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Chevron Phillips Chemical Company LP v. Kingwood Crossroads, L.P.

Court of Appeals of Texas, Ninth District, Beaumont

September 21, 2017

CHEVRON PHILLIPS CHEMICAL COMPANY LP, Appellant
v.
KINGWOOD CROSSROADS, L.P., Appellee

          Submitted on June 11, 2015

         On Appeal from the 410th District Court Montgomery County, Texas Trial Cause No. 14-04-04123-CV

          Before Kreger, Horton, and Johnson, JJ.

          MEMORANDUM OPINION

          CHARLES KREGER Justice

         In this appeal, Appellant Chevron Phillips Chemical Company LP ("CP Chem") contests the trial court's order and judgment on remand concerning the award of Kingwood Crossroads, L.P.'s ("KCR's") attorneys' fees. We hold that the trial court erred by failing to segregate KCR's attorneys' fees incurred in advancing affirmative contract claims from those fees incurred defending CP Chem's breach-of-contract counterclaim. We reverse and remand for KCR to segregate these fees and for the trial court to determine the amount of fees necessary for defense of CP Chem's contract claim.

         I. Factual and Procedural Background

         This is the second appeal in a lawsuit, which KCR filed against CP Chem over a failed real estate transaction, concerning CP Chem's liability for KCR's attorneys' fees. On the initial appeal, the Fourteenth Court of Appeals made several modifications to the trial court's judgment and remanded solely for KCR to segregate the fees its attorneys incurred in successfully defending against CP Chem's contract counterclaim or to demonstrate that segregation was not required, and for the trial court to determine the amount of fees necessary for the defense of CP Chem's contract counterclaim. Chevron Phillips Chem. Co. v. Kingwood Crossroads, L.P., 346 S.W.3d 37, 70 (Tex. App.-Houston [14th Dist.] 2011, pet. denied) (hereinafter referred to as "Chevron I"). On remand, the trial court held that all of KCR's attorneys' fees incurred in advancing its affirmative breach-of-contract claims against CP Chem also advanced its defense of CP Chem's breach-of-contract counterclaim; and therefore, the court did not segregate the fees between KCR's affirmative contract claim (upon which it was not a prevailing party) and KCR's successful defense of CP Chem's contract counterclaim (for which the Fourteenth Court of Appeals held KCR was entitled to recover). CP Chem presents a seven-issue canopy over a multitude of sub-issues, which we summarize and address as follows: (1) whether KCR was a "prevailing party" under Texas law; (2) whether the trial court properly segregated the amount of attorneys' fees before making its award; (3) whether a jury trial was necessary on remand; (4) the beginning date when post-judgment interest begins to accrue on the attorneys' fee award; (5) the amount of appellate fees to which KCR is entitled; (6) whether CP Chem is entitled to settlement credits for the amount of attorneys' fees KCR was paid in pre-trial settlements with other defendants; and (7) whether CP Chem should be allowed to offset KCR's outstanding judgment liability to CP Chem against any award of attorneys' fees found necessary to defend the breach-of-contract counterclaim.

         The original proceedings involved multiple parties and claims. See Chevron I, 346 S.W.3d at 42-47. However, as the scope of this appeal is limited to issues concerning the attorneys' fees that the trial court awarded to KCR on remand, we include only those facts and procedural aspects of the case necessary to address the complaints in this appeal.

         A. Trial Proceedings

         The underlying litigation began when KCR asserted causes of action against: (i) CP Chem for breach of contract, tortious interference, fraud, negligent misrepresentation, and conspiracy; (ii) Exxon Land Development Inc. ("ELDI"), for tortious interference and conspiracy; (iii) First American Title Insurance Company ("First American") for breach of contract, violation of the Texas Deceptive Trade Practices Act, tortious interference, and negligent misrepresentation; and (iv) Kingwood Place West Community Association, Inc. ("the Association") for declaratory judgment.

