Opinion issued October 31, 2025
In The
Court of Appeals For The
First District of Texas ———————————— NO. 01-23-00415-CV ——————————— BUNGALOW REVIVAL, LLC, Appellant V. JOSÉ CRUZ, JR. AND SARAH CRUZ, Appellees
On Appeal from the 61st District Court Harris County, Texas Trial Court Case No. 2017-45154
MEMORANDUM OPINION
José Cruz, Jr. and his wife Sarah Cruz sued Bungalow Revival, LLC for
breach of an oral contract for home remodeling services, alleging that the work
was of poor quality and required thousands of dollars in repair. Bungalow Revival
counterclaimed for breach of the same contract, alleging that the Cruzes failed to pay the final invoice—a fact which they conceded. A jury found that both the
Cruzes and Bungalow Revival breached the contract, neither breach was excused,
and actual damages for both parties ($75,000 for the Cruzes and $36,424.45 for
Bungalow Revival). After offsetting the amount of the final invoice, the trial court
entered judgment on the verdict in favor of the Cruzes for $38,575.55 in actual
damages, along with pre- and post-judgment interest.
In its first two issues on appeal, Bungalow Revival argues that it was entitled
to attorney’s fees and prejudgment interest. In its third and final issue, it argues the
evidence was legally insufficient to support the jury’s finding that the Cruzes had
$75,000 in actual damages.
We conclude that the evidence of the Cruzes’ damages is not legally
insufficient simply because the jury’s reasoning is unclear, and the $75,000
damages award is within the range of evidence presented at trial. Because
Bungalow Revival prevailed on its claim for breach of contract, it was entitled to
attorney’s fees under Chapter 38 of the Civil Practice and Remedies Code.
However, because it failed to segregate its attorney’s fees, we will remand this
portion of the case to the trial court for a determination of the amount of fees to be
awarded. Finally, we conclude that Bungalow Revival was not entitled to
prejudgment interest.
2 We affirm the trial court’s judgment except as to Bungalow Revival’s claim
for attorney’s fees, which we remand for further proceedings.
Background
The Cruzes were good friends with Gilbert Perez, the sole owner of
Bungalow Revival. When the Cruzes decided to move to the Houston area where
José grew up, they asked Perez to take on a construction project to update and
customize their million-dollar new home in West University Place.1 Perez had
done this kind of project on a home the Cruzes previously owned in the Houston
area. Based on this experience and their good friendship with Perez, the Cruzes
entered into an oral agreement with Bungalow Revival to complete the work as
requested by Sarah in exchange for the Cruzes paying “cost plus 25%.”
The Cruzes were eager to move into their house, which they bought in
September 2015. As the work progressed, the Cruzes and their three minor
children lived in a two-bedroom apartment. Working with Sarah, Perez created
design plans for the house. The Cruzes initially hoped to move into the house in
January, but as the work progressed, the completion date slipped multiple times.
Perez and Nick Eronko, a Bungalow Revival employee who worked closely with
Perez, testified at trial that the delays were caused by numerous changes to the
1 José Cruz, Jr. is a former major league baseball player, who currently coaches the Rice University men’s baseball team. Due to his work, the family lived in several cities before moving back to Houston. 3 scope and design details that were requested by Sarah, as well as subcontractor
availability and scheduling, material delivery, a flood in Houston, and the need to
redo some of the work as issues arose. Sarah and José believed that Perez did not
prioritize the work on their house and that the changes to the scope of work that
Sarah requested could not account for any delays.
As the project progressed from demolition in early November 2015 through
completion in July 2016, Sarah frequently communicated with Perez and Eronko,
who principally handled billing. Some of the communications were light-hearted
and friendly and reflected the continued good relationship among them, including
sharing meals and holidays together.
In early November 2015, Eronko sent the Cruzes a conceptual budget
showing the anticipated costs for material and labor, plus 25%, based on the scope
of work that Bungalow Revival understood Sarah had requested. That estimate was
approximately $230,000. However, José testified that he did not want to spend that
much money on this project because of the large investment he had already made
in the house. He and Sarah testified that they had told Perez that their budget was
$140,000. According to Eronko, he sent the Cruzes requests for payment by email,
attaching a spreadsheet and the supporting the invoices or emailing or hand
delivering them separately. The Cruzes, however, said that they saw the
spreadsheet but not the invoices.
