Real Estate Litigation in Texas

Topics Covered

Contemplating litigation and evaluating the case

Jurisdiction and venue
Real estate causes of action
Phases of the case
Recovery of direct and consequential damages
Recovery of Attorney’s fees and costs
TROs and Injunctions
Discovery
Motions for summary judgment
Mediation
Judgment and collection

This article discusses basic practices, rules, and procedures involved in Texas real estate litigation. For our purposes, litigation refers to the filing and prosecuting of a real estate-related lawsuit, or defense against one, in the Texas county civil courts at law or the civil district courts. We will not discuss litigation in the appellate or federal courts. Also, our focus is on real estate and business litigation, not divorce cases, criminal defense, or any other area. References to rules in this article are to the Texas Rules of Civil Procedure.

CONTEMPLATING LITIGATION

The Hard Realities

In contemplating filing or defending against a lawsuit, one should keep in mind three cardinal rules which shock clients when they learn them:

(1) There is no such thing as a perfect case and yes, that includes yours;

(2) no one ever gets exactly what they want in court and yes, that includes you; and

(3) litigation always costs more than you think it will. As to the last item, you might consider even modest litigation as roughly the equivalent of buying a new car, and an expensive one at that.

Real estate investors are typically accustomed to working with a transactional real estate lawyer who may be excellent at preparing sophisticated documentation but has never tried a lawsuit—or even set foot in a courtroom except perhaps to pay a traffic ticket. The practice of law is now intensely specialized. Anyone involved as a plaintiff or a defendant should retain an experienced trial attorney. In Texas, there is a separate board certification for civil trial law.

The realities of litigation are such that even experienced transactional lawyers are surprised when they see first-hand what judges and juries can do. Every trial lawyer has had a client say “The judge can’t do that!” The reply is usually always the same: Actually, she can and she just did.

It may be advisable for anyone involved in litigation to have a team of lawyers working for you: one who is an expert on real estate transactions, the other who is a specialist in convincing a judge or jury that your case has merit. In cases where one is a defendant with much to lose, it may also be prudent to retain an asset protection attorney and tax specialist, just in case. This is similar to having several physicians. The days when one lawyer could do it all are ancient history.

Evaluating a Litigation Case

A good litigation case consists of:

(1) facts that show clear liability on the part of the defendant; and

(2) monetary damages in an amount that makes the process worthwhile.

Both factors must be present. Good liability facts are not helpful if there is no real monetary loss; and large damages will not help a plaintiff who cannot show a clear path to holding the defendant legally liable. One or more established causes of action (fraud or breach of contract, for example) must apply.

Note that legal liability is not the same as moral liability. The justice system, like every human institution, is imperfect. It is not only unable but unwilling to right every wrong.

As a rule of thumb, there should be at least $50,000 in actual damages to make it worthwhile to file a suit in county or district court. Plaintiffs with $5,000 and $10,000 cases should consider filing a small claims action in justice court where an attorney is not required. Otherwise, such cases are not cost-effective. The days when it was reasonable to hire an attorney for a low-damage claim are gone. A breach-of-contract claim in a real estate transaction of, say, $2,500 is not the basis for a lawsuit. It is more appropriately considered a collection item or a business write-off.

Complexity of Modern Litigation

Litigation has increased in complexity to an astonishing degree. A prime culprit is the docket control order or DCO (also called a scheduling order) which is generated by the clerk’s computer shortly after the lawsuit is filed. In times past these orders contained only a few dates, including the discovery completion date, the date by which experts were to be designated, and a trial date. DCOs have now expanded to include many more dates and deadlines. Meeting these dates and deadlines not only costs money but is the attorney’s professional obligation, both to the client and to the court. Attorneys must therefore be prudent when signing on as attorney of record. The attorney must not only be confident that the case has merit but that the client has the commitment and financial means to pursue litigation at today’s level of complexity and expense.

Expense of Litigation

Many real estate and business attorneys require an initial retainer of at least $20,000 (plus costs such as filing fees) with supplementary retainer installments to follow. Larger or more specialized firms may require significantly more up front. There is a reason for these retainers. For attorneys, there are few situations more frustrating than being in a lawsuit governed by an extensive DCO while stuck with a client who cannot or will not pay the bills for the complex work that order requires.

JURISDICTION AND VENUE

Jurisdiction

The term jurisdiction has three aspects: first, whether a particular court is enabled by law to handle certain subjects (subject-matter jurisdiction); second, whether damages fall within certain monetary limits (monetary jurisdiction”); and third, whether the court has jurisdiction over the parties and property involved (personal jurisdiction and in remjurisdiction, respectively). All of these requirements must be satisfied.

County courts and district courts have subject-matter jurisdiction over the full range of real estate and business matters. However, in certain counties other than Harris County, matters pertaining to title to real estate must be brought in district court. Justice courts have original jurisdiction over possession of real property so evictions must be brought there.

County courts have monetary jurisdiction up to $250,000. District courts can hear cases that exceed $500 in value, and there is no upper limit. Often, but not always, litigation in county court is cheaper and faster than in district courts.

Venue

After determining jurisdiction, a potential litigant must consider venue. Venue refers to the county in which a lawsuit is brought. Pursuant to the general venue statute (Civ. Prac. & Rem. Code Sec. 15.002), one cannot file suit just anywhere. A lawsuit must be filed in a particular county if (1) all or a substantial part of the events or omissions giving rise to the claim occurred in that county; or (2) the defendant resides in that county or, if a corporation or other registered entity, does business there; or (3) the real property the subject of the suit lies in that county.

Civil Practice & Remedies Code Section 15.011 is even more specific when it comes to real estate cases: “Actions for recovery of real property or an estate or interest in real property, for partition of real property, to remove encumbrances from the title to real property, for recovery of damages to real, or to quiet title to real property shall be brought in the county in which all or a part of the property is located.”

