Opinion issued November 17, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-15-00169-CV
———————————
STEWART BEACH CONDOMINIUM
HOMEOWNERS ASSOCIATION, INC., Appellant
V.
GILI N PROP INVESTMENTS, LLC;
BARAK RESHEFF; BARYO INVESTMENTS, LLC;
SIMCA HELED; AHUVA HALED; PAVEL
(LEONID) GORBULSKY; AND RAMI BARNEA, Appellees
On Appeal from the 122nd District Court
Galveston County, Texas
Trial Court Case No. 14-CV-1266
OPINION
Four condominium owners obtained temporary injunctions to prohibit
Stewart Beach Condominium Homeowners Association from foreclosing on their
condominiums. Stewart Beach appeals the trial court’s denial of its motion to
dissolve the four temporary injunctions.1 Stewart Beach argues: (1) the temporary
injunction orders do not meet the requirements of Texas Rule of Civil Procedure
683; (2) Gili N Prop Investments, LLC, Baryo Investments LLC, Rami Barnea,
Simca and Ahuva Heled, and Pavel Gorbuslski (collectively referred to as the
“homeowners”) did not meet their burden to prove the elements of a temporary
injunction; and (3) the homeowners had “unclean hands” and thus were barred
from seeking temporary injunctions. The homeowners argue that we do not have
jurisdiction over this appeal. We affirm.
Background
Stewart Beach is a homeowner’s association. It charged the homeowners
assessments for community maintenance ranging from $3,500 to $6,200—
assessments that the homeowners admit they owe. Stewart Beach’s demand
included an amount for its attorney’s fees incurred during its assessment-collection
efforts. The homeowners contest the amount of the attorney’s fees demanded,
claiming the fees were excessive, unconscionable, and unauthorized by the
association agreement. They paid neither the assessment nor the attorney’s fee
demand. Because the homeowners did not pay the amount demanded, Stewart
1
See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(4) (West 2015) (granting
courts of appeals jurisdiction over interlocutory appeals of orders “grant[ing] or
overrul[ing] a motion to dissolve a temporary injunction”)
2
Beach attempted to foreclose on their condominiums. The homeowners sought,
and the trial court granted, temporary injunctions to avoid foreclosure.
A. Attorney fee agreement
The engagement letter between Stewart Beach and its attorney provides for a
hybrid attorney fee consisting of three parts: (1) a flat fee of $75 for “[c]ollection
cure letters” and $225 for filing notices of liens; (2) a contingency fee “equal to
20% on all collections”; and (3) an hourly fee of $195 for the attorney’s work and
$65 for his paralegal’s work.
B. Attorney’s work on the case
Stewart Beach’s attorney mailed a form collection cure letter to each of the
homeowners. The boilerplate, form letter merely plugged in information he
received from his client, Stewart Beach. The attorney also filed liens—again using
boilerplate forms—against each of the homeowners. His paralegal prepared these
two documents, which the attorney reviewed.
Stewart Beach’s attorney demanded in the “collection cure” letter that the
homeowners pay his attorney’s fees ranging from $1,600 to $2,150. No calculation
or description of the time or services was included in the demand letter. Testimony
during the temporary-injunction hearing revealed that the fee included: (1) $300
for the two documents prepared by the paralegal, (2) $585 for hourly charges, and
3
(3) an amount that represents 20% of the uncollected assessments. For all four
homeowners, the total demanded for attorney’s fees was over $16,000.
C. Lawsuit against homeowners
Stewart Beach sued the homeowners for breach of contract and attempted to
foreclose on their condominiums. In the homeowners’ answer to Stewart Beach’s
lawsuit, they admitted they owe some assessments but argued that the attorney’s
fees were excessive. They raised counterclaims for fraudulent liens 2 and excessive
demand. 3
2
Texas law imposes liability for a fraudulent lien when a person files a lien with:
(1) knowledge that the document or other record is a fraudulent
court record or a fraudulent lien or claim against real or
personal property or an interest in real or personal property;
(2) intent that the document . . . be given the same legal effect as a
court record . . . evidencing a valid lien or claim against real or
personal property or an interest in real or personal property; and
(3) intent to cause another person to suffer:
(A) physical injury;
(B) financial injury; or
(C) mental anguish or emotional distress.
TEX. CIV. PRAC. & REM. CODE ANN. § 12.002 (West Supp. 2014).
3
The excessive demand doctrine tempers the right of the claiming party to recover
attorney’s fees. Wayne v. A.V.A. Vending, Inc., 52 S.W.3d 412, 417–18 (Tex.
App.—Corpus Christi 2001, pet. denied); Allstate Ins. Co. v. Lincoln, 976 S.W.2d
873, 878 (Tex.App.—Waco 1998, no writ). This doctrine recognizes that, “[i]f the
claiming party makes an unreasonable demand, the other party should not be
forced to pay the demand or else risk suffering the opposing party’s attorney’s
fees.” Wayne, 52 S.W.3d at 417–18; see Fire & Cas. Ins. Co. of Connecticut v.