4 Some problems appeared throughout the project. First, Sarah had requested
that the floors be refinished because she did not like the reddish color of the
Brazilian cherry wood floors that were installed by the seller not long before the
Cruzes bought the home. The floors were sanded and refinished to an ebony color,
but they had to be redone after the Cruzes moved into the house due to a chemical
reaction that affected the appearance of the floors. The Cruzes temporarily left the
house while the floors were redone. The Cruzes were concerned about dust
mitigation during the flooring work because they had separately contracted for air
conditioning work, and they did not want the dust from the floor work to clog the
air conditioning system.
When the Cruzes finally moved in, Bungalow Revival still had to complete
the punch list—a final list of small changes, corrections, or completions to be made
to the house. Although the Cruzes, particularly Sarah, repeatedly indicated that
they were pleased with the appearance and the quality of the work in the home,
when they moved in, that changed. The primary issues of concern were the
Brazilian cherry wood floors, the work in an upstairs bathroom, particularly the
shower, and the air conditioning system.2 Although Perez said the floors were in
good condition when the Cruzes moved in, they underwent what he described as a
2 Sarah testified about other problems with Bungalow Revival’s work, including a broken water line to an ice machine, electrical outlet problems, floor issues, and a broken toilet seat. 5 chemical reaction in the weeks just after the Cruzes moved in. Sarah also testified
that she believed the floors were scratched by subcontractors performing other
work. The family left the house temporarily and the floors were refinished again.
Sarah testified that they stayed in a hotel for about a week, which cost $1,547.82.
By the time of trial, the Cruzes had not done any other work on the floors.
The Cruzes also maintain that the upstairs shower leaked, causing damage to
a downstairs ceiling. Sarah testified that she spent more than $13,000 to repair the
shower and about $3,000 to repaint the ceiling. Sarah testified that sawdust from
the projects done in the house got into the air ducts and clogged the air conditioner
drain, necessitating emergency repair. Sarah said that in the four years after she
moved into the house in the summer of 2016, she had spent about $15,000 on air
conditioning repairs.
The Cruzes sued Bungalow Revival in July 2017 for breach of contract.3 At
trial, Jose, Sarah, Eronko, and Perez testified. In addition, the Cruzes presented
testimony from Fred Willcox, a professional real estate inspector, and Bungalow
Revival presented testimony from Thomas Cloninger, a long-time professional in
construction in Houston.
3 The Cruzes also sued Perez and Eronko individually, but they are not parties to this appeal. In addition to breach of contract, the Cruzes also pleaded breach of the Texas Deceptive Trade Practices Act and fraud. The Cruzes only obtained favorable jury findings on their breach of contract claim against Bungalow Revival. 6 Willcox testified that he inspected the house in 2018, finding problems with
the work done in the upstairs bathroom. He said that the tile and grout lines were
uneven, and an inspection showed water in the wall behind the tile and in the
ceiling beneath the shower, all of which was caused by flawed installation. Willcox
helped prepare the $9,000 estimate to repair the master bath shower stall in 2018,
though he later said that he estimated it would cost $18,000 to repair the shower
and retile the floor in the bathroom. He opined that Bungalow Revival’s failure to
contain the dust during renovation caused damage to the air conditioning unit,
which would cost $5,700 to repair in 2023. He estimated that the entire project
should have cost only about $120,000, rather than the roughly $285,000 that the
Cruzes paid to Bungalow Revival in total.
Finally, based on 2023 estimates made shortly before trial, Willcox
estimated that repair of the downstairs floors would cost approximately $200,000.
That figure included $15,000 to move furniture, $54,000 for the floors, $13,000 to
refinish the stairs, $25,000 for three months’ rental allowance (even though he
thought the work should take only one month), and $32,500 to paint the trim
throughout the house.
