Bungalow Revival, LLC v. Jose Cruz, Jr. and Sarah Cruz

Opinion issued October 31, 2025

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-23-00415-CV
———————————
BUNGALOW REVIVAL, LLC, Appellant
V.
JOSÉ CRUZ, JR. AND SARAH CRUZ, Appellees

On Appeal from the 61st District Court
Harris County, Texas
Trial Court Case No. 2017-45154

MEMORANDUM OPINION

José Cruz, Jr. and his wife Sarah Cruz sued Bungalow Revival, LLC for

breach of an oral contract for home remodeling services, alleging that the work

was of poor quality and required thousands of dollars in repair. Bungalow Revival

counterclaimed for breach of the same contract, alleging that the Cruzes failed to
pay the final invoice—a fact which they conceded. A jury found that both the

Cruzes and Bungalow Revival breached the contract, neither breach was excused,

and actual damages for both parties ($75,000 for the Cruzes and $36,424.45 for

Bungalow Revival). After offsetting the amount of the final invoice, the trial court

entered judgment on the verdict in favor of the Cruzes for $38,575.55 in actual

damages, along with pre- and post-judgment interest.

In its first two issues on appeal, Bungalow Revival argues that it was entitled

to attorney’s fees and prejudgment interest. In its third and final issue, it argues the

evidence was legally insufficient to support the jury’s finding that the Cruzes had

$75,000 in actual damages.

We conclude that the evidence of the Cruzes’ damages is not legally

insufficient simply because the jury’s reasoning is unclear, and the $75,000

damages award is within the range of evidence presented at trial. Because

Bungalow Revival prevailed on its claim for breach of contract, it was entitled to

attorney’s fees under Chapter 38 of the Civil Practice and Remedies Code.

However, because it failed to segregate its attorney’s fees, we will remand this

portion of the case to the trial court for a determination of the amount of fees to be

awarded. Finally, we conclude that Bungalow Revival was not entitled to

prejudgment interest.

2
We affirm the trial court’s judgment except as to Bungalow Revival’s claim

for attorney’s fees, which we remand for further proceedings.

Background

The Cruzes were good friends with Gilbert Perez, the sole owner of

Bungalow Revival. When the Cruzes decided to move to the Houston area where

José grew up, they asked Perez to take on a construction project to update and

customize their million-dollar new home in West University Place.1 Perez had

done this kind of project on a home the Cruzes previously owned in the Houston

area. Based on this experience and their good friendship with Perez, the Cruzes

entered into an oral agreement with Bungalow Revival to complete the work as

requested by Sarah in exchange for the Cruzes paying “cost plus 25%.”

The Cruzes were eager to move into their house, which they bought in

September 2015. As the work progressed, the Cruzes and their three minor

children lived in a two-bedroom apartment. Working with Sarah, Perez created

design plans for the house. The Cruzes initially hoped to move into the house in

January, but as the work progressed, the completion date slipped multiple times.

Perez and Nick Eronko, a Bungalow Revival employee who worked closely with

Perez, testified at trial that the delays were caused by numerous changes to the

1
José Cruz, Jr. is a former major league baseball player, who currently coaches the
Rice University men’s baseball team. Due to his work, the family lived in several
cities before moving back to Houston.
3
scope and design details that were requested by Sarah, as well as subcontractor

availability and scheduling, material delivery, a flood in Houston, and the need to

redo some of the work as issues arose. Sarah and José believed that Perez did not

prioritize the work on their house and that the changes to the scope of work that

Sarah requested could not account for any delays.

As the project progressed from demolition in early November 2015 through

completion in July 2016, Sarah frequently communicated with Perez and Eronko,

who principally handled billing. Some of the communications were light-hearted

and friendly and reflected the continued good relationship among them, including

sharing meals and holidays together.

In early November 2015, Eronko sent the Cruzes a conceptual budget

showing the anticipated costs for material and labor, plus 25%, based on the scope

of work that Bungalow Revival understood Sarah had requested. That estimate was

approximately $230,000. However, José testified that he did not want to spend that

much money on this project because of the large investment he had already made

in the house. He and Sarah testified that they had told Perez that their budget was

$140,000. According to Eronko, he sent the Cruzes requests for payment by email,

attaching a spreadsheet and the supporting the invoices or emailing or hand

delivering them separately. The Cruzes, however, said that they saw the

spreadsheet but not the invoices.

