The doctrines of res judicata and merger do not prevent collection of post-judgment attorney’s fees where the contract expressly provides for such fees. To reach this decision, the Court relied on Texas Supreme Court cases holding that res judicata, the doctrinal basis for the doctrine of merger, does not apply where new facts have arisen since the prior litigation or where the parties expressed their intent that obligations survive the judgment.
WL Cite: In re Graves, 2016 WL 4427068 (Bankr. W.D. Tex. Aug. 19, 2016).
An unpaid subcontractor brought an adversary proceeding against the Debtor, a contractor, to except debt from discharge. The contractor stipulated to its liability on the debt and its nondischargeability but the subcontractor sought attorney’s fees for prosecuting the nondischargeability action. The Court found that attorney’s fees in prosecuting a dischargeability action can be recovered and declared nondischargeable if the fees are (1) allowed by statute or contract and (2) arise from or are on account of the conduct that resulted in a nondischargeable debt. In this case, the subcontractor sought fees under section 38.001(2) of the Texas Civil Practice and Remedies Code, which allows a party to recover its fees for establishing debt for labor performed. The subcontractor sought to extend section 38.001(2) to also apply to actions for misapplication of funds under the Texas Construction Trust Fund Act, even though the latter does not contain a fee-shifting provision. As Texas courts are split on this issue, the Court chose to follow the Texas courts that had held that the subcontractor could only recover fees incurred in establishing the Debtor’s liability for labor that the subcontractor performed and not for attorney’s fees incurred in establishing that the Debtor had violated the Texas Construction Trust Fund Act.
WL Cite: Schwertner Backhoe Services, Inc. v. Kirk (In re Kirk), 525 B.R. 325 (Bankr. W.D. Tex. 2015).