Opinion
No. 01-08-00007-CV
Opinion issued April 2, 2009.
On Appeal from 269th District Court Harris County, Texas, Trial Court Cause No. 2007-11508.
Panel consists of Chief Justice RADACK and Justices ALCALA and HANKS.
MEMORANDUM OPINION
Appellant, Jawad N. Alsheikh, appeals the trial court's judgment in favor of appellee, Arabian National Shipping Corp. (Arabian). In two issues, Alsheikh asserts the trial court erred because the doctrine of res judicata barred this suit, and because the evidence is legally insufficient to establish the amount of attorneys' fees awarded. We conclude this suit is not barred by res judicata, and the evidence is legally sufficient to support the award for attorneys' fees. We affirm the judgment of the trial court.
Background
In 1990, Alsheikh made two promissory notes totaling about $154,000 to Arabian. The notes matured one year after issuance, had identical interest rates, and were secured by deeds of trust on real property Alsheikh owns in Harris County. Alsheikh did not timely pay the notes but made partial payments through May 2004. In 2005, Arabian sent Alsheikh a notice of default and demand for payment. Subsequently, Alsheikh filed suit in the trial court seeking a declaratory judgment that the liens securing the notes had expired based on the four-year statute of limitations governing real property liens. The trial court granted Arabian's motion for summary judgment, stating that neither the debts nor the liens were discharged by limitations, and the Fourteenth Court of Appeals affirmed. See Alsheikh v. Arabian Nat. Shipping Corp., No. 14-05-00787-CV, 2006 WL 1675384 (Tex.App.-Houston [14th Dist.] 2006, no pet.) (mem. op.) (hereinafter Alsheikh I).
When Alsheikh continued to refuse to pay the debts, Arabian filed a suit for breach of contract to collect the amounts due under the notes. Alsheikh filed a separate suit seeking a declaration of the amounts due under the notes and an injunction preventing Arabian from foreclosing its liens on Alsheikh's property secured by the notes. The lawsuits were consolidated into a single cause, then the application for judicial foreclosure was severed into a separate cause. After a one-day bench trial, the trial court ordered Arabian recover $302,176.59 from Alsheikh, plus post-judgment interest; ordered Alsheikh to pay Arabian's reasonable and necessary attorneys' fees in the amount of $100,000, plus $20,000 if the case proceeded to the court of appeals, plus another $20,000 if writ was sought from the Texas Supreme Court, plus post-judgment interest; and ordered that Alsheikh take nothing on his claims against Arabian.
Res Judicata
In his first issue, Alsheikh asserts this lawsuit is barred by res judicata because Alsheikh I involved the same parties, this lawsuit involves claims that could have been raised in Alsheikh I, and Alsheikh I resulted in a final judgment. See Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996) (defining elements of res judicata). In its appellee's brief, Arabian contends Alsheikh did not raise the affirmative defense of res judicata below, so the argument is waived on appeal. See Tex. R. Civ. P. 94. Alsheikh responds that the defense of res judicata was raised in the pleadings, or alternatively, was tried by consent. Assuming Alsheikh is correct that either the defense of res judicata was raised in the pleadings or tried by consent, we conclude the instant lawsuit is not barred by res judicata.
Arabian contends the lawsuit is not barred by res judicata because the suit is for further relief based on a declaratory judgment, which is permitted under section 37.011 of the Civil Practice and Remedies Code. Tex. Civ. Prac. Rem. Code Ann. § 37.011 (Vernon 2008). Alsheikh responds that section 37.011 does not apply because Arabian did not seek declaratory relief in Alsheikh I. See id. Section 37.011 allows any "further relief" that is based on a declaratory judgment or decree, as follows:
Further relief based on a declaratory judgment or decree may be granted whenever necessary or proper. The application must be by petition to a court having jurisdiction to grant the relief. If the application is deemed sufficient, the court shall, on reasonable notice, require any adverse party whose rights have been adjudicated by the declaratory judgment or decree to show cause why further relief should not be granted forthwith.
Id. Here, the further relief is in the form of a judgment for the amount due under the notes, which follows the trial court's declaratory judgment in Alsheikh I, where the trial court determined that the debts and liens were not discharged by limitations. We conclude the lawsuit is not barred by res judicata because the suit is for further relief based on a declaratory judgment, as permitted under section 37.011 of the Civil Practice and Remedies Code. See id.
We also note that when section 37.011 applies, a previous judgment granting only declaratory relief does not bar a subsequent application for relief based on rights declared in the prior judgment, "even though such relief could have been granted in the original action," unless such application was actually considered and denied in the original action. State v. Anderson Courier Serv., 222 S.W.3d 62, 66 (Tex.App. 2005, pet. denied); Valley Oil Co. v. City of Garland, 499 S.W.2d 333, 335 (Tex.Civ. App — Dallas 1973, no writ). As our sister court explained,
the rationale for this apparent departure from the usual rule of res judicata is that the losing party in a declaratory judgment action can normally be expected to recognize the rights declared by the judgment and act accordingly, but that if he fails to do so, the court should have ample power to enforce the judgment by subsequent coercive orders, whether or not such relief was sought in the original action.