4
Some problems appeared throughout the project. First, Sarah had requested

that the floors be refinished because she did not like the reddish color of the

Brazilian cherry wood floors that were installed by the seller not long before the

Cruzes bought the home. The floors were sanded and refinished to an ebony color,

but they had to be redone after the Cruzes moved into the house due to a chemical

reaction that affected the appearance of the floors. The Cruzes temporarily left the

house while the floors were redone. The Cruzes were concerned about dust

mitigation during the flooring work because they had separately contracted for air

conditioning work, and they did not want the dust from the floor work to clog the

air conditioning system.

When the Cruzes finally moved in, Bungalow Revival still had to complete

the punch list—a final list of small changes, corrections, or completions to be made

to the house. Although the Cruzes, particularly Sarah, repeatedly indicated that

they were pleased with the appearance and the quality of the work in the home,

when they moved in, that changed. The primary issues of concern were the

Brazilian cherry wood floors, the work in an upstairs bathroom, particularly the

shower, and the air conditioning system.2 Although Perez said the floors were in

good condition when the Cruzes moved in, they underwent what he described as a

2
Sarah testified about other problems with Bungalow Revival’s work, including a
broken water line to an ice machine, electrical outlet problems, floor issues, and a
broken toilet seat.
5
chemical reaction in the weeks just after the Cruzes moved in. Sarah also testified

that she believed the floors were scratched by subcontractors performing other

work. The family left the house temporarily and the floors were refinished again.

Sarah testified that they stayed in a hotel for about a week, which cost $1,547.82.

By the time of trial, the Cruzes had not done any other work on the floors.

The Cruzes also maintain that the upstairs shower leaked, causing damage to

a downstairs ceiling. Sarah testified that she spent more than $13,000 to repair the

shower and about $3,000 to repaint the ceiling. Sarah testified that sawdust from

the projects done in the house got into the air ducts and clogged the air conditioner

drain, necessitating emergency repair. Sarah said that in the four years after she

moved into the house in the summer of 2016, she had spent about $15,000 on air

conditioning repairs.

The Cruzes sued Bungalow Revival in July 2017 for breach of contract.3 At

trial, Jose, Sarah, Eronko, and Perez testified. In addition, the Cruzes presented

testimony from Fred Willcox, a professional real estate inspector, and Bungalow

Revival presented testimony from Thomas Cloninger, a long-time professional in

construction in Houston.

3
The Cruzes also sued Perez and Eronko individually, but they are not parties to
this appeal. In addition to breach of contract, the Cruzes also pleaded breach of the
Texas Deceptive Trade Practices Act and fraud. The Cruzes only obtained
favorable jury findings on their breach of contract claim against Bungalow
Revival.
6
Willcox testified that he inspected the house in 2018, finding problems with

the work done in the upstairs bathroom. He said that the tile and grout lines were

uneven, and an inspection showed water in the wall behind the tile and in the

ceiling beneath the shower, all of which was caused by flawed installation. Willcox

helped prepare the $9,000 estimate to repair the master bath shower stall in 2018,

though he later said that he estimated it would cost $18,000 to repair the shower

and retile the floor in the bathroom. He opined that Bungalow Revival’s failure to

contain the dust during renovation caused damage to the air conditioning unit,

which would cost $5,700 to repair in 2023. He estimated that the entire project

should have cost only about $120,000, rather than the roughly $285,000 that the

Cruzes paid to Bungalow Revival in total.

Finally, based on 2023 estimates made shortly before trial, Willcox

estimated that repair of the downstairs floors would cost approximately $200,000.

That figure included $15,000 to move furniture, $54,000 for the floors, $13,000 to

refinish the stairs, $25,000 for three months’ rental allowance (even though he

thought the work should take only one month), and $32,500 to paint the trim

throughout the house.

