Intercontinental Group Partnership v. Kb Home Lone Star L.P.

IN THE SUPREME COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

════════════

No. 07-0815

════════════

Intercontinental Group

Partnership, Petitioner,

v.

KB Home Lone Star L.P.,

Respondent

════════════════════════════════════════════════════

On Petition for Review from the

Court of Appeals for the Thirteenth District of

Texas

════════════════════════════════════════════════════

Argued March 12,

2009

Justice Willett delivered

the opinion of the Court, in which Chief

Justice Jefferson , Justice

Hecht , Justice Green , and

Justice Johnson joined.

Justice Brister filed a

dissenting opinion, in which Justice

O’Neill , Justice Wainwright

and Justice Medina joined.

This breach-of-contract case poses a straightforward question: What does

“prevailing party” mean? We have construed this phrase in a discretionary

fee-award statute 1 but not in a mandatory fee-award

contract. Specifically, when a contract mandates attorney’s fees to a

“prevailing party,” a term undefined in the contract, has a party “prevailed” if

the jury finds the other side violated the contract but awards no money damages?

We agree with the United States Supreme Court, which holds that to prevail, a

claimant must obtain actual and meaningful relief, something that materially

alters the parties’ legal relationship. 2 That is, a plaintiff must prove

compensable injury and secure an enforceable judgment in the form of damages or

equitable relief. The plaintiff here secured neither. We thus reach the same

conclusion as in another breach-of-contract case decided today: “a client must

gain something before attorney’s fees can be awarded.” 3 We reverse the court of appeals’ judgment

and render a take-nothing judgment.

I. Background

KB Home Lone Star L.P. (KB Home), a national homebuilder, contracted with

Intercontinental Group Partnership (Intercontinental), a real estate developer,

to develop lots in a McAllen subdivision known as Santa Clara and sell them to

KB Home. The contract provided:

Attorney’s fees . If either party named herein brings

an action to enforce the terms of this Contract or to declare rights hereunder,

the prevailing party in any such action, on trial or appeal, shall be entitled

to his reasonable attorney's fees to be paid by losing party as fixed by the

court.

“Prevailing

party” was not defined.

Intercontinental began selling Santa Clara lots to other buyers, and KB

Home sued for breach of contract (among other theories) and sought specific

performance, damages, injunctive relief, and attorney’s fees. 4 KB Home did not seek a declaratory

judgment under the contract. At trial, KB Home sought only one type of actual

damages: lost profits due to Intercontinental’s

alleged breach. Intercontinental counterclaimed, asserting that KB Home failed

to honor an oral agreement to buy Santa Clara at a below-market price in

exchange for an exclusive partner arrangement for future property

acquisitions.

The jury found that Intercontinental breached the written contract but

answered “0” on damages, though it did award KB Home $66,000 in attorney’s

fees. 5 The jury rejected Intercontinental’s oral-agreement claim and consequently did

not answer the conditional question about Intercontinental’s attorney’s fees related to that claim.

Both parties moved for judgment, claiming attorney’s fees as the “prevailing

party.” The trial court sided with KB Home and signed a judgment in its favor

for $66,000, concluding that KB Home “should recover its damages against

[Intercontinental] as found by the jury . . . .” The court of appeals

affirmed. 6

II. Is KB Home the Prevailing Party?

Under the American Rule, litigants’ attorney’s fees are recoverable only

if authorized by statute or by a contract between the parties. 7

A. Applicability of Chapter 38 to KB Home’s Breach Claim

We first address the applicability of the discretionary attorney’s-fees

provision in Chapter 38 of the Civil Practice and Remedies Code. 8 As seen here, the statutory and contract

provisions are similar in general but dissimilar in particular:

The

Contract

Chapter

38

If

either party named herein brings an action to enforce the terms of this

Contract or to declare rights hereunder, the prevailing party . . . shall

be entitled to his reasonable attorney’s fees to be paid by losing party

as fixed by the court.

A

person may recover reasonable attorney’s fees from an individual or

corporation, in addition to the amount of a valid claim and costs, if the

claim is for . . . an oral or written contract.

We held in Green International, Inc. v. Solis that before a party

is entitled to fees under section 38.001, that “party must (1) prevail on a

cause of action for which attorney's fees are recoverable, and (2) recover

damages.” 9 If Green and Chapter 38 applied to

this case, KB Home could not recover attorney’s fees since it did not recover

any damages. But Green , while instructive, is not controlling, nor is

Chapter 38.

Parties are free to contract for a fee-recovery standard either looser or

stricter than Chapter 38's, and they have done so here. As KB

Home points out, Chapter 38 permits recovery of attorney’s fees “in addition to

the amount of a valid claim,” while nothing in the contract expressly requires

that a party receive any “amount” of damages. The triggering event under

the contract is that a party prevail in an action “to enforce the terms of this

Contract or to declare rights hereunder

. . . .” True enough, but the question remains: what does

“prevailing party” mean under the contract?

