Summary
concluding appellants' fee-related stipulation in trial court did not waive complaint that trial court erred in awarding full amount of opponent's unsegregated attorneys' fees
Summary of this case from Eldorado Homeowners' Ass'n v. CloughOpinion
NO. 14-17-00282-CV
04-17-2018
KATHERINE MILLIKEN & CHARLES MULHALL, Appellants v. LUCY TUROFF, Appellee
On Appeal from the 270th District Court Harris County, Texas
Trial Court Cause No. 2016-16699
MEMORANDUM OPINION
In this appeal from the judgment rendered after a jury trial on multiple causes of action and a stipulation as to the amount of each side's reasonable and necessary attorney's fees, defendants Katherine Milliken and Charles Mulhall ask us to reverse the trial court's award of attorney's fees to plaintiff Lucy Turoff because Turoff failed to segregate fees incurred for legal work on claims for which fee recovery is authorized from fees incurred for services on claims for which fees are unavailable. We agree, and we reverse the fee-award portion of the judgment and remand for a new trial solely on that issue.
I. BACKGROUND
After a boundary dispute arose between Turoff and her neighbors Milliken and Mulhall, Turoff brought an action against them for trespass, tortious interference with an existing or prospective contract, conspiracy to commit such trespass or tortious interference, negligence, gross negligence, intentional infliction of emotional distress, trespass to try title, and declaratory judgment. She also sought a temporary restraining order and temporary and permanent injunctions. Milliken and Mulhall counterclaimed for declaratory relief. Turoff moved unsuccessfully for summary judgment on her declaratory-judgment and trespass actions, and Milliken and Mulhall moved, at least partially unsuccessfully, for summary judgment on Turoff's claims of trespass, tortious interference, negligence, gross negligence, intentional infliction of emotional distress and her request for declaratory relief.
The record does not contain an order on Milliken and Mulhall's motion, and at least some of these claims survived to be the subject of a motion for directed verdict.
Although both sides requested attorney's fees under the Uniform Declaratory Judgments Act, Turoff's attorney Michael West testified on direct examination only to the amount of fees incurred for trying her case as a whole and his opinion of the reasonable and necessary attorney's fees that would be incurred to handle various stages of an appeal. On cross-examination, West testified that he had not segregated fees incurred for particular causes of action. In contrast, Milliken and Mulhall's counsel Lennon Wright testified regarding the attorney's fees that his clients incurred, or would incur, in the trial and appeal only of the requests for declaratory relief.
Before the case was submitted to the jury, West and Wright each stipulated that the attorney's fees to which the other had testified were reasonable and necessary, but did not stipulate that either side was entitled to recover attorney's fees. The jury was asked only whether Turoff's property survey properly showed her property's boundary lines, and if not, how far, and in which direction, the westerly boundary line of the property should be moved. The jury unanimously found that Turoff's survey showed the correct boundaries.
Turoff moved for entry of judgment to include attorney's fees for all of the services performed by Turoff's counsel, and Milliken and Mulhall opposed the motion on the ground that Turoff had failed to segregate recoverable from nonrecoverable attorney's fees. The trial court rendered judgment awarding Turoff the full amount of fees she sought. Milliken and Mulhall appeal only the fee-award portion of the judgment.
II. GOVERNING LAW
Turoff sought attorney's fees pursuant to Texas Civil Practice and Remedies Code section 37.009. That section provides that in a proceeding under the Uniform Declaratory Judgments Act ("the UDJA"), "the court may award costs and reasonable and necessary attorney's fees as are equitable and just." TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (West 2015). Whether attorney's fees are reasonable and necessary are questions of fact. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). The equity and justice of a fee award under the UDJA "are questions of law committed to a trial court's broad discretion in light of all the circumstances." Anglo-Dutch Petroleum Int'l, Inc. v. Greenberg Peden, P.C., 522 S.W.3d 471, 497 (Tex. App.—Houston [14th Dist.] 2016, pets. denied) (citing Ridge Oil Co. v. Guinn Invs., Inc., 148 S.W.3d 143, 161 (Tex. 2004) and Bocquet, 972 S.W.2d at 21). Because a fee award under the UDJA is discretionary, we review the award for abuse of discretion. See Bocquet, 972 S.W.2d at 21. A trial court abuses its discretion if its ruling is arbitrary, unreasonable, or without regard to guiding legal principles. See id. A trial court abuses its discretion in awarding fees under the UDJA if there is insufficient evidence that the fees were reasonable and necessary or if the award is inequitable or unjust. See id.
The governing law regarding segregation of attorney's fees is set forth in Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006). Absent an authorizing contract or statute, a party is responsible for its own attorney's fees. See id. at 310-11. Here, the authorizing statute on which Turoff relied authorizes the recovery of attorney's fees only in connection with the parties' respective requests for declaratory relief.
