Silver Lion, Inc. v. Esperanza Martinez

Affirmed in Part, Reversed and Rendered in Part, and Memorandum Opinion filed March 6, 2007 Affirmed in Part, Reversed and Rendered in Part, and Memorandum Opinion filed March 6, 2007. In The Fourteenth Court of Appeals _______________ NO. 14-05-00746-CV _______________ SILVER LION, INC., Appellant V. ESPERANZA MARTINEZ, Appellee On Appeal from County Civil Court at Law No. 4 Harris County, Texas Trial Court Cause No. 802,624 M E M O R A N D U M   O P I N I O N In this conversion case, Silver Lion, Inc. (ASilver Lion@) appeals a judgment in favor of Esperanza Martinez on the grounds that: (1) the trial court abused its discretion by denying Silver Lion leave to file an action against third parties; (2) the evidence is insufficient to support the trial court=s findings of fact and conclusions of law; and (3) attorney=s fees were not recoverable under the Texas Declaratory Judgment Act (ADJA@). We affirm in part and reverse and render in part. Background Dolphin Street, Inc. (ADolphin Street@) leased premises from Silver Lion to operate a jazz club. Martinez provided Dolphin Street working capital for Dolphin Street and Dolphin Street, through its president, Kent Larsen, executed a promissory note (the Anote@) to Martinez for $163,000.00 and a security agreement, including as collateral (the Acollateral@) the furniture, fixtures, and equipment of Dolphin Street. Silver Lion executed a subordination of any lien interest Silver Lion may have had then or in the future to Martinez. After Dolphin Street missed several payments on the note, Martinez attempted to repossess the collateral by making demand on Silver Lion. When Silver Lion refused to release some of the property Martinez requested, Martinez filed suit against Silver Lion, seeking damages for conversion of collateral and a declaratory judgment that certain items of collateral were fixtures and that Martinez had a superior right to possession of the collateral. After a bench trial, the trial court entered judgment awarding Martinez damages on her conversion claim and attorney=s fees, but granting no declaratory relief. Third Party Claim Silver Lion=s first issue contends that the trial court abused its discretion by refusing Silver Lion leave to file a Across-complaint@ against Dolphin Street and Larsen, because they were necessary third parties to this lawsuit. Procedural matters, such as joinder of parties or consolidation of claims, are reviewed for abuse of discretion. Allison v. Ark. La. Gas Co., 624 S.W.2d 566, 568 (Tex. 1981). Generally, all persons may be joined in one action as defendants if a party asserts a right to relief arising out of the same transaction, occurrence, or series of transactions or occurrences, and if any question of law or fact common to all of them will arise in the action. Tex. R. Civ. P. 40(a). Thus, a defendant may assert an action against a third party who may be liable to him or the plaintiff for all or part of the plaintiff=s claim against the defendant. Tex. R. Civ. P. 38(a). However, leave of court must be obtained to file a third-party petition more than thirty days after a defendant serves his original answer. Id. A person who is subject to service of process must be joined if, in his absence, complete relief cannot be had among those already parties, or if his interest is so situated that the disposition of the action in his absence may impair or impede his ability to protect that interest or subject any of the parties to a substantial risk of incurring multiple or inconsistent obligations by reason of that interest. Tex. R. Civ. P. 39(a). In this case, Silver Lion asserts that leave should have been granted to file its third party claims because: (1) adequate relief could not be had between the parties, and Silver Lion=s interests were not protected, unless Dolphin Street and Larsen were joined; (2) Martinez=s conversion claim against Silver Lion was derivative of her note claim against Dolphin Street and Larsen, and the only connection between Silver Lion and Martinez arises from the lease between Dolphin Street, Larsen, and Silver Lion; (3) Dolphin Street and Larsen=s failure to repay the note and failure to pay rent to Silver Lion under the lease caused Martinez to file suit against Silver Lion, when it should have caused Martinez to file suit against Dolphin Street and Larsen for failing to pay the note; and (4) Dolphin Street and Larsen were necessary parties to support Silver Lion=s claim of failure of consideration on the note. However, none of these contentions demonstrate how or why Dolphin Street would have been liable to Silver Lion for any part of Martinez=s conversion claim or declaratory relief claim against Silver Lion or how complete relief could otherwise not be had without joining Dolphin Street and Larsen as parties to the suit. Accordingly, Silver Lion=s first issue fails to demonstrate that the trial court abused its discretion in refusing leave to join those parties, and it is overruled. Sufficiency of the Evidence Silver Lion=s second, third, and fourth issues argue that the evidence is legally and factually insufficient[1] to support the trial court=s findings that: (1) the note was supported by consideration; (2) Martinez had a superior interest in, and was entitled to immediate possession of, the withheld collateral; and (3) Martinez suffered damages as a result of Silver Lion=s refusal to relinquish it.