B. Attorney’s Fees Under the

Contract

The contract leaves “prevailing party” undefined, so we presume the

parties intended the term’s ordinary meaning.1 0 We have found the United States Supreme

Court’s analysis helpful in this area.1 1 In Hewitt v. Helms , the Court was

faced with the question of whether a plaintiff who obtained a favorable judicial

pronouncement in the course of litigation, yet suffered a final judgment against

him, could be a prevailing party.1 2 Helms had sued several prison officials

alleging a violation of his constitutional rights.1 3 The district court granted summary

judgment against him on the merits of his claim, but the court of appeals

reversed, holding that he had a valid constitutional claim.1 4 On remand, the district court still

rendered summary judgment against him, finding that the defendants were shielded

by qualified immunity.1 5 Helms then sought his attorney’s fees,

claiming that the court of appeals’ decision made him the prevailing party.1 6 The Supreme Court disagreed, saying

“[r] espect for ordinary language requires that a

plaintiff receive at least some relief on the merits of his claim before he can

be said to prevail.”1 7 And since Helms did not obtain a damages

award, injunctive or declaratory relief, or a consent decree or settlement in

his favor, he was not a prevailing party.1 8 Five years later in Farrar v.

Hobby , a federal civil-rights case, the Court elaborated:

[T]o

qualify as a prevailing party, a . . . plaintiff must obtain at least some

relief on the merits of his claim. The plaintiff must obtain an enforceable

judgment against the defendant from whom fees are sought, or comparable relief

through a consent decree or settlement. Whatever relief the plaintiff secures

must directly benefit him at the time of the judgment or settlement. Otherwise

the judgment or settlement cannot be said to “affect the behavior of the

defendant toward the plaintiff.” Only under these circumstances can civil rights

litigation effect “the material alteration of the legal relationship of the

parties” and thereby transform the plaintiff into a prevailing party. In short,

a plaintiff “prevails” when actual relief on the merits of his claim materially

alters the legal relationship between the parties by modifying the defendant's

behavior in a way that directly benefits the plaintiff.1 9

The Court concluded that the plaintiff “prevailed” in Farrar

because he was awarded one dollar in damages: “A judgment for damages in any

amount, whether compensatory or nominal, modifies the defendant’s behavior for

the plaintiff’s benefit by forcing the defendant to pay an amount of money he

otherwise would not pay.”2 0 Farrar did not speak to whether a

plaintiff awarded zero damages can claim prevailing-party status, but under the

Farrar Court’s analysis, a plaintiff who receives no judgment for damages

or other relief has not prevailed.

The trial-court judgment in today’s case recited the jury’s finding that

“[t]he sum of zero dollars would fairly and reasonably compensate KB” for its

damages, if any, resulting from Intercontinental’s

breach, and that “[t]he sum of sixty-six thousand dollars and zero cents”

constituted a reasonable fee for the necessary services of KB Home’s attorneys.

The judgment continued, however:

It

appearing to the Court that, based upon the verdict of the jury, KB Home Lone

Star should recover its damages against the International Group

Partnership as found by the jury, and the Court so

finds.

IT IS

ACCORDINGLY ORDERED, ADJUDGED AND DECREED that KB Home Lone Star have and

recover from the International Group Partnership judgment for the sum of

sixty-six thousand dollars and zero cents ($66,000.00).2 1

The court erred in making that award. The jury answered “0" on damages,

and KB Home sought no other type of relief, so the trial court should have

rendered a take-nothing judgment against KB Home on its contract claim.2 2

It seems beyond serious dispute that KB Home achieved no genuine success

on its contract claim. Whether 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. It recovered no damages; it secured no declaratory or injunctive

relief; it obtained no consent decree or settlement in its favor; it received

nothing of value of any kind, certainly none of the relief sought in its

petition.2 3 No misconduct was punished or deterred,

no lessons taught. KB Home sought over $1 million in damages, but instead left

the courthouse empty-handed: “That is not the stuff of which legal victories are

made.”2 4 Nor do we perceive any manner in which

the outcome materially altered the legal relationship between KB Home and

Intercontinental.2 5 Before the lawsuit, Intercontinental was

selling lots that were promised to KB Home. After the lawsuit, Intercontinental

had sold the promised lots and was not required to pay a single dollar in

damages or do anything else it otherwise would not have done.

