Epps v. Fowler

• Decision Date: 26 August 2011
• Docket Number: No. 10–0283.,10–0283.
• Citation: 351 S.W.3d 862,54 Tex. Sup. Ct. J. 1759
• Parties: Christopher N. EPPS and Laura L. Epps, Petitioners, v. Bruce FOWLER, Jr. and Stephanie L. Fowler, Respondents.
• Court: Texas Supreme Court

351 S.W.3d 862

54 Tex. Sup. Ct. J. 1759

Christopher N. EPPS and Laura L. Epps, Petitioners,

v.Bruce FOWLER, Jr. and Stephanie L. Fowler, Respondents.

No. 10–0283.

Supreme Court of Texas.

Argued Feb. 3, 2011.Decided Aug. 26, 2011.

Noel West Short, Travis Dale Weitzel, West Short & Associates, P.C., Georgetown, TX, for Christopher N. Epps.

Frank B. Lyon, Attorney at Law, Austin, TX, for Bruce Fowler, Jr.

Justice LEHRMANN delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice WAINWRIGHT, Justice GREEN, Justice WILLETT, and Justice GUZMAN joined.

Two years ago, we held that a plaintiff who obtained favorable jury findings but no damages was not entitled to attorney's fees under contractual language entitling a prevailing party to such fees. Intercont'l Group P'ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 652 (Tex.2009). Today, we consider whether a defendant is a prevailing party entitled to attorney's fees when the plaintiff nonsuits a claim without prejudice. We hold that such a defendant is not a prevailing party unless the court determines, on the defendant's motion, that the plaintiff took the nonsuit in order to avoid an unfavorable judgment. We also hold that, because a nonsuit with prejudice immediately alters the legal relationship between the parties by its res judicata effect, a defendant prevails when the plaintiff nonsuits with prejudice. Because the trial court has not had the opportunity to determine whether the plaintiff nonsuited in order to avoid an unfavorable judgment, we reverse the court of appeals' judgment and remand the defendant's claim for attorney's fees under the contract to the trial court. Finally, we hold that the court of appeals erred by not remanding the case to allow the trial court to dispose of the Eppses' pending claim for sanctions under chapter 10 of the Civil Practice and Remedies Code, and accordingly remand for the trial court to dispose of that alternative claim if it determines that fees are not available under the contract.

I. Background

In 2004, Bruce and Stephanie Fowler purchased a house in Georgetown, Texas, from Laura and Christopher Epps. Two years later, the Fowlers allegedly discovered cracks in the house's sheetrock and evidence of past repairs. They concluded that the foundation was failing, and sued the Eppses for violations of the Deceptive Trade Practices Act, fraud, and negligent misrepresentation. The Fowlers claimed that the Eppses were aware of problems with the house's foundation and failed to disclose them at the time of the sale. The Eppses denied having knowledge of any defects in the foundation. They sought their attorney's fees as sanctions under Chapter 10 of the Civil Practice and Remedies Code on the ground that the Fowlers' claims were legally and factually groundless. Alternatively, they sought attorney's fees under section 17 of the earnest money contract signed by the parties, which provides that “[t]he prevailing party in any legal proceeding related to the contract is entitled to recover reasonable attorney's fees and all costs of such proceeding incurred by the prevailing party.” ¹ The contract does not define the term “prevailing party.”

According to the Eppses, the Fowlers failed to respond to discovery, including the Eppses' requests for admissions, and cancelled or postponed a number of depositions.² The Eppses moved for partial summary judgment, and the Fowlers responded with an expert report attached. The same day they filed their summary judgment response, the Fowlers filed a motion to substitute counsel, which was granted. The next day, the Fowlers' newly retained counsel filed a notice of nonsuit without prejudice. The parties proceeded to trial on the Eppses' contractual attorney's fees issue. At the trial, the Eppses expressly reserved their claim for fees as sanctions under Chapter 10.

Rather than dismissing the Fowlers' claims, the trial court rendered judgment that they take nothing and ordered that the Fowlers pay the Eppses' attorney's fees of $22,950. The judgment provided that “[a]ny relief not granted herein is expressly denied.” The Fowlers appealed. The court of appeals modified the judgment to reflect that the Fowlers' claims were dismissed without prejudice. 352 S.W.3d 1, 6. It also reversed the portion of the judgment ordering that the Fowlers pay attorney's fees, reasoning that a favorable decision on the merits of a case is necessary to confer prevailing party status on a litigant. 352 S.W.3d at 6–7. We granted the Eppses' petition for review to decide whether a defendant is a prevailing party when the plaintiff voluntarily nonsuits without prejudice. 54 Tex.Sup.Ct.J. 428 (Jan. 11, 2011).

