Court Opinion

ID: 4667492
Source: CourtListenerOpinion
Date Created: 2021-03-15 07:15:45.538824+00
Date Added: 2024-06-11T08:02:57.376655
License: Public Domain

Opinion issued March 11, 2021

                                     In The

                              Court of Appeals
                                    For The

                          First District of Texas
                            ————————————
                              NO. 01-20-00182-CV
                           ———————————
                          PATRICK HSU, Appellant
                                        V.
 CONTERRA SERVICES, LLC, KYLE JOSEPH SMITH, AND AVALON
                    HOMES, Appellees

               On Appeal from the County Court at Law No. 3
                           Harris County, Texas
                      Trial Court Case No. 1114627

                         MEMORANDUM OPINION

      Conterra Services, LLC sued Dr. Patrick Hsu for failing to pay an invoice for

work performed on a sewage line. After a bench trial, the trial court entered a

judgment against Hsu that awarded damages, prejudgment interest, and attorney’s

fees to Conterra and denied Hsu’s counterclaims. Hsu appeals contending that:
      (1) the trial court erred in denying his motion to exclude untimely disclosed
          evidence of prejudgment interest and attorney’s fees; and

      (2) the evidence is legally and factually insufficient to support the attorney’s
          fees awarded to Conterra by the trial court.

We affirm.

                                  BACKGROUND

                                     The Lawsuit

      Conterra sued Hsu alleging he had contracted for it to work on his home sewer

system, which was blocked and backing up, but refused to pay afterward. Conterra

asserted claims for breach of contract, promissory estoppel, violation of the Prompt

Payment Act, and quantum meruit and unjust enrichment.

      Hsu answered and counterclaimed for intentional infliction of emotional

distress and fraud. Hsu alleged that Conterra conspired with a homebuilder and its

chief operating officer to force Hsu to pay for the sewer work.

                                 Motion to Exclude

      On the day of trial, Hsu moved to exclude Conterra’s experts as well as

evidence of damages Conterra had not disclosed in response to Hsu’s request for

disclosures. The trial court heard the motion before trial.

      Hsu’s counsel conceded he understood the basis for Conterra’s claim for

damages of $5,040, which was the amount Conterra had billed Hsu for the sewer

work. But he objected that while Conterra had asserted it was due 18% interest under

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the Prompt Payment Act, it had not disclosed the manner of calculating the amount

of interest. As to the experts, Hsu objected that Conterra had not timely disclosed

them, including its own counsel for the purpose of testifying about fees. Hsu also

objected that Conterra had not disclosed the total amount of attorney’s fees.

      Conterra responded that it had cited the statute providing for interest in its

petition, specifically, the Prompt Payment Act, Chapter 28 of the Property Code.

Conterra further responded that it had sought attorney’s fees in its petition. Thus, it

argued, Hsu was not surprised or prejudiced by its untimely disclosure that its

counsel intended to testify about these fees, particularly given that this was a simple

case involving a relatively small fee claim. Conterra stated it had designated the

other two experts out of caution, but that it did not need their testimony.

      The trial court denied Hsu’s motion as to damages and attorney’s fees. The

court stated that it was not convinced that allowing Conterra’s evidence on damages

and fees would be unfairly prejudicial or result in trial by ambush.

                                     Bench Trial

      The parties tried the case to the bench. Conterra presented two witnesses: Kyle

Smith, who testified about the work performed and the surrounding circumstances,

and its counsel, who testified about the attorney’s fees incurred.

      It was undisputed that Conterra resolved Hsu’s sewer problem by removing a

blockage. Smith testified that the job was undertaken at Hsu’s request and took two-

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and-a-half days. It required removing part of a sidewalk, excavating to access the

sewer pipe, disconnecting the pipe, removing debris and other material from the

pipe, replacing some clay pipe with PVC pipe, backfilling the excavated worksite,

and repairing the sidewalk that had been removed.

      Conterra sent Hsu an invoice for the work. The invoice stated a total amount

due of $5,040 and was dated August 1, 2017. The record shows that Conterra sent

the invoice to Hsu by e-mail that same day.

      Conterra’s counsel testified about his background as an attorney and that he

spent 19-and-a-half hours on this case. This work included document review,

drafting a demand letter and pleading, drafting and responding to discovery requests,

reviewing discovery responses, drafting a motion for continuance, appearing at two

pretrial hearings, preparing for trial, and trying the case. His hourly billing rate is

$300, which resulted in $5,850 in fees for the total time spent on the case.

