Sunchase IV Homeowners Association, Inc. and Board v. David Atkinson

Supreme Court of Texas

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No. 20-0682

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Sunchase IV Homeowners Association, Inc. and Board,

Petitioners,

v.

David Atkinson,

Respondent

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On Petition for Review from the

Court of Appeals for the Thirteenth District of Texas

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PER CURIAM

Justice Lehrmann did not participate in the decision.

This case concerns whether a defendant condominium association

is entitled to attorney’s fees after obtaining a take-nothing judgment on

claims by a plaintiff unit owner. Because we have held that a party may

qualify as a “prevailing party” by “successfully defending against a claim

and securing a take-nothing judgment,” Rohrmoos Venture v. UTSW

DVA Healthcare, LLP, 578 S.W.3d 469, 486 (Tex. 2019), we conclude

that the fee award was authorized by Section 82.161(b) of the Texas

Property Code. Accordingly, we reverse the court of appeals’ judgment

as to attorney’s fees.

Sunchase IV is a condominium complex in South Padre Island,

Texas. The property is administered and managed by Sunchase IV

Homeowners Association (Sunchase), a non-profit corporate entity of

which each unit owner is a member. Sunchase’s Board operates the

property subject to rules and regulations contained in the Sunchase IV

Homeowners Association, Inc. Condominium By-Laws and the

Sunchase IV Condominium Declaration and Master Deed (the

Governing Documents).

David Atkinson owns a unit in the Sunchase IV complex. In July

2008, Hurricane Dolly caused damage to Sunchase IV, including

Atkinson’s unit. Following a lengthy repair and insurance disbursement

process, Atkinson sued Sunchase and its Board for fraud, civil

conspiracy, breach of fiduciary duty, breach of contract, negligence,

gross negligence, conversion, and trespass. Atkinson alleged that

Sunchase created a fraudulent scheme to keep insurance monies from,

and shift the hurricane repair obligations to, individual unit owners. He

also asserted that Sunchase violated its Governing Documents by

altering portions of individual units, making secretive repairs inside his

unit, and failing to repair common elements of the building. Finally, he

contended that Sunchase unlawfully used his air conditioning and

violated terms of a previous settlement agreement by giving

“preferential parking” to motorcycles, trailers, and boats.

In response, Sunchase filed a counterclaim for declaratory

judgment and requested attorney’s fees under Section 82.161 of the

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Texas Property Code (the Uniform Condominium Act) and Section

37.009 of the Texas Civil Practice and Remedies Code (the Uniform

Declaratory Judgments Act). Sunchase moved for partial summary

judgment and the trial court granted its motion on twelve declaratory

issues, including that “Sunchase [was] entitled to reasonable attorney’s

fees and costs of litigation from Atkinson in the event Sunchase

prevail[ed].” The case proceeded to trial on Atkinson’s remaining claims

and Sunchase’s claim for attorney’s fees. Ultimately, the jury found that

Sunchase did not breach a fiduciary or contractual duty to Atkinson,

Sunchase did not trespass, and Sunchase was entitled to reasonable

attorney’s fees of $135,029.94 for trial and $85,000 for appeal. Atkinson

appealed.

The court of appeals affirmed the trial court’s take-nothing

judgment, concluding that Atkinson’s substantive challenges were

either waived or unsupported by the record. The court of appeals also

rejected Atkinson’s argument that Sunchase had failed to segregate its

fees, but it held that Sunchase was not entitled to attorney’s fees under

either theory asserted in the trial court. As to Section 37.009, the court

concluded that Sunchase “did not state a claim for affirmative relief”

because its request for declaratory relief was a mirror image of

Atkinson’s claims. ___ S.W.3d ___, 2020 WL 2079093, at *15 (Tex.

App.—Corpus Christi–Edinburg Apr. 30, 2020). Regarding Section

82.161, the court of appeals concluded that Sunchase was not a

prevailing party because (1) it was not adversely affected by a violation

of Chapter 82 or the condominium’s declaration or bylaws, and (2) it did

not seek affirmative relief.