As judgment should have been rendered in Intercontinental’s favor, it is untenable to say that KB

Home prevailed and should recover attorney’s fees. A stand-alone finding on

breach confers no benefit whatsoever.2 6 A zero on

damages necessarily zeroes out “prevailing party” status for KB Home.2 7

C. Declaration of Rights?

KB Home argues that it should nonetheless recover attorney’s fees because

it sued to “declare rights” under the contract and prevailed by obtaining a jury

verdict that Intercontinental breached the contract. We disagree. In

Southwestern Bell Mobile Systems v. Franco we noted that “[ i ]t is the judgment, not the verdict,

that we must consider in determining whether attorney’s fees are

proper.”2 8 The United States Supreme Court has

likewise reasoned that the judgment is critical to the prevailing-party

determination.2 9 In this case, the trial court should

have rendered a take-nothing judgment on KB Home’s contract claim. Neither law

nor logic favors a rule that bestows “prevailing party” status upon a plaintiff

who requests $1 million for actual injury but pockets nothing except a jury

finding of non-injurious breach; to prevail in a suit that seeks only actual

damages — compensation for provable economic harm — there must be a showing that

the plaintiff was actually harmed, not merely wronged.

If KB Home had brought its breach-of-contract case and obtained favorable

answers on the same “failure to comply” questions, but the jury also found that

an affirmative defense barred KB Home’s claim, a take-nothing judgment in favor

of Intercontinental would have been rendered. There would be no dispute that KB

Home had not prevailed, despite jury findings that Intercontinental breached. No

rational distinction exists between that scenario and the one before us. In

both, the end result is a take-nothing judgment with no meaningful judicial

relief for KB Home. Its only “relief” in either case is the gratification that

comes with persuading a jury that Intercontinental behaved badly. But

vindication is not always victory. However satisfying as a matter of principle,

“purely technical or de minimis ” success

affords no actual relief on the merits that would materially alter KB Home’s

relationship with Intercontinental.3 0 Accordingly, KB Home, while perhaps a

“nominal winner”3 1 in convincing the jury that it was

“wronged,”3 2 cannot be deemed a “prevailing party” in

any non-Pyrrhic sense.3 3

III. Is Intercontinental the Prevailing Party?

If KB Home “lost” by receiving no damages does that mean Intercontinental

“won” by remitting no damages? We cannot reach this question if it is not

properly presented, and it is not. On the record before us,3 4 it is undisputed that Intercontinental

neither preserved the issue nor presented any evidence (either before, during,

or after trial) regarding its attorney’s fees for defending KB Home’s

breach-of-contract claim.3 5 This failure, along with others

discussed below, waives any right to recovery.3 6

Intercontinental contends that the phrase “fixed by the court” in the

contract means the trial judge, not the jury, decides the proper measure of

attorney’s fees after trial ends, thus “there was no need for Defendant to have

submitted a question on attorneys fees.” Reading “fixed by the court” to mean

“fixed by the judge” is a straightforward construction.3 7 But a contract’s overriding purpose is

to capture the parties’ intent, meaning we must construe it in light of how the

parties meant to construe it. In this case, the parties’ trial conduct is itself

instructive.

In this case, KB Home submitted the attorney’s-fees issue, like other

fact issues, to the jury, not to the court, and the record contains no

indication that Intercontinental objected.3 8 Intercontinental’s lone pleading requesting attorney’s fees

is its original counterclaim, where it asserts Chapter 38, not the written

contract, as a basis for recovering fees related to its oral-contract

counterclaim. The one time that Intercontinental mentioned fees spent defending

KB Home’s written-contract claim came during a post-trial hearing for entry of

judgment when Intercontinental argued, “If they’re not the prevailing party,

then we successfully defended. And . . . we’re entitled to attorney’s fees. And

I’m prepared to present evidence today to that effect.” The trial court did not

respond, and Intercontinental neither pressed the issue nor made any offer of

proof. The record contains no mention of a jury-charge conference or any

pretrial conference, much less one indicating that the manner of setting

attorney’s fees was in question. Intercontinental never argued the contract was

ambiguous. Moreover, there is no indication that Intercontinental asked the

trial court to take judicial notice of trial testimony concerning its attorney’s

fees ,3 9 or that Intercontinental offered any

fees-related testimony in the post-trial hearing.

Both KB Home as plaintiff on its written-contract claim and

Intercontinental as counter-plaintiff on its oral-contract claim submitted an

attorney’s fees question on their affirmative claims, apparently because they

understood that the jury would hear evidence and decide what fee award, if any,

was proper. Thus, the parties, given how they and the trial court actually tried

the case, interpreted “fixed by the court” to mean that fees in this case would

be determined by a court proceeding (for example, a court judgment effectuating

the jury’s verdict). This reading is not unreasonable. The contract does not

reserve fees specifically to the trial judge, but to the court, and both parties

submitted all fact questions to the jury. In short, any reading of “fixed by the

court” must be informed by the record and by how the parties chose to present

fees to the jury on their respective claims.