If suit is filed in the wrong county the opposing party will likely make a special appearance in order to ask for a change of venue. Failing to pay attention to proper venue therefore results in wasted time and money.

The New Business Courts

In addition to district, county, and justice courts, there is now a new and specialized type of trial court established by Government Code Chapter 25A effective September 1, 2024. Business courts have jurisdiction in all counties (concurrent with district courts) in specifically-listed types of business disputes. The amount in controversy must exceed $5,000,000 for certain of these cases and $10,000,000 for others.

Certain types of cases are excluded altogether from business court jurisdiction. Cases arising from the Property Code (except for mechanic’s lien cases) and the Business Organizations Code are not excluded, but cases arising from the Deceptive Trade Practices Act, the Estates Code, the Family Code, and the Insurance Code are excluded.

A newly-created Fifteenth Court of Appeals has exclusive jurisdiction over cases that are appealed from the business courts.

All in all, the business courts are designed to deal primarily with sizeable lawsuits involving big business rather than individual consumers. They are intended to be Texas’ answer to the Delaware model where dedicated business courts are popular with large corporations.

REAL ESTATE CAUSES OF ACTION

An effective lawsuit must meet all the required elements of one or more established causes of action. Causes of action derive from specific statutes (e.g., the Property Code) or from common law (legal history and tradition). Examples of causes of action relating to real estate include:

breach of contract and specific performance
breach of express or implied warranty
common law fraud
statutory fraud
conversion
negligence
deceptive trade practices
conspiracy
wrongful foreclosure
slander of title
suit to quiet title
trespass to try title
suit for specific performance
suit for declaratory judgment
violation of the real estate license act

Specific Performance of Contracts

Suits for the specific performance of real estate contracts are common. What is your recourse when the opposite party fails to perform a valid contract? The solution is a suit seeking an order compelling the other party to do what that party agreed to do. A San Antonio case explains:

Specific performance is an equitable remedy that may be awarded, at the trial court’s discretion, for a breach of contract. . . and is an alternative remedy to damages. When the recovery of monetary damages is inadequate to compensate the complainant, the transgressor is compelled to perform the promise of its contract. . . . Specific performance is not a separate cause of action, but rather it is an equitable remedy used as a substitute for monetary damages when such damages would not be adequate. Marx v. FDP, LP, 474 S.W.3d 368 (Tex.App—San Antonio 2015, no pet.).

The TREC 1-4 Contract provides for this remedy. Paragraph 15 states that an aggrieved party may “enforce specific performance, seek such other relief [against the defaulting party] as may be provided by law, or both.” For practical reasons, the remedy of specific performance is more effective against a breaching seller than a breaching buyer. In the case of a seller breach, one is demanding that the seller execute and deliver a deed—which is not a major burden in practical terms. In contrast, it is difficult to compel a buyer to apply for and obtain a loan, sign a note and deed of trust, and so forth. Disappointed sellers are most often in the position of keeping the buyer’s earnest money and moving on.

Trespass to Try Title

Trespass to try title is a statutory action that is appropriate when someone claiming ownership of land seeks to dispossess someone who has (by whatever means) taken possession of the land.The classic example is when someone has occupied land that belongs to you and they cannot be peaceably ousted. Property Code Section 22.001(a) states: “A trespass-to-try-title action is the method of determining title to lands, tenements [improvements on the land], or other real property.” Regardless of how an action is pled, if the evidence shows that there is a title dispute between the parties then the trespass-to-try-title statute applies. Roberson v. Odom, 529 S.W.3d 498, 502 (Tex. App.—Texarkana 2017, no pet.).

The Texas Supreme Court explains further:

A trespass-to-try-title action is the exclusive remedy for resolving overarching claims to legal title. It embraces all character of litigation that affects the title to real estate. In a trespass-to-try-title action, a plaintiff may prove legal title by establishing: (1) a regular chain of title of conveyances from the sovereign to the plaintiff; (2) a superior title to that of the defendant out of a common source; (3) title by limitations (i.e., adverse possession); or (4) possession that has not been abandoned.” Brumley v. McDuff, 616 S.W.3d 826 (Tex. 2021).

A trespass to try title action requires the petition to allege: (1) the parties’ real names and residences; (2) a legally sufficient description of the premises; (3) the plaintiff’s claimed interest; (4) that plaintiff possesses the premises or is entitled to possession; (5) that the defendant unlawfully entered and dispossessed the plaintiff of the premises and withholds possession; and (6) a prayer for relief. Stelly v. DeLoach, 644 S.W. 3d 657 (Tex. 2022) citing Tex. R. Civ. P. 783.

Why not, one might ask, just pursue a forcible detainer (eviction) action in justice court? Because a trespass to try title case involves competing claims to title, and jurisdiction over title issues lies exclusively in the district court, not justice court. In a forcible-detainer case the sole issue is who has the superior right to immediate possession. This does not include determinations of title. Title claims cannot be resolved by means of the forcible detainer process in justice court. Marshall v. Hous. Auth. of San Antonio, 198 S.W.3d 782 (Tex. 2006). A justice court has no jurisdiction to adjudicate title to land (Gov’t Code Sec. 27.031(b)).

It is possible to pursue a trespass to try title action as a means of establishing title by adverse possession. Brumley v. McDuff, 616 S.W.3d 826 (Tex. 2021).

Trespass to Try Title Versus Quiet Title

There is a distinction between these two causes of action. Trespass to try title is a statutory and legal cause of action. Quiet title is a common law action in equity. A plaintiff in a quiet title action must prove (1) an interest in specific real property; (2) title to the property is affected by the defendant’s claim; and (3) defendant’s claim is invalid. Sadler v. Duvall, 815 S.W.2d 285 (Tex.App.—Texarkana 2017, no pet.).

