness [sic] of [Statewide's and Berrospe's appellate attorney's fees] in reference to the Arthur Andersen elements."[7]

Counsel, however, did not apply the elements to the facts of this case. Counsel also stated that he had never done an appeal and that he referred appellate work to a colleague. The record contains no other evidence regarding the parties' appellate attorney's fees.

We determine that the evidence is legally insufficient to support the trial court's award of appellate attorney's fees to EZ Management. Statewide's and Berrospe's counsel did not testify regarding specific Arthur Andersen elements. If he had, he could not have testified based on personal knowledge.

Statewide's and Berrospe's general statements are insufficient to support an award of appellate attorney's fees. See Dilston House, 230 S.W.3d at 718 (affirming the trial court's denial of attorney's fees to the prevailing party where the prevailing party had not presented evidence of its reasonable attorney's fees); Cale's Clean Scene Carwash, 76 S.W.3d at 787 (denial of attorney's fees is appropriate if the evidence fails to prove the value of the services provided).

Moreover, the testimony of Statewide's and Berrospe's counsel does not establish EZ Management's appellate attorney's fees. See Dilston House, 230 S.W.3d at 718. In Dilston House, we rejected the argument that a trial court must assume reasonable fees for one litigant are the same as those for another where, as here, no evidence supports that assumption. See id. (testifying counsel did not know whether opposing counsel had spent the same amount of energy, time, and money on the case).[8]

We conclude that the testimony of Statewide's and Berropse's counsel provides, at most, no more than a scintilla of evidence supporting the trial court's award of appellate attorney's fees; therefore, the evidence is legally insufficient to support the award. See City of Keller, 168 S.W.3d at 822. We sustain Statewide's and Berrospe's third issue. We reverse the trial court's award of appellate attorney's fees and render judgment that EZ Management take nothing in appellate attorney's fees.

SOURCE: HOUSTON COURT OF APPEALS - 14 DISTRICT - No. 14-13-01049-CV - 1/13/2015.
Court of Appeals of Texas, Fourteenth District, Houston.
Memorandum Opinion filed January 13, 2015.

The footnotes also contain useful caselaw cites and snippets, including an enumeration of the Arthur Andersen factors: 

[6] EZ Management did not ask the trial court to take judicial notice of the usual and customary attorney's fees or the contents of the case file. It does not argue on appeal that we should presume the trial court took judicial notice. See Tex. Civ. Prac. & Rem. Code Ann. § 38.004 (Vernon 2008); Arellano v. Don McGill Toyota of Katy, Inc., No. 14-09-00961-CV, 2011 WL 345869, at *3 (Tex. App.-Houston [14th Dist.] Feb. 3, 2011, no pet.) (mem. op.) ("Under section 38.004 of the Texas Civil Practice and Remedies Code, entitled `Judicial Notice,' in a bench trial, the trial court, without receiving evidence, can take judicial notice of the usual and customary attorney's fees and the contents of the case file.").

[7] The Texas Supreme Court has identified non-exclusive factors the trial court should consider in evaluating the reasonableness of attorney's fees. See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997).

These factors include (1) the time and labor required, novelty and difficulty of the questions involved, and the skill required to properly perform the legal service; (2) the likelihood that the acceptance of employment precluded other employment by the lawyer; (3) the fee customarily charged in the locality for similar services; (4) the amount involved and the results obtained; (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 performing the services; and (8) whether the fee is fixed or contingent. Id.

[8] In contrast, in Keith v. Keith, 221 S.W.3d 156 (Tex. App.-Houston [1st Dist.] 2006, no pet.), cited by EZ Management, the court assumed that testimony regarding the reasonableness of appellate attorney's fees applied to both parties where the record showed that both parties' attorneys estimated approximately the same amount of time would be spent on appeal and the attorney to whom the assumption applied charged a higher rate than the attorney who testified regarding his appellate fees. Id. at 170 n.10.

TEXAS SUPREME COURT CASE ON POINT 

 See Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998) (noting that statutes providing that a party "may recover" attorney's fees are not discretionary); TEX. CIV. PRAC. & REM.CODE ANN. § 38.001(8) (Vernon 1997) (stating that a person "may recover" reasonable attorney's fees, in addition to the amount of a valid claim, if the claim is for an oral or written contract). Therefore, a jury (or judge, at a bench trial) does not have discretion to simply deny an award of attorney's fees if any were properly proven.

