Case Updates for March, April, and May 2014

By John BarnesBaker, Donelson, Bearman, Caldwell & Berkowitz, PC, and Andrew Nelson, Wright & Close, LLP

Attorney’s fees under Chapter 38: Is failure to segregate between claims fatal to recovery?

McMahon v. Zimmerman, No. 01-12-01090-CV, 2014 WL 1258815 (Tex. App.—Houston [1st Dist.] Mar. 27, 2014, no pet. h.).

Issue Presented: When a litigant fails to segregate attorney’s fees between claims for which fees are recoverable and claims for which they are not, can the litigant still recover fees attributable to the claims for which fees are recoverable?

Relevant Facts: A client sued his former attorney for legal malpractice in connection with a divorce proceeding. The attorney counterclaimed for breach of contract for unpaid attorney’s fees. The trial court granted summary judgment in favor of the attorney on the malpractice claims, and, following a bench trial, issued a judgment in favor of the attorney on the breach of contract claim. The attorney sought an award of attorney’s fees in the amount of $72,810 pursuant to TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8). That amount represented the total amount of fees incurred both in the defense of the malpractice claim and in prosecution of the breach-of-contract claim. The attorney argued that the two causes of action were too intertwined to require segregation, but the trial court disagreed and awarded only $6,000 in fees for the prosecution of the breach-of-contract claim.

Legal Summary: On appeal, the client argued that, in the absence of segregation, the evidence was legally insufficient to support any award of fees. The Court of Appeals began by explaining that segregation between claims for which fees are recoverable and those for which they are not is required, and the party seeking to recover fees bears the burden of proof. Ordinarily, if segregation is required and the claimant does not provide testimony on the proper segregation, the cause should be remanded for proper findings. This case was different, however, in that it was tried to the bench, and the court made specific findings regarding the amount of fees attributable to the contract claim. The Court of Appeals explained that “trial courts have no obligation to delve into billing records to segregate fees on behalf of litigants who do not offer segregation testimony,” but it is not error if they elect to do so. The trial court’s findings of fact were sufficient to show that the trial court considered which fees were attributable to the different claims; therefore, remand was not necessary. The evidence before the trial court—namely fee bills—was sufficient to support the award.


Default Judgments: How quickly must a court rule on the motion?

Davis v. West, No. 01-13-00463-CV, 2014 WL 1258551 (Tex. App.—Houston [1st Dist.] Mar. 27, 2014, no pet. h.)

Issues Presented: How quickly must a court rule on a default judgment? If the court does not rule on the motion immediately and the defendant files an answer in the interim, is a plaintiff prejudiced by the court’s failure to rule promptly?

Relevant Facts: A plaintiff orally moved for a default judgment in a court hearing against a defendant that had not filed an answer. The court did not immediately rule on the motions, and two weeks later, the defendant filed an answer. Four days after the answer was filed, the plaintiff filed a written motion for a default judgment, but the trial court denied the motion.

Legal Summary: On appeal, the plaintiff argued that the trial court erroneously failed to promptly rule on her motion for default judgment and that she was prejudiced as a result. The plaintiff asked the Court of Appeals to reverse and render a default judgment against the defendant.

The Court of Appeals began by noting that “[t]he temporal requirement on a judge to rule on a pending motion for default judgment is only that the judge rule within a ‘reasonable time.’” The court further noted that appellate courts have previously held that one month is a reasonable time. Under the circumstances, the court held, two weeks was not an unreasonable delay.

The Court of Appeals next addressed the plaintiff’s argument that she was prejudiced by the trial court’s delay in ruling until after the defendant filed its answer. The court rejected that argument, explaining that the defendant may file an answer at any time before a default judgment is rendered. And “[o]nce an answer is on file, even if it is filed after the due date, the district court may not render a no-answer default judgment.” The defendant’s answer, filed prior to the court’s ruling, therefore rendered the plaintiff’s complaint moot.


Recusal: Applicable only to the individual judge or to the entire court?

Davis v. West, No. 01-13-00463-CV, 2014 WL 1258551 (Tex. App.—Houston [1st Dist.] Mar. 27, 2014, no pet. h.)

Issue Presented: When a judge recuses from a case and later leaves the bench, may the new judge hear the case?

