Opinion issued June 28, 2012




                                 In The

                           Court of Appeals
                                For The

                       First District of Texas
                         ————————————
                           NO. 01-11-00227-CV
                         ———————————
JAMES R. CLEVELAND; PAUL R. CLEVELAND; KELLIE L. DORMAN;
 NICOS ENERGY, LLC; OASIS PETROLEUM, LLC; AND LONE STAR
            LAND & EXPLORATION, LLC, Appellants
                                   V.
ROBERT G. TAYLOR II; JOSEPH F. ARCHER; CLAIBORNE BRUCE;
ALLAM ALSHAYEB; RUSS HIMEL; RAYMOND CHACHERE; DENNIS
  MCLAUGHLIN; DALE GORMAN; LOUAY JOUBARANI; SEMAN
         MATTA; AND CARLO CANGELOSI, Appellees



                 On Appeal from the 400th District Court
                        Fort Bend County, Texas
                   Trial Court Case No. 09-CV-175448
                                   OPINION

      Appellees, Robert G. Taylor II, Joseph F. Archer, Claiborne Bruce, Allam

Alshayeb, Russ Himel, Raymond Chachere, Dennis McLaughlin, Dale Gorman,

Louay Joubarani, Seman Matta, and Carlo Congelosi (collectively, “the

Investors”), sued appellants, James R. Cleveland, Paul R. Cleveland, Kellie L.

Dorman, Nicos Energy, LLC, Oasis Petroleum, LLC, and Lone Star Land &

Exploration, LLC (collectively, “the Cleveland parties”) for fraud, breach of

contract, and other causes of action arising out of investments related to an oil and

gas prospect. The trial court eventually entered summary judgment in favor of the

Investors on all of their claims. In five issues, the Cleveland parties argue that the

trial court erred (1) in denying their motion to compel arbitration; (2) in refusing to

allow them to withdraw their deemed admissions; (3) in granting summary

judgment in favor of the Investors; (4) in granting summary judgment awarding the

Investors attorney’s fees of $500,000; and (5) in entering “the death-penalty

sanction” against Kellie Dorman.

      We modify and affirm as modified.




                                          2
                                      Background

      The Investors invested various sums of money in an oil and gas venture

described by the parties as the Schleicher County well.1 The investments were

primarily solicited by James “Rusty” Cleveland, who controlled the companies

Oasis Petroleum, LLC, and Lone Star Land & Exploration, LLC. Paul Cleveland,

James’s son, was also involved in the venture at issue at various points, both

individually and through his operating company, Copperhead Operating, LLC.2

Many of the investments were received by Nicos Energy, LLC, which was owned

by James Cleveland’s wife, Kellie Dorman.

      The Investors subsequently discovered that James Cleveland had previously

pled guilty to securities fraud and had served a prison sentence for that crime.

They also discovered that, as a condition of his supervised release, James

Cleveland was not supposed to act in a fiduciary capacity at any financial

institution. They never received any of the promised returns on their investments

regarding the oil and gas venture, and this lawsuit was filed.3


1
      The record also contains some references to another prospect referred to as the
      “Fort Bend” or “Pleak” interest. However, the record does not provide a clear
      description of this interest.
2
      Copperhead Operating, LLC, is not a party to this case.
3
      The parties were also involved in other litigation. According to arguments
      presented to the trial court, the Investors in this case had previously intervened in a
      lawsuit that James Cleveland and Lone Star Land & Exploration had filed against
      the entity with which they had contracted to drill and operate the Schleicher
                                             3
      Two investors, Archer and Taylor, filed their original petition on October 5,

2009, alleging causes of action for common law fraud and fraudulent inducement,

breach of contract, conspiracy to defraud, unjust enrichment, and violations of the

Texas Theft Liability Act.4 Archer and Taylor also demanded an accounting

regarding the money they had invested and alleged that “Nicos Energy, LLC, Oasis

Petroleum, LLC and Lone Star Land & Exploration, LLC are the alter egos of the

individual Defendants.”    The remaining investors were subsequently added in

amended petitions.5 The Cleveland parties filed a general denial on April 9, 2010.

      The Investors alleged that James and Paul Cleveland made various

representations regarding the Schleicher County well’s productivity and potential

returns on investments with the purpose of inducing them to invest money. The

Investors wrote checks or wired money to various Cleveland entities, including

Oasis Petroleum and Nicos Energy, based on the Cleveland parties’ representations

that they would assign interests in the prospect to the Investors in return.


      County well, claiming that they had an interest in any recovery Cleveland and
      Lone Star might receive from the driller. Also, another entity that allegedly
      invested in the Schleicher County well sued James Cleveland, Paul Cleveland, and
      Lone Star Land & Exploration, among others, alleging causes of action for
      negligence, breach of contract, conversion, fraud, and negligent misrepresentation
      related to the Schleicher County well. The record does not reveal the outcomes of
      these suits.
4
      See TEX. CIV. PRAC. & REM. CODE ANN. §§ 134.001–.005 (Vernon 2011).
5
      The Investors also filed various causes of action related to violations of federal
      and state securities acts, but these claims are not raised on appeal.
                                          4
However, the Investors were never given written documentation of their interests

in the well. The Investors alleged that the Cleveland parties’ representations about

the nature of the oil and gas prospect and the additional wells and production that

they intended to procure were all false.

      The    Investors    propounded       multiple   requests   for   production   and

interrogatories, and the Cleveland parties failed to respond. On August 4, 2010,

the Investors moved for the first time to compel the Cleveland parties to comply

with the Investors’ discovery requests. On August 16, 2010, the parties entered an

agreed order, signed by the trial court, granting the Investors’ motion to compel.