      On cross-examination, Conterra’s counsel conceded that he had sent invoices

to Conterra that were not provided to Hsu in discovery. He further conceded that he

did not disclose the amount of his fees to Hsu before trial.

      After Conterra rested, Hsu moved for a directed verdict on the basis that no

contract existed between the parties. The trial court denied the motion. Hsu then

rested without calling any witnesses or putting on any evidence.

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      The trial court found a valid contract existed between Conterra and Hsu and

that Hsu failed to pay for Conterra’s work performed under the contract. The court

entered a judgment against Hsu for $7,005.60, consisting of the $5,040 stated in

Conterra’s invoice and $1,965.60 in prejudgment interest. The trial court also

awarded Conterra attorney’s fees in the amount of $5,850. The trial court ruled that

Hsu take nothing on his counterclaims.

                               Motion for New Trial

      Hsu moved for a new trial, renewing his complaints that Conterra had not

timely designated its fee expert or disclosed how it calculated prejudgment interest.

The record does not divulge whether Hsu requested a hearing on the motion or

submitted the motion for decision without a hearing. No ruling is in the record.

                                  DISCUSSION

I.    Damages and Interest

      Hsu argues the trial court erred in not excluding Conterra’s evidence of

prejudgment interest because Conterra did not disclose its method of calculation.

Hsu admits Conterra referred to the Prompt Payment Act, which specifies when

prejudgment interest begins and ceases to accrue, but he argues Conterra did not

disclose two pieces of data needed to calculate the amount: (1) the date on which

Hsu received Conterra’s written payment request; and (2) the date 35 days after

receipt of the request, which is when interest began to accrue under the Act.

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      A.     Standard of Review

      We review evidentiary rulings for abuse of discretion. H2O Sols. v. PM Realty

Grp., 438 S.W.3d 606, 621 (Tex. App.—Houston [1st Dist.] 2014, pet. denied). We

likewise review discovery rulings for abuse of discretion. ADB Interest v. Wallace,

606 S.W.3d 413, 439 (Tex. App.—Houston [1st Dist.] 2020, pet. filed). But to the

extent we must construe the text of a rule of civil procedure, including a discovery

rule, its meaning presents a question of law that we review de novo. BASF Fina

Petrochemicals Ltd. P’ship v. H.B. Zachry Co., 168 S.W.3d 867, 871 (Tex. App.—

Houston [1st Dist.] 2004, pet. denied).

      B.     Analysis

      Hsu does not complain that Conterra failed to disclose how it calculated the

$5,040 in contract damages. Nor could he. At trial, Hsu conceded he understood the

basis for the $5,040, which was stated in Conterra’s invoice.

      As to the $1,965.60 in prejudgment interest the trial court awarded Conterra,

Conterra’s disclosure responses are not in the record, so we cannot assess their

adequacy. But Conterra concedes that it did not provide an actual calculation of the

amount of interest it claimed was owed in its disclosures.

      Under the discovery rules in effect at the time, Conterra was obligated to

disclose “the amount and any method of calculating economic damages.” See TEX.

                                          6
R. CIV. P. 194.2(d).1 Economic damages are generally understood to constitute

compensation for pecuniary loss. See TEX. CIV. PRAC. & REM. CODE § 41.001(4);

TEX. BUS. & COM. CODE § 17.45(11). Prejudgment interest is a type of damages. See

Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 898 (Tex. 2000). Its

purpose is compensatory. See Brainard v. Trinity Universal Ins. Co., 216 S.W.3d

809, 812 (Tex. 2006). Thus, under the discovery rules then in effect, Conterra was

required to disclose the method of calculating its prejudgment interest.

