author: CHARLES W. SEYMORE, Justice.

text:
    In re: George E. GUIDRY, Dwight W. Andrus, III and Dwight W. Andrus Insurance, Inc., Relators.
    No. 14-10-00464-CV.
    Court of Appeals of Texas, Houston (14th Dist.).
    July 1, 2010.

      Debora Beck Alsup, Austin, Rick Lee Oldenettel, Houston, John E. McElligott, Lafayette, for relators.
    Werner Powers, Dallas, Lamont A. Jefferson, San Antonio, Aleñe R. Levy, Houston, for real party in interest.
    Panel consists of Justices ANDERSON, FROST, and SEYMORE.

      . The Insureds allege the following actual damages: (1) "unpaid claims of approximately $35,000,000," (2) more than $17 million in attorney’s fees from the Derrick Litigation, (3) more than $8 million in attorney's fees and costs from the Coverage Suit, and (4) lost profits of no more than $30 million.

   OPINION

CHARLES W. SEYMORE, Justice.

In this mandamus proceeding we must determine whether the trial court abused its discretion by refusing to disqualify one of several lawyers representing the plaintiffs on grounds that the lawyer’s participation in the trial would violate the lawyer-witness rule. On May 21, 2010, relators George E. Guidry, Dwight W. Andrus, III and Dwight W. Andrus Insurance, Inc. filed a petition for writ of mandamus in this court. See Tex. Gov’t Code Ann. § 22.221 (Vernon 2004); see also Tex.R.App. P. 52. In the petition, relators, who are the defendants in the trial court, ask this court to compel the Honorable Alexandra Smoots-Hogan, presiding judge of the 164th District Court of Harris County to grant their motion to disqualify Lamont Jefferson as one of the trial lawyers for the real parties in interest, who are the plaintiffs in the trial court. Concluding that the respondent clearly abused her discretion in denying relators’ motion to disqualify, we conditionally grant the writ of mandamus.

I. Background

Relators are insurance brokers who obtained insurance on behalf of the real parties in interest, Environmental Procedures, Inc. d/b/a Sweco Oilfield Services and Advanced Wirecloth, Inc. (collectively, “Insureds”). In 1991, relator Guidry obtained insurance, effective October 1, 1991 through September 30, 1992, for the Insureds through British-American Insurance Group Ltd. (“British American”). The coverage consisted of a commercial general liability (“CGL”) policy with a limit of $1 million for any one accident or occurrence and an umbrella policy with a $3.5 million limit for any one accident or occurrence. Coverage under the 1991 British American CGL policy was apportioned among seven insurers, and the responsibility for the coverage limits under the umbrella policy was shared among twenty-eight insurers. Guidry provided the Insureds with cover notes reflecting this coverage. In 1993 and 1994, Guidry obtained the Insureds’ CGL and umbrella insurance from Lexington Insurance Company. Under the terms of the Lexington policies, the limits of coverage were reduced by the costs of defense.

The Derrick Litigation

In the summer of 1994, Advanced Wire-cloth, Inc. notified Guidry that it had been sued by a competitor, Derrick Manufacturing Corporation, who alleged various patent and trademark violations, as well as other violations of Texas common law and the Texas Business and Commerce Code. Guidry forwarded the information to British American. In the summer of 1995, Derrick sued the Insureds and others alleging similar claims regarding the violation of a second patent. These lawsuits (“the Derrick Litigation”) were subsequently consolidated. The Insureds notified Guidry of the second suit, which information Guidry forwarded to Lexington. After initially denying coverage, in April 1996, Lexington offered to provide defense counsel for the Insureds under a complete reservation of rights. The Insureds did not accept the services of the counsel that Lexington offered to provide at Lexington’s expense, and continued to pay their retained defense counsel. In September 2001, a successor in interest to the Insureds paid approximately $15 million to settle the Derrick Litigation. By this time, the Insureds had incurred approximately $17 million in attorneys’ fees in the Derrick Litigation. Despite various requests by the Insureds to their insurers for reimbursement of their defense costs, the Insureds had been reimbursed for less than $695,000 in defense costs when they settled the Derrick Litigation. The insurers did not contribute funds to settle the Derrick Litigation.

Coverage Counsel for the Insureds During the Derrick Litigation

Lawyers at the law firm of Haynes and Boone, LLP served as coverage counsel for the Insureds during the Derrick Litigation. Haynes & Boone partner Lamont Jefferson served as primary coverage counsel for the Insureds from July 1999 through the settlement of the Derrick Litigation. Jefferson advised the Insureds regarding coverage issues. On the Insureds’ behalf, Jefferson also sought reimbursement for the costs of the Derrick Litigation from the insurers. To this end, Jefferson sent at least a dozen letters to counsel for the insurers. On the Insureds’ behalf, Jefferson also entered into an agreement, effective February 18, 2000, with various insurers tolling the statute of limitations for any claims that the Insureds might have against the insurers. As the settlement agreement for the Derrick Litigation was being drafted, Jefferson provided advice to the Insureds as to revisions to the language of the agreement that would help the Insureds pursue claims against the insurers after settlement of the Derrick Litigation.

The Coverage Suit

Shortly after the settlement of the Derrick Litigation, Lexington filed a declaratory judgment action against the Insureds seeking a coverage determination (the “Coverage Suit”). The Insureds counterclaimed alleging coverage and asserting various claims. Other insurers were later added to the Coverage Suit. Jefferson was attorney in charge for the Insureds in the Coverage Suit. The Insureds eventually settled the Coverage Suit. In total, the Insureds received approximately $17 million from various insurers. The Insureds paid Haynes & Boone approximately $8 million in attorney’s fees in the Coverage Suit, and the Insureds paid approximately $1.5 million in expenses.

The Broker Suit

The Insureds filed suit in the trial court below against relators George E. Guidry, Dwight W. Andrus, III and Dwight W. Andrus Insurance, Inc. (collectively the “Brokers”) on August 29, 2003 (the “Broker Suit”). The Insureds asserted claims against the Brokers for negligence, gross negligence, negligent misrepresentation, fraud, breach of fiduciary duty, and violations of article 21.21 of the Texas Insurance Code. The Insureds also asserted claims under section 101.201 of the Texas Insurance Code (“Unauthorized Insurance Claims”). The Insureds invoked the discovery rule and the doctrine of estoppel. In the Broker Suit, the Insureds alleged that the Brokers obtained substandard insurance for the Insureds from 1991 through 1994.

The Trial Court’s Partial Summary Judgment

Based on their affirmative defense of limitations, the Brokers moved for summary judgment on the claims governed by the two-year statute of limitations, and the Insureds filed a response in opposition. The Insureds have alleged three possible dates on which the statute of limitations began to run on their claims: (1) the date on which they settled the Derrick Litigation, (2) the date on which Lexington sued them for a declaratory judgment regarding coverage, or (3) the date on which Guidry’s deposition was taken in the Coverage Suit. All of these dates fall less than two years before the Insureds sued the Brokers. The trial court granted a partial summary judgment dismissing the Insureds’ claims for negligence, negligent supervision, negligent misrepresentation, and violations of article 21.21 of the Texas Insurance Code (collectively the “Two-Year Claims”).

The 2005 Trial

The remaining claims proceeded to trial in 2005, before the Honorable Martha Hill Jamison, then presiding judge of the trial court. Before the trial, the trial court granted the Brokers’ motion for leave to designate Lamont Jefferson, along with many others, as responsible third parties. The Brokers also designated Jefferson as a fact witness and deposed him before trial.

Jefferson’s Testimony at the 2005 Trial

During their case in chief at trial, the Insureds called Jefferson as a witness. Though the Two-Year Claims were not tried in 2005, the claims that were tried involve similar legal issues regarding (1) when, through the exercise of reasonable diligence, the Insureds should have discovered the alleged actionable conduct of the Brokers, and (2) the reasonableness and necessity of the actions of the Insureds’ lawyers in the Coverage Suit. The transcript of Jefferson’s testimony at the 2005 trial consumes more than 200 pages, almost all of which is fact-witness testimony about what happened in the Coverage Suit and the Derrick Litigation. Jefferson gave specific and significant testimony regarding (1) the Insureds’ claimed damages in the Broker Suit and (2) when the Insureds discovered or should have discovered their claims against the Brokers.

The Results of the 2005 Trial and the Appeal to this Court

During trial on the remaining claims, the trial court granted a directed verdict as to the Insureds’ claims for breach of fiduciary duty. The jury found that the Brokers did not commit fraud and that certain insurance policies were independently procured, which was a defense to the Unauthorized Insurance Claims. The trial court rendered a take-nothing judgment against the Insureds, who appealed to this court.

On appeal, this court reversed the trial court’s partial summary judgment based on a conclusion that most of the summary-judgment evidence submitted by the Brokers was untimely. See Environmental Procedures, Inc. v. Guidry, 282 S.W.3d 602, 619-21 (Tex.App.-Houston [14th Dist.] 2009, pet. denied). This court remanded the Insureds’ Two-Year Claims to the trial court. See id. at 637. We affirmed the remainder of the judgment. See id. This court’s mandate issued on December 18, 2009.

The Insureds’ Lawyers

Throughout the Broker Suit, which is now in its seventh year, Werner Powers of the Haynes & Boone firm has been the attorney in charge for the Insureds. See Tex.R.App. P. 8. In addition to Powers, several other lawyers at Haynes & Boone have represented the Insureds: Aleñe Levy (appellate counsel), Christina Crozier, David Ylitalo, Erika Blomquist, and Stett Jacoby. Jefferson did not appear as a trial lawyer for the Insureds in the Broker Suit until March 19, 2010.

The Insureds’ Amended Petition

On remand in the trial court, Werner Powers signed an amended petition for the Insureds that was filed on January 29, 2010. In this petition, the Insureds allege that the Brokers’ negligence was the proximate cause of approximately $90 million in actual damages to the Insureds. The Insureds seek not more than $47 million in actual damages as to their negligent-misrepresentation claim. The Insureds also seek punitive damages, attorney’s fees, prejudgment interest, and postjudgment interest.

Status Conference on Remand

After remand, the trial court set a status conference for February 19, 2010. Powers appeared at this conference on behalf of the Insureds. At the hearing, the trial court announced its desire to try the remanded claims (the Two-Year Claims) quickly, at a trial setting in the summer of 2010 that could not be changed. To accommodate the trial court’s goal, the parties agreed to a July 12, 2010 trial setting, and the parties agreed that they did not need further discovery, except relating to the Insureds’ potential designation of an additional expert witness.

