Court Opinion

ID: 2953207
Source: CourtListenerOpinion
Date Created: 2015-09-16 23:10:09.029094+00
Date Added: 2024-06-11T11:41:51.366224
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                        NO. 03-10-00650-CV

                Agustin Zurita and AZ Restaurant Ventures, LLC, Appellants

                                                   v.

                                  SVH-1 Partners, Ltd., Appellee

    FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT
    NO. D-1-GN-003768, HONORABLE GISELA D. TRIANA-DOYAL, JUDGE PRESIDING

                             MEMORANDUM OPINION

                SVH-1 Partners, Ltd. (“the Landlord”) sued Agustin Zurita for breach of a

commercial lease; AZ Restaurant Ventures, LLC (“AZR”) intervened and filed claims against the

Landlord for conversion and tortious interference. After a bench trial, the trial court rendered

judgment against Zurita on the Landlord’s breach-of-contract claim and against AZR on its

conversion and tortious-interference claims. The judgment awarded the Landlord damages, pre- and

post-judgment interest, and attorneys’ fees, and held Zurita and AZR jointly and severally liable for

the attorneys’ fee award. The trial court also concluded that it lacked jurisdiction to consider Zurita’s

and AZR’s requests for declarations regarding the existence and priority of liens on certain restaurant

equipment AZR had purchased with financing from a third party. In four issues, AZR and Zurita

contend that the trial court erred in (1) rendering judgment that AZR take nothing on its conversion

claim; (2) concluding that it lacked jurisdiction over Zurita’s and AZR’s requests for declaratory
relief; (3) holding Zurita and AZR jointly and severally liable for attorneys’ fees awarded to the

Landlord; and (4) making certain procedural rulings that were arbitrary and capricious and denied

them a fair trial. We will modify the trial court’s judgment and, as modified, affirm.

                      FACTUAL AND PROCEDURAL BACKGROUND

                The Landlord owns the Sunset Valley Homestead Shopping Center located in Austin.

In March 2007, the Landlord and Zurita executed a commercial lease for approximately 3,000 square

feet of space in the shopping center. The lease provided that “Tenant will use the Premises to

operate a restaurant whose primary business is a sandwich bar.” Because Zurita intended to operate

the restaurant through a separate entity that had not yet been formed, the lease included a provision

setting forth the Landlord’s consent to a “one-time” assignment of the lease, to be executed before

the date the leased premises were deemed by the Landlord to be ready for occupancy, to an entity

created to operate the restaurant and “whose managing principal is Agustin Zurita.” After the lease

was signed, Zurita formed Z & P Sunset Valley Food but failed to execute an assignment of the lease

to that entity prior to the date on which the premises were ready for occupancy. Consequently, Zurita

remained the tenant on the lease.

                The lease also granted the Landlord a lien on certain personal property located on

the premises:

       LANDLORD SHALL HAVE AND TENANT HEREBY GRANTS TO
       LANDLORD A CONTINUING SECURITY INTEREST FOR ALL RENTALS
       AND OTHER SUMS OF MONEY DUE OR TO BECOME DUE HEREUNDER
       FROM TENANT, UPON ALL GOODS, WARES, EQUIPMENT, FIXTURES,
       FURNITURE, INVENTORY, ACCOUNTS, DOCUMENTS, GENERAL
       INTANGIBLES, CHATTEL PAPER, DEPOSIT ACCOUNTS, DOCUMENTS,

                                                 2
       INSTRUMENTS, INVESTMENT PROPERTY AND OTHER PERSONAL
       PROPERTY OF TENANT NOW OWNED OR HEREAFTER ACQUIRED
       (COLLECTIVELY “COLLATERAL”) AND SITUATED (OR DOCUMENTS
       EVIDENCING SUCH COLLATERAL KEPT) ON, AT, OR WITHIN THE
       PREMISES, WHICH IS LOCATED AT Sunset Valley Homestead Shopping
       Center, SEC Hwy 290 and Brodie Lane, Austin, Texas. . . . THIS SECURITY
       AGREEMENT AND FINANCING STATEMENT ALSO COVERS FIXTURES
       LOCATED AT THE PREMISES DESCRIBED IN EXHIBIT A AND EXHIBIT B
       ATTACHED HERETO, AND MAY BE FILED FOR RECORD IN THE
       REAL ESTATE RECORDS FOR THE COUNTY IN WHICH THE PREMISES
       ARE LOCATED.

Exhibits A and B provided specific descriptions of the premises leased by Zurita. Pursuant to this

provision, in the event of Zurita’s default under the lease, the Landlord would have all rights and

remedies of a secured creditor under the Uniform Commercial Code, including the right to sell the

property subject to the security interest granted by Zurita. See Tex. Bus. & Com. Code Ann.

§§ 9.101-.709 (West 2011). When Zurita signed the lease granting the security interest, the leased

premises were unfinished, and no equipment, fixtures, furniture, or other items were located there.