The Austin court of appeals states:

A claim for trespass to try title is distinct from a claim to quiet title, though the differences are nuanced. A claim to quiet title is traditionally one in which the superior title holder seeks to remove a challenge to that title. Thus, the plaintiff in a quiet-title suit must prove, as a matter of law, that he has a right of ownership and that the adverse claim is a cloud on the title that equity will remove.

Over time, the term “quiet title” has acquired a colloquial meaning encompassing many kinds of title disputes, including those 39 more aptly named as trespass-to-try-title actions. Even when plaintiffs have called their claims ones to “quiet title,” the claims are actually claims for trespass to try title when their substance amounts to seeking title ownership of land.

See Faith P. and Charles L. Bybee Foundation v. Knutzen, 681 S.W.3d 818 (Tex.App.— Austin 2023, no pet.).

A suit to quiet title or to remove cloud can be maintained only by a person owning an interest in the property involved. Bell v. Ott, 606 S.W.2d 942, 953 (Tex. Civ. App.—Waco 1980, writ ref’d n.r.e.). The goal of an action to quiet title is . . . to nullify the effect of the disputed claim or encumbrance that affects or impairs the title to the property when no other means exist to establish that the claim is invalid or unenforceable. See Sadler, cited above.Note that a successful quiet title action only eliminates the defendant’s competing claim. It does not affirm or validate the plaintiff’s title as does a trespass-to-try-title action.

A plaintiff who establishes superior title in a trespass-to-try-title action may recover for loss of rents and profits and other damages to compensate for any harm to the property caused by the defendant’s presence (Tex. R. Civ. P. 783(f)).

Slander of Title and Fraudulent Instruments

Slander of title is an action undertaken at common law in order to remedy a false or fraudulent claim against one’s property. Slander of title consists of a “false and malicious statement made in disparagement of a person’s title to property which causes special damages. . . . The amount of actual damages the slander causes is generally the difference between the contract price (the amount the plaintiff would have received but for the defendant’s title disparagement) and the property’s market value at the time of trial with the cloud removed.” Allen-Pieroni v. Pieroni, 535 S.W.3d 887 (Tex. 2017).

To establish a cause of action leading to damages, mere falsity of the lien claim is insufficient. The plaintiff must show that the document was [intentionally] made, presented or used to perpetrate a fraud. Smith v. 2005 Tower LLC, 2024 WL 3616470 (Tex.App.—Beaumont 2024, pet. denied). Special damages arising from the slander (e.g., loss of a sale) must be proven. They are not presumed. Ellis v. Waldop, 656 S.W.2d 902 (Tex. 1983).

Statutory causes of action related to slander of title are found in the Civil Practices and Remedies Code and the Government Code. These pertain specifically to fraudulent instruments and liens:

Civ. Prac. & Rem. Code Sec. 12.002. Liability

(a) A person may not make, present or use a document or other record with: (1) knowledge that the document or other record is . . . a fraudulent lien or claim against real or personal property . . . ; (2) intent that the document . . . be given the same legal effect as . . . a valid lien claim against 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.

Gov. Code Sec. 51.901(c). [A] document . . . is presumed to be fraudulent if:

(1) the document is a purported judgment or other document purporting to memorialize or evidence an [an order of] . . . a purported court or a . . . a purported judicial officer . . .;

(2) the document or instrument purports to create a lien or assert a claim against real or personal property or an interest in real or personal property and: (A) is not a [lawful] document . . . (B) is not created by implied or express consent or agreement of the obligor, debtor, or the owner . . . or (C) is not an equitable, constructive, or other lien imposed by a [lawful] court . . . [or]

(3) the document or instrument . . . is filed by an inmate . . .; or

(4) the document or instrument purports to convey title to or an interest in real property and: (A) a person has been convicted of an offense under Title 7 or Title 8, Penal Code . . .; or (B) the document or instrument is the subject of an owner’s affidavit and certificate of mailing filed and recorded in accordance with Section 5.0206, Property Code, and a controverting affidavit was not timely filed. . . .

Gov. Code Sec. 51.902. Action on Fraudulent Judgment Lien

(a) A person who is the purported debtor or obligor or who owns real or personal property or an interest in real or personal property and who has reason to believe that the document purporting to create a lien or a claim against the real or personal property or an interest in the real or personal property previously filed or submitted for filing and recording is fraudulent may complete and file with the district clerk a [verified] motion [seeking review of the purported lien by a district court].

Gov. Code Sec. 51.9035. Action on Fraudulent Lien on Property

(a) A person who is the purported debtor or obligor or who owns real or personal property or an interest in real or personal property and who has reason to believe that the document purporting to create a lien or a claim against the real or personal property or an interest in the real or personal property previously filed or submitted for filing and recording is fraudulent may complete and file with the district clerk a motion [entitled “Petition for Judicial Review of Document or Instrument Purporting to Convey Title to or an Interest in Real Property”] verified by affidavit by a completed form for ordinary certificate of acknowledgment, of the same type described by Section 121.007, Civil Practice and Remedies Code. . . .

In addition to civil liability for the foregoing, criminal penalties are found in Penal Code Sec. 31.23 (real estate theft); Penal Code Sec. 32.49 (refusal to release a fraudulent instrument); Penal Code Sec. 32.60 (real estate fraud); Penal Code Title 7 (offenses against property including forgery of a deed); and Penal Code Title 8 (offenses against public administration including perjury and falsification).