The Brokers’ Motion for Summary Judgment on Remand

A few weeks later, on March 4, 2010, the Brokers filed a motion for summary judgment based primarily on the two-year statute of limitations, which they claim bars any recovery by the Insureds on the Two-Year Claims. As part of their summary-judgment evidence, the Brokers relied upon Jefferson’s February 11, 2000 letter (the “Jefferson Letter”) to the Insureds in which he advises them that British American was responsible to pay “all costs of defense, without regard to policy limits, until the policy limits have been exhausted by either judgment or settlement.” (emphasis in original). The Brokers also relied upon Jefferson’s statement in this letter that Lexington and British American’s position that they may pay a pro rata share of defense costs is “not supportable under either Texas or Louisiana law.” The Brokers also sought summary judgment regarding a 1991-92 British American insurance policy based on Jefferson’s testimony at the 2005 trial.

In their summary-judgment motion, the Brokers referred to Jefferson by name as a fact witness. The Brokers asserted that the Insureds’ Two-Year Claims accrued either when the insurers issued the insurance policies, or when the Insureds began paying their own defense costs in the Derrick Litigation, or — at the latest — when they received the Jefferson Letter. Each of those occurrences took place more than two years before the Broker Suit was filed.

Jefferson’s First Appearance as a Member of the Broker Suit Trial Team

Before the Brokers filed their summary-judgment motion in reliance upon Jefferson’s statements, Jefferson had not served as litigation counsel for the Insureds in the Broker Suit. Jefferson appeared as “additional counsel” on the Insureds’ filings for the first time on March 19, 2010, when the Insureds filed their response in opposition to the Brokers’ summary-judgment motion. Upon receiving the Insureds’ summary-judgment response, counsel for the Brokers called Jefferson on the phone to inquire about Jefferson’s intended role. Counsel for the Brokers also sent a letter to Jefferson, dated March 22, 2010, stating that (1) he is not clear what Jefferson’s intentions are regarding his role in this case; (2) Jefferson is a material fact witness whom the Brokers intend to call at trial, if the trial court does not grant summary judgment; and (3) the Brokers think that Jefferson’s status as a material fact witness precludes him from serving as a trial lawyer for the Insureds. On the same date, counsel for the Brokers sent a letter to the Insureds’ attorney in charge (Powers) by facsimile, stating that (1) he understood that Jefferson intends to cover the hearing on March 26, 2010 on the parties’ cross-motions for summary judgment; (2) Jefferson authored some of the key documents relied upon in the Brokers’ motion for summary judgment; (3) Jefferson testified on many substantive issues at the 2005 trial; and (4) the Brokers believe it is inappropriate for Jefferson to make an appearance as counsel in the Broker Suit.

The Brokers’ Objection to Jefferson Serving on the Courtroom Team

The Brokers immediately filed a written objection to Jefferson appearing as litigation counsel for the Insureds in the Broker Suit, based primarily on the lawyer-witness rule. See Tex. Disciplinary R. Profl Conduct 3.08(a). The Brokers stated they recently learned that Jefferson planned to argue on behalf of the Insureds at the summary-judgment hearing scheduled for March 26, 2010. Pointing out that Jefferson testified extensively as a fact witness at the 2005 trial, the Brokers asserted that, because Jefferson is a key fact witness, Jefferson’s appearance as an advocate for the Insureds could be perceived as creating an appearance of impropriety and should not be allowed. The Brokers asked that the trial court limit Jefferson’s role in the Broker Suit to that of a witness and not allow him to appear as a courtroom advocate in the litigation. The Brokers did not set this objection for hearing or obtain a ruling on it at that juncture.

In the meantime, the Insureds voluntarily allowed that Jefferson would not argue at the March 26, 2010, summary-judgment hearing on the parties’ cross-motions for summary judgment, and Jefferson did not argue at this hearing. The trial court took the Brokers’ motion and the Insureds’ motion under advisement. To date, the trial court has not ruled on these pending summary-judgment motions.

The Insureds’ Motion to Strike

About a month after the summary-judgment hearing, the Insureds filed a motion to strike or overrule the Brokers’ objection to Jefferson’s participation as additional trial counsel in the Broker Suit. The Insureds stated that they sought to promptly resolve whether Jefferson could serve as additional trial counsel because trial was set for July 12, 2010. The Insureds argued that the Brokers’ objection should be stricken for the following reasons: (1) the Insureds have confirmed that they will not call Jefferson to testify at trial; (2) Jefferson’s purportedly “key” testimony does not go to “an essential fact” in the Brokers’ case; (3) Jefferson’s allegedly “key” evidence can be adduced through sources other than Jefferson; (4) any attempt by the Brokers to call Jefferson as a witness at trial would be a purely tactical maneuver; (5) the Brokers have not shown that allowing Jefferson to serve as additional trial counsel would violate Rule 3.08 of the Texas Disciplinary Rules of Professional Conduct (“Rule 3.08”); and (6) even if the Brokers had shown a violation of Rule 3.08, they have not shown that they would suffer actual prejudice from Jefferson testifying as a fact witness while also serving as one of the Insureds’ trial lawyers.

The Brokers’ Motion to Disqualify Counsel

One week later, the Brokers filed a motion to disqualify Jefferson from acting as trial counsel for the Insureds. In this motion, the Brokers argued that Jefferson should be disqualified for the following reasons: (1) Jefferson is an essential witness who gave lengthy deposition testimony in this case and lengthy trial testimony at the 2005 trial regarding material facts within his personal knowledge; (2) the Insureds have designated Jefferson as “additional trial counsel” in order to shield Jefferson from testifying at trial regarding coverage issues, his handling of the Coverage Suit, and statute-of-limitations issues; (3) allowing Jefferson to serve as trial counsel would violate guidelines for disqualification that are based on Rule 3.08; (4) Jefferson’s trial testimony is necessary to establish essential facts; (5) allowing Jefferson to serve as both a trial lawyer and a fact witness will cause actual prejudice to the Brokers by blurring the line in the jurors’ minds between Jefferson’s legal arguments as counsel and his trial testimony as a fact witness, potentially inducing the jury to give undue weight to his arguments as counsel because of his extensive personal knowledge of the facts; (6) though disqualification is a severe and disfavored remedy because it can harm a party by depriving the party of its chosen counsel, the Insureds’ chosen counsel has always been Powers, who remains the Insureds’ attorney in charge; (7) the Insureds are seeking a tactical advantage by trying to keep Jefferson from testifying by designating him as additional counsel; and (8) the exceptions in Rule 3.08(a) do not apply, and disqualifying Jefferson will not work a substantial hardship on the Insureds.

The Trial Court’s Ruling Denying Disqualification

On May 14, 2010, the trial court held a very brief hearing on the Brokers’ motion to disqualify. At the hearing, the Insureds lodged various objections against all of the evidence attached to the Brokers’ motion to disqualify. The trial court sustained all of these objections. After hearing arguments of counsel, the trial court denied the Brokers’ motion to disqualify.

The Mandamus Petition

On May 21, 2010, the Brokers filed their petition for writ of mandamus, contending the trial court abused its discretion by denying their motion to disqualify Jefferson. The Brokers also assert that the trial court clearly abused its discretion by sustaining the Insureds’ objections to all of the attachments to their disqualification motion.

II. Mandamus StandaRD on Motion to Disqualify

Mandamus is appropriate to correct a trial court’s abuse of discretion in denying a motion to disqualify counsel because there is no adequate remedy by appeal. See In re EPIC Holdings, Inc., 985 S.W.2d 41, 52-54 (Tex.1998). In determining whether mandamus is appropriate, we focus on whether the trial court abused its discretion. In re Meador, 968 S.W.2d 346, 350 (Tex.1998). In determining whether the trial court abused its discretion with respect to resolution of factual matters, we may not substitute our judgment for that of the trial court and may not disturb the trial court’s decision unless it is shown to be arbitrary and unreasonable. See Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex.1992). A trial court also abuses its discretion if it fails to analyze or apply the law correctly. See id. at 840.

III. Analysis

Texas Disciplinary Rule of Professional Conduct 3.08, entitled “Lawyer as Witness,” provides guidance on the issue of disqualification. Rule 3.08 provides:

(a) A lawyer shall not accept or continue employment as an advocate before a tribunal in a contemplated or pending adjudicatory proceeding if the lawyer knows or believes that the lawyer is or may be a witness necessary to establish an essential fact on behalf of the lawyer’s client, unless:
(1) the testimony relates to an uncontested issue;
(2) the testimony will relate solely to a matter of formality and there is no reason to believe that substantial evidence will be offered in opposition to the testimony;
(3) the testimony relates to the nature and value of legal services rendered in the case;
(4) the lawyer is a party to the action and is appearing pro se; or
(5) the lawyer has promptly notified opposing counsel that the lawyer expects to testify in the matter and disqualification of the lawyer would work substantial hardship on the client.

Tex. Disciplinary R. Prof'l Conduct 3.08(a), reprinted in Tex. Gov’t Code, tit. 2, subtit. G, app. A (Tex. State Bar R. art. X, § 9). (Vernon 2005).

Rule 3.08 is grounded principally on the notion that the finder of fact may become confused when one person acts as both advocate and witness. See Tex. Disciplinary R. Prof'l Conduct 3.08 cmt. 4; Anderson Producing, Inc. v. Koch Oil Co., 929 S.W.2d 416, 422 (Tex.1996). “A witness is required to testify on the basis of personal knowledge, while an advocate is expected to explain and comment on evidence given by others. It may not be clear whether a statement by an advocate-witness should be taken as proof or as an analysis of the proof.” Tex. Disciplinary R. Profl Conduct 3.08 cmt. 4. The rule reflects the concern that an opposing party may be handicapped in challenging the credibility of a testifying lawyer. Anderson, 929 S.W.2d at 416. Other possible justifications for the rule include: (1) a testifying lawyer may be a less effective witness because he is more easily impeachable for interest; (2) a lawyer-witness may have to argue his own credibility; (3) while the role of a witness is to objectively relate facts, the role of an advocate is to advance his client’s cause; and (4) an appearance of impropriety may be created when a lawyer testifies on behalf of his client. See F.D.I.C. v. U.S. Fire Ins. Co., 50 F.3d 1304, 1311 (5th Cir.1995).

