wade-p-fitzgerald-and-minot-tully-pratt-iv-and-michael-g-panzarella-as ( 2011 )

OPINION
No. 04-10-00371-CV
Wade P. FITZGERALD and Minot Tully Pratt, IV and Michael G. Panzarella, as Trustee of the
MTPIV Trust and Cinco Family Trust,
Appellants
v.
SCHROEDER VENTURES II, LLC,
Appellee
From the 150th Judicial District Court, Bexar County, Texas
Trial Court No. 2008-CI-05416
Honorable Janet P. Littlejohn, Judge Presiding
Opinion by: Karen Angelini, Justice
Sitting: Catherine Stone, Chief Justice
Karen Angelini, Justice
Marialyn Barnard, Justice
Delivered and Filed: April 6, 2011
REVERSED AND RENDERED
The issue presented in this appeal is whether defendants who successfully defended
claims arising from a real estate transaction should have been awarded attorney’s fees and costs
under the parties’ earnest money contract. The trial court refused to award attorney’s fees and
costs under the contract, relying on the Texas Supreme Court’s decision in Intercontinental
Group P’Ship v. KB Home Lone Star, L.P. 295 S.W.3d 650 (Tex. 2009). We conclude
Intercontinental is not applicable here, and the defendants were entitled to attorney’s fees and
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costs under the plain language of the parties’ contract. We, therefore, reverse and render
judgment awarding attorney’s fees and costs.
BACKGROUND
Schroeder Ventures II, LLC, purchased a tract of land from Minot Tully Pratt, IV, and
Michael G. Panzarella, as Trustee of the MTPIV Trust and Cinco Family Trust. Wade P.
Fitzgerald, a real estate broker, represented Pratt in the sales transaction. The attorney’s fees
provision in the parties’ earnest money contract provided:
16. ATTORNEY’S FEES: If Buyer, Seller, any broker, or any escrow agent is a
prevailing party in any legal proceeding brought under or with relation to this
contract or this transaction, such party is entitled to recover from the non-
prevailing parties all costs of such proceeding and reasonable attorney’s fees. This
Paragraph 16 survives termination of this contract.
(emphasis added). The contract, which was a standard contract promulgated by the Texas
Association of Realtors, did not define the term “prevailing party.” Although not a signatory to
the contract, Schroeder Ventures assumed the buyers’ rights and obligations under the contract
by assignment.
After the sale closed, Schroeder Ventures sued Fitzgerald, Pratt, and Panzarella for fraud,
fraudulent misrepresentation, negligence, gross negligence, and negligent misrepresentation in
the sales transaction. The suit alleged Fitzgerald, Pratt, and Panzarella failed to disclose the
existence of a sinkhole adjacent to the real property. Fitzgerald, Pratt, and Panzarella filed
pleadings seeking to recover attorney’s fees based on the parties’ earnest money contract, but
sought no other affirmative relief.
At trial, the jury found in favor of Fitzgerald, Pratt, and Panzarella—and against
Schroeder Ventures—on all of the liability questions. Specifically, the jury found Fitzgerald,
Pratt, and Panzarella did not commit statutory fraud or fraud against Schroeder Ventures in the
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transaction. The jury also found Fitzgerald, Pratt, and Panzarella did not make a negligent
misrepresentation to Schroeder Ventures in the transaction. Finally, the jury found Fitzgerald,
Pratt, and Panzarella were not negligent in the transaction. In fact, the only party the jury found
to be negligent in the transaction was Schroeder Ventures.
The jury also made findings as to reasonable and necessary attorney’s fees. The jury
found the reasonable and necessary fees for Fitzgerald’s attorneys to be $104,063.00 for trial and
$25,000.00 for a successful appeal to the court of appeals. The jury found the reasonable and
necessary fees for Pratt’s and Panzarella’s attorneys to be $195,688.00 for trial and $25,000.00
for a successful appeal to the court of appeals. The jury also found Pratt and Panzarella incurred
$5,100.00 in costs.
Fitzgerald, Pratt, and Panzarella moved for entry of judgment in accordance with the
jury’s verdict. In response, Schroeder Ventures argued Fitzgerald, Pratt, and Panzarella were not
entitled to attorney’s fees based on the Texas Supreme Court’s analysis of the term “prevailing
party” in Intercontinental. Schroeder also argued the attorney’s fees provision in the contract did
not apply because Schroeder’s claims were not contractual in nature, and the attorney’s fees
provision in the contract covered only contractual claims.