Cloninger testified that he, too, inspected the house in 2018. He testified that

he thought the house was “beautiful” and, based on its condition, he did not

imagine that the family had lived there for two years since the renovations, with

7
the exception of the wood floors. He saw evidence of dogs, and he attributed the

scratches on the floor to the dogs. He said that the built-in cabinetry was

“beautiful” and met the American Wood Working Institute’s certifications. As to

the bathroom, he said that the tile work looked “great” with the exception of a

small bit of grout in one corner that needed to be scraped away with a small razor.

He testified that the plumbing fixtures were properly installed, and the connections

met the plumbing code. In the attic, the HVAC ductwork was “fine,” the joints

were taped, and the supply and return air grilles were plumb. The condenser

outside was operating normally without unusual noise or vibration, and the air

conditioner chilled the home by more than 25 degrees Fahrenheit below the

ambient external temperature. Overall, he called Bungalow Revival’s work “above

average to excellent quality.”

When asked about the cost of the project, he disputed Willcox’s testimony

that the work could have been done for $140,000. Cloninger testified that he had

been a professional estimator for 45 years, and based on his understanding of the

scope of the project, it could not have been done for only $140,000. He also

disputed Willcox’s testimony about the cost and timeline for replacing the

Brazilian cherry floors. He estimated that the work could be done in two weeks,

not one month, and that the floors could be replaced for approximately $14 to $17

dollars per foot installed.

8
Both sides rested, and the jury returned a verdict finding that both Bungalow

Revival and the Cruzes breached the agreement and that neither breach was

excused. The jury found damages of $75,000 to compensate the Cruzes for the

damages that resulted from Bungalow Revival’s failure to comply. The jury found

damages of $36,424.45 to compensate Bungalow Revival for the damages from the

Cruzes’ failure to comply.4

Bungalow Revival sought judgment notwithstanding the verdict (JNOV),

arguing that there was no evidence to support the award of $75,000 to the Cruzes.

Bungalow Revival also sought $177,495.03 in attorney’s fees, costs exceeding

$10,000, and pre- and post-judgment interest. The trial court denied the motion for

JNOV, applied the jury’s award in favor of Bungalow Revival as a credit, and

awarded judgment in favor of the Cruzes for $38,575.55 in damages, along with

$17,395.56 in prejudgment interest and post-judgment interest at the rate of 7.75%.

Bungalow Revival appealed.

Analysis

Bungalow Revival raises three issues on appeal, asserting that: (1) the trial

court erred by denying its legal fees; (2) the trial court erred by denying pre-

4
The Cruzes never disputed that they had withheld the final payment for the project
in an amount of $36,424.45. The only disputed question of fact was whether they
were excused from complying due to Bungalow Revival’s breach of the parties’
agreement. The jury found that they were not excused, and the Cruzes have not
challenged that finding on appeal.
9
judgment interest; and (3) the trial court erred by denying the motion for JNOV

because there was no evidence to support the jury’s award of $75,000 in damages

to the Cruzes.

I. The $75,000 damages award is supported by legally sufficient evidence.

We address Bungalow Revival’s third issue first because a holding in favor

of Bungalow Revival could affect our analysis of the first two issues.

A. Standard of Review

We review a trial court’s denial of a JNOV under a legal sufficiency or “no

evidence” standard. Kelsey-Seybold Med. Grp., PLLC v. Roberts, No. 01-23-

00025-CV, 2024 WL 4594833, at *4 (Tex. App.—Houston [1st Dist.] Oct. 29,

2024, pet. denied) (mem. op.). The test for legal sufficiency is “whether the

evidence at trial would enable reasonable and fair-minded people to reach the

verdict under review.” City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).

When conducting a legal sufficiency review, we “view the evidence in the light

favorable to the verdict, crediting favorable evidence if reasonable jurors could,

and disregarding contrary evidence unless reasonable jurors could not.” Id. at 807;

see also Kroger Tex. Ltd. P’ship v. Suberu, 216 S.W.3d 788, 793 (Tex. 2006). So

long as the evidence falls within the zone of reasonable disagreement, we may not

substitute our judgment for that of the factfinder. City of Keller, 168 S.W.3d at

822.