The Supreme Court of Texas has said that “ ‘[disqualification is a severe remedy.’” In re Sanders, 153 S.W.3d 54, 57 (Tex.2004) (quoting Spears v. Fourth Court of Appeals, 797 S.W.2d 654, 656 (Tex.1990)). Disqualification is a measure that can cause immediate harm by depriving a party of its chosen counsel and disrupting court proceedings. See id. Thus, allegations of unethical conduct alone or evidence showing only a remote possibility of a violation of the disciplinary rules is not enough to require disqualification. See id. The fact that a lawyer simultaneously serves as both an advocate and a witness does not in itself compel disqualification. See id. Disqualification is only appropriate if the lawyer’s testimony is “necessary to establish an essential fact.” Tex. Disciplinary R. Prof'l Conduct 3.08(a); see In re Sanders, 153 S.W.3d at 57. The party requesting disqualification must demonstrate that the opposing lawyer’s dual roles as lawyer and witness will cause the party actual prejudice. See id. Even if a lawyer is disqualified based on the lawyer-witness rule, the lawyer can still represent the client in that case by performing out-of-court functions in the case, such as drafting pleadings, assisting with pretrial strategy, engaging in settlement negotiations, and assisting with trial strategy. See Anderson Producing Inc., 929 S.W.2d at 422-23.

According to the Insureds, the Broker Suit “is a case brought by the [Insureds] against their insurance brokers (Defendants) for the placement of substandard insurance with financially unstable and, in some cases, insolvent insurance carriers.” If the trial court does not grant summary judgment, then there may be an issue at trial as to when the Insureds first had knowledge of facts that would have caused a reasonably prudent person to have made an inquiry that would have led to the discovery of the Two-Year Claims. See Fish v. Marsters Co., No. 14-06-00129-CV, 2007 WL 1438555, at *8-9 (Tex.App.Houston [14th Dist.] May 17, 2007, pet. denied) (mem.op.).

From July 1999 through the filing of the Broker Suit, Jefferson served either as coverage counsel for the Insureds or as attorney in charge for the Coverage Suit against the insurers on the allegedly substandard insurance policies. During the 2005 trial, Jefferson testified at length as a fact witness regarding these matters. Among other things, he testified that the first time he remembers thinking that the Insureds had a claim against the Brokers was during Guidry’s deposition. However, when asked if, before the Guidry deposition, he was aware of any fact that might arouse suspicion regarding the Brokers’ alleged misconduct, Jefferson testified that there may have been things that “looking back,” arouse suspicion. Significantly, Jefferson was the Insureds’ agent and attorney, and Jefferson’s testimony in this regard is material to the issue of when the Insureds first had knowledge of facts that would have caused a reasonably prudent person to have made an inquiry that would have led to the discovery of the Two-Year Claims.

Jefferson testified that the Insureds could have sued Lexington in 1995, 1996, 1997,1998,1999, or 2000, but did not do so. When asked why the Insureds did not sue the insurers sooner, Jefferson stated there were two reasons: (1) The Derrick Litigation “was a huge piece of litigation ... and the client didn’t want to open up another battlefront”; (2) “probably more importantly ... we had two insurance companies who were giving us assurance after assurance that the money is coming.”

During Jefferson’s trial testimony, Powers laid a predicate for his factual inquiries to Jefferson, saying “I want to go back to some of the — some of the issues that happened in [the Coverage Suit] and who we sued and what we knew — when we knew it.” Jefferson sent the Jefferson Letter to Jim Maroney, General Counsel for the Insureds’ parent company, on February 11, 2000, advising that the insurance companies were taking insupportable positions on their duty to defend the Derrick Litigation. In his testimony under direct examination at the 2005 trial, Jefferson addressed “what we knew — when we knew it.” (emphasis added). This crucial knowledge and testimony goes to the heart of the Brokers’ argument that Jefferson’s testimony is necessary to establish essential facts relevant to the Brokers’ limitations defense.

The Insureds assert that Jefferson’s testimony is not necessary to establish essential facts. They allege that any evidence concerning settlement in the Coverage Suit can be presented by representatives of the Insureds with whom Jefferson communicated or other lawyers who participated in the Coverage Suit. With regard to the Jefferson Letter, the Insureds allege that the letter is the best evidence of its contents and that the recipient of the letter could testify to its contents. However, these other sources of proof would not be able to explain or testify concerning the facts that Jefferson knew that might have aroused suspicion regarding the possible existence of the Two-Year Claims. In addition, because the Jefferson Letter and the evidence of what Jefferson knew and when he knew it are crucial elements of the Brokers’ defense, the Brokers are entitled not only to offer the letter into evidence, but also to call the author as a witness to furnish testimony concerning the substance of the letter and his thought processes in preparing it and in filing suit on behalf of the Insureds.

We conclude that, as a matter of law, Jefferson’s testimony is necessary to establish an essential fact and that none of the exceptions listed in Rule 3.08(a) apply. See U.S. Fire Ins. Co., 50 F.3d at 1317 (holding that plaintiffs lawyer was necessary witness under lawyer-witness rule because lawyer had knowledge of facts relating to defendant’s defense based on discovery of facts that would put plaintiff on notice about its loss); Ayus v. Total Renal Care, Inc., 48 F.Supp.2d 714, 715-17 (S.D.Tex.1999) (disqualifying defendant’s lawyer under lawyer-witness rule because lawyer had knowledge of material facts based on his authorship of several letters that were necessary evidence in the case); Dean Park & Const. & Real Estate Invest. Corp. v. Meredith, Donnell & Abernethy, No. 13-03-730-CV, 2005 WL 1832046, at *3 (Tex.App.-Corpus Christi Aug. 4, 2005, no pet.) (mem.op.) (holding that trial court did not err by concluding that testimony of plaintiffs lawyer was necessary to establish essential element of his client’s case); In re Bahn, 13 S.W.3d 865, 874 (Tex.App.Fort Worth 2000, no pet.) (holding that trial court did not err by concluding that testimony of plaintiffs lawyer was necessary to establish essential element of his client’s case).

In addition, allowing Jefferson to serve as both a trial lawyer and a fact witness would cause actual prejudice to the Brokers by blurring the line in the jurors’ minds between Jefferson’s legal arguments as counsel and his trial testimony as a fact witness, potentially inducing the jury to give undue weight to his arguments as counsel because of his extensive personal knowledge of the facts or because the jury could not recall whether statements he made during the trial were made from the counsel table or the witness stand. If Jefferson were permitted to serve on the Insureds’ courtroom team, the Brokers would be prejudiced in then- ability to obtain Jefferson’s exclusion from the courtroom under the rule for exclusion of witnesses. See Anderson Producing, Inc., 929 S.W.2d at 423 (finding no prejudice when party, among other things, made no effort to exclude lawyer-witness from the courtroom by placing him under the rule.). In denying the motion to disqualify, the trial court may have determined that allowing Jefferson to occupy dual roles as trial lawyer and fact witness would not cause the Brokers actual prejudice. To the extent that the trial court made this determination, we conclude that the court clearly abused its discretion. See In re Balm, 13 S.W.3d at 874 (concluding that lawyer’s dual roles as trial lawyer and fact witness would cause actual prejudice to opposing party).

The Insureds further claim that the Brokers are attempting to use Rule 3.08 as a tactical tool to deprive them of their right to be represented by the lawyer of their choice. See Tex. Disciplinary R. Profl Conduct 3.08, cmt. 10. In this case, as the Brokers point out, throughout the Broker Suit, the Insureds have chosen Powers as their attorney in charge. The Insureds have not chosen to replace Powers as attorney in charge or to designate Jefferson as attorney in charge. Rather, the Insureds seek to add Jefferson to their existing six-member litigation team. Powers is still the Insureds’ attorney in charge, and disqualifying Jefferson would not deny the Insureds their choice of Powers as their attorney in charge. According to the Insureds, they asked Jefferson to serve as additional trial counsel “recognizing the pressures created by the fast-track schedule in this complex case and scheduling conflicts created by Mr. Powers’ busy trial docket.” Seeking to disqualify “additional counsel” would not appear to be a tactical tool to deprive the opposing party of the right to be represented by the “lawyer of his or her choice.” See id. The important concern for the Insureds’ freedom to choose their lawyer is less pronounced when the disqualified lawyer is not the attorney in charge. While parties have freedom to choose two lawyers or, with leave of court, more than two lawyers, the need to defer to a party’s choice of counsel is diminished when the lawyer in question is merely “additional counsel.”

Furthermore, Jefferson first appeared as additional counsel in the Broker Suit late in the litigation, and the Brokers promptly objected. In addition, before Jefferson’s first appearance in March 2010, he had already testified as a fact witness, been designated as a fact witness, and had his letters and testimony cited in the Brokers’ summary-judgment motion. Given these circumstances, there is little, if anything, to suggest that the Brokers are seeking to disqualify for tactical reasons.

IV. Conclusion

Under the applicable standard of review, we conclude that the respondent clearly abused her discretion in denying the Brokers’ motion to disqualify. We are confident that the respondent will vacate her order denying the Brokers’ motion to disqualify and will issue an order disqualifying Lamont Jefferson from serving as trial counsel in the Broker Suit. Only in the event the respondent fails to do so, will the writ issue.

      . Though Jefferson was designated as a responsible third party, the trial court did not ask the jury to determine the percentage of responsibility of Jefferson or any of the others designated as responsible third parties.

      . The transcript of Jefferson’s deposition testimony is 159 pages long.

      . Though the Insureds had designated Jefferson as an expert witness regarding the reasonableness and necessity of their attorney's fees and costs in the Coverage Suit and the Derrick Litigation, the Insureds had not designated Jefferson as a fact witness. Nevertheless, early in his trial testimony Jefferson began testifying as a fact witness. The Brokers objected that Jefferson had not been designated as a fact witness. The Insureds responded that the Brokers had designated Jefferson as a fact witness and had deposed Jefferson "for ten hours.” The trial court overruled the Brokers' objection and gave them a running objection to the Insureds' failure to designate Jefferson as a fact witness.

      .In this testimony, Jefferson never opined as to the reasonableness and necessity of the attorney's fees and costs incurred by the Insureds in the Coverage Suit or in the Derrick Litigation.

