Robert E. Stephenson v. Avalon Care Group, LLC
CourtTexas Court of Appeals, 1st District (Houston)
Date FiledOctober 30, 2026
Docket01-24-00839-CV
StatusPublished
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Full Opinion
Opinion issued October 30, 2026
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-24-00839-CV
———————————
ROBERT E. STEPHENSON, Appellant
V.
AVALON CARE GROUP, LLC, Appellee
On Appeal from the 236th District Court1
Tarrant County, Texas
Trial Court Case No. 236-309244-19
MEMORANDUM OPINION
1
Pursuant to its docket equalization authority, the Supreme Court of Texas
transferred this appeal from the Court of Appeals for the Second District of Texas
to this Court. See Misc. Docket No. 24–9081, Transfer of Cases from Courts of
Appeals (Tex. Oct. 14, 2024); see also TEX. GOV’T CODe § 73.001 (authorizing
transfer of cases). We are unaware of any conflict between precedent of that court
and that of this court on any relevant issue. See TEX. R. APP. P. 41.3.
Robert E. Stephenson appeals from the trial court’s grant of summary
judgment in favor of appellee Avalon Care Group, LLC (“Avalon”) on some of his
claims and affirmative defenses. He also argues that there is error in the attorney’s
fees awarded after jury trial. Specifically, he argues that Avalon was required to
segregate its attorney’s fees and failed to do so and that the evidence is legally
insufficient to support the conditional appellate attorney’s fees awarded. We
reverse and remand for new trial on the conditional appellate attorney’s fees
awarded and affirm the judgment in all other respects.
Background
Tonya Powell, Stephenson’s maternal aunt, was a resident at an Avalon
memory care facility from April 2013 to July 2019. Stephenson assumed
responsibility for her care after his parents passed away. In April 2016,
Stephenson, as “Responsible Party,” signed a financial agreement, accepting
financial responsibility for Powell’s care at Avalon.
The financial agreement stated in part:
Monthly Rent, Fees, and Terms
The Resident or Responsible Party agrees to the rate of $5400
per month for accommodation in a private room to be paid one
month in advance. The first month’s charges will be prorated on
a thirty-day scale and will be due upon admission. It is
understood that the rate may be later adjusted by the facility
upon appropriate advance written notice to the Resident or
Responsible Party. The charges will be incurred for the day of
admission as well as the day of discharge. Failure of the
2
Resident or Responsible Party to pay for services deemed
necessary and proper by the facility, or prescribed by the
physician, will release the facility form any and all liability
which may result from lack of such services, and will be
sufficient grounds for the facility to require immediate removal
of the resident. Responsible Party agrees to transfer resident
without delay upon notice to do so.
After no payments were made between April 20, 2018 and July 3, 2019,
Avalon sued Powell2 and Stephenson seeking payment of the balance due for the
ten months of care provided without compensation. Avalon alleged claims for
breach of contract, suit on sworn account, unjust enrichment, and attorney’s fees,
arguing that Stephenson owed Avalon a debt under the terms of the financial
agreement. Stephenson countersued for breach of contract, unfair debt collection
practices, and fraudulent inducement; he also sought to recover attorney’s fees. He
asserted nine affirmative defenses. In his counterclaim, Stephenson in his
individual capacity and in his capacity as executor of Powell’s estate alleged that
Avalon agreed to a “perpetual care agreement” (“PCA”), under which Stephenson
claimed Avalon agreed that “Ms. Powell could stay at Avalon for the duration of
her life. In exchange, Avalon would receive, over time, all of the funds held in a
trust for which Ms. Powell was the beneficiary.”
Avalon moved for traditional summary judgment. Among other things,
Avalon sought summary judgment that Stephenson’s counterclaim for breach of
2
When Powell passed away, her estate was substituted as a party. Stephenson is the
executor of Powell’s estate.
3
contract and affirmative defense of “prior material breach” were barred by the
parol evidence rule and his counterclaim for fraud was barred by the indemnity
agreement he signed. Stephenson’s response to the motion for summary judgment
included his affidavit and an email exchange between him and Avalon’s
representative, which occurred before the execution of the financial agreement.
Stephenson asserted that the email exchange and his affidavit created an issue of
material fact as to the existence of a PCA.