Buslease, Inc., No. 08-01-00277-CV, 2002 WL 1301570, at *2 (Tex. App.—El
Paso June 13, 2002, pet. denied) (mem. op., not designated for publication). If the
trial court determines that the attorney’s fees Stewart Beach demanded were
excessive and therefore “unreasonable” or demanded “in bad faith,” the trial court
could limit the award of attorney’s fees. Oyster Creek Fin. Corp. v. Richwood
4
D. Temporary injunction
After an evidentiary hearing, which included testimony by Stewart Beach’s
attorney on his fees and testimony by the homeowners’ expert that the fees were
“clearly excessive,” “unreasonable,” and “unconscionable,” the trial court granted
four temporary injunctions, one for each of the four units.
Each of the orders granting a temporary injunction found that “there are
unpaid assessments against the property” and that the “reasonable and necessary
attorney’s fees and costs . . . are $300”—the amount set forth in the engagement
letter for the demand letter and lien. The orders also found that the “owner will
suffer imminent and irreparable harm if this Court does not enjoin the foreclosures
of the Property.” The orders set a bond at the amount of the assessment plus the
$300 in attorney’s fees.
Invs. II, Inc., 176 S.W.3d 307, 318 (Tex. App.—Houston [1st Dist.] 2004, pet.
denied); Alford v. Johnston, 224 S.W.3d 291, 298–99 (Tex. App.—El Paso 2005,
pet. denied); Pennington v. Gurkoff, 899 S.W.2d 767, 772 (Tex. App.—Fort
Worth 1995, writ denied). But, if the trial court does not find the original fee
demand to be excessive, this continuing controversy subjects the homeowners to
claims for the additional attorney’s fees in this appeal and for the continued
proceedings in the trial court. Thus, the ultimate recovery for attorney’s fees could
potentially be higher than the original claimed amount because of the
accumulating attorney’s fees. See Thomas v. Lake Cove Cmty. Ass’n, Inc., No. 14-
13-00173-CV, 2014 WL 1004525 (Tex. App.—Houston [14th Dist.] Mar. 13,
2014, no pet.) (mem. op.) (noting that association initially spent $2,314 in
attorney’s fees but after trial recovered $4,952 in attorney’s fees because of
additional services).
5
Stewart Beach then filed a motion to dissolve the temporary injunctions,
which the trial court denied. Stewart Beach now appeals the trial court’s denial of
its motion to dissolve.
Standard of Review
We review a trial court’s decision to grant or deny a motion to dissolve a
temporary injunction under an abuse of discretion standard. Conlin v. Haun, 419
S.W.3d 682, 686 (Tex. App.—Houston [1st Dist.] 2013, no pet.). A trial court has
broad discretion in denying or granting such a motion. Id. “A trial court abuses its
discretion only if it reaches a decision so arbitrary and unreasonable that it amounts
to a clear and prejudicial error of law or if it clearly fails to correctly analyze or
apply the law.” Id. (citing Intercontinental Terminals Co. v. Vopak N. Am., Inc.,
354 S.W.3d 887, 892 (Tex. App.—Houston [1st Dist.] 2011, no pet.)). We only
review the validity of the temporary injunction order; we do not review the merits
of the underlying case. INEOS Grp. Ltd. v. Chevron Phillips Chem. Co., 312
S.W.3d 843, 848 (Tex. App.—Houston [1st Dist.] 2009, no pet.). We review the
evidence in the light most favorable to the district court’s ruling, drawing all
legitimate inferences from the evidence and deferring to the district court’s
resolution of conflicting evidence. Id. A district court abuses its discretion if it
misapplies the law to established facts. Id. There is no abuse of discretion as long
6
as some evidence reasonably supports the district court’s decision. Butnaru v. Ford
Motor Co., 84 S.W.3d 198, 211 (Tex. 2002).
When a party challenges a finding of fact, like Stewart Beach does here, the
finding is not determinative unless it is supported by the record. Brejon v. Johnson,
314 S.W.3d 26, 30 (Tex. App.—Houston [1st Dist.] 2009, no pet.). We review the
sufficiency of the evidence to determine whether the trial court abused its
discretion in making the finding. Id. The “legal and factual sufficiency of the
evidence are not independent grounds for asserting error, but they are relevant
factors in assessing whether the trial court abused its discretion.” Dunn v. Dunn,
177 S.W.3d 393, 396 (Tex. App.—Houston [1st Dist.] 2005, pet. denied). “A trial
court does not abuse its discretion when there is some evidence of a substantive
and probative character to support the trial court’s judgment.” Miles v. Peacock,
229 S.W.3d 384, 389 (Tex. App.—Houston [1st Dist.] 2007, no pet.).
Jurisdiction
The homeowners argue, “The Court of Appeals is without Jurisdiction . . .
because the Notice of Appeal was filed more than 20 days after the Orders
complained of, and the subsequent Motion to Dissolve the Injunctions raised [no]
new grounds and was ineffective to renew appellate jurisdiction.”