10
We may sustain a no-evidence challenge when (1) the record bears no

evidence of a vital fact, (2) the rules of law or of evidence bar the court from

giving weight to the only evidence offered to prove a vital fact, (3) the evidence

offered to prove a vital fact is no more than a mere scintilla, or (4) the evidence

establishes conclusively the opposite of a vital fact. Gunn v. McCoy, 554 S.W.3d

645, 658 (Tex. 2018). Evidence does not exceed a scintilla if it is so weak as to do

no more than create a mere surmise or suspicion that the fact exists. Kroger Tex.

Ltd. P’ship, 216 S.W.3d at 793 (quoting Ford Motor Co. v. Ridgway, 135 S.W.3d

598, 601 (Tex. 2004) (citation omitted)).

When a party attacks the legal sufficiency of an adverse finding on which it

did not have the burden of proof, it must demonstrate that there is no evidence to

support the adverse finding. See Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex.

1983). The jury, as the factfinder, is the sole judge of the witnesses’ credibility and

the weight to give their testimony. City of Keller, 168 S.W.3d at 819. “It is the

province of the jury to resolve conflicts in the evidence,” and when reasonable

jurors could resolve conflicting evidence either way, we presume they did so in

accordance with the verdict. City of Keller, 168 S.W.3d at 820. We must defer to

the jurors’ determination of these matters and their resolution of conflicting

evidence. Id.

11
The jury has “discretion to award damages within the range of evidence

presented at trial.” Gulf States Utils. Co. v. Low, 79 S.W.3d 561, 566 (Tex. 2002);

accord Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 713 (Tex. 2016).

A jury’s damages award must have a rational basis; the jury may not arbitrarily

award an amount that is not supported by the evidence. Patino-Perez v. Howland,

No. 01-16-00054-CV, 2017 WL 3598241, at *4 (Tex. App.—Houston [1st Dist.]

Aug. 22, 2017, no pet.) (mem. op.).

B. Analysis

Bungalow Revival argues that the damages awarded, $75,000, does not bear

a rational basis to the demonstrative exhibit used by the Cruzes to argue for

damages.5 It further argues that neither the witnesses nor the attorneys presented

the jury with a range of damages to award.

The evidence in this case was highly contested as to the quality of the work

performed, the extent of damages and necessity of repair, the costs to repair, and

5

12
who bore responsibility for the delay in completion and increase in costs of the

project. Texas law is clear that it is the jury that sifts through the evidence,

determines the credibility of the witnesses and the weight to assign to the evidence,

and reaches a conclusion. See City of Keller, 168 S.W.3d at 820.

The jury found that both the Cruzes and Bungalow Revival breached the

agreements, but it found that neither breach was excused. The evidence about the

delay in the timeline and the changes to the scope of work, which increased the

cost of the renovation, was contested. Based on the evidence presented at trial, the

jury could have found that the Cruzes were responsible for the delays and

increased costs such that the expenses due to delay and cost overruns were not

damages from Bungalow Revival’s failure to comply with the parties’ agreement.

In other words, the jury could have reasonably concluded that Bungalow Revival

failed to comply with the parties’ agreement by delivering a renovation that did not

meet the Cruzes expectations but not by delivering a renovation late or for a total

price that was higher than originally contemplated. Thus, the jury could have

reasonably based its damages award on the costs associated with repairing the parts

of the renovation that did not meet the Cruzes’ expectations. At trial, the evidence

centered on the Brazilian cherry wood floors, the bathroom, and the air

conditioner.

13
In this case, the jury could have reasonably concluded that the Brazilian

cherry wood floors needed repair, but it could have rejected the $199,910.69 cost

estimated by Willcox, which he testified included only $54,000 for the floors

themselves, with the remainder being attributed to the cost of moving furniture and

renting temporary housing for $8,500 per month for three months. The jury could

have considered the exhibits that were admitted at trial in conjunction with

Cloninger’s estimate of approximately $14 to $17 per square foot for the flooring

replacement. Defense exhibit 58 included a cost breakdown from Alfred C.

Schulle, Wood Floor Specialist, that estimated 2600 square feet of existing

Brazilian cherry floors. The jury could have reasonably concluded that, based on

Cloninger’s testimony, the replacement of the existing cherry wood floor should

cost somewhere between $36,400 and $44,200.