The trial court granted Avalon’s summary judgment motion on Stephenson’s
counterclaims for breach of contract and fraudulent inducement.3 During the
litigation, Avalon amended its petition to add fraudulent transfer, common law
fraud, and statutory fraud claims and also added Dan Mark, trustee of Powell’s
trust, as a defendant, asserting fraudulent transfer and conspiracy claims alleging
that Stephenson and Mark transferred certain assets to Stephenson in an effort to
deplete Powell’s trust. The case proceeded to trial, and the jury found in favor of
Avalon on its breach of contract claim. The jury awarded damages for breach of
contract, attorney’s fees, and conditional appellate attorney’s fees.
Stephenson appeals the trial court’s summary judgment ruling and the
attorney’s fees award.
3
The trial court also granted Avalon’s no evidence summary judgment motion on
claims that arose out of Stephenson’s allegations related to quality of care received
at Avalon. The court dismissed these claims on grounds that they were healthcare
liability claims for which Stephenson failed to file a compliant expert report.
4
Summary Judgment
Stephenson argues that the trial court erred by granting summary judgment
in favor of Avalon on Stephenson’s counterclaims for breach of contract,
fraudulent inducement, and his affirmative defense of prior material breach
because he established a genuine issue of material fact as to the existence of a
PCA. We disagree.
A. Standard of Review
We review de novo a trial court’s order granting summary judgment. Hillis
v. McCall, 602 S.W.3d 436, 439 (Tex. 2020). Under traditional summary judgment
procedure, the movant has the initial burden of showing that no genuine issue of
material fact exists, and that he is entitled to judgment as a matter of law. See id. at
439–40; TEX. R. CIV. P. 166a(c). To be entitled to traditional summary judgment,
the party without the burden of proof must conclusively negate at least one
essential element of each cause of action.4 Frost Nat’l Bank v. Fernandez, 315
S.W.3d 494, 508 (Tex. 2010). The burden shifts to the nonmovant to come forward
with competent controverting evidence sufficient to raise a genuine issue of
material fact. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671,
678–79 (Tex. 1979). Proof is conclusive if reasonable people could not differ in
4
Here, Avalon sought summary judgment on Stephenson’s counterclaim.
5
their conclusions. Helix Energy Sols. Grp. v. Gold, 522 S.W.3d 427, 431 (Tex.
2017).
In reviewing a grant of summary judgment, we “examine the entire record in
the light most favorable to the nonmovant, indulging every reasonable inference
and resolving any doubts against the motion.” Sudan v. Sudan, 199 S.W.3d 291,
292 (Tex. 2006) (quoting City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex.
2005)). When, as here, the trial court does not specify the grounds on which it
granted summary judgment, we must uphold the trial court’s judgment if any of the
grounds properly presented are meritorious. Merriman v. XTO Energy, Inc., 407
S.W.3d 244, 248 (Tex. 2013).
B. Analysis
1. The trial court did not err in granting Avalon summary judgment
on Stephenson’s breach of contract claim.
Stephenson argues that he met his burden to raise a genuine issue of material
fact regarding his breach of contract claim. He argues that his affidavit and emails
between him and Avalon’s representative raised an issue of fact as to the existence
of the PCA. Stephenson’s breach of contract claim alleged that in 2013, when his
parents contracted with Avalon for his aunt’s room, Avalon agreed to a PCA under
which Avalon would continue to provide care to Powell once her trust funds were
depleted. To prevail at trial on his contract claim, Stephenson needed to prove
(1) the existence of a valid contract, (2) performance by Stephenson, (3) breach of
6
the contract by Avalon and (4) damages sustained as a result of the breach. Berdin
v. Allstate Ins. Co., No. 02-22-00426-CV, 2023 WL 7037619, at *6 (Tex. App.—
Fort Worth Oct. 26, 2023, no pet.) (mem. op.). To defeat Avalon’s traditional
motion for summary judgment on his claim, Stephenson was required to file a
response that created a fact issue about at least one element of the cause of action,
by either identifying a fact issue in the summary judgment proof already in the
record or by attaching additional summary judgment evidence that created a fact
issue. Prince v. Weleba, No. 02-23-00085-CV, 2023 WL 6476009, at *7 (Tex.
App.—Fort Worth Oct. 5, 2023, no pet.) (mem. op.).