Cloninger testified that he, too, inspected the house in 2018. He testified that
he thought the house was “beautiful” and, based on its condition, he did not
imagine that the family had lived there for two years since the renovations, with
7 the exception of the wood floors. He saw evidence of dogs, and he attributed the
scratches on the floor to the dogs. He said that the built-in cabinetry was
“beautiful” and met the American Wood Working Institute’s certifications. As to
the bathroom, he said that the tile work looked “great” with the exception of a
small bit of grout in one corner that needed to be scraped away with a small razor.
He testified that the plumbing fixtures were properly installed, and the connections
met the plumbing code. In the attic, the HVAC ductwork was “fine,” the joints
were taped, and the supply and return air grilles were plumb. The condenser
outside was operating normally without unusual noise or vibration, and the air
conditioner chilled the home by more than 25 degrees Fahrenheit below the
ambient external temperature. Overall, he called Bungalow Revival’s work “above
average to excellent quality.”
When asked about the cost of the project, he disputed Willcox’s testimony
that the work could have been done for $140,000. Cloninger testified that he had
been a professional estimator for 45 years, and based on his understanding of the
scope of the project, it could not have been done for only $140,000. He also
disputed Willcox’s testimony about the cost and timeline for replacing the
Brazilian cherry floors. He estimated that the work could be done in two weeks,
not one month, and that the floors could be replaced for approximately $14 to $17
dollars per foot installed.
8 Both sides rested, and the jury returned a verdict finding that both Bungalow
Revival and the Cruzes breached the agreement and that neither breach was
excused. The jury found damages of $75,000 to compensate the Cruzes for the
damages that resulted from Bungalow Revival’s failure to comply. The jury found
damages of $36,424.45 to compensate Bungalow Revival for the damages from the
Cruzes’ failure to comply.4
Bungalow Revival sought judgment notwithstanding the verdict (JNOV),
arguing that there was no evidence to support the award of $75,000 to the Cruzes.
Bungalow Revival also sought $177,495.03 in attorney’s fees, costs exceeding
$10,000, and pre- and post-judgment interest. The trial court denied the motion for
JNOV, applied the jury’s award in favor of Bungalow Revival as a credit, and
awarded judgment in favor of the Cruzes for $38,575.55 in damages, along with
$17,395.56 in prejudgment interest and post-judgment interest at the rate of 7.75%.
Bungalow Revival appealed.
Analysis
Bungalow Revival raises three issues on appeal, asserting that: (1) the trial
court erred by denying its legal fees; (2) the trial court erred by denying pre-
4 The Cruzes never disputed that they had withheld the final payment for the project in an amount of $36,424.45. The only disputed question of fact was whether they were excused from complying due to Bungalow Revival’s breach of the parties’ agreement. The jury found that they were not excused, and the Cruzes have not challenged that finding on appeal. 9 judgment interest; and (3) the trial court erred by denying the motion for JNOV
because there was no evidence to support the jury’s award of $75,000 in damages
to the Cruzes.
I. The $75,000 damages award is supported by legally sufficient evidence.
We address Bungalow Revival’s third issue first because a holding in favor
of Bungalow Revival could affect our analysis of the first two issues.
A. Standard of Review
We review a trial court’s denial of a JNOV under a legal sufficiency or “no
evidence” standard. Kelsey-Seybold Med. Grp., PLLC v. Roberts, No. 01-23-
00025-CV, 2024 WL 4594833, at *4 (Tex. App.—Houston [1st Dist.] Oct. 29,
2024, pet. denied) (mem. op.). The test for legal sufficiency is “whether the
evidence at trial would enable reasonable and fair-minded people to reach the
verdict under review.” City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).
When conducting a legal sufficiency review, we “view the evidence in the light
favorable to the verdict, crediting favorable evidence if reasonable jurors could,
and disregarding contrary evidence unless reasonable jurors could not.” Id. at 807;
see also Kroger Tex. Ltd. P’ship v. Suberu, 216 S.W.3d 788, 793 (Tex. 2006). So
long as the evidence falls within the zone of reasonable disagreement, we may not
substitute our judgment for that of the factfinder. City of Keller, 168 S.W.3d at
822.