         CP Chem filed a counterclaim against KCR for breach of contract, seeking $155, 000.00 in damages, for making a fraudulent claim against real property and asserting other claims for declaratory judgment. CP Chem's counterclaim was based upon the same contract as KCR's contract claims against CP Chem. ELDI also filed a counterclaim requesting a declaratory judgment. Chevron I, 346 S.W.3d at 47. Before trial, KCR settled with First American and the Association, and "[a] jury trial was conducted on the remaining claims." Id.

         Prior to trial, the parties stipulated that the jury would be responsible for determining the amount of attorneys' fees, but the trial court would determine whether and how to segregate attorneys' fees. During the trial, the court instructed the parties to present evidence segregating their attorneys' fees, so that it would not have to retry the case over that issue. KCR submitted evidence of its attorneys' fees in the form of trial testimony of KCR's counsel, Paul Mitchell; portions of a trial deposition transcript of Mitchell; and KCR's redacted billing records.

         At the conclusion of the trial, the jury found that CP Chem failed to comply with the contract but that CP Chem's failure to comply was excused by impracticability. Additionally, CP Chem was found liable for negligent misrepresentation and fraud. The jury also found that KCR's reasonable and necessary fees for preparation and trial were $3, 000, 000.00.

         Pursuant to the parties' stipulation, the trial court addressed fee segregation in a separate hearing. KCR identified three categories of fees that it conceded "should probably be segregated": (i) $32, 430.00 in fees associated with the settlement with First American; (ii) $8, 675.00 in fees connected to the settlement with the Association; and (iii) $16, 560.00 relating to a discovery dispute with First American (totaling $57, 665.00). The trial court reduced the jury's $3, 000, 000.00 finding of reasonable attorneys' fees by these amounts ($57, 665.00) to $2, 942, 335.00, and rendered judgment partially in favor of KCR, stating in part that:

[KCR] is entitled to $2, 942, 335.00 in reasonable attorneys' fees from CP Chem as a prevailing party in its contract action. If on appeal it is determined that [KCR] should have segregated these attorneys' fees, [KCR's] recovery for attorneys' fees for its contract action shall be reduced by 5% to $2, 795, 218.25.

         The trial court's judgment also stated that KCR was entitled to recover against CP Chem for fraud damages, and ordered the parties to specifically perform under the contract. The judgment, however, stated that KCR was to take nothing from CP Chem in damages on its claim for breach of contract. The judgment further provided that CP Chem, as "a prevailing party in the contract action, and as a just and equitable award under" its declaratory judgment cause of action, was to recover $1, 200, 000.00 in attorneys' fees from KCR but awarded CP Chem no damages on its counterclaim.

         Additionally, the trial court's final judgment provided that should any party appeal, attorneys' fees on appeal shall be awarded to the party prevailing on appeal; specifically, that if KCR were the prevailing party on appeal, it would be entitled to $150, 000.00 in the Court of Appeals and another $150, 000.00 if it prevailed in the Texas Supreme Court, with CP Chem responsible for sixty-five percent of any such payment to KCR, and ELDI responsible for the remaining thirty-five percent.

         B. The Fourteenth Court of Appeals' Decision

         CP Chem, ELDI, and KCR appealed, and the case was transferred to the Fourteenth Court of Appeals pursuant to an equalization order issued by the Texas Supreme Court. Chevron I, 346 S.W.3d at 42, n.1. Relevant to our decision, CP Chem challenged (1) the specific-performance order; (2) the award of fraud damages to KCR; and (3) the award of attorneys' fees to KCR. Id. at 50. The Fourteenth Court of Appeals sustained CP Chem's first two challenges and sustained in part, and overruled in part, CP Chem's third issue.[1] Id. at 65-67, 70. The Fourteenth Court of Appeals consequently reversed and rendered judgment (1) denying KCR's request for an order requiring specific performance of the contract; (2) that KCR take nothing on its fraud claim against CP Chem; (3) that KCR take nothing on its request for attorneys' fees against CP Chem for KCR's prosecution of its declaratory-judgment action; and (4) "that [KCR] take nothing on its request for attorneys' fees against CP Chem for [KCR's] prosecution of its breach-of-contract claim; but [the Fourteenth Court of Appeals] remand[ed] for determination of the amount of attorneys' fees [KCR] [was] entitled to recover for its defense of CP Chem's breach-of-contract claim." Id. at 78.