The jury could have reasonably rejected the three-month estimate of time

that the Cruzes would be out of their home for the repair and instead concluded

that a much shorter time frame, like the two weeks Cloninger estimated, was more

appropriate. Thus, the jury could have rejected the $8,500 per month estimate for

housing while the floors were installed. Instead, the jury could have estimated the

cost of a two-week hotel stay based on Sarah’s testimony and the hotel bill from

their previous one-week hotel stay. That hotel stay cost the Cruzes $1,547.82, and

the jury could have estimated that a two-week stay would cost about $3,000. The

14
jury could have credited Sarah’s testimony that she paid over $13,000 to repair the

shower, $3,000 to repaint the ceiling damaged by the shower leak, and $15,000 to

repair the air conditioner in the four years she lived in the house.

Considering the evidence presented at trial regarding installation of new

floors, costs associated with the bathroom and the prior leak, a two-week hotel

stay, and repairs to the air conditioner, a reasonable range of damages would be

somewhere between $70,400 and $88,000.6 While we cannot say with certainty

that this is how the jury assessed damages, we can say that there is a rational basis

for the jury’s award of $75,000 in damages and that this award is supported by the

evidence. See City of Keller, 168 S.W.3d at 820; Gulf States Utils., 79 S.W.3d at

566; Patino-Perez, 2017 WL 3598241, at *4.

We overrule this issue.

II. Bungalow Revival is entitled to attorney’s fees.

Bungalow Revival sought attorney’s fees on its breach of contract claim for

the unpaid final invoice for the project under Chapter 38 of the Texas Civil

Practice and Remedies Code. In the trial court and on appeal, Bungalow Revival

maintained that it prevailed on its cause of action against the Cruzes because the

6
The low range of the estimate is based on $36,400 for the floors, $3,000 for a hotel
stay, $3,000 to repaint the ceilings damaged by the bathroom leak, $15,000 for air
conditioner repairs, and $13,000 for bathroom repairs. The high range of the
estimate is based on $54,000 for the floors, $3,000 for a hotel stay, $3,000 to
repaint the ceilings damaged by the bathroom leak, $15,000 for air conditioner
repairs, and $13,000 for bathroom repairs.
15
jury found in its favor and that it need not obtain a net recovery on its claim to be

entitled to attorney’s fees. The Cruzes argue that Bungalow Revival is not entitled

to attorney’s fees because they, not Bungalow Revival, prevailed on the main issue

in this case and because Bungalow Revival failed to segregate its attorney’s fees.

The trial court denied fees to Bungalow Revival.

A. Applicable Law

1. Entitlement to Attorney’s Fees

In Texas, each party ordinarily pays its own attorney’s fees. Rohrmoos

Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 483 (Tex. 2019).

However, a prevailing party may recover attorney’s fees from the opposing party,

when fee-shifting is authorized by statute or contract. Id. at 484. When fee-shifting

is authorized, the party seeking the fee award must prove that the fees are

reasonable and necessary. Id. The availability of attorney’s fees under a particular

statute is a question of law for the court. Holland v. Wal-Mart Stores, Inc., 1

S.W.3d 91, 94 (Tex. 1999) (per curiam).

When this lawsuit was filed, Chapter 38 of the Texas Civil Practice and

Remedies Code provided that “[a] person may recover reasonable attorney’s fees

from an individual or corporation, in addition to the amount of a valid claim and

16
costs, if the claim is for . . . an oral or written contract.”7 Act of May 17, 1985, 69th

Leg., R.S., ch. 959 (amended by Act of May 28, 2021, 87th Leg., R.S., ch. 665 §1)

(former TEX. CIV. PRAC. & REM. CODE § 38.001(8)). The Texas Supreme Court has

repeatedly held that to recover attorney’s fees under section 38.001, a party must

(1) prevail on a cause of action for which attorney’s fees are recoverable, and

(2) recover damages. E.g., Rohrmoos Venture, 578 S.W.3d at 484. But the party

who prevails need not obtain a net recovery because his entitlement to attorney’s

fees under the statute “is not dependent upon the outcome of other claims or

counterclaims joined in the lawsuit.” McKinley v. Drozd, 685 S.W.2d 7, 11 (Tex.