10 We may sustain a no-evidence challenge when (1) the record bears no
evidence of a vital fact, (2) the rules of law or of evidence bar the court from
giving weight to the only evidence offered to prove a vital fact, (3) the evidence
offered to prove a vital fact is no more than a mere scintilla, or (4) the evidence
establishes conclusively the opposite of a vital fact. Gunn v. McCoy, 554 S.W.3d
645, 658 (Tex. 2018). Evidence does not exceed a scintilla if it is so weak as to do
no more than create a mere surmise or suspicion that the fact exists. Kroger Tex.
Ltd. P’ship, 216 S.W.3d at 793 (quoting Ford Motor Co. v. Ridgway, 135 S.W.3d
598, 601 (Tex. 2004) (citation omitted)).
When a party attacks the legal sufficiency of an adverse finding on which it
did not have the burden of proof, it must demonstrate that there is no evidence to
support the adverse finding. See Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex.
1983). The jury, as the factfinder, is the sole judge of the witnesses’ credibility and
the weight to give their testimony. City of Keller, 168 S.W.3d at 819. “It is the
province of the jury to resolve conflicts in the evidence,” and when reasonable
jurors could resolve conflicting evidence either way, we presume they did so in
accordance with the verdict. City of Keller, 168 S.W.3d at 820. We must defer to
the jurors’ determination of these matters and their resolution of conflicting
evidence. Id.
11 The jury has “discretion to award damages within the range of evidence
presented at trial.” Gulf States Utils. Co. v. Low, 79 S.W.3d 561, 566 (Tex. 2002);
accord Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 713 (Tex. 2016).
A jury’s damages award must have a rational basis; the jury may not arbitrarily
award an amount that is not supported by the evidence. Patino-Perez v. Howland,
No. 01-16-00054-CV, 2017 WL 3598241, at *4 (Tex. App.—Houston [1st Dist.]
Aug. 22, 2017, no pet.) (mem. op.).
B. Analysis
Bungalow Revival argues that the damages awarded, $75,000, does not bear
a rational basis to the demonstrative exhibit used by the Cruzes to argue for
damages.5 It further argues that neither the witnesses nor the attorneys presented
the jury with a range of damages to award.
The evidence in this case was highly contested as to the quality of the work
performed, the extent of damages and necessity of repair, the costs to repair, and
12 who bore responsibility for the delay in completion and increase in costs of the
project. Texas law is clear that it is the jury that sifts through the evidence,
determines the credibility of the witnesses and the weight to assign to the evidence,
and reaches a conclusion. See City of Keller, 168 S.W.3d at 820.
The jury found that both the Cruzes and Bungalow Revival breached the
agreements, but it found that neither breach was excused. The evidence about the
delay in the timeline and the changes to the scope of work, which increased the
cost of the renovation, was contested. Based on the evidence presented at trial, the
jury could have found that the Cruzes were responsible for the delays and
increased costs such that the expenses due to delay and cost overruns were not
damages from Bungalow Revival’s failure to comply with the parties’ agreement.
In other words, the jury could have reasonably concluded that Bungalow Revival
failed to comply with the parties’ agreement by delivering a renovation that did not
meet the Cruzes expectations but not by delivering a renovation late or for a total
price that was higher than originally contemplated. Thus, the jury could have
reasonably based its damages award on the costs associated with repairing the parts
of the renovation that did not meet the Cruzes’ expectations. At trial, the evidence
centered on the Brazilian cherry wood floors, the bathroom, and the air
conditioner.
13 In this case, the jury could have reasonably concluded that the Brazilian
cherry wood floors needed repair, but it could have rejected the $199,910.69 cost
estimated by Willcox, which he testified included only $54,000 for the floors
themselves, with the remainder being attributed to the cost of moving furniture and
renting temporary housing for $8,500 per month for three months. The jury could
have considered the exhibits that were admitted at trial in conjunction with
Cloninger’s estimate of approximately $14 to $17 per square foot for the flooring
replacement. Defense exhibit 58 included a cost breakdown from Alfred C.
Schulle, Wood Floor Specialist, that estimated 2600 square feet of existing
Brazilian cherry floors. The jury could have reasonably concluded that, based on
Cloninger’s testimony, the replacement of the existing cherry wood floor should
cost somewhere between $36,400 and $44,200.