Relevant Facts: In the same case referenced above, the plaintiff argued that the trial court lacked jurisdiction to issue a summary judgment against her based on the recusal of a former judge of the court. While the plaintiff’s claims were pending, the judge of the 149th Judicial District Court of Brazoria County recused from the case. The presiding judge of the district therefore assigned another judge to preside over the case. The assigned judge then granted summary judgment in favor of one of the defendants, but the plaintiff’s claims against another defendant remained pending for several years. In the interim, the recused judge retired and another judge was elected to take his place. The newly-elected judge then granted summary judgment in favor of the remaining defendant.

Legal Summary: On appeal, the plaintiff argued that, as a result of the prior judge’s recusal, the 149th District Court lacked jurisdiction to render a decision in her cause. In rejecting the plaintiff’s argument, the Court of Appeals first held that recusal, unlike disqualification, is not a jurisdictional issue. The court then found that the recusal order merely removed the challenged judge, not the court itself. The case was never actually transferred out of the 149th district – another judge was simply assigned to the case. Thus, the Court of Appeals held that the first judge’s recusal did not cause the 149th District Court to lose jurisdiction.


Summary Judgment: Whether the court of appeals may consider untimely summary judgment evidence.

Alphaville Ventures, Inc., et al. v. First Bank, No. 14-12-00580-CV (Tex. App.—Houston [14th Dist.] April 1, 2014, no pet.).

Issue Presented: Whether the court of appeals may consider untimely summary judgment evidence and what summary judgment evidence is necessary to establish that a note has been assigned.

Relevant Facts: Alphaville Ventures, Inc. (“Alphaville”) was the debtor by assignment on a note to the Small Business Loan Source LLC (“SBLS”). First Bank claimed that it was the creditor by assignment on the note Alphaville defaulted, and First Bank brought suit.

First Bank moved for summary judgment, attaching evidence that the note had been transferred to First Bank by SBLS pursuant to a Loan Purchase and Sale Agreement (“PSA”). Nine days before the hearing on its motion, First Bank filed supplemental evidence in support of its motion. The trial court granted summary judgment in favor of First Bank, from which this appeal was brought.

Legal Summary: The Court of Appeals reversed and remanded, concluding: (a) the court of appeals may not consider summary judgment evidence that was not timely filed and (b) there was no evidence that the note had been assigned to First Bank because the PSA recognized additional steps needed to effect the assignment, and there was no evidence that these steps had occurred.


Execution of Judgment: Effect of a judgment based on a premarital obligation on community property.

Drake Interiors, L.L.C. v. Andrea Marie Thomas et al., No. 14-13-00349-CV (Tex. App.—Houston [14th Dist.] April 29, 2014, no pet. h.).

Issues Presented: (1) Can an abstract of a judgment rendered before the marriage create a valid lien on a home jointly managed as community property? (2) If so, what is the effect of a homestead designation after a divorce?

Relevant Facts: In October 2002, Rob Thomas married Andrea Thomas ("Andrea"). In 2003, the couple acquired a townhome known as the Asbury Property, which they held as their joint management community property. In 2004, Drake Interiors, L.L.C. ("Drake") obtained a final judgment against Rob based on a premarital obligation.

Drake abstracted the Judgment, recording it in Harris County, where the Asbury Property is located. Shortly thereafter, Rob and Andrea separated and vacated the Asbury Property Andrea was awarded ownership of the Asbury Property in the divorce. Drake brought suit to enforce its lien.

While this suit was pending, Andrea returned to the Asbury Property and claimed it as her homestead. Andrea asserted that the Asbury Property was exempt from forced sale, and sought a declaration that Drake's judgment lien was invalid. The trial court granted Andrea's motion, declaring that Drake's lien did not attach and was null and void as to the Asbury Property.

Legal Summary: The Court of Appeals reversed and remanded, holding that pursuant to sections 3.202(c) of the Texas Family Code, Drake's judgment lien attached to any non-exempt community interest in the Asbury Property, as it was a debt incurred before or during the marriage and the Asbury Property was jointly managed by Rob and Andrea during their marriage. However, because the Court concluded that Drake had failed to prove that Rob and Andrea had both abandoned the Asbury Property as their homestead at the time the lien was created, the Court remanded for further proof.


