Opinion ID: 2171909
Heading Depth: 1
Heading Rank: 6

Heading: Attorney's Fees: Declaratory Judgment & Breach of Contract

Text: The court of appeals affirmed part of the attorney's fee award based on the Declaratory Judgments Act. [34] MBM asserts four reasons why declaratory relief was improper and cannot support a fee award. We disagree that declaratory relief was improper but agree it cannot support the fee award here. First, MBM argues that declaratory relief is not available for contract claims (like those here) that are fully matured and predicated upon a terminated relationship. But the Act says relief is available in contract cases before or after there has been a breach, [35] so a matured breach is explicitly covered by the Act. [36] Further, declaratory relief is often available after a relationship has been terminated, as in cases concerning noncompetition covenants signed by former employees, [37] or offsetting judgments between former litigants. [38] MBM notes that we justified declaratory relief in BHP Petroleum Co. v. Millard by referring to an ongoing and continuing relationship, but that was solely to show that the defendant's counterclaim (relating to the parties' future rights) went beyond the plaintiff's claim (relating to past damages alone). [39] We disagree that a party can immunize itself against declaratory relief by simply terminating any ongoing relationship. Second, MBM urges that declarations of non-liability should be barred in contract cases, just as they are in tort cases. As we said in Abor v. Black : Because [the Act] appears to give the courts jurisdiction over declarations of non-liability of a potential defendant in a tort action, we find that the ... District Court had jurisdiction over the suit. However, we hold that the trial court should have declined to exercise such jurisdiction because it deprived the real plaintiff of the traditional right to choose the time and place of suit. [40] But the real plaintiff and the traditional right to choose the time and place of suit are materially different in contract and tort cases. The real plaintiff in a tort action is the injured party, yet both parties often suffer injury if a contract collapses. When each party claims the other breached (as is usually the case), [41] it is hard to say who ought to be the real plaintiff. Here, for example, why should MBM get to choose the time and place of suit rather than the Woodlands? The Act itself specifically contemplates declarations that are negative (non-liability) as well as affirmative (liability). [42] And historically, declarations of non-liability under a contract have been among the most common suits filed under the Act, including:  suits by insurers to declare non-liability under a duty-to-defend clause, [43]  suits by employees to declare non-liability under a covenant not to compete, [44] and  suits by a party to declare non-liability for higher or additional payments. [45] Extending the bar against declarations of non-liability from tort to contract cases would drastically handicap declaratory-judgment practice in Texas. Third, MBM argues that declaratory judgments are available only if there is no adequate alternative cause of action. But this has never been the rule in Texas. Shortly after the Legislature passed the Act in 1943, [46] this Court adopted exactly the opposite rule, stating that the existence of another adequate remedy does not bar the right to maintain an action for declaratory judgment and finding this rule supported by better reasoning. [47] The federal courts follow the same rule, as Federal Rule of Civil Procedure 57 makes clear: The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate. We agree the Act cannot be invoked when it would interfere with some other exclusive remedy [48] or some other entity's exclusive jurisdiction. [49] But prohibiting declaratory judgments whenever a breach of contract claim is available would negate the Act's explicit terms covering such claims. [50] Yet while declaratory relief may be obtained under the Act in all these circumstances, that does not mean attorney's fees can too. Texas has long followed the American Rule prohibiting fee awards unless specifically provided by contract or statute. [51] By contrast, the Declaratory Judgments Act allows fee awards to either party in all cases. [52] If repleading a claim as a declaratory judgment could justify a fee award, attorney's fees would be available for all parties in all cases. That would repeal not only the American Rule but also the limits imposed on fee awards in other statutes. Accordingly, the rule is that a party cannot use the Act as a vehicle to obtain otherwise impermissible attorney's fees. [53] The Act was originally intended as a speedy and effective remedy for settling disputes before substantial damages were incurred. [54] It is intended to provide a remedy that is simpler and less harsh than coercive relief, if it appears that a declaration might terminate the potential controversy. [55] But when a claim for declaratory relief is merely tacked onto a standard suit based on a matured breach of contract, allowing fees under Chapter 37 would frustrate the limits Chapter 38 imposes on such fee recoveries. And granting fees under Chapter 37 when they are not permitted under the specific common-law or statutory claims involved would violate the rule that specific provisions should prevail over general ones. [56] While the Legislature intended the Act to be remedial, [57] it did not intend to supplant all other statutes and remedies. [58] At trial, the Woodlands recovered no damages on its breach of contract claim, so it cannot recover fees under Chapter 38. Allowing it to recover the same fees under Chapter 37 would frustrate the provisions and limitations of the neighboring chapter in the same Code. [59] Accordingly, we hold the Woodlands cannot recover attorney's fees under the Declaratory Judgments Act. Nevertheless, the Woodlands argues it is entitled to fees because the declaratory relief it sought did more than merely duplicate the issues litigated in its contract and fraud claims. The five declarations the Woodlands obtained in the judgment were: 1. that the Woodlands complied with its contractual obligations to provide notice of its intent not to renew; 2. that MBM improperly failed to timely designate a carrier and location for the return; 3. that MBM's manipulation of the termination dates barred it from making any claim that [the Woodlands] failed to provide timely notice; 4. that the Woodlands relied to its detriment on the termination dates provided by MBM; and 5. that the Woodlands has suffered damage as a direct result of its detrimental reliance upon the termination dates provided by MBM. Whether the Woodlands sent timely notice of cancellation and MBM failed to designate a return location were part and parcel of the Woodlands' contract claim. And whether MBM misrepresented the termination dates and the Woodlands relied on those misrepresentations were duplicative of the Woodlands' fraud claim. Thus, the declarations sought by the Woodlands merely duplicated issues already before the trial court.