Anthony G. Petrello v. Matthew W. Prucka, Sheryl S. Prucka, Rahul Nath and Usha Nath

Opinion issued September 24, 2013

In The

Court of Appeals

For The

First District of Texas

————————————

NO. 01-11-00749-CV

———————————

ANTHONY G. PETRELLO, Appellant

V.

MATTHEW W. PRUCKA, SHERYL S. PRUCKA,

RAHUL NATH, AND USHA NATH, Appellees

On Appeal from the 55th Judicial District

Harris County, Texas

Trial Court Case No. 2007-74969

OPINION

This appeal arises from extensive litigation over Anthony Petrello’s attempt

to buy a house from his former next-door neighbor, Matthew Prucka. After a

federal district court decided that his discrimination and conspiracy claims failed as

a matter of law, Petrello asserted other claims in state court related to the same

real-estate transaction. The state trial court granted summary judgment against

Petrello, holding that his claims were precluded by the final judgment in the

federal case and that they failed to satisfy the statute of frauds.

Because Petrello’s state-law claims arise from the same nucleus of operative

facts that gave rise to his federal suit—the same real-estate transaction—the

doctrine of res judicata bars him from relitigating his claims in state court. We

affirm.

Background

In 2007, Prucka, who lived on 8 Remington Lane in Houston, decided to sell

his house. Petrello lived at 10 Remington Lane, and he contends that he sought to

buy Prucka’s house to provide his severely disabled daughter Carena a place to live

with her caretakers. Petrello called Prucka and offered to pay $6.5 million for the

house. Petrello alleges that Prucka declined the offer but orally granted him a right

of first refusal with respect to future offers. Prucka contends that he agreed only to

keep Petrello informed so that he could submit an equal or higher offer if he chose.

After declining Petrello’s $6.5 million offer, Prucka listed the property for

sale at the price of $8.3 million. Rahul Nath submitted a $7.6 million offer that

included contingencies. Prucka declined Nath’s offer and informed Petrello that a

higher offer had been made. In response, Petrello increased his offer to $8.2

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million. Because Petrello’s offer was not subject to a brokerage fee, it would have

netted Prucka more than an offer of the listed price from someone else. Prucka

then called Nath, who agreed to pay the full listed price of $8.3 million. Despite

the fact that the transaction included a fee for his broker, Prucka signed a written

contract on December 5, 2007 to sell to Nath for that price. With no knowledge of

Petrello’s offer, Nath paid Prucka $75,000 in earnest money.

Two days after the contract was signed, Petrello contacted Nath. Petrello

attempted to convince Nath not to go through with purchase or else to allow

Petrello to buy the house from him. Nath refused. Four days later, Petrello sued

Prucka in state court. He alleged various state-law claims for failing to give him

the right of first refusal, including breach of contract and unjust enrichment.

Petrello also filed a notice of lis pendens against 8 Remington Lane in the Harris

County Clerk’s office.

In light of Petrello’s pending lawsuit, Prucka and Nath signed an agreement

with respect to the litigation, including the contingency that Petrello might prevail.

The sale of 8 Remington Lane closed on January 16, 2008. Eight days later, Nath

intervened in Petrello’s state-court suit.

Petrello had told Prucka that he intended to make major architectural

modifications of 8 Remington Lane to accommodate his daughter, such as the

installation of an elevator or an accessible bathroom. Prucka testified in a

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deposition that neither he nor his wife wanted the house to be renovated in that

way, preferring to sell to someone who would instead preserve its historic

architectural integrity. After the deposition, Petrello amended his petition to allege

discrimination claims under the Fair Housing Act, 42 U.S.C. §§ 3601–3619

(2006). Petrello alleged that Prucka did not want the house altered to

accommodate Carena, that he accordingly refused to sell the house to him, and that

Nath conspired with and assisted in the discrimination against Carena after closing

the sale of the property. Petrello also asserted violations of state and municipal fair

housing laws. Altogether, Petrello alleged 14 causes of action, including:

(1) discrimination under the Federal Fair Housing Act, (2) discrimination under the

Texas Fair Housing Act, (3) discrimination under the Houston Fair Housing Act,

(4) civil conspiracy to discriminate, (5) aiding and abetting discrimination,

(6) conspiracy to deprive him equal protection of laws under 42 U.S.C. §§ 1981–

1988, (7) breach of oral contract to provide the right of first refusal, (8) breach of

oral contract to sell the house, (9) estoppel, (10) constructive trust, (11) tortious

interference with contract, (12) tortious interference with business relations,

(13) breach of auction, and (14) a request for a declaratory judgment.