The trial court concluded Intercontinental precluded recovery of attorney’s fees by
Fitzgerald, Pratt, and Panzarella, and refused to render judgment in accordance with the jury’s
findings on attorney’s fees. Instead, the trial court rendered judgment denying Fitzgerald, Pratt,
and Panzarella recovery on their counterclaim for attorney’s fees, and ordered all attorney’s fees
and costs to be paid by the party who incurred them. The trial court rendered a take-nothing
judgment in accordance with the jury’s liability findings.
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Thereafter, Fitzgerald, Pratt, and Panzarella brought this appeal to challenge the trial
court’s denial of attorney’s fees and costs under the contract.
STANDARD OF REVIEW
Generally, a trial court’s award of attorney’s fees is reviewed for an abuse of discretion.
Bocquet v. Herring, 972 S.W.2d 19, 20-21 (Tex. 1998); Ragsdale v. Progressive Voters League,
801 S.W.2d 880, 881 (Tex. 1990). The trial court has discretion to fix the amount of attorney’s
fees, but it does not have discretion to deny attorney’s fees entirely if they are proper. Mercier v.
Sw. Bell Yellow Pages, Inc., 214 S.W.3d 770, 775 (Tex. App.—Corpus Christi 2007, no pet.);
World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 683 (Tex. App.—Fort Worth 1998, pet.
denied).
Texas follows the “American Rule” which prohibits awards of attorney’s fees unless
specifically authorized by statute or by a contract between the parties. MBM Fin. Corp. v. The
Woodlands Operating Co., L.P., 292 S.W.3d 660, 669 (Tex. 2009). An issue concerning the
availability of attorney’s fees under a statute or a contract presents a question of law that
appellate courts review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex 1999);
In re Lesikar, 285 S.W.3d 577, 583 (Tex. App.—Houston [14th Dist.] 2009, orig. proceeding).
Therefore, we apply the de novo standard of review in this case.
DOES INTERCONTINENTAL APPLY?
Fitzgerald, Pratt, and Panzarella argue that Intercontinental did not preclude an award of
attorney’s fees in this case, and that under the plain language of the parties’ earnest money
contract, they were entitled to recover their attorney’s fees from Schroeder Ventures because
they successfully defended against all of its claims. Schroeder Ventures counters that under the
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prevailing party analysis provided in Intercontinental, Fitzgerald, Pratt, and Panzarella were not
prevailing parties, and therefore, the trial court properly refused to award them attorney’s fees.
In Intercontinental, KB Homes sued Intercontinental for breach of contract, and sought
money damages for lost profits. 295 S.W.3d at 652. The jury found in favor of KB Homes on its
breach of contract claim, but awarded no damages. Id. Intercontinental counterclaimed against
KB Homes for breach of contract, but the jury found no breach of contract by KB Homes. Id.
Intercontinental waived any claim for attorney’s fees in defending KB Home’s breach of contract
claim by not submitting the issue to the jury. Id. at 662. Both parties moved for judgment,
claiming attorney’s fees as “prevailing party” under the parties’ contract, which provided that
“the prevailing party . . . shall be entitled to his reasonable attorney’s fees.” Id. at 652-53.
The trial court found KB Homes was the prevailing party and awarded it attorney’s fees.
Id. The appellate court affirmed the trial court’s judgment, but the Texas Supreme Court
reversed. Id. at 653. In its opinion, the Texas Supreme court concluded KB Homes was not
entitled to an award of attorney’s fees under the contract because even though it had obtained a
breach of contract finding in its favor, it had not obtained any damages. Id. at 655-56. Because
KB’s goal in the litigation was recovery damages, the Texas Supreme Court concluded KB
Homes had not prevailed in any meaningful sense. See id. In announcing its holding, the supreme
court stated,
[W]hen a contract mandates attorney’s fees to a “prevailing party,” a term
undefined in the contract, has a party “prevailed” if the jury finds the other side
violated the contract but awards no money damages? We agree with the United
States Supreme Court, which holds that to prevail, a claimant must obtain actual
and meaningful relief, something that materially alters the parties’ legal
relationship. That is, a plaintiff must prove compensable injury and secure an
enforceable judgment in the form of damages or equitable relief. The plaintiff
here secured neither. We thus reach the same conclusion as in another breach of
contract case decided today: “a client must gain something before attorney’s fees
can be awarded.”
