Realtex Housing Management, LLC v. Villa Main Housing Associates, Ltd.

       TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



                                      NO. 03-22-00104-CV



                        Realtex Housing Management, LLC, Appellant

                                                 v.

                         Villa Main Housing Associates, Ltd., Appellee


              FROM THE 459TH DISTRICT COURT OF TRAVIS COUNTY
 NO. D-1-GN-18-001482, THE HONORABLE MAYA GUERRA GAMBLE JUDGE PRESIDING



                            MEMORANDUM OPINION


               Realtex Housing Management, LLC, (Realtex) appeals from the trial court’s

judgment in favor of Villa Main Housing Associates, Ltd., (Villa Main) on its claims against

Realtex arising out of an agreement for management of property Villa Main owned in

Port Arthur, Texas. We will affirm the trial court’s judgment.


                                        BACKGROUND 1

               Villa Main and Realtex executed a property management agreement (“the

Agreement”) effective December 1, 2011, for management of property Villa Main owned in Port

Arthur (“the Property”). Pursuant to the Agreement, Realtex agreed to manage the Property in

compliance with all applicable laws, including Section 42 of the Internal Revenue Code (the



       1  The facts set forth in this section are derived from findings of fact the trial court filed
after conducting a bench trial and, unless otherwise indicated, are unchallenged by Realtex.
low-income housing tax credit program); Section 8 of the United States Housing Act (the

Housing Choice Voucher Program); the Housing Assistance Payment Contract applicable to the

Property; as well as other applicable federal and state statutes and regulations relating to

affordable housing. The Agreement includes Realtex’s agreement to “conduct its operations

according to all Applicable Law, and as outlined in loan documents, bond documents, Land Use

Restriction Agreements, Extended Use Agreements and the Partnership Agreement, and/or any

other type of agreement related to [Villa Main] or the Project,” which included the low-income

housing tax credit program, Section 8 Housing Choice Voucher Program, and Housing

Assistance Payment contracts, each of which applied to operation and management of the

Property. The Agreement also required Realtex to maintain an insurance policy protecting

“against loss due to employee fraud, theft, dishonesty, defalcation, and embezzlement.”

               Pursuant to the Agreement, Realtex agreed to indemnify, protect, defend, and

hold Villa Main harmless from and against “all Claims, demands, actions, liabilities, losses,

costs, expenses, damages, penalties, interest, fines, injuries and obligations, including reasonable

attorneys’ fees, court costs and litigation expenses” incurred by Villa Main on account of (a) any

act by Realtex, its agents or employees, outside the scope of Realtex’s authority under the

Agreement; (b) any act or failure to act by Realtex, or its agents or employees, constituting

negligence, misconduct, fraud, or breach of the Agreement; and (c) any act or omission by

Realtex, or its agents or employees, in violation of any applicable law.

               In April 2016, Realtex notified Villa Main that one of its employees assigned to

the Property—Lynette Jones-Nixon—had been terminated due to violation of corporate policies.

The termination was prompted by Realtex’s obtaining information that there may have been

improprieties with how on-site personnel handled the United States Department of Housing and

                                                 2
Urban Development (HUD) subsidies paid under the Section 8 Housing Assistance contract and

other funds entrusted to Villa Main by HUD. In that same notification, Realtex indicated that

another of its employees assigned to the Property (Rosalba Sanchez) had resigned.

              In January 2018, HUD’s Office of Inspector General issued an audit report (“the

OIG Audit”) stating that Realtex’s employees at the Property had perpetrated a fraud scheme

during the several-year audit period by which (1) $534,741 in federal subsidies were paid for

nonexistent “ghost tenants” and (2) $1,095,364 in federal subsidies were improperly paid

because they were not supported by adequate documentation required by the Section 8 Housing

Choice Voucher Program and Housing Assistance Payment contract. 2 The trial court found that

the OIG Audit reflected the results of an investigation of fraudulent conduct occurring at the

Property only during Realtex’s tenure as property manager pursuant to the Agreement. The trial

court also found that the OIG Audit did not reflect the results of any investigation of conduct

occurring at the Property before or after Realtex’s tenure as property manager.       The OIG

determined that Jones-Nixon and Sanchez set up nonexistent “ghost tenants” by filing subsidy

information for tenants who had moved out of units and rented those units to non-Section 8

tenants to collect the rent for themselves. Jones-Nixon and Sanchez admitted to this scheme

pursuant to a plea agreement in their criminal trials. The OIG also determined that 43 tenant

files were deficient in numerous ways, including falsified income, income discrepancies, missing

documentation and certifications, and missing tenant files. The OIG Audit concluded that the

fraud was “obvious.”