The case was removed to federal court. Once there, Petrello obtained an

injunction that prevented Nath from making any improvements or major changes

to the home pending the legal proceedings, which the Fifth Circuit vacated on

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interlocutory appeal. See Petrello v. Nath, 350 Fed. App’x 887 (5th Cir. 2009). In

its opinion, the Fifth Circuit suggested that the record raised “a serious question

under 28 U.S.C. § 1367(a) whether federal supplemental jurisdiction over the

plaintiff’s state law claims is appropriate.” Id. at 889 n.1. The court stated that it

was “not clear” whether Petrello’s state-law claims were so related to the federal-

law claims as to form part of the same case or controversy, allowing for

supplemental federal jurisdiction over the related claims. Id. Nevertheless, the

Fifth Circuit also expressly acknowledged that it “need not examine federal

jurisdiction over the state law claims” in the interlocutory appeal, and thus the

court did not actually decide that issue. Id.

A lengthy discovery process ensued. Then, at a pretrial conference on the

eve of trial, Petrello orally moved to nonsuit most of his claims against the

defendants, leaving only claims related to violations of the federal, state, and

municipal fair housing laws. The federal district judge specifically asked: “what

are you going ahead on, what causes of action?” Petrello’s attorney responded that

the only remaining claims before that court were the “Fair Housing Act claims . . .

state and federal.” His attorney further stated that Petrello wished to avoid “any

potential problem that might have been hinted by the Fifth Circuit about [the

district court’s] jurisdiction,” explaining, “We don’t want to try it in state court and

it removes that issue.” The defendants did not object to Petrello’s motion for leave

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to amend his complaint and to nonsuit his other claims, and the district court orally

granted the motion. In his subsequent final pleading filed in federal court, his

“Sixth Amended Complaint,” Petrello listed only six causes of action: (1) a federal

Fair Housing Act claim, (2) a Texas Fair Housing Act claim, (3) a Houston Fair

Housing Act claim, (4) civil conspiracy to discriminate in housing sales, (5) aiding

and abetting such discrimination, and (6) conspiracy to deprive the Petrellos the

equal protection of the laws under 42 U.S.C. §§ 1981–1988.

At the time of trial Nath also had a live counterclaim before the federal

district court. Nath requested a declaration under the Texas Declaratory Judgment

Act, TEX. CIV. PRAC. & REM. CODE ANN. §§ 37.001–.011 (West 2008), that (1) the

Naths had title to 8 Remington Lane, (2) Petrello had no rights to the house, (3)

Petrello’s lis pendens was void and the title to the house was clear, and (4) the

Naths were entitled to attorney’s fees.

The case was tried to a jury which was unable to reach a verdict, and a

mistrial was declared. After the mistrial, the original federal district judge recused

himself, and the case was transferred to another judge. The federal district court

then granted judgment as a matter of law in favor of the defendants. See FED. R.

CIV. P. 50(a). Reasoning that the alleged oral agreement for the purchase and sale

of the house was unenforceable under the statute of frauds, the court held that even

after a trial Petrello had not established a prima facie case for a violation of the

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federal Fair Housing Act, the Texas Fair Housing Act, or the Houston Fair

Housing Ordinance. Petrello v. Prucka, No. H-08-1933, 2011 WL 305444 (S.D.

Tex. Jan. 27, 2011); see McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802,

93 S. Ct. 1817, 1824 (1973) (requiring discrimination claimants to meet the burden

of proving that they qualify under anti-discrimination statutes); see also 42 U.S.C.

§ 3603(b)(1) (exempting the sale of housing without the services of brokers or any

person in the business of selling houses from the Fair Housing Act). The judge

signed a document titled “Final Judgment” which stated that “the plaintiffs shall

take nothing by their federal, state and city discrimination and conspiracy claims.”

The Fifth Circuit later affirmed the district court’s judgment. Petrello v. Prucka,

484 F. App’x 939 (5th Cir. 2012), cert. denied, 133 S. Ct. 1723 (2013).

The final judgment entered by the federal district court also stated: “State

common law claims are remanded.” Similarly, the memorandum opinion and

order accompanying the final judgment stated in its conclusion that the “remaining

state law claims and any counterclaims, including the Naths’ claim to clear the title

to their house, are remanded . . . pursuant to 28 U.S.C. § 1447(c).” Although the

memorandum opinion and order made passing reference to Petrello’s claims for

breach of contract, tortious interference, aiding and abetting, and breach of auction,

the court made no reference to the pretrial nonsuit of such claims, and it did not

specifically analyze or otherwise address the continuing viability of those claims.