Prior to signing the financial agreement, Stephenson emailed Avalon’s
representative the following:
Jon, I only had one last question regarding the financial
requirements in the long future. I have always understood that
my parents decided on your facility even though the monthly
care price was higher because of the long term guarantee of
residency. Although Tonya Powell’s estate has many years left
on it, I just want to be sure that if the time comes that her
finances have been expended (her only expense is her
residency) she will still be able to remain at Avalon. Currently I
am unable to find the original contract. I hate to sign the new
contract and eliminate the perpetual financial agreement I
understood we had since 2013. I was not able to find this clause
anywhere in the contract. If you could, please confirm that this
is Avalon’s policy and that it will be upheld.
Thank you,
Eric
7
Avalon’s representative responded:
Eric,
Based upon our conversation today and although I do not have
the most accurate #’s with at least $200k in Tonya’s investment
account as well as $500+ and $600+ (dependent upon
fluctuations in the oil and gas market) coming in monthly
Avalon would take care of Ms. Powell all the way through
hospice even if her assets were to deplete for whatever is
brought in monthly at that time understanding that these funds
are to be used for Ms. Powell’s care. Based upon my
calculation this would allow for around 4 more years of care at
Avalon. Let me know if you need anything else. Take Care.
Jon
Stephenson does not dispute that the emails were sent before he signed the
financial agreement. In his affidavit, Stephenson averred that he signed the
financial agreement after this email exchange and a subsequent phone call with
Avalon’s representative.
In his affidavit, Stephenson states that it was his understanding that the
original terms of his aunt’s residence included a promise that Avalon “would
provide a room and associated care” for the duration of her life if Avalon received
monthly payments from her trust beginning in 2013 until her trust was depleted.
The financial agreement Stephenson signed in 2016 obligates him as responsible
party to pay Powell’s rent without condition. According to Stephenson’s affidavit,
Powell’s trust fund was depleted to $0 in July 2018. As evidence, he submitted a
bank statement from August 2018.
8
In the trial court and on appeal, Avalon argues that the parol evidence rule
prohibits Stephenson from introducing the emails as evidence of a PCA between
Stephenson and Avalon because they are inconsistent with the unambiguous
financial agreement Stephenson signed. Moreover, Avalon argues that Stephenson
failed to introduce evidence sufficient to establish a fact question on the existence
of the PCA or that any of the conditions triggering perpetual care, such as
depletion of Powell’s trust, had occurred. Even putting aside the parol evidence
point for these purposes, Avalon failed to establish a fact question on this claim.
Stephenson did not meet his burden to raise a genuine issue of material fact
on the existence of the PCA agreement. The PCA is not in the record. The best
evidence of its existence is Stephenson’s own affidavit that “it was [his]
understanding that [the terms of his aunt’s residence with Avalon] included a
promise that Avalon would provide a room and associated care for [his] aunt for
the duration of her life, referred to as a ‘perpetual living arrangement,’ if Avalon
received monthly payments beginning in 2013 from her trust until such time as that
trust was depleted.” This speculative testimony does not demonstrate the existence
of an agreement between Avalon and Powell’s representatives. See T.O. Stanley
Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992) (“The material
terms of the contract must be agreed upon before a court can enforce the
contract.”). Stephenson did not establish a genuine issue of material fact as to the
9
existence of a contract between Stephenson’s parents and Avalon that would
preclude summary judgment.
Furthermore, even if we assumed Stephenson’s affidavit and the emails are
sufficient evidence to raise a fact question as to the existence of the PCA contract,
Stephenson did not submit evidence to establish a genuine issue of material fact as
to his performance under the contract. Stephenson did not present evidence of the
trust’s assets or that they had been depleted. Although Stephenson submitted a
statement from an account at Morgan Stanley from August 1 through 31, 2018
showing a $0.40 balance, this statement does not show the starting value of the
trust, when it depleted and over what amount of time, or that Powell or her
representatives made regular monthly payments to Avalon from 2013 until the time
of depletion. There is also no evidence that the Morgan Stanley account is the
entirety of assets in Stephenson’s trust. Stephenson fails to raise a genuine issue of
material fact as to performance of the alleged PCA agreement because he has not
demonstrated that Powell’s trust made payments from 2013 to its depletion to
Avalon.