1985) (interpreting predecessor statute to section 38.001). Thus, the party who

prevails on a claim for which attorney’s fees are recoverable may obtain a

judgment for those fees “even if the amount of the claim is entirely offset by an

opposing party’s claim.” Id.

2. Segregation of Attorney’s Fees

A fee claimant is, however, required to segregate fees when a lawsuit

involves both claims for which attorney’s fees are recoverable and claims for

which attorney’s fees are not recoverable. Tony Gullo Motors I, L.P. v. Chapa, 212

7
In 2021, Section 38.001 was amended to provide that attorney’s fees may be
recoverable from “an individual or organization other than a quasi-governmental
entity authorized to perform a function by state law, a religious organization, a
charitable organization, or a charitable trust, in addition to the amount of a valid
claim and costs” if the claim is for one of the eight enumerated topics, including
“an oral or written contract.” TEX. CIV. PRAC. & REM. CODE § 38.001.
17
S.W.3d 299, 311 (Tex. 2006). Similarly, segregation is required when a lawsuit

involves multiple parties and claims. See Stewart Title Guar. Co. v. Sterling, 822

S.W.2d 1, 10 (Tex. 1991) (“In order to show the reasonableness and necessity of

attorney’s fees, the plaintiff is required to show that the fees were incurred while

suing the defendant sought to be charged with the fees on a claim which allows

recovery of such fees.”); French v. Moore, 169 S.W.3d 1, 17 (Tex. App.—Houston

[1st Dist.] 2004, no pet.) (“A party seeking attorney fees has a duty to segregate

nonrecoverable fees from recoverable fees, and to segregate the fees owed by

different parties.”).

In 1991, in Sterling, the Texas Supreme Court noted that there existed a

recognized exception to the duty to segregate attorney’s fees. Sterling, 822 S.W.2d

at 11. There the Court said that segregation of fees was not required when “causes

of action involved in the suit are dependent upon the same set of facts or

circumstances” and are “intertwined to the point of being inseparable.” Id. at 11–

12 (cleaned up). But fifteen years later, the Court recognized that this exception

had created a flood of claims for attorney’s fees based on arguments that both

recoverable and unrecoverable fees were “inextricably intertwined.” Tony Gullo

Motors I, 212 S.W.3d at 312. The Court explained that the application of the

exception by the courts of appeals had been inconsistent and sometimes failed to

18
give proper deference to the role of the factfinder in determining the amount of

attorney’s fees. Id. at 312–13.

The Supreme Court “reaffirm[ed] the rule that if any attorney’s fees relate

solely to a claim for which such fees are unrecoverable, a claimant must segregate

recoverable from unrecoverable fees.” Id. at 313. It modified the Sterling exception

and announced a new rule of law: “Intertwined facts do not make tort fees

recoverable; it is only when discrete legal services advance both a recoverable and

unrecoverable claim that they are so intertwined that they need not be segregated.”

Id. at 313–14. And, as relevant to this appeal, the Court noted that some fee

disputes could be decided as a matter of law. Id. at 314. “For example, to prevail

on a contract claim a party must overcome any and all affirmative defenses (such

as limitations, res judicata, or prior material breach), and the opposing party who

raises them should not be allowed to suggest to the jury that overcoming those

defenses was unnecessary.” Id. But when “at least some of the attorney’s fees are

attributable only to claims for which fees are not recoverable,” the fee claimant

must segregate fees. Id. Failure to segregate attorney’s fees does not preclude

recovery as the issue may be remanded to the trial court. Id. (“Unsegregated

attorney’s fees for the entire case are some evidence of what the segregated amount

should be.”).

B. Application to Facts

19
Here, the jury found that the Cruzes breached the contract and determined

that Bungalow Revival’s damages were $36,424.45. Thus, Bungalow Revival

prevailed on a claim based on an oral contract. That the jury’s determination of the

Cruzes’ damages, $75,000, exceeded and completely offset that of Bungalow

Revival does not alter the fact that Bungalow Revival prevailed on a cause of

action. Bungalow Revival was not required to obtain a net recovery in order to

obtain attorney’s fees under section 38.001. See McKinley, 685 S.W.2d at 11.