               At trial, Zurita testified that after the premises were ready for occupancy, AZR

purchased the restaurant equipment and furnishings. In connection with this purchase, AZR entered

into financing agreements with US Bancorp. AZR is a limited liability company formed in 2006 and

owned solely by Zurita. According to Zurita, AZR had legal title to the equipment and furnishings

located in the leased premises, and US Bancorp had a purchase money security interest in the

financed items.

               The ten-year lease term commenced in September 2007. In January 2008 Zurita

began defaulting on rent payments. In June 2008 Zurita sent a letter to the Landlord informing it that

he had decided to close the restaurant. The next day, the Landlord sent Zurita a letter informing him

                                                  3
that, due to his default in paying rent, and because he had given notice that he was vacating the

leased premises, it was exercising its right to terminate Zurita’s right to possession of the premises.

Thereafter, the Landlord informed Zurita in writing that, if he failed to pay the balance due for

unpaid rent, it intended to proceed with disposition of the contents of the leased premises, claiming

a security interest in that property pursuant to the terms of the lease. Through his counsel, Zurita

requested that no action be taken until counsel had an opportunity to investigate the facts and

expressed a particular concern that the items the Landlord claimed a security interest in were subject

to a subordination agreement in favor of US Bancorp. During the parties’ subsequent settlement

negotiations, which failed, counsel for Zurita learned that there was no subordination agreement

covering the contents of the leased premises. The Landlord gave notice of a November 13, 2008

public sale and disposition of collateral, including all non-affixed contents of the leased premises.

The letter also stated that “[a]ll fixtures have reverted to the Landlord in accordance with the law.”

At the sale, one of Zurita’s business associates bid $50,000 for the property, but later withdrew the

bid. Consequently, the Landlord’s opening bid of $25,000 was the winning bid. The Landlord

credited the $25,000 against Zurita’s debt to it under the lease.

               The Landlord filed its original petition against Zurita on October 17, 2008 alleging

breach of the lease and seeking damages for past-due rent payment, various expenses, late fees, and

other charges. Zurita filed a general denial and requested a declaration that US Bancorp had a lien

on personal property that was superior to the Landlord’s. Zurita also filed counterclaims for:

(1) conversion, based on his assertion that AZR held legal title to the property, and consequently the

security interest granted to the Landlord by Zurita had not attached to the property sold; (2) tortious

                                                   4
interference with a contractual relationship between US Bancorp and AZR; (3) violation of a right

to redeem, based on the Landlord’s alleged refusal to accept Zurita’s offer to pay his debt to the

Landlord, including attorneys’ fees; and (4) common law fraud, based on allegedly false

representations Zurita claimed the Landlord made in connection with Zurita’s attempts to redeem

the property. Zurita later added a counterclaim for “failure to mitigate.”

                In April 2009 AZR filed a plea in intervention seeking a declaration that it had legal

title to the property sold and that the Landlord had no valid lien on that property. AZR also asserted

causes of action for: (1) conversion, based on the Landlord’s allegedly unlawful foreclosure and sale

of the property at public auction; and (2) tortious interference with a contractual relationship between

AZR and US Bancorp.

                The trial court subsequently granted the Landlord’s motion for summary judgment

on Zurita’s liability for breach of the lease. The court also ordered that the Landlord recover from

Zurita its damages and attorneys’ fees in amounts to be determined by the factfinder. In his third

amended answer, Zurita dropped his request for declaratory relief and all previously asserted

counterclaims. This amended answer contained only Zurita’s general denial, an affirmative defense

that the Landlord failed to mitigate its damages, and a request for attorneys’ fees.

                After a bench trial, the trial court awarded the Landlord $284,838.80 against Zurita

on the breach-of-contract claim. The court rendered judgment against AZR on its conversion and

tortious interference claims. The court denied the Landlord’s claim for reverse veil-piercing against

Zurita and AZR. The court reduced the amount of actual damages awarded to the Landlord for

Zurita’s breach of the lease agreement by $25,000 due to its conclusion that the Landlord failed to

                                                   5
properly conduct a foreclosure under Uniform Commercial Code article 9 but also found that the

foreclosure sale did serve to pass title to the property despite the defect. The order also held Zurita

and AZR jointly and severally liable for $85,000 in attorneys’ fees awarded to the Landlord.

After rendering judgment, the trial court filed findings of fact and conclusions of law. This

appeal followed.

                                           DISCUSSION

                 In their first issue, Zurita and AZR challenge the trial court’s judgment against AZR

on its conversion claim. They assert that the record conclusively demonstrates that AZR, not Zurita,

had legal title to the property the Landlord foreclosed on and sold at public auction, that Zurita could

not have granted the Landlord a security interest in the property the Landlord sold, and that the

Landlord’s disposition of AZR’s property was therefore wrongful. As demonstrated by the findings

of fact and conclusions of law detailed below, the trial court determined that the Landlord’s

foreclosure and sale of the property was not wrongful, and therefore did not constitute conversion,

because Zurita could and did grant to the Landlord a security interest in the property located within

the leased premises to secure payment for rent and other sums due under the lease:

        FOF 9:          Zurita granted a continuing security interest in all of the personal
                        property situated on, at, or within the premises to [the Landlord] to
                        secure payment for rent and other sums due under the lease.