Valley Oil Co., 499 S.W.2d at 336; see also 3 William V. Dorsaneo III, Texas Litigation Guide § 45.03 (2008) ("After a party has obtained a declaratory judgment, a subsequent suit may be brought for further relief if it is necessary or proper. This rule involves a departure from the strict application of res judicata, which would ordinarily bar a subsequent proceeding because coercive relief could have been granted in the original action. It is justified on the theory that the loser may be expected to recognize the rights declared by the judgment, and if not, some form of compulsion should be available.").
Because Alsheikh refused to pay his debts secured by the two notes after Alsheikh I — a declaratory judgment action — we conclude Arabian was entitled under section 37.011 to seek relief to enforce the judgment in Alsheikh I. See Anderson Courier, 222 S.W.3d at 66; Valley Oil Co., 499 S.W.2d at 335. We hold the underlying lawsuit is not barred by res judicata. We overrule Alsheikh's first issue.
Attorneys' Fees
In his second issue, Alsheikh asserts the evidence is legally insufficient to support the trial court's award of $100,000 in attorneys' fees to Arabian.
In general, the reasonableness of attorneys' fees is question of fact. City of Garland v. Dallas Morning News, 22 S.W.3d 351, 367 (Tex. 2000). In an appeal from a bench trial, we may not invade the fact-finding role of the trial court, who alone determines the credibility of the witnesses, the weight to give their testimony, and whether to accept or reject all or any part of that testimony. Volume Millwork, Inc. v. W. Houston Airport Corp., 218 S.W.3d 722, 730 (Tex.App. 2006, pet. denied).
A party can recover reasonable attorneys' fees if he prevails and recovers damages on a cause of action for which recovery of attorneys' fees is permitted. See Tex. Civ. Prac. Rem. Code Ann. § 38.001 (Vernon 2008); Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). The grant or denial of attorneys' fees is within the trial court's sound discretion, and we will not reverse the court's ruling regarding attorneys' fees unless there is a clear abuse of discretion. Ryan v. Abdel-Salam, 39 S.W.3d 332, 337 (Tex.App. 2001, pet. denied).
When reviewing the reasonableness of an award for attorneys' fees, a court should consider the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Arthur Andersen Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997) (citing Tex. Disciplinary R. Prof'l Conduct 1.04). Attorneys' fees must bear some reasonable relationship to the amount in controversy, but the amount of damages awarded is only one factor in determining the reasonableness of a fee award. USAA County Mut. Ins. Co. v. Cook, 241 S.W.3d 93, 103 (Tex.App. 2007, no pet.). We examine each of these factors separately.
1. Time, Labor, Novelty, Difficulty, and Skill
The first factor requires that we examine the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly. Kennedy, Arabian's trial attorney, did not testify about the exact number of hours expended on this case or the rate charged. Kennedy did testify that the "efforts required to overcome the delay tactics in this case" were significant:
I cut my teeth doing collection work on behalf of the Resolution and Trust Corporation, the FDIC. I have pursued debtors for a long time. I've seen all kinds of tricks tried in order to avoid payment of debts. Frankly, I've seen all of the tricks that were tried in this case at separate times. I've never seen anyone try them all together in one lawsuit. That is a significant factor for why the attorney fees are high in this case. That includes the forum shopping found by the bankruptcy court when the bankruptcy was filed on the eve of the last trial setting.
2. Affect on Other Employment
The record is silent concerning the second factor, which pertains to evidence of the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer.
3. Fee Charged in Locality
The third factor is the fee customarily charged in the locality for similar legal services. Kennedy did not testify about the exact number of hours expended on this case or the rate charged to reach the hourly estimate of $80,000. Nevertheless, the trial court was permitted to "take judicial notice of the usual and customary attorney's fees and of the contents of the case file without receiving further evidence," Tex. Civ. Prac. Rem. Code Ann. § 38.004 (Vernon 2008), because the award of attorneys' fees in this case arose under Texas Civil Practice and Remedies Code section 38.001. See id. § 38.001 (allowing recovery of attorneys' fees when claim is based on written contract); Valdez v. Valdez, 930 S.W.2d 725, 732-33 (Tex.App. 1996, no writ) (holding section 38.004 only applies to claims under section 38.001).