      On September 22, 2010, the Investors moved again for sanctions,

complaining of multiple instances in which the Cleveland parties “have refused to

participate in discovery.” The motion for sanctions alleged that the Cleveland

parties had not complied with the agreed order of August 16, 2010. The Investors

also alleged that “Kellie Dorman refused to attend her properly noticed

deposition”6 and that “James R. Cleveland appeared at his deposition for

approximately 17 minutes, where he refused to answer even basic questions

regarding his prior employment, and then walked out of the deposition on the

advice of counsel when asked about his parole terms for his theft and securities

violations conviction.”

6
      The Investors filed a notice of nonappearance related to Dorman’s first failure to
      appear for her deposition.
                                            5
      On October 4, 2010, attorneys for both sides attended a hearing on the

Investors’ motion for sanctions. The trial court stated that the Investors’ motion

for sanctions “appear[ed] to be the death penalty” and that he would attempt to use

less-harsh remedies to procure compliance before he struck the Cleveland parties’

pleadings and entered a default judgment. The trial court signed an order, dated

November 29, 2010, and subsequently amended on December 6, 2010, granting

sanctions and compelling discovery. The trial court ordered full and complete

compliance with the Investors’ previous discovery requests and provided specific

dates and times for each Cleveland party to appear to be deposed at the offices of

the Investors’ counsel, Lytle & Moore, LLP, in Richmond, Texas.

      On December 6, 2010, the Cleveland parties filed their first amended

answer, special exceptions, and breach of contract counterclaim for unpaid

operating costs under a “valid participation agreement.” In response, the Investors

filed several special exceptions and asserted numerous affirmative defenses.

      On December 13, 2010, the Cleveland parties filed their motion to compel

arbitration.   The motion states, “In a written Participation Agreement[, the

Investors] agreed to arbitrate this case in the following terms: A copy of the

agreement is attached hereto and is labeled as Exhibit A.” It also quotes a portion

of the “Participation Agreement” addressing arbitration.            However, the




                                         6
“Participation Agreement” itself is not attached to the motion provided with the

clerk’s record.

      On December 14, 2010, Kellie Dorman again failed to appear for her

deposition. The Investors filed a second certificate of nonappearance.

      On December 20, 2010, the Investors answered the Cleveland parties’

counterclaim and filed special exceptions. The Investors also moved for summary

judgment, seeking traditional summary judgment on their own claims and no-

evidence summary judgment on the Cleveland parties’ counterclaim.

      On December 30, 2010, the Investors moved again for orders of contempt

and sanctions against the Cleveland parties, arguing that Kellie Dorman and Nicos

Energy failed to appear for their depositions and that all Cleveland parties had

failed to comply with the court’s prior order. The Investors asked that, in addition

to ordering further sanctions and holding the Cleveland parties in contempt, the

trial court render a default judgment against all Cleveland parties.

      On January 10, 2011, the date the Investors noticed for the hearing on their

motion for contempt and sanctions, the Cleveland parties moved for a continuance

on the grounds that their attorney had a scheduling conflict and that they had

moved to compel arbitration and were “awaiting the Order setting this Motion for a

hearing.”   The trial court proceeded with the hearing, granted the Investors’

motion, and ordered that Kellie Dorman’s pleadings be struck. The Investors also

                                          7
argued their December 20, 2010 motion for summary judgment on all of their

claims against the Cleveland parties; the trial court denied the motion.7

      On January 25, 2011, the Investors filed a motion for default judgment

against Kellie Dorman in compliance with the trial court’s order striking her

pleadings.

      On January 27, 2011, the Investors filed a “Notice of Filing [of] Defendant’s

Admissions,” contending that they had served the Cleveland parties with requests

for admission on December 21, 2010, and that the Cleveland parties had failed to

respond. The Investors attached a copy of their requests for admission to the

notice and certified that the notice had been served on Gregg Clements, the

attorney for the Cleveland parties.

      On January 31, 2011, the Investors filed their response to the Cleveland

parties’ motion to compel arbitration. The Investors argued multiple bases for

denying the motion, including: (1) the Cleveland parties failed to establish that an

agreement of the parties to arbitrate existed or that the dispute fell within the scope

of an arbitration agreement between the parties; (2) the arbitration clause cited in

the motion to compel arbitration was unconscionable because it permitted the

Cleveland parties to choose all three members of the arbitration panel; and (3) the

Cleveland parties waived their right to compel arbitration “by waiting over a year

7
      There is no written ruling on this motion in the record. The trial court stated on
      the record in a subsequent hearing that it was denied.
                                           8
since this suit was filed, and less than sixty days before the commencement of

trial” to bring their motion to compel. Among other arguments, the Investors

complained that the Cleveland parties attached only “an unverified and

unauthenticated document to their Motion” and that the agreement that was

attached was an agreement between Oasis Petroleum, LLC and “an unknown third

party, Diane Ganzer.”    The “Participation Agreement” exhibit attached to the

Investors’ response, dated November 2, 2007, provided that it “was made and

entered into . . . by and between Oasis Petroleum, LLC . . . and Diane C.

Genzer. . . .” It was signed by Kellie Dorman on behalf of Oasis Petroleum and by

Diane Genzer on her own behalf.

      Also on January 31, following a hearing, the trial court rendered default

judgment against Kellie Dorman on all of the Investors’ claims and on Dorman’s

counterclaim for unpaid expenses.      The trial court further ordered that “the

damages of [the Investors’] Second Amended Petition are unliquidated and will be

established at an evidentiary hearing to take place on February 4, 2011.” The trial

court denied the Investors’ motion for contempt and sanctions against the

remaining Cleveland parties. Finally, the trial court granted the Investors’ special

exceptions contending that the Cleveland parties’ counterclaim was too general to

give fair notice of the facts or to plead adequate allegations, among other grounds.