The jury could have reasonably rejected the three-month estimate of time
that the Cruzes would be out of their home for the repair and instead concluded
that a much shorter time frame, like the two weeks Cloninger estimated, was more
appropriate. Thus, the jury could have rejected the $8,500 per month estimate for
housing while the floors were installed. Instead, the jury could have estimated the
cost of a two-week hotel stay based on Sarah’s testimony and the hotel bill from
their previous one-week hotel stay. That hotel stay cost the Cruzes $1,547.82, and
the jury could have estimated that a two-week stay would cost about $3,000. The
14 jury could have credited Sarah’s testimony that she paid over $13,000 to repair the
shower, $3,000 to repaint the ceiling damaged by the shower leak, and $15,000 to
repair the air conditioner in the four years she lived in the house.
Considering the evidence presented at trial regarding installation of new
floors, costs associated with the bathroom and the prior leak, a two-week hotel
stay, and repairs to the air conditioner, a reasonable range of damages would be
somewhere between $70,400 and $88,000.6 While we cannot say with certainty
that this is how the jury assessed damages, we can say that there is a rational basis
for the jury’s award of $75,000 in damages and that this award is supported by the
evidence. See City of Keller, 168 S.W.3d at 820; Gulf States Utils., 79 S.W.3d at
566; Patino-Perez, 2017 WL 3598241, at *4.
We overrule this issue.
II. Bungalow Revival is entitled to attorney’s fees.
Bungalow Revival sought attorney’s fees on its breach of contract claim for
the unpaid final invoice for the project under Chapter 38 of the Texas Civil
Practice and Remedies Code. In the trial court and on appeal, Bungalow Revival
maintained that it prevailed on its cause of action against the Cruzes because the
6 The low range of the estimate is based on $36,400 for the floors, $3,000 for a hotel stay, $3,000 to repaint the ceilings damaged by the bathroom leak, $15,000 for air conditioner repairs, and $13,000 for bathroom repairs. The high range of the estimate is based on $54,000 for the floors, $3,000 for a hotel stay, $3,000 to repaint the ceilings damaged by the bathroom leak, $15,000 for air conditioner repairs, and $13,000 for bathroom repairs. 15 jury found in its favor and that it need not obtain a net recovery on its claim to be
entitled to attorney’s fees. The Cruzes argue that Bungalow Revival is not entitled
to attorney’s fees because they, not Bungalow Revival, prevailed on the main issue
in this case and because Bungalow Revival failed to segregate its attorney’s fees.
The trial court denied fees to Bungalow Revival.
A. Applicable Law
1. Entitlement to Attorney’s Fees
In Texas, each party ordinarily pays its own attorney’s fees. Rohrmoos
Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 483 (Tex. 2019).
However, a prevailing party may recover attorney’s fees from the opposing party,
when fee-shifting is authorized by statute or contract. Id. at 484. When fee-shifting
is authorized, the party seeking the fee award must prove that the fees are
reasonable and necessary. Id. The availability of attorney’s fees under a particular
statute is a question of law for the court. Holland v. Wal-Mart Stores, Inc., 1
S.W.3d 91, 94 (Tex. 1999) (per curiam).
When this lawsuit was filed, Chapter 38 of the Texas Civil Practice and
Remedies Code provided that “[a] person may recover reasonable attorney’s fees
from an individual or corporation, in addition to the amount of a valid claim and
16 costs, if the claim is for . . . an oral or written contract.”7 Act of May 17, 1985, 69th
Leg., R.S., ch. 959 (amended by Act of May 28, 2021, 87th Leg., R.S., ch. 665 §1)
(former TEX. CIV. PRAC. & REM. CODE § 38.001(8)). The Texas Supreme Court has
repeatedly held that to recover attorney’s fees under section 38.001, a party must
(1) prevail on a cause of action for which attorney’s fees are recoverable, and
(2) recover damages. E.g., Rohrmoos Venture, 578 S.W.3d at 484. But the party
who prevails need not obtain a net recovery because his entitlement to attorney’s
fees under the statute “is not dependent upon the outcome of other claims or
counterclaims joined in the lawsuit.” McKinley v. Drozd, 685 S.W.2d 7, 11 (Tex.