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The next day, Nath moved in state district court to cancel the lis pendens on

8 Remington Lane. Less than a month later, Petrello filed a petition in state court.

He alleged 14 causes of action, reasserting the housing discrimination claims the

federal court had dismissed and the eight state common-law causes of action that

he had nonsuited on the eve of the federal trial. In other words, although they were

listed in a different order, Petrello’s petition in state court listed the same 14 causes

of action as had been alleged in his federal complaint before his move to nonsuit

certain claims. The state common-law causes of action re-urged by Petrello

included claims of breach of contract, estoppel, constructive trust, tortious

interference with contract and business relations, and breach of auction.

The defendants filed a motion for summary judgment, and the trial court

entered judgment against Petrello. Among other reasons, the trial court held that

Petrello’s claims were precluded because he had already litigated them in federal

court, or he was required to litigate them there as they all arose from a common

nucleus of operative facts. The court explained that the “remand” was not “an

acknowledgement that some or any state court claims exist,” but that it was

intended to resolve the few remaining matters, such as the lis pendens.

Subsequently, the defendants moved for sanctions, cancelation of the lis pendens,

and the award of attorney’s fees under the Declaratory Judgment Act. See TEX.

CIV. PRAC. & REM. CODE ANN. § 37.009 (West 2008). The trial court denied

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sanctions, but it awarded attorney’s fees under the Declaratory Judgment Act and

canceled the lis pendens. Petrello then timely filed this appeal.

Analysis

We review a trial court’s grant of summary judgment de novo. Valence

Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). In our review, we

examine the entire record in the light most favorable to the nonmovant, indulging

every reasonable inference and resolving any doubts in the nonmovant’s favor.

City of Keller v. Wilson, 168 S.W.3d 802, 824–25 (Tex. 2005). When summary

judgment is sought and granted on multiple grounds, we will affirm the judgment

if any of the grounds on which it is based is meritorious. Joe v. Two Thirty Nine

Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004); Cadle Co. v. Bray, 264 S.W.3d

205, 210 (Tex. App.—Houston [1st Dist.] 2008, pet. denied). Asserting that a

claim is barred by res judicata is an affirmative defense. TEX. R. CIV. P. 94.

Accordingly, Prucka and Nath bore the burden of establishing each of the elements

of res judicata as a matter of law. Garcia v. Shell Oil Co., 355 S.W.3d 768, 773

(Tex. App.—Houston [1st Dist.] 2011, no pet.).

I. Res judicata

Federal law controls the determination of whether the federal district court’s

final judgment is res judicata as to the subsequent state-court proceeding. Geary v.

Tex. Commerce Bank, 967 S.W.2d 836, 837 (Tex. 1998) (per curiam); Garcia, 355

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S.W.3d at 774. Res judicata, or claim preclusion, bars the litigation of claims that

either have been litigated or should have been raised in an earlier suit. Test

Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005). Res

judicata applies when “(1) the parties are identical or in privity; (2) the judgment in

the prior action was rendered by a court of competent jurisdiction; (3) the prior

action was concluded by a final judgment on the merits; and (4) the same claim or

cause of action was involved in both actions.” Id. When successive suits seek

recovery for the same injury, “a judgment on the merits operates as a bar to the

later suit, even though a different legal theory of recovery is advanced in the

second suit.” Nilsen v. City of Moss Point, Miss., 701 F.2d 556, 564 (5th Cir.

1983) (citation omitted).

To determine whether two suits involve the same claim or cause of action,

the Fifth Circuit applies the transactional test from the Restatement (Second) of

Judgments. Test Masters, 428 F.3d at 571; Garcia, 355 S.W.3d at 774. “Under

the transactional test, a prior judgment’s preclusive effect extends to all rights of

the plaintiff with respect to all or any part of the transaction, or series of connected

transactions, out of which the original action arose.” Test Masters, 428 F.3d at

571. “[T]he critical issue is not the relief requested or the theory asserted but

whether the plaintiff bases the two actions on the same nucleus of operative facts.”

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Agrilectric Power Partners, Ltd. v. Gen. Elec. Co., 20 F.3d 663, 665 (5th Cir.