         Notably, in arriving at its decision concerning KCR's recovery of attorneys' fees incurred in its defense of CP Chem's breach-of-contract counterclaim, the Fourteenth Court of Appeals first determined that section 38.001(8) of the Civil Practice and Remedies Code did not authorize KCR to recover attorneys' fees because KCR was not a prevailing party on a valid contract claim for damages. Id. at 69-70.[2] Yet, that court held that because KCR successfully defended CP Chem's breach-of-contract counterclaim, KCR was entitled to recover attorneys' fees based on the language of the contract in question.[3] Id. at 70 (holding that the contract at issue entitled a "prevailing party" to recover attorneys' concomitant with either a successful prosecution or a successful defense of a claim). "Therefore, we may uphold the trial court's determination that [KCR] is entitled to some fees because it successfully defended CP Chem's breach-of-contract counterclaim." Id. (emphasis added).

         The Fourteenth Court of Appeals further held that remand was necessary "because the trial court did not specifically award fees for [KCR's] successful defense of CP Chem's contract claim, [and therefore] issued no finding on whether segregation of those fees is required." Id. (emphasis added). The Fourteenth Court of Appeals determined that it could "not merely affirm the entire attorney-fee award based on [KCR's] successful defense of [the contract] claim, " and instead "remand[ed] for [KCR] to segregate these fees or demonstrate segregation is not required and for the trial court to determine the amount of fees recoverable for defense of CP Chem's contract claim." Id.

         In its cross-appeal, KCR challenged (1) one of the trial court's declarations concerning the property in question; (2) the jury's impracticability finding excusing CP Chem from performing under the contract; and (3) the award of attorneys' fees to CP Chem. Id. at 50. The Fourteenth Court of Appeals held that KCR's first challenge was rendered moot by reversal of the specific-performance order, and overruled its remaining two challenges. Id. at 50, 61, 72. Notably, the Fourteenth Court of Appeals did not address whether CP Chem must segregate its attorneys' fees because:

[KCR did] not argue on appeal that CP Chem was required to segregate its fees . . . [but r]ather, [KCR] argue[d] that the award [was] erroneous on both grounds (contract and declaratory-judgment actions). Accordingly, [the Fourteenth Court of Appeals] [upheld] the entire award because CP Chem successfully defended the contract action.

Id. at 72.

         C. On Remand to the Trial Court

         On remand, the trial court first ordered the parties to mediate all outstanding issues, inviting them to "engage in appropriate discovery, " and setting an oral hearing for final resolution. After mediation failed, KCR filed a motion for final judgment for attorneys' fees based on the evidence in the pre-remand record. CP Chem, however, filed a jury demand, paid its jury fees, and opposed KCR's motion as premature on the theory that the Fourteenth Court of Appeals' remand order required a "new trial." KCR opposed CP Chem's request for a new trial as well as its more specific request for a jury trial, claiming that the parties had previously stipulated that the court would determine segregation issues, and the parties had already developed a full evidentiary record.

         The trial court did not conduct a new trial on remand, noting that it was "obvious to [him] . . . that the [Fourteenth] Court sent this back to [him] to decide." The court did, however, hold a hearing. KCR (the party bearing the burden of proof) offered no new evidence. CP Chem's counsel, whom the trial court accepted as an expert on the issue of attorneys' fees, testified that a reasonable fee for KCR's defense of CP Chem's contract counterclaim would be no more than $75, 000.00, based on the limited information that KCR had offered on the issue of fees. The trial court issued its final ...


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