4. Amount Involved and Results Obtained
The fourth factor relates to the amount involved and the results obtained. This case involved Arabian's attempt to collect on two notes in the principal amounts of $87,239.85 and $66,855.88, plus interest. Kennedy obtained a judgment for Arabian in the amount of $302,176.59 plus post-judgment interest.
5. Time Limitations
The record is silent concerning the fifth factor, which is the time limitations imposed by the client or by the circumstances.
6. Nature and Length of Professional Relationship
The sixth factor pertains to the nature and length of the professional relationship with the client. The vice president of Arabian testified that Arabian used a different attorney in Alsheikh I, then hired Kennedy's law firm to handle the current suit, which was filed in February of 2007.
7. Experience, Reputation, and Ability of Lawyer
The seventh factor considers the experience, reputation, and ability of the lawyer or lawyers performing the services. Kennedy testified that he practices commercial litigation and has been licensed by the State of Texas since 1989.
8. Type of Fee
The eighth factor considers the type of fee involved. Kennedy testified that a reasonable fee on an hourly basis would be $80,000. Arabian's vice-president testified that Arabian agreed to pay Kennedy a 1/3 contingency fee. Kennedy testified that a 1/3 contingency fee would be reasonable in this case.
On appeal, Alsheikh complains that Kennedy did not testify about time spent on the case, the novelty and difficulty of the legal questions involved, or several other of the Arthur Andersen factors. We note that time spent working on the case is only one consideration for the first Arthur Andersen factor, and that Kennedy did explain that the case was more difficult and time-consuming than most other cases because of delay tactics employed by Alsheikh. In addition, evidence need not be submitted to support every factor. See Bank of Tex. v. VR Elec., Inc., No. 01-07-00308-CV, 2008 WL 5455692, at *12-13 (Tex.App. Dec. 31, 2008, pet. filed) (holding evidence of attorneys' fees sufficient despite failure of evidence to address each Arthur Anderson factor); McAlester Fuel Co. v. Carpenter, No. 01-07-00653-CV, 2009 WL 417301, at *6 (Tex.App. Feb. 19, 2009, no pet. h.) (mem. op.) (holding absence of evidence for two factors does not render evidence insufficient).
Alsheikh also complains that Kennedy's testimony was conclusory because Kennedy stated he took the Arthur Andersen factors into consideration without identifying underlying facts to support the eight factors. While testifying, Kennedy identified each factor and stated he took these factors into consideration in forming his opinions. As set forth above, Kennedy did testify to most of the factors from Arthur Andersen. We conclude Kennedy's testimony is not conclusory because he did provide facts to support most of the Arthur Andersen factors and based his opinions on his experience and knowledge of the practice of law in Harris County. See Tex. Commerce Bank v. New, 3 S.W.3d 515, 517-18 (Tex. 1999) (noting affidavit testimony in support of attorneys' fees was not conclusory and was legally sufficient where attorney testified he was duly licensed attorney, he was familiar with usual and customary attorneys' fees in locality, and, based on his knowledge of services rendered, fee in dispute was reasonable); State County Mut. Fire Ins. Co. v. Walker, 228 S.W.3d 404, 409 (Tex.App.-Fort Worth 2007, no pet.) (finding attorney's testimony not conclusory where "attorney testified about his professional experience and background and described the work he had performed and the amount of time spent on the case").
Finally, Alsheikh asserts that a contingent fee may never be reasonable basis for a court's award of attorneys' fees. Alsheikh cites Arthur Andersen, in which the Texas Supreme Court states, "[W]e cannot agree that the mere fact that a party and a lawyer have agreed to a contingent fee means that the fee arrangement is in and of itself reasonable for purposes of shifting that fee to the defendant." Arthur Andersen, 945 S.W.2d at 818-19. We agree with the Texas Supreme Court that the existence of a contingency-fee arrangement does not, by itself, make the fee reasonable for purposes of fee shifting. However, when the Arthur Andersen factors are met, the award of attorneys' fees on a contingent basis may be appropriate. See Transcon. Gas Pipeline v. Texaco, 35 S.W.3d 658, 675-76 (Tex.App. 2000, pet. denied) (holding award of attorneys' fees on contingency basis was reasonable based on Arthur Andersen factors); see also VingCard A.S. v. Merrimac Hospitality Sys., Inc., 59 S.W.3d 847, 870 (Tex.App.-Fort Worth 2001, pet. denied) (same).
Considering all of the record evidence in a light most favorable to the verdict and indulging every reasonable inference from that evidence in support of the verdict, legally sufficient evidence exists to uphold the reasonableness of attorneys' fees. See Tex. Commerce Bank, 3 S.W.3d at 517-18; Bank of Tex., 2008 WL 5455692, at *12-13; State County Mut. Fire Ins. Co., 228 S.W.3d at 409. We overrule Alsheikh's second issue.
Conclusion
We affirm the judgment of the trial court.