In any case, even assuming the written contract reserved attorney’s fees

exclusively to the judge and not the jury, Intercontinental has certainly waived

that argument and its rights to recover fees under the contract.

Intercontinental did not plead for attorney’s fees under the contract, and never

sought to amend its pleadings to do so.4 0 Nor, apparently, did Intercontinental

ever object, either before the case went to the jury or post-trial, that KB

Home’s jury question on attorney’s fees was immaterial because the contract left

that issue to the judge. As noted above, Intercontinental first raised its

“fixed by the court” argument during a post-trial hearing for entry of judgment,

after the case (including Intercontinental’s jury

request for fees on the oral contract) had been fully tried to the jury. Nothing

indicates that Intercontinental made the trial court aware of its position

before the jury charge was submitted or raised any issue about the

contract’s meaning as to attorney’s fees. Nor did Intercontinental offer any

evidence when it made its oral, post-trial request that the trial court award it

fees under the contract.

Given that both parties tried questions of breach and attorney’s fees to

the jury, Intercontinental cannot be excused for failing to submit a jury

question on attorney’s fees incurred in defending KB Home’s lawsuit on the

written contract, or otherwise preserving the issue for appellate review.4 1 The issue of whether a

breaching-but-nonpaying defendant can be a “prevailing party” under an

attorney’s-fees provision like this is interesting legally, but not before us

procedurally.4 2

IV. Response to the Dissent

The dissent accuses the Court of ignoring the contract’s language in

order to reach an easy-to-apply answer. Nothing could be further from the truth.

Since the contract leaves “prevailing party” undefined, we must do our best to

effectuate the parties’ intent. We believe the most sensible interpretation is

that a plaintiff prevails by receiving tangible relief on the merits.

Despite what the dissent contends, the Court is not saying a plaintiff

must recover a money judgment in every breach-of-contract action. Quite the opposite. The dissent cites a variety of situations

where we agree the plaintiff would “prevail”: when the plaintiff obtains

rescission of the contract, specific performance, an injunction, or a

declaratory judgment. Today’s decision is not grounded on the fact that KB Home

received no money damages, but rather on the fact that KB Home received nothing

at all.4 3

The reason we focus on money damages is because KB Home focused on money

damages. Had KB Home pursued nominal damages, rescission, specific performance,

injunctive relief, or declaratory relief, that would be another case.4 4 But since KB

Home’s sole goal at trial was actual damages, it cannot declare victory without

recovering any, a point the dissent

seems to concede: “Money damages may be indispensable in contract claims

seeking money damages . . . .”4 5 This is exactly

such a claim.

The jury’s verdict delivered KB Home a stand-alone finding on breach, but

a breach-of-contract plaintiff who seeks nothing beyond economic damages cannot

receive a judgment based on breach alone.4 6 In CU Lloyd’s of Texas v.

Feldman , the court of appeals granted the plaintiff a partial summary

judgment on liability and rendered judgment for him.4 7 We reversed,

holding:

When the

relief sought is a declaratory judgment, an appellate court may properly render

judgment on liability alone. In this case, however, Feldman sought no

declaratory relief and no evidence of damages was submitted or considered. . . .

Thus, the court of appeals erred in rendering judgment for Feldman.4 8

Feldman

was a summary-judgment case (where the plaintiff submitted no evidence of

damages), and today’s case arises in a jury-verdict context (where the plaintiff

submitted evidence of damages that the jury rejected), but the common thread is

plain: Absent tangible relief, either monetary or equitable, a judgment on

liability alone is improper. Where a party seeks only damages, as here, damages

are a precondition to “prevailing.”

It is unconvincing to construe KB Home’s suit as one seeking declaratory

relief. The DJA, like the contract, covers an action “to declare rights,”4 9 and as explained above, authorizes an

award of attorney’s fees. A declaratory judgment, by its nature, is forward

looking; it is designed to resolve a controversy and prevent future damages.5 0 It affects a

party’s behavior or alters the parties’ legal relationship on a going-forward

basis. Here, however, KB Home’s suit was decidedly focused on the past, seeking

backward-looking money damages for prior breaches of contract. The dissent is

right that “[a]n action to ‘declare rights’ is not an action for money

damages,”5 1 but this case was never the former and

always the latter. KB Home could have brought a declaratory-judgment action and

“prevailed” (and thus recovered attorney’s fees) had the trial court rendered

judgment on liability.5 2 It chose not to, opting instead to seek

actual damages from the jury. The attorney’s-fees provision does not require a

monetary recovery in every case, but KB Home made it necessary in this case by

demanding only monetary, not declaratory, relief.