      . In their brief in this court, the Insureds state that they "have informed opposing counsel and the trial court that Mr. Jefferson will not testify at trial as the information addressed in his testimony is available from multiple other sources."

      . The trial court later signed a written order to the same effect.

      . In their petition, the Brokers also argue that Jefferson should be disqualified pursuant to Texas Disciplinary Rule of Professional Conduct 3.04. At oral argument, the Brokers abandoned that contention and advised this court that they did not seek disqualification on Rule 3.04 grounds.

      . The trial court sustained objections to all of the evidence the Brokers submitted with their motion to disqualify. The Brokers assert that the trial court clearly abused its discretion when it sustained these objections. We agree, and we consider the evidence submitted by the Brokers.

      . When asked by the Insureds’ counsel if until this deposition Jefferson was "aware of any fact that would even arouse suspicion as to [the Brokers’] misconduct,” Jefferson testified, "I can’t think of anything in particular, but in hindsight, well, there may have been a couple of things that might — that, in looking back, arouses suspicion [sic] or falls within that category.” (emphasis added). Jefferson’s counsel then asked Jefferson, "But not at that time?” To which Jefferson replied, "No, sir.”

      .The Insureds argue that the Jefferson Letter is not relevant to the Brokers’ limitations argument because the Brokers’ primary limitations argument is that limitations started to run in 1993, 1994, or 1995. However, parties are allowed to make arguments in the alternative, and the Brokers base one of their alternative limitations arguments on the Jefferson Letter.

      . The Insureds cite In re B.L.H. See No. 01-06-00817-CV, 2008 WL 864072, at *3-5 (Tex.App.-Houston [1st Dist.] Mar. 27, 2008, no pet.) (mem.op.). In that case, the party moving for disqualification did not establish that the lawyer’s testimony was necessary to establish an essential fact, and the motion to disqualify was filed on the night before the first day of trial. See id. The B.L.I-I. case is not on point.

      . In a post-submission letter, the Insureds filed the Brokers' latest designation of witnesses emphasizing that several witnesses were listed who could testify with regard to the accrual of their cause of action. Those witnesses, however, cannot testify regarding (1) the facts that Jefferson knew that might have aroused suspicion regarding the possible existence of the Two-Year Claims, or (2) Jefferson's understanding of the facts or knowledge of insurance law that affected Jefferson's thought process and conclusions when he advised his clients to settle the Coverage Suit and prosecute claims against the Brokers.

      .The Insureds argue that tire exception in Rule 3.08(a)(5) applies. For that exception to apply, Jefferson must have promptly notified opposing counsel that Jefferson expects to testify at trial. See Tex. Disciplinary R. Prof'l Conduct 3.08(a)(5). Jefferson has not given this notification; therefore, this exception does not apply. See In re Bahn, 13 S.W.3d at 874. Even if this notification had been given, there is no evidence that disqualification would work a substantial hardship on the Insureds. Powers has been attorney in charge for the Insureds from August 29, 2003 to the present. Jefferson made his first appearance as counsel in the Broker Suit on March 19, 2010, and that appearance was as additional litigation counsel.

      . The Insureds cite this court's opinion in Schwartz v. Jefferson. See 930 S.W.2d 957, 960-61 (Tex.App.-Houston [14th Dist.] 1996, orig. proceeding). The Schwartz court did not have the benefit of the legal standard adopted by the Supreme Court of Texas in In re Sanders. See 153 S.W.3d at 56-57. In addition, as noted by the Insureds, the party seeking disqualification in Schwartz did not show that the lawyer’s testimony was necessary to establish an essential fact. See Schwartz, 930 S.W.2d at 960-61. If the Schwartz movant had shown that the lawyer’s testimony was necessary for the movant to establish an essential fact, then, under In re Sanders, the movant would have to show actual prejudice from opposing counsel's service as both trial counsel and a necessary witness. See In re Sanders, 153 S.W.3d at 57. The fact that the nonmovant is not calling the lawyer lo testify at trial would not be relevant to such an analysis. See id. The Schwartz case is not on point.

      . The Insureds also suggest that, though the Brokers only sought to disqualify Jefferson, their eventual goal is to disqualify the entire Haynes & Boone firm in the future. However, the record reflects that Haynes & Boone has obtained the clients' informed consent as to some Rule 3.08 issues, and with the Insureds’ informed consent, nothing in Rule 3.08 would preclude Haynes & Boone from continuing to represent the Insureds even if Jefferson is disqualified from serving as one of their trial lawyers. See Tex. Disciplinary R. Prof'l Conduct 3.08(c); Anderson Producing Inc., 929 S.W.2d at 424.

      . At oral argument Jefferson acknowledged that he had not been designated as attorney in charge for the Insureds.

      . See Tex.R. Civ. P. 9 ("Not more than two counsel on each side shall be heard on any question or on the trial, except in important cases, and upon special leave of the court.”).

      . A lawyer disqualified under the lawyer-witness rule is still free to represent the client in that case by performing out-of-court functions, such as drafting pleadings, assisting with pretrial strategy, engaging in settlement negotiations, and assisting with trial strategy. See Anderson Producing Inc., 929 S.W.2d at 422-23.


source: Caselaw Access Project

author: G. ALAN WALDROP, Justice.

license: Public Domain

text:
    Maurice STEPHENS a/k/a Maurice Wayne Stephens, Individually and as Testamentary Trustee u/w/o Jess M. Stephens, Deceased, and as Trustee of the Jess M. Stephens and Alice Abernathy Stephens Irrevocable Trust; and Lisa Price, Appellants v. LPP MORTGAGE, LTD., Appellee.
    No. 03-09-00097-CV.
    Court of Appeals of Texas, Austin.
    July 1, 2010.

      Jeffrey S. Levinger, Brett D. Kitnick, Hankinson Levinger, L.L.P., Dallas, TX, Colton P. Johnson, Albany, TX, for appel-lee.
    George S. Finley, Smith, Rose, Finley, P.C., San Angelo, TX, for appellant.
    Before Justices PURYEAR, WALDROP and HENSON.
   OPINION

G. ALAN WALDROP, Justice.

This is a case involving judicial foreclosure of a lien on real estate. Appellee LPP Mortgage, Ltd., the lienholder under the terms of a deed of trust securing payment of a promissory note, filed this suit to foreclose its lien on the real property securing the debt. LPP Mortgage filed this suit after first securing a judgment on the debt in a separate, previously filed suit and unsuccessfully attempting to collect on that judgment. Appellants — Maurice Stephens a/k/a Maurice Wayne Stephens, individually and as testamentary trustee u/w/o Jess M. Stephens, deceased, and as trustee of the Jess M. Stephens and Alice Abernathy Stephens Irrevocable Trust, and Lisa Price — owned the property at issue and challenge LPP Mortgage’s ability to foreclose its lien in this manner. The district court entered judgment in favor of LPP Mortgage.

Appellants assert that LPP Mortgage’s suit is barred by res judicata and waiver, based on the prior lawsuit in which LPP Mortgage sued on the note, but did not pursue foreclosure of its lien either judicially or non-judieially. The previous lawsuit culminated in a judgment in LPP Mortgage’s favor on the debt. We hold that LPP Mortgage’s current suit to foreclose its lien is not barred by res judicata or waiver. The judgment on the note has not been satisfied, and the recovery of a judgment on a note secured by a lien does not preclude foreclosure on the lien in a subsequent suit instituted for that purpose. Appellants also assert that LPP Mortgage’s suit is barred by limitations, based on the application of the Texas statute of limitations applicable to debts. However, LPP Mortgage obtained the note and deed of trust via transfer from the U.S. Small Business Administration (the “SBA”), a federal agency. The deed of trust contains express contractual provisions establishing the choice of federal law relating to limitations. We hold that, based on the plain language of the deed of trust, and in accordance with the principle that an assignee receives the full rights of the assignor, LPP Mortgage received the benefit of the deed of trust provisions calling for the application of federal law relating to limitations on debts owed to the SBA. We affirm the judgment of the district court.

Factual and Procedural Background

LPP Mortgage is the beneficiary — by assignment — under a deed of trust encumbering real property owned by appellants in Concho County and securing repayment of a certain promissory note of which LPP Mortgage is the holder — also by assignment. When appellants’ predecessors in interest originally executed the note and deed of trust at issue in this suit on October 21, 1980, the SBA was the holder of the note and the beneficiary under the deed of trust. On August 3, 2000, before the note matured, the SBA assigned the note and deed of trust to LPP Mortgage. The note matured pursuant to its terms on October 15, 2000. It was not fully paid.

LPP Mortgage filed suit to collect on the note on November 1, 2001, in Tom Green County (the county of residence of the individuals obligated to pay under the note). The 2001 lawsuit involved claims only with respect to the note. LPP Mortgage did not pursue foreclosure of its lien under the deed of trust, or otherwise place the deed of trust at issue. On October 20, 2003, the district court entered judgment on the promissory note in favor of LPP Mortgage. Under the judgment, LPP Mortgage was entitled to recover the sums due and owing under the terms of the note. A writ of execution was issued on the judgment. However, the writ was returned “Nulla Bona,” and the judgment remains unsatisfied.

Pursuant to the terms of the deed of trust, the beneficiary had the right to take possession of or sell the secured property upon the borrower’s failure to pay the indebtedness. On February 15, 2007, LPP Mortgage filed this suit for judicial foreclosure of its lien against appellants in Con-cho County district court, seeking to enforce the deed of trust with respect to the property securing the debt. Following a bench trial, on January 28, 2009, the district court entered judgment in favor of LPP Mortgage, ordering foreclosure of LPP Mortgage’s lien. Appellants appeal, alleging error in the district court’s denial of their affirmative defenses of res judica-ta, waiver, and limitations.

Standard of Review

Appellants challenge the district court’s conclusions of law that LPP Mortgage’s right to foreclose the deed of trust is not barred by res judicata, waiver, or limitations. The facts of this case are not disputed. We conduct a de novo review of the district court’s legal conclusions. See Reliance Nat’l Indem. Co. v. Advance’d Temps., Inc., 227 S.W.3d 46, 50 (Tex.2007); Hackenjos v. Hackenjos, 204 S.W.3d 906, 908 (Tex.App.-Dallas 2006, no pet.).