“The interlocutory appeal of an order denying a motion to dissolve a
temporary injunction is an accelerated appeal, and accordingly, the notice of appeal
7
must be filed within 20 days of the date of the order denying the motion.” Conlin,
419 S.W.3d at 685. The statute granting us jurisdiction to hear an interlocutory
appeal allows an appeal from either an order that “grants or refuses a temporary
injunction” or one that “grants or overrules a motion to dissolve a temporary
injunction.”4 TEX. CIV. PRAC. & REM. CODE ANN. § 51.014. An appeal “must be
filed within 20 days after the judgment or order is signed.” TEX. R. APP. P. 26.1(a).
The 20-day time period to appeal an order granting or overruling the motion to
dissolve a temporary injunction starts on the day of the order appealed—even if
that order is not the first order granting or denying such a motion in the lawsuit.
See Conlin, 419 S.W.3d at 685 (holding appeal was timely because within time
period for second—but not first—motion to dissolve).
Stewart Beach appeals the trial court’s denial of its motion to dissolve the
temporary injunction. It filed the notice of appeal three days after the trial court
denied its motion to dissolve—well within the 20-day limit.
4
The homeowners argue that the statute’s wording, “grants or refuses a temporary
injunction or grants or overrules a motion to dissolve a temporary injunction as
provided by Chapter 65,” indicates the statute only grants us appellate jurisdiction
over dissolution of injunctions for damages. TEX. CIV. PRAC. & REM. CODE ANN.
§ 51.014 (West 2015). We disagree. While the one subsection of Chapter 65 the
homeowners cite deals with “injunction[s] enjoining the collection of money,” the
entirety of the chapter gives a trial court jurisdiction to grant injunctions “of equity
. . . if not in conflict with this chapter or other law.” TEX. CIV. PRAC. & REM.
CODE ANN. §§ 65.001, 65.031 (West 2008). Thus the language “as provided by
Chapter 65” refers to any injunction “of equity” and grants us jurisdiction to hear
an appeal of any such injunction or of a motion to dissolve such an injunction.
8
The homeowners claim that the motion to dissolve the temporary injunction
was “pro forma” and “merely reiterates” the arguments against the temporary
injunction that Stewart Beach made at the temporary injunction hearing. They cite
City of Houston v. Estate of Jones in arguing that “merely reiterating” such
arguments is “not effective” to “extend the appellate deadline” and contend that the
20 days commenced with the granting of the temporary injunction. 388 S.W.3d
663 (Tex. 2012).
Estate of Jones does not support the homeowners for two reasons. First, it
dealt with a plea to the jurisdiction. In that case, the City of Houston, two years
after it filed its original plea to the jurisdiction, filed a second plea to the
jurisdiction containing the same arguments as the original plea. Id. at 665. The
Texas Supreme Court agreed with the trial court in construing the new “plea” as a
motion to reconsider. Id. at 666. Because the statute allowing interlocutory appeals
did not provide for an appeal of a motion to reconsider a plea to the jurisdiction,
the Texas Supreme Court held it did not have jurisdiction over an appeal of the
denial of the motion. Id. at 667. An order denying a motion to dissolve a temporary
injunction is different: the statute authorizing interlocutory appeals specifically
allows appeal of such an order—unlike a motion to reconsider a plea to the
jurisdiction.
9
Second, unlike Estate of Jones, the motion here raised new grounds for
relief. The motion to dissolve argues that the temporary injunction order does not
meet the requirements of the Rules of Civil Procedure, specifically the requirement
that the order “set forth the reasons for its issuance,” and thus, the order is “void”
and the trial court had “no discretion to deny a motion to dissolve.” These
arguments were not raised at the temporary injunction hearing; indeed, such
arguments could not have been raised there because Stewart Beach could not
challenge the form of the order before it was issued.
Thus, Stewart Beach’s appeal is timely and we have jurisdiction over it.
The Temporary Injunction Order Satisfies the Requirements
of Texas Rule of Civil Procedure 683
Stewart Beach argues that the four temporary injunction orders “do not set
out the reasons for entry or identify the harm [the homeowners] will suffer if not
entered” and thus violate the requirements of Texas Rule of Civil Procedure 683.5
That rule requires: “Every order granting an injunction . . . shall set forth the
reasons for its issuance; shall be specific in terms; shall describe in reasonable
detail . . . the act or acts sought to be restrained; and
5
Stewart Beach also argues that the orders violated Rule 684, which requires the
court to “fix the amount of security to be given by the applicant” for a temporary
injunction, but Stewart Beach does not give any detail on how that Rule is
violated. This “[f]ailure to cite legal authority or to provide substantive analysis of
the legal issues presented results in waiver of the complaint.” Canton-Carter v.