[2] When evaluating a legal sufficiency challenge, we view the evidence in a light favorable to the verdict, crediting favorable evidence if reasonable factfinders could, and disregarding contrary evidence unless reasonable factfinders could not. City of Keller v. Wilson, 168 S.W.3d 802, 821, 827 (Tex. 2005). Under a factual sufficiency review, we weigh and consider all the evidence in the case, setting aside the judgment only if the evidence is so factually weak, or the verdict so contrary to the overwhelming weight of the evidence, as to make the judgment clearly wrong and unjust. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). Consideration Silver Lion=s second issue challenges the sufficiency of the evidence that the note was supported by consideration, in particular, whether Martinez gave any value for the promissory note. Although both Martinez and Larsen testified that Martinez provided more than $163,000 in loan proceeds in conjunction with the note, Silver Lion contends that the note and security agreement transaction was a sham to keep the property of Dolphin Street from other creditors because the security agreement was executed while Dolphin Street was on the brink of closing. Silver Lion also argues that there must be other evidence to corroborate the testimony of Larsen and Martinez because they were involved in a personal relationship. However, because Silver Lion cites no authority for this proposition, and its second issue challenges only the sufficiency of the evidence to show consideration for the note (and no other aspects of the transaction), its second issue affords no basis for relief and is overruled. Superior Interest Silver Lion=s third issue challenges the sufficiency of the evidence to support the trial court=s finding that Larsen had defaulted on the note (as a condition to finding that Martinez had a superior interest in, and right to immediate possession of, the collateral pursuant to the security agreement). The note provides that payments were to commence on March 1, 2003 and that, in the event of default in the payment of any installment of principal or interest when due, Martinez may declare the entirety of the note immediately due and payable without notice. The security agreement provides that, upon default of the note, Martinez may, among other things, enter any premises where the collateral is located and take possession of any of it. Martinez and Larsen each testified that Dolphin Street had failed to make payments on the note, and Silver Lion=s brief cites no controverting evidence or legal basis to conclude that a default had not occurred or was excused. Therefore, Silver Lion=s third issue fails to demonstrate the legal or factual insufficiency of the evidence to support the trial court=s finding of default, and it is overruled. Evidence of Damages Silver Lion=s fourth issue challenges the sufficiency of the evidence to support the trial court=s finding that Martinez suffered damages from Silver Lion=s withholding of the collateral because: (1) Silver Lion was operating under the terms of the Management Agreement between it and Larsen and thus did not exercise unauthorized dominion or control over glasses, plates, and other equipment; and (2) the brass glass racks and exterior signs were not trade fixtures to which Dolphin Street was entitled because the racks and signs were bolted to the ceiling and wall, respectively, and removing them would require removal of screws and patching of holes. As to the first contention, Silver Lion=s brief provides no explanation of how the Management Agreement was in any way relevant to the exercise of control over the disputed items. See Tex. R. App. P. 38.1(h). It therefore affords no basis for relief. Regarding the second contention, the trial court found that the brass racks and exterior signs were not fixtures and could be removed without causing damage to the building. Silver Lion cites no authority to support its contention that removing screws and leaving their holes to be patched constitutes a damage to the building that would defeat Martinez=s right under the security agreement to remove those items. Silver Lion=s fourth issue thus fails to demonstrate any insufficiency of the evidence and is overruled. Attorney=s Fees Silver Lion=s fifth issue asserts that the trial court abused its discretion by awarding Martinez attorney=s fees because there was no legal basis for the award.