Dalisa, Inc. and Enchanted Rock Pictures, L.P./Lawren E. Bradford Charles E. Pratt, III Martha Claire Tompkins John Francis Heard, Jr. Mary Ellen Heard Susan Frances Heard Joan Heard Michael Thomas Heard Judith Jacks Lide James H. W. Jacks Jenni v. Lawren E. Bradford Charles E. Pratt, III Martha Claire Tompkins John Francis Heard, Jr. Mary Ellen Heard Susan Frances Heard Joan Heard Michael Thomas Heard/ Dalisa, Inc. and Enchanted Rock Pictures, L.P

• Court: Court of Appeals of Texas
• Decided: June 21, 2002
• Docket: 03-01-00042-CV
• Status: Published

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-01-00042-CV

Dalisa, Inc. and Enchanted Rock Pictures, L.P./ Lawren E. Bradford; Charles E. Pratt, III;

Martha Claire Tompkins; John Francis Heard, Jr.; Mary Ellen Heard; Susan Frances

Heard; Joan Heard; Michael Thomas Heard; Judith Jacks Lide; James H. W.

Jacks; Jennifer Jacks Henley; Liza Billups Lewis; LeAnn Billups; James S.

Billups III 1996 Trust No. 1; James S. Billups, III, Trustee; Francesca

Billups Mannix; and Marcella Billups Symington, Appellants

v.

Lawren E. Bradford, Charles E. Pratt, III; Martha Claire Tompkins; John Francis Heard,

Jr.; Mary Ellen Heard; Susan Frances Heard; Joan Heard; Michael Thomas Heard;

Judith Jacks Lide; James H. W. Jacks; Jennifer Jacks Henley; Liza Billups Lewis;

LeAnn Billups; James S. Billups III 1996 Trust No. 1; James S. Billups, III,

Trustee; Francesca Billups Mannix; and Marcella Billups Symington/

Dalisa, Inc. and Enchanted Rock Pictures, L.P., Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT

NO. GN002569, HONORABLE F. SCOTT MCCOWN, JUDGE PRESIDING

DISSENTING OPINION

Because the majority today substitutes its judgment for that of the district court in matters within that court's discretion, thus greatly restricting a trial court's ability to procedurally manage cases pending before it, I respectfully dissent.

I. The Issue

The majority dismisses this appeal, holding that this Court lacks jurisdiction to entertain it because the district court erred in severing portions of the case, postjudgment, thereby rendering his final judgment interlocutory and unappealable. Simply stated, it is the majority's view that the district court did not follow existing law when he severed Bradford's claim for attorney's fees and Dalisa's counterclaims from Bradford's original action for declaratory relief. ⁽¹⁾

The Texas Rules of Civil Procedure provide that "[a]ny claim against a party may be severed and proceeded with separately." Tex. R. Civ. P. 41. The supreme court has repeatedly affirmed that Rule 41 invests the trial court with broad discretion in dealing with matters of severance. Guaranty Fed. Sav. Bank v. Horseshoe Bay Operating Co., 793 S.W.2d 652, 658 (Tex. 1990) (citing McGuire v. Commercial Union Ins. Co., 431 S.W.2d 347 (Tex. 1968)). Indeed, severance of claims "rests within the sound discretion of the trial court." Liberty Nat. Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex. 1996) (emphasis added) (citing Guaranty Fed. Sav. Bank, 793 S.W.2d at 658; Hamilton v. Hamilton, 280 S.W.2d 588, 591 (Tex. 1955)). A trial court abuses its discretion if its decision "is arbitrary, unreasonable, and without reference to guiding principles," Goode v. Shoukfeh, 943 S.W.2d 441, 446 (Tex. 1997) (quoting Mercedes-Benz Credit Corp. v. Rhyne, 925 S.W.2d 664, 666 (Tex. 1996)), or if it simply rules "without regard to guiding legal principles." Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998); see also Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding) ("A trial court has no 'discretion' in determining what the law is or applying the law to the facts. Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion . . . ."). However stated, if the trial court fails to analyze or apply the law correctly or interprets the law incorrectly, the trial court has abused its discretion. This is true whether dealing with a mandamus action, like Walker, or an appeal, as is the case before this Court. See W. Wendell Hall, Standards of Review in Texas, 29 St. Mary's Law Journal 351, 362-67 (1998).