Landlord-Tenant: Notice requirements for termination of a lease.

Betty Getters v. Baytown Housing Authority, No. 14-13-00045-CV (Tex. App.—Houston [14th Dist.] April 30, 2014, no pet. h.).

Issue Presented: Did a combined notice of termination and notice to vacate comply with Tex. Prop. Code § 24.005 in the context of a federally-subsidized, multi-family housing project?

Relevant Facts: Betty Getters (“Getters”) is a resident of a federally-subsidized, multi-family housing project operated by Baytown Housing Authority (“Baytown”). Before terminating the lease for cause, Baytown was required to provide a notice of termination that would inform Getters of her right to exercise the project's grievance procedure and request a hearing. This notice was required to be given 30 days before the termination date if for a reason other than failure to pay rent timely or a health, safety or security concern.

On June 11, 2012, Baytown served a combined notice of termination and notice to vacate the premises. On June 28, 2012, without further notice to Getters, Baytown filed a forcible detainer action. Getters moved for judgment on the grounds that (1) BHA had not provided her with a second notice to vacate after the 30 days had expired; and (2) the lawsuit was filed prior to the expiration of the 30 days given to vacate. The county court denied Getters' motion, and awarded possession to BHA. On appeal, Baytown argued that the appeal was moot because the lease had expired and did not provide for automatic renewal.

Legal Summary: The Court of Appeals reversed and rendered judgment in Getters' favor, concluding that (a) the appeal was not moot, as Baytown was required to automatically renew the lease under the United States Housing Act of 1937; (b) the forcible detainer action was filed prematurely; and (c) the forcible detainer action violated section 24.005(e), because Baytown filed the notice to vacate before Getters was allowed a right to respond. Furthermore, Baytown’s breaches were not subject to a harm analysis under sections 24.005.


Insurance: Effect of a vacancy clause on a mortgagee’s coverage for fire.

SWE Homes, LP v. Wellington Insurance Co., No. 14-12-01116-CV (Tex. App.—Houston [14th Dist.] May 15, 2014, no pet. h.).

Issue Presented: Does a standard mortgage clause in a residential insurance policy provide coverage to a mortgagee for a loss by fire when the policy also contains a vacancy clause and the mortgagor has left the property vacant?

Relevant Facts: Edgar Sadberry (“Sadberry”) purchased a Texas Dwelling Policy from Wellington Insurance Co. (“Wellington”), naming SWE Homes, LP (“SWE”) as a beneficiary in the mortgagee clause. A vacancy exclusion voided Sadberry’s coverage. Sadberry's home was damaged in a fire. Sadberry admitted that the property had been vacant for over a year prior to the fire. Wellington denied coverage under the policy's vacancy clause.

Legal Summary: The Court of Appeals reversed and remanded, holding that the mortgage clause created a separate contract between the insurer and the mortgagee, which could not be vitiated by the conduct of the mortgagor. Since the vacancy clause applied as an exception only to coverage of claims brought by Sadberry, it was not sufficient to defeat SWE's claim, and the summary judgment was improper.


Compelling arbitration: Whether a minor is bound by an arbitration clause in an employment agreement.

PAK Foods Houston, LLC v. Marissa Garcia, et al., No. 14-13-00409-CV (Tex. App.—Houston [14th Dist.] May 22, 2014, no pet. h.).

Issue Presented: Can an employer compel arbitration on personal injury claims brought by and on behalf of a minor employee?

Relevant Facts: Marissa Garcia brought suit as next friend of S.L., a minor for injuries incurred during S.L.’s employment with PAK Foods (“PAK”). PAK filed a motion to compel arbitration and stay trial proceedings pursuant to its Mutual Agreement to Arbitrate. Garcia contended that S.L. had disaffirmed any arbitration agreement by objecting to arbitration. The trial court denied arbitration.

Legal Summary: Recognizing that well-established Texas law holds that a contract executed by a minor is voidable at the minor's discretion, the Court concluded that S.L.'s election to file suit in lieu of arbitration voided the Agreement. The Court further recognized that this also applied to S.L.'s mother's claims, as they were wholly derivative of S.L.'s claims.