Under Chapa, if any attorney's fees relate solely to a claim for which such fees are unrecoverable, the party seeking a fee award must segregate its recoverable from its unrecoverable fees. See id. at 313. There is no exception, even if merely nominal fees were incurred for performing a discrete legal service that advanced only a claim for which fees are unrecoverable. See id. Moreover, the burden is on the party seeking to recover attorney's fees to show that segregation is not required. Clearview Props, L.P. v. Prop. Tex. SC One Corp., 287 S.W.3d 132, 144 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (citing CA Partners v. Spears, 274 S.W.3d 51, 81 (Tex. App.—Houston [14th Dist.] 2008, no pet.)). In sum, a party seeking an award of attorney's fees must segregate recoverable from nonrecoverable fees unless it proves that no amount of the fees it seeks were for a discrete legal service that advanced only a claim or claims for which fees are nonrecoverable.
In a case that involves a cause of action for which attorney's fees are non-recoverable, this can be an extraordinarily difficult burden to meet. For example, if the plaintiff files a pleading in which one paragraph alleges a tort cause of action for which fees are not recoverable, then the fees for the time spent in drafting that paragraph are non-recoverable, and the plaintiff must segregate the fees incurred for drafting that portion of the pleading from the fees incurred for drafting the portions of the pleading that advanced claims for which fees are recoverable. See Chapa, 212 S.W.3d at 314.
III. THE SEGREGATION COMPLAINT WAS NOT WAIVED
Turoff contends that Milliken and Mulhall's challenge to the award of attorney's fees must fail because they stipulated in the trial court to the amount of Turoff's reasonable and necessary attorney's fees. In effect, Turoff maintains that the stipulation waived Milliken and Mulhall's complaint about Turoff's failure to segregate. We disagree.
The record shows that Milliken and Mulhall stipulated only to the amount of Turoff's reasonable and necessary fees for the case. Before the charge conference, Turoff's counsel West reminded the court that he had testified that Turoff's reasonable and necessary attorney's fees through trial were $26,700, plus $15,000 if Milliken and Mulhall appealed to an intermediate court of appeals, plus $10,000 if a petition for review to the Texas Supreme Court was filed, plus $3,000 if the case was briefed to the Texas Supreme Court, plus $5,000 if the case proceeded to oral argument. Milliken and Mulhall's counsel Wright then stated, "[W]e stipulate that those are the numbers; but we don't stipulate that you're entitled to recover." West asked, "[S]o, you stipulate that they're reasonable numbers, you just—and necessary but you're not stipulating that the Court should grant those?" Wright answered, "Correct." Wright then summarized the testimony about Milliken and Mulhall's reasonable and necessary attorney's fees. Finally, the trial court asked, "And just to clarify, gentlemen, the stipulation is not that anybody is entitled to recover attorney's fees, but if the Court finds that anybody is, those are the numbers; is that correct?" Both attorneys agreed that this was their stipulation. Because the stipulation disposed of the question of the amount of each side's reasonable and necessary attorney's fees, no question regarding attorney's fees was submitted to the jury.
But, a stipulation to the amount of reasonable and necessary attorney's fees for Turoff's case did not waive Milliken and Mulhall's complaints about factors other than reasonableness and necessity that must be considered in awarding fees under the UDJA. As the Texas Supreme Court explained in Wells Fargo Bank, N.A. v. Murphy, these additional factors include justice, equity, and segregation:
An award of attorney's fees under the UDJA is subject to modification based upon certain limiting principles. Under section 37.009, a trial court may award reasonable and necessary attorney's fees only when it would be equitable and just to do so. TEX. CIV. PRAC. & REM. CODE § 37.009; see Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). These statutory limitations are complimented by other limiting principles, such as segregation of fees. See, e.g., Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313-14 (Tex. 2006) (requiring litigants to segregate attorney's fees between claims that allow for the recovery of attorney's fees and claims that do not).Murphy, 458 S.W.3d 912, 919 (Tex. 2015). The stipulation therefore did not waive Milliken and Mulhall's complaint that the trial court erred in awarding the full amount of Turoff's unsegregated attorney's fees.
Moreover, Milliken and Mulhall brought this problem to the trial court's attention both before and after the stipulation. Before entering into the stipulation, Milliken and Mulhall used their cross-examination of Turoff's counsel to highlight the failure to segregate attorney's fees. After entering into the stipulation, Milliken and Mulhall complained in their response to Turoff's motion for judgment that Turoff had failed to segregate attorney's fees.
We accordingly conclude that, if Turoff was required to segregate attorney's fees, then the trial court reversibly erred in awarding the full amount of unsegregated attorney's fees. We turn now to the merits of that question.
IV. SEGREGATION OF ATTORNEY'S FEES WAS REQUIRED
Out of all of Turoff's claims and requests for relief—including claims of trespass, tortious interference with an existing or prospective contract, conspiracy to commit trespass or tortious interference, negligence, gross negligence, intentional infliction of emotional distress, trespass to try title, and requests for a temporary restraining order, a temporary injunction, a permanent injunction, and declaratory relief—attorney's fees were recoverable only for the claims under the UDJA.
The record conclusively establishes that discrete legal services were rendered that advanced only causes of action for which no attorney's fees are recoverable. For example, the majority of Turoff's Original Petition and Application for Declaratory Relief and Temporary Restraining Order consists of factual and legal allegations that bear only on claims for which no attorney's fees are available. The same is true of substantial sections of her first amended petition, her supplemental first amended petition, her original and amended motions for summary judgment, and her response to Milliken and Mulhall's motion for summary judgment. Turoff's proposed temporary restraining order and her supplemental original petition are concerned exclusively with claims and requests for relief for which she cannot recover attorney's fees.