        FOF 10:         On October 30, 2007, [the Landlord] filed a UCC Financing
                        Statement with the Texas Secretary of State. Zurita was named as the
                        debtor.

                                                   6
       FOF 11:         On November 28, 2007, [the Landlord] filed a UCC Financing
                       Statement in the Real Estate Records of Travis County, Texas. Zurita
                       was named as the debtor.

       FOF 26:         Zurita and [AZR] each claim that [AZR] was the owner of all of the
                       items that were to be sold on November 12, 2008.

       FOF 27:         Even if [AZR] held legal title to the collateral, Zurita continued to
                       have rights in the collateral through his possession and use of the
                       collateral in the restaurant, and by virtue of his 100% control of
                       [AZR], the purported owner of the collateral.

       FOF 44:         [The Landlord] acted in furtherance of its own contractual rights to
                       proceed with the repossession and disposition of its collateral.

       COL 3:          Zurita had the authority to grant the security interest which attached
                       in the manner required by Section 9.203 of the Business and
                       Commerce Code. Full ownership of the collateral is not required.

       COL 4:          [The Landlord] perfected its security interest as required by Sections
                       9.501(a)(2) and 9.501(a)(1)(B) of the Business and Commerce Code.

       COL 8:          Because it lawfully took possession of the collateral, [the Landlord]
                       did not convert any property of Zurita or [AZR].

                Zurita and AZR’s first issue challenges these findings of fact and conclusions of law.

We review a trial court’s conclusions of law de novo and will uphold the conclusions if the judgment

can be sustained on any legal theory supported by the evidence. BMC Software Belg., N.V.

v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). What otherwise might be a question of fact becomes

one of law when the fact is not in dispute or is conclusively established. See Tenneco Inc.

v. Enterprise Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996). Although a trial court’s conclusions

of law may not be challenged for factual sufficiency, we may review the legal conclusions drawn

from the facts to determine whether the conclusions are correct. Id. We review a trial court’s

                                                  7
findings of fact for legal and factual sufficiency of the evidence using the same standards applied to

a jury verdict. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996).

                A party alleging conversion must show that: (1) it owned, possessed, or had the

right to immediate possession of personal property; (2) the defendant wrongfully exercised dominion

or control over such property; and (3) the owner suffered injury. See Green Int’l v. Solis,

951 S.W.2d 384, 391 (Tex. 1997); United Mobile Networks, L.P. v. Deaton, 939 S.W.2d 146, 147

(Tex. 1997); Khorsid, Inc. v. Christian, 257 S.W.3d 748, 759 (Tex. App.—Dallas 2008, no pet.).

The parties here do not dispute that AZR had legal title to the property or that the Landlord exercised

dominion or control over it. The dispute is whether the Landlord’s conduct was wrongful.

Was the Landlord’s disposition of the property wrongful?

                The Landlord asserted, and the trial court agreed, that its disposition of the property

was lawful because it was exercising its rights as a secured creditor with a perfected security interest

in the property. Zurita and AZR, on the other hand, contend that the Landlord did not have a valid

security interest in the property because (1) Zurita had no power to grant the Landlord a security

interest in property owned by AZR, and (2) by its terms, the granting language limited the security

interest to property owned by Zurita. The security agreement plainly granted the Landlord a security

interest in property “owned or hereafter acquired” by Zurita, and located in the leased premises.

Zurita and AZR assert that the security interest therefore attached only to property to which Zurita

held or acquired legal title. We disagree.

                For a security interest to attach to the collateral, the debtor must have “rights in the

collateral or the power to transfer rights in the collateral to the secured party.” Tex. Bus. & Com.

                                                   8
Code Ann. § 9.203(b)(2) (emphasis added). As a general rule, a security interest attaches only to

whatever rights the debtor may have in the collateral, broad or limited as those rights may be.

However, comment 6 to section 9-203 observes that the italicized phrase accommodates exceptions

to the general rule that “enable a debtor to transfer, and a security interest to attach to, greater rights

than the debtor has.” Id. cmt. 6. Such an exception exists here. It is undisputed that Zurita is the

sole owner of AZR. Consequently, he had the power to transfer rights in property to which his

company, AZR, held legal title.

                With respect to AZR and Zurita’s contention that the language of the Landlord’s lien

itself does not cover property to which Zurita does not have legal title, we note that the provision

purports to grant a security interest in property Zurita “owned or hereafter acquired.” We do not

agree that this granting language limits the collateral subject to the security interest to only those

items to which Zurita had legal title. The Uniform Commercial Code does not equate a debtor’s

rights in collateral with its possession of legal title. See In re Whatley, 874 F.2d 997, 1004 (5th Cir.