The trial court did not err in granting Avalon summary judgment on
Stephenson’s breach of contract counterclaim.
10
2. Stephenson did not raise a genuine issue of material fact on his
affirmative defense of prior material breach.
As an affirmative defense to Avalon’s breach of contract claim based on the
financial agreement, Stephenson alleged that Avalon had previously breached the
PCA negotiated with his parents.5 Avalon moved for summary judgment on the
affirmative defense, but not on its underlying breach of contract claim. Similar to
Stephenson’s counterclaim for breach of contract, Stephenson could defeat
summary judgment by creating at least a fact issue about his affirmative defense.
Prince, 2023 WL 6476009 at *10.
As discussed above in relation to his breach of contract claim, Stephenson
did not meet his burden to present evidence creating a genuine issue of material
fact as to the existence of the PCA or his performance under the contract. He did
not provide evidence of the assets or value of the assets in Powell’s trust and their
depletion. He did not provide proof of monthly payments to Avalon from the trust
from 2013 until that depletion to support a material breach of the PCA by Avalon.
The trial court did not err in granting summary judgment for Avalon on this
ground.
5
When one party to a contract commits a material breach of that contract, the other
party is discharged or excused from further performance. PAJ, Inc. v. Hanover Ins.
Co., 243 S.W.3d 630, 633 (Tex. 2008). The contention that a party is excused
from its contract performance by the other party’s prior material breach is an
affirmative defense. Henry v. Masson, 333 S.W.3d 825, 834 (Tex. App.—Houston
[1st Dist.] 2010, no pet.).
11
3. The trial court did not err in granting Avalon summary judgment
on Stephenson’s fraudulent inducement claim.
Avalon argues that Stephenson cannot prevail on his fraudulent inducement
claim because he signed an indemnity agreement releasing fraud claims against
Avalon. Avalon also argues that Stephenson did not respond with evidence to raise
a genuine issue of material fact on his fraud claim because he did not present any
evidence of the elements of the claim, such as Avalon’s intent. Stephenson argues
that the indemnity agreement was not a release and was only an agreement to
indemnify Avalon for claims from third parties. We need not reach the issue of the
indemnity agreement because we hold that Stephenson did not raise a fact issue on
his fraud claim.
The elements of fraud are: (1) that the speaker made a material
misrepresentation; (2) that he knew was false when he made it or that he made
recklessly without any knowledge of its truth and as a positive assertion; (3) with
the intent that the other party act upon it; and (4) that the other party acted in
reliance on the misrepresentation and (5) suffered injury. Italian Cowboy Partners,
Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011). A
representation is material if “a reasonable person would attach important to [it] and
would be induced to act on the information in determining his choice of actions in
the transaction in question.” Id. (internal quotation and citation omitted).
Fraudulent inducement is a particular species of fraud that arises only in the
12
context of a contract and requires the existence of a contract as part of its proof.
Wilmot v. Bouknight, 466 S.W.3d 219, 227 (Tex. App.—Houston [1st Dist.] 2015,
pet. denied) (citing Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001)). With a
fraudulent inducement claim, the elements of fraud must be established as they
relate to an agreement between the parties. Id. (citing Haase, 62 S.W.3d at 798–
99).
Stephenson’s fraudulent inducement claim alleges that (1) Avalon falsely
represented that it would take care of Powell even if her investment accounts were
depleted; (2) Avalon knew this representation was false when it was made;
(3) Avalon intended for Stephenson to rely upon the representation and Stephenson
did so when signing the financial agreement; and (4) Avalon’s false representations
deprived Powell of agreed upon care for which Stephenson contracted.
Avalon argues that Stephenson did not present evidence to establish a
genuine issue of material fact as to Avalon’s intent or that Avalon knew it made a
false statement when the emails were sent. We agree. Stephenson did not raise a
genuine issue of material fact as to a material misrepresentation made by Avalon
with knowledge of its falsity with intent that Stephenson act upon it. The terms of
the agreement upon which Stephenson claims to rely are not in the email. The
email from Avalon’s representative states that based on the financial information
Stephenson provided, Powell would be able to pay Avalon for approximately four
13
years. The record does not demonstrate that this is a false statement or that Avalon
knew it was false and intended that Stephenson would be induced to sign the
financial agreement.