       2   The fraudulent conduct commenced as early as 2009, before Realtex signed the
Agreement with Villa Main. The individuals who committed the fraudulent conduct worked for
the company that preceded Realtex as manager of the Property and were retained by Realtex
when it took over managing the Property.
                                               3
               In October 2018, HUD demanded that, in light of the findings contained in the

OIG Audit, Villa Main repay (1) $534,741 for federal subsidies paid for nonexistent “ghost

tenants” and (2) $1,095,364 for federal subsidies improperly paid because they were not

supported by adequate or required documentation. Villa Main sued Realtex asserting causes of

action for breach of contract, negligent supervision, and negligence. Realtex filed a general

denial and asserted affirmative defenses of impossibility of performance and limitations. After a

three-day bench trial, the case was suspended for the court to consider a jurisdictional challenge

raised by Realtex. Trial resumed and, at its conclusion, the trial court rendered judgment in Villa

Main’s favor. The court determined that it had jurisdiction over the case and that Realtex had

failed to prove its defenses of impossibility of performance and limitations. The court took

judicial notice of Villa Main’s election to pursue its remedies pursuant to its breach of contract

claim and awarded Villa Main actual damages in the amount of $1,630,105.00. The court also

awarded Villa Main attorneys’ fees of $244,380.75 and post-judgment interest.

               Realtex then perfected this appeal, arguing in five issues that the trial court erred

by (1) finding that it had jurisdiction over the case, (2) finding that Realtex failed to prove its

affirmative defenses of impossibility of performance and limitations, (3) awarding damages that

were purely speculative, and (4) awarding Villa Main attorneys’ fees and costs.


                                         DISCUSSION

Subject Matter Jurisdiction

               In its second appellate issue, Realtex asserts that Villa Main lacked standing to

bring this suit and, consequently, the trial court erred in determining that it had subject-matter

jurisdiction over the case. Realtex asserts that Villa Main, a limited partnership, was “require[d]


                                                 4
to have one or more general partners and one or more limited partners.” See Tex. Bus. Orgs.

Code § 1.002(50) (defining “limited partnership” as “a limited partnership under Title 4 and that

has one or more general partners and one or more limited partners”). Realtex argues that Villa

Main’s general partner, GP, LLC, was required to withdraw as a general partner of the limited

partnership due to its failure to pay franchise taxes as required by the Texas Tax Code. See Tex.

Tax Code §§ 171.251 (providing that comptroller shall forfeit corporate privileges of corporation

that fails to pay franchise taxes imposed); .2515 (providing that comptroller may for same

reasons used in relation to forfeiture of corporate privileges forfeit right of taxable entity to

transact business in state).     Realtex maintains that, as a result, “Villa Main, as a limited

partnership, does not exist as an entity for any purpose other than for winding up, amounting to

the forfeiture of the right to do business.” Realtex contends that because Villa Main has forfeited

its right to do business, it lacks standing to assert claims against Realtex. This contention,

however, raises a complaint about Villa Main’s capacity to sue, not its standing. See, e.g.,

Heartland Holdings Inc. v. United States Tr. Co. of Tex. N.A., 

 (Tex. App.—

Houston [14th Dist.] 2010, no pet.) (“While the question of whether a party is entitled to sue on a

contract is often informally referred to as a question of ‘standing,’ it is not truly a standing issue

because it does not affect the jurisdiction of the court; it is, instead, a decision on the merits.”).

                A party must have both standing and capacity to sue. Austin Nursing Ctr., Inc.

v. Lovato, 

 (Tex. 2005). “‘Texas courts have had considerable difficulty in

defining the relationship of the twin doctrines of capacity and standing.’” 