Bungalow Revival was, however, required to segregate its fees. A review of

the billing records submitted to the trial court shows that some fees were incurred

in pursuit of Bungalow Revival’s third-party claims. And some were incurred in

conducting legal research about the Texas Deceptive Trade Practices Act. Because

Bungalow Revival is not entitled to collect those attorney’s fees from the Cruzes,

we conclude that some attorney’s fees in this case relate solely to claims for which

such fees are unrecoverable, and segregation was required. See Tony Gullo Motors

I, 212 S.W.3d at 313.

In addition, Bungalow Revival relies on language from Tony Gullo Motors I

to argue that it is entitled to recover nearly all of the remainder of its attorney’s

fees because “[t]he facts and circumstances surrounding Bungalow Revival’s

breach of contract claim (and the Cruzes’ affirmative defenses asserted thereto)

were intertwined to the point of being inseparable from Bungalow Revival’s

20
defense of the Cruzes’ other claims against Bungalow Revival arising out of the

same oral contract and related to the same actions taken by each party in

connection with the contract.” Appellant’s Br. 22.

The flaw in Bungalow Revival’s argument is that it relied on language from

Tony Gullo Motors I that the court modified a few paragraphs later. See Tony Gullo

Motors I, 212 S.W.3d at 312–14. No longer is it sufficient for a fee-seeking party

to argue that the facts and circumstances are inseparably intertwined. See id. at

313–14. A fee-seeking party must now show that discrete legal services advance

both a recoverable and unrecoverable claim. See id. Bungalow Revival is entitled

to some amount of attorney’s fees because it prevailed on its own breach of

contract claim. On remand it must demonstrate that all the fees it seeks were for

discrete legal services that advanced its own breach of contract claim, even if they

also advanced its defense of the Cruzes’ claim against Bungalow Revival.

Bungalow Revival argues on appeal that it is entitled to rendition because its

evidence of attorney’s fees was uncontroverted at trial. It also argues that it did

segregate its fees by way of an affidavit from its attorney estimating that 10% of

the attorney’s fees should be allocated to work relating solely to individual

defendants, Nick Eronko and Gilbert Perez. See id. at 314 (suggesting that

testimony from attorney about percentage of work that can be attributed to

recoverable fees may suffice for segregation purposes). This does not, however,

21
address the need to segregate fees incurred for discrete legal services that did not

advance Bungalow Revival’s breach of contract claim against the Cruzes,

including services relating to joining third parties or researching non-contract

claims, for example.

The Cruzes argue that the trial court properly denied Bungalow Revival’s

request for attorney’s fees, however, we have already said that failure to segregate

fees is not fatal to a party’s claim for attorney’s fees. See id. Because we conclude

that Bungalow Revival failed to segregate attorney’s fees when it was required to

do so, we will remand for a determination of the amount of attorney’s fees to

which Bungalow Revival is entitled.

III. The trial court did not err by denying Bungalow Revival’s request for
prejudgment interest.

Bungalow Revival argues that it was entitled to prejudgment interest under

Section 302.002 of the Texas Finance Code, and, alternatively, under principles of

equity because of the harsh effect of the lost use of money during the pendency of

the litigation. The Cruzes maintain that Bungalow Revival was not a creditor and

that no equitable reason exists to award prejudgment interest.

A. Applicable Law

“Prejudgment interest is compensation allowed by law as additional

damages for lost use of the money due as damages during the lapse of time

between the accrual of the claim and the date of judgment.” Ventling v. Johnson,

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466 S.W.3d 143, 153 (Tex. 2015) (internal quotations omitted). Texas law

provides two legal sources for prejudgment interest: (1) general principles of

equity and (2) enabling statutes. Johnson & Higgins of Tex., Inc. v. Kenneco

Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998). When no statute controls, an

award of prejudgment interest is governed by equitable principles, and the decision

to award prejudgment interest falls within the trial court’s discretion. Patriot

Contracting, LLC v. Shelter Prods., Inc., 650 S.W.3d 627, 659 (Tex. App.—

Houston [1st Dist.] 2021, pet. denied). We review the trial court’s award of

prejudgment interest for an abuse of discretion. Id.