Baylor Coll. of Med., 271 S.W.3d 928, 931 (Tex. App.—Houston [14th Dist.]
2008, no pet.).
10
. . . shall include an order setting the cause for trial on the merits with respect to the
ultimate relief sought.” TEX. R. CIV. P. 683.
The four orders granting the temporary injunctions, which are identical
except for the name of the homeowner and the amount of the assessment and bond,
meets the four requirements of Rule 683. First, the orders set forth the reasons for
their issuance. The order states “After considering[] the pleadings, testimony,
exhibits, [and] other evidence properly before the Court, legal authorities, and the
argument of counsel, the Court: FINDS there are unpaid assessments against the
Property [and] FINDS the reasonable and necessary attorney’s fees and costs
incurred by the Association to make the demand to the Owner and file the lien
against the Property are $300.00.”
Second, the orders identify the harm that the homeowners would suffer if
Stewart Beach foreclosed on the condominiums. It states that the trial court
“FINDS the Owner will suffer imminent and irreparable harm if this Court does
not enjoin the foreclosures of the Property, currently scheduled to occur on
Tuesday, January 6, 2015 at 10:00 a.m.” The harm of losing one’s home “is
obvious”; a homeowner would “probably be injured if the property were foreclosed
and sold.” Franklin Sav. Ass’n v. Reese, 756 S.W.2d 14, 15–16 (Tex. App.—
Austin 1988, no writ).
11
Third, the order sets out the act to be restrained: it “ORDERS [that Stewart
Beach be] . . . TEMPORARILY ENJOINED from conducting any foreclosure by
private sale or otherwise of the Property until and pending signature and entry of
final resolution of this suit or until further order of this Court.”
Fourth, the order sets a date for the trial on the merits. 6 Thus, the orders
granting the temporary injunctions in this case meet the requirements of Rule 683.
We overrule Stewart Beach’s first issue.
Temporary Injunction
A temporary injunction “preserve[s] the status quo of the litigation’s subject
matter pending a trial on the merits.” Butnaru, 84 S.W.3d at 204. The “status quo”
is the “last, actual, peaceable, noncontested status which preceded the pending
controversy.” In re Newton, 146 S.W.3d 648, 651 (Tex. 2004) (internal quotation
marks omitted). “To obtain a temporary injunction, the applicant must plead and
prove three specific elements: (1) a cause of action against the defendant; (2) a
6
This differs from the cases Stewart Beach cites in which the appeals court held
that the temporary injunction order did not meet the requirements of Rule 683
because the order did not set a date for the trial on the merits. See Interfirst Bank
San Felipe v. Paz Constr. Co., 715 S.W.2d 640, 641 (Tex. 1986) (holding order
violated Rule 683 because it did not set date for trial on merits); Conlin, 419
S.W.3d at 687 (same). The two other cases Stewart Beach cites are not helpful to
deciding this issue because neither discusses the requirements of Rule 683. See
Qwest Commc’ns Corp. v. AT&T Corp., 24 S.W.3d 334 (Tex. 2000) (holding that
order granting temporary injunction is appealable); Tex. State Optical v. Wiggins,
882 S.W.2d 8 (Tex. App.—Houston [1st Dist.] 1994, no writ) (holding trial court
applied wrong law to facts in case).
12
probable right to the relief sought; and (3) a probable, imminent, and irreparable
injury in the interim.” Butnaru, 84 S.W.3d at 204.
Stewart Beach challenges the second and third elements: it argues that it is
“impossible” for the homeowners to obtain relief and that the homeowners would
not suffer an irreparable injury if the foreclosures were to proceed because other
remedies exist for them.
A. Probable right to the relief sought
Stewart Beach argues, “It is impossible for [the homeowners] to show they
will succeed on the merits of the case because they confess in their pleadings they
owe . . . the amount [Stewart Beach] pled.”
When a trial court holds a hearing on a temporary injunction, the only
question “is whether the applicant is entitled to preservation of the status quo of the
subject matter of the suit pending trial on the merits. The ruling on the temporary
injunction may not be used to obtain an advance ruling on the merits.” Iranian
Muslim Org. v. City of San Antonio, 615 S.W.2d 202, 208 (Tex. 1981) (internal
citations omitted). On appeal, the question “is whether the trial court abused its
discretion in granting or denying the temporary injunction.” Id. Because the trial
court cannot give an advance ruling on the merits, “the applicant is not required to
establish that she will prevail on final trial . . . .” Walling v. Metcalfe, 863 S.W.2d
56, 58 (Tex. 1993) (internal citations omitted).