The dissent contends the judgment declares the parties’ rights, but the

part of the judgment the dissent quotes from merely incorporates the jury

verdict. KB Home’s petition sought jury findings on breach, damages and

attorney’s fees. Taken at face value, the lawsuit asks the jury to “enforce the

terms of this Contract”; it does not ask the court to declare rights. Intercontinental’s attorney noted as much at a post-trial

hearing, stating that “an action to enforce a contractual provision” is “exactly

what we’re dealing with here.” There are cases where parties who disagree over a

contract’s meaning have asked the courts to declare their respective rights ,5 3 but these cases are typically brought as

declaratory-judgment actions. One exception is Feldman , which strengthens

our decision today as illustrated in Feldman ’s opening paragraph:

In this

insurance case, we consider whether a court of appeals may properly render

judgment on a party’s liability for breach of contract without evidence of

damages and when no declaratory judgment has been sought. We conclude that it

cannot . . . .5 4

Finally, the dissent resurrects an old version of Black’s Law Dictionary

to define “prevailing party” as the one who prevails on the “main issue” of the

case. The dissent then states there was “no doubt the main issue was defendant

Intercontinental’s counterclaim,” and because the jury

found for KB Home on that counterclaim, KB Home must be the prevailing party.

But this analysis does precisely what the dissent accuses the Court of doing: It

disregards the language of the contract.

The attorney’s-fees provision makes clear that the prevailing party is

judged by "an action to enforce the terms of this Contract or to declare

rights hereunder ."5 5 The problem with the dissent’s analysis

is that Intercontinental's counterclaim was not rooted

in the parties’ written contract, but rather in an alleged separate oral

agreement. Under the dissent’s “main issue” test, the interpretation of

“prevailing party” in “this Contract” is controlled by the fate of a claim

brought under a separate oral contract.

Displacing the parties’ agreed-to language with the dissent’s “main

issue” analysis would yield an anomalous result: Plaintiff sues for $1

million-plus, winds up empty-handed, but nonetheless “prevails.” That cannot be

right. Focusing on what KB Home walked away with post-trial – no relief

whatsoever – we cannot say it emerged the prevailing party.

V. Conclusion

Whether seeking attorney’s fees under Chapter 38 (which impliedly

requires a claimant to first recover damages)5 6 or under this contract (where the jury

denied the claimant’s sole basis for recovery), the bottom line is the same: As

there was no award to the client, there can be no attorney’s fee award

either.5 7 KB Home obtained nothing of value from

its breach-of-contract lawsuit — certainly no judgment acknowledging compensable

injury — and thus cannot recover its attorney’s fees under the contract: “to

recover those fees, the [claimant] had to recover damages for breach of

contract.”5 8 On these

uncommon facts, we adopt a “no harm, no fee” rule, meaning a stand-alone finding

of breach unaccompanied by any tangible recovery (either monetary or equitable

relief) cannot bestow “prevailing party” status. As for Intercontinental, it

waived any claim for attorney’s fees defending KB Home’s breach-of-contract

claim by not submitting the issue to the factfinder .

Accordingly, we reverse the court of appeals’ judgment and render judgment that

KB Home take nothing.

_______________________________________

Don R. Willett

Justice

OPINION DELIVERED: August

28, 2009

1 Green Int’l, Inc. v. Solis , 951 S.W.2d 384, 390 (Tex.

1997).

2 Farrar v. Hobby , 506 U.S. 103, 111-12 (1992).

3

MBM Fin. Corp. v. Woodlands Operating

Co. , ___ S.W.3d ___, ___ (Tex. 2009)

(construing the attorney’s-fees provision in section 38.001 of the Texas Civil

Practice & Remedies Code, which specifies that attorney’s fees must be “in

addition to the amount of a valid claim and costs”).

4

Intercontinental had sold a majority of the Santa

Clara lots to other developers, so KB Home dropped its specific performance and

injunctive relief claims before trial and sought only lost

profits.

5

Specifically, the jury was asked: “Did

Intercontinental Group Partnership fail to comply with the Santa Clara Lot

Contract?” and separately “What sum of money, if any, if paid now in cash, would

fairly and reasonably compensate KB Home Lone Star, L.P. for its damages, if

any, that resulted from such failure to comply with the Santa Clara Lot

Contract?”

6 ___ S.W.3d ___, ___.

7

MBM Fin. Corp. v. Woodlands Operating

Co. , __ S.W.3d __, __ (“Texas has long

followed the ‘American Rule’ prohibiting fee awards unless specifically provided

by contract or statute.” (citing Tony Gullo Motors

I, L.P. v. Chapa , 212 S.W.3d 299, 310-11 (Tex. 2006) (“Absent a contract or

statute, trial courts do not have inherent authority to require a losing party

to pay the prevailing party’s fees.”))).