1985) (interpreting predecessor statute to section 38.001). Thus, the party who
prevails on a claim for which attorney’s fees are recoverable may obtain a
judgment for those fees “even if the amount of the claim is entirely offset by an
opposing party’s claim.” Id.
2. Segregation of Attorney’s Fees
A fee claimant is, however, required to segregate fees when a lawsuit
involves both claims for which attorney’s fees are recoverable and claims for
which attorney’s fees are not recoverable. Tony Gullo Motors I, L.P. v. Chapa, 212
7 In 2021, Section 38.001 was amended to provide that attorney’s fees may be recoverable from “an individual or organization other than a quasi-governmental entity authorized to perform a function by state law, a religious organization, a charitable organization, or a charitable trust, in addition to the amount of a valid claim and costs” if the claim is for one of the eight enumerated topics, including “an oral or written contract.” TEX. CIV. PRAC. & REM. CODE § 38.001. 17 S.W.3d 299, 311 (Tex. 2006). Similarly, segregation is required when a lawsuit
involves multiple parties and claims. See Stewart Title Guar. Co. v. Sterling, 822
S.W.2d 1, 10 (Tex. 1991) (“In order to show the reasonableness and necessity of
attorney’s fees, the plaintiff is required to show that the fees were incurred while
suing the defendant sought to be charged with the fees on a claim which allows
recovery of such fees.”); French v. Moore, 169 S.W.3d 1, 17 (Tex. App.—Houston
[1st Dist.] 2004, no pet.) (“A party seeking attorney fees has a duty to segregate
nonrecoverable fees from recoverable fees, and to segregate the fees owed by
different parties.”).
In 1991, in Sterling, the Texas Supreme Court noted that there existed a
recognized exception to the duty to segregate attorney’s fees. Sterling, 822 S.W.2d
at 11. There the Court said that segregation of fees was not required when “causes
of action involved in the suit are dependent upon the same set of facts or
circumstances” and are “intertwined to the point of being inseparable.” Id. at 11–
12 (cleaned up). But fifteen years later, the Court recognized that this exception
had created a flood of claims for attorney’s fees based on arguments that both
recoverable and unrecoverable fees were “inextricably intertwined.” Tony Gullo
Motors I, 212 S.W.3d at 312. The Court explained that the application of the
exception by the courts of appeals had been inconsistent and sometimes failed to
18 give proper deference to the role of the factfinder in determining the amount of
attorney’s fees. Id. at 312–13.
The Supreme Court “reaffirm[ed] the rule that if any attorney’s fees relate
solely to a claim for which such fees are unrecoverable, a claimant must segregate
recoverable from unrecoverable fees.” Id. at 313. It modified the Sterling exception
and announced a new rule of law: “Intertwined facts do not make tort fees
recoverable; it is only when discrete legal services advance both a recoverable and
unrecoverable claim that they are so intertwined that they need not be segregated.”
Id. at 313–14. And, as relevant to this appeal, the Court noted that some fee
disputes could be decided as a matter of law. Id. at 314. “For example, to prevail
on a contract claim a party must overcome any and all affirmative defenses (such
as limitations, res judicata, or prior material breach), and the opposing party who
raises them should not be allowed to suggest to the jury that overcoming those
defenses was unnecessary.” Id. But when “at least some of the attorney’s fees are
attributable only to claims for which fees are not recoverable,” the fee claimant
must segregate fees. Id. Failure to segregate attorney’s fees does not preclude
recovery as the issue may be remanded to the trial court. Id. (“Unsegregated
attorney’s fees for the entire case are some evidence of what the segregated amount
should be.”).
B. Application to Facts
19 Here, the jury found that the Cruzes breached the contract and determined
that Bungalow Revival’s damages were $36,424.45. Thus, Bungalow Revival
prevailed on a claim based on an oral contract. That the jury’s determination of the
Cruzes’ damages, $75,000, exceeded and completely offset that of Bungalow
Revival does not alter the fact that Bungalow Revival prevailed on a cause of
action. Bungalow Revival was not required to obtain a net recovery in order to
obtain attorney’s fees under section 38.001. See McKinley, 685 S.W.2d at 11.