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Id. at 652 (emphasis added). Later, the court stated, “In short, a plaintiff ‘prevails’ when actual
relief on the merits of his claim materially alters the legal relationship between the parties by
modifying the defendant’s behavior in a way that directly benefits the plaintiff.” Id. at 654
(emphasis added).
Turning to the case before us, Schroeder Venture argues Intercontinental precluded the
award of attorney’s fees to the defendants in this case. Schroeder Ventures maintains that in
order to be a prevailing party, a party must meet two requirements. First, the party must prevail
upon the court for some affirmative relief and must obtain that relief. Second, the relationship
between the parties must be materially altered by the judgment. Schroeder Ventures argues the
trial court properly refused to award Fitzgerald, Pratt, and Panzarella attorney’s fees because
these requirements were not met in this case.
We disagree with Schroeder Ventures’s reading of Intercontinental, and its argument that
Intercontinental precluded the award of attorney’s fees under the parties’ contract. As shown in
the above-quoted excerpts, the court’s analysis in Intercontinental is framed in terms of what a
“plaintiff” or “claimant” must do to be a prevailing party. Although there are instances in which
the court in Intercontinental uses more general language such as “party,” these references must
be read in the context of the case. 1 The entire discussion in Intercontinental is in the context of a
plaintiff suing for damages and yet obtaining nothing. Thus, Intercontinental illustrates what a
plaintiff must to do be a prevailing party; it does not answer the question of what a defendant
must do to be a prevailing party. Because the analysis in Intercontinental is tailored to what a
1
For example, the court stated, “It seems beyond serious dispute that KB Home achieved no genuine success on its
contract claim. Whether a party prevails turns on whether the party prevails upon the court to award it something,
either monetary or equitable. KB Home got nothing except a jury finding that Intercontinental violated the
contract.” Intercontinental, 295 S.W.3d at 655 (emphasis added).
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plaintiff must do to obtain prevailing party status, it did not provide a reason for denying the
defendants’ request for attorney’s fees in this case.
Moreover, in Intercontinental the court concluded that the issue now before us—whether
the defendant was the prevailing party and entitled to attorney’s fees for successfully defending
against the plaintiff’s claims—was waived. Thus, in Intercontinental the court never reached the
issue presented to us in this case. As the court stated in Intercontinental,
If KB Home “lost” by receiving no damages does that mean Intercontinental
“won” by remitting no damages? We cannot reach this question if it is not
properly presented, and it is not. On the record before us, it is undisputed that
Intercontinental neither preserved the issue nor presented any
evidence…regarding its attorney’s fees for defending KB Home’s breach-of-
contract claim.
295 S.W.3d at 657 (emphasis added).
At least one other Texas intermediate appellate court has concluded the analysis in
Intercontinental was inapplicable to determining whether a defendant who successfully defended
a claim was a prevailing party under the parties’ agreement. Silver Lion, Inc. v. Dolphin Street,
Inc., No. 01-07-00370-CV, 2010 WL 2025749, at *18 (Tex. App.—Houston [1st Dist.] May 20,
2010, pet. denied) (“The court in Intercontinental did not reach the issue of whether the
defendant in that case could instead be the ‘prevailing party,’ holding that the defendant had
waived that issue for appeal.”). Thus, the First Court of Appeals looked to other authority to
decide if the defendant, who was awarded a take-nothing judgment on a breach of contract claim
against him, could be the prevailing party under the parties’ agreement. Id. Relying on other
authority, the First Court of Appeals held the defendant was the prevailing party, and therefore,
was entitled to attorney’s fees under the parties’ agreement for successfully defending the claim
against him. Id.
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For these reasons, we conclude Intercontinental did not apply to the attorney’s fees issue
in the present case, and did not provide a reason for denying Fitzgerald, Pratt, and Panzarella
attorney’s fees under the parties’ contract.
CONTRACT CONSTRUCTION
Having determined that Intercontinental is inapplicable here, we turn to the language of
the parties’ contract to determine if Fitzgerald, Pratt, and Panzarella were entitled to attorney’s
fees. A court’s primary concern when interpreting a contract is to ascertain and give effect to the
intent of the parties as expressed in the contract. Seagull Energy E&P, Inc. v. Eland Energy, Inc.,
207 S.W.3d 342, 345 (Tex. 2006). Contract terms are given their plain, ordinary, and generally
accepted meanings, and contracts are to be construed as a whole in an effort to harmonize and
give effect to all provisions of the contract. Valence Operating Co. v. Dorsett, 164 S.W.3d 656,
662 (Tex. 2005).