II. Attorney's Fees

It will no doubt come as a surprise to the trial bench and bar alike to discover that a trial court cannot reserve for later determination the amount of attorney's fees to be awarded. It is not uncommon for a trial court to sever issues of attorney's fees from the main suit, allowing the substantive issues in the case to go before the appellate court before assessing liability for and the amount of the fees to be awarded. Indeed, a strong argument may be made that such is the preferable practice. It avoids the rather awkward procedure often employed, but now by implication mandated in all cases, of guessing a reasonable attorney's fee for a successful appeal to the court of appeals, for drafting a petition for review to the supreme court, for briefing in the supreme court, and for oral argument in the supreme court. Courts euphemistically refer to this practice as a "conditional award" of attorney's fees. See, e.g., Hughes v. Habitat Apartments, 828 S.W.2d 794, 795 (Tex. App.--Dallas 1992, no writ) ("An award of appellate attorney's fees is a conditional award, depending upon the outcome of the appeal. A trial court must condition an award of appellate attorney's fees upon the appellant's unsuccessful appeal."). The supreme court has long recognized this practice. See International Sec. Life Ins. Co. v. Spray, 468 S.W.2d 347, 349 (Tex. 1971) (approving form of trial-court judgment where "a total award [of attorney's fees] is first fixed and then a proviso is added which reduces the award by remittitur in the absence of appellate steps").

Before today, a trial court, in the exercise of its discretion, often severed attorney's- fee issues. If, after the appellate process had run its course, issues remained regarding the entitlement to or the amount of attorney's fees that might be recovered in the action, the trial court could determine such issues based on real, not theoretical, knowledge of the final outcome of the case and the actual time and effort of the attorneys. This seems to me to be the preferable practice, particularly if left to the discretion of the trial court.

The majority takes a narrow view of the instances in which a trial court can sever a claim from the main suit, determining that the supreme court's general language in Guaranty Federal Savings Bank restricts a trial court's ability to sever a claim to those instances where "(1) the controversy involves more than one cause of action, (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted, and (3) the severed claim is not so interwoven with the remaining action that they involve the same facts and issues." Guaranty Fed. Sav. Bank, 793 S.W.2d at 658 (quoted in State Dep't of Highways & Public Transp. v. Cotner, 845 S.W.2d 818, 819 (Tex. 1993)). ⁽²⁾ Today, for the first time, an appellate court applies this test to a request for attorney's fees.

I do not doubt that it may be so applied. In a general sense, the majority is correct. The consideration of attorney's fees is the consideration of an issue or claim, not the consideration of a separate cause of action. In such an analysis, a trial court's severance of an attorney's-fee demand can never survive appellate-court scrutiny and must always render the trial-court judgment interlocutory. This is so because "attorney's fees may not be recovered from an opposing party unless such recovery is provided for by statute or by contract between the parties." Travelers Indem. Co. v. Mayfield, 923 S.W.2d 590, 593 (Tex. 1996) (emphasis added) (citing Dallas Cent. Appraisal Dist. v. Seven Inv. Co., 835 S.W.2d 75, 77 (Tex. 1992); New Amsterdam Cas. Co. v. Texas Indus., 414 S.W.2d 914, 915 (Tex. 1967)). However, I believe that our jurisprudence provides an exception to the general independent-cause-of-action rule, which allows a trial court to sever an attorney's-fee request from the main case, even though the request could not stand alone in its own right.