       Conterra contends it satisfied its disclosure obligations by referring to the

Prompt Payment Act, specifically Section 28.002 of the Property Code. Under that

provision, a contractor must be paid no later than 35 days after it makes a written

payment request. TEX. PROP. CODE § 28.002(a). Any unpaid amount required under

the Act begins to accrue interest on the day after the date when payment becomes

due until the date on which a judgment is entered. Id. § 28.004(a), (c)(3). Given that

Hsu did not deny receiving the invoice on August 1, 2017, he would have known

when interest began accruing under the statute. And because interest would continue

to accrue through the date of judgment, it was not capable of definitive pretrial

calculation. Under these circumstances, we agree with Conterra that it satisfied its

discovery obligation to disclose the method of calculating prejudgment interest. In

1
    Effective January 1, 2021, the relevant rule is now Rule 194.2(b)(4); the text of
    the amended rule remains the same as former Rule 194.2(d). See Order, Misc.
    Docket No. 20-9153 (Tex. Dec. 23, 2020) (approving rule amendments).
                                          7
doing so, we note that former Rule 194.2(d) required disclosure of “the method of

calculating” these damages, not disclosure of an actual calculation.

         Thus, we hold the trial court did not abuse its discretion in failing to exclude

Conterra’s evidence as to prejudgment interest on the basis of non-disclosure.2

II.      Attorney’s Fees

         Hsu contends Conterra’s evidence of attorney’s fees is insufficient to support

the trial court’s fee award for two reasons. First, he argues that the trial court erred

in not excluding the evidence of fees as untimely disclosed. Had it done so, Hsu

reasons, there would have been no evidence of fees. Second, he argues that, in any

event, the evidence of fees is legally and factually insufficient because Conterra did

not submit any documents in support of its fees, such as billing invoices, and because

Conterra’s counsel’s testimony was not sufficiently detailed.

         A.     Untimely Disclosure

         If a party fails to timely disclose a witness in response to a discovery request,

the witness may not testify unless the trial court finds that there was good cause for

failing to do so or that the failure “will not unfairly surprise or unfairly prejudice the

2
      We note one discrepancy: the Prompt Payment Act specifies an interest rate of
      1.5% per month, whereas Conterra sought 18% per year. TEX. PROP. CODE
      § 28.004(b). But Hsu has not raised this discrepancy or asserted that the trial court
      miscalculated prejudgment interest. Thus, we cannot reverse the trial court’s
      judgment on this basis. See Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993)
      (per curiam) (“We have held repeatedly that the courts of appeals may not reverse
      the judgment of a trial court for a reason not raised in a point of error.”).
                                              8
other parties.” TEX. R. CIV. P. 193.6(a)(2). The burden of establishing good cause or

lack of unfair surprise and unfair prejudice is on the party seeking to call the witness.

TEX. R. CIV. P. 193.6(b). The trial court has broad discretion to determine whether

the party has carried this burden. Syrian Am. Oil Corp. v. Pecten Orient Co., 524

S.W.3d 350, 366 (Tex. App.—Houston [1st Dist.] 2017, no pet.).

      It is undisputed that Conterra failed to timely disclose its counsel as an expert

witness who would testify about attorney’s fees in its discovery responses. The

good-cause exception to the timely disclosure requirement is not at issue. The

parties’ dispute instead turns on whether the record establishes that Hsu was not

unfairly surprised or unfairly prejudiced by Conterra’s untimely disclosure.

       Hsu initially argues that the trial court erred by placing the burden on him to

establish that he was unfairly surprised or unfairly prejudiced instead of requiring

Conterra to establish lack of unfair surprise or unfair prejudice. We reject this

argument because the record shows the trial court did not misallocate the burden.

      After hearing argument from both parties, the trial court ruled that it was not

convinced that admission of the evidence would result in trial by ambush or be

prejudicial or harmful to the defense. Hsu then requested permission to be heard

again and argued that untimely disclosed evidence is inadmissible. Hsu did not assert

that the trial court had misallocated the burden of proof or persuasion in making its

ruling. The trial court disagreed with Hsu as to the legal standard, noting it was

                                           9
allowed to consider whether there was surprise or unfairness. The court then stated

that Hsu had not explained how the admission of the evidence would surprise or

harm him and asked him to explain how the evidence would do so. Hsu responded

that he was prejudiced by the untimely disclosure because it prevented him from

assessing the reasonableness of the fees before trial. The trial court then reiterated

its ruling, stating that it was going to allow Conterra’s counsel to testify as to the

reasonable and necessary attorney’s fees incurred because:

      •   Conterra requested fees in its petition, so Hsu knew that fees were at issue,
          and he thus was not surprised by the untimely disclosure; and
      •   the amount of fees at issue was not substantial, and the issue of fees was
          not complicated, so Hsu was not harmed or prejudiced either.