Here, the contract states, “If Buyer, Seller, any broker, or any escrow agent is a
prevailing party in any legal proceeding brought under or with relation to this contract or this
transaction, such party is entitled to recover from the non-prevailing parties all costs of such
proceeding and reasonable attorney’s fees.” The contract makes no reference to a party’s status
as a plaintiff or defendant in the litigation. Instead, the attorney’s fee provision applies to any
“buyer,” “seller,” “broker,” or “escrow agent.” Pratt and Panzarella were sellers, and Fitzgerald
was a broker. Thus, on its face, the attorney’s fees provision appears to apply to them, regardless
of their status in the litigation.
When the parties entered into the earnest money contract in October 2005, the term
“prevailing party” was defined by Black’s Law Dictionary as “[a] party in whose favor a
judgment is rendered, regardless of the amount of damages awarded…[a]lso termed successful
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party.” BLACK’S LAW DICTIONARY 1154 (8th ed. 2004) (emphasis in original). According to
Webster’s Dictionary, the word “prevail” means: (1) to gain ascendancy through strength or
superiority: triumph; (2) to be or become effective or effectual; (3) to use persuasion
successfully. WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 932 (9th ed. 1991). We conclude
that under the plain, ordinary, and generally accepted meaning of the parties’ contract, a buyer,
seller, broker, or escrow agent who triumphs or wins in a legal proceeding and has a judgment
rendered in his favor is entitled to recover costs and attorney’s fees from the non-prevailing
party.
In the context of this legal proceeding, Fitzgerald, Pratt, and Panzarella were the
successful parties in the litigation; they indisputably triumphed or won. The jury found no
liability as to all of the claims brought against them, and the trial court accepted the jury’s no-
liability findings and rendered a take-nothing judgment in their favor. On the other hand,
Schroeder Ventures, who obtained no jury findings in its favor and recovered nothing on any of
its claims, neither achieved success in the litigation, nor triumphed in any sense. Under these
circumstances, Fitzgerald, Pratt, and Panzarella were the prevailing parties, and they were
authorized under the contract to recover their fees and costs from the non-prevailing party,
Schroeder Ventures.
NON-CONTRACTUAL NATURE OF THE CLAIMS
Finally, we address Schroeder Ventures’ alternative argument that Fitzgerald, Pratt, and
Panzarella were not entitled to attorney’s fees because the attorney’s fees provision in the
contract only applies to contractual claims. Although Schroeder Ventures have not advanced this
argument on appeal, they did urge it in the trial court. Additionally, Fitzgerald, Pratt, and
Panzarella address this argument on appeal.
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According to its plain language, the attorney’s fees provision in the parties’ contract
applies to “any legal proceeding bought under or with relation to this contract or this
transaction.” (emphasis added). The claims in this case, although tort claims, involve allegations
that Fitzgerald, Pratt, and Panzarella failed to disclose information in the sales transaction which
was the subject of the contract. We, therefore, conclude the attorney’s fees provision applies to
the claims in this case. See Fowler v. Epps, No. 03-08-00055-CV, 2010 WL 521109, at *3 (Tex.
App.—Austin Feb. 10, 2010, pet. granted) (holding sales contract language stating “the
prevailing party in any legal proceeding related to this contract” was broad enough to encompass
tort claims arising from the sales transaction); Robbins v. Capozzi, 100 S.W.3d 18, 27 (Tex.
App.—Tyler 2002, no pet.) (holding lawsuit was “brought under or with respect to the
transaction” when suit was brought to rescind the contract based on an alleged misrepresentation
in the transaction).
CONCLUSION
Under the plain, ordinary, and generally accepted language of the earnest money contract,
Fitzgerald, Pratt, and Panzarella were entitled to recover their attorney’s fees and costs from
Schroeder Ventures because they were prevailing parties in this legal proceeding. Accordingly,
the trial court erred in refusing to award attorney’s fees and costs to Fitzgerald, Pratt, and
Panzarella. We reverse the trial court’s judgment and render judgment awarding attorney’s fees
and costs.
Karen Angelini, Justice
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