                                         9
The trial court ordered the Cleveland parties to amend the defects in their pleadings

by 5:00 p.m. on February 7, 2011.

      The Investors again moved, on January 31, 2011, for summary judgment or,

alternatively, for sanctions requesting default judgment against the Cleveland

parties. The Investors argued, in part, that they were entitled to summary judgment

against the Cleveland parties based on their failure to respond to the requests for

admissions propounded on December 21, 2010.              In addition to the deemed

admissions, the Investors also filed numerous other documents demonstrating the

Cleveland parties’ failure to comply with various discovery requests. The record

contains no ruling on this motion.

      On February 8, 2011, the Investors filed multiple documents in preparation

for the February 15, 2011 trial setting, including their exhibit list, which listed the

Cleveland parties’ deemed admissions as an exhibit.

      On February 9, 2011, the Cleveland parties filed an unsigned, amended

counterclaim asserting that the Investors were liable for breach of contract for

failure to pay expenses incurred under the contracts at issue. The Investors moved

to dismiss the Cleveland parties’ counterclaim and sought sanctions against the

Cleveland parties for filing a frivolous claim.

      On February 15, 2011, the parties appeared in court and were called for trial.

The Cleveland parties announced they were not ready for trial, and the trial court

                                          10
addressed various other pending motions, including a motion for default judgment

against Nicos Energy, the Cleveland parties’ attempt to file the breach of contract

counterclaim, and the Cleveland parties’ motion to compel arbitration.

      Regarding the motion to compel arbitration, the Cleveland parties’ attorney

stated at the hearing that he believed all of the Investors had signed identical

Participation Agreements and that the originals had been destroyed. The Investors’

attorney conceded that some of the Investors signed “a similar agreement” to the

“Participation Agreement” provided by the Cleveland parties, but “not all of them

did.” The Cleveland parties presented no evidence that any Investors had signed

agreements, nor did they present any evidence of what the terms of the alleged

agreements were.      Nevertheless, the Investors also argued that the arbitration

provision in the Participation Agreement between Oasis Petroleum and Diane

Ganzer was unconscionable on its face because it allowed Copperhead Operating,

LLC, a company for which Paul Cleveland was the sole managing member,8 to

name all three arbitrators. The trial court stated, “Well, I just can’t believe that an

arbitration before three arbitrators that are appointed by one side would be a fair

8
      The Cleveland parties’ attorney stated at the hearing that the provision involving
      Copperhead Operating, and Paul Cleveland in the Participation Agreement
      between Oasis and Ganzer was not relevant to the claims of the Investors. He
      stated, “And it’s our contention that every one of them signed a participation
      agreement ordering . . . that they shall go to arbitration on a three-arbitrator panel.
      Then the name on there is not applicable to this case, which you can deduce
      Copperhead would not be on this. It’s the agreement itself without the name that
      we’re saying these [Investors] signed. . . .”
                                            11
arbitration, and, therefore, I’m going to deny [the Cleveland parties’] motion to

compel arbitration.” The trial court’s signed order denying the motion to compel,

however, did not provide a basis for the ruling.

      The Investors also renewed their previous objections to the Cleveland

parties’ amended counterclaim for contractual unpaid operating costs, arguing that

it did not cure the defects cited in their special exceptions to the Cleveland parties’

original counterclaim, that the attached “Participation Agreement” was signed by a

non-party to the present suit rather than by one of the Investors, and that the

attached agreement did not support a claim for unpaid operation costs, even if it

could be enforced against the Investors. The parties also discussed the existence of

the Cleveland parties’ deemed admissions: the Investors’ attorney stated on the

record, “We sent requests for admissions that were never responded to.”

      Finally, the attorney for the Cleveland parties stated that he had “been fired

by both of my clients that are here”—James Cleveland and the two corporations he

represented, Oasis Petroleum and Lone Star Land & Exploration, and Paul

Cleveland—and asked the trial court to allow them time to secure new counsel

before proceeding to trial. James Cleveland and Paul Cleveland were both sworn

as witnesses and testified that they were in the process of securing new counsel.

James also testified that he decided to fire Clements when he realized that

Clements had not filed a “motion to compel” or a motion to continue the hearing

                                          12
on the default judgment and that he had started seeking new counsel when he

“found out that [Clements] has not been . . . truthful with me about what’s going on

in this case.” He acknowledged, however, that he had not yet entered into a

representation agreement or paid fees to another attorney. James also testified that

he did not believe he had been adequately represented and that he wanted Clements

to file a motion to continue the February 15 trial date so that James could secure

new counsel. Paul Cleveland testified that he believed he had a conflict of interest

with the other Cleveland parties and that he intended to secure his own counsel

separate from that of the remaining parties.       He testified that he was not

comfortable with Clements representing him at the same time as he represented the

other Cleveland parties. Paul further testified that he had retained a new attorney,

Charles Watson, that morning.

      The trial court stated that it would defer ruling on Clements’ motion to

withdraw until the Cleveland parties could obtain other counsel, and he

admonished Clements, in the presence of James and Paul Cleveland, that if they

failed to procure new counsel “within a reasonable time,” they would be required

to go forward to trial with Clements as their attorney. The trial court granted a

continuance on the trial setting to May 17, 2011. However, Clements never filed a

written motion to withdraw as counsel and Watson never made an appearance as

an attorney of record.

                                        13
      On April 4, 2011, the Investors moved a third time for traditional and no-

evidence summary judgment against the Cleveland parties. The Investors argued

that there was no genuine issue of material fact on their claims for common law

fraud and fraudulent inducement, breach of contract, conspiracy, unjust

enrichment, Texas Theft Liability Act violations, an accounting, and alter ego, and

therefore, they were entitled to summary judgment. The Investors further argued

that the Cleveland parties had made “deemed admissions which are the basis for

summary judgment.”        In addition to filing the Cleveland parties’ deemed

admissions, the Investors filed more than twenty additional exhibits in support of

their motion for summary judgment, including multiple affidavits, deposition

excerpts, letters produced during discovery, certified copies of proceedings in other

courts, and records from the Secretary of State regarding the corporate parties.