Turoff accordingly was required, but failed, to segregate her attorney's fees. The issue of attorney's fees therefore must be remanded for a new trial. See Kinsel v. Lindsey, 526 S.W.3d 411, 428 (Tex. 2017); Chapa, 212 S.W.3d at 314; Int'l Security Life Ins. Co. v. Finck, 496 S.W.2d 544, 546-47 (Tex. 1973).
Although Turoff acknowledges that she can recover attorney's fees only under the UDJA, she nevertheless maintains that she was not required to segregate fees. But, her appellate brief as well as her attorney's trial testimony shows that Turoff arrived at this conclusion by relying on an outdated test. In her appellate response brief, Turoff quotes the following language from Chapa in support of her position that she was not required to segregate fees:
[A] recognized exception to this duty to segregate arises when the attorney's fees rendered are in connection with claims arising out of the same transaction and essentially the same facts ... Therefore, when the causes of action involved in the suit are dependent upon the same set of facts or circumstances and thus are 'intertwined to the point of being inseparable,' the party suing for attorney's fees may recover the entire amount covering all claims.Chapa, 212 S.W.3d at 311.
Turoff failed to note, however, that Chapa was quoting Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 11 (Tex. 1991)—a decision that Chapa then went on to abrogate. The Texas Supreme Court explained, "To the extent Sterling suggested that a common set of underlying facts necessarily made all claims arising therefrom 'inseparable' and all legal fees recoverable, it went too far." Chapa, 212 S.W.3d at 313.
The current rule is stated later in Chapa:
[I]f any attorney's fees relate solely to a claim for which such fees are unrecoverable, a claimant must segregate recoverable from unrecoverable fees. Intertwined facts do not make tort fees recoverable; it is only when discrete legal services advance both a recoverable and unrecoverable claim that they are so intertwined that they need not be segregated.Id. at 313-14.
Just as Turoff's brief shows that she relied on the wrong segregation test on appeal, the record of Michael West's trial testimony shows that Turoff relied on the outdated Sterling test at trial rather than the current Chapa test. When West was cross-examined on the subject of attorney's fees, he stated that he had not segregated fees among the various causes of action alleged because "they're all based on the same set of facts, the same issues." This may have been sufficient under Sterling, but that has not been the proper standard since Chapa was decided in 2006.
West further testified, "[E]very time that I spent . . . all applies to declaratory judgment as much as it applied to any other action because my actions are the same, other than just making the claims protecting my client's interest; but all the work I did is the same." Citing Garcia v. Gomez, 319 S.W.3d 638, 642 (Tex. 2010), Turoff argues on appeal that "[a]n attorney's testimony is taken as true as a matter of law if it is (1) clear, positive, and direct, (2) free of inaccuracies and suspicio[u]s circumstances, and (3) uncontroverted." This is not quite correct. Garcia states, "[W]here the testimony of an interested witness 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.'" Id. (quoting Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990)) (emphasis added). West's testimony is contradicted by the documents he filed in this case, which conclusively establish that not all of his time was applicable to the claims under the UDJA. We already have mentioned the many causes of action raised in the pleadings that West filed on Turoff's behalf, and with the exception of claims under the UDJA, attorney's fees are not available for any of them. In addition, Turoff alleged facts that did not advance a claim for which fees are recoverable. To cite just one example, Turoff at one time pleaded a claim of intentional infliction of emotional distress, alleging that Milliken and Mulhall harassed her "by screaming extreme and outrageous false allegations" and by "go[ing] out of their way to stare, watch, videotape, and photograph Ms. Turoff and her family." Because the time West spent drafting these paragraphs of Turoff's pleading or developing these facts did not advance Turoff's claim for declaratory judgment on the boundary dispute or her defense against Milliken and Mulhall's competing claim, Turoff cannot recover attorney's fees for that time. See id. at 314 (explaining that Chapa could not recover attorney's fees for the time spent drafting the fraud paragraph of her petition).
The examples given in this opinion are merely that—examples—and do not include all of the legal services for which fees are unrecoverable.
Because Turoff's pleadings assert claims for which attorney's fees are not available, "it cannot be denied that at least some of the attorney's fees are attributable only to claims for which fees are not recoverable." See id. And under Chapa, "if any attorney's fees relate solely to a claim for which such fees are unrecoverable, a claimant must segregate recoverable from unrecoverable fees." Id. at 313 (emphasis added). The record therefore conclusively establishes that Turoff was required to segregate her attorney's fees.
V. CONCLUSION
We reverse the portions of the judgment awarding Turoff trial attorney's fees and conditionally awarding her further attorney's fees in the event that an appeal should be filed or should progress to a particular stage. We leave intact the remainder of the judgment, which has not been challenged on appeal, and we remand the case to the trial court for a new trial solely on the issue of attorney's fees.
/s/ Tracy Christopher
Justice Panel consists of Justices Christopher, Donovan, and Jewell.