Non-suit precludes attorney's fees award as prevailing party under agreement

Posted on March 8, 2010 by Byron Henry

The Austin Court of Appeals recently held that a plaintiff's notice of non-suit precludes a defendant from recovering attorney's fees as prevailing party under a written agreement.  In this case, the plaintiffs bought a house from defendants under a standard-form sales contract promulgated by the Texas Real Estate Commission.   Plaintiffs brought suit against defendants for failing to disclose alleged defects to the house and sought attorney's fees.  Defendants also requested attorney's fees.  Section 17 of the contract provides that the prevailing party is entitled to attorney's fees.  Plaintiffs nonsuited their claims prior to trial leaving only the defendant's claim for attorney's fees unresolved.  The trial court entered a take nothing judgment against the plaintiffs (despite the nonsuit) and awarded the defendants attorney's fees.

The court of appeals reversed the take-nothing judgment against the plaintiffs because the trial court had no discretion but to dismiss the plaintiffs' claims without prejudice once the notice of nonsuit was filed.  More importantly, however, the court reversed the attorney's fees award and held that the defendants were not prevailing parties because they had not prevailed on the merits of any legal proceeding related to the contract.  The court of appeals stated:

Because the court did not adjudicate the [plaintiffs'] claims, and because the [defendants] brought no claim for relief on which they could prevail other than their request for attorney's fees, the [defendants] did not prevail on any claims that would entitled them to attorney's fees under the terms of contract.

The court of appeals also rejected defendants' argument that allowing parties to nonsuit at the last minute to avoid liability for attorney's fees was poor public policy.  The court distinguished a case in which a party sought statutory attorney's fees after a partial nonsuit.  The court's opinion in Fowler v. Epps can be found here.

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Do counterclaims survive when a plaintiff non-suits?

Posted on March 17, 2009 by David Oliveros

The simple answer is yes, they do. See Texas Rule of Civil Procedure 162.

But the defendant's pleading must allege a cause of action independent of the plaintiff's claims on which the defendant can recover.  If a defendant fails to do so, then the plaintiff has an absolute right to a non-suit of all claims, as the Dallas Court of Appeals demonstrated in In re Metropolitan Lloyds Insurance Company of Texas.

Metropolitan filed  a declaratory judgment seeking a declaration of its rights and obligations under the insured's (Timberlake) insurance policy.  In her answer, Timberlake generally denied all allegations and then prayed that the court would enter judgment on her counterclaim against Metropolitan.  But she never named the cause of action nor explained the relief she sought.

Eventually, Metropolitan moved for non-suit without prejudice of all claims asserted in the lawsuit. The judge granted the non-suit.  A few days later, Timberlake filed a supplemental counterclaim which included new claims for various causes of action.

Metropolitan filed a motion for entry of a dismissal order, which the judge denied.  Metropolitan then sought mandamus relief.

Was generically mentioning "counterclaim" in her answer enough for Timberlake to have a valid counterclaim at the time Metropolitan non-suited?

No.  Although Timberlake's answer contained the term "Counterclaim" in the title and mentioned it in the conclusion, her answer did nothing more than contest Metropolitan's claims for relief.  As is well established in Texas law, any pleadings for affirmative relief must put the opposing party on notice of the nature and basic issues of the relief sought.  Timberlake failed to do that before Metropolitan filed the non-suit.  Thus, Timberlake's counterclaim did not survive the non-suit.

For your reading pleasure, the opinion is located here.
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