1994) (quoting Matter of Howe, 913 F.2d 1138, 1144 (5th Cir. 1990)).

The nucleus of operative facts in both Petrello’s federal action and his

subsequent state-court action are the same. His state-law claims, which include

breach of contract and a request for a declaratory judgment that he is entitled to the

property, arise from the same transaction—the sale of 8 Remington Lane—that

gave rise to his fair housing claims. See, e.g., Thanedar v. Time Warner, Inc., 352

Fed. App’x 891, 895, 898 (5th Cir. 2009) (employee’s termination comprised same

core set of facts for both prior lawsuit’s Title VII claims and later lawsuit’s OSHA

whistleblower and Sarbanes-Oxley retaliation claims); Harper v. AutoAlliance

Int’l, Inc., 392 F.3d 195, 209 (6th Cir. 2004) (Title VII discrimination claim, Title

VII retaliation claim, state race-discrimination claim, workers’ compensation

retaliation claim, and state-law abuse-of-process claim all arose from the same

nucleus of operative facts because they all arose from employee’s termination);

Clifton v. Warnaco, Inc., 53 F.3d 1280 (Table), 1995 WL 295863, at *8 (5th Cir.

Apr. 18, 1995) (prior suit involving breach of contract claims based on employee’s

termination barred later suit involving age and sex discrimination claims because

those claims arose from the same termination).

In each suit, Petrello (1) alleged the same oral agreement existed between

him and Prucka, (2) complained of Prucka’s sale to Nath despite his higher net

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offer, (3) complained of the same alleged interference by Nath in his purchase of

the home, and (4) sought the same remedy of rescission of the house’s sale. The

language in the pleadings for both suits further demonstrates their similarity. See

Vines v. Univ. of La. at Monroe, 398 F.3d 700, 710 (5th Cir. 2005) (prior state

court action barred federal action involving the same language in pleadings and

same factual allegations that retired university employees were given increased

workloads, discriminated against, and eventually not rehired). The state action is

not based on a new or different factual scenario than the federal action. See Test

Masters, 428 F.3d at 572 (holding a suit based on a new set of trademark

infringement allegations was not barred by res judicata).

Accordingly, this suit and Petrello’s prior suit arise from same nucleus of

operative facts and thus constitute the same cause of action for purposes of claim

preclusion. See Agrilectric Power, 20 F.3d at 665. Petrello does not challenge that

the same parties and cause of action were involved in the prior federal case as in

this case. But he disputes whether two other elements of res judicata apply: that

the prior action was concluded by a final judgment on the merits and that a court of

competent jurisdiction rendered the prior judgment.

A. Finality

Petrello disputes the finality of the prior federal judgment because it did not

dispose of all of his claims—specifically, his state-law claims that he had

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nonsuited before the federal trial. He relies upon Del-Ray Battery Co. v. Douglas

Battery Co., 635 F.3d 725 (5th Cir. 2011), to support his argument that a judgment

lacks finality “when outstanding issues remain.” Id. at 730. Unlike the judgment

in Del-Ray Battery, however, the federal final judgment in this case left no issues

outstanding with respect to Petrello’s claims. See id. (holding that interlocutory

summary judgment order addressing only some outstanding issues was not final

judgment). Petrello had nonsuited his state common-law and declaratory-judgment

claims on the eve of a trial on claims of discrimination and conspiracy in

connection with Prucka’s sale of the house to Nath. Accordingly, the state-law

claims were in no sense outstanding or remaining at the time the federal district

court’s final judgment. Cf. FED. R. CIV. P. 41(b) (providing that generally any

dismissal “except one for lack of jurisdiction, improper venue, or failure to join a

party . . . operates as an adjudication on the merits”). Petrello chose not to pursue

them.

Petrello’s voluntary dismissal of certain claims does not undermine the

finality of the federal judgment and its preclusive effect. Even when a court grants

a nonsuit without prejudice, res judicata precludes such claims from being asserted

later if they “could have been advanced in support of the cause of action on the

occasion of its former adjudication.” Davis v. Dallas Area Rapid Transit, 383 F.3d

309, 314 (5th Cir. 2004) (quoting Nilsen, 701 F.2d at 560). When later-asserted

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claims arise from the same nucleus of operative facts as prior claims, such claims

not only could have been brought but should have been brought in the first action

to create a single, convenient trial unit. Id. at 313–14. Res judicata bars such

claims that a party failed to pursue, even if the court granted a nonsuit without

prejudice regarding them. See, e.g., Howe, 913 F.2d at 1147 n.30 (holding that res

judicata barred suit although original proceedings were dismissed without

prejudice when the plaintiffs had opportunity to bring claims in original suit). 1