Bungalow Revival was, however, required to segregate its fees. A review of
the billing records submitted to the trial court shows that some fees were incurred
in pursuit of Bungalow Revival’s third-party claims. And some were incurred in
conducting legal research about the Texas Deceptive Trade Practices Act. Because
Bungalow Revival is not entitled to collect those attorney’s fees from the Cruzes,
we conclude that some attorney’s fees in this case relate solely to claims for which
such fees are unrecoverable, and segregation was required. See Tony Gullo Motors
I, 212 S.W.3d at 313.
In addition, Bungalow Revival relies on language from Tony Gullo Motors I
to argue that it is entitled to recover nearly all of the remainder of its attorney’s
fees because “[t]he facts and circumstances surrounding Bungalow Revival’s
breach of contract claim (and the Cruzes’ affirmative defenses asserted thereto)
were intertwined to the point of being inseparable from Bungalow Revival’s
20 defense of the Cruzes’ other claims against Bungalow Revival arising out of the
same oral contract and related to the same actions taken by each party in
connection with the contract.” Appellant’s Br. 22.
The flaw in Bungalow Revival’s argument is that it relied on language from
Tony Gullo Motors I that the court modified a few paragraphs later. See Tony Gullo
Motors I, 212 S.W.3d at 312–14. No longer is it sufficient for a fee-seeking party
to argue that the facts and circumstances are inseparably intertwined. See id. at
313–14. A fee-seeking party must now show that discrete legal services advance
both a recoverable and unrecoverable claim. See id. Bungalow Revival is entitled
to some amount of attorney’s fees because it prevailed on its own breach of
contract claim. On remand it must demonstrate that all the fees it seeks were for
discrete legal services that advanced its own breach of contract claim, even if they
also advanced its defense of the Cruzes’ claim against Bungalow Revival.
Bungalow Revival argues on appeal that it is entitled to rendition because its
evidence of attorney’s fees was uncontroverted at trial. It also argues that it did
segregate its fees by way of an affidavit from its attorney estimating that 10% of
the attorney’s fees should be allocated to work relating solely to individual
defendants, Nick Eronko and Gilbert Perez. See id. at 314 (suggesting that
testimony from attorney about percentage of work that can be attributed to
recoverable fees may suffice for segregation purposes). This does not, however,
21 address the need to segregate fees incurred for discrete legal services that did not
advance Bungalow Revival’s breach of contract claim against the Cruzes,
including services relating to joining third parties or researching non-contract
claims, for example.
The Cruzes argue that the trial court properly denied Bungalow Revival’s
request for attorney’s fees, however, we have already said that failure to segregate
fees is not fatal to a party’s claim for attorney’s fees. See id. Because we conclude
that Bungalow Revival failed to segregate attorney’s fees when it was required to
do so, we will remand for a determination of the amount of attorney’s fees to
which Bungalow Revival is entitled.
III. The trial court did not err by denying Bungalow Revival’s request for prejudgment interest.
Bungalow Revival argues that it was entitled to prejudgment interest under
Section 302.002 of the Texas Finance Code, and, alternatively, under principles of
equity because of the harsh effect of the lost use of money during the pendency of
the litigation. The Cruzes maintain that Bungalow Revival was not a creditor and
that no equitable reason exists to award prejudgment interest.
“Prejudgment interest is compensation allowed by law as additional
damages for lost use of the money due as damages during the lapse of time
between the accrual of the claim and the date of judgment.” Ventling v. Johnson,
22 466 S.W.3d 143, 153 (Tex. 2015) (internal quotations omitted). Texas law
provides two legal sources for prejudgment interest: (1) general principles of
equity and (2) enabling statutes. Johnson & Higgins of Tex., Inc. v. Kenneco
Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998). When no statute controls, an
award of prejudgment interest is governed by equitable principles, and the decision
to award prejudgment interest falls within the trial court’s discretion. Patriot
Contracting, LLC v. Shelter Prods., Inc., 650 S.W.3d 627, 659 (Tex. App.—
Houston [1st Dist.] 2021, pet. denied). We review the trial court’s award of
prejudgment interest for an abuse of discretion. Id.