1989) (holding bankruptcy court erred in equating debtor’s rights in collateral with its possession

of legal title and observing that “[t]he Uniform Commercial Code does not equate the two concepts;

they are not the same”). A debtor need not have legal title to equipment in order to grant a creditor

a security interest. Id. (citing Matter of Samuels & Co., Inc., 526 F.2d 1238 (5th Cir. 1987)

(en banc)). While the Uniform Commercial Code does not define the term “rights in the collateral,”

it is generally recognized that legal title is not required and that rights in the collateral may be

sufficient if the true owner consents to the debtor’s use of the collateral as security, or if the true

owner is estopped from denying the creation of the security interest because he has allowed another

                                                    9
to appear as the owner, or as having full power of disposition over the property, so that an innocent

person is led into dealing with such apparent owner. See, e.g., In re Pubs, Inc. of Champaign,

618 F.2d 432, 437-38 (7th Cir. 1980) (applying Illinois law).1 Although we have found no Texas

cases directly on point, “all of the courts that have considered the question have ruled that an owner’s

permission to use goods as collateral creates rights in the debtor sufficient to give rise to an

enforceable security interest.” In re WL Homes, LLC, 452 B.R. 138, 142 (Bankr. D. Del. 2011)

(citing Merchants Bank v. Atchison, 832 F.2d 1236, 1239 (11th Cir. 1987)); see also Franklin Bank

v. Tindall & Co., 2008 U.S. Dist. LEXIS 27765, at *18 (E.D. Mich. Apr. 7, 2008). Here, the

landlord’s lien specifically identifies that it attaches to “all goods, wares, equipment fixtures,

furniture, inventory, accounts, documents, instruments, investment property, and other personal

property” that Zurita owns or hereafter acquires and that are located at the leased premises. Because

the UCC does not equate ownership rights sufficient to convey a security interest with legal title,

Zurita had sufficient rights in the collateral to “own” it for purposes of granting a security interest,

and the description of the collateral contained in the lease provision purports to grant to the Landlord

a security interest in all such property. This conclusion is consistent with the purposes and goals of

the Uniform Commercial Code, which was designed, in part, “to prevent hidden-title subterfuge in

which the true owner of collateral, by permitting another party to exercise an outward appearance

       1
           The Uniform Commercial Code should be construed to promote uniformity with other
jurisdictions. See Tex. Bus. & Com. Code Ann. § 1.103(a)(3) (West 2009) (provisions of Texas
Uniform Commercial Code must be construed “to make uniform the law among the various
jurisdictions”); 1/2 Price Checks Cashed v. United Auto Ins. Co., 344 S.W.3d 378, 391 (Tex. 2011)
(citing In re King-Porter Co., 466 F.2d 722, 732 (5th Cir. 1971)); see also Tex. Gov’t Code Ann.
§ 311.028 (West 2005) (“A uniform act included in a code shall be construed to effect its general
purpose to make uniform the law of those states that enact it.”).

                                                  10
of ownership, could deceive third-party creditors to their detriment.” Kinetics Tech. Int’l Corp.

v. Fourth Nat’l Bank, 705 F.2d 396, 399 (10th Cir. 1983). We conclude that the security interest

granted to the Landlord was not strictly limited to the property to which Zurita held legal title.

Rather, the security interest also covered the equipment, fixtures, furniture, inventory, and similar

items located on the leased premises that Zurita had the authority to pledge as security under

section 9.203. This included the property to which AZR, an entity owned solely by Zurita, held legal

title and which was located at the leased premises. We overrule the first appellate issue.

Did the trial court have jurisdiction over the requests for declaratory relief?

                 In their second issue, Zurita and AZR contend that the trial court erred by concluding

that it lacked jurisdiction over their requests for declaratory relief and therefore refusing to address

those claims. The record reflects that, by the time of trial, Zurita had abandoned any claim for

declaratory relief.2 AZR’s live pleading, however, requested a declaration that it owned the

foreclosed-on property and that US Bancorp’s purchase-money security interest was superior to the

Landlord’s lien. The trial court concluded that the Landlord lawfully repossessed and disposed

of the property, thereby effectively denying AZR’s request for a declaration that it owned the

property. With respect to AZR’s request that the court declare that US Bancorp had rights in the

property superior to the Landlord’s, the trial court’s findings of fact and conclusions of law include

the following:

       2
           Zurita’s third amended answer and verified denial, filed on January 15, 2010, does not
include a request for declaratory judgment. This pleading contains only a general and verified denial
and sets forth as an affirmative defense that the Landlord failed to mitigate its damages.

                                                  11
       FOF 42:         Because Zurita and [AZR] failed to join or retain other parties who
                       may have or claim an interest in the collateral, the court cannot make
                       any declaration regarding their interests. These parties include U.S.
                       Bancorp (USB), Coactive Capital Partners, LLC, American
                       Equipment, and Tarka. The only documentation provided from these
                       entities showed, at most, a possible purchase money security interest
                       in computers and related equipment, not one in restaurant furniture,
                       fixtures, and non-computer equipment. None of these potential lean
                       [sic] holders sought to intervene to prove and protect any potential
                       security interest, if one existed.