1

Our conclusion that Petrello’s claims arise from a common nucleus of

operative facts implies that all of the claims could have been pursued

together in the federal trial pursuant to the federal court’s supplemental

jurisdiction. See 28 U.S.C. § 1367(a) (“Except as provided in subsections

(b) and (c) or as expressly provided otherwise by Federal statute, in any civil

action of which the district courts have original jurisdiction, the district

courts shall have supplemental jurisdiction over all other claims that are so

related to claims in the action within such original jurisdiction that they form

part of the same case or controversy under Article III of the United States

Constitution.”); City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156,

164-65, 118 S. Ct. 523, 529 (1997) (“the federal courts’ original jurisdiction

over federal questions carries with it jurisdiction over state law claims that

‘derive from a common nucleus of operative fact,’ such that ‘the relationship

between [the federal] claim and the state claim permits the conclusion that

the entire action before the court comprises but one constitutional “case.”’”

(quoting Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138

(1966)). Our conclusion in this regard does not suggest that Petrello was

required to defy a prior ruling of the Fifth Circuit. See Petrello v. Nath, 350

Fed. Appx. 887, 889 n.1 (5th Cir. 2009) (“our review of the record raises a

serious question under 28 U.S.C. § 1367(a) whether federal supplemental

jurisdiction over the plaintiff’s state law claims is appropriate”). Despite the

Fifth Circuit’s dictum questioning the exercise of supplemental jurisdiction

over these claims, the federal district court did not react by striking those

claims from the case, as it was surely obligated to do if it found its own

jurisdiction lacking. See, e.g., Steel Co. v. Citizens for a Better Env’t, 523

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Petrello does not offer a plausible interpretation of the federal district court’s

order that the state-law claims it “remanded” specifically referred to any of

Petrello’s own claims. When the federal district court dismissed the claims related

to housing discrimination and conspiracy, Petrello had no remaining claims.

Petrello’s other claims had all been dismissed after he moved to nonsuit them.

Thus, the only claims “remaining” in the action were Nath’s state-law claims under

the Texas Declaratory Judgment Act. These were a request for a declaration that

he possessed fee simple title to the house, that the lis pendens was void, and that he

was entitled to attorney’s fees.

The fact that the district court remanded the remaining state-law claims does

not affect the finality of the federal court’s judgment. A judgment containing a

remand order is final as to those aspects of the judgment “distinct and separable

from the remand proper.” Morris v. T E Marine Corp., 344 F.3d 439, 445 (5th Cir.

U.S. 83, 95, 118 S. Ct. 1003, 1013 (1998). Had the Fifth Circuit actually

ruled there was no supplemental jurisdiction, or if the federal district court

had actually declined to exercise its supplemental jurisdiction, see 28 U.S.C.

§ 1367(c), then we would be faced with a different scenario in which it could

not be concluded that the state-law claims could have been brought in the

first action. Cf. In re Haynes & Boone, LLP, 376 S.W.3d 839, 847 (Tex.

App.—Houston [1st Dist.] 2012) (orig. proceeding) (noting the

undesirability of circumstances amounting to “jurisdictional ping-pong” due

to their tendency to “undermine public confidence in our judiciary” and

“squander private and public resources” (quoting Christianson v. Colt Indus.

Operating Corp., 486 U.S. 800, 818–19, 108 S. Ct. 2166, 2179 (1988)). But

the federal courts never so ruled. Had Petrello intended to preserve the right

to assert these claims, he could have sought and obtained a jurisdictional

ruling in the federal court. Instead, he voluntarily dismissed the claims.

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2003) (quoting First Nat’l Bank v. Genina Marine Servs., Inc., 136 F.3d 391, 394

(5th Cir. 1998)). Here, the resolution of Petrello’s claims regarding the sale of the

house was distinct from the remanded state-law claims, such as Nath’s claim

seeking to cancel the lis pendens. Accordingly, we conclude that the federal

district court’s judgment was final in the relevant sense, that is, with respect to all

of Petrello’s claims relating to and arising from the sale of the Prucka house.