Res Judicata

Appellants contend that after suing on the promissory note and reducing that claim to judgment, LPP Mortgage was barred by res judicata from pursuing the remedy of foreclosure of the deed of trust lien securing repayment of the note. For res judicata to apply, there must be (1) a prior final judgment on the merits by a court of competent jurisdiction, (2) identity of parties or those in privity with them, and (3) a second action based on the same claims that were raised or could have been raised in the first action. Citizens Ins. Co. v. Daccach, 217 S.W.3d 430, 449 (Tex.2007). The doctrine of res judicata seeks to bring an end to litigation, prevent vexatious litigation, maintain stability of court decisions, promote judicial economy, and prevent double recovery. Id. Under the doctrine, if a plaintiff prevails in a lawsuit, his cause of action merges into the judgment and the cause of action dissolves. Jeanes v. Henderson, 688 S.W.2d 100, 103 (Tex.1985). The question, here, is whether LPP Mortgage was required to litigate its claim for judicial foreclosure of its lien as part of its prior suit on the promissory note.

It has long been the rule in Texas that “suit may be maintained on a note secured by lien without enforcement of the lien, and after judgment another suit can be brought to foreclose the lien.” Kempner v. Comer, 73 Tex. 196, 11 S.W. 194, 196 (1889).

It is so well settled as not to be controverted that the right to recover a personal judgment for a debt secured by a lien on land and the right to have a foreclosure of lien are severable, and a plaintiff may elect to seek a personal judgment without foreclosing the lien, and even without a waiver of the lien.

Carter v. Gray, 125 Tex. 219, 81 S.W.2d 647, 648 (1935). “[A] creditor can establish liability and thereafter bring a subsequent suit to foreclose his lien.” Lodal & Bain Eng’rs, Inc. v. Bayfield Pub. Util. Dist., 583 S.W.2d 653, 654-55 (Tex.Civ.App.-Houston [1st Dist.] 1979), rev’d on other grounds, 602 S.W.2d 262 (Tex.1980).

Appellants argue, however, that this longstanding rule was overruled by the Texas Supreme Court’s decision in Barr v. Resolution Trust Corp., 837 S.W.2d 627 (Tex.1992). In Barr, the supreme court “reaffirmed” the transactional approach to res judicata, which relates to what claims could have been litigated in a prior lawsuit. See 837 S.W.2d at 631. Under the transactional approach, res judica-ta may apply if the subsequent suit arises out of the same subject matter as a previous suit and, through the exercise of diligence, could have been litigated in the previous suit. See id. A determination of what constitutes the subject matter of a suit requires an examination of the factual basis of the claims without regard to the form of action. See id. at 630.

Appellants rely on the principle that “in order to ascertain the entire agreement between contracting parties, separate documents executed at the same time, for the same purpose, and in the course of the same transaction are to be construed together.” See Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984). According to appellants, if the note and deed of trust should be construed together based on this principle, it follows that under the transactional approach to res judicata — as set out in Barr- — a final judgment on the note will bar a subsequent suit to foreclose the lien.

We disagree. The fact that two documents should be viewed together for purposes of construing those documents’ terms is not, by itself, sufficient to require all claims under either document to be brought together, particularly given that, here, the two documents create two separate and severable rights held by LPP Mortgage. When a debt is memorialized by a note that is secured by a lien, the note and lien constitute separate obligations. See Aguero v. Ramirez, 70 S.W.3d 372, 374 (Tex.App.-Corpus Christi 2002, pet. denied); Whittington v. Whittington, 853 S.W.2d 193, 195 (Tex.App.-Beaumont 1993, no writ). Such separate obligations may be litigated in separate lawsuits. See Carter, 81 S.W.2d at 648. Therefore, the holder of a note and security interest may bring suit and obtain judgment on the note, and — if, as is the case here, the holder did not request foreclosure in that suit, the judgment on the note in the holder’s favor is not satisfied, and no provisions of the note or deed of trust contractually alter the parties’ remedies— the lien-creditor may later bring suit for judicial foreclosure of the lien.

Our conclusion is consistent with the supreme court’s application of the transactional approach to res judicata actually applied in Barr. George Barr was one of two partners in a partnership that executed a promissory note, and both partners executed a personal guaranty of the note. See 837 S.W.2d at 628. The holder of the note, Sunbelt Federal Savings, filed suit against both the partnership as maker of the note and Barr’s partner as guarantor. In a separate suit, Sunbelt sued Barr under the guaranty agreement, but the trial court entered a take-nothing judgment in favor of Barr. See id. In response, Sunbelt amended its pleadings in its first lawsuit to assert a claim against Barr in his capacity as partner in the partnership. See id. The supreme court held that res judicata barred Sunbelt’s attempt to add Barr as a party. See id. at 631. The court observed that the note and Barr’s guaranty agreement were executed as part of a single transaction. See id. However, the court also observed that in both suits Sunbelt sought to hold Barr “primarily hable for payment of the note” and sought “the same amount of damages.” See id. This is significant. In this case, there is a longstanding rule in Texas that the note and hen constitute separate obhgations, and they involve different remedies. Thus, while in its first suit LPP Mortgage sought and obtained a money judgment against those parties obligated on the note, in this suit LPP Mortgage seeks to enforce the deed of trust and obtain the right to judicially foreclose its hen against the property encumbered by the lien. The claims in the two lawsuits in Barr were each attempts to reduce a debt to judgment. Here, the claims in the two suits are different, the remedies sought are different, and the parties are different. LPP Mortgage’s current suit for judicial foreclosure of a lien cannot be barred by res judicata based solely on a previous suit reducing the debt to a money judgment.

Moreover, we are persuaded by the facts that (1) a state statute can modify the general rule that a party who sues a maker on a note is not precluded under the doctrine of res judicata from pursuing the security by way of foreclosure, see Restatement (Third) of Property: Mortgages § 8.2 cmt. a, reporters’ note (1997) (identifying six states with “one-action” legislation); and (2) no Texas statute establishes such a one-action rule, see, e.g., Tex. Bus. & Com.Code Ann. § 9.601(a) (West Supp. 2009) (after default, secured party may reduce claim to judgment, foreclose, or otherwise enforce claim or security interest by any available judicial procedure). To hold as appellants argue would be to accomplish by general res judicata principles what would otherwise seem to require specific legislative action. We decline to do so.

We are also persuaded by the policy concerns identified by the United States Bankruptcy Court for the Southern District of Texas in its consideration of this issue. See In re Gayle, 189 B.R. 914, 919 (Bankr.S.D.Tex.1995). If a judgment on the note prevented a suit for foreclosure of a lien securing the debt, debtors would have incentive not to satisfy any judgment in favor of the holder of the note. As a result, creditors would be forced, as a practical matter, to seek foreclosure (whether judicial or non-judicial) prior to or in conjunction with any suit on a promissory note, even when foreclosure is the less desirable remedy for either or both parties. See id. In contrast, by permitting the creditor to sue on a note without forfeiting the remedy of foreclosure, our holding preserves the creditor’s ability to recover the amounts owed without having to pursue the remedy of foreclosure when such remedy may not be practical or necessary.

We conclude that until the underlying debt is actually satisfied, the recovery of a judgment on the note secured by a deed of trust lien, where foreclosure of the lien has not been sought in that suit, does not merge the deed of trust in the judgment and does not preclude foreclosure on the lien in a subsequent suit instituted for that purpose. The district court did not err in concluding that LPP Mortgage’s right to foreclose was not barred by res judicata.

Waiver

Appellants contend that the district court erred in concluding that the affirmative defense of waiver did not bar LPP Mortgage’s claim for judicial foreclosure. Waiver involves the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. See Tenneco Inc. v. Enterprise Prods. Co., 925 S.W.2d 640, 643 (Tex.1996). The elements of waiver include (1) an existing right, benefit, or advantage held by a party, (2) the party’s actual knowledge of its existence, and (3) the party’s actual intent to relinquish the right, or intentional conduct inconsistent with the right. Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 778 (Tex.2008).

In their attempt to show waiver, appellants rely solely on the fact that LPP Mortgage, in its 2001 lawsuit, sued only on the promissory note and did not pursue the remedy of foreclosure under the deed of trust — an available remedy that LPP Mortgage presumably knew existed. However, we have already held that the filing of suit and recovery of a judgment on a note secured by a lien does not preclude foreclosure on the lien in a subsequent suit instituted for that purpose. See, e.g., Carter, 81 S.W.2d at 648. Therefore, LPP Mortgage’s filing suit on the note in the 2001 lawsuit was not the relinquishment of its right to foreclose the lien and was not conduct inconsistent with such right. The district court did not err in concluding that LPP Mortgage’s claim for judicial foreclosure was not barred by waiver.

Statute of Limitations

Appellants contend that LPP Mortgage’s suit is barred by limitations and that the district court erred as a matter of law in concluding otherwise. LPP Mortgage concedes that if the Texas statute of limitations applicable to the foreclosure of a real property lien applies, this suit is untimely. See Tex. Civ. Prac. & Rem.Code Ann. § 16.035(a) (West 2002). However, the note and deed of trust in this case were originally executed in favor of the SBA. See 13 C.F.R. § 123.5 (2010) (identifying disaster loans offered by SBA). Federal law prohibits a person who receives any benefit or assistance from the SBA to claim or assert any state law to defeat the obligation incurred in obtaining such benefit or assistance. See id. § 101.106(d) (2010). Moreover, federal law provides that there is no limit on the time for the United States, or an officer or agency thereof, to bring an action to establish the title to, or right of possession of, real property. See 28 U.S.C. § 2415(c) (2006).

As a general rule, when a federal agency assigns a note and deed of trust to a subsequent holder, the assignee retains the applicable federal law protection against any state statute of limitations. See Federal Deposit Ins. Corp. v. Bledsoe, 989 F.2d 805, 810 (5th Cir.1993); Jackson v. Thweatt, 883 S.W.2d 171, 174-75 (Tex.1994); see also Tex. Bus. & Com.Code Ann. § 3.203(b) (West 2002) (providing, as general rule, that transfer of instrument “vests in the transferee any right of the transferor to enforce the instrument”). Applying this rule, the SBA’s assignment to LPP Mortgage of the deed of trust included a transfer of the benefits of both (1) the United States’ exemption from state law setting periods of limitation and (2) the absence of a period of limitations for foreclosure actions. See LPP Mortgage Ltd. v. Hotaling, 497 F.Supp.2d 1217, 1220 (D.Colo.2007).