, n.1 (quoting

5 William V. Dorsaneo III, Texas Litigation Guide § 70.06[2] (2005)). “The issue of standing

focuses on whether a party has a sufficient relationship with the lawsuit so as to have a

‘justiciable interest’ in its outcome, whereas the issue of capacity ‘is conceived of as a procedural

                                                   5
issue dealing with the personal qualifications of a party to litigate.’”         Id. at 849 (quoting

6A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Wright, Miller & Kane, Federal

Practice and Procedure: Civil 2d § 1559, at 441 (2d ed. 1990)). “A plaintiff has standing when it

is personally aggrieved, regardless of whether it is acting with legal authority; a party has

capacity when it has the legal authority to act, regardless of whether it has a justiciable interest in

the controversy.” Nootsie, Ltd. v. Williamson Cnty. Appraisal Dist., 

 (Tex.

1996); see also 6A Wright, Miller & Kane § 1559, at 441 (“Capacity has been defined as a

party’s personal right to come into court, and should not be confused with the question of

whether a party has an enforceable right or interest.”).

               In Texas, the standing doctrine requires that there be (1) “a real controversy

between the parties,” that (2) “will be actually determined by the judicial declaration sought.”

Nootsie, 

. Without standing, a court lacks subject matter jurisdiction to hear a

case. Texas Ass’n of Bus. v. Texas Air Control Bd., 

 (Tex. 1993). Capacity,

on the other hand, is concerned with the party’s legal authority to pursue a claim. Lovato,

. “For example, minors and incompetents are considered to be under a

legal disability and are therefore unable to sue or be sued in their individual capacities; such

persons are required to appear in court through a legal guardian, a ‘next friend,’ or a guardian ad

litem.” 

. A party who has suffered an injury and therefore has a justiciable interest in

the controversy may lack legal authority to sue and, therefore, suit must be brought on their

behalf by another party that does have the legal authority to sue. 

 “Unlike standing, however,

which may be raised at any time, a challenge to a party’s capacity must be raised by a verified

pleading in the trial court.” 

 (citing Tex R. Civ. P. 93(1)-(2); Sixth RMA Partners v. Sibley,

 (Tex. 2003)).

                                                  6
               On appeal, Realtex asserts that, on October 27, 2011, Villa Main was required to

“wind up” its business because its sole general partner, GP, LLC, had ceased to be a general

partner of the limited partnership ninety days after forfeiture of its right to transact business in

the state. See Tex. Tax Code § 171.2515 (taxable entity forfeits right to transact business in state

if it fails to pay franchise taxes); Tex. Bus. Org. Code § 153.501(b)(2) (withdrawal of general

partner of domestic limited partnership is event requiring winding up under section 11.051(4) of

Texas Business Organizations Code). Realtex argues, therefore, that Villa Main had no authority

to do anything other than wind up its business, which it maintains constitutes “the forfeiture of

the right to do business.”     This assertion, however, is one challenging Villa Main’s legal

authority to pursue its claim against Realtex and is, therefore, a complaint about capacity. See

Lovato, 

. 3

               Realtex also asserts on appeal that Villa Main’s limited partnership agreement

required its dissolution after failure to appoint a new general partner to replace GP, LLC.

Realtex maintains that Villa Main no longer “existed,” and its claims should have been brought

on its behalf by “any number of entities, including a successor-in-interest of GP, LLC or its

insurers.” Again, this is a complaint about Villa Main’s capacity to bring its claims against

Realtex, not its standing. See Pike v. Texas EMC Mgmt., LLC, 

, 774 (Tex. 2020)

(“[T]he question whether a plaintiff has established his right ‘to go forward with [his] suit’ or

‘satisfied the requisites of a particular statue’ pertains ‘in reality to the right of the plaintiff to

relief rather than to the [subject-matter] jurisdiction of the court to afford it.’” (quoting Dubai


       3   We also note that the winding up procedures set forth in the Texas Business
Organizations Code expressly provide that “during the winding up process, the domestic entity
may prosecute or defend a civil, criminal, or administrative action.” See Tex. Bus. Org. Code
§ 11.052(b).
                                                  7
Petroleum Co. v. Kazi, 

 (Tex. 2000)); Lovato, 

 (when

party with justiciable interest in suit lacks legal authority, i.e., capacity, to sue, suit must be

brought on its behalf by another party that does have legal authority to sue). Realtex’s failure to

file a verified pleading challenging Villa Main’s capacity waived its right to complain about the

matter on appeal. See Nootsie, 

 (parties who do not follow Texas Rule of

Civil Procedure 93’s mandate to file verified pleading when arguing that plaintiff lacks legal

capacity to sue waive any right to complain about matter on appeal). We overrule Realtex’s

second issue.


