Opinion ID: 2834484
Heading Depth: 1
Heading Rank: 1

Heading: “To Declare Rights Hereunder”

Text: Texas follows “the American Rule” prohibiting recovery of attorney’s fees unless provided by contract or statute. 6 As this fee award depends entirely on a contract, we must start with the contract’s terms: Attorney’s Fees . If either party named herein brings an action to enforce the terms of this Contract or to declare rights hereunder, the prevailing party in any such action, on trial or appeal, shall be entitled to his reasonable attorney’s fees to be paid by [the] losing party as fixed by the court. Even if “prevailing party” status usually requires an award of money damages (which, as shown below, it does not), this contract precludes such an interpretation for three reasons. First, the contract provides fees for a prevailing defendant as well as a prevailing plaintiff . A defendant with no counterclaim could never recover money damages, yet under this contract would be entitled to recover its attorney’s fees anyway. Second, the contract provides for fees in actions “to declare rights hereunder.” An action to “declare rights” is not an action for money damages; a declaratory judgment may be rendered on liability alone without any reference to damages. 7 The Court says KB Home did not obtain a judgment declaring its rights, but that is not what the judgment itself says. After detailing the jury’s verdict, the judgment explicitly states on page 4 that Intercontinental “failed to comply with the Santa Clara Lot Contract” and its “failure to comply was not excused.” What more could a judgment say to declare the parties’ contractual rights? Third, a party with no damages can still bring an action “to enforce the terms” of a contract. Since its earliest days, Texas law has provided that a party who has suffered no damages may still obtain nominal damages for breach of contract. 8 A party with no damages may also seek rescission or specific performance. 9 Money damages may be indispensable in contract claims seeking money damages , but not for contract claims seeking something else. The Court says “[a] stand-alone finding on breach confers no benefit whatsoever.”1 0 But this judgment did not rescind the contract or render it void, and there was no evidence all the lots in Santa Clara had been sold. While KB Home did not request specific performance, that does not mean either party no longer has to perform. Before suit was filed, Intercontinental acted as if it were excused from the contract; this judgment says it is not. That seems to me precisely the kind of “judicially sanctioned change in the legal relationship of the parties”1 1 that makes KB Home at least partly the winner. The Court avoids the parties’ contract by looking entirely to federal and state statutory law, but those laws are drafted differently. In Texas, statutory attorney’s fees for breach of contract require a monetary recovery because the statute provides for fees only when recovered “in addition to the amount of a valid claim.”1 2 The federal Declaratory Judgment Act does not authorize attorney’s fees,1 3 so the Supreme Court cases said to be “helpful in this area” all concern federal statutes attaching attorney’s fees to a damages claim.1 4 Of course, the Supreme Court’s views are not just “helpful” but binding when we construe those federal statutes. But that is not the case when we apply Texas law to construe a Texas contract whose terms differ from any existing federal or state law. As there is no evidence the parties contracted with reference to these statutes or cases, relying on them simply replaces the parties’ intent with someone else’s. I agree that if a statute of limitations or some other affirmative defense barred KB Home’s contract claim, it could not be the prevailing party. But the judgment in such a case would declare that KB Home had no contractual rights due to that affirmative defense. By contrast, the absence of damages does not preclude a declaration that KB Home has a right to contract performance. Reading this contract as a whole, the parties never intended zero damages to mean zero attorney’s fees.