Appellants, however, rely on Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562 (Tex.2001), for the proposition that the SBA’s protection against state limitations periods does not inure to a subsequent noteholder’s benefit when the SBA transfers the note before it matures and, thus, before a cause of action under the note has accrued. In Holy Cross, upon the failure of a bank, the Federal Deposit Insurance Corporation (FDIC) became the bank’s receiver and the holder of a promissory note executed by the appellant church and secured by a deed of trust. See 44 S.W.3d at 565. The FDIC sold the note to a subsequent holder, who accelerated the note, at which time the holder’s cause of action on the note accrued. See id. at 565, 570. Eventually, the holder of the note foreclosed on the church’s property, but not until over four years after the note’s acceleration. See id. at 570. The four-year Texas statute of limitations, if applicable, would have barred the suit. Relying on Jackson v. Thweatt, the holder argued that he was entitled to the six-year limitations period under the applicable federal law, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). See id. Conversely, the church argued that the holder should not get the benefit of the longer federal limitations period when no cause of action accrued until the FDIC was no longer the noteholder. See id. at 570-71.

The supreme court considered the “two justifications” for extending FIRREA’s limitations period to FDIC’s successors, each of which were relied on in Jackson. See id. at 573 (citing Jackson, 883 S.W.2d at 174). The first justification is that without such extension, the FDIC would be forced to prosecute all notes where limitations has run, because there would be no purchasers of an unenforceable note. See id. The court concluded that this justification did not apply when no cause of action has accrued at the time of transfer, because the transferee would have the full four-year period to enforce the note. A significant impact on the note’s marketability would not be expected. See id. at 574. The second justification identified by the court in Holy Cross is the common law principle that an assignee stands in the shoes of his assignor, and thus, an extended limitations period is part of the “bundle of rights” transferred with the note. See id. at 573. The court concluded that this justification also did not apply, because FIRREA’s six-year limitations period did not attach until a claim accrued. Thus, when the FDIC transfers the note before a claim accrues, the FDIC’s right to a six-year limitations period under FIRREA “is never triggered.” See id. at 574. Without the statute ever applying, the common law rule is never needed to fill in the statutory gap of whether the statute applies to an assignee.

In this case, LPP Mortgage’s right to pursue remedies under the deed of trust did not mature or accrue until after LPP Mortgage obtained the note and deed of trust from the SBA. Appellants argue that, as a result, we should construe the federal law governing the SBA’s limitations period in the same manner that the supreme court construed FIRREA’s limitations provision in Holy Cross. According to appellants, as in Holy Cross, neither justification for extending the benefit of the federal limitations period (or lack thereof) should apply in this type of situation.

We agree that the first justification identified in Holy Cross may be inapplicable. Declining to extend the SBA’s protections from state limitations periods to the transferee of a note held by the SBA would not seem to result in significant market concerns when no cause of action has yet accrued. Once a cause of action accrued, the transferee would have the full four-year period provided for by state law.

However, unlike in Holy Cross, the second justification — an assignee stands in the shoes of the assignor — does apply here. Under the FIRREA, which the supreme court was construing in Holy Cross, the statute of limitations does not begin to run until the date on which the cause of action accrues. See id. at 571 (quoting 12 U.S.C. § 1821(d)(14) (2006)). In contrast, for the SBA, there is neither a federal nor state limitations period applicable to the enforcement of an instrument from the outset. See 28 U.S.C. § 2415(c); 13 C.F.R. § 101.106(d). This protection is part of the SBA’s “bundle of rights” immediately upon the instrument’s execution.

Moreover, the plain language of the deed of trust governs the parties’ rights and remedies with respect to limitations. The deed of trust in this case contains the following provision: “In compliance with section 101.1(d) of the Rules and Regulations of the Small Business Administration (13 C.F.R. 101.1(d)), this instrument is to be construed and enforced in accordance with applicable Federal law.” This provision does not require that the SBA be the party attempting to enforce the instrument for federal law to apply. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983) (“If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.”). The federal regulation referenced by the provision included the following:

Any person, corporation or organization that applies for and receives any benefit or assistance from SBA, or that offers any assurance or security upon which SBA relies for the granting of such benefit or assistance, shall not be entitled to claim or assert any local immunity to defeat the obligation such party incurred in obtaining or assuring such Federal benefit or assistance.

31 Fed.Reg. 10,466 (Aug. 4, 1966) (codified at former 13 C.F.R. § 101.1(d)(4)). This prohibition against a person relying on a state statute of limitations to defeat any obligation incurred in obtaining the SBA’s assistance is not made contingent on the SBA remaining the holder of the applicable instrument. Under the plain language of the regulation, state limitations law is to be disregarded with respect to enforcement of this particular deed of trust. Thus, appellants cannot rely on a Texas statute of limitations to defeat the right of the holder of the lien — whether the SBA or an assignee — to judicially foreclose.

Based on the plain language of the deed of trust and the cited federal regulation, and in accordance with the principle that an assignee receives the full rights of the assignor, we hold that LPP Mortgage received the benefit of the SBA’s protection from state statutes of limitations. Therefore, the district court did not err in concluding that LPP Mortgage’s right to foreclose is not barred by limitations.

Conclusion

Appellants have failed to establish that LPP Mortgage’s right to judicially foreclose its lien is barred by res judicata, waiver, or limitations. Having overruled each of appellants’ points on appeal, we affirm the judgment of the district court.

      . Appellant Maurice Stephens filed a counterclaim against Harold L. Stephens, a third party, for indemnity. That counterclaim was not subject to final disposition by the district court’s judgment and is not at issue in this appeal.

      . This distinction is highlighted by the fact that the first lawsuit was filed in the county of residence of the makers of the note, Tom Green County, and the current lawsuit was filed in the county in which the real property encumbered by the lien is located, Concho County.

      . The property at issue had been transferred by the original obligors on the debt.

      . We note that the Restatement of Judgments applies both the transactional approach to res judicata, see Restatement (Second) of Judgments § 24 (1982), and the general rule that a judgment on a note does not preclude a subsequent suit for foreclosure, see id. § 18 cmt. g-

      . Appellant Lisa Price cites Kermacy v. First Unitarian Church of Austin, 361 S.W.2d 734, 736 (Tex.Civ.App.-Austin 1962, writ ref'd n.r.e.), to argue that the original debt created by the note merged into the judgment and became a new debt and, therefore, the district court's findings of fact referring to the "note” rather than the "note judgment” were error. However, Price does not explain how such references, if error, caused any of the court's conclusions of law to be error, other than by merely restating arguments that we have already addressed.

      . In fact, under the principles of res judicata, LPP Mortgage’s decision not to pursue the remedy of foreclosure in the 2001 lawsuit preserved its right to pursue that remedy in this lawsuit.

      . Neither party has identified any federal policy that instruments held by the SBA remain marketable. Whereas the SBA makes its own loans, the FDIC obtains notes from failed banks. One of FIRREA’s purposes was to provide funds from public and private sources to deal expeditiously with the failed bank's assets obtained by the FDIC. See Jackson v. Thweatt, 883 S.W.2d 171, 174 (Tex.1994) (citing FIRREA, Pub.L. No. 101-73, § 101(8), 103 Stat. 183, 187 (1989)).

      . In contrast, the promissory note states that “this instrument is to be construed and (when SBA is the Holder or a party in interest) enforced in accordance with applicable Federal law.”

      . In 1996, the provisions of 13 C.F.R. section 101.1(d) were modified and moved to their current location at 13 C.F.R. section 101.106. See 60 Fed.Reg. 57,965, 57,966 (Nov. 24, 1995), adopted 61 Fed.Reg. 2394, 2395-96 (Jan. 26, 1996).


author: Justice MORRIS.

text:
    NAUTILUS INSURANCE COMPANY, Appellant, v. Frances STEINBERG and Morton Rudberg, Appellees.
    No. 05-08-01418-CV.
    Court of Appeals of Texas, Dallas.
    July 2, 2010.
    Rehearing Overruled Aug. 16, 2010.

      John C. Tollefson, Stephen A. Melendi, Tollefson, Bradley, Ball & Mitchell, L.L.P., Beth D. Bradley, Thompson, Coe, Cousins & Irons, L.L.P., Dallas, for appellant.
    Morton A. Rudberg, Dallas, for appel-lees.
    Before Justices MORRIS, MURPHY, and FILLMORE.
   OPINION

Opinion by

Justice MORRIS.

This appeal follows a trial before the court without a jury. Central to the appeal is the meaning of the word “theft” as used in an insurance policy that excludes “damage caused by or resulting from theft.” After reviewing the record, we conclude the trial court erred in its construction of the policy and its application of the law to the facts of this case. We further conclude that,.because of its incorrect construction of the policy and application of the law, the trial court failed to make a necessary fact finding. We reverse the trial court’s judgment and remand the cause for further proceedings.

I.

Appellees Frances Steinberg and Morton Rudberg were the insured parties under a commercial property insurance policy issued by Nautilus Insurance Company. The policy covered a building owned by appellees located in Dallas, Texas. Among the policy’s provisions was coverage for “vandalism,” which was defined as “willful and malicious damage to, or destruction of, the described property.” The vandalism coverage provision also contained a “theft” exclusion, which stated:

We will not pay for loss or damage caused by or resulting from theft, except for building damage caused by the breaking in or exiting of burglars.

On March 26, 2007, Leonard Dwayne Heard climbed onto the roof of appellees’ building, opened up the air conditioning units located there, and removed copper pipes and electrical wiring. While he was still on the roof, Heard was found and arrested by Dallas police officers. The arresting officer listed theft as the offense on the incident report. Heard was indicted, however, for felony criminal mischief. He pleaded guilty to and was convicted of that offense.

Appellees notified Nautilus of the damage done to their property and the company assigned a claim investigator. On April 17, 2007, Nautilus sent a letter to appellees informing them that their claim had been denied because there was no coverage under the policy for “theft.” The denial was reaffirmed by a second letter on May 2 after appellees sent Nautilus a sworn proof of loss.

Appellees brought this suit against Nautilus seeking to recover the amount they alleged was owed under the policy, statutory penalties,, attorney’s fees, and costs along with prejudgment and post-judgment interest. A trial was held before the court at which the parties stipulated to the above facts. The trial court also admitted documentary evidence including an affidavit from the records of the Dallas Police Department. According to the affidavit, the arresting officer observed that Heard had removed fourteen or fifteen copper pipes from the air conditioning units attached to appellees’ building and left the pipes lying on the roof.