Suit for Declaratory Judgment

An alternative for obtaining relief from a forged or fraudulent real estate instrument is to seek a declaratory judgment pursuant to Chapter 37 of the Civil Practices and Remedies Code (although the specific statutes mentioned above are a more direct route). Unlike many real estate causes of action, a declaratory judgment offers the opportunity for the plaintiff to collect attorney’s fees.

Civ. Prac. & Rem. Code Sec. 37.004. Subject Matter of [Declaratory Judgments]

(a) A person interested under a deed, will, written contract, or other [document] . . . may have determined any question of construction or validity arising under the [document] and obtain a declaration of rights, status, or other legal relations thereunder. (b) A contract may be construed either before or after there has been a breach. (c) Notwithstanding [the trespass to try title statute contained in Property Code Section 22.001, a person may nonetheless obtain a declaratory judgment] when the sole issue concerning title to real property is the determination of the proper boundary line between adjoining properties.

Seeking a declaratory judgment is also appropriate for boundary disputes. These are usually settled by means an action for declaratory judgment rather than a trespass to try title action.

“It is often said that any suit involving a dispute over the title to land is an action in trespass to try title, whatever its form and regardless of the relief sought. . . . The Texas Legislature, however, has also provided that notwithstanding [Property Code Section 22.001] a claimant may sue for declaratory relief when the sole issue concerning title to real property is the determination of the proper boundary line between adjoining properties [see Texas Civil Practice and Remedies Code Section 37.004(c)]. . . . The basic test of whether a lawsuit should be considered a boundary dispute posits [the following:] If there would have been no case but for the question of boundary, then the case is necessarily a boundary case even though it may involve questions of title.” AB Land Co. v. Sanders, 695 S.W.3d 820 (Tex.App.—Houston [14th Dist.] 2024, no pet.).

Deceptive Trade Practices

The Deceptive Trade Practices Act (Chapter 17 of the Business and Commerce Code) includes within its scope false, misleading, and deceptive practices in the buying and selling of residential real estate, since residential real estate is viewed by the DTPA as a consumer good. DTPA causes of action include fraud, misrepresentation, false advertising, and failure to disclose material information and defects (Sec. 17.46(a) and (b)); breach of an express or implied warranty (Sec. 17.50(a)(2)); and—most broadly of all—any unconscionable act or course of action (17.50(a)(3)).

A real estate buyer who has suffered economic damages or mental anguish may seek treble damages plus attorney’s fees and costs if the defendant was a producing cause of the harm, even if the consumer never actually bought anything from the defendant. Note that this is a far more liberal causation standard than proximate cause which is the rule in most other areas of the law.

Section 17.505 of the DTPA requires 60 days notice to the defendant who then has the opportunity to avoid exemplary (punitive) damages by making a good-faith offer of settlement which must encompass both the plaintiff’s damages and attorney’s fees.

PHASES OF THE CASE

Once jurisdiction, venue, and causes of action are decided upon, and the case is filed, the litigation process can be broken down into predictable phases:

Initial Pleadings and Discovery

original petition or original answer
application for temporary restraining order (TRO)
hearing to convert TRO to a temporary injunction (TI)
ongoing attorney-client conferences
settlement negotiations with the opposition
written discovery
required disclosures (formerly requests for disclosure)
interrogatories
requests for admission
requests for production

Continuing Discovery/Motions/Mediation Phase

responding to written discovery
amending pleadings, including filing a counter-claim or cross action
hearings on various motions
half-day mediation
continuing settlement negotiations
oral depositions
motion for summary judgment
locate experts and obtain expert reports
ongoing attorney-client conferences

Pre-Trial Phase

ascertain compliance with docket control order
final amendment of pleadings
additional motions, if appropriate
supplementation of discovery responses
designation of experts by the deadline
business records affidavit
pre-trial order preparation
conferences with client to prepare testimony
conferences with witnesses to prepare testimony
pre-trial research and preparation
correspondence and conversations with the opposition

Trial Phase

trial of the case by judge or jury
entry of judgment

Post-Trial Phase

motion for new trial or defense of motion for new trial
request for findings of fact and conclusions of law
post-judgment discovery
abstraction, execution, and attempt to collect the judgment

TROs and Temporary Injunctions

Injunctive relief (a temporary restraining order or temporary injunction) may be requested after suit is filed. Injunctions are useful in preventing another party from taking certain action, such as foreclosure, that will cause irreparable harm to the applicant (Rule 680) for which there is no adequate remedy at law (i.e., an award of damages will not cure the prospective harm).

A temporary restraining order (TRO) is a form of emergency, equitable relief that is good up to 14 days. A TRO is granted, if at all, after notice to both sides and a hearing. A temporary injunction (TI)—which is the next step in the process after the TRO expires—requires a more thorough hearing, usually a mini-trial, at which the applicant must show a likelihood of prevailing upon the merits at trial of the case. A TI usually remains in effect for the duration of the litigation. Finally, a permanent injunction may be granted as part of a judgment and is usually for an indefinite period (Civ. Prac. & Rem. Code Chap. 65).

Note that a bond is always required if a TRO or TI is granted. The amount can be nominal (say, $100) or it can be more significant. Bonds in the amount of $5,000, $10,000, or $20,000 are common, although the amount can be set much higher depending on the circumstances of the case and the inclinations of the judge. The amount of the bond is discretionary with the judge and is designed to protect the interests of the party against whom injunctive relief is awarded—in case, for instance, the plaintiff’s case is ultimately shown to have no merit.

An applicant for a TRO or TI needs to be prepared to post the cash (which is refundable if the applicant prevails in the case) within 24 hours of the hearing or utilize the services of a bondsman to do so. Bondsmen will require 10-20% of the bond amount as a non-refundable premium as well as collateral (e.g., a lien on real estate). Do not ask your attorney to seek a TRO or TI unless you have sufficient resources with which to post a bond.