Statute of Limitations

                In its third issue, Realtex argues that the trial court erred in concluding that Villa

Main timely filed its negligence and negligent hiring claims because Villa Main did not bring

those claims within the applicable two-year statute of limitations. Realtex requests that this

Court “reverse the trial court’s findings and render judgment in favor of Realtex as to

negligence.” We need not address this argument because, even assuming it is meritorious, any

alleged error would be harmless. The trial court’s judgment recites that it “takes judicial notice

of [Villa Main’s] election to pursue its remedy pursuant to [its] breach of contract claim against

[Realtex].” Thus, the trial court’s judgment was based on a breach of contract claim, not a

negligence claim. Realtex does not argue that Villa Main failed to bring suit within the four-year

limitations period for a breach of contract claim. Because any error by the trial court related to

the limitations period for bringing a negligence claim would have no effect, it is ultimately

harmless and would not warrant reversal. See Tex. R. App. P. 44.1(a)(1) (no judgment may be




                                                  8
reversed on appeal on ground that trial court made error of law unless court of appeals concludes

that error probably caused rendition of improper judgment). We overrule Realtex’s third issue.


Impossibility of Performance

               In its first issue, Realtex argues that the trial court erred in determining that it

failed to prove its defense of impossibility of performance. Realtex asserts that its failure to

comply with its obligations under the Agreement was excused because of objective original

impossibility: specifically, the fraudulent conduct of Nixon-Jones and Sanchez, which had been

ongoing at the time it executed the Agreement and which it was unaware of and could not detect.

       Section 266 of the Restatement of Contracts provides:


       Where, at the time a contract is made, a party’s performance under it is
       impracticable without his fault because of a fact of which he has no reason to
       know and the non-existence of which is a basic assumption on which the contract
       is made, no duty to render that performance arises, unless the language or
       circumstances indicate the contrary.


Restatement (Second) of Contracts § 266. The trial court found that, with respect to the “ghost

tenant” issue, the relevant facts “were confirmed by interviews with former Section 8 tenants,

former onsite managers, employers, reported income contributors, and non-Section 8 tenants,

who confirmed that Jones-Nixon and Sanchez set up nonexistent ‘ghost tenants’ by filing

subsidy information for tenants who had moved out of the units and rented those units to non-

Section 8 tenants.” With respect to the unsupported subsidy payments and the deficiencies in the

required documentation, the court found that “a review and analysis of each of the files []

reflect[ed] that each of the files was deficient in the way identified by OIG’s investigation and

reflected in the OIG Audit.” The trial court further found that:



                                                 9
       Had Realtex engaged in a preliminary audit of the tenant files at the time it began
       managing the Property, Realtex could have identified and corrected the
       compliance deficiencies described in the OIG Audit, whether by supplying the
       missing documentation, correctly certifying or recertifying tenant eligibility, or
       otherwise removing non-eligible tenants from units. To the extent any
       compliance deficiencies were present in any of the tenant files at the time it began
       managing the Property, Realtex was retained to and capable of correcting those
       deficiencies in accordance with the terms of the Management Agreement.


Thus, the trial court’s finding supports the conclusion that Realtex did have reason to know of

the facts that underlie Villa Main’s breach of contract claim; i.e., that the Property was not being

managed in compliance with all applicable laws as required by the terms of the Agreement.

Although not directly challenging this finding, on appeal Realtex states that “documents

provided in advance of and during the management period supported that no such fraud could

have been occurring.” Specifically, Realtex points to evidence that it relied on the records of the

previous property manager and on prior third-party audits when conducting its due diligence

before assuming management of the Property and that, in retrospect, those documents were

unreliable and inaccurate. Realtex further asserts that it continued to rely on annual audit reports

prepared by third parties “which continued to be devoid of any findings of deficiencies or

deviations from relevant laws and statutes.” Realtex relies on this evidence to argue that there is

legally and factually insufficient evidence to support the trial court’s finding that Realtex could

have identified the compliance deficiencies.         Realtex argues that, instead, the evidence

establishes that the “covert fraud” made it impossible for Realtex to perform its contractual

obligations to conduct its operations according to all applicable law.