B. Analysis

1. Statutory Prejudgment Interest

Section 302.002 provides:

If a creditor has not agreed with an obligor to charge the obligor any
interest, the creditor may charge and receive from the obligor legal
interest at the rate of six percent a year on the principal amount of the
credit extended beginning on the 30th day after the date on which the
amount is due. If an obligor has agreed to pay to a creditor any
compensation that constitutes interest, the obligor is considered to
have agreed on the rate produced by the amount of that interest,
regardless of whether that rate is stated in the agreement.”

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TEX. FIN. CODE § 302.002.8 The Finance Code defines “creditor” as “a person who

loans money or otherwise extends credit. The term does not include a judgment

creditor.” TEX. FIN. CODE § 301.002(a)(3).

Bungalow Revival argues that it was a creditor because it paid all the

subcontractors. However, nothing in the pleadings or the evidence established that

there was a credit transaction between Bungalow Revival and the Cruzes. Instead,

both the pleadings and the evidence established that there was an oral contract for

Bungalow Revival to renovate the Cruzes’ home and that the parties agreed that

the Cruzes would pay Bungalow Revival’s costs plus 25%.

Ordinarily, when a general contractor hires a subcontractor to work for an

owner, the owner is not in privity of contract with the subcontractor. See Interstate

Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 615, 618 (Tex. 2004).

Instead, the owner is directly liable to the general contractor and the general

contractor is liable to the subcontractor. See id. While the general contractor can

look to the owner to recover funds owed to the subcontractor, that does not mean

that the general contractor has loaned money or extended credit to the owner. See

id.

8
Section 302.002 appears in Title 4, Subtitle A, Subchapter A of the Texas Finance
Code. Title 4 pertains to “Regulation of Interest, Loans, and Financed
Transactions,” and Subtitle A pertains to “Interest.” Subchapter A pertains to
“Usurious Interest.”
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Here, when the Cruzes hired subcontractors directly to complete specific

tasks, they paid them directly. But when Bungalow Revival hired the

subcontractors, the Cruzes paid Bungalow Revival the cost plus 25% in accordance

with the parties’ agreement. The Cruzes were not in privity with the subcontractors

hired by Bungalow Revival, and thus, they did not directly owe them any payment.

See id. Rather, Bungalow Revival was responsible for paying the subcontractors

and then seeking reimbursement plus 25% from the Cruzes.

Because the agreement between Bungalow Revival and the Cruzes was not a

credit transaction, we conclude that the court did not abuse its discretion by not

awarding prejudgment interest under section 302.002 of the Finance Code.

2. Equitable Prejudgment Interest

Prejudgment interest is “compensation allowed by law as additional

damages for lost use of the money due as damages during the lapse of time

between the accrual of the claim and the date of judgment.” Johnson & Higgins,

962 S.W.2d at 528. “Prejudgment interest is calculated on the judgment amount,

not the amount of damages awarded by the jury.” Pringle v. Moon, 158 S.W.3d

607, 611 (Tex. App.—Fort Worth 2005, no pet.). Credits or offsets due a defendant

should be deducted from the total damages awarded before prejudgment interest is

calculated. See Tenn. Gas Pipeline Co. v. Technip USA Corp., No. 01-06-00535-

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CV, 2008 WL 3876141, at *23 (Tex. App.—Houston [1st Dist.] Aug. 21, 2008,

pet. denied) (mem. op.) (citing Pringle, 158 S.W.3d at 611).

Here, the jury awarded $75,000 in damages to the Cruzes, and $36,424.45 in

damages to Bungalow Revival. Bungalow Revival was entitled to an offset of

$36,424.45 against the $75,000 damages award before the calculation of any

prejudgment interest. Because the award to Bungalow Revival was entirely offset

by the Cruzes’ damages, there was no amount left on which Bungalow Revival

could obtain prejudgment interest. See Tenn. Gas Pipeline Co., 2008 WL 3876141,

at *23; Pringle, 158 S.W.3d at 611.

Accordingly, we cannot conclude that the trial court abused its discretion by

not awarding Bungalow Revival equitable prejudgment interest.

We overrule this issue.

Conclusion

We affirm the trial court’s judgment except as to Bungalow Revival’s claim

for attorney’s fees, which we remand for further proceedings.

Susanna Dokupil
Justice

Panel consists of Justices Guerra, Gunn, and Dokupil.

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