After reviewing the evidence, the trial court concluded Nautilus failed to show that the exclusion applied to bar coverage. In its findings of fact, the trial court focused on the fact that Heard never removed the copper pipes from the roof of the building. The court also concluded that the air conditioning units were not personal property and Nautilus failed to prove Heard “took any personal property” from appellees. Finally, the trial court stated that Nautilus “failed to prove from a preponderance of the evidence that there was a theft of the copper pipe removed from the air conditioning units.” The trial court awarded appellees the stipulated amount of actual damages along with statutory penalties, attorney’s fees, and interest. Nautilus then brought this appeal.

II.

In its first two issues on appeal, Nautilus contends the trial court erred in construing the policy in such a manner as to conclude that the theft exclusion did not apply. Nautilus has conceded, both in the trial court and on appeal, that appellees met their initial burden of proving that their loss resulted from “willful and malicious damage to, or destruction of, the described property.” See Federated Mut. Ins. Co. v. Grapevine Excavation Inc., 197 F.3d 720, 723 (5th Cir.1999) (insured bears initial burden to show claim falls within scope of coverage). In other words, Nautilus does not challenge the fact that appel-lees proved the damage caused by Heard fell -within the scope of the policy’s coverage for “vandalism.” Nautilus contends only that the trial court erred in concluding that Nautilus failed to meet its burden to show the theft exclusion applied to bar coverage. See id. (once insured proves coverage, burden shifts to insurer to prove exclusion applies).

We review the trial court’s construction of an insurance contract de novo. See Harrison v. Great Am. Assur. Co., 227 S.W.3d 890, 892 (Tex.App.-Dallas 2007, no pet.). Neither side contends the language of the exclusion is ambiguous, and we agree it is not. Accordingly, we must enforce the language to which the parties agreed and not alter it under the guise of construction. See Fiess v. State Farm Lloyds, 202 S.W.3d 744, 753 (Tex.2006). The insurer bears the burden of pleading and proving by a preponderance of the evidence that a policy exclusion applies to bar coverage. See Nobles v. Emps. Ret. Sys., 53 S.W.3d 483, 486 (Tex.App.-Austin 2001, no pet.).

The relevant exclusion here states that Nautilus will not pay for losses or damage caused by or resulting from “theft.” The term “theft” is not defined in the policy. In general, when a term in an insurance policy is not defined, we consider the ordinary, everyday meaning of the word. See Progressive Cnty. Mut. Ins. Co. v. Sink, 107 S.W.3d 547, 552 (Tex. 2003). In the case of the word “theft,” however, the Texas Supreme Court has held that the term is to be given the same meaning in an insurance policy that it has under criminal law. See Hudiburg Chevrolet, Inc. v. Globe Indem. Co., 394 S.W.2d 792, 795 (Tex.1965).

The Texas Penal Code states that a person commits theft when he “unlawfully appropriates property with intent to deprive the owner of property.” See Tex. Penal Code Ann. § 31.03(a) (Vernon Supp. 2009). To “appropriate” property, a person must “acquire or exercise control over property other than real property.” See id. § 31.01(4). And to “deprive” the owner of property, a person must “withhold property from the owner permanently or for so extended a period of time that a major portion of the value or enjoyment of the property is lost to the owner,” or “restore property only upon payment of reward or other compensation,” or “dispose of property in a manner that makes recovery of the property by the owner unlikely.” See id. § 31.01(2). The term “property” is defined to include “tangible or intangible personal property including anything severed from land.” See id. § 31.01(5). For the theft exclusion to apply, therefore, Nautilus was required to show, by a preponderance of the evidence, that Heard exercised control over appellees’ personal property with the intention of depriving them of the property’s possession, enjoyment, or use.

The undisputed evidence in this case shows that Heard removed copper pipes from the air conditioning units located on the roof of appellees’ building. The evidence also shows that both Heard and the pipes were still on the roof when Heard was apprehended by the police. During the trial, the judge specifically indicated she believed the property allegedly being stolen had to be removed from the premises for a theft to occur. This belief is reflected in the trial court’s findings of fact wherein the court specifically found that there was no evidence the copper pipes were removed from the roof of the building. The trial court’s construction of the term “theft” to require the property be removed from the premises does not comport with Texas law.

To show theft under Texas law, it is not necessary to establish that the property was removed or carried away from the premises. See Hill v. State, 633 S.W.2d 520, 521 (Tex.Crim.App.1982). Any removal of the property, no matter how slight, from its customary location is sufficient to show control over the property for purposes of theft. See Baker v. State, 511 S.W.2d 272 (Tex.Crim.App.1974); Commercial Cas. Ins. Co. v. Goode, 135 S.W.2d 816, 818 (Tex.Civ.App.Galveston, 1940, writ dism’d). The undisputed evidence here shows that Heard removed the copper pipes from the air conditioning units. The act of removing the pipes was sufficient to show control over the property for purposes of theft. See Edwards v. State, 440 S.W.2d 648, 649 (Tex.Crim.App. 1969). To the extent the trial court concluded the policy’s theft exclusion did not apply because Heard did not exercise control over the property, its conclusion was wrong.

The trial court’s findings of fact and conclusions of law also indicate the court concluded the copper pipes were not “personal property” because they were originally affixed to the building. This conclusion is also wrong. Once the copper pipes were separated from the building, they became property that could be stolen. See id.; Looney v. State, 80 Tex.Crim. 317, 189 S.W. 954, 955 (1916). That the pipes were originally part of a fixture does not prevent them from being subject to theft. See Farris v. State, 69 S.W. 140, 141 (Tex.Crim.App.1902).

Based on the foregoing, it is clear that Heard exercised control over appel-lees’ personal property as defined by Texas criminal law and, by extension, the insurance policy at issue. But this alone is not sufficient to show that a theft occurred. It was also Nautilus’s burden to show, by a preponderance of the evidence, that Heard had the intent to deprive ap-pellees of the property’s possession, enjoyment, or use.

Unlike the other elements of theft at issue in this case, the trial court made no express finding on the element of intent. The findings of fact and conclusions of law show that the trial court’s judgment was based upon an application of the term “theft” that erroneously required removing from the premises property that was never attached to the building. Because the court’s findings of fact and conclusions of law show the trial court’s judgment was based on an incorrect construction of the contract and interpretation of the law, we cannot imply a finding of intent to support the judgment. See Jones v. Smith, 291 S.W.3d 549, 553 (Tex.App.-Houston [14th Dist.] 2009, no pet.).

Although we cannot imply a finding of intent, Nautilus contends that appellees conceded the intent issue in their answers to interrogatories. In its first set of interrogatories to appellees, Nautilus asked them to detail all information “regarding the manner in which [the copper] items were removed from [the] premises.” Ap-pellees responded that they were not present when the police officers removed the property from the roof, but they were told that an individual had “vandalized the air conditioning units” by “removing the copper portions probably to sell [or] to buy dope.” This statement is not a concession of Heard’s intent but merely a recitation of what appellees were told by the police.

Furthermore, the evidence does not establish Heard’s intent to commit theft as a matter of law. Indeed, a review of the record shows that the trial judge considered the evidence of intent to be “speculative.” The parties did not stipulate to Heard’s intent in removing the copper pipes from the air conditioning units. And, absent a stipulation by the parties on the issue, it was within the province of the trial court, as the trier of fact, to determine whether Nautilus had proven intent by a preponderance of the evidence. See Davis v. State, 904 S.W.2d 946, 950-51 (Tex.App.-Austin 1995, no writ) (findings of fact may be compelled by stipulated facts that are evidentiary in nature). Intent is a question of fact to be determined by the trier of fact from all of the surrounding circumstances. See Smith v. State, 965 S.W.2d 509, 518 (Tex.Crim.App.1998).

The stipulated facts show that Heard was found on the roof of appellees’ building. The arresting officer stated that Heard “had removed fourteen to fifteen two foot copper pipes and left them laying next to the units.” The police believed Heard intended to take the copper pipes and sell them. Heard was not charged with theft, however. He was charged with and indicted for criminal mischief, a crime that, in essence, describes vandalism. A person commits criminal mischief if he intentionally or knowingly damages or destroys the tangible property of the owner. See Tex. Penal Code Ann. § 28.03(a). The offense of criminal mischief does not include the element of intent to deprive the owner of the property. Id.

As the parties stipulated, Heard entered into a plea agreement under which he confessed, pleaded guilty to, and was convicted of criminal mischief. Heard’s judicial confession states that he intentionally and knowingly damaged and destroyed appel-lees’ tangible property without them consent. Heard never stated, however, that he destroyed appellees’ property with the intent to deprive appellees of its possession, enjoyment, or use. At most, Heard’s statement is a confession to vandalism only. He did not confess to theft.

In response to Nautilus’s argument, ap-pellees contend Heard’s intent is not dis-positive of the entire coverage issue because, even if Heard intended to commit theft and the allegedly stolen property was excluded from coverage, the policy should be construed to cover the damage to the building. Appellees rely heavily on the Texas Supreme Court case of U.S. Fid. & Guar. Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353 (Tex.1971). As recent cases have noted, however, the policy language addressed in Bimco is significantly different from the current policy language at issue here. See Certain Undenmiters at Lloyds, London v. Law, 570 F.3d 574, 578 n. 11 (5th Cir.2009); Essex Ins. Co. v. Eldridge Land, L.L.C., 14-09-00619-CV, 2010 WL 1992833, at *4 (Tex.App.-Houston [14th Dist.] May 20, 2010, no pet. h.). The current policy language unambiguously excludes from coverage all damages caused by or resulting from theft. See Law, 570 F.3d at 579. All of the property damage in this case was caused by or resulted from Heard’s removal of the copper components from the air conditioning units. If Heard’s intent was to steal the copper, then all of the property damage claimed by appellees falls squarely within the theft exclusion to coverage.

The trial court failed to make a finding on the element of intent because it erroneously construed the term “theft” in appel-lees’ policy to require property be taken off the premises. The trial court also erred in concluding the theft exclusion did not apply if the property stolen was originally part of the building. Because the trial court erred in its construction and application of the policy language, we resolve Nautilus’s first two issues in its favor. This conclusion renders it unnecessary for us to address Nautilus’s other arguments.