               When a party attacks the legal sufficiency of the evidence supporting an adverse

finding on an issue on which it had the burden of proof, it must demonstrate on appeal that the

evidence establishes, as a matter of law, all vital facts in support of the issue. Dow Chem. Corp.

                                                10
v. Francis, 

 (Tex. 2001) (per curiam) (citing Sterner v. Marathon Oil Co.,

 (Tex. 1989)). We will sustain a legal sufficiency challenge only if the

contrary proposition was conclusively established.       

   When a party attacks the factual

sufficiency of an adverse finding on which it had the burden of proof, it must demonstrate on

appeal that the adverse finding is against the great weight and preponderance of the evidence.

Urista v. Bed, Bath & Beyond, Inc., 

 (Tex. App.—Houston [1st Dist.] 2007,

no pet.).

               The evidence Realtex points to fails to conclusively prove that it could not have

learned that its employees were not conducting operations at the Property in compliance with

applicable law. There was evidence at trial that Realtex performed a complete audit of the tenant

files when it took over management of the Property for the very purpose of identifying and

resolving preexisting compliance deficiencies and to avoid being held responsible for any

noncompliance by its predecessors. There was also testimony from Realtex that correcting such

deficiencies was the type of work it was retained to perform. Moreover, the Agreement itself

contemplated that Realtex was to “secure full compliance” with applicable laws, indicating the

possibility of preexisting incidences of noncompliance. Evidence that Realtex relied on third-

party auditors does not excuse it from the obligation it undertook to identify and correct

compliance deficiencies. This is especially true given the trial court’s unchallenged finding that

those deficiencies could have been identified and readily corrected along with the OIG’s

determination that the compliance deficiencies were “obvious.”

               Further, Realtex failed to establish that one of the basic assumptions it made when

executing the Agreement was that there was no existing fraud or incidences of noncompliance.

In fact, evidence was presented at trial that Realtex undertook an audit of the tenant files when it

                                                11
took over management of the Property for the purpose of ensuring that it would not be held

responsible for its predecessors’ errors.    And Realtex testified at trial that the compliance

deficiencies were “readily correctible” even if “not financially feasible.” Rather than support the

conclusion that Realtex could not perform its obligations under the agreement, the evidence

supports the conclusion that Realtex simply did not perform them. Realtex did not conclusively

establish its impossibility defense, nor is the evidence so weak that the trial court’s finding is so

against the great weight and preponderance of the evidence as to be clearly wrong or unjust. We

overrule Realtex’s first issue.


Damages

               In its fourth issue, Realtex asserts that the trial court erred in awarding Villa Main

$1,630,105 in actual damages because Villa Main failed to demonstrate that those damages were

more than merely speculative. Realtex maintains that Villa Main relied solely on a HUD

demand letter that constitutes no evidence of any actual damages sustained by Villa Main. This

argument is a challenge to the legal sufficiency of the evidence supporting the trial court’s

damages award.      We may sustain the challenge only if the record shows (1) no evidence

supporting Villa Main’s damages; (2) the evidence offered to prove damages is no more than a

scintilla; (3) the evidence establishes the opposite of the damages awarded; or (4) the court was

barred by law or the rules of evidence from considering the only evidence offered to prove

damages. Crosstex N. Tex. Pipeline, L.P. v. Gardiner, 

 (Tex. 2016).

               The evidence supporting the damages award consists not only of the HUD

demand letter, but also the detailed audit report that identifies each instance in which HUD found

that a payment had been made to a “ghost tenant” or made without the required supporting


                                                 12
documentation. Realtex did not present evidence to dispute the accuracy of the audit report. The

HUD demand letter and the instances of noncompliance identified by the OIG in its audit are

evidence that Villa Main was legally obligated to repay $1,095,364 in unsupported subsidy

payments and $534,741 in improperly paid Section 8 rental assistance. The Agreement contains

a provision requiring Realtex to indemnify Villa Main for any “demands” and “obligations”

arising out of “any act or failure to act by Realtex, or its agents or employees, constituting

negligence, misconduct, fraud, or breach of the Agreement.” The evidence was undisputed that

the HUD demand for repayment was caused by the conduct of Realtex’s employees, and the

unchallenged amount demanded by HUD and detailed in the audit report are some evidence

supporting the trial court’s award of $1,630,105 in damages. The amount demanded in the HUD

letter was supported by the audit findings and the audit report itself itemized the amounts that

HUD asserted were improperly paid. Cf. U.S. Renal Care, Inc. v. Jaafar, 

 (Tex. App.—San Antonio 2011, pet. denied) (concluding that demand letter with no

supporting evidence showing how amount demanded was derived and calculated was conclusory

and therefore not evidence of amount actually owed).