II. Prevailing Party

Texas adheres to the American Rule with respect to attorney's fees. KB Home, 295 S.W.3d at 653. Under that rule, litigants may recover attorney's fees only if specifically provided for by statute or contract. Id. (citing MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 669 (Tex.2009)). Thus, we must determine if the contract between the Fowlers and the Eppses authorized the trial court's award of fees in this case to the Eppses because they “prevailed.”

Our primary concern when we construe a written contract is to ascertain the parties' true intent as expressed in the contract. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex.2005) (citing J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003); Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex.2000); Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983)). We may look to the entire agreement in an effort to give each part meaning. Coker, 650 S.W.2d at 393. In this instance, the agreement does not expressly define the term prevailing party, and no other portion of the agreement sheds light on the term's meaning. When a contract leaves a term undefined, we presume that the parties intended its plain, generally accepted meaning. Valence Operating Co., 164 S.W.3d at 662; KB Home, 295 S.W.3d at 653. Accordingly, we give the term its ordinary meaning. Often, we consult dictionaries to discern the natural meaning of a common-usage term not defined by contract, statute, or regulation. See Reyes v. City of Laredo, 335 S.W.3d 605, 607 (Tex.2010); Albertson's, Inc. v. Sinclair, 984 S.W.2d 958, 960 (Tex.1999); Guardian Life Ins. Co. of Am. v. Scott, 405 S.W.2d 64, 65 (Tex.1966). But in this case, as in our controlling KB Home decision, we are interpreting a legal-usage term within a form contract, a term that many courts (including us less than two years ago) have explicated by examining how prevailing party is used statutorily.³

In KB Home, we held that a plaintiff who obtained a jury finding that the defendant had breached its contract but was awarded no damages was not a prevailing party. 295 S.W.3d at 655. We reasoned

[w]hether 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.... Nor do we perceive any manner in which the outcome materially altered the legal relationship between KB Home and Intercontinental.

Id.

A. Federal tests

As we did in KB Home⁴ we find federal cases focusing on the meaning of prevailing party instructive.⁵ In Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health and Human Resources, 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001), the Supreme Court considered whether a plaintiff who received neither a favorable judgment nor a consent degree, but whose lawsuit nevertheless caused the defendant to voluntarily change its conduct, was a prevailing party. The Court rejected the notion that a plaintiff whose lawsuit had served as the catalyst for a change in the defendant's conduct should be considered a prevailing party entitled to attorney's fees under the Fair Housing Act Amendments, 42 U.S.C. § 3613(c)(2), and the Americans with Disabilities Act, 42 U.S.C. § 12205, overruling several Circuit Court decisions. Id. at 601–02, 121 S.Ct. 1835 (citing Stanton v. S. Berkshire Reg'l Sch. Dist., 197 F.3d 574, 577, n. 2 (1st Cir.1999); Marbley v. Bane, 57 F.3d 224, 234 (2d Cir.1995); Baumgartner v. Harrisburg Housing Auth., 21 F.3d 541, 546–50 (3d Cir.1994); Payne v. Bd. of Educ., 88 F.3d 392, 397 (6th Cir.1996); Zinn v. Shalala, 35 F.3d 273, 276 (7th Cir.1994); Little Rock Sch. Dist. v. Pulaski Cnty. Special Sch. Dist., # 1, 17 F.3d 260, 263 n. 2 (8th Cir.1994); Kilgour v. Pasadena, 53 F.3d 1007, 1010 (9th Cir.1995); Beard v. Teska, 31 F.3d 942, 951–52 (10th Cir.1994); Morris v. West Palm Beach, 194 F.3d 1203, 1207 (11th Cir.1999)). In reaching that conclusion, the Court noted that “enforceable judgments on the merits and court-ordered consent decrees create the ‘material alteration of the legal relationship of the parties' necessary” to confer prevailing party status on the plaintiff. Id. at 604, 121 S.Ct. 1835 (quoting Tex. State Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792–93, 109 S.Ct. 1486, 103 L.Ed.2d 866 (1989)). A voluntary change in the defendant's conduct, by contrast, lacked the requisite “judicial imprimatur” to confer prevailing party status on the plaintiff. Id. at 605, 121 S.Ct. 1835.

While Buckhannon involved a plaintiff who claimed to have prevailed because of the defendant's voluntary action, at least two Circuit Courts have applied its reasoning to defendants seeking attorney's fees as a result of plaintiffs' voluntary actions. In Claiborne v. Wisdom, the Seventh Circuit considered whether a defendant was a prevailing party after the plaintiff voluntarily moved to dismiss her claim. 414 F.3d 715 (7th Cir.2005). Exercising the discretion afforded it by Rule 41(a)(2) of the Federal Rules of Civil Procedure,⁶ the district court dismissed the claim with prejudice. Id. at 717. The Seventh Circuit affirmed. Id. at 719. The order “effect[ed] a material alteration...