13
“[C]ourts are often particularly careful when it comes to the element of
‘probable right of recovery,’ sometimes referred to as ‘likelihood of success on the
merits’ . . . .” Intercontinental Terminals, 354 S.W.3d at 897. This element “seems
to infringe upon two well-engrained judicial prohibitions: against advisory
opinions and against forming opinions about the merits of the case before the
conclusion of the evidence.” Id. The “probable right of recovery” is a “term of art”
in the law of temporary injunctions. Id. “[T]he applicant for [a] temporary
injunction [need not] offer evidence and persuade the judge to find from that
evidence the adjudicative facts necessary for the applicant to prevail on the merits,
based on probabilities.” Id. (internal citations omitted). A temporary injunction
hearing is not a “mini trial” in which “the judge predicts the applicant’s chances of
success at the real trial, based upon the judge’s estimate of where the truth
probably lies concerning the adjudicative facts and the law made applicable thereto
by the pleadings in the case.” Id. (internal citations omitted). “[T]o show a
probable right of recovery,” the party applying for a temporary injunction, “must
plead a cause of action and present some evidence that tends to sustain it. The
evidence must be sufficient to raise a bona fide issue as to the applicant’s right to
ultimate relief.” Id. (internal citations and quotation marks omitted).
Thus, to “show a probable right of recovery,” the homeowners must “present
some evidence that tends to sustain” their excessive-demand claim that the
14
attorney’s fees were excessive and were either sought in bad faith or were
unreasonable. Cameron v. Bell, No. 13-01-767-CV2003, WL 253609, at *2 (Tex.
App.—Corpus Christi Feb. 6, 2003, no pet.); Intercontinental Terminals, 354
S.W.3d at 897. The trial court made a finding that, at the time the demand letter
was sent to the homeowners, “reasonable and necessary attorney’s fees and costs
. . . [were] $300.” The testimony at the temporary-injunction hearing provided
substantial support for this finding and no contrary evidence was presented.
When a contract between a lawyer and his client contains a provision setting
the amount of attorney’s fees, that provision establishes a presumption that the
amount is reasonable between the client and the attorney—but this presumption
does not apply to a third party from whom fees are sought, like the homeowners.
See Leal v. Leal, 628 S.W.2d 168, 170–71 (Tex. App.—San Antonio 1983, no
writ) (holding that agreement between plaintiff and attorney did not establish
presumption of reasonableness when plaintiff attempted to recover attorney’s fees
from defendant).
Expert testimony on attorney’s fees is necessary if the fees are disputed. The
homeowners presented expert testimony that the original demanded attorney’s fees
were unreasonable. Stewart Beach’s attorney offered factual testimony regarding
his fees. But, other than the attorney’s misinterpretation of a Fourteenth Court of
Appeal’s decision, which we discuss below, Stewart Beach offered no expert
15
testimony on the reasonableness of the demanded attorney’s fee or the number of
hours expended on the tasks. In most cases, the attorney who testifies in support of
the requested fees should quantify the number of hours and describe the tasks
performed, supported by appropriate billing records or other documentary
evidence. El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 763 (Tex. 2012). In
determining the reasonableness of the fee, the trial court must consider (1) the
number of hours the attorney reasonably worked on the claim and (2) the
reasonable hourly rate for that work. Id.
At the hearing, however, Stewart Beach’s attorney generally described the
work necessary to complete the demand letter and lien notice and work he did after
sending the demand letter. This evidence does not support the original fee demand
in excess of the flat fee. He did not provide any timesheets or other evidence of the
number of hours he reasonably worked on the demand letters. To the extent the
work corresponded to any aspect of the hybrid fee arrangement, it appears to
correspond to the flat fees that would be charged, which is the amount found by the
trial court to be the reasonable amount of fees through the date the demand letter
was sent.
1. Combination of hybrid fee
The homeowners’ expert used the attorney’s fee demand sent to one of the
four homeowners, Simca and Ahuva Heled, to illustrate the unreasonableness of
16
Stewart Beach’s attorney’s hybrid fee.7 The Heleds owed Stewart Beach $3,616.33
in assessments. In addition to the amount due for assessments, Stewart Beach’s
demand letter demanded $1,665.27 in attorney’s fees (roughly 44% of the
assessments owed) without any supporting calculation. During the temporary-
injunction hearing, the homeowners’ attorney asked Stewart Beach’s attorney how
much of that $1,665.27 was for his hourly fees. He responded, “I don’t know. . . . It
was $75 for the standard cure notice. I bill $225 for liens . . . . Then there’s 20
percent of the delinquent amount collection fee . . . .” That testimony leaves about
$642 of remaining fees. 8
2. Flat Fee
The only evidence presented to the trial court regarding the reasonableness
of Stewart Beach’s fees when it issued the temporary injunction is the flat fee of
$75 for writing the collection letter and $225 for filing the lien. The homeowners’
7
The chart below summarizes the demanded fees:
Flat Fee Contingent Fee Remaining Total
(20% of $3,616.33) Fees
$300 $723.27 $642 $1,665.27
8
Even if we assume the flat fee was only intended to cover the paralegal’s time and
that the attorney would also charge an hourly fee on top of the flat fee (a fee
arrangement that is not clearly set forth in the engagement letter), to justify this
amount at his $195 hourly rate, Stewart Beach’s attorney would have to present
evidence that he spent 3.25 hours reviewing a two-page form letter and a two-page
notice of lien and did so for each form letter sent to the homeowners. No such
evidence was presented.