Petrello’s own treatment of the federal district court’s judgment also

supports this conclusion that the judgment is final. Petrello did not question its

finality when he appealed the judgment to the Fifth Circuit, which generally can

only hear appeals from final judgments. See John G. & Marie Stella Kennedy

Mem’l Found. v. Mauro, 21 F.3d 667, 670 (5th Cir. 1994) (upholding jurisdiction

to review judgment dismissing plaintiff’s federal claims although the district court

remanded parts of the case to state court); RESTATEMENT (SECOND) OF JUDGMENTS

§ 13 cmt. g (“[T]hat the parties were fully heard, that the court supported its

decision with a reasoned opinion, that the decision was subject to appeal or was in

fact reviewed on appeal, are factors supporting the conclusion that the decision is

final for the purpose of preclusion.”). Finality for purposes of res judicata is

generally the same as finality for purposes of appellate review. RESTATEMENT

(SECOND) OF JUDGMENTS § 13 cmt. b. Further, in his briefing and correspondence

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with the trial court, Petrello explicitly acknowledged that the district court rendered

final judgment on the merits.

B. Competent jurisdiction

Petrello also argues that the prior judgment was not rendered by a court of

competent jurisdiction because the district court purportedly declined to exercise

its supplemental jurisdiction over his state-law claims when it “remanded” them.

This argument is inconsistent with Petrello’s voluntary dismissal of such claims

prior to the federal trial, and Petrello gives no reason why that nonsuit should be

considered ineffective. Because the voluntarily dismissed claims were not part of

the federal case at the time of the federal judgment, they could not have been

remanded upon the dismissal of Petrello’s “discrimination and conspiracy claims.”

In the alternative, Petrello contends that the federal court used the “remand”

language to decline to exercise supplemental jurisdiction over the “state common

law claims.” As we conclude that federal district court was not specifically

referencing Petrello’s claims, it necessarily could not have specifically declined to

exercise jurisdiction over the claims and thereby preserve them against the res

judicata bar. See Vines v. Univ. of La. at Monroe, 398 F.3d 700, 712 (5th Cir.

2005) (“Absent an express reservation, res judicata applies to bar a second suit.”).

Thus, res judicata bars Petrello’s state suit, as the trial court correctly

concluded.

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II. Attorneys’ fees

Petrello also challenges the trial court’s award of attorney’s fees to the

defendants. The trial court awarded Prucka $152,000 in fees and $30,000 in costs,

and it awarded Nath $73,000 in fees and $27,000 in costs. The court awarded

contingent attorney’s fees in the amount of $50,000 for appeal to the court of

appeals and $25,000 for appeal to the Supreme Court of Texas. Petrello argues

that the trial court erred by awarding attorney’s fees based on a post-judgment

motion supported by affidavits, rather than requiring evidence to be presented at a

pre-judgment hearing. Additionally, he argues that the attorney’s fees awarded

were not properly segregated and included $40,000 in unrecoverable costs.

A. Proof by affidavit

We review a trial court’s award of attorney’s fees under the Declaratory

Judgments Act for an abuse of discretion. Hot-Hed, Inc. v. Safehouse Habitats

(Scotland), Ltd., 333 S.W.3d 719, 733 (Tex. App.—Houston [1st Dist.] 2010, pet.

denied). “A trial court abuses its discretion when it reaches a decision so arbitrary

and unreasonable as to constitute a clear and prejudicial error of law.” Id. When a

movant includes a prayer for attorney’s fees in its summary-judgment motion, an

attached affidavit is testimony that may be considered as proof of the attorney’s

fees incurred. Owen Elec. Supply, Inc. v. Brite Day Constr., Inc., 821 S.W.2d 283,

288 (Tex. App.—Houston [1st Dist.] 1991, writ denied); see Gaughan v. Nat’l

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Cutting Horse Ass’n, 351 S.W.3d 408, 423 (Tex. App.—Fort Worth 2011, pet.

denied). To create a fact issue, the nonmovant must file a counter-affidavit

contesting the reasonableness of the movant’s attorney’s fee claim. See TEX. CIV.

PRAC. & REM. CODE ANN. § 18.001(b) (West 2008). Unless a controverting

affidavit is filed, an affidavit as to the amount of attorney’s fees is presumed

reasonable. Id.; Hunsucker v. Fustok, 238 S.W.3d 421, 432 (Tex. App.—Houston

[1st Dist.] 2007, no pet.). The party intending to controvert a claim in the

attorney’s fees affidavit must file a counter-affidavit no later than 30 days after

receipt of the affidavit. TEX. CIV. PRAC. & REM. CODE ANN. § 18.001(e).