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Sunchase filed a petition for review in this Court, arguing that

(1) a defendant that obtains a take-nothing judgment may qualify as a

prevailing party under Section 82.161, and (2) Sunchase’s requests for

declaratory relief either were not mirror images of Atkinson’s claims or

qualified for an exception to the mirror-image rule.

Consistent with our decision in Rohrmoos, we conclude that

Sunchase is entitled to attorney’s fees because it is a prevailing party

under Section 82.161(b). Because a single legal basis is sufficient to

support the trial court’s award of fees, we do not reach Sunchase’s

second issue.

Though the general rule is that litigants are responsible for their

own attorney’s fees, parties may recover attorney’s fees from an

opposing party if authorized by a statute or contract. Rohrmoos, 578

S.W.3d at 484; Travelers Indem. Co. of Conn. v. Mayfield, 923 S.W.2d

590, 593 (Tex. 1996). Whether a party is entitled to attorney’s fees is a

question of law. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex.

1999).

Chapter 82 of the Texas Property Code governs the creation,

management, and termination of condominiums. Section 82.161

provides:

(a) If a declarant or any other person subject to this chapter

violates this chapter, the declaration, or the bylaws, any

person or class of persons adversely affected by the

violation has a claim for appropriate relief.

(b) The prevailing party in an action to enforce the

declaration, bylaws, or rules is entitled to reasonable

attorney’s fees and costs of litigation from the

nonprevailing party.

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Because it provides that a prevailing party “is entitled to” attorney’s

fees, subsection (b) is a mandatory fee-shifting provision. See Bocquet v.

Herring, 972 S.W.2d 19, 20 (Tex. 1998). The Legislature did not define

“prevailing party” in Chapter 82, but we have previously construed the

term in other contexts. See Rohrmoos, 578 S.W.3d at 484-86 (addressing

“prevailing party” language in a contract); Intercontinental Grp. P’ship

v. KB Home Lone Star L.P., 295 S.W.3d 650, 653-55 (Tex. 2009) (drawing

from “prevailing party” jurisprudence in the Supreme Court of the

United States to construe “prevailing party” language in Section 38.001

of the Texas Civil Practice and Remedies Code).

The court of appeals concluded that “to qualify as the prevailing

party, [Sunchase] must have shown that it was adversely affected by a

violation of ‘this chapter, the declaration, or the bylaws’ and that it

suffered damages or otherwise obtained affirmative relief from the trial

court.” 2020 WL 2079093, at *8 (quoting TEX. PROP. CODE § 82.161(a)).

This is a correct statement of the two-pronged test for identifying

prevailing plaintiffs. But neither the text of Section 82.161 nor our cases

support applying such a test to defendants.

First, the court of appeals incorrectly applied subsection (a) to

Sunchase, holding that it must have been “adversely affected by a

violation” of Chapter 82. But subsection (a) restricts the class of

plaintiffs who may bring a cause of action under the Act. Only after

subsection (a) has been met may a plaintiff—via an action to enforce the

Chapter, declaration, or bylaws—obtain the “actual and meaningful

relief . . . materially alter[ing] the parties’ legal relationship” required to

become a prevailing party under subsection (b). Wheelbarger v. Landing

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Council of Co–Owners, 471 S.W.3d 875, 896-97 (Tex. App.—Houston [1st

Dist.] 2015, pet. denied) (quoting KB Home, 295 S.W.3d at 652)

(discussing the “prevailing party” element only after a plaintiff shows

she was “adversely affected” by a violation).

In contrast, a defendant seeking fees need only satisfy subsection

(b), which requires that it prevail “in an action to enforce” a

condominium’s governing documents or rules. It does not require the

party seeking fees to be the same party who brought the action.