Initially, it is important to note that neither Guaranty Federal Savings Bank nor Cotner, nor any case in their pedigree, concerns or discusses the propriety of a trial court's preappeal severance of a request for attorney's fees. See, e.g., Guaranty Fed. Sav. Bank, 793 S.W.2d at 658 (affirming trial court's severance of third-party action); Cotner, 845 S.W.2d at 819 (reversing severance because facts and issues relating to liability for automobile accident same for multiple plaintiffs). There is a paucity of reported cases in which an appellate court has even mentioned a trial court's severance of an attorney's-fee claim. One is without precedential value due to its reversal on the merits of the whole case by the supreme court. See Grain Dealers Mut. Ins. Co. v. McKee, 911 S.W.2d 775, 782-83 (Tex. App.--San Antonio 1995), rev'd on other grounds, 943 S.W.2d 455 (Tex. 1997). In another, the supreme court recognized, but did not discuss, the trial court's action: "[T]he district court granted judgment for defendants and severed their claims for attorney fees and damages. . . . The defendants nonsuited their tort claims, and the parties then tried defendants' claim for attorney fees to the bench." Bocquet, 972 S.W.2d at 20 (emphasis added). We may discern from McKee and Bocquet, however, that the supreme court is aware of trial-court attorney's-fee-severance practice but has chosen not to address it. In National Surety Corp. v. Standard Concrete Pipe Sales Co., 366 S.W.2d 103 (Tex. Civ. App.--Houston [1st Dist.] 1963, no writ), the court of appeals held it to be error for the trial court to include in a summary judgment an order severing an attorney's-fee issue in a suit on an account when the defendant, in controverting affidavits, raised an issue of fact as to the reasonableness of the attorney's fees demanded in the plaintiff's motion for summary judgment. Id. at 105. The crux of the court's holding was that the defendant was entitled to rely on its affidavits as raising a fact issue to defeat the summary-judgment motion. Id. The outcome may well have been different if the severance had come after a ruling on the motion for summary judgment. See Cherokee Water Co. v. Forderhause, 641 S.W.2d 522, 526 (Tex. 1982) (holding that trial court did not abuse its discretion in severing defendant's counterclaim after summary judgment was granted as to plaintiff's claim).

Bradford directs this Court to several cases in which appellate courts have severed attorney's fees claims and remanded for a new trial. See Great Am. Reserve Ins. Co. v. Britton, 406 S.W.2d 901, 907 (Tex. 1966); ASAI v. Vanco Insulation Abatement, Inc., 932 S.W.2d 118, 124 (Tex. App.--El Paso 1996, no writ); International Ass'n of Firefighters Local 624 v. City of San Antonio, 822 S.W.2d 122, 132 (Tex. App.--San Antonio 1991, writ denied); Industrial Disposal Supply Co. v. Perryman Bros. Trash Serv., Inc., 664 S.W.2d 756, 761 (Tex. App.--San Antonio 1983, writ ref'd n.r.e.); Leal v. Leal, 628 S.W.2d 168, 171 (Tex. App.--San Antonio 1982, no writ). The majority distinguishes and discards these cases because, in each, the attorney's-fee issue was severed by the appellate, as opposed to the trial, court, and "[s]everance of a part of a claim for remand to the trial court invokes different considerations." Dalisa, Inc. v. Bradford, No. 03-01-42-CV, slip op. at 6 (Tex. App.--Austin ____. ___, 2002, no pet. h.). The majority, although technically correct, discards these cases too quickly.

What the majority actually holds is that only causes of action may be severed by a trial court. This would appear consistent with the language of Guaranty Federal Savings Bank. See 793 S.W.2d at 658. But the supreme court, in Guaranty Federal Savings Bank and later Cotner, has created confusion by interchanging cause with claim, thus leaving the impression that something less than a stand-alone cause of action is capable of trial-court severance. ⁽³⁾ The confusion has been enhanced because the appellate courts of this state have consistently stated that a claim for attorney's fees is a severable claim. Such is true of each case cited by Bradford: "The claim for attorney fees is a severable claim, and under Rule 503, Texas Rules of Civil Procedure, we are authorized to sever the claim and reverse the judgment as to it only, which we do." Britton, 406 S.W.2d at 907. "The claim for attorney's fees is a severable claim and we are authorized to sever the claim and reverse and remand the judgment only insofar as it pertains to attorney's fees." ASAI, 932 S.W.2d at 124. "We sever, reverse, and remand that portion of the judgment which denied attorney's fees to plaintiffs . . . ." International Ass'n of Firefighters, 822 S.W.2d at 132. "The claim for attorney's fees is a severable claim and we are authorized to sever the claim and reverse and remand the judgment only insofar as it pertains to attorney's fees." Industrial Disposal Supply, 664 S.W.2d at 761. "The claim for attorney's fees is a severable claim." Leal, 628 S.W.2d at 171. ⁽⁴⁾ With appellate courts consistently advising trial courts that a claim for attorney's fees is a "severable" claim, it is little wonder that trial courts lost sight of the nuance that only appellate courts could do the severing.