8 Tex. Civ. Prac. & Rem. Code §

38.001.

9 951 S.W.2d 384, 390 (Tex. 1997).

10 See

Valence Operating Co. v. Dorsett , 164 S.W.3d 656, 662 (Tex. 2005).

11 See,

e.g. , Dallas v. Wiland , 216 S.W.3d 344 , 358 n.61 (Tex. 2007); Sw . Bell Mobile Sys., Inc. v. Franco , 971

S.W.2d 52, 55-56 (Tex. 1998); Grounds v. Tolar

Indep . Sch . Dist. , 856 S.W.2d 417, 423 (Tex.

1993).

12 482 U.S. 755, 757 (1987).

13 Id .

14 Id . at

757-58.

15 Id . at

758.

16 Id . at

759.

17 Id . at

760.

18 Id .

19 506 U.S. 103,

111-12 (1992) (reviewing attorney’s fees awarded pursuant to 42 U.S.C. § 1988 )

(citations omitted).

20 Id . at 113-14

(noting that “the prevailing party inquiry does not turn on the magnitude of the

relief obtained”).

21 (Emphasis

added).

22 Cf. State

Farm Life Ins. Co. v. Beaston , 907 S.W.2d 430, 437-38 (Tex. 1995) (rendering

take-nothing judgment against party who recovered no damages on claim alleging

violation of Insurance Code article 21.21, even assuming arguendo the party prevailed on the article

21.21 claim).

23 See

Helms , 482 U.S. at

760 .

24 Id .

25 See

Farrar , 506 U.S. at

111-12 .

26 See

id . at 111 (to

be a prevailing party, “[w] hatever relief the

plaintiff secures must directly benefit him . . . .”). It is

difficult to conclude a breach-of-contract plaintiff has prevailed when the jury

says the plaintiff was wholly uninjured and denies all requested relief. As the

dissent recognizes, money damages are essential in contract claims seeking money

damages (though not for contract claims seeking something else). ___ S.W.3d ___, ___. Every single court of appeals has

likewise held that one of the required elements in a breach-of-contract suit

seeking money damages is that the plaintiff was in fact damaged by the breach.

Wright v. Christian & Smith , 950 S.W.2d 411, 412 (Tex. App.—Houston

[1st Dist.] 1997, no pet.); Fieldtech

Avionics & Instruments, Inc. v. Component Control.com, Inc. , 262 S.W.3d

813, 825 (Tex. App.—Fort Worth 2008, no pet.); Roundville Partners, L.L.C. v. Jones , 118

S.W.3d 73, 82 (Tex. App.—Austin 2003, pet. denied); Killeen v. Lighthouse

Elec. Contractors, L.P. , 248 S.W.3d 343, 349 (Tex. App.—San Antonio 2007,

pet. denied); Reynolds v. Nagley , 262 S.W.3d

521, 527 (Tex. App.— Dallas 2008 , pet. denied); West v. Brenntag Sw ., Inc. , 168 S.W.3d

327, 337 (Tex. App.—Texarkana 2005, pet. denied); Domingo v. Mitchell ,

257 S.W.3d 34, 39 (Tex. App.—Amarillo 2008, pet. denied); Hovorka v. Cmty . Health

Sys., Inc. , 262 S.W.3d 503, 508-09 (Tex. App.—El Paso 2008, no pet.);

Sullivan v. Smith , 110 S.W.3d 545, 546 (Tex. App.—Beaumont 2003, no

pet.); Bank of Am., N.A. v. Hubler , 211 S.W.3d

859, 864 (Tex. App.—Waco 2006, pet. granted, judgm’t

vacated w.r.m .); United Plaza-Midland, L.L.C. v.

First Serv . Air Conditioning Contractors, Inc. ,

No. 11-05-00382-CV, 2007 WL 4536525 , at *7 (Tex. App.—Eastland Dec. 20, 2007,

pet. denied) ( mem . op.); Lake v. Premier Transp . , 246 S.W.3d 167, 173 (Tex. App.—Tyler 2008, no

pet.); Pegasus Energy Group v. Cheyenne Petroleum , 3 S.W.3d 112, 127

(Tex. App.—Corpus Christi 1999, pet. denied); West v. Triple B Servs ., L.L.P. , 264 S.W.3d 440, 446 (Tex. App.—Houston

[14th Dist.] 2008, no pet.).