17
expert testified that these flat fees were “reasonable.” The trial court set the
reasonable attorney’s fees in the bond at $300—presumably to cover Stewart
Beach’s attorney’s flat fee. But Stewart Beach demanded attorney’s fees much
higher than that. Therefore, we look to the other portions of the hybrid fee
arrangement for support.
3. Hourly fee
Stewart Beach’s attorney testified that he charges $195 an hour. The
homeowners did not challenge the attorney’s hourly rate. Their expert did,
however, testify that charging an hourly rate on top of the flat fee and on top of the
contingency fee was “clearly excessive,” not “reasonable,” and “unconscionable.”
Stewart Beach offered no testimony or billing records to substantiate an hourly-fee
charge beyond the flat fee already charged for the work the attorney described he
performed.
Based on this lack of evidence, the trial court did not abuse its discretion in
finding that the homeowners had a likelihood of success on the merits of their
challenge to Stewart Beach’s attorney’s hourly-rate fees over and above the flat
fee.
4. Contingency Fee
If the contract between the attorney and the client provides for a contingency
fee, attorney’s fees cannot be recovered based solely on the evidence of the fee
18
agreement. Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818
(Tex. 1997). Instead, the factfinder must determine the reasonableness of a
contingency fee in a specific dollar amount. Id. at 819. When the factfinder
determines the reasonableness of the fee, it must consider, among other factors, the
uncertainty of collection before the legal services have been rendered. Id. at 818.
Even if the contingent fee is reasonable from the standpoint of the client and the
attorney, the fee is not necessarily reasonable when the attorney attempts to collect
from a third party, like the homeowners. Id.
Stewart Beach’s attorney provided no evidence that the specific dollar
amount collected on the basis of the 20% contingency fee is reasonable. 9 Instead,
the attorney offered two rationales for the fee: (1) it was the fee set forth in his
engagement letter and (2) it was the same percentage contingency fee approved by
the Court of Appeals in Schwartzott v. Marvilla, 390 S.W.3d 15 (Tex. App.—
Houston [14th Dist.] 2012, pet. denied).
The first rationale is not persuasive: as previously discussed, the attorney’s
fee contract is not binding on a third party.
9
Although Stewart Beach argues that the 20% fee is not a contingency fee, the
engagement letter suggests otherwise. The attorney’s contract reads that he “will
be entitled to a flat fee equal to 20% on all collections.” If a homeowner does not
pay the assessment, no collection occurs and thus Stewart Beach would not owe
their attorney the 20%. Thus, the fee is contingent on collection and is a
contingency fee. See Arthur Andersen, 945 S.W.2d at 818 (referring to
contingency fees as fees that “compensate the attorney for the risk that the
attorney will receive no fee whatsoever if the case is lost”).
19
The second rationale is based on a misinterpretation of Schwartzott on three
levels. First, the attorney’s fee there was 10%—not 20%. Id. at 21. Second, it was
part of a two-fold—not three-fold—hybrid agreement that included a flat and
contingency, but not hourly, fee. Id. Third and most importantly, the court did not
“approve” the fee; it held, based on the limited record and expert testimony before
it, that the trial court did not err in awarding the attorney’s fees. Id.
In contrast, the homeowners provided expert testimony that Stewart Beach’s
attorney’s contingency fee was unreasonable. The expert testified that charging a
contingency fee in addition to the hourly rate constituted an excessive fee. Their
expert testified that this fee arrangement was particularly unreasonable given that
the homeowner association assessments were comparatively small dollar amounts
compared to the value of the condominiums and were secured by a lien on the
condominium. This testimony indicates that the “uncertainty of collection” (one of
the Arthur Andersen 10 factors for determining the reasonableness of contingency
fees) was relatively low, weighing against the reasonableness of a contingency fee
on top of the flat fee and the hourly fee.
Based on the testimony at the hearing, the homeowners presented evidence
in support of their claims of a fraudulent lien and excessive demand and
established a “bona fide issue as to the applicant’s right to ultimate relief.”
10
945 S.W.2d at 818.
20
Intercontinental Terminals, 354 S.W.3d at 897. This “bona fide issue” justified the
trial court’s decision to grant the temporary injunction to “maintain the status quo”
until a trial on the merits could determine whether the attorney’s fees were
reasonable.