The trial court did not err in granting summary judgment in favor of Avalon
on this claim.
Attorney’s Fees
After trial, the jury awarded Avalon fees totaling $278,615.18 on its breach
of contract claim.6 On appeal, Stephenson urges that the fee award should be
reversed because Avalon failed to segregate fees between those incurred in
connection with recoverable and unrecoverable claims. We disagree.
A. Relevant Facts
From the time the case was filed in 2019 through trial, Stephenson pleaded
and argued that a PCA existed that allowed him to avoid his contractual obligation
to Avalon under the financial agreement. This excuse defense was tried and
submitted to the jury. Avalon’s theory was that Stephenson misled Avalon about
the state of Powell’s finances before the financial agreement was signed. To defeat
contractual defenses, Avalon sought discovery to prove that Stephenson, and
6
See TEX. CIV. PRAC. & REM. CODE § 38.001(8) (authorizing recovery of attorney’s
fees to prevailing party on breach of contract claim).
14
eventually trustee Dan Mark, hid and transferred Powell’s assets out of her estate.7
Stephenson’s affirmative defenses included estoppel, fraudulent inducement, lack
of damages, waiver, ratification, and prior material breach. Mark’s defenses
included estoppel, waiver, ratification, and prior material breach. Discovery during
the case focused on evidence of Powell’s trust assets and personal assets during
relevant time periods. The case eventually proceeded to trial.
At trial, Avalon’s attorney testified about fees incurred to defeat the
affirmative claims against it and to gather evidence to secure the jury verdict that
denied Stephenson relief on all his defenses. Testimony included that Avalon
incurred years of discovery costs to document that Stephenson left out assets held
by Powell when he emailed Avalon’s representative about the PCA and to
document the lengths Stephenson and Mark went to hide or transfer Powell’s
assets to avoid paying Avalon.
Avalon submitted its counsel’s fee record detailing all the work expended on
the case, hourly rates, and testimony that the fees were reasonable and necessary in
line with the industry custom. This testimony included information on fee
segregation. Avalon’s counsel testified that its legal services were intertwined. It
was not possible to segregate fees between recoverable contract claims and
7
After discovering evidence of Powell’s trustee Dan Mark’s participation in
transferring her assets, Avalon amended its petition to add him as a defendant.
Mark answered and pleaded several defenses to Avalon’s breach of contract claim.
15
unrecoverable fraud claims, nor was it possible to segregate fees for its
unrecoverable fraud claims against Mark. This testimony included:
Q: It’s your testimony, though, you cannot separate any fees out
that were solely incurred and pursued the claims against Dan
Mark?
A: No. Because it is so tied to – it’s the exact same evidence
and so tied to us trying to collect against Mr. Stephenson on the
contract, in finding out what happened to the assets, that made
it impossible for us to collect and to defend against the
defenses. So, and I tried, and it just didn’t work.
Counsel testified that discovery for fraudulent transfer claims was connected
to discovery for contract claims, stating:
“Well it’s kind of connected because you’re trying to, part of
this was trying to figure out where the numbers had come from.
So that was intertwined with your defenses to the breach of
contract claim that this agreement existed based on, based on
these numbers. And so what started all this is asking where the
evidence was of those numbers. So that was very much
intertwined in defending the excuse for nonpayment.”
Counsel testified that adding Mark was a consequence of pursuing Powell’s
assets, “given the disputed defense of the perpetual care agreement” and that the
claim was a result of conducting discovery to understand where Powell’s assets
went. Counsel testified that the fees incurred in pursuing the fraudulent transfer
claim against Mark were inextricably intertwined to those incurred to pursue the
breach of contract claim because 100% of the fees Avalon incurred in pursuit of
the breach of contract claim against Stephenson would still have been incurred
16
even if the fraudulent transfer claim against Mark had never been brought. Counsel
testified that in this case, the representations of availability of assets for the breach
of contract claim tied into the claims for fraudulent transfer of assets.
Avalon’s counsel testified and provided evidence that fees for five years of
litigation up until trial totaled $203,615.18. She said that representation at trial cost
an additional $75,000.
Stephenson’s counsel argued to the jury that the fees should be segregated
and implored the jury not to award the full amount requested because the fees did
not relate to Avalon’s breach of contract action.