The majority is correct that neither section 37.009 nor section 38.001 of the civil practice and remedies code recognizes a stand-alone action for attorney's fees. See Tex. Civ. Prac. & Rem. Code Ann. §§ 37.009 & 38.001 (West 1997); see also Huff v. Fidelity Life Ins. Co., 312 S.W.2d 493, 501 (Tex. 1958) (previous statute); Standard Concrete Pipe, 366 S.W.2d at 104 (previous statute). And, as originally promulgated, the supreme court may have meant for Rule 41 to allow a trial court to sever only a distinct cause of action. See Tex. R. Civ. P. 41.

Severance is proper . . . only where the suit involves two or more separate and distinct causes of action. Each of the causes into which the action is severed must be such that the same might properly be tried and determined if it were the only claim in controversy . . . . A severable cause of action may be tried separately . . . , but an issue that might properly be the subject of a separate trial is not necessarily severable.

Kansas Univ. Endowment Ass'n v. King, 350 S.W.2d 11, 19 (Tex. 1961). In King, the supreme court recognized the confusion caused by appellate courts, including itself, using the terms "separate trial" and "severance" synonymously. Id. The court also referred to Hall's comment for a comparison of the two terms as well as an analysis of the cases leading to the confusion. Id. (citing Robert A. Hall, Comment, Severance and Separate Trial in Texas, 36 Tex. L. Rev. 339 (1958)). There is little doubt that the persistent trial-court confusion with regard to when the court can order a separate trial, as opposed to a severance, has led to the issue before this Court today. Such confusion lies at the very heart of appellate courts' continual use of phrases such as "the claim for attorney's fees is a severable claim."

Although its genesis may have been in confusion, it is my belief that, as applied to a claim for attorney's fees, severance practice has developed a character of its own, evolving into a system with which both the trial bench and bar are comfortable and, until today, appellate courts have largely ignored. Such evolution is to be expected.

The truth is, that the law is always approaching, and never reaching, consistency. It is forever adopting new principles from life at one end, and it always retains old ones from history at the other, which have not yet been absorbed or sloughed off. It will become entirely consistent only when it ceases to grow.

Oliver Wendell Holmes, Jr., The Common Law 36 (Legal Classics Library 1982) (1881). I see no reason to disturb a practice that is the natural outgrowth of trial courts' exercising their discretion to prevent the attorney's-fee tail from wagging the substantive-issue dog.

The supreme court has observed that "[t]he controlling reasons for a severance are to do justice, avoid prejudice and further convenience." Guaranty Fed. Sav. Bank, 793 S.W.2d at 658. Nothing could do more violence to this principle than restricting the trial court's power to adjudicate attorney's-fee claims within or without the main action as the court, in its discretion and with due consideration to its charge to do justice, avoid prejudice, and further convenience, deems proper. In severing Bradford's claim, the district court did not act "without regard to guiding legal principles," Bocquet, 972 S.W.2d at 21, but observed them. It is my hope that the supreme court will examine current practice, clear the confusion, and state the extent to which a trial court may separately consider and resolve attorney's-fee issues.

III. Counterclaims

I also disagree with my colleagues' holding that the district court abused his discretion when he severed Dalisa's counterclaims. The district court's final judgment declared that

(a) [Dalisa has] no contract for the purchase of the real property of [Bradford] that is described in [Bradford's] Original Petition (the "Property");

(b) [Dalisa has] no beneficial interest in the Property; and

(c) [Dalisa has] no other interest in the Property sufficient to support the filing of any lis pendens or otherwise to cloud [Bradford's] title.