Stewart Beach argues that the homeowners’ failure to pay the assessments
that they admit they owe precludes them from benefiting from a temporary
injunction to stop foreclosure. It is true that “claimed confusion concerning the
amount of the payment required to avoid foreclosure is not in itself grounds for an
injunction. . . . [A] debtor seeking equitable relief from a foreclosure sale must first
tender the full sum of the admitted debt.” Ginther-Davis Ctr., Ltd. v. Houston Nat’l
Bank, 600 S.W.2d 856, 864 (Tex. Civ. App.—Houston [1st Dist.] 1980, writ ref’d
n.r.e). If a party admits to owing part of a debt, it must make “an unconditional
offer . . . [of] a sum not less in amount than that due.” Baucum v. Great Am. Ins.
Co. of New York, 370 S.W.2d 863, 866 (Tex. 1963).
The requirement for a debtor to tender the amount owed, however, does not
require “that the money was to be brought into Court, or tendered as a condition
precedent to the granting of relief;” the debtor must show only “a readiness and
willingness to pay” and act “in good faith.” Poff v. Rollinsford Sav. Bank, 105
S.W.2d 782, 783 (Tex. Civ. App.—Amarillo 1937, no writ). In Poff, the debtor
“asked the court to determine their indebtedness to appellees and offered to pay the
21
amount thereof when determined.” Id. This offer to pay the full amount determined
by the factfinder constituted a sufficient offer “of the full amount owed.” Id.
Here, the homeowners explicitly state in their pleading that they did not
“dispute their obligation to pay appropriate assessments”; 11 they disputed the
amount of the attorney’s fees. During the temporary injunction hearing, one of the
homeowners testified that he, representing the other homeowners with delinquent
assessments, offered to pay Stewart Beach “the assessments and on top of it [ ]
would add 20 percent of [the attorney’s] fees.” This amount was more than the
amount the trial court found was reasonable.12 In addition to the offer the
homeowners made to Stewart Beach, the homeowners posted a bond—“brought
[the money] into Court”—for the amount they admit they owed in assessments and
the amount the trial court found was a reasonable attorney’s fee as a condition of
11
There is an additional dispute over the amount of assessments that are due. The
homeowners argue that “previous assessments may [ ] not have been properly
credited” and may have been “improperly applied to [attorney’s] fees or otherwise
handled in violation of the Bylaws.” No evidence was provided at the temporary-
injunction hearing to support this claim so the temporary injunction cannot be
based on this allegation in the pleadings. See Bay Fin. Sav. Bank, FSB v. Brown,
142 S.W.3d 586, 589–90 (Tex. App.—Texarkana 2004, no pet.) (“No temporary
injunction may issue unless the applicant offers competent evidence in support of
his or her application to the trial court at the hearing on the temporary injunction . .
. .”).
12
For example, 20% of the $1,665.27 in attorney’s fees that Stewart Beach’s
attorney attempted to charge the Heleds would be $333.06—greater than the $300
that the trial court found was reasonable.
22
the temporary injunction. Poff, 105 S.W.2d at 783. This bond protected Stewart
Beach’s interests.
While the homeowners have not tendered the assessments that they admit
they owe to Stewart Beach, the actions taken by the homeowners of
(1) offering to pay the admitted debt due and (2) posting a bond as a condition of
the temporary injunction satisfy the requirements of Texas law. We hold that the
homeowners met the element of “probable right to the relief sought” to obtain the
temporary injunction.
B. Irreparable Injury
Stewart Beach argues that the homeowners are not irreparably harmed
because they are “protected from wrongful foreclosure by the redemption
provision of the [Texas Uniform Condominium Act] . . . [and] the legal remedy of
a lawsuit for wrongful foreclosure . . . .”
A trial court cannot issue an injunction when the party seeking the injunction
has a plain and adequate legal remedy. Int’l Harvester Credit Corp. v. Rhoades,
363 S.W.2d 397, 399 (Tex. Civ. App.—Austin 1962, no writ). A temporary
injunction is, however, appropriate to block foreclosure of real property. Irving
Bank & Tr. Co. v. Second Land Corp., 544 S.W.2d 684, 688 (Tex. Civ. App.—
Dallas 1976, writ ref’d n.r.e.). “[I]t is obvious that [the property owner] would
23
probably be injured if the property were foreclosed and sold . . . . ” Franklin Sav.
Ass’n, 756 S.W.2d at 15–16.
The right to monetary damages in a lawsuit for wrongful foreclosure is not
an adequate remedy because “every piece of real estate is unique, and if
foreclosure were allowed before a full determination” of the underlying claim, the
homeowner “would be irreparably harmed.” Perales v. Riviera, No. 13-03-002-
CV, 2003 WL 21705740, at *3 (Tex. App.—Corpus Christi July 24, 2003, no pet.)