The jury found in favor of Avalon on its contract claim against Stephenson
individually, awarding $63,621.74 in actual damages and $278,615.18 in
attorney’s fees. The trial court entered judgment for Avalon in those amounts plus
conditional appellate fees as determined by the jury.
B. Standard of Review
Ordinarily, a party seeking to recover attorney’s fees must “segregate fees
between claims for which they are recoverable and claims for which they are not.”
Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006). “[I]f 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. But an
exception exists when discrete legal services advance both recoverable and
17
unrecoverable claims. Id. at 313–14. The extent to which certain claims can or
cannot be segregated is a mixed question of law and fact for the jury.8 Id. at 313.
“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. “This standard does not require more precise proof for attorney’s
fees than for any other claims or expenses” and an attorney’s opinion about the
amount of services necessary on recoverable claims is sufficient to permit the jury
to resolve the fact issue regarding the amount of reasonable attorney’s fees for
recoverable claims. Chapa, 212 S.W.3d at 314. “[T]he court of appeals [can
apply] standard factual and legal sufficiency review to the jury’s verdict based on
that evidence.” Id. at 314.
C. Analysis
The party seeking to recover attorney’s fees bears the burden of
demonstrating segregation is not required. Hillegeist Fam. Enters., LLP v.
Hillegeist, 667 S.W.3d 349, 357 (Tex. App.—Houston [1st Dist.] 2022, no pet.).
8
The Supreme Court in Chapa explained that the need to segregate fees is a
question of law but the standard “gives no deference to the factual determinations
of the trial judge or the jury. But the fees necessary to prove particular claims
often turn on such facts—how hard something was to discover and prove, how
strongly it supported particular inferences or conclusions, how much difference it
might make to the verdict, and a host of other details that include judgment and
credibility questions about who had to do what and what it was worth. Given all
these details, it may often be impossible to state as a matter of law the extent to
which certain claims can or cannot be segregated; the issue is more a mixed
question of law and fact for the jury.” See Tony Gullo Motors I, L.P. v. Chapa, 212
S.W.3d 299, 313–14 (Tex. 2006).
18
Stephenson’s appellate argument that Avalon did not meet its burden to segregate
attorney’s fees or establish the exception to its need to do so is essentially an attack
on the legal and factual sufficiency to support the jury’s attorney’s fee award,
which we evaluate with the usual standards of review. See City of Keller, 168
S.W.3d at 827.
Avalon presented evidence on attorney’s fees from which the jury could
reasonably conclude that segregation was impossible. For the exception to
segregation to apply, Avalon needed to show that its attorney’s fees incurred were
in connection with claims arising out of the same transaction and the claims were
so interrelated that their prosecution or defense entails proof or denial of
essentially the same facts. See Turner v. Ewing, 625 S.W.3d 510, 525 (Tex. App.—
Houston [14th Dist.] 2020, pet. denied). Here, the gravamen of each of Avalon’s
claims is that Stephenson signed a financial agreement obligating him to pay
Powell’s rent, and to defeat Stephenson’s counterclaims, there was no PCA
between Stephenson and Avalon, or to the extent there was, Stephenson lied to
Avalon about the state of Powell’s finances. Avalon’s counsel testified that the
discrete legal tasks required to advance the case from petition, through discovery,
summary judgment, motions to compel, and trial advanced both recoverable and
irrecoverable claims against all parties.
19
As part of developing evidence for its claims, Avalon added fraud claims
against Mark and Stephenson, but the legal work for those claims arose out of and
along with the legal work conducted to advance its initial contract claims and to
defend against related affirmative defenses. See Varner v. Cardenas, 218 S.W.3d
68, 69 (Tex. 2007) (holding that fees incurred in successfully defending against
counterclaim in order to collect full amount of note need not be segregated);
Anglo-Dutch Petroleum Intern., Inc. v. Case Funding Network, LP, 441 S.W.3d
612, 634 (Tex. App.—Houston [1st Dist.] 2014, pet. denied) (holding that “to
prove their entitlement to recover for Anglo-Dutch’s breach of the investment
agreements, the release investors had to overcome Anglo-Dutch’s counterclaims.
Attorneys’ fees incurred to defeat a counterclaim that must be overcome to recover
fully on a contract need not be segregated.”).