No one has a right to a TRO or TI. Whether either one can be obtained depends on several factors including the attitude and charitable disposition of the judge. Generally, the plaintiff must be prepared to show that there is:

(1) a legitimate cause of action against the defendant;

(2) there is a probability that the relief requested will be granted upon trial of the case; and

(3) if injunctive relief is not granted immediately, there will be imminent and irreparable harm to the plaintiff that will not be adequately addressed by a subsequent damages remedy.

See Kennedy v. Gulf Coast Cancer & Diagnostic Ctr. At Se., Inc., 326 S.W.3d 352, 359 (Tex.App.—Houston [1st Dist.] 2010, no pet.).

The outcome of an application for a TRO or TI is never automatic or guaranteed. For the attorney, an application for injunctive relief adds a significant layer of complexity and expense to a lawsuit and can be expected to substantially increase the client’s legal fees.

The Discovery Process

Discovery refers to mechanisms for obtaining information, documents, and tangible things about an opponent’s case (Tex. R. Civ. P. 190 et seq.). Discovery can be divided generally into written discovery (required disclosures, interrogatories, requests for admission, and requests for production) and depositions of parties, witnesses, and experts. Discovery is necessary and it is expensive. No modern case can be effectively litigated without doing thorough discovery, which is at least partially responsible for soaring costs. The period for discovery can go on for quite a while (months), although the docket control order usually contains a date by which discovery must be completed.

Lawyers prefer to do written discovery first and then, as needed, take oral depositions. It should be noted that this system is broken. Many lawyers who bill by the hour can be intentionally obstructionist by objecting to a broad swath of even routine interrogatories and production requests. This is at best contrary to the spirit of the rules, at worst unethical. The net effect of objecting to everything is to make oral depositions inevitable, since the inquiring party needs the information, one way or another, in order to prepare for trial. Depositions are time-consuming and expensive for the client, but for those lawyers who bill by the hour that is just fine. Chances are you will be doing at least two depositions in your case—yours and your opponent’s. Average cost? Between the court reporter and legal fees, around $3,000 each.

Clients occasionally question the need to do discovery, hoping to avoid the expense, but attorneys know that it is always better to go to trial with thorough foreknowledge of the facts and the opponent’s case. Their own clients will be the first to blame them if they do not. A lawyer will usually prefer to fire a client who insists on cutting discovery costs rather than risk harm to his or her reputation by going to trial unprepared.

Note that the most basic discovery about the case and the parties—certain required disclosures—are no longer optional under Rule 194.

Motions for Summary Judgment

A motion for summary judgment is an attempt to dispose of all or part of the case without proceeding to a full trial on the merits (Tex. R. Civ. P. 166(a)). Such a motion may be partial (limited in scope to certain issues or certain parties) or it may affect the entire case. Disposition by summary judgment is proper only when the movant establishes there are no genuine issues of material fact such that the movant is entitled to judgment as a matter of law. That’s a high standard. In evaluating a motion for summary judgment, the reviewing court must “indulge every reasonable inference in favor of the non-movant and resolve any in its favor.” Nixon v. Mr. Property Mgmt., 690 S.W.2d 546, 548 (Tex. 1985).

In a motion for summary judgment, all evidence favorable to the non-movant will be taken as true and all doubts must be resolved in the non-movant’s favor—meaning the non-movant gets the benefit of the doubt across the board as to the merits of its case.The practical result is that summary judgments are difficult to obtain. Judges are reluctant to deprive a party of his or her day in court.

MSJs are useful, however, when one wants to address just part of the dispute—possession of real property, for instance, leaving issues of title for trial; or a partial MSJ may be a way to remove a party from a suit if that party was joined improperly in an individual capacity.

MSJ hearings are limited to lawyer argument supported by documentary evidence and affidavits. Live witness testimony is not allowed. One of the most basic criterion by which an attorney evaluates a case is whether or not it will survive an MSJ by the other side.

Mediation

Parties should expect to mediate, like it or not, since most judge’s order it automatically (It is usually one of the deadlines in the docket control order). All judges will order mediation if either side requests it. It may be for a half day or a full day. It is voluntary in the sense that neither side is obligated to accept any particular outcome. All aspects of mediation are confidential and (like settlement discussions) cannot later be brought up in court.

The cost of the mediator’s services is usually $500 to $1,000 per side for a half-day. Clients must come to mediation prepared with a cashier’s check or money order payable to the mediator. This is collected before mediation begins. Attorney fees for the individual parties are in addition to this amount. While some may consider this expensive, mediation is nonetheless far cheaper than going forward with trial of the case.

Clients should also come to mediation prepared to be reasonable, since it is seldom that anyone in the legal system gets exactly what he or she wants. No attorney wants a client who will not mediate or will not mediate in good faith. Incentives for settlement at mediation include: (1) the cost and aggravation of continued litigation; and (2) having certainty and control over the outcome rather than leaving it to a judge or jury who can return whimsical results.

Mediation is beneficial in that it is successful around 75% of the time. It also removes the essential unpredictability of the courtroom. Any experienced lawyer has stories about times when he or she was shocked and dumbfounded by an unexpected verdict.

Time to Trial

The total time to trial (in non-pandemic times) is approximately nine to twelve months, although this varies according to the court, county, and availability of expedited trial under Rules 47 and 169 (see below). Cases are usually heard in the order of oldest first. They are set for a certain term of court (one week in county courts and two weeks in district court).

During this time, the attorney, the client, and the witnesses are all on call which can be inconvenient and expensive (if, for instance, one must pay hourly experts to sit around and wait). There is a lot of sitting around and waiting involved in trial work.