The district court had earlier granted Bradford partial summary judgment on these issues and, on the same day the above-quoted judgment was signed, severed into a separate case "all of [Dalisa's] causes of action for damages and attorneys' fees and [Bradford's] request for an award of reasonable and necessary attorneys' fees under the Declaratory Judgment Act." The stated reason for the court's action was to prevent Dalisa's damage claims from delaying resolution of the legal title to the property at issue. The district court thus severed the parties' title claims from their damage claims. I believe this action to be appropriate and well within the district court's discretion.

I see no difference between the district court's action here and that approved by the supreme court in Cherokee Water Co. Cherokee held real property by virtue of a deed that conveyed it title to the surface estate and a preferential right to acquire the mineral estate, which the grantor had reserved, if the grantor decided to sell the minerals. Cherokee Water Co., 641 S.W.2d at 523.

Cherokee Water Company [Cherokee], as holders of the preferential right to purchase, brought suit against Martha Paul Rogers Forderhause and others [mineral owners] for declaratory judgment and specific performance of the preferential right to purchase. The mineral owners brought a counterclaim for reformation of the deed. Both Cherokee and the mineral owners moved for summary judgment.

The trial court granted Cherokee's motion for summary judgment. It severed the mineral owners' claim for reformation of the deed. The trial court found that Cherokee was the holder of a preferential right to purchase under the deed, that and oil and gas lease executed by the mineral owners constituted an attempted sale of the oil, gas and other minerals under the terms of the preferential right to purchase, and ordered specific performance.

Id. (emphasis added) (brackets in original). In approving the trial-court severance, the supreme court observed that "[a] claim may be properly severed if it is part of a controversy which involves more than one cause of action, and the trial judge is given broad discretion in the manner of severance and consolidation of causes." Id. at 525 (emphasis added) (citing McGuire, 431 S.W.2d 347). Although the court stopped short of endorsing post-summary-judgment severance to obtain appellate review of a portion of a trial-court case, the court found such practice to be within the trial court's discretion:

Under these facts, we cannot find . . . abuse of discretion. The reformation claim was severed after summary judgment was granted for Cherokee, apparently in an effort to expedite appellate review of the declaratory judgment action. While it may have been preferable to try the reformation issue before an appeal would normally lie, we cannot say that any abuse of discretion occurred.

Id. at 526. I cannot distinguish the district court's action in the case at bar from that of the trial court in Cherokee Water Co.

By holding that the district court "abused its discretion when it severed Bradford's claim for declaratory relief from Dalisa's counterclaims because both are interwoven to an extent that they involve the same facts and issues," Dalisa, slip op. at 7, the majority has intruded in an area best left to trial courts. This Court, indeed the author of the majority opinion, has recognized that the abuse-of-discretion standard is "so amorphous that it means everything and nothing at the same time." Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 935 (Tex. App.--Austin 1987, no writ). The majority today renders the standard even more shapeless.

IV. Harm or Prejudice

Finally, I do not agree that harm or prejudice is shown simply because a severance has the effect of converting an otherwise interlocutory judgment into a final one. Dalisa, slip op. at 8 (citing Standard Concrete Pipe, 366 S.W.2d at 105). The majority reads, and the First Court of Appeals perhaps wrote, Standard Concrete Pipe too broadly. In the limited factual context of the case--the trial court's ordering a severance within the body of an order granting summary judgment, Standard Concrete Pipe, 366 S.W.2d at 104-05--it is perhaps arguable that the court's sweeping statement, without reference to authority, that "[t]he error of the [trial] court in granting severance was prejudicial in that it made what otherwise would have been an interlocutory summary judgment final," is correct. Id. at 105. I do not find Standard Concrete Pipe persuasive authority when, as here, the trial court severs after granting summary judgment as to a portion of the cause. See Cherokee Water Co., 641 S.W.2d at 526. As is germane to severance practice, Standard Concrete Pipe is authority only for the proposition that a trial court cannot deprive a summary-judgment nonmovant of the benefit of its controverting affidavits by severing the issue controverted before granting summary judgment.

V. Conclusion

This Court accomplishes nothing but a further delay in the resolution of this cause by dismissing the appeal. I would overrule Dalisa's motion to dismiss and consider the appeal on its merits. Because the majority does otherwise, I respectfully dissent.