                 Despite this evidence, Realtex points to the following language in the

demand letter:


       If the owner does not cure the violations within the requisite timeframe, we will
       refer the issue to the Departmental Enforcement Center (DEC) to pursue legal
       action including referral to the U.S. Attorney’s Office.


Realtex argues that the evidence of damages is legally insufficient because there was no evidence

that the matter was ever referred to the DEC, as the letter threatened would occur in the event of

nonpayment. Realtex states that the referral would be for “a determination for an action under


                                               13
the False Claims Act or the Program Fraud Civil Remedies Act,” and then argues that any such

enforcement claim would be barred by the applicable statute of limitations. 4 However, evidence

that (1) Villa Main could be, but had not yet been, referred to the DEC for further enforcement

actions under either the False Claims Act or the Program Fraud Civil Remedies Act and (2) that

those enforcement actions would be barred by limitations does not negate the evidence as to

HUD’s independent claim against Villa Main for repayment of unsupported subsidies and rental

assistance in the amount of $1.6 million. Because Villa Main is legally obligated to repay HUD

$1.6 million, this amount represents the financial harm to Villa Main caused by Realtex’s failure

to comply with its obligations under the Agreement. Thus, Realtex was contractually obligated

to indemnify Villa Main.      See Avenell v. Chrisman Props., L.L.C., No 14-08-01180-CV,

, at *4 (Tex. App.—Houston [14th Dist.] Apr. 8, 2010, no pet.) (mem. op.)

(“Generally, the parties to a contract can agree on the remedy to be applied if the agreement is

breached; such an agreement should be enforced unless it is illegal or against public policy.”).

               Realtex also asserts that the damages award should be reversed because it

encompasses damages it contends were assessed for actions occurring after its contract with

Villa Main had ended and, consequently, should not have been attributed to Realtex. Realtex

relies on a statement in the OIG Audit that it covered a period from January 2012 through

May 2017.     Realtex asserts that because its contract was terminated with Villa Main in

May 2016, the damages award included damages “for events or occurrences over which Realtex

had no control or contractual duty to act or prevent.” A review of the evidence, however,

confirms that the amount demanded by HUD was related to repayment for subsidies paid out


       4  Realtex did not assert or present evidence that HUD’s claims against Villa Main based
on its audit were barred by limitations.
                                                14
only during Realtex’s tenure. The duration of the “Audit Period” identified in the report is not

by itself evidence that any of the $1.6 million HUD demanded be repaid related to acts or

omissions occurring after May 2016. In fact, the Audit Report states that “[t]he fraud detailed in

this report occurred during the time RealTex Housing Management, LLC was the management

agent,” which the report stated was from December 2011 to May 2016. Further, there was

testimony that after Villa Main terminated the Agreement with Realtex in May 2016, the

subsequent property manager did not submit any requests for HUD subsidies for any tenants for

whom it did not have supporting documentation. The evidence does not demonstrate that any of

the $1.6 million demanded by HUD was related to or arose from conduct occurring after

May 2016. We overrule Realtex’s fourth issue.


Attorneys’ Fees

               In its fifth issue, Realtex argues that the trial court erred in awarding attorneys’

fees to Villa Main because Villa Main failed to “specifically request an award of attorney’s fees

under any contract between it and Realtex.”          The Agreement provides that Realtex shall

indemnify Villa Main for costs and expenses “including reasonable attorneys’ fees, court costs

and litigation expenses” incurred by Villa Main because of Realtex’s breach of the Agreement.