27 We said in a

1998 decision discussing Farrar that two plaintiffs who proved

retaliatory discharge under Texas law “prevailed” even though the jury awarded

no money damages. Sw . Bell Mobile

Sys. v. Franco , 971 S.W.2d 52, 56 (Tex. 1998) (per curiam ). Unlike today’s case, however, one of the plaintiffs

in Franco received equitable relief: reinstatement. As to that plaintiff,

Franco correctly decided that he was a prevailing party. However, like KB

Home in this case, the other Franco plaintiff received no relief

whatsoever. As we noted in Franco , under the United States Supreme

Court’s reasoning in Farrar , “‘the only reasonable fee’” when a plaintiff

fails to prove damages is usually “‘no fee at all.’” Id. at 55-56 (quoting Farrar , 506 U.S. at 115 ).

Also, our 1998 Franco decision predated the United States Supreme Court’s

2001 decision in Buckhannon Board & Care Home, Inc. v. West Virginia

Department of Health & Human Services , 532 U.S. 598, 603 (2001), which

refined its earlier analysis and basically held: “no money judgment, no fees.”

Accordingly, we disagree with Franco n that a

plaintiff who recovers no money and receives no equitable relief can be a

prevailing party. Instead, a plaintiff must receive affirmative judicial relief

to be considered a prevailing party.

28 971 S.W.2d at 56 .

29 Buckhannon , 532

U.S. at 603-04 .

30 See Tex.

State Teachers Ass’n v. Garland Indep . Sch . Dist ., 489 U.S. 782, 792 (“Where the plaintiff’s success on

a legal claim can be characterized as purely technical or de minimis , a district court would be justified in

concluding that” attorney’s fees should be denied.).

31 Abraham Lincoln, Notes for

Law Lecture (July 1, 1850), reprinted

in 2 Collected Works of Abraham

Lincoln 142 (John G. Nicolay & John Hay

eds. 1894) (“Discourage litigation. Persuade your neighbors to compromise

whenever you can. Point out to them how the nominal winner is often a real loser

— in fees, expenses, and waste of time.”).

32 But

see Zapata Hermanos Sucesores , S.A. v.

Hearthside Baking Co. , 313 F.3d 385, 389 (7th Cir. 2002) (Posner, J.) (“[A]

breach of contract is not considered wrongful activity in the sense that a tort

or a crime is wrongful. When we delve for reasons, we encounter Holmes’s

argument that practically speaking the duty created by a contract is just to

perform or pay damages . . . .”)

( citing Oliver

Wendell Holmes, Jr., The Common Law 300-02 (1881) and Oliver W. Holmes,

The Path of the Law , 10 Harv.

L. Rev . 457, 462

(1897)).

33 See Goland v. Cent. Intelligence Agency , 607 F.2d 339, 356 (D.C. Cir. 1978) (declining to

define “substantially prevail” in the Freedom of Information Act but doubting

“that plaintiffs could be said to have ‘substantially prevailed’ if they, like

Pyrrhus , have won a battle but lost the

war.”). See also

Farrar v. Hobby , 506 U.S. 103, 117, 119 (1992) (O’Connor, J., concurring)

(noting that a plaintiff who achieves a purely technical victory, something

Justice O’Connor labels “[c] himerical

accomplishments,” has in reality “failed to achieve victory at all, or has

obtained only a pyrrhic victory for which the reasonable fee is

zero.”).

34 In this

Court, both the clerk’s and reporter’s records are partial.

35 As its

briefing makes clear, the only evidence Intercontinental introduced on

attorney’s fees, and the only jury question it submitted on attorney’s fees,

concerned “its separate counterclaim for breach of an

oral agreement by Plaintiff” (emphasis in original), not its

defense of KB Home’s breach-of-contract claim. Intercontinental concedes that

since it lost on that affirmative claim, “the jury rightfully denied Defendant’s

request for attorneys fees on that claim, and Defendant

does not complain about that finding.”

36 See Bocquet v. Herring ,

972 S.W.2d 19, 21 (Tex. 1998) (noting that reasonableness and necessity of fees

are “question[s] of fact for the jury’s determination’”) (quoting Trevino v.

Am. Nat'l Ins. Co. , 168 S.W.2d 656, 660 (Tex. 1943)).

37 Somewhat

analogous to this contract provision is the attorney’s-fees provision in the

Texas Declaratory Judgment Act (DJA): “[T]he court may award costs and

reasonable and necessary attorney’s fees as are equitable and just.” Tex. Civ. Prac. & Rem.

Code § 37.009. One court

of appeals has recently noted that, “[o]n the face of this provision, it would

appear that the trial court, not the jury, determines the amount of attorneys’

fees . . . .” Ogu v. C.I.A. Servs . Inc. , No. 01-07-00933-CV, 2009 WL 41462 , at *3 (Tex.

App.—Houston [1st Dist.] Jan. 8, 2009, no

pet.) ( mem . op.). But,

the court continued, “ the amount of the attorneys’ fees

is a question of fact for the jury to decide.” Id . (citing City of

Garland v. Dallas Morning News , 22 S.W.3d 351, 367 (Tex. 2000)). We express

no view on the matter.