HOUSTON CASES ON ATTORNEY FEE PROOF 

 Cf. Dilston House Condo. Ass'n v. White, 230 S.W.3d 714, 718 (Tex.App.-Houston [14th Dist.] 2007, no pet.) ("Even when an award of attorney's fees is mandatory under an applicable statute, the requesting party is still required to offer evidence to support an award."); Manon v. Tejas Toyota, Inc., 162 S.W.3d 743, 751-52 (Tex.App.-Houston [14th Dist.] 2005, no pet.) (even though fees are mandatory under the DTPA and Chapter 38 of the Civil Practice and Remedies Code, plaintiffs could not recover fees because they failed to introduce evidence of fees at trial).

EXCERPT FROM 2014 DALLAS CASE FINDING ATTORNEY FEE PROOF INSUFFICIENT - NO TESTIMONY ON HOURLY RATE OR HOURS SPENT IN WORK ON CASE (KNOWN AS "LOADSTAR" CALCULATION IN FEDERAL COURT)

Attorney's Fees and Interest

ViewPoint requested an award of its reasonable and necessary attorney's fees under chapter 38 of the civil practice and remedies code. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 38.001-.006; 1/2 Price Checks Cashed v. United Auto. Ins. Co., 344 S.W.3d 378, 392 (Tex.2011) (claim on check is a contract claim under TEX. CIV. PRAC. & REM.CODE ANN. § 38.001(8)).

The affidavit of ViewPoint's attorney presents the opinion that a lump sum amount is a reasonable and necessary fee for ViewPoint's claims against Allied. The affidavit describes the attorney's experience, recites the factors described in Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex.1997), and states the attorney considered those factors. The affidavit gives a brief description of the kinds of work done, then the opinion that $89,000 is a reasonable and customary fee through the filing of the motion for summary judgment, and additional amounts for fees in case of appeal.

However, the affidavit does not state the hourly rates of the attorneys performing the services or the number of hours worked by those attorneys. Allied did not challenge the affidavit or present evidence contradicting the amount of attorney's fees stated in the affidavit.

It is not necessary that the record include evidence on each of the Arthur Andersen factors. See Brockie v. Webb, 244 S.W.3d 905, 909-10 (Tex.App.-Dallas 2008, pet. denied). While documentary evidence is not a prerequisite to an award of attorney's fees, the claimant must present evidence to support a finding that the amount of the fee is reasonable. See In re A.B.P., 291 S.W.3d 91, 99 (Tex.App.-Dallas 2009, no pet.) (documentary evidence not a prerequisite to award of attorney's fees).

Generally, the nature and extent of the attorney's services are expressed by the number of hours worked and the hourly rate. Brockie, 244 S.W.3d at 909. However, there is no rigid requirement that both facts be introduced into evidence to support a finding attorney's fees are necessary and reasonable. Id; Hays & Martin, L.L.P. v. Ubinas-Brache, M.D., 192 S.W.3d 631, 636 (Tex.App.-Dallas 2006, pet. denied). In Hays & Martin, this Court affirmed an award of attorney's fees where the evidence did not include evidence of the number of hours spent working on the case. Hays & Martin L.L.P., 192 S.W.3d at 637. But the attorney in that case testified to the hourly rates of the attorneys working on the case and the complexity of the case. Id. Where a court has the total fee and either the hourly rates or the time necessary for the legal tasks, it can easily calculate the missing term in determining the reasonableness of the fee. See Hagedorn v. Tisdale, 73 S.W.3d 341, 353-54 (Tex.App.-Amarillo 2002, no pet.) (while court did not have total number of hours spent on case by each lawyer, it had means to determine approximate number of hours spent based on testimony as to the total fees and hourly rates of each person who worked on case).

The affidavit of a party's attorney regarding reasonable attorney's fees is expert testimony that will support an award of attorney's fees in a summary judgment proceeding. Ellis v. Renaissance on Turtle Creek Condo. Ass'n, Inc., 426 S.W.3d 843, 857 (Tex.App.-Dallas 2014, pet. filed). And testimony from an interested witness that "is not contradicted by any other witness, or attendant circumstances, and the same is clear, direct and positive, and free from contradiction, inaccuracies, and circumstances tending to cast suspicion thereon, it is taken as true, as a matter of law." Smith v. Patrick W.Y. Tam Trust, 296 S.W.3d 545, 547 (Tex.2009) (quoting Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex.1990) (per curiam)). This is especially true where the opposing party had the means and opportunity to disprove the testimony but failed to do so. Id.; see also Garcia v. Gomez, 319 S.W.3d 638, 641 (Tex.2010) ("The attorney's testimony is not objectionable as merely conclusory because the opposing party, or that party's attorney, likewise has some knowledge of the time and effort involved and if the matter is truly in dispute, may effectively question the attorney regarding the reasonableness of his fee.").