1. Statutory Prejudgment Interest
Section 302.002 provides:
If a creditor has not agreed with an obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal interest at the rate of six percent a year on the principal amount of the credit extended beginning on the 30th day after the date on which the amount is due. If an obligor has agreed to pay to a creditor any compensation that constitutes interest, the obligor is considered to have agreed on the rate produced by the amount of that interest, regardless of whether that rate is stated in the agreement.”
23 TEX. FIN. CODE § 302.002.8 The Finance Code defines “creditor” as “a person who
loans money or otherwise extends credit. The term does not include a judgment
creditor.” TEX. FIN. CODE § 301.002(a)(3).
Bungalow Revival argues that it was a creditor because it paid all the
subcontractors. However, nothing in the pleadings or the evidence established that
there was a credit transaction between Bungalow Revival and the Cruzes. Instead,
both the pleadings and the evidence established that there was an oral contract for
Bungalow Revival to renovate the Cruzes’ home and that the parties agreed that
the Cruzes would pay Bungalow Revival’s costs plus 25%.
Ordinarily, when a general contractor hires a subcontractor to work for an
owner, the owner is not in privity of contract with the subcontractor. See Interstate
Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 615, 618 (Tex. 2004).
Instead, the owner is directly liable to the general contractor and the general
contractor is liable to the subcontractor. See id. While the general contractor can
look to the owner to recover funds owed to the subcontractor, that does not mean
that the general contractor has loaned money or extended credit to the owner. See
id.
8 Section 302.002 appears in Title 4, Subtitle A, Subchapter A of the Texas Finance Code. Title 4 pertains to “Regulation of Interest, Loans, and Financed Transactions,” and Subtitle A pertains to “Interest.” Subchapter A pertains to “Usurious Interest.” 24 Here, when the Cruzes hired subcontractors directly to complete specific
tasks, they paid them directly. But when Bungalow Revival hired the
subcontractors, the Cruzes paid Bungalow Revival the cost plus 25% in accordance
with the parties’ agreement. The Cruzes were not in privity with the subcontractors
hired by Bungalow Revival, and thus, they did not directly owe them any payment.
See id. Rather, Bungalow Revival was responsible for paying the subcontractors
and then seeking reimbursement plus 25% from the Cruzes.
Because the agreement between Bungalow Revival and the Cruzes was not a
credit transaction, we conclude that the court did not abuse its discretion by not
awarding prejudgment interest under section 302.002 of the Finance Code.
2. Equitable Prejudgment Interest
Prejudgment interest is “compensation allowed by law as additional
damages for lost use of the money due as damages during the lapse of time
between the accrual of the claim and the date of judgment.” Johnson & Higgins,
962 S.W.2d at 528. “Prejudgment interest is calculated on the judgment amount,
not the amount of damages awarded by the jury.” Pringle v. Moon, 158 S.W.3d
607, 611 (Tex. App.—Fort Worth 2005, no pet.). Credits or offsets due a defendant
should be deducted from the total damages awarded before prejudgment interest is
calculated. See Tenn. Gas Pipeline Co. v. Technip USA Corp., No. 01-06-00535-
25 CV, 2008 WL 3876141, at *23 (Tex. App.—Houston [1st Dist.] Aug. 21, 2008,
pet. denied) (mem. op.) (citing Pringle, 158 S.W.3d at 611).
Here, the jury awarded $75,000 in damages to the Cruzes, and $36,424.45 in
damages to Bungalow Revival. Bungalow Revival was entitled to an offset of
$36,424.45 against the $75,000 damages award before the calculation of any
prejudgment interest. Because the award to Bungalow Revival was entirely offset
by the Cruzes’ damages, there was no amount left on which Bungalow Revival
could obtain prejudgment interest. See Tenn. Gas Pipeline Co., 2008 WL 3876141,
at *23; Pringle, 158 S.W.3d at 611.
Accordingly, we cannot conclude that the trial court abused its discretion by
not awarding Bungalow Revival equitable prejudgment interest.
Conclusion
We affirm the trial court’s judgment except as to Bungalow Revival’s claim
for attorney’s fees, which we remand for further proceedings.
Susanna Dokupil Justice
Panel consists of Justices Guerra, Gunn, and Dokupil.