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Svoboda v. Thai

Court of Appeals of Texas, First District

April 2, 2019

BRANDON RAY SVOBODA AND KAREN LAM SVOBODA, Appellants
v.
JACKIE THAI, Appellee

          On Appeal from the 55th District Court Harris County, Texas Trial Court Case No. 2014-43646

          Panel consists of Justices Lloyd, Kelly, and Hightower.

          MEMORANDUM OPINION

          PETER KELLY JUSTICE

         The central question in this appeal is whether the final judgment properly awarded attorney's fees to appellee Jackie Thai, who prevailed in the underlying contract dispute. Thai pleaded for attorney's fees in accordance with Chapter 38 of the Texas Civil Practice and Remedies Code, and the case was tried to a jury, which determined reasonable attorney's fees for litigation in the trial court. The trial court entered judgment on the verdict, and the Svobodas appealed.

         On appeal, the Svobodas contend that: (1) the court erred by awarding attorney's fees because Thai did not plead and prove presentment, and because the amount of fees found by the jury was unreasonable, and (2) the jury's finding that Thai did not make an excessive demand was contrary to the great weight of the evidence. Because there was neither an express nor deemed fact finding about presentment, we cannot consider the appellants' contention that there was no proof of presentment under the usual sufficiency standards of review. Considering the appellants' arguments in light of the procedural history, we conclude that presentment was not proved as a matter of law, and therefore the judgment for attorney's fees must be reversed. Accordingly, we reverse the award of attorney's fees and render judgment for Thai on her contract claim.

         Background

         Jackie Thai sold a nail salon, "Jenny Nails," to Brandon and Karen Svoboda for $54, 000. The bill of sale provided for three payments: (1) $23, 000 due at closing on April 7, 2014; (2) $23, 000 due on May 7, 2014; and (3) $8, 000 due on August 7, 2014. The Svobodas made the first two payments. The bill of sale provided for the transfer of all assets of the business, including goodwill, to the Svobodas. It did not require Thai to continue working or be present at the nail salon after the sale, but the Svobodas maintained that Thai had separately, orally agreed to assist with introduction and retention of clients. When that did not occur in a manner that satisfied the Svobodas, their lawyer sent Thai a demand letter under the Texas Deceptive Trade Practices Act (DTPA). The letter, which was sent three weeks before the final $8, 000 payment was due, asserted that Thai had fraudulently induced the Svobodas' purchase of the nail salon and sought return of the $46, 000 of the purchase price that had been paid. Two weeks later, Thai filed suit against the Svobodas for breach of contract.

         Thai sued the Svobodas for the outstanding $8, 000 on the contract for sale of Jenny Nails. She alleged: "On or about July 11, 2014, Defendants [the Svobodas] notified Plaintiff [Thai] that they refuse to comply with the Agreement and refuse to pay the remaining $8, 000 balance." Thai also pleaded for "an award of attorney's fees and costs pursuant to Section 38.001 et seq. of the Texas Civil Practices & Remedies Code."

         The Svobodas filed a general denial, and they alleged that Thai was not entitled to attorney's fees because she failed to present the claim as required by Chapter 38. The Svobodas filed counterclaims for fraudulent inducement and violation of the DTPA. They also later asserted that a subsequent settlement demand should not be construed as presentment, but if it were, the demand was excessive.

         At trial, Thai's attorney, John Na, testified about attorney's fees. He testified about his experience and that of his colleagues, and he explained the hourly rates and charges shown on the billing records. He initially testified that the total amount of attorney's fees through trial was $16, 542.50, but then he corrected himself and testified that the number did not include fees for an emergency hearing and for trial. Na testified that, including the emergency hearing and the trial, the attorney's fees were $19, 437.50. On cross-examination, Na was asked about the fees for specific tasks, and he testified that there were no depositions, little discovery, and few hearings before trial.

         Na testified without objection that Texas law permits recovery of attorney's fees "as long as you make a presentment where the other side has an opportunity to pay what's owed and avoid $20, 000 going to trial." He asserted that his firm had presented the claim to the Svobodas twice: (1) in January 2015 when a colleague sent a demand letter seeking $18, 000, and (2) by oral conversations with the Svobodas' prior attorney in which Na demanded payment of at least $8, 000 and negotiated attorney's fees. Na said that the $18, 000 demanded in the letter represented the $8, 000 contract claim plus attorney's fees that accrued as of the date of the letter. When confronted with his billing statements, he acknowledged that less than $4, 000 in attorney's fees had accrued by the date of the letter. Na then testified that the letter was part of settlement negotiations, and "you always start high." Na could not identify a date when the oral conversations with the Svobodas' prior attorney occurred, and he acknowledged that that no phone calls or conversations with opposing counsel were noted in his billing records. He nevertheless testified that he "remember[ed] as a fact that he did" talk to the Svobodas' prior attorney. He also testified that the conversations with the attorney were in the context of settlement: "I saw that my office made a demand for 18, 000. But in my phone conversations with [the Svobodas' attorney], I told him . . . their clients need to come at least up to 8, 000, which they wouldn't do so we can talk about settlement."

         The jury found in favor of Thai on the breach-of-contract claim, and it found that Thai did not make an excessive demand for payment. The jury determined that $16, 542.26 was a reasonable attorney's fee for representation in the trial court. The trial court entered judgment on the verdict, which included an award of attorney's fees.