      Viewed in context, the trial court’s ruling was not premised on a misallocation

of the burden of proof or persuasion. When the trial court made its final ruling, it did

not state it was allowing Conterra to present its untimely disclosed evidence because

Hsu had failed to establish that he was unfairly surprised or unfairly prejudiced.

Rather, the court found that Hsu was neither unfairly surprised nor unfairly

prejudiced. While the trial court did request that Hsu explain how he was surprised

or harmed, it did so only after it had already indicated that it was going to allow the

evidence. In doing so, the court was giving Hsu an opportunity to change its mind,

not improperly foisting the burden of proof or persuasion onto him.

                                          10
       As to the merits of the trial court’s ruling, it is undisputed that Conterra

included a request for attorney’s fees in its petition. Thus, from the suit’s outset, Hsu

knew Conterra sought fees. Under these circumstances, the trial court did not abuse

its discretion in finding that Hsu was not unfairly surprised by the untimely

disclosure of Conterra’s counsel as an expert witness. See Syrian Am. Oil, 524

S.W.3d at 366 (“Courts have held that a trial court does not abuse its discretion in

admitting testimony by an untimely designated attorney’s fees expert when, as here,

the party’s pleadings contained a request for attorney’s fees well before trial.”).

       Hsu argues that he was nonetheless unfairly prejudiced by the untimely

designation because his own lawyer was not able to prepare to cross-examine

Conterra’s counsel or to request and review the relevant billing records.3 But as Hsu

acknowledges in his brief, this is not a complicated suit. Conterra’s counsel testified

as to his total hours, the tasks he undertook during this time, how much time various

tasks took to complete, and his billing rate. In this simple case, billing records would

not have disclosed much more information than counsel’s testimony. Moreover, the

rules allow a party to seek a continuance if any new information disclosed requires

it. TEX. R. CIV. P. 193.6(c). Hsu never did so. Under these circumstances, the trial

court did not abuse its discretion in finding that Hsu was not unfairly prejudiced by

3
    At trial, Hsu asserted he requested the billing records in discovery. But neither
    Hsu’s discovery requests nor Conterra’s responses are included in the record. Nor
    does the record indicate whether Hsu moved to compel production of the records.
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Conterra’s late disclosure. See Syrian Am. Oil, 524 S.W.3d at 366–67 (trial court did

not abuse discretion in allowing evidence of fees, even though amount sought and

billing records were not timely disclosed, given that party opposing fees had known

other side sought them and did not seek continuance to assess new information).

      We thus hold the trial court did not err in failing to exclude Conterra’s counsel

from testifying about its reasonable and necessary attorney’s fees.

      B.     Sufficient Evidence

      Hsu contends that even if the trial court properly admitted Conterra’s

counsel’s testimony as to attorney’s fees, his testimony is legally and factually

insufficient to support the fee award. Hsu argues this is so because Conterra did not

introduce its counsel’s billing records. Citing Arthur Andersen & Co. v. Perry

Equipment Corp., Hsu further argues that Conterra’s counsel’s testimony was

insufficient because he did not testify about the factors the Supreme Court has

identified as being relevant to fee awards. See 945 S.W.2d 812, 818 (Tex. 1997).

      As an initial matter, Hsu misstates the standard of review. We review a trial

court’s award of attorney’s fees for abuse of discretion. Kubbernus v. ECAL

Partners, 574 S.W.3d 444, 486 (Tex. App.—Houston [1st Dist.] 2018, pet. denied).

Under this standard, evidentiary sufficiency issues are not independent grounds and

instead are factors relevant in assessing whether the trial court abused its discretion.

                                          12
Id. We thus consider whether the trial court had sufficient evidence on which to

exercise its discretion and, if so, whether it erred in applying that discretion. Id.

      A party who prevails on a claim based on an oral or written contract may

recover attorney’s fees. TEX. CIV. PRAC. & REM. CODE § 38.001(8). In a bench trial,

the trial court may take judicial notice of the usual and customary attorney’s fees

and of the contents of the case file without further evidence. Id. § 38.004(1). The

usual and customary fees for a contract claim are presumptively reasonable, but the

side responsible for paying the fees may rebut this presumption. Id. § 38.003. Trial

courts are experts on the reasonableness of fees. McMahon v. Zimmerman, 433

S.W.3d 680, 693 (Tex. App.—Houston [1st Dist.] 2014, no pet.). They may draw on

their knowledge and experience in assessing the evidence on attorney’s fees. Id.