      On April 12, 2011, the Cleveland parties, through their attorney Clements,

moved to abate the trial court proceedings pending their appeal of the trial court’s

denial of their motion to compel arbitration.9

      On April 26, 2011, the trial court rendered summary judgment against all the

Cleveland parties, including Dorman and Nicos Energy.               It ordered that the

Cleveland parties, jointly and severally, pay the following amounts to the

Investors: Alshayeb, $7,500; Archer, $100,000; Bruce, $30,000; Chachere,


9
      The record does not contain an explicit ruling on the motion to abate.
                                           14
$30,275; Cangelosi, $185,000; Gorman, $55,000; Himel, $150,000; Joubarani and

Matta, $472,000; McLaughlin, $227,039.98; and Taylor, $199,392, for a total of

$1,456,206.98. The trial court also awarded $500,000 as attorney’s fees, and it

awarded “taxable costs” without specifying a dollar amount.

      On May 23, 2011, new counsel filed an appearance on behalf of the

Cleveland parties. On May 24, 2011, the Cleveland parties moved to withdraw the

deemed admissions, moved for a new trial, and moved to set aside the death-

penalty sanction against Dorman. This motion was accompanied by the affidavits

of James Cleveland, Paul Cleveland, Kellie Dorman, and Gregg Clements, among

other documents. In their affidavits, James Cleveland, Paul Cleveland, and Kellie

Dorman all averred that they were not aware of the requests for admissions and

would have answered them had they been aware and that they first learned of the

requests for admissions after the trial court rendered summary judgment. Clements

averred that his office received the requests for admissions but he did not see or

answer them. He stated that it “appears to be true” that no one from his office

informed the Cleveland parties about the requests for admissions due to some

turnover in his office staff. Finally, he stated that he did not intentionally fail to

answer the requests for admission, but that his failure was due to “oversight and

mistake on my part, as well as the disorganized situation in my office at that time.”




                                         15
      On July 11, 2011, following a July 7, 2011 hearing, the trial court denied the

Cleveland parties’ motion to withdraw the deemed admissions, motion for new

trial, and motion to set aside Dorman’s death-penalty sanction.

                         Motion to Compel Arbitration

      In their first issue, the Cleveland parties argue that the trial court erred in

denying their motion to compel arbitration.

      A party attempting to compel arbitration must first establish that the dispute

in question falls within the scope of a valid arbitration provision. J.M. Davidson,

Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). The presumption in favor of

arbitration arises only after the party seeking to compel arbitration proves that a

valid agreement exists. Id.

      Here, the Cleveland parties have failed to prove that any of the Investors

entered a valid agreement to arbitrate. The Cleveland parties referenced only the

Participation Agreement between Oasis Petroleum and Diane Ganzer, an

individual who is not a party to this suit. The Cleveland parties presented no

evidence that the terms of that Participation Agreement apply in the instant case.

They presented only their motion to compel and the argument of their counsel that

all of the Investors signed similar agreements and that at least one of the terms of

the Participation Agreement—the clause designating the party who would choose

the panel of arbitrators—did not apply in the present case. Neither an attorney’s


                                         16
arguments nor the pleadings or motions of a party constitute evidence. See, e.g.,

Love v. Moreland, 280 S.W.3d 334, 336 n.3 (Tex. App.—Amarillo 2008, no pet.);

Potter v. GMP, L.L.C., 141 S.W.3d 698, 704 (Tex. App.—San Antonio 2004, pet.

dism’d); see also Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d

656, 660 (Tex. 1995) (stating that pleadings, even if sworn and verified, are not

generally competent evidence to prove facts alleged in them); McCain v. NME

Hosps., Inc., 856 S.W.2d 751, 757 (Tex. App.—Dallas 1993, no writ) (“Motions

and arguments of counsel are not evidence.”). Thus, the Cleveland parties failed to

meet their burden of proving the existence of a valid agreement to arbitrate

between the parties, and the trial court did not abuse its discretion in denying the

motion to compel arbitration. See Webster, 128 S.W.3d at 227.

      The Cleveland parties argue that the trial court based its ruling on the

Investors’ argument that the arbitration agreement was unconscionable and that the

ruling should be overturned on that ground. However, the written and signed order

of the trial court denied the motion to compel without providing a basis for the

ruling. “[A] judgment or order that is rendered in writing and signed by the trial

judge becomes the official judgment of the court,” and recitals in a signed order

“control over conflicting recitals in either the reporter’s or clerk’s record.” Lopez

v. Brown, 356 S.W.3d 599, 603 n.4 (Tex. App.—Houston [14th Dist.] 2011, no

pet.). We may uphold an order denying arbitration if it is proper on any basis

                                         17
considered by the trial court. See Bates v. MTH Homes-Texas, L.P., 177 S.W.3d

419, 422 (Tex. App.—Houston [1st Dist.] 2005, no pet.); In re H.E. Butt Grocery

Co., 17 S.W.3d 360, 367 (Tex. App.—Houston [14th Dist.] 2000, orig.

proceeding). Because we have concluded that the order denying arbitration was

proper on the basis that the Cleveland parties failed to establish the existence of a

valid agreement to arbitrate between the parties, we need not address the remaining

grounds presented to the trial court.

      We overrule the Cleveland parties’ first issue.

                       Withdrawal of Deemed Admissions

      In their second issue, the Cleveland parties argue that the trial court erred in

refusing to allow them to withdraw their deemed admissions.