         The Svobodas filed a motion for new trial in which they challenged the award of attorney's fees and the jury's verdict on a question on which the Svobodas had the burden of proof: whether Thai had made an excessive demand. They asserted that there was neither pleading nor proof of presentment of the claim, as required by Chapter 38 of the Texas Civil Practice and Remedies Code and that the amount of attorney's fees was excessive. They also challenged the finding on excessive demand. The motion for new trial was overruled by operation of law, and the Svobodas appealed.

         Analysis

         The Svobodas raise two issues on appeal, each with several subpoints. Their first issue challenges the award of attorney's fees. They assert that although Thai pleaded for attorney's fees under Chapter 38, she did not specifically plead that presentment occurred. They further assert that there was no evidence of presentment and that the jury's award of attorney's fees was unreasonable. Their second issue challenges the jury's finding that Thai's demand was not excessive.

         I. The Svobodas challenge the evidence of presentment.

         A. Chapter 38 requires presentment of a claim as a prerequisite for obtaining a judgment for attorney's fees.

         In Texas, litigants generally are responsible for their own attorney's fees, Ashford Partners, Ltd. v. ECO Res., Inc., 401 S.W.3d 35, 41 (Tex. 2012), unless an award of attorney's fees is authorized by statute or the parties' contract. Wells Fargo Bank, N.A. v. Murphy, 458 S.W.3d 912, 915 (Tex. 2015); see Peterson Grp., Inc. v. PLTQ Lotus Grp., L.P., 417 S.W.3d 46, 60 (Tex. App.-Houston [1st Dist.] 2013, pet. denied). "Absent exceptions not applicable here, the party requesting attorney's fees must affirmatively plead for them to be eligible for a judgment containing a fee award." Murphy, 458 S.W.3d at 915 (citing Tex.R.Civ.P. 301).

         Texas Civil Practice and Remedies Code section 38.001 authorizes recovery of attorney's fees on a breach-of-contract claim. Tex. Civ. Prac. & Rem. Code § 38.001. "To recover attorney's fees under this statute, a party must first prevail on the underlying claim and recover damages." In re Nalle Plastics Family Ltd. P'ship, 406 S.W.3d 168, 173 (Tex. 2013). The statute also requires that:

(1) the claimant must be represented by an attorney;
(2) the claimant must present the claim to the opposing party or to a duly authorized agent of the opposing party; and
(3) payment for the just amount owed must not have been tendered before the expiration of the 30th day after the claim is presented.

Tex. Civ. Prac. & Rem. Code § 38.002.

         "The purpose of the presentment requirement is to allow the party against whom the claim is asserted an opportunity to pay it or tender performance within 30 days after they have notice of the claim without incurring an obligation for attorney's fees." Gibson v. Cuellar, 440 S.W.3d 150, 157 (Tex. App.-Houston [14th Dist.] 2013, no pet.); see Jones v. Kelley, 614 S.W.2d 95, 100 (Tex. 1981) (same; interpreting predecessor statute to section 38.001); Lyon v. Bldg. Galveston, Inc., No. 01-15-00664-CV, 2017 WL 4545831, at *11 (Tex. App.-Houston [1st Dist.] Oct. 12, 2017, pet. denied) (mem. op.) (same). Presentment is a demand or request for payment or performance, whether written or oral. See Jones, 614 S.W.2d at 100; Lyon, 2017 WL 4545831, at *11. No particular form of presentment is required, see Lyon, 2017 WL 4545831, at *11, but "merely filing suit for a breach of contract, by itself, does not constitute presentment." Genender v. USA Store Fixtures, LLC, 451 S.W.3d 916, 924 (Tex. App.-Houston [14th Dist.] 2014, no pet.).

         Presentment must be pleaded and proved. See Lyon, 2017 WL 4545831, at *11. However, in the absence of a special exception pointing out the lack of specific pleading of presentment, a pleading that gives "fair notice" that the party is seeking to recover attorney's fees under Chapter 38 is sufficient. Id. at *10 (citing Roark v. Allen, 633 S.W.2d 804, 810 (Tex. 1982) ("A petition is sufficient if it gives fair and adequate notice of the facts upon which the pleader bases his claim.")).

         In this case, Thai pleaded for attorney's fees under Chapter 38: "Plaintiff is further entitled to an award of attorney's fees and costs pursuant to Section 38.001 et seq. of the Texas Civil Practices & Remedies Code." The Svobodas did not file a special exception regarding the lack of specificity of Thai's pleading. In their first amended answer, the Svobodas pleaded that Thai had not "given proper demand under the statute upon which she relies for an award of attorneys' fees." They further pleaded that "a demand was made under the rubric of a settlement demand, which under law should not be considered a demand pursuant to statute." Considering both the absence of special exceptions and the Svobodas' answer, which indicated that they had fair notice of Thai's intent to recover attorney's fees under Chapter 38, we reject the Svobodas' argument that Thai did not plead presentment. See Lyon, 2017 WL 4545831, at *10. We do not need to address Thai's assertions that presentment was tried by consent. See Tex. R. App. P. 47.1.

         B. There was no actual or deemed fact finding of presentment.

         The Svobodas challenge the evidentiary support for presentment of the claim, and in their brief, they recite the usual standards of review for legal and factual sufficiency of an adverse finding on an issue on which they did not bear the burden of proof. Similarly, Thai's brief recites the factual sufficiency standard of review for an adverse finding on which a party did not bear the burden of proof. Both the Svobodas and Thai have predicated their sufficiency arguments on standards of review that require a factfinding. See City of ...


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