(mem. op.); El Paso Dev. Co. v. Berryman, 729 S.W.2d 883, 888 (Tex. App.—
Corpus Christi 1987, no writ). Thus the availability of a remedy, like a claim for
wrongful foreclosure, that provides monetary damages does not negate the element
of “irreparable harm.” Guardian Sav. & Loan Ass’n v. Williams, 731 S.W.2d 107,
108–09 (Tex. App.—Houston [1st Dist.] 1987, no writ); Perales, 2003 WL
21705740, at *3.
The right of redemption is also not an adequate remedy for the homeowners.
A foreclosure can, itself, be a substantial burden to the property owner—even if the
property owner can recover the property. For example, a foreclosure can “ruin [the
owner’s] reputation, prevent him from borrowing money at any other financial
institution in the United States.” Guardian Sav. & Loan Ass’n, 731 S.W.2d at 108.
Neither a lawsuit for monetary damages for wrongful foreclosure nor the
statutory right of redemption is an adequate remedy for the homeowners. The
24
homeowners established that they would suffer “irreparable harm” if Stewart
Beach foreclosed on their properties.
Accordingly, we overrule Stewart Beach’s second issue.
Unclean Hands
Stewart Beach next argues that “[a]sking the trial court to enjoin [Stewart
Beach’s] statutory and contractual rights while [the homeowners] confess to
material breach flies in the face of equitable principles. . . . [The homeowners]
confess they owe the debt for delinquent assessments, the court found they owed
the debt and included the findings in the injunction Orders.”
The doctrine of “unclean hands” allows a court to “refuse to grant equitable
relief, such as an injunction, sought by one whose conduct in connection with the
same matter or transaction has been unconscientious, unjust, or marked by a want
of good faith, or one who has violated the principles of equity and righteous
dealing.” Park v. Escalera Ranch Owners’ Ass’n, Inc., 457 S.W.3d 571, 597 (Tex.
App.—Austin 2015, no pet.) (internal quotation marks and citations omitted). “A
party seeking to invoke this equitable doctrine must show that he has been
seriously harmed and the wrong complained of cannot be corrected without
applying the doctrine.” City of Fredericksburg v. Bopp, 126 S.W.3d 218, 221 (Tex.
App.—San Antonio 2003, no pet.).
25
Admitted breach of a contract is not necessarily sufficient to invoke the
doctrine of unclean hands. 13 See David v. Bache Halsey Stuart Shields, Inc., 630
S.W.2d 754, 758 (Tex. App.—Houston [1st Dist.] 1982, no writ) (refusing to apply
unclean-hands doctrine to prevent party who admitted to breaching arbitration
provision from seeking temporary injunction); Spring v. Walthall, Sachse & Pipes,
Inc., No. 04-05-00228-CV, 2005 WL 2012669, at *2 (Tex. App.—San Antonio
Aug. 24, 2005, no pet.) (mem. op.) (affirming trial court’s order granting
temporary injunction and rejecting argument that moving party had unclean hands
because of breach of contract). Thus, the homeowners’ admission that they did not
pay the assessments does not bar them from seeking a temporary injunction.
In addition, Stewart Beach does not show that it is “seriously harmed” or
that any “wrong complained of cannot be corrected without applying the doctrine.”
City of Fredericksburg, 126 S.W.3d at 221. The trial court’s requirement that the
homeowners post a bond in the amount of the assessments and reasonable
13
None of the cases cited by Stewart Beach held that an admission of a breach of
contract automatically bars a party from seeking an injunction under the unclean-
hands doctrine. In three of the cases cited by Stewart Beach, the courts upheld the
temporary injunctions, holding that the moving party did not have unclean hands.
LDF Constr., Inc. v. Bryan, 324 S.W.3d 137, 149–50 (Tex. App.—Waco 2010, no
pet.); In re Jim Walter Homes, Inc., 207 S.W.3d 888, 899 (Tex. App.—Houston
[14th Dist.] 2006, no pet.); Thomas v. McNair, 882 S.W.2d 870, 881 (Tex. App.—
Corpus Christi 1994, no pet). The fourth case, City of Fredericksburg v. Bopp, did
find that the party seeking the injunction had unclean hands because the party’s
actions were “marked by a want of good faith.” 126 S.W.3d at 222. That case is
not analogous to this case, however, because Stewart Beach has not presented any
allegation or proof of bad faith by the homeowners.
26
attorney’s fees they admit are due protects Stewart Beach’s interests, and, thus any
“wrong complained of” has been “corrected” without applying the unclean-hands
doctrine. Id. Accordingly, we overrule Stewart Beach’s third and final issue.
Conclusion
We affirm the order of the trial court.
Harvey Brown
Justice
Panel consists of Justices Jennings, Higley, and Brown.
27