      Once an action is filed, a party may serve written requests for admissions

that can encompass “any matter within the scope of discovery, including

statements of opinion or of fact or of the applications of law to fact. . . .” TEX. R.

CIV. P. 198.1; Marino v. King, 355 S.W.3d 629, 632 (Tex. 2011) (per curiam). If

the opposing party does not serve its responses to the admissions requests within

thirty days, the matters in the requests are deemed admitted against the party

without the necessity of a court order. TEX. R. CIV. P. 198.2(C); Marino, 355

S.W.3d at 633.      Any matter admitted or deemed admitted is conclusively

established unless the court, on motion, permits withdrawal or amendment of the


                                         18
admission. TEX. R. CIV. P. 198.3; Boulet v. State, 189 S.W.3d 833, 836 (Tex.

App.—Houston [1st Dist.] 2006, no pet.) (citing Marshall v. Vise, 767 S.W.2d 699,

700 (Tex. 1989)).

      We review a trial court’s ruling on a motion to withdraw deemed admissions

for an abuse of discretion. See Wheeler v. Green, 157 S.W.3d 439, 443 (Tex.

2005) (per curiam) (“We recognize that trial courts have broad discretion to permit

or deny withdrawal of deemed admissions, but they cannot do so arbitrarily,

unreasonably, or without reference to guiding rules or principles.”). Withdrawal of

deemed admissions is permitted upon a showing of good cause and a finding by

the trial court that (1) the party relying upon the deemed admissions will not be

unduly prejudiced, and (2) presentation of the merits of the action will be served.

TEX. R. CIV. P. 198.3; Marino, 355 S.W.3d at 633. The party seeking withdrawal

of the deemed admissions has the burden to establish good cause. Boulet, 189

S.W.3d at 836.

      The Texas Supreme Court has held that, under special circumstances, a party

may bring a request to withdraw deemed admissions for the first time in a motion

for new trial. See Wheeler, 157 S.W.3d at 442; see also Marino, 355 S.W.3d at

632–33 (holding that trial court erred in denying pro se appellant opportunity to

withdraw deemed admissions, in spite of fact that she never formally made such

request before trial court, because her “argument and pending motions” filed prior

                                        19
to rendition of summary judgment provided evidence of good cause and lack of

prejudice). However, the supreme court has also held “the equitable principles

allowing these arguments to be raised in a motion for new trial do not apply if a

party realizes its mistake before judgment and has other avenues of relief

available.”   Wheeler, 157 S.W.3d at 442 (citing Carpenter v. Cimarron

Hydrocarbons Corp., 98 S.W.3d 682, 686 (Tex. 2002)); see also Unifund CCR

Partners v. Weaver, 262 S.W.3d 796, 798 (Tex. 2008) (holding that summary

judgment motion put appellant on notice of deficiency of his response to requests

for admissions, and, thus, appellant knew of his mistake before judgment but failed

to respond, thereby waiving his right to challenge deemed admissions).

      The Cleveland parties argue that they are entitled to “a more lenient

standard” because: (1) the trial court’s summary judgment “was based on merits-

preclusive deemed admissions”; (2) the Investors’ “requests for admissions were

aimed at seeking admissions that [the Cleveland parties] did not have a case, as

opposed to gathering information” and the requests asked the Cleveland parties to

“admit the elements of [the Investors’] claims against them”; and (3) “there was no

evidence of flagrant bad faith or callous disregard for the rules and the [Investors]

could prepare for trial without the admissions.” Specifically, they argue that their

motion for new trial affidavits and the affidavit of Gregg Clements establish that

they acted in good faith, that they were unaware of the requests for admission due

                                         20
to Clements’ poor representation, and that they would have responded had they

known of the existence of the requests for admission.

      The Investors served the Cleveland parties, through their attorney Gregg

Clements, with requests for admissions on December 21, 2010, and the Cleveland

parties failed to respond. Prior to the trial court’s rendition of judgment, the

Investors (1) filed a notice of the Cleveland parties’ deemed admissions on January

27, 2011; (2) filed two motions for summary judgment—one on January 31, 2011,

and one on April 4, 2011—based, in part, on the Cleveland parties’ deemed

admissions; (3) filed a trial exhibit list including the deemed admissions as an

exhibit; and (4) stated on the record at the time of the original trial setting,

February 15, 2011, in the presence of both James and Paul Cleveland and their

attorney, the fact that the Investors “sent requests for admissions that were never

responded to” by any of the Cleveland parties, in addition to pointing out several

other discovery and pleading abuses. The notice of deemed admissions, two

motions for summary judgment, trial exhibit list, and discussion on the record in

the presence of two of the Cleveland parties and their attorney demonstrate that the

Cleveland parties had notice of their mistake before the trial court rendered

judgment and that they had other avenues of relief available, but that they failed to

take action until after the trial court’s judgment. Thus, we conclude that the




                                         21
Cleveland parties waived their right to challenge the deemed admissions. See

Weaver, 262 S.W.3d at 798; Wheeler, 157 S.W.3d at 442.

      The Cleveland parties cite Wheeler and Marino to support their arguments

on this issue. In Wheeler, although the pro se litigant, Wheeler, filed her responses

to the requests for admissions two days after they were due because of a

miscalculation involving the mailbox rule, they were filed six months before the

motion for summary judgment based exclusively on the deemed admissions was

heard. 157 S.W.3d at 441. The supreme court held that Wheeler did not waive her

complaint regarding withdrawal of the deemed admissions by presenting it for the

first time in her motion for new trial because “nothing in this record suggests that

before summary judgment was granted, [Wheeler] realized that her responses were

late, that she needed to move to withdraw deemed admissions, or that she needed

to file a response to the summary judgment raising either argument.” Id. at 442.