As to work expended on fraud claims against Mark, counsel testified that it
was through the legal work conducted on its breach of contract claim and a
consequence of pursuing Powell’s assets that it discovered and added Mark as a
defendant. She testified that the legal work for fraud claims against him as a party
cannot be segregated because it was by virtue of obtaining the documents to
support the initial claims that his alleged involvement was discovered.
The jury heard sufficient evidence to conclude that legal work conducted for
recoverable and irrecoverable claims across multiple parties was so inextricably
20
intertwined as to fall within the exception and excuse Avalon from the general duty
to segregate its attorney’s fees. Chapa, 212 S.W.3d at 313–14. We overrule
Stephenson’s issue related to segregation.
Contingent Appellate Fees
In his final issue, Stephenson argues that the evidence is legally insufficient
to support the jury’s award of future appellate attorney’s fees.
“When reviewing a trial court’s award of attorneys’ fees, we must ensure the
record contains sufficient evidence to support such an award.” Yowell v. Granite
Operating Co., 620 S.W.3d 335, 354 (Tex. 2020) (citing Rohrmoos Venture v.
UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 505 (Tex. 2019)). “The party
seeking attorneys’ fees bears the burden of proof and must supply enough facts to
support the reasonableness of the amount awarded.” Yowell, 620 S.W.3d at 355.
Specifically, to recover contingent appellate fees, the party with the burden of
proof must “provide opinion testimony about the services it reasonably believes
will be necessary to defend the appeal and a reasonable hourly rate for those
services.” Id. at 355; see also Fiamma Statler, LP v. Challis, No. 02-18-00374-CV,
2020 WL 63344790, at *19 (Tex. App.—Fort Worth Oct. 29, 2020, pet. denied)
(mem. op.) (stating same).
Avalon’s counsel testified that the cost of attorney’s fees for the court of
appeals would be $65,000, which would include the cost of the transcript for the
21
party appealing. She testified that filing a petition to the Texas Supreme Court
would be $25,000, if the court requests briefing on the petition the fees would be
$15,000, and that if the petition is accepted and requires merits briefing and a
hearing, fees would be an additional $50,000. The jury awarded Avalon
conditional appellate attorney’s fees in accordance with this testimony.
Avalon’s counsel’s testimony regarding appellate attorney’s fees merely
constituted a request for such fees and did not serve as evidence of their
reasonableness and necessity. Counsel did not address the services she reasonably
believed would be necessary to defend an appeal and did not identify a reasonable
hourly rate for the performance of any such service. See MRT of Kempt TX-SNF,
LLC v. Lloyd Douglas Enters., LC, 698 S.W.3d 607, 620–24 (Tex. App.—Dallas
2024, no pet.) (holding same); See QJD Peking Duck Rest., Inc. v. TCP Spectrum
Partners, Ltd., No. 01-22-00545-CV, 2023 WL 5436907, at *3 (Tex. App.—
Houston [1st Dist.] Aug. 24, 2023, no pet.) (mem. op.) (listing cases where
contingent appellate attorney’s fee awards were reversed because “the evidence did
not address the services to be rendered on appeal or simply stated a lump-sum fee
amount for appeal to the court of appeals or to the Texas Supreme Court”); Wells
Fargo Bank, N.A. v. Rodriguez, No. 02-21-00155-CV, 2022 WL 803839, at *5
(Tex. App.—Fort Worth Mar. 17, 2022, no pet.) (mem. op.) (reversing contingent
appellate attorney’s fee award because testimony included only attorney’s bare
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opinion that lump-sum fee amount was reasonable and necessary for representation
on appeal). The trial court erred in awarding Avalon appellate attorney’s fees.
We sustain Stephenson’s third issue.
Conclusion
We reverse the trial court’s judgment as to its award of conditional
attorney’s fees to Avalon and remand the cause to the trial court for a new trial
limited to the determination of reasonable and necessary conditional appellate
attorney’s fees to be awarded to Avalon, if any, related to proceedings in this Court
and redetermination of conditional appellate fees to be awarded, if any, in the event
of further proceedings. We affirm the trial court’s judgment in all other respects.
Susanna Dokupil
Justice
Panel consists of Justices Caughey, Morgan, and Dokupil.
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