In this case, the defendants included a prayer for attorney’s fees in their

summary-judgment motion, and they submitted affidavits supporting the award.

Petrello did not file a counter-affidavit challenging these fees as unreasonable.

Instead, he argues that the issue of the reasonableness and necessity of Declaratory

Judgment Act attorney’s fees must be submitted to the jury, relying upon Bocquet

v. Herring, 972 S.W.2d 19 (Tex. 1998), and Fuqua v. Oncor Elec. Delivery Co.,

315 S.W.3d 552 (Tex. App.—Eastland 2010, pet. denied). Petrello’s cases do not

stand for the proposition he advances.2 While attorney’s fees are an issue for the

2

In Bocquet, the Supreme Court noted that the issue of whether attorney’s

fees are reasonable is “generally” a “question of fact for the jury’s

determination.” Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). But

when the trial court decides a case as a matter of law, as here, a party’s

uncontroverted affidavits establish the reasonable amount of attorney’s fees

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jury in cases in which the jury is the factfinder, Bocquet, 972 S.W.2d at 21, an

affidavit can establish the reasonableness of attorney’s fees for summary judgment

purposes. Gaughan, 351 S.W.3d at 423. When no controverting affidavit is filed,

mere criticism of the amount of attorney’s fees sought does not create a fact issue

and the trial court may grant summary judgment on the amount of attorney’s fees.

Id. at 423–24; Merch. Ctr., Inc. v. WNS, Inc., 85 S.W.3d 389, 397 (Tex. App.—

Texarkana 2002, no pet.); see also Hunsucker, 238 S.W.3d at 432 (holding it is an

abuse of discretion not to award fees when party submitted uncontroverted

affidavit establishing reasonableness of fees).

B. Segregation of fees

Petrello next argues that the trial court erred by awarding attorney’s fees that

had not been segregated. The question of the need to segregate fees is a question

of law, which we review de novo. Tony Gullo Motors, Inc. v. Chapa, 212 S.W.3d

as a matter of law as well. Hunsucker v. Fustok, 238 S.W.3d 421, 432 (Tex.

App.—Houston [1st Dist.] 2007, no pet.). And unlike the scenario in Fuqua,

Petrello raised no fact question on the issue of the reasonableness of

attorney’s fees. Fuqua v. Oncor Elec. Delivery Co., 315 S.W.3d 552, 559–

60 (Tex. App.—Eastland 2010, pet. denied). There, the party requesting

fees asked the trial court to determine the issue over the objection of the

opposing party, which requested a jury trial on the issue. Id. at 560. Petrello

never raised a fact question because he failed to comply with the provision

of TEX. CIV. PRAC. & REM. CODE ANN. § 18.001 requiring a controverting

affidavit to contest the issue. See Merch. Ctr., Inc. v. WNS, Inc., 85 S.W.3d

389, 397 (Tex. App.—Texarkana 2002, no pet.) (holding reasonableness of

attorney’s fees under Declaratory Judgment Act is fact question, but clear,

direct, and uncontroverted evidence of fees is taken as true as matter of law

when opposing party has not rebutted such evidence).

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299, 312–13 (Tex. 2006). Parties seeking attorney’s fees must “segregate fees

between claims for which they are recoverable and claims for which they are not.”

Id. at 311. But when legal services advancing both recoverable and unrecoverable

claims are intertwined, legal services need not be segregated. Id. A claim is not

disallowed because it does “double service,” but a claimant must segregate fees if

any attorney’s fees relate solely to a claim for which fees are unrecoverable. Id. at

313. The party seeking to recover attorney’s fees carries the burden of

demonstrating that fee segregation is not required. CA Partners v. Spears, 274

S.W.3d 51, 82 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (citing Hong

Kong Dev., Inc. v. Nguyen, 229 S.W.3d 415, 455 (Tex. App.—Houston [1st Dist.]

2007, no pet.)). “[T]he evidence of the amount of recoverable attorney’s fees is

sufficiently segregated if, for example, the attorney testifies that a given percentage

of the drafting time would have been necessary even if the claim for which

attorney’s fees are not recoverable had not been asserted.” Id.