      The court observed that Wheeler’s procedural failures were based on her

mistaken understanding of when “service” occurred and of what a summary

judgment “hearing” was and concluded, “On this record, the lower courts could

have concluded that [Wheeler] was wrong on her dates and wrong on how to

correct them, but not that either was the result of intent or conscious indifference.”

Id. The court noted, however, that “[b]y contrast, if the same elementary mistakes




                                         22
had been made by a lawyer, such a conclusion might well be warranted.” Id. at

442 n.1.

      The supreme court reached a similar conclusion in Marino, where the pro se

litigant’s responses to the requests for admission were one day late, where she had

filed “argument and pending motions” raising grounds for continuing the summary

judgment hearing and denying the motion for summary judgment, and where the

record indicated that she had presented good cause to extend the discovery

deadline before the trial court ruled on the summary judgment motion based

exclusively on the deemed admissions. 355 S.W.3d at 630–33.

      This case is distinguishable from both Wheeler and Marino. Here, the

Cleveland parties were represented at all times by an attorney, unlike the pro se

litigants in Wheeler and Marino. Furthermore, the Cleveland parties did not file

responses to the requests for admissions until well after the trial court rendered

summary judgment, rather than just a day or two after the original admissions

deadline, as occurred in Wheeler and Marino. In fact, the Cleveland parties failed

to respond to numerous discovery requests and orders compelling production, even

after the February 15, 2011 trial setting, when their failure to respond to

admissions and other discovery was discussed on the record in the presence of both

James and Paul Cleveland and their attorney. Following this hearing, they failed,

for the third time, to respond to the Investors’ motion for summary judgment.

                                        23
      Finally, the trial court’s summary judgment here was not, as the Cleveland

parties argue, based exclusively upon the deemed admissions. The Texas Supreme

Court has acknowledged that requests for admissions were “never intended to be

used as a demand upon a plaintiff or defendant to admit that he had no cause of

action or ground of defense.” Stelly v. Papania, 927 S.W.2d 620, 622 (Tex. 1996)

(per curiam). The supreme court has held that “when admissions are deemed as a

discovery sanction to preclude a presentation of the merits, they implicate the same

due process concerns as other case-ending discovery sanctions.” Marino, 355

S.W.3d at 632; Wheeler, 157 S.W.3d at 443. Thus, in Wheeler, the supreme court

held that “absent flagrant bad faith or callous disregard for the rules, due process

bars merits-preclusive sanctions.” Wheeler, 157 S.W.3d at 443; see also Marino,

355 S.W.3d at 633 (stating that Wheeler “required a showing of ‘flagrant bad faith

or callous disregard for the rules’ to substantiate a summary judgment based solely

on deemed admissions.”).

      Here, contrary to the Cleveland parties’ arguments, we need not determine

whether the record demonstrates the existence of flagrant bad faith and callous

disregard for the rules because the summary judgment was not based solely on the

deemed admissions.      See Marino, 355 S.W.3d at 633 (stating that Wheeler

“required a showing of ‘flagrant bad faith or callous disregard for the rules’ to

substantiate a summary judgment based solely on deemed admissions.”) (emphasis

                                        24
added).    Instead, we analyze the propriety of the summary judgment and

supporting evidence.

      We overrule the Cleveland parties’ second issue.

                                Summary Judgment

      In their third issue, the Cleveland parties argue that the trial court erred in

rendering summary judgment against them.           The Investors asserted multiple

grounds for recovery, including claims for fraud and fraudulent inducement,

breach of contract, conspiracy, unjust enrichment, alter ego, and violations of the

Texas Theft Liability Act and other statutory violations, against all the Cleveland

defendants, including Dorman and Nicos Energy.             The trial court rendered

summary judgment against all of the Cleveland parties, jointly and severally, for

the amounts the Investors had invested with the Cleveland parties.

A.    Standard of Review

      We review de novo the trial court’s ruling on a summary judgment motion.

Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848

(Tex. 2009). To prevail on a traditional summary judgment motion, the movants

must establish that no genuine issues of material fact exist and that they are entitled

to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Little v. Tex. Dep’t of

Criminal Justice, 148 S.W.3d 374, 381 (Tex. 2004). Parties moving for summary

judgment on their own claims must conclusively prove all essential elements of the


                                          25
claim. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); see also

TEX. R. CIV. P. 166a(a) (“A party seeking to recover upon a claim . . . may, at any

time after the adverse party has appeared or answered, move with or without

supporting affidavits for a summary judgment in his favor upon all or any part

thereof.”). A matter is conclusively established if reasonable people could not

differ as to the conclusion to be drawn from the evidence. See City of Keller v.

Wilson, 168 S.W.3d 802, 816 (Tex. 2005). “[S]ummary judgments must stand or

fall on their own merits, and the non-movant’s failure to answer or respond cannot

supply by default the summary judgment proof necessary to establish the movant’s

right.” McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 343 (Tex.

1993).

      If the movants meets their burden, the burden then shifts to the nonmovants

to raise a genuine issue of material fact precluding summary judgment. See Centeq

Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995). The evidence raises a

genuine issue of fact if reasonable and fair-minded jurors could differ in their

conclusions in light of all of the summary judgment evidence. Goodyear Tire &

Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007) (per curiam).              To

determine if the nonmovants have raised a fact issue, we review the evidence in the

light most favorable to the nonmovants, crediting favorable evidence if reasonable

jurors could do so, and disregarding contrary evidence unless reasonable jurors

                                        26
could not. Fielding, 289 S.W.3d at 848 (citing City of Keller, 168 S.W.3d at 827).

We indulge every reasonable inference and resolve any doubts in the nonmovants’

favor. Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002) (citing Sci.

Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997)).