As stated above, the issue of coverage in this case ultimately hinges on the determination of Heard’s intent. Intent is a question of fact uniquely within the realm of the trier of fact. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex.1986); Robles v. State, 664 S.W.2d 91, 94 (Tex.Crim.App.1984). The trial court, however, did not make a finding on the element of intent that would control the case under the correct construction of the policy and interpretation of the law. See Jones, '291 S.W.3d at 555. We therefore reverse the trial court’s judgment and remand the cause for further proceedings.

      . Appellees do not argue that the exception to the exclusion for "building damage caused by the breaking in or exiting of burglars" applies in this case. In their brief on appeal, appel-lees explicitly state "[t]here was no breaking or entering of the insured building itself."


author: Justice LANG-MIERS.

text:
    CITY OF RICHARDSON, Appellant, v. William GORDON, Appellee.
    No. 05-09-00532-CV.
    Court of Appeals of Texas, Dallas.
    July 2, 2010.
    Rehearing Overruled Aug. 23, 2010.

      Peter G. Smith, Braden Metcalf, Nichols, Jackson, Dillard, Hager & Smith, LLP, Dallas, for Appellant.
    Richard B. Tanner, Richardson, for Ap-pellee.
    Before Justices BRIDGES, LANG, and LANG-MIERS.
   OPINION ON MOTION FOR REHEARING

Opinion By

Justice LANG-MIERS.

We deny appellant’s motion for rehearing. On the Court’s own motion, we withdraw our opinion issued March 18, 2010 and vacate the judgment of that date. This is now the opinion of the Court. This is an interlocutory appeal from the denial in part of a plea to the jurisdiction. We reverse that portion of the trial court’s order denying in part the plea to the jurisdiction and render judgment dismissing Gordon’s declaratory judgment claim and request for attorney’s fees as moot.

Background

In October 2007, Gordon sued the City alleging that the city council violated the city charter and the Texas Open Meetings Act for many years by holding closed meetings. He alleged that the closed meetings violated the city charter because the charter required all city council meetings to be open:

All meetings of the Council and all committees thereof shall be open to the public and the rules of the Council shall provide that citizens of the city shall have a reasonable opportunity to be heard at any such meetings, concerning any matter there considered.

Richardson, Tex., City Charter § 3.10 (1989), amended by Richardson, Tex., City Charter § 3.10 (2007). He alleged that the closed meetings also violated the Texas Open Meetings Act because that act does not authorize a city to hold closed meetings when the city charter requires all meetings to be open:

This chapter does not authorize a governmental body to close a meeting that a charter of the governmental body:
(1) prohibits from being closed; or
(2) requires to be open.

Tex. Gov’t Code Ann. § 551.004 (Vernon 2004). Gordon asked the court for a declaration that the City had violated its charter and the Texas Open Meetings Act; for an order enjoining the City from engaging in any projects, contracts, or activities discussed or decided in the closed meetings; for an order requiring the City to produce agendas, tapes, and records from the closed meetings; and for attorney’s fees pursuant to the Declaratory Judgments Act. See Tex. Civ. Prag. & Rem.Code Ann. § 37.009 (Vernon 2008).

While the lawsuit was pending, the City amended its charter, effective November 14, 2007, to allow the city council to meet in closed session as permitted by state law:

All meetings of the City Council and all committees thereof shall be open to the public except as otherwise permitted by State law, and the rules of the City Council shall provide that citizens of the City shall have a reasonable opportunity to be heard at any such meetings, in regard to any matter there considered.

Richardson, Tex., City Charter § 3.10 (2007).

Several months after the charter was amended, Gordon amended his petition to seek relief only for alleged violations through November 13, 2007. Thereafter, the City filed a no-evidence motion for summary judgment on Gordon’s claims. The court granted the motion in part, stating:

[T]he Court FINDS there is no genuine issue of material fact on any of Plaintiffs claims, other than Plaintiff’s claim that the City Council conducted closed meetings in violation of Defendant’s City Charter.... [ J]udgment is hereby entered in favor of Defendant City of Richardson, Texas on all of Plaintiff William Gordon’s claims and causes of action, including but not limited to all alleged violations of the Open Meetings Act, all alleged violations of the Election Code, and all alleged violations of Defendant’s City Charter, save and except Plaintiffs claim that the City Council conducted closed meetings in violation of Defendant’s City Charter.

By this order, the trial court dismissed all of Gordon’s claims except the claim for declaratory and injunctive relief relating to the alleged violations of the city charter.

The City then filed a second plea to the jurisdiction (its first plea raised other issues) arguing that Gordon’s claim for declaratory and injunctive relief became moot when the City amended its charter. It also argued that the trial court did not have jurisdiction to enjoin the City from engaging in any projects, contracts, or activities discussed in the closed meetings. The trial court agreed that it did not have jurisdiction to enjoin the City and granted the plea to the jurisdiction in part:

[T]he Court has no authority to enjoin Defendant from participating in any manner in any projects, contracts, actions or other activities allegedly discussed by the Richardson City Council in closed meetings occurring on or before November 14, 2007; ... the Court has no authority to render any such projects, contracts, actions or activities invalid or otherwise void; and ... Plaintiffs request for injunctive relief is moot....

Although the trial court denied Gordon’s request for injunctive relief as moot, it did not dismiss his claim for a declaration that the City held meetings in violation of its charter from October 26, 2004 to November 13, 2007. On appeal, the City argues that the trial court should have granted the plea to the jurisdiction in its entirety because Gordon’s claim for declaratory relief is moot, he has no standing to assert it, and the City is immune from liability for attorney’s fees under the Declaratory Judgments Act.

Standard of Review

A party may challenge the trial court’s subject-matter jurisdiction by filing a plea to the jurisdiction. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 225-26 (Tex.2004). Whether the trial court has subject-matter jurisdiction is a question of law, which we review de novo. Id. at 226. The plaintiff has the burden to plead facts affirmatively showing the trial court has subject-matter jurisdiction. Id. In conducting our review, we construe the pleadings liberally in favor of the plaintiff and look to the plaintiffs intent. Id. at 226-27. We consider the pleadings and the evidence pertinent to the jurisdictional inquiry. Id.; City of Dallas v. First Trade Union Sav. Bank, 133 S.W.3d 680, 686 (Tex.App.-Dallas 2003, pet. denied). However, we do not assess the merits of the plaintiffs claims. Cnty. of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex.2002). If the evidence creates a fact issue concerning jurisdiction, the plea to the jurisdiction must be denied. Miranda, 133 S.W.3d at 227-28.

The mootness doctrine implicates subject-matter jurisdiction. Trulock v. City of Duncanville, 277 S.W.3d 920, 923 (Tex.App.-Dallas 2009, no pet.). A case is moot if a controversy ceases to exist or the parties lack a legally cognizable interest in the outcome. Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 642 (Tex.2005). The mootness doctrine dictates that a court avoid rendering an advisory opinion by only deciding an issue that presents a “live” controversy at the time of the decision. City of Farmers Branch v. Ramos, 235 S.W.3d 462, 469 (Tex.App.-Dallas 2007, no pet.).

A declaratory judgment action does not give a court jurisdiction “to pass upon hypothetical or contingent situations, or to determine questions not then essential to the decision of an actual controversy, although such questions may in the future require adjudication.” Bexar Metro. Water Dist. v. City of Bulverde, 234 S.W.3d 126, 130-31 (Tex.App.-Austin 2007, no pet.) (quoting Firemen’s Ins. Co. v. Burch, 442 S.W.2d 331, 333 (Tex.1968)). “A declaratory judgment is appropriate only if a justiciable controversy exists as to the rights and status of the parties and the controversy will be resolved by the declaration sought.” Id. at 130 (citing Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex.1995)).

Discussion

In its first issue, the City argues that Gordon’s only remaining claim is moot. It contends that any decision determining whether the closed meetings violated the former city charter would be advisory only. Gordon argues that the claim is not moot because the trial court could order the City to produce records from the closed meetings so that the citizens of Richardson could see how their representatives voted in those meetings.

The Texas Open Meetings Act governs the propriety of conducting closed meetings and the release of certified agendas and records from closed meetings. See Tex. Gov’t Code Ann. §§ 551.001-.146 (Vernon 2004 & Supp.2009). Although Gordon requested the release of certain records of the closed meetings pursuant to the Texas Open Meetings Act, the trial court dismissed those claims. And even if we liberally construe Gordon’s pleading to state a claim under the Texas Public Information Act, that claim was also dismissed when the trial court granted the City’s no-evidence motion for summary judgment. The only request for relief remaining after the court’s ruling on the summary judgment was Gordon’s request for a declaration that the closed meetings violated the city charter and for attorney’s fees pursuant to the Declaratory Judgments Act.

We conclude that Gordon’s claim for declaratory relief is moot. Because the city charter provision about which Gordon complains has been amended, no future violations of that provision can occur. See Speer v. Presbyterian Children’s Home & Serv. Agency, 847 S.W.2d 227, 228-30 (Tex.1993) (claim of discriminatory practices in hiring adoption service workers that sought only declaratory and injunctive relief became moot when entity stopped offering adoption services); Trulock, 277 S.W.3d at 925-28 (claim that city ordinance unconstitutional became moot when city modified ordinance to delete challenged provisions). And Gordon’s request for an order enjoining the City from engaging in projects, contracts, or activities discussed or decided in the closed meetings was also denied. Consequently, any decision determining whether the City held meetings in the past that violated an obsolete provision in the city charter would be advisory only. “[W]hen the action sought to be enjoined is accomplished and ‘suitable coercive relief becomes impossible, it is improper to grant declaratory relief.” Speer, 847 S.W.2d at 229 (quoting State ex rel. McKie v. Bullock, 491 S.W.2d 659, 660 (Tex.1973)).

Gordon’s request for attorney’s fees under the Declaratory Judgments Act does not keep the controversy alive. Gordon was unsuccessful in the trial court on all but one of his claims, and he has proven unsuccessful on that claim on appeal. Because declaratory and injunctive relief are not available to Gordon, he is not entitled to recover his attorney’s fees and costs pursuant to the Declaratory Judgments Act. See Speer, 847 S.W.2d at 229-30.

We sustain the City’s first issue. We reverse that portion of the trial court’s order denying in part the City’s second plea to the jurisdiction and render judgment dismissing Gordon’s declaratory judgment claim and request for attorney’s fees as moot.

      . See Tex. Gov’t Code Ann §§ 552.001-.353 (Vernon 2004 & Supp. 2009).