       COL 18:         Because Zurita and [AZR] failed to join USB or retain Tarka as
                       parties, the court lacked jurisdiction to adjudicate the priority of
                       claims to the collateral, or the rights to possession of such collateral.
                       When declaratory relief is sought, all persons who have or claim any
                       interest that would be affected by the declaration must be made
                       parties. V.T.C.A., Civil Practice & Remedies Code § 37.006(a).

       COL 19:         If the court did render a declaratory judgment for [AZR], it would be
                       an impermissible advisory opinion only. An advisory opinion decides
                       an abstract question of law without binding the parties. The court
                       lacks subject matter jurisdiction to do so.

The trial court concluded that it could not make a declaration of the rights of an entity that was not

a party to the suit. This was not error. When declaratory relief is sought, “all persons who have or

claim any interest that would be affected by the declaration must be made parties.” Tex. Civ. Prac.

& Rem. Code Ann. § 37.006(a) (West 2008). The statute mandates joinder of persons whose

interests would be affected by the judgment. See Indian Beach Prop. Owners’ Ass’n v. Linden,

222 S.W.3d 682, 697 (Tex. App.—Houston [1st Dist.] 2007, no pet.); see also Tex. R. Civ. P. 39

(governing joinder of persons needed for just adjudication). The purpose of this provision is to avoid

a multiplicity of suits, since a declaratory judgment does not prejudice the rights of a person not a

party to the proceeding. See Dahl v. Hartman, 14 S.W.3d 434, 436 (Tex. App.—Houston [14th

                                                  12
Dist.] 2000, pet. denied). AZR’s failure to join USB as a party contradicted the statute’s directive

that, when seeking declaratory relief, joinder of all persons with an interest that would be affected

by the declaration is required.

                Zurita and AZR rely on Brooks v. Northglen Ass’n, 141 S.W.3d 158, 162 (Tex. 2004),

to support their contention that the trial court’s conclusion that their failure to join US Bancorp

deprived the court of jurisdiction over the request for declaratory relief was erroneous. In Brooks,

a group of property owners sought a declaration regarding their homeowners’ association’s right to

increase annual assessments and impose late fees. The homeowners’ association covered six Harris

County subdivisions, each of which was governed by a separate set of deed restrictions. The

plaintiffs included property owners from four of the six subdivisions, but none from the remaining

two. The supreme court concluded that the absence of some of the homeowners from the represented

subdivisions did not deprive the court of jurisdiction to declare the rights of all property owners from

those subdivisions. The court then considered whether there was jurisdiction to declare the rights

of property owners from the subdivisions that had no representative homeowners as parties to the

proceeding. The court stated:

        A declaratory judgment requires a justiciable controversy as to the rights and status
        of parties actually before the court for adjudication, and the declaration sought must
        actually resolve the controversy. A judicial decision reached without a case or
        controversy is an advisory opinion, which is barred by the separation of powers
        provision of the Texas Constitution.

Id. at 163-64 (citations omitted). The court held that because there were no “plaintiffs” from the

two remaining subdivisions, there was no person in those sections for whom rights could be declared

                                                  13
in the declaratory judgment action. Id. at 164. Consequently, “the trial court was without

jurisdiction to issue a judgment” with respect to those subdivisions, and any opinion interpreting

their rights would be purely advisory. Id. Applying the supreme court’s reasoning in Brooks, the

trial court in the present case properly concluded that it did not have jurisdiction to declare the rights

of US Bancorp, an entity that was not a party to the proceeding.

                AZR further contends that, in the event the trial court lacked jurisdiction to declare

US Bancorp’s rights, the proper remedy was to afford it the opportunity to join the missing party,

not to dismiss the request for lack of jurisdiction. However, AZR had no basis for bringing

US Bancorp into the suit—any existing dispute or controversy pertaining to the priority of liens in

the property is between the Landlord and US Bancorp. The trial court is only required to order that

a third party be made a party to the suit if, without its presence, “complete relief cannot be accorded

among those already parties.” Tex. R. Civ. P. 39(a) (emphasis added). Here, the court was able to

adjudicate the issues between the Landlord and Zurita without determining the rights of US Bancorp

vis-à-vis the Landlord. US Bancorp declined to intervene in the lawsuit or otherwise seek an

adjudication of its rights in the collateral in this proceeding. Moreover, AZR never sought to have

US Bancorp intervene or somehow joined in the litigation at any time prior to or during trial, and

never sought a continuance for that purpose. See id. (“If [a party] should join as plaintiff but refuses

to do so, he may be made a defendant, or, in a proper case, an involuntary plaintiff.”). We overrule

the second appellate issue.

