law-breach-of-contract-and-attorneys-fees-when-can-prevailing-defendant-get-fees? | the American
Rule | statutory and contractual attorney's fees | attorneys fees case law |
Award of Attorney’s Fees [ the Defendant Counterpetitioner]
In his fourth issue, Yeh contends that the trial court erred in awarding attorney’s fees to NAH of
$458,851 in its final judgment. Footnote Specifically, he asserts that NAH is not entitled to legal fees
because Yeh stipulated that he owed NAH for overhead expenses, NAH was not the “prevailing party” in
the lawsuit and that NAH cannot recover attorney’s fees for merely successfully defending against his
breach claim. Footnote Whether a party is entitled to attorney’s fees is a question of law that we review
de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999). As a general rule, each party
bears the cost of its own attorney, absent a contractual or statutory provision to the contrary. Panizo v.
Young Men’s Christian Ass’n of the Greater Houston Area, 938 S.W.2d 163, 168 (Tex. App.—Houston
[1st Dist.] 1996, no writ). Section 38.001(8) of the Civil Practice and Remedies Code provides that a
party may recover reasonable attorney’s fees if its claim is for “an oral or written contract.” Tex. Civ.
Prac. & Rem. Code Ann. § 38.001(8) (Vernon 2003). “To recover attorney’s fees under Section 38.001,
a party must (1) prevail on a cause of action for which attorney’s fees are recoverable and (2) recover
damages.” Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997); Ryan v. Abdel-Salam, 39 S.W.3d
332, 337 (Tex. App.—Houston [1st Dist.] 2001, pet. denied). If both parties receive some judgment, the
prevailing party is “the party vindicated by the judgment rendered.” See Brown v. Fullenweider, 135 S.W.
3d 340, 347 (Tex. App.—Texarkana 2004, pet. denied). Section 38.001 does not allow for an award of
attorney’s fees for a party’s successful defense against a breach of contract claim. Cytogenix, Inc. v.
Waldroff, 213 S.W.3d 479, 490–91 (Tex. App.—Houston [1st Dist.] 2006, no pet.). However, fees
incurred in defending a breach of contract counterclaim can be recovered to the extent they are
necessary to a party’s recovery on its original breach of contract claim. Varner v. Cardenas, 218 S.W.3d
68, 69 (Tex. 2007).
Yeh v. MacOugall (Tex.App.- Houston [1st Dist.] Jan. 17, 2008)(Alcala)
(breach of contract, counterclaim attorneys fees, attorney's fees, attorney's fees to prevailing party but
only as affirmative relief, no award to prevailing defendant for merely defeating plaintiff's contract claim)
AFFIRM TC JUDGMENT: Opinion by Justice Alcala
Before Chief Justice Radack, Justices Alcala and Bland
01-06-00509-CV Peter J. Yeh v. David J. MacDougall, D.O., P.A. d/b/a Neurosurgical Association of
Houston
Appeal from 333rd District Court of Harris County (Hon. Joseph Halbach)
While Yeh is correct that NAH may not recover attorney’s fees solely for successfully defending a
contract claim against it, NAH also sued for breach of contract and was successful in its suit. NAH sought
to collect the amount due in overhead expenses without litigation by sending a demand letter to Yeh’s
attorney. In its demand letter, NAH acknowledged the amount owed to Yeh for misdirected deposits. NAH
never disputed that it owed Yeh an offset for the amount of the misdirected deposits. When Yeh did not
pay the amount due for the overhead expenses, which was an amount that exceeded the amount NAH
owed Yeh for the misdirected deposits, NAH brought a breach of contract suit to recover the outstanding
overhead expenses. Yeh filed a counterclaim for breach of contract stemming from NAH’s failing to follow
up with insurers about payment, failing to collect co-pays from patients, and committing other billing
errors. The jury found that Yeh owed NAH $113,627.51 for overhead expenses incurred during the
shared expense period. The jury also found that Yeh was entitled to an offset of $53,615.78 for NAH’s
misdirected deposits. The jury found against Yeh on his counterclaim, finding no breach by NAH. In the
trial court’s final judgment, it rendered judgment in favor of NAH for the net amount of $60,011.73.
Because NAH was successful on its breach of contract claim and was awarded damages, NAH was
entitled to recover attorney’s fees under section 38.001. Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8);
Green Int’l, Inc., 951 S.W.2d at 390. Although the award to NAH was reduced by the amount NAH owed
to Yeh, we cannot conclude that this offset means that NAH was not the prevailing party at trial. NAH
never disputed that it owed the amount from the misdirected deposits, and acknowledged that debt in
the demand letter sent to Yeh prior to the beginning of litigation. The judgment for the overhead amount
exceeds the amount NAH owed to Yeh for the misdirected deposits. Further, NAH can recover attorney’s
fees for its defense against Yeh’s counterclaim because NAH could not have prevailed but for the
successful defense. See Varner, 218 at 69. We hold that the trial court did not err by awarding attorney’
s fees to NAH by determining that it was the prevailing party “vindicated by the judgment rendered.”
Brown, 135 S.W.3d at 347.