Expedited Trial

Expedited trial rules found in Rules 47 and 169 can move matters along more quickly so long as the case qualifies. According to Rule 169(a), expedited trials may include only actions that fall below a certain monetary threshold:

The expedited actions process in this rule applies to a suit in which all claimants, other than counter-claimants, affirmatively plead that they seek only monetary relief aggregating $250,000 or less, excluding interest, statutory or punitive damages and penalties, and attorney’s fees and costs.

Expedited trial rules limit the discovery period to 180 days after the first request for discovery is served on any party and impose a limit of 15 interrogatories, 25 requests for production, and 15 requests for admission. Mediation for a half day will be ordered unless the parties agree otherwise.

Rule 169(d)(2) et seq. sets out the expedited trial process:

On any party’s request, the court must set the case for a trial date that is within 90 days after the discovery period in Rule 190.2(b)(1) ends. The court may continue the case twice, not to exceed a total of 60 days . . . Each side is allowed no more than eight hours to complete jury selection, opening statements, presentation of evidence, examination and cross-examination of witnesses, and closing arguments. On motion and a showing of good cause by any party, the court may extend the time limit to no more than twelve hours per side.

Jury Trial Versus Trial to the Judge

Jury trials are more suitable in cases where one desires to inflame the passions of jurors in order to get a bigger verdict. This is more likely in personal injury (tort) cases than in real estate or business cases where issues of blood and malice are usually (but not always) absent. In the latter, technical questions of contract law and the like are often best left for a judge to decide (rather than sending these issues to a jury) since the judge has the training and expertise and hears similar cases often.

RECOVERY OF DAMAGES

Statutory and Common Law

The ability of a plaintiff to recover damages arises from common law or statutory law or, in some cases, both. For example, a plaintiff may plead for damages for fraud both pursuant to common law and under the Statutory Fraud Act. Occasionally, statutes may expressly preempt and replace common law, both with regards to permissible causes of action and allowable damages. There may be additional factors (such as the required statutory notice of a DTPA claim) that may apply and affect the final calculation.

Individual contracts may also stipulate liquidated damages that will be invoked if either party breaches, at least so long such damages do not amount to a penalty. Atrium Medical Center LP v. Houston Red C LLC, — S.W.3d —, 2020 WL 596873 (Tex. 2020).

Calculation of damages in any given case can be relatively easy, as in the case of a promissory note where simple math usually applies; or the calculation can be more complex, being grounded in specific circumstances and a specific contract that are subject to specific applicable law. So as to avoid speculation (speculative damages are not recoverable) courts require that damage claims be supported by objective facts, figures, and data.

Direct Versus Consequential Damages

There is a distinction between direct damages that arise immediately from a breach of contract event and consequential damages which tend to follow later and less directly. Direct damages include damages to restore the benefit of the bargain. These are sometimes called benefit-of-the-bargain damages.

The second category is consequential damages. “Consequential damages include foreseeable damages [and lost profits] that were caused by [a breach of contract] but were not a necessary consequence of it, are recoverable so long as the parties contemplate that these damages would be a probable result of [any] breach when they made the contract. [The evidence at trial] must be sufficient to allow a reasonable factfinder to draw a rational inference that some damages naturally flowed from the [defendant’s] conduct.” Bagby 3015, LLC v. Bagby House, LLC, 674 S.W.3d 609 (Tex.App.—Houston [1st Dist.] 2023, no pet.).

Consequential damages compensate the plaintiff for more far-ranging but still foreseeable losses that were caused by the breach (and flow naturally from it) but were not necessarily a direct and immediate result of it. Stuart v. Bayless, 964 S.W.2d 920 (Tex. 1998).

As an example, in order to find liability for consequential damages on the part of a lender who breached a loan commitment, “the lender must have known, at the time the commitment was made, the nature of the borrower’s intended use of the loan proceeds.” Basic Cap. Mgmt., Inc. v. Dynex Com., Inc., 348 S.W.3d 894 (Tex. 2011).

Texas law requires that consequential damages be foreseeable at the time of contracting and ascertainable with reasonable certainty. “Consequential damages include those damages that were reasonably foreseeable or contemplated by the parties at the time the contract was entered into as the probable result of a breach. . . A loss that is not the probable consequence of the breach, from the breaching party’s perspective at the time of contracting, is not foreseeable.” Signature Industrial Services, LLC and Jeffrey Ogden v. International Paper Company, — S.W.3d —, No. 20-0396 (Tex. 2022).

Damages in Real Estate Cases

Benefit-of-the-bargain damages (a form of direct damages) may include the loss to the plaintiff by measuring the direct, monetary impact of losing a real estate transaction. According to the Texas Supreme Court in MSW Corpus Christi Landfill, Ltd. v. Gulley-Hurst, LLC, 664 S.W.3d 102 (Tex. 2023):

Benefit-of-the-bargain damages are calculated based on] the difference between what was promised and what was received. . . . The purpose of benefit of the bargain damages is to place the seller in the same economic position he would have been in had the contract been performed. . . . Benefit-of-the-bargain damages, which derive from an expectancy theory, evaluate the difference between the value that was represented and the value actually received. . . .

The benefit-of-the-bargain measure computes the difference between the value as represented and the value received. . . . Although courts have noted that when the breached contract is for real estate, the measure of the seller’s damages is the difference between the contract price and the property’s market value at the time of the breach . . . this formula applies only when the value of the property has remained the same or decreased after the purchaser’s breach, leaving the seller unable to receive the expected value of the contract. . . .

When the property’s market value at the time of breach exceeds the contract price, the correct measure of benefit of the bargain damages is the difference between the promised contract price and what the seller received. . . .

One must solely replicate the actual benefit of the bargain that has been lost. Accordingly, unpredictable windfalls to the plaintiff as a result of increases in property value are not permitted. In so doing, one must distinguish between the economic position of the plaintiff without the contract versus the plaintiff’s economic position without the breach. According to MSW, it is the latter that applies.