                                                   14
Award of attorneys’ fees to the Landlord

                 The trial court’s judgment awards the Landlord $85,000 for reasonable and necessary

attorneys’ fees for trial. The judgment also awards the Landlord $20,000 in attorneys’ fees in the

event of an unsuccessful appeal by Zurita or AZR to the court of appeals and an additional $10,000

in the event of an unsuccessful appeal by Zurita or AZR to the Texas Supreme Court. The judgment

provides that Zurita and AZR are jointly and severally liable to the Landlord for all attorneys’ fees.

The third appellate issue raises various challenges to the attorneys’ fee award.3

                 Zurita and AZR contend that the trial court erred when it ordered AZR to pay the

Landlord attorneys’ fees pursuant to section 37.009 of the Uniform Declaratory Judgments Act

(UDJA). We review an award of attorneys’ fees under the UDJA for abuse of discretion. See

Bocquet v. Herring, 972 S.W.2d 18, 20-21 (Tex. 1998). Appellants argue that, although the

Landlord’s pleadings requested an award of attorneys’ fees, it did not specifically request attorneys’

fees pursuant to the UDJA, and consequently the trial court’s award of attorneys’ fees is an abuse

of discretion.

                 Section 37.009 of the UDJA provides: “In any proceeding under this chapter, the

court may award costs and reasonable and necessary attorney’s fees as are equitable and just.” Tex.

Civ. Prac. & Rem. Code Ann. § 37.009 (West 2008). In a declaratory judgment action, the trial court

may award either side costs and reasonable attorneys’ fees as are equitable and just. See Arthur M.

       3
          As an initial matter, Zurita and AZR state that in the event this Court sustains the second
appellate issue and holds that the trial court erred in concluding that it lacked subject matter
jurisdiction over the request for declaratory relief, the attorneys’ fee award should be reversed and
the cause remanded to allow the trial court to reassess fees. Our disposition of the second issue
moots this request.

                                                  15
Deck & Assocs. v. Crispin, 888 S.W.2d 56, 62 (Tex. App.—Houston [1st Dist.] 1994, writ denied).

The question, then, is not whether the Landlord’s pleadings include a specific request for attorneys’

fees under the UDJA, but whether the action between AZR and the Landlord was one “under this

chapter,” i.e., whether it was a declaratory judgment action. It is undisputed that AZR sought

declaratory relief against the Landlord under the UDJA. Thus, the trial court was authorized to

award attorneys’ fees to any party with pleadings requesting them. See Purvis Oil Corp. v. Hillin,

890 S.W.2d 931, 939 (Tex. App.—El Paso 1994, no writ) (concluding that party moving for

attorneys’ fees in declaratory judgment action need not specify statutory authority for award so long

as that party has pleaded for attorneys’ fees).

               Zurita and AZR next contend that the Landlord was not entitled to an award of

attorneys’ fees under the UDJA because “the trial court found it lacked jurisdiction to consider the

request for declaratory relief.” AZR asserts that because there was no adjudication on the merits of

the claim, no party prevailed and an award of any attorneys’ fees under those circumstances is not

equitable and just. While the requirements that fees be reasonable and necessary are matters of fact,

the requirements that fees be equitable and just are matters of law. See Bocquet, 972 S.W.2d at 21.

In a declaratory judgment action, the decision to award attorneys’ fees is solely within the discretion

of the trial court. See Neeley v. West Orange-Cove Consol. Indep. Sch. Dist., 176 S.W.3d 746, 799

(Tex. 2005). Under section 37.009, a trial court may exercise its discretion to award attorneys’

fees to the prevailing party, the nonprevailing party, or neither. See Barshop v. Medina Cnty.

Underground Water Conservation Dist., 925 S.W.2d 618, 637-38 (Tex. 1996) (award of attorneys’

fees in declaratory judgment action is not dependent on finding that party “substantially prevailed”).

                                                  16
Moreover, the statute does not require a judgment on the merits of the dispute as a prerequisite to

a fee award. See Castro v. McNabb, 319 S.W.3d 721, 735 (Tex. App.—El Paso 2009, no pet.). AZR

invoked the UDJA when it sought declaratory relief. The trial court’s conclusion that it lacked

jurisdiction to render the requested declarations did not change the nature of the proceeding.

Because this was a proceeding under the UDJA, the trial court did not abuse its discretion by

awarding the Landlord attorneys’ fees pursuant to section 37.009.

               Zurita and AZR also argue that the attorneys’ fee award should be reversed because

the Landlord failed to segregate the fees incurred in connection with the UDJA claim filed by AZR

from the fees incurred in prosecuting its affirmative claim for breach of contract against Zurita. We

understand Zurita and AZR’s brief to complain about both (1) the Landlord’s failure to segregate its

fees between the UDJA claims and its claims for affirmative relief and (2) the trial court’s failure

to segregate the fees awarded between Zurita and AZR, instead making them jointly and severally

liable for the entire fee award. With regard to the Landlord’s failure to segregate fees between

the breach-of-contract claim and the claims under the UDJA, we note that fee claimants are

required to segregate fees incurred in connection with claims for which fees are recoverable from

fees incurred in connection with claims for which they are not. Tony Gullo Motors I, L.P. v. Chapa,

212 S.W.3d 299, 311 (Tex. 2006). Segregation is required because trial courts lack the inherent

authority to require a losing party to pay the prevailing party’s fees, and may only award fees if

authorized by contract or statute. Id. In this case, however, the Landlord was authorized by statute

to recover attorneys’ fees incurred in connection with both the breach of contract claim and the

UDJA claim. Consequently, it was not required to segregate its fees.