      We must affirm the summary judgment if any of the grounds presented to

the trial court are meritorious. Provident Life & Accident Ins. Co. v. Knott, 128

S.W.3d 211, 216 (Tex. 2003); Pickett v. Tex. Mut. Ins. Co., 239 S.W.3d 826, 840

(Tex. App.—Austin 2007, no pet.).

B.    The Investors’ Breach of Contract Claim

      To prevail on a breach of contract claim, a plaintiff must prove: (1) the

existence of a valid contract; (2) the plaintiff’s performance or tender of

performance; (3) the defendant’s breach of contract; and (4) the plaintiff’s damages

as a result of the breach. Prime Prods. Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631,

636 (Tex. App.—Houston [1st Dist.] 2002, pet. denied).

      The Investors argued in their motion for summary judgment that (1) they

had valid contracts with the Cleveland entities, (2) that each Investor performed

pursuant to the contract by investing the amount agreed upon between the parties,

(3) that the Cleveland parties breached the agreement by failing to properly invest

the money, and (4) that they were harmed by the Cleveland parties’ breach. They

supported this argument with the affidavits of the Investors and their supporting


                                         27
exhibits. The Investors also included deposition excerpts from James and Paul

Cleveland regarding their involvement in the oil and gas prospect and the nature of

their interest in the corporate entities involved, documents related to other

litigation involving various Cleveland parties, letters written by James and Paul

Cleveland, documents from the Texas Secretary of State regarding the corporate

entities involved, and the Cleveland parties’ deemed admissions.

      The Investors’ affidavits outlined the nature of their agreement and course of

dealing with the Cleveland parties. For example, Robert Taylor averred that, in

approximately February or March 2007, James and Paul Cleveland represented that

the Schleicher County well was “producing approximately 10 million cubic feet of

gas per day.” In April 2007, James told Taylor that “he would transfer a 2%

ownership interest in the leases and existing well in exchange for an immediate

investment in this Schleicher County well that he claimed . . . was producing in

excess of 10 million cubic feet of gas per day.” James told Taylor to wire the

money to an account for Nicos Energy, which James represented that he

controlled. Taylor averred that James sought a second investment in May 2007 to

convert the well to a saltwater injection well and to drill a new well that would

improve production from the lease. Taylor stated that James promised him that

this investment “would represent a 4% or 6% interest in the leases.”




                                        28
      Taylor averred that James Cleveland eventually provided an unsigned lease

entered into between “Larry J. Kerr” and “Ryanco Trust” that indicated the

potential interest in the Schleicher County property expired on April 17, 2007,

“which was prior to the dates that [Archer] and I made our investments.” He stated

that James never provided further documentation regarding Taylor’s interest in the

lease or the wells. Taylor stated that James eventually gave him “a handful of

invoices showing some work-over to the well totaling approximately $300,000 [the

amount invested by Taylor and Archer], in an effort to show that work had been

done, but this shows that a small amount of re-work to a damaged well was done,

not that a new well was drilled or that a saltwater injection well had been drilled or

completed.” Finally, Taylor averred that “the Schleicher County well had no

production” and that there “was never any saltwater injection well. There was

never a new well drilled.” He stated that “there was no work being performed as

of the date that I invested onward.”

      Attached as exhibits to Taylor’s affidavit were certified copies from the

Texas Railroad Commission showing that the Schleicher County well, operated by

Copperhead Operating, LLC, an entity controlled by Paul Cleveland, had no

production between January 2003 and January 2011, email correspondence

between Taylor and James Cleveland, a copy of the unsigned lease, and documents

reflecting the wire transfers Taylor made to Nicos Energy. Taylor’s exhibits also

                                         29
included two copies of “Contract Assignments” that James Cleveland delivered to

Taylor in August 2007. The Contract Assignment acknowledged the receipt of “a

wire transfer payable to Nicos Energy, LLC, represented by James R. Cleveland,

acting in his capacity as President of Nicos Energy, LLC, (hereinafter referred to as

Assignor), for the Schleicher County Lone Star Land & Exploration, LLC lease.”

It further stated: “Oasis Petroleum, LLC agrees to assign, sell, convey, and will

transfer to Taylor . . . upon completion of the first well” a working interest in that

well and the saltwater injection well located on the lease.

      We conclude that Taylor’s statements recounted above were clear, positive,

direct, otherwise credible and supported by accompanying documents, free from

contradictions and inconsistencies, and could have been readily controverted.

Thus, these portions of Taylor’s affidavit could serve as the basis for granting

summary judgment. See Trico Techs. Corp. v. Montiel, 949 S.W.2d 308, 310 (Tex.

1997) (holding that uncontroverted, self-serving affidavit of interested witness may

serve as basis for granting summary judgment if evidence is “clear, positive, direct,

otherwise credible, free from contradictions and inconsistencies, and could have

been readily controverted.”); see also TEX. R. CIV. P. 166a(c) (discussing use of

affidavits as summary judgment evidence).

      Archer, McLaughlin, and Cangelosi made substantially similar statements in

their affidavits and also provided multiple supporting documents. Himel likewise

                                          30
averred that he invested money in the Schleicher County well in exchange for a

certain interest in the well, and that several friends—investors Alshayeb, Bruce,

and Gorman—also invested based on similar arrangements. Himel’s affidavit

included exhibits regarding his own transfers and alleged interests, as well as the

business records affidavits of Alshayeb, Bruce, and Gorman reflecting their

investments and purported interests in the Schleicher County well in the form of

additional “Contract Assignments” and checks or wire transfers paid to Oasis

Petroleum or Nicos Energy. All investors averred that the Cleveland parties failed

to invest the money as promised and that they never received any payment from

any of the Cleveland parties.