Second, the court of appeals incorrectly concluded that Sunchase

must have suffered damages or obtained affirmative relief to qualify as

a prevailing party. But the text of subsection (b), unlike some other

fee-shifting statutes, does not contain a requirement that the prevailing

party obtain damages or affirmative relief. 1 The court of appeals

seemingly derived its rule from three cases involving prevailing

plaintiffs. See Farrar v. Hobby, 506 U.S. 103, 109-10 (1992) (holding

that “to qualify as a prevailing party, a civil rights plaintiff must obtain

at least some relief on the merits of his claim” (emphasis added)); KB

Home, 295 S.W.3d at 652 (adopting the rule from Farrar and concluding

that “a plaintiff must prove compensable injury and secure an

enforceable judgment in the form of damages or equitable relief”

(emphasis added)); Wheelbarger, 471 S.W.3d at 896 (applying the rule

from KB Home and holding that a condominium unit owner-plaintiff was

1 Cf. TEX. CIV. PRAC. & REM. CODE § 38.001(b)(8) (authorizing recovery

of fees “in addition to the amount of a valid claim”); Green Int’l, Inc. v. Solis,

951 S.W.2d 384, 390 (Tex. 1997) (holding that prevailing party must recover

damages to obtain fees under Chapter 38).

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not a prevailing party because she could not show “she suffered damages

or otherwise obtained affirmative relief from the trial court”).

In KB Home, we recognized but did not reach the question

whether the requirements necessary for a prevailing plaintiff to recover

fees would apply to differently situated parties, such as

“breaching-but-nonpaying defendant[s].” 295 S.W.3d at 659. Since

deciding KB Home, we provided an answer in Rohrmoos as to one class

of defendants: those who successfully defend against a plaintiff’s claims

and obtain a take-nothing judgment. 578 S.W.3d at 486. Rohrmoos

addressed whether a defendant could obtain attorney’s fees under a

commercial lease provision authorizing a fee award to “the prevailing

party” in “any action to enforce the terms of this Lease.” Id. at 484. We

explained that KB Home considered “only what a plaintiff must prove to

be a ‘prevailing party.’” Id. at 485. Distilling the foundational principle

from KB Home and Farrar, we concluded that “[a] defendant can obtain

actual and meaningful relief, materially altering the parties’ legal

relationship, by defending against a claim and securing a take-nothing

judgment on the main issue.” Id. at 486.

Applying the rule from Rohrmoos here, we hold that Sunchase is

a prevailing party under Section 82.161(b). First, because Atkinson

alleged that his damages were due to violations of the Governing

Documents and requested injunctive relief to interpret and enforce the

Governing Documents, Atkinson’s suit was an “action to enforce” the

condominium declaration and bylaws under subsection (a). Specifically,

Atkinson cites the Governing Documents as a basis for his claims of

fraud, breach of contract, and breach of fiduciary duty, as well as his

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allegations that Sunchase unlawfully made changes to common

elements and gave preferential parking to certain vehicles.

Second, the trial court granted Sunchase a partial summary

judgment on twelve declaratory issues and a partial directed verdict

before the jury found against Atkinson on each of the remaining issues.

Sunchase thus obtained a take-nothing judgment on all of Atkinson’s

substantive claims, so it was a prevailing party under subsection (b).

See Rohrmoos, 578 S.W.3d at 486.

In conclusion, the court of appeals’ decision regarding fees is

contrary to our holding in Rohrmoos. Sunchase did not need to show it

was adversely affected by a violation of Chapter 82 or obtain damages

to qualify as a prevailing party under Section 82.161(b). Consistent with

Rohrmoos, Sunchase is a prevailing party because it obtained a

take-nothing judgment on the main issue of the litigation. Without

hearing oral argument, TEX. R. APP. P. 59.1, we grant Sunchase’s

petition for review, reverse the court of appeals’ judgment as to

attorney’s fees, and reinstate the trial court’s judgment awarding fees to

Sunchase.

OPINION DELIVERED: April 8, 2022

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