Lee Yeakel, Justice

Before Justices Yeakel, Patterson and Powers^*

Filed: June 21, 2002

Publish

^* Before John E. Powers, Senior Justice (retired), Third Court of Appeals, sitting by assignment. See Tex. Gov't Code Ann. § 74.003(b) (West 1998).

1. For clarity, I will refer to the parties in the same manner as the majority, "Dalisa" and "Bradford."

2. This three-part test first appears in a law-review comment in 1958:

[I]n order that there may be a severance:

(1) There must be a controversy involving more than one cause of action.

(2) The cause severed must be such that it could be the proper subject of a lawsuit were it the only claim involved in the controversy.

(3) The causes sought to be severed must not be so interwoven as to involve the same identical facts and issues nor, in certain instances, may the causes be severed if they relate to the same subject matter.

Robert A. Hall, Comment, Severance and Separate Trial in Texas, 36 Tex. L. Rev. 339, 339 (1958) (footnotes omitted). The progression from law-review comment to supreme-court standard is traced by the following cases: Hayes v. Norman, 383 S.W.2d 477, 478-79 (Tex. Civ. App.--Corpus Christi 1964, writ ref'd n.r.e.) (citing Hall, supra); Straughan v. Houston Citizens Bank & Trust Co., 580 S.W.2d 29, 33 (Tex. Civ. App.--Houston [1st Dist.] 1979, no writ) (citing Hayes, 383 S.W.2d 477; Hall, supra); Saxer v. Nash Phillips-Copus Co. Real Estate, 678 S.W.2d 736, 739 (Tex. App.--Tyler 1984, no writ) (citing Straughan, 580 S.W.2d 29); Weaver v. Jock, 717 S.W.2d 654, 662 (Tex. App.--Waco 1986, writ ref'd n.r.e.) (citing Hayes, 383 S.W.2d at 478-79); Guaranty Fed. Sav. Bank v. Horseshoe Bay Operating Co., 793 S.W.2d 652, 658 (Tex. 1990) (citing Weaver, 717 S.W.2d 654; Saxer, 678 S.W.2d 736); State Dep't of Highways & Public Transp. v. Cotner, 845 S.W.2d 818, 819 (Tex. 1993) (citing Guaranty Fed. Sav. Bank, 793 S.W.2d 652).

3. The language used by Hall in his comment avoided such confusion. See Hall, supra, note 2.

4. See also Zemaco, Inc. v. Navarro, 580 S.W.2d 616, 621 (Tex. Civ. App.--Tyler 1979, writ dism'd) ("The claim for attorney's fees is a severable claim. We are authorized to sever the claim for attorney's fees and reverse and remand the judgment as to it only."); Hopkins v. Hopkins, 539 S.W.2d 242, 249 (Tex. Civ. App.--Fort Worth 1976, writ dism'd) ("We reverse the judgment of the trial court insofar as it awards an amount as attorney's fees, and sever the issues thereupon from all other aspects of the case; and as a severed case remand the same to the trial court for a new trial."); Uhl v. Uhl, 524 S.W.2d 534, 539 (Tex. Civ. App.--Fort Worth 1975, no writ) ("We sever and reverse and remand the case upon the issue of reasonable amount to be allowed plaintiff as attorney's fees . . . ."); Cicero Smith Lumber Co. v. Gaston, 447 S.W.2d 736, 738 (Tex. Civ. App.--Amarillo 1961, writ ref'd n.r.e.) ("The claim for attorney's fees is a severable claim. We are authorized to sever the claim for attorney's fees and reverse and remand the judgment as to it only."); Schecter v. Folsom, 417 S.W.2d 180, 184 (Tex. Civ. App.--Dallas 1967, no writ) ("[T]he claim for attorney's fees was severed [in Great American Reserve Insurance Co. v. Britton, 406 S.W.2d 901, 907 (Tex. 1966)], and the judgment reversed as to attorney's fees only. We shall do the same in this case."); Rhoades v. Miller, 414 S.W.2d 942, 945 (Tex. Civ. App.--Tyler 1967, no writ) ("In view of the fact that the claim for attorney's fees is a severable claim, we are authorized to sever the claim and reverse the judgment as to it only, which we do.").