38 In Texas

courts, the reasonableness of attorney’s fees is normally “a fact issue for the

jury.” Scott A. Brister, Proof of Attorney’s Fees in Texas , 24 St. Mary’s L.J. 313, 349 (1993) (“Texas

law treats attorney's fees as a fact issue for the jury rather than as a

collateral matter usually determined by the court after the trial has been

concluded and the loser determined.”). Obviously, parties can contract otherwise

if they wish.

39 Tex. Civ. Prac. & Rem. Code

§ 38.004 (“The court may take judicial

notice of the usual and customary attorney’s fees and of the contents of the

case file without receiving further evidence in: (1) a proceeding before the

court; or (2) a jury case in which the amount of attorney’s fees is submitted to

the court by agreement.”).

40 Tex. R. Civ.

P . 301 (providing that the court’s judgment

shall conform to the pleadings).

41 Tex. R. Civ. P . 279 (“Upon appeal all independent grounds of recovery

or of defense not conclusively established under the evidence and no element of

which is submitted or requested are waived.”); cf. Wilz v. Fluornoy , 228 S.W.3d

674, 676-77 (Tex. 2007) (per curiam ); Hunt Constr . Co. v. Cavazos , 689 S.W.2d 211, 212 (Tex. 1985)

(per curiam ).

42 Some might

argue that not every lawsuit produces a winner (even cases that go to verdict);

the parties could battle to what amounts to a draw, pay their own fees and

expenses, and go home. Here, a jury finds there was breach but not injurious

breach; the wronged plaintiff gets nothing and the wrongdoing defendant gives

nothing. If “receiving no damages” means the plaintiff did not prevail, does

“remitting no damages” necessarily mean the breaching defendant prevailed? When

defining litigation success, some might argue that while relief is required for

plaintiffs to prevail, a finding of “no breach” is required for defendants —

that is, a desired finding on breach is insufficient for plaintiffs but

indispensable for defendants.

43 Citing cases

from 1917 and earlier, the dissent also argues that KB

is the prevailing party because it is entitled to nominal damages. ___ S.W.3d ___, ___. Nothing in the record shows that KB Home

requested nominal damages in the trial court or that it appealed any non-award

of nominal damages, so that scenario is simply not before us today. More to the

point, as the Court makes clear in another case decided today, the modern Texas

rule is that “nominal damages are not available when the harm is entirely

economic and subject to proof (as opposed to non-economic harm to civil or

property rights).” MBM Fin. Corp. v. Woodlands Operating

Co. , ___ S.W.3d ___, ___ (Tex. 2009). KB Home asked the jury to award

damages to remedy an “entirely economic” harm that was “subject to proof”: lost

profits.

44 To this end,

the dissent is mistaken in saying we are requiring parties to wait until they

are damaged in order to seek a declaration of their respective

rights.

45 ___ S.W.3d ___ at ___.

46 See CU

Lloyd’s of Tex. v. Feldman , 977 S.W.2d

568, 568 (Tex. 1998) (per curiam ).

47 Id . at

569.

48 Id . (internal

citations omitted).

49 Tex. Civ. Prac. & Rem. Code §

37.003.

50 See Bonham

State Bank v. Beadle , 907 S.W.2d 465,

467 (Tex. 1995) (“A declaratory judgment is appropriate only if a justiciable controversy exists as to the rights and status

of the parties and the controversy will be resolved by the declaration

sought.”).

51 ___ S.W.3d ___, ___.

52 CU Lloyd’s

of Tex. v. Feldman , 977 S.W.2d 568, 569

(Tex. 1998) (“When the relief sought is a declaratory judgment, an appellate

court may properly render judgment on liability alone.”).

53 See

Tex. Civ.

Prac. & Rem. Code § 37.004; Allstate

Ins. Co. v. Hallman , 159 S.W.3d 640, 641 (Tex. 2005); Brooks v. Northglen Ass’n , 141 S.W.3d

158, 161 (Tex. 2004); CU Lloyd’s of Tex. v. Feldman , 977 S.W.2d 568, 569

(Tex. 1998) (per curiam ); Firemen’s Ins. Co. of

Newark, N.J. v. Burch , 442 S.W.2d 331, 332 (Tex. 1968); Hoover v. Gen.

Crude Oil Co. , 147 Tex. 89, 90 , 212 S.W.2d 140, 141 (1948).

54 977 S.W.2d at 568 .

55 (Emphasis

added).

56 MBM Financial Corp. v. Woodlands Operating

Co. , ___ S.W.3d ___ (Tex.

2009).

57 See

id . at ___ (“a

client must gain something before attorney’s fees can be

awarded.”).

58 Id . at

___.