[3] In particular, Silver Lion contends that determining whether the sinks, racks, and signs were fixtures was a necessary step in resolving Martinez=s conversion claim, and, thus, attorney=s fees could not be awarded under the Declaratory Judgments Act. In this case, attorney=s fees were sought only under the Declaratory Judgment Act (ADJA@). See Tex. Civ. Prac. & Rem. Code Ann. ' 37.009 (Vernon 1997). Attorney=s fees may be awarded under the DJA in a declaratory judgment proceeding, even to a non-prevailing party. Id.; Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998). Conversely, attorney=s fees may not be awarded under the DJA in an action for which relief is not available under the DJA.[4] Declaratory relief is available only if a justiciable controversy exists that will be resolved by the declaration sought,[5] and is not available to settle disputes that are already pending before the court. BHP Petroleum Co. v. Millard, 800 S.W.2d 838, 841 (Tex. 1990) (orig. proceeding). Therefore, there is no basis for declaratory relief when a party is seeking in the same action a different, enforceable remedy, and a judicial declaration would add nothing to what would be implicit or express in a final judgment for the enforceable remedy. See, e.g., Hageman/Fritz, Byrne, Head & Harrison, L.L.P. v. Luth, 150 S.W.3d 617, 627 (Tex. App.CAustin 2004, no pet.). In that event, attorney=s fees are not recoverable under the DJA. Id. In this case, Martinez sought a declaration that items of collateral in the leased premises were not fixtures and that Martinez had a superior right to possession of them. However, because Martinez=s conversion claim required the same determinations, the declaratory relief requested would have added nothing to what was express or implied in granting recovery for conversion. Because declaratory relief was therefore not available, attorney=s fees could not be awarded under the DJA.[6] Accordingly, Silver Lion=s fifth issue is sustained, the trial court=s award of attorney=s fees is reversed, judgment is rendered that Martinez take nothing on her attorney=s fees claim, and the remainder of the judgment is affirmed. /s/ Richard H. Edelman Justice Judgment rendered and Memorandum Opinion filed March 6, 2007. Panel consists of Justices Anderson, Edelman, and Frost. [1] In a bench trial, a party is not required to preserve a complaint in the trial court that the evidence is legally or factually insufficient. See Tex. R. App. P. 33.1(d). [2] These findings of fact and/or conclusions of law relate to the trial court=s conclusion of law that Silver Lion wrongfully exercised dominion over the collateral at Dolphin Street to the exclusion of Martinez and, thus, its imposition of liability against Silver Lion for conversion. See Dolenz v. Cont=l Nat=l Bank of Fort Worth, 620 S.W.2d 572, 576 (Tex. 1981) (acknowledging definition of conversion to be the exercise of dominion over the personal property of another without consent of the owner and to the exclusion of the owner=s right of possession); Waisath v. Lack=s Stores, Inc., 474 S.W.2d 444, 447 (Tex. 1971). [3] A party may recover attorney=s fees only if provided for by statute or contract. Gulf States Utils. Co. v. Low, 79 S.W.3d 561, 567 (Tex. 2002). [4] See, e.g., Martin v. Amerman, 133 S.W.3d 262, 267 (Tex. 2004) (holding that boundary dispute was governed exclusively by Texas trespass-to-try-title statute and, thus, party could not alternatively seek relief under DJA in order to recover his attorney=s fees). [5] Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995). [6] See Luth, 150 S.W.3d at 627 (reversing award of attorney=s fees under the DJA because the declaratory judgment claim presented no new controversy and added nothing to what would be implicit or expressed in a final judgment for the conversion and right of property claim); Strayhorn v. Raytheon E-Systems, Inc., 101 S.W.3d 558, 572 (Tex. App.CAustin 2003, pet. denied) (affirming trial court=s denial of attorney=s fees under the DJA because the request for statutory interpretation was redundant to the suit for a refund); Kenneth Leventhal & Co. v. Reeves, 978 S.W.2d 253, 258 S59 (Tex. App.CHouston [14th Dist.]1998, no pet.) (reversing award of attorney=s fees because party cannot use declaratory relief, identical to his breach of contract claim, to recover attorney=s fees that are not otherwise available); Barnett v. City of Colleyville, 737 S.W.2d 603, 606S07 (Tex. App.CFort Worth 1987, writ denied) (holding that attorney=s fees cannot be recovered when judgment for the abatement of a public nuisance was inclusive of the litigated issues and could not be divided into declaratory and coercive aspects).