MBM Financial Corp. v. Woodlands Operating Co

In MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 667 (Tex. 2009), the plaintiff sued for breach of contract and for declaratory judgment. MBM, 292 S.W.3d at 663. Because the evidence did not support the award of any actual or nominal damages for the breach-of-contract claim, the supreme court held that attorney's fees were not available under section 38.001 of the Civil Practices and Remedies Code. See Tex. Civ. Prac. & Rem. Code 38.001; MBM, 292 S.W.3d at 666. The supreme court further held that a party may not replead a claim as a declaratory judgment to justify an otherwise impermissible fee award and that "when a claim for declaratory relief is merely tacked onto a standard suit based on a matured breach of contract, allowing fees under Chapter 37 would frustrate the limits Chapter 38 imposes on such fee recoveries." MBM, 292 S.W.3d at 669-70. At trial, the plaintiff recovered no damages on its breach of contract and fraud claims. Although the plaintiff obtained five declarations, these declarations merely duplicated the issues in the fraud and contract claims. Id. at 671. As a result, the Supreme Court concluded that the plaintiff could not recover fees under the declaratory judgment statute. Id. at 670. In so doing, the Court held that: "When a claim for declaratory relief is merely tacked on to a standard suit for a matured breach of contract, allowing fees under the declaratory judgment statute would frustrate the limits Chapter 38 imposes on such fee recoveries. And granting fees under the declaratory judgment statute when they are not permitted under the specific common-law or statutory claims involved would violate the rule that specific provisions prevail over general ones." Id. The court then held that attorney's fees may not be awarded in tort cases such as fraud and that the Woodlands could not recover attorney's fees under section 38.001 of the Civil Practice & Remedies Code because the Woodlands had not proved any damages on its breach of contract claim. Id. at 666-67. The court then concluded that the Woodlands could not recover attorney's fees for its declaratory judgment action: The Act was originally "intended as a speedy and effective remedy" for settling disputes before substantial damages were incurred. It is "intended to provide a remedy that is simpler and less harsh than coercive relief, if it appears that a declaration might terminate the potential controversy." But when a claim for declaratory relief is merely tacked onto a standard suit based on a matured breach of contract, allowing fees under Chapter 37 of the Civil Practice& Remedies Code would frustrate the limits Chapter 38 imposes on such fee recoveries. And granting fees under Chapter 37 when they are not permitted under the specific common-law or statutory claims involved would violate the rule that specific provisions should prevail over general ones. While the Legislature intended the Act to be remedial, it did not intend to supplant all other statutes and remedies. At trial, the Woodlands recovered no damages on its breach of contract claim, so it cannot recover fees under Chapter 38. Allowing it to recover the same fees under Chapter 37 would frustrate the provisions and limitations of the neighboring chapter in the same Code. Accordingly, we hold the Woodlands cannot recover attorney's fees under the Declaratory Judgments Act. (Id. at 670.)In sum, the plaintiff established a breach of contract but it was not entitled to attorney's fees under TEX. CIV. PRAC. & REM. CODE ANN. 38.001 (Vernon 2008) because it failed to prove any damages. Id. at 666. The plaintiff also obtained a declaratory judgment that it complied with the contract and that the defendant did not. Id. at 670. It argued that this declaratory judgment authorized an attorney's fee award. The supreme court affirmed the plaintiff's declaratory judgment but found that this did not authorize an attorney's fee award under the Declaratory Judgment Act. The court reasoned that, if a claimant could recover attorney's fees under Section 37.009 simply by repleading a breach of contract claim as a declaratory judgment action, this would repeal the American Rule and the limits imposed on fee awards in other statutes. Id. at 669. Because specific statutory provisions prevail over general provisions in statutory construction 4 and the declaratory judgment claim was redundant of the breach of contract claim, the plaintiff's right to recover attorney's fees was defined by contract law. Because the plaintiff could not recover its attorney's fees under Section 38.001, it could not recover them under Section 37.009. Id. at 670.