According to Realtex, however, Villa Main’s pleadings requested attorneys’ fees “solely

pursuant to Chapter 38 of the Texas Civil Practice and Remedies Code” and, consequently, Villa

Main waived a claim to recover fees pursuant to the Agreement. 5 Realtex relies on cases holding



       5  Because Realtex is a limited liability company, the trial court could not order Realtex
to pay attorneys’ fees pursuant to Texas Civil Practice and Remedies Code chapter 38. See
Permit Partners, LLC v. Sauer, No. 03-19-00059-CV, 

, at *6 (Tex. App.—
Austin Jan. 29, 2021, pet. denied) (mem. op.) (trial court not authorized to assess fees under
Texas Civil Practice and Remedies Code section 38.001 against limited liability company).
                                                15
that a party whose pleadings seek attorneys’ fees only under Chapter 38 waives its right to

recover fees pursuant to a contractual agreement between the parties. See, e.g., Peterson Grp.,

Inc. v. PLTQ Lotus Grp., L.P., 

 (Tex. App.—Houston [1st Dist.] 2013, pet.

denied) (holding that party who pleads for attorneys’ fees only under Chapter 38 waives its claim

for attorneys’ fees under contractual provision “because a court’s judgment must conform to the

pleadings”); see also Tex. R. Civ. P. 301 (“The judgment of the court shall conform to the

pleadings, the nature of the case proved and the verdict, if any, and shall be so framed as to give

the party all the relief to which he may be entitled either in law or equity.”).

               In its live pleading, with respect to attorneys’ fees, Villa Main requested

“recovery of these attorneys’ fees, costs, and expenses pursuant to Chapter 38 of the Texas Civil

Practice and Remedies Code and applicable common law.” Villa Main’s pleadings also recite

the indemnification provision contained in the Agreement, including Realtex’s agreement to

indemnify Villa Main for attorneys’ fees and costs incurred by Villa Main as a result of Realtex’s

breach of the Agreement. In its prayer for relief, Villa Main requested “[a]ttorneys’ fees; and

[a]ll other relief to which Plaintiff is entitled.” “A prayer for general relief will support any relief

raised by the evidence and consistent with the allegations in the petition.” Salomon v. Lesay,

 (Tex. App.—Houston [1st Dist.] 2012, no pet.). Here, Villa Main’s

allegations in its petition include that breach of the Agreement gives rise to Realtex’s obligation

to indemnify Villa Main for its attorneys’ fees. The evidence at trial was consistent with the

allegations of breach of contract and the resulting indemnification obligation. Villa Main’s

pleadings did not request attorneys’ fees solely pursuant to Chapter 38, but also “pursuant to



Although the statute was subsequently amended to permit the assessment of attorneys’ fees
against limited liability companies, the prior version of the statute applies in this case.
                                                  16
applicable common law” and, additionally, included a prayer for general relief. Cf. Vast Constr.,

LLC v. CTC Contractors, LLC, 

 (Tex. App.—Houston [14th Dist.] 2017, no

pet.) (because plaintiff’s petition sought attorneys’ fees only under Chapter 38, it could not

recover fees under indemnification provision of contract).

               Texas law follows a “fair notice” standard of pleading, meaning we look to

whether a petition gives fair notice of the facts upon which the pleader bases his claims.

DeRoeck v. DHM Ventures, LLC, 

 (Tex. 2018). The key inquiry is whether

the opposing party “can ascertain from the pleading the nature and basic issues of the

controversy and what testimony will be relevant.”        

   Villa Main’s petition quotes the

indemnification provision entitling it to attorneys’ fees incurred due to Realtex’s breach of

contract and the pleading seeks attorneys’ fees pursuant not only to Chapter 38, but also

under “applicable common law.” Villa Main also prayed for whatever general relief it was

entitled to. We conclude that the pleadings were sufficient to support an award of attorneys’ fees

pursuant to the indemnification provision contained in the Agreement.          See Daugherty v.

Highland Cap. Mgmt., L.P., No. 05-14-01215-CV, 

, at *2-3 (Tex. App.—

Dallas Aug. 22, 2016, no pet.) (mem. op.) (holding that when plaintiff quoted indemnification

provision permitting recovery of attorneys’ fees and included request for fees pursuant to

“section 38.001 and any other applicable law,” pleading was sufficient to put defendant on notice

that plaintiff included claim for its attorneys’ fees pursuant to contract). We overrule Realtex’s

fifth issue.




                                               17
                                       CONCLUSION

              Having overruled each of Realtex’s five appellate issues, we affirm the trial

court’s judgment.



                                              __________________________________________
                                              Chari L. Kelly, Justice

Before Justices Baker, Kelly, and Theofanis

Affirmed

Filed: December 15, 2023




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