The trial court granted summary judgment on the bases of preclusion of

claims and the statute of frauds—defenses that would equally defeat Petrello’s

Declaratory Judgment Act claims and his various state-law claims for which

attorney’s fees are unrecoverable. When the services necessary to defend a claim

for which fees are available also advance an argument against a claim for which

fees are not recoverable, “then the exception to the general fee-segregation rule

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applies, and the amount of time or money that was reasonable to expend in

performing the service need not be segregated among the claims it advanced.” In

re Lesikar, 285 S.W.3d 577, 585 (Tex. App.—Houston [14th Dist.] 2009, orig.

proceeding); see also Bencor, Inc. v. Variable Annuity Life Ins. Co., No. 01-09-

00094-CV, 2011 WL 1330818, at *9 (Tex. App.—Houston [1st Dist.] Apr. 7,

2011, pet. denied) (mem. op.) (holding prevailing party could recover declaratory

judgment attorney’s fees “when it raised the defense of res judicata as to both the

breach of contract claim and the claim for declaratory relief”). In support of their

request for fees, the defendants presented affidavits from their attorneys and

supporting documents to the trial court supporting the conclusion that the fees were

reasonable and intertwined with the defense of Petrello’s Declaratory Judgment

Act claims. Accordingly, we conclude that the trial court did not abuse its

discretion in its attorney’s fees award.

C. Unrecoverable costs

Finally, Petrello contests the trial court’s award of “almost $40,000 in

unrecoverable costs” to the Prucka and Nath. He contends that the costs were not

recoverable because Texas law does not generally permit the recovery of litigation

expenses, such as photocopies and exhibit preparation, as “costs.” See, e.g., TEX.

R. CIV. P. 140 (“No fee for a copy of a paper not required by law or these rules to

be copied shall be taxed in the bill of costs.”).

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The manner of assessing costs is left largely to the trial court’s discretion.

Shaikh v. Aerovias de Mexico, 127 S.W.3d 76, 82 (Tex. App.—Houston [1st Dist.]

2003, no pet.). “Costs” usually refers to “fees and charges required by law” to be

paid to the courts or some of their officers, and the amount is fixed by statute or the

court’s rules. Id. Generally, expenses incurred in prosecuting or defending a

lawsuit are not recoverable as costs, unless permitted by a statute or rule. Sterling

Bank v. Willard M, L.L.C., 221 S.W.3d 121, 125 (Tex. App.—Houston [1st Dist.]

2006, no pet.). Whether a particular expense is permitted by statute or rule to be

recoverable as a cost is a question of law, which we review de novo. Ferry v.

Sackett, 204 S.W.3d 911, 912 (Tex. App.—Dallas 2006, no pet.).

Here, the Declaratory Judgment Act grants discretion to the trial court to

“award costs and reasonable and necessary attorney’s fees as are equitable and

just.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (West 2008); see also

Bocquet, 972 S.W.2d at 21 (holding section 37.009 entrusts awards to sound

discretion of trial court). When the Declaratory Judgment Act provides for the

recovery of costs, other rules limiting the award of costs, such as the Texas Rules

of Civil Procedure, do not control. W. Beach Marina, Ltd. v. Erdeljac, 94 S.W.3d

248, 270 (Tex. App.—Austin 2002, no pet.); see also Bocquet, 972 S.W.2d at 21

(limitations on trial court’s discretion to make awards under section 37.009 found

in statute’s language). The general rule relied upon by Petrello that litigation

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expenses cannot be assessed as costs stems from the Texas Rules of Civil

Procedure. See, e.g., Shaikh, 127 S.W.3d at 82. No such limitation is found in the

Declaratory Judgment Act, which instead allows the court to award both costs and

attorney’s fees so long as the award is equitable and just. TEX. CIV. PRAC. & REM.

CODE ANN. § 37.009; Martin v. Cadle Co., 133 S.W.3d 897, 906–07 (Tex. App.—

Dallas 2004, pet. denied).

Petrello does not argue that the award of costs connected to defending his

lawsuit was either inequitable or unfair. Therefore, we overrule this issue. See

Martin, 133 S.W.3d at 907 (overruling appellant’s challenge to section 37.009

award when he does not argue award inequitable or unjust); W. Beach Marina, 94

S.W.3d at 270 (same).

Conclusion

As the trial court’s grant of summary judgment on the ground of res judicata

was meritorious, we need not address Petrello’s other issues to affirm the

judgment. Two Thirty Nine Joint Venture, 145 S.W.3d at 157. We affirm the

judgment of the trial court.

Michael Massengale

Justice

Panel consists of Justices Keyes, Massengale, and Brown.

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