www.urban.inc. v. Chris Drummond
508 S.W.3d 657
Tex. App.2016Background
- In 2011 Drummond signed an exclusive six‑month Residential Buyer/Tenant Representation Agreement with Urban that contained a prevailing‑party attorney’s‑fees clause. Urban sued Drummond for breach after he bought a house through another realtor during the exclusivity period.
- Drummond asserted numerous defenses and counterclaims (including breach of fiduciary duty and a pleaded breach‑of‑contract “counterclaim” that the court treated as an affirmative defense asserting prior material breach). He also filed third‑party claims against Urban’s counsel and employees, later nonsuited.
- Prior to trial Urban obtained summary judgment on several counterclaims; the jury was only asked about Urban’s breach of contract claim and Drummond’s affirmative defenses (prior material breach and fiduciary duty).
- The jury found Urban committed the first material breach, Drummond’s breach was excused, awarded Urban zero damages, and awarded attorney’s fees: $110,000 to Drummond (trial) and $60,000 (conditional appellate). It also found Urban’s attorney’s fees through trial were $74,649.
- The trial court entered a take‑nothing judgment on Urban’s claims and awarded Drummond attorney’s fees under the contract. Urban moved to disregard and for sanctions; the trial court denied sanctions.
- On appeal the court affirmed that Drummond was the prevailing party for purpose of contract fees but reversed and remanded for further proceedings on fee segregation (third‑party claims) and affirmed denial of sanctions.
Issues
| Issue | Plaintiff's Argument (Urban) | Defendant's Argument (Drummond) | Held |
|---|---|---|---|
| Whether Drummond was a "prevailing party" under the Agreement's fee clause | Drummond cannot be prevailing because he obtained no affirmative relief on a counterclaim and Urban prevailed on many issues | Drummond successfully defended the main issue (Urban’s breach claim) because Urban committed the prior material breach that excused Drummond’s performance | Drummond was the prevailing party; prevailing status turns on success on the main issue, not on receipt of affirmative relief here (affirmed) |
| Whether the trial court properly awarded Drummond $110,000 without segregating fees for nonrecoverable claims | Award improper because Drummond failed to segregate time spent on third‑party claims and other nonrecoverable matters | Fees recoverable under the agreement for the legal proceeding, but time attributable to third‑party claims where Urban was not the non‑prevailing party must be segregated | Remand for further proceedings on segregation and amount of recoverable fees (reverse in part) |
| Whether Urban was entitled to statutory attorney’s fees or sanctions under DTPA, TDCA, Rule 13, Chapter 9, Chapter 10, or Rule 215 | Urban sought mandatory fees/sanctions arguing many of Drummond’s claims were groundless, brought in bad faith, and discovery/pleading abuses occurred | Drummond submitted affidavit that counsel made reasonable inquiry; many sanction grounds were not timely raised or waived; no abuse of discretion shown | Trial court did not abuse discretion denying sanctions and statutory fees; waiver and lack of evidentiary hearing were fatal to Urban's claims (affirmed) |
| Whether Urban could recover fees for defending third‑party claims against Urban’s employees/counsel | Urban argued fees recoverable because those claims were part of the same legal proceeding and were groundless | Drummond argued third‑party claims were separate as to non‑prevailing party and were nonsuited; Urban waited too long to seek sanctions/fees | Urban waived sanctions/fees for third‑party claims by failing to seek pretrial rulings; fees for those third‑party matters must be segregated and cannot be charged to Urban absent basis (affirmed/partial reverse) |
Key Cases Cited
- Epps v. Fowler, 351 S.W.3d 862 (Tex. 2011) (defendant may be prevailing party under contract fee clause after plaintiff’s nonsuit)
- Intercontinental Grp. P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650 (Tex. 2009) (interpretation of contractual ‘prevailing party’ limited to disputes governed by the contract)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (movant must segregate attorney’s fees between recoverable and nonrecoverable claims)
- Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004) (prior material breach discharges the other party from performance)
- Donwerth v. Preston II Chrysler–Dodge, Inc., 775 S.W.2d 634 (Tex. 1989) (standards for awarding attorney’s fees under DTPA and court’s discretion review)
- SEECO, Inc. v. K. T. Rock, LLC, 416 S.W.3d 664 (Tex. App. — Houston [14th Dist.] 2013) (defendant who prevails on main issue may recover contractual attorney’s fees)
- Bhatia v. Woodlands N. Hous. Heart Ctr., PLLC, 396 S.W.3d 658 (Tex. App. — Houston [14th Dist.] 2013) (use of main‑issue analysis to determine prevailing party under a contract)