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               Regarding the complaint that the trial court erred by not dividing the fee award

between Zurita and AZR, this contention is directly contradicted by, and inconsonant with, their own

trial testimony. When presenting evidence in support of Zurita and AZR’s request for their

attorneys’ fees, their counsel testified that: “[T]his is the type of case where the parties are so

inextricably intertwined, that it would be virtually impossible to segregate the attorneys’ fees as

between the various parties.” Having testified at trial that it was impossible to segregate the fees

between the parties, Zurita and AZR are estopped from now complaining on appeal that the trial

court failed to do so. In re Dep’t of Family & Protective Servs., 273 S.W.3d 637, 646 (Tex. 2009)

(party estopped from taking position on appeal clearly adverse to position it took unequivocally at

trial). Moreover, even if this was error, it was invited by Zurita and AZR’s counsel. See Tittizer

v. Union Gas Corp., 171 S.W.3d 857, 862 (Tex. 2005) (party cannot complain on appeal that trial

court took specific action that complaining party requested).

               Zurita and AZR next assert that there is insufficient evidence that the amount of

attorneys’ fees for which they were held jointly and severally liable is reasonable. However, during

the presentation of evidence at trial supporting the Landlord’s claim for attorneys’ fees, counsel for

Zurita and AZR stated: “Your Honor, I don’t object to the reasonableness of [the Landlord’s]

attorneys’ fees.”   Consequently, appellants have also waived any complaint regarding the

reasonableness of the fee award.

               In a final complaint about attorneys’ fees, Zurita and AZR challenge the trial court’s

judgment awarding appellate attorneys’ fees jointly and severally against them. As written, the

judgment makes both AZR and Zurita liable for the Landlord’s appellate attorneys’ fees even if only

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one of them pursues the unsuccessful appeal. This was error. While our disposition moots the

complaint with respect to the appellate attorneys’ fees awarded to the Landlord in connection with

the appeal to this Court, we modify the judgment to reflect that the contingent award of $10,000 in

attorneys’ fees to the Landlord in the event of an unsuccessful appeal to the Texas Supreme Court

applies only against the party or parties that actually participate in such appeal, if any.

Failure to award attorneys’ fees to Zurita

               The trial court reduced its award of actual damages to the Landlord by $25,000 based

on its finding that the Landlord failed to properly conduct the foreclosure sale. In their third

appellate issue, Zurita and AZR contend that this reduction in the amount awarded implies that the

trial court found that the Landlord either breached the lease agreement or breached sections 9.610

and 9.611 of the business and commerce code. See Tex. Bus. & Com. Code Ann. §§ 9.601, .611.

Appellants assert that such an implied finding supports an award of attorneys’ fees to Zurita “based

on its [sic] successful breach claim and UCC violation claim.” Appellants fail to identify which

provision of the lease it contends the Landlord breached or explain how the Landlord’s failure to

conduct the foreclosure sale in compliance with the UCC constitutes breach of the lease agreement,

nor did they advance any breach-of-contract claims at trial. Moreover, appellants do not identify any

statutory provision that would entitle Zurita to an award of attorneys’ fees for the Landlord’s failure

to conduct the foreclosure sale in compliance with Article 9. Cf. id. § 9.625 (setting forth remedies

for secured party’s failure to comply with chapter nine, including damages in amount of any loss

caused by such failure but not providing for award of attorneys’ fees). Assuming that the trial court

made the implied finding that Zurita and AZR rely on, such finding does not provide a basis for

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awarding them attorneys’ fees. With the exception of the modification to the award of appellate

attorneys’ fees noted above, we overrule the third appellate issue.

Were Zurita and AZR denied a fair trial?

               In their fourth issue, Zurita and AZR assert that several of the trial court’s rulings

were arbitrary and capricious and consequently, they were denied a fair trial. Specifically, Zurita and

AZR complain that the trial court’s denial of two motions for continuance and its refusal to give

them additional time during trial to present more evidence, considered independently or

cumulatively, constitute reversible error requiring remand.

               On January 29, 2010, Zurita and AZR filed a motion to continue the February 16,

2010 trial setting. The case had been set for a nonjury trial on that date since the trial court’s entry

of a scheduling order in October 2009. As one of the grounds for the requested continuance, Zurita

and AZR asserted that, due to accident and mistake, they had failed to make a timely jury demand.