Here, while the affidavit gives a general description of the services performed, such as conferring with the client, drafting pleadings, preparing and responding to discovery, researching the applicable law, and preparing and responding to motions for summary judgment, it does not state the number of hours expended or the hourly rates charged for the services.

Thus, we have only the total amount of the fee and no way to determine whether the time spent on specific tasks was reasonable or the hourly rates charged were reasonable. Nor does the affidavit indicate the fee was determined on some alternative billing arrangement, such as a flat-fee or percentage of recovery, or whether that arrangement would be reasonable in this type of case.

In Brockie, this Court held the evidence was factually insufficient to support the amount of reasonable and necessary attorney's fees incurred in defending a counterclaim because there was no evidence of the number of hours expended, the hourly rates charged, or the specific services performed. Brockie, 244 S.W.3d at 911. The only evidence regarding the fees for defending the counterclaim was a lump sum amount on another attorney's bill to the client and that attorney's testimony that the fees were reasonable and necessary. Id.

Furthermore, uncontradicted testimony does not mandate an award of the amount claimed in all cases. See Smith, 296 S.W.3d at 547-48; Ragsdale, 801 S.W.2d at 882. "[T]he fee, though supported by uncontradicted testimony, was unreasonable in light of the amount involved and the results obtained, and in the absence of evidence that such fees were warranted due circumstances unique to this case." Smith, 296 S.W.3d at 548.

The affidavit in this case, even though not controverted, is not clear about the method used to determine the amount of attorney's fees. The supreme court has cautioned that in many cases generalities about an attorney's services may not be sufficient to support a finding of the amount of reasonable and necessary attorney's fees. See Long v. Griffin, ___ S.W.3d ___, ___, No. 11-1021, 2014 WL 1643271, at *2-3 (Tex. Apr. 25, 2014) (per curiam); City of Laredo v. Montano, 414 S.W.3d 731, 736-37 (Tex.2013) (per curiam); El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 763 (Tex.2012); see also In re Marriage of Pyrtle, 433 S.W.3d 152, 167 (Tex.App.-Dallas 2014, no pet. h.) (concluding evidence was insufficient to support attorney's fees where record did "not show the reasonableness of the hourly rate stated by [client], the `performance of specific tasks,' the `time required for those tasks,' or the `person who performed the work'") (quoting El Apple, 370 S.W.3d at 765, 763).

We conclude the summary judgment evidence fails to establish as a matter of law the amount of reasonable and necessary attorney's fees ViewPoint is entitled to recover. Accordingly, we cannot render judgment for attorney's fees and must remand the claim for attorney's fees to the trial court. See Long, ___ S.W.3d at ___, No. 11-1021, 2014 WL 1643271, at *3; Montano, 414 S.W.3d at 736-37; El Apple, 370 S.W.3d at 764.

ViewPoint requested an award of prejudgment interest in its cross-motion for summary judgment. However, the record does not contain the information necessary to determine the amount of prejudgment interest due on the check claim. See Long v. Castle Texas Prod. Ltd. P'ship, 426 S.W.3d 73, 77 (Tex.2014); Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 531 (Tex.1998) (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).

ViewPoint failed to establish the amounts of reasonable and necessary attorney's fees or prejudgment interest to which it is entitled. Thus, it is not entitled to summary judgment for these amounts.

SOURCE: DALLAS COURT OF APPEALS - 05-12-01370-CV - 8/7/2014
CASE STYLE: VIEWPOINT BANK v. ALLIED PROPERTY AND CASUALTY INSURANCE COMPANY,
CITE: 439 S.W.3d 626 (2014)

Tuesday, March 3, 2015

Contract Construction as explained by the Texas Supreme Court (2015)

 
CONTRACT CONSTRUCTION 
 
"In construing contracts, we must ascertain and give effect to the parties' intentions as expressed in the document." Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000). We attempt to harmonize all contractual provisions by "analyzing the provisions with reference to the whole agreement." Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (per curiam). We "construe contracts from a utilitarian standpoint bearing in mind the particular business activity sought to be served," and, when possible and proper, we avoid a "construction which is unreasonable, inequitable, and oppressive." Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987). If, through the use of relevant rules of construction, the contract can be given a definite meaning, we construe it as a matter of law. Frost Nat'l Bank, 165 S.W.3d at 312.

HOOKS v. SAMSON LONE STAR, LIMITED PARTNERSHIP, No. 12-0920 (Tex. January 30, 2015)

SOURCE: TEXAS SUPREME COURT HOOKS v. SAMSON LONE STAR, LIMITED PARTNERSHIP, No. 12-0920 (Tex. January 30, 2015)