Damages for Lost Profits

Damages for lost profits (also called damages for lost opportunity) are a form of consequential damages that are common in real-estate related litigation, particularly construction cases. Can these be recovered in a business or real estate contract case? Yes, but the rules on this type of damages are strict:

Lost profits are damages for the loss of net income to a business measured by reasonable certainty. . . . With respect to the recovery of lost profits as consequential damages, the law is well-settled: lost profits can be recovered only when the amount is proved with reasonable certainty. Proof need not be exact, but neither can it be speculative. . . . [However,] anticipated profits cannot be recovered where they are dependent upon uncertain and changing conditions, such as market fluctuations, or the chances of business, or where there is no evidence from which they may be intelligently estimated. . . .

The law is wisely skeptical of claims of lost profits from untested ventures or in unpredictable circumstances, which in reality are little more than wishful thinking. . . . [Notwithstanding the foregoing, a] party who breaks his contract cannot escape liability [merely] because it is impossible to state or [difficult to] prove a perfect measure of damages.

See Phillips v. Carlton Energy Group, LLC, 58 Tex. Sup. Ct. J. 803 (Tex. 2015).

Damages for lost profits do not automatically accrue when a contract is breached. The plaintiff must do more than show in general terms that it “suffered some lost profits. The amount of the loss must be shown by competent evidence with reasonable certainty. . . . A party’s bare assertion that a contract was lost does not establish lost profits with reasonable certainty. . . .” In other words, personal opinion, speculation, and hope are not grounds for reasonable certainty and will not justify recovery of lost profits.More specific and exact proof must be offered.” Horizon Healthcare Corp. v. Acadia Healthcare Co., 520 S.W.3d 848 (Tex. 2017).

Recovery of Attorney’s Fees and Costs

Although usually considered to be a separate claim from consequential damages, legal fees and costs of court are generally recoverable in contract cases in Texas pursuant to the Civil Practice & Remedies Code:

Civil Prac. & Rem. Code Sec. 38.001. Recovery of Attorney’s Fees

A person may recover reasonable attorney’s fees from an individual or organization other than a quasi-governmental entity authorized to perform a function by state law, a religious organization, a charitable organization, or a charitable trust, in addition to the amount of a valid claim and costs, if the claim is for: (1) rendered services; (2) performed labor; (3) furnished material; (4) freight or express overcharges; (5) lost or damaged freight or express; (6) killed or injured stock; (7) a sworn account; or (8) an oral or written contract.

Section 38.002 adds the following caveat:

Civil Prac. & Rem. Code Sec. 38.002. Procedure for Recovery of Attorney’s Fees

To recover attorney’s fees under this chapter: (1) the claimant must be represent-ted by an attorney; (2) the claimant must present the claim to the opposing party or to a duly authorized agent of the opposing party; and (3) payment for the just amount owed must not have been tendered before the expiration of the 30th day after the claim is presented.

Under the Deceptive Trade Practices Act, a consumer who prevails shall be awarded court costs and reasonable and necessary attorneys’ fees (Bus. & Com. Code Sec. 17.50(d)). Under Sec. 17.50(b)(1):

Bus & Com. Code Sec. 17.50. Relief for Consumers

(b)(1). If the trier of fact finds that the conduct of the defendant was committed knowingly, the consumer may also recover damages for mental anguish, as found by the trier of fact, and the trier of fact may award not more than three times the amount of economic damages; or if the trier of fact finds the conduct was committed intentionally, the consumer may recover damages for mental anguish, as found by the trier of fact, and the trier of fact may award not more than three times the amount of damages for mental anguish and economic damages. . . .”

Conversely, if the court finds that a DTPA claim was groundless or brought in bad faith or for the purpose of harassment, “the court shall award the defendant reasonable and necessary attorneys’ fees and court costs” (Bus. & Com. Code Sec. 17.50(c)).

Attorney’s fees are also recoverable under the Statutory Fraud Act:

Bus. & Com Code Sec. 27.01. Fraud in Real Estate and Stock Transactions

(b) A person who makes false representations to another person for the purpose of inducing that person to enter into a contract involving real estate or stock transactions, shall be liable to the defrauded person for reasonable and necessary attorney’s fees.

The Property Code also addresses attorney’s fees:

Prop. Code Sec. 53.126. Costs and Attorney’s Fees

In any proceeding to foreclose a lien or to enforce a claim against a bond issued under Subchapter H, I, or J or in any proceeding to declare that any lien or claim is invalid or unenforceable in whole or in part, the court shall award costs and reasonable attorney’s fees as are equitable and just.

What protections exist against frivolous lawsuits?

DTPA Sec. 17.50(c), mentioned above, is an attempt to discourage frivolous claims by allowing a defendant the possibility of recovering attorney’s fees and costs.

Rule 91a of the Rules of Civil Procedure provides some additional protection to defendants. The rule provides that causes of action with no basis in law or fact may be dismissed within 45 days of the filing of an appropriate motion. It provides a dismissal remedy early in the process rather than having to wait for discovery to be completed in order to file a motion for summary judgment. This motion is separate from the original answer and should be filed with a request for hearing promptly after filing the answer.

Rule 13 of the Rules of Civil Procedure applies sanctions, including sanctions against attorneys, for lawsuits that are groundless or brought in bad faith. Although “Courts shall presume that pleadings, motions, and other papers are filed in good faith . . . If a pleading, motion or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, after notice and hearing, shall impose an appropriate sanction available under Rule 215-2b, upon the person who signed it, a represented party, or both.”