      To obtain attorney’s fees, a party generally must present evidence of the

reasonable hours spent by its counsel and its counsel’s reasonable hourly billing rate.

Rohrmoos Venture v. UTSW DVA Healthcare, 578 S.W.3d 469, 498 (Tex. 2019). To

be sufficient, this evidence must at a minimum include proof of:

      •    the particular services performed;

      •    the identity of the person who performed these services;

      •    an approximation as to when these services were performed;

      •    the reasonable amount of time required to perform these services; and

      •    the reasonable hourly rate of the person performing them.

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Id. Once a party has introduced this evidence, the resulting fee calculation—often

referred to as the base loadstar figure—is presumptively reasonable and necessary.

Id. at 499. The categories of evidence identified above take into account most of the

Arthur Andersen factors, such as the time and labor required, the novelty and

difficulty of the questions involved, the skill required to perform the legal services

properly, the fee customarily charged in the locality for similar legal services, the

amount involved, the experience and ability of the person performing the services,

whether the fee is fixed or contingent, the uncertainty of collection before the

performance of the services, and the result obtained. Id. at 500–01.

      The fee proponent may seek an enhancement of the base loadstar figure, but

it must introduce specific evidence supporting the enhancement. Id. at 501. The fee

opponent may seek a reduction of the base loadstar figure, but it must introduce

specific evidence negating the figure’s presumptive reasonableness. Id. In seeking

an enhancement or a reduction, neither party may rely on the Arthur Andersen

factors that the loadstar calculation already takes into account. Id.

      Conterra’s counsel testified he had been an attorney for a decade and had spent

the last seven years litigating construction disputes. He offices in Houston and about

half his work is in Harris and surrounding counties. He testified from notes he made

based on his invoices and other documents. Counsel testified about the total number

of hours he worked, the tasks he performed, how much time these tasks took to

                                          14
complete, and his hourly billing rate. The trial court could readily infer the basic

timeframe in which counsel undertook this work based on the nature of the tasks he

performed—initial consultation with his client, drafting a demand letter and petition,

drafting, responding to, and reviewing discovery, drafting a motion for continuance,

court appearances, trial preparation, and trial—and the contents of the court’s case

file. Counsel testified that his work was standard and that he did not do anything

exceptional. On its face, this testimony satisfies the requirements for calculating a

loadstar figure. See id. at 499.

      Hsu argues that the evidence is insufficient because Conterra did not introduce

its counsel’s billing records. While advisable, “billing records are not required to

prove that the requested fees are reasonable and necessary.” Id. at 502. Introduction

of billing records is advisable because “in all but the simplest cases, the attorney

would probably have to refer to some type of record or documentation to provide

this information.” El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 763 (Tex. 2012). But

this is a very simple breach-of-contract case alleging nonpayment for services

rendered. Conterra called a single fact witness to testify. While the defense cross-

examined this witness, it did not put any witnesses on the stand and introduced no

evidence of its own. Conterra’s counsel billed a mere 19.5 hours for straightforward

tasks. An attorney could reasonably testify about his fees from memory alone under

these circumstances. Counsel, however, did not testify from memory alone. He

                                         15
testified with the aid of notes based on his records. On this record, we hold that the

absence of the records themselves does not render the evidence insufficient.

      Hsu also complains that Conterra’s counsel’s testimony is insufficient because

he did not testify about the Arthur Andersen factors. While counsel did not explicitly

address these factors, the testimony he gave in support of the base loadstar figure

implicitly accounted for several of them. See Rohrmoos, 578 S.W.3d at 500–01.

Moreover, counsel need not address every Arthur Andersen factor in every case in

order for the evidence of fees to be sufficient. Academy Corp. v. Interior Buildout &

Turnkey Constr., 21 S.W.3d 732, 742 (Tex. App.—Houston [14th Dist.] 2000, no

pet.). On this record, we reject Hsu’s contention that Conterra’s counsel’s testimony

was insufficient because he did not address the Arthur Andersen factors.

      We hold that the trial court did not abuse its discretion in awarding Conterra

its reasonable and necessary attorney’s fees based on the evidence before it.

                                  CONCLUSION

      We affirm the trial court’s judgment.

                                              Gordon Goodman
                                              Justice

Panel consists of Justices Goodman, Landau, and Guerra.

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