They argued that the trial court should grant a continuance in order to allow them to try their case

before a jury. Zurita and AZR also asserted that they needed additional time to conduct discovery

regarding the Landlord’s alleged failure to mitigate damages. Zurita and AZR claimed to have

recently been provided the names of individuals who presented the Landlord with letters of intent

regarding the leased premises; they requested a continuance in order to conduct discovery as to those

individuals. However, Zurita and AZR also conceded that the names were provided by the Landlord

in response to interrogatories that had not been propounded until thirty-four days before the

expiration of the discovery period for a case that had been on file for over a year.

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                We review a trial court’s denial of a motion for continuance for an abuse of

discretion. BMC Software Belg., N.V., 83 S.W.3d at 800. A trial court abuses its discretion when

it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of

law. Id. If a continuance is sought in order to pursue further discovery, the movant must describe

the evidence sought, explain its materiality, and show that the party requesting the continuance has

used due diligence to obtain the evidence. Wal-Mart Stores Tex., LP v. Crosby, 295 S.W.3d 346,

356 (Tex. App.—Dallas 2009, pet. denied). The record does not affirmatively show the diligence

necessary for Zurita and AZR to have obtained a continuance to conduct additional discovery. See

State v. Wood Oil Distrib., 751 S.W.2d 863, 865 (Tex. 1988) (failure of litigant to utilize rules of

civil procedure for discovery purposes will not authorize granting of continuance). Moreover, the

trial court did not abuse its discretion in refusing to continue the trial in order to permit counsel for

Zurita and AZR to obtain a jury trial when they failed to timely request one and did not object to the

nonjury trial setting entered by the court as part of its scheduling order.

                At trial, Zurita and AZR orally reurged their motion for continuance, essentially

arguing that the continuance was required so that they could obtain testimony from witnesses

regarding the Landlord’s alleged failure to mitigate damages. Texas Rule of Civil Procedure 252

provides that if the ground for a continuance is lack of testimony, the party seeking the continuance

must provide an affidavit stating that the testimony is material, that he used due diligence to procure

the testimony, and that such testimony cannot be procured from any other source. See Tex. R. Civ.

P. 252. Rule 252 further provides that if the motion for continuance is sought due to the absence of

a witness, the movant must provide an affidavit stating the name and address of the witness, what

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he expects the witness’s testimony to prove, and that the continuance is not sought for delay but so

justice may be done. See id. A trial court does not abuse its discretion when it denies a motion for

continuance that does not meet those requirements. See Pape v. Guadalupe-Blanco River Auth.,

48 S.W.3d 908, 914 (Tex. App.—Austin 2001, pet. denied) (citing Tex. R. Civ. P. 252). Zurita and

AZR’s oral motion for a continuance at trial did not comply with the requirements of rule 252.

Accordingly, we conclude that the trial court did not abuse its discretion by denying Zurita and

AZR’s motion for continuance.

                Zurita and AZR also complain that the trial court erred in limiting the time they had

to present their case. On the first day of trial, the court asked the parties how much time they needed,

and counsel for Zurita and AZR expressed no objection to the statement by counsel for the Landlord

that the case would take two and a half days. At the end of the second day that the trial court heard

evidence, and again at the beginning and the end of the third day on which the court heard evidence,

the trial court discussed the time limits for the parties to present their respective cases. The trial

court repeatedly provided the parties with a summary of the time each had used and how much time

remained. Zurita and AZR did not object or inform the court that they needed more time. Counsel

for Zurita and AZR only complained about the time limit when there was one hour remaining of the

allotted time for their evidence. Counsel again asked for a continuance, which the trial court denied,

explaining that Zurita and AZR were aware of the time limits and had never objected to them.

                To preserve error for appeal, Zurita and AZR were required to make a timely, specific

objection to the time limit at the earliest possible opportunity. See Schwartz v. Forest Pharms., Inc.,

127 S.W.3d 118, 126-27 (Tex. App.—Houston [1st Dist.] 2003, pet. denied) (citing Tex. R. App.

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P. 33.1). Zurita and AZR failed to object to the initial imposition of the time limit. In addition, they

subsequently failed to object when the trial court repeatedly reminded them of the time limit and

advised them of their remaining time. Instead, they made no objection until the court gave its final

reminder on the last day of trial. By failing to make a timely objection, they waived any complaint

that the trial court erred by imposing and enforcing the time limit. See id.

                Zurita and AZR have failed to show that the trial court’s rulings, considered

individually or cumulatively, denied them a fair trial. Having concluded that the trial court did not

abuse its discretion in denying Zurita and AZR’s motion for continuance and that Zurita and AZR

waived any error by the trial court in limiting the trial time to two and a half days, we overrule the

fourth appellate issue.

                                          CONCLUSION

                We modify the trial court’s judgment to reflect that the contingent award of $10,000

in attorneys’ fees to the Landlord in the event of an unsuccessful appeal to the Texas Supreme Court

is rendered only against the party or parties that actually participate in any such appeal. As modified,

we affirm the trial court’s judgment.

                                                _____________________________________________

                                                J. Woodfin Jones, Chief Justice

Before Chief Justice Jones, Justices Puryear and Goodwin

Modified and, as Modified, Affirmed

Filed: December 8, 2011

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