JUDGMENT AND COLLECTION

Judgments Final after 30 Days

Judgment may occur as a result of motion for full or partial summary judgment, a jury or bench trial, or by default if the defendant does not file a written answer. In county and district courts, the judgment becomes final thirty days after the judge’s signature unless there is a motion for new trial or other action by the defendant to vacate or modify the judgment. All parties must be notified. “When the final judgment or other appealable order is signed, the clerk of the court shall immediately give notice to the parties or their attorneys of record by first-class mail advising that the judgment or order was signed” (Rule 306(a)(3)).

A surprising number of judgments occur by default but these are relatively easy to set aside if timely action is taken. Typical grounds include allegations of no service or defective service along with other technical defects. “A default judgment should be set aside and a new trial ordered in any case in which the failure of the defendant to answer was not intentional, or the result of conscious indifference . . . but was due to a mistake or accident; provided the motion for new trial sets up a meritorious defense and is filed at a time when the granting thereof will occasion no delay or otherwise work an injury to the plaintiff.” Craddock v. Sunshine Bus Lines, Inc., 133 S.W.2d 124 (Tex. 1939). The court goes on to state that this rule “prevents an injustice to the defendant without working an injustice on the plaintiff.” Plaintiffs might of course disagree since swift recourse has now been delayed, but courts nonetheless take a forgiving attitude in this regard consistent with Texas’ historical partiality in favor of debtors.

Once a judgment is final, the only means of attack is a bill of review. These are generally unsuccessful unless fraud was involved in obtaining the judgment. The complainant must assume “the burden of proving that the judgment was rendered as the result of the fraud, accident or wrongful act of the opposite party or official mistake unmisted with any negligence of his own. . . .” Baker v. Goldsmith, 582 S.W.2d 409 (Tex. 1979). Although the word accident is mentioned here, subsequent cases make it clear that some sort of fraud (concealment or misrepresentation), not just accident, will be required for a successful bill of review.

Collection on a Judgment

Collecting a judgment against an individual is frequently difficult in Texas because of homestead laws and the constitutional prohibition against garnishing wages. If the loser has no insurance coverage, collection can be a real problem. Similarly, satisfying a judgment against a corporation or LLC may be challenging if assets have been moved out of the company name or are located in other jurisdictions. Attorneys are fond of saying that they could paper the walls of their offices with judgments obtained but never collected. That is the reality in Texas, especially when it comes to judgment debtors who are individuals.

Execution on a judgment is most likely to be successful when the defendant has cash in the bank, investment real estate, or a business with substantial inventory or receivables. If none of these is present, the plaintiff’s best option may be to file an abstract of judgment in the real property records and hope that the defendant will sell property through a title company during the 10 years that the AJ remains on file.

Post-Judgment Discovery

Post-judgment discovery enables a creditor to determine whether or not he is dealing with a judgment-proof debtor or perhaps a debtor who negligently failed to make an asset protection plan and whose assets are widely exposed. Written discovery requires responses within 30 days unless an extension is granted. An oral deposition is also possible. The format and procedure is the same as for any trial deposition, except the focus is now on assets, their location, and their value.

Post-judgment discovery can be lengthy and brutal. Attempting to represent oneself in this process is the equivalent of swimming through piranha-infested waters.

ATTORNEY-CLIENT ISSUES

Representing Oneself as a Pro SeLitigant

Because of mushrooming complexity, representing oneself as a pro selitigant is no longer feasible for non-attorneys except in perhaps in small claims cases in justice courts (which hear controversies involving up to $20,000). These courts are also handy because they are located in various neighborhood precincts.

For many, justice court may be the best option, but even there one sees more and more attorneys at the bench, and few things are more foolish than a pro selitigant attempting to match wits or knowledge of the rules with a trial lawyer. It goes without saying that representing oneself at higher court levels—county court or district court—is inviting trouble. The Rules of Civil Procedure, the Civil Practice & Remedies Code, and the Rules of Evidence govern trial work. These are complicated even for lawyers who appear in court frequently. They can appear illogical, incomprehensible, and Byzantine to others.

Corporations and limited liability companies are required to have an attorney in Texas. They are not permitted to represent themselves, either in filing or answering a lawsuit

Obligations of the Client

A client cannot expect to meet with an attorney, pay a retainer, and then walk away and forget about the lawsuit. The client must be an active and essential participant since a case in litigation will involve considerable time, effort, and expense. Patience and persistence are also required since it can take nine months or more to move a case to trial, and there are invariably bumps in the road.

The attorney-client relationship is based on trust, candor, participation, and communication. A client should tell the attorney everything pertinent to the case and provide all relevant documents.

A plaintiff who does not know the location of the person or entity to be sued should be prepared to incur the expense of a private investigator.

Clients should resist the temptation to micro-manage a lawsuit. Reach an agreement with the attorney on general goals and strategy and then let him or her do the job. Even so, no attorney can ever make a guarantee concerning the outcome of a case. Attorneys are merely the agents of their clients within the system.

Conclusion

A lawsuit is a business enterprise and a tough and demanding one at that. It should never be taken personally. One function of the attorney is to help the client keep a cool head and evaluate the case rationally.

Legal fees and costs expended to pursue a suit represent a form of business investment. Alternatively, for instance, one could put that same money into stocks, real estate, or a gambling trip to Las Vegas. The client needs to estimate the rate of return on the investment in exchange for time, effort, and money expended. Putting dollars to work in a lawsuit represents an opportunity cost in economic terms, meaning those funds are not available for other uses. Clients who say these sorts of businesslike calculations are beside the point, that their suit is all about principle, are the first to tire of the process and quit, leaving their attorneys with unpaid bills and egg on their faces. Attorneys do not like to quit and they do not like to lose. Clients must have both the fortitude and the finances to support their attorney’s efforts to thoroughly litigate and win the case.