      The Cleveland parties argue only that the Investors’ proof of this claim

“relies on the [Investors’] testimony, which does not rise to the level of

conclusively establishing breach.” However, as we have already discussed, the

affidavits of the Investors provided the terms upon which they paid money to the

various Cleveland parties, and the Investors averred that the money was not

invested consistent with those terms.    These statements were “clear, positive,

direct, otherwise credible, free from contradictions and inconsistencies, and could

have been readily controverted,” and, thus, served as a proper basis for granting

summary judgment. See Montiel, 949 S.W.2d at 310. These statements were

further supported by documents demonstrating that the Cleveland parties accepted

                                        31
various payments but never produced any gas from the Schleicher County well or

drilled the promised saltwater injection well or “new” well.

      Regarding damages, the Investors presented multiple affidavits, financial

records, and, in addition, deemed admissions regarding the amount of money each

investor paid to the Cleveland parties. The Investors averred that the money they

invested was not used as promised and that they never received any payment or

compensation from the Cleveland parties. The exact amount of each Investors’

investment was provided in the individual affidavits or business records and was

also the subject of deemed admissions.        These amounts constituted reliance

damages of the Investors. See Quigley v. Bennett, 227 S.W.3d 51, 56 (Tex. 2007)

(stating that reliance damages are one type of recoverable damages for breach of

contract and are intended to “compensate for the plaintiff’s out-of-pocket

expenditures”); see also Chung v. Lee, 193 S.W.3d 729, 733 (Tex. App.—Dallas

2006, pet. denied) (“When . . . a party makes a substantial investment in

performing the agreement and the agreement is breached, she is entitled to have

that investment returned.”).

      We conclude that the summary judgment evidence, adduced by the Investors

and never controverted by the Cleveland parties, established that the Investors

agreed to invest cash with various Cleveland parties in exchange for an interest in

the Schleicher County well, that the Investors made such investments, that the

                                         32
Cleveland parties breached the agreement by failing to provide the Investors with

the agreed upon interests and by failing to use the investments to develop those

interests, and that the Investors were damaged by this breach in the amount of their

investments. Thus, the Investors established each element of their cause of action

for breach of contract against the Cleveland parties. See Prime Prods. Inc., 97

S.W.3d at 636 (providing elements of breach of contract claim); see also Rhone-

Poulenc, Inc., 997 S.W.2d at 223 (holding that party moving for summary

judgment on his own claim must conclusively prove all essential elements of the

claim); City of Keller, 168 S.W.3d at 816 (holding that matter is conclusively

established if reasonable people could not differ as to conclusion to be drawn from

evidence).

      Therefore, the burden shifted to the Cleveland parties to raise a genuine

issue of material fact. See Centeq Realty, Inc., 899 S.W.2d at 197. The Cleveland

parties, who did not respond to the motion to summary judgment in the trial court,

failed to present any evidence raising a genuine issue of material fact.

      We hold that the trial court did not err in granting summary judgment on this

ground.10    Because the Investors’ claim for breach of contract supports the



10
      We note that the Investors’ motion for summary judgment included arguments and
      authority that they were entitled to no-evidence summary judgment on the
      Cleveland parties’ counterclaim for unpaid expenses, and the trial court’s
      judgment ordered “that all claims by [the Cleveland parties] against [the Investors]
                                           33
judgment of the trial court, we need not address the other grounds asserted in the

motion for summary judgment.11 See Provident Life & Accident Ins. Co., 128

S.W.3d at 216 (holding that we must affirm summary judgment if any ground

presented to trial court is meritorious).

                                   Attorney’s Fees

      In their fourth issue, the Cleveland parties argue that the trial court erred in

awarding $500,000 in attorney’s fees.

      The trial court awarded attorney’s fees of $500,000 based on the affidavit of

the Investors’ attorney, Jeremy Stone. Stone provided his qualifications as a

shareholder with his law firm and an attorney with general knowledge regarding

reasonable and necessary fees customarily charged for legal services in Harris and

Fort Bend Counties. He averred that he and his firm provided representation for all

of the Investors totaling over 600 hours, and he provided a list of services he

performed. Stone stated that his hourly rate was $300 per hour and his associate’s

rate was $200 per hour, “which are reasonable rates considering the factors” he had

previously discussed, such as time and labor required, the fee customarily charged,


      are dismissed with prejudice. The Cleveland parties do not complain of this
      portion of the trial court’s ruling on appeal.
11
      The trial court’s summary judgment was rendered against all Cleveland parties,
      including Dorman. Because we uphold the trial court’s judgment against Dorman
      on this basis, we need not address the Cleveland parties’ fifth issue, arguing that
      the trial erred in striking Dorman’s pleadings and entering a default judgment on
      liability only against her prior to its entry of summary judgment.
                                            34
and the nature and length of the professional relationship with the client. He

specifically averred that “[t]he total amount of attorneys’ fees, including paralegal

time, is $142,400, which is reasonable and necessary.” He further stated that his

firm “incurred $12,675.54 in expenses” and that “these fees were reasonable and

customary.” Finally, he stated that his firm “has a 40% contingency fee agreement

with Plaintiffs. It is my opinion [that] 40% of the judgment amount against

Defendants would be a reasonable and necessary fee considering the factors

above.”

      The Cleveland parties did not respond to the motion for summary judgment

or object to Stone’s affidavit before the trial court entered judgment. They argued

for the first time in their motion for new trial that the award of $500,000 in

attorney’s fees was erroneous because the Investors did not conclusively establish

that they were entitled to $500,000 in attorney’s fees because Stone averred that

both $142,400 and 40% of the judgment constituted a reasonable fee.

      We review an award of attorney’s fees for abuse of discretion. Bocquet v.

Herring, 972 S.W.2d 19, 20–21 (Tex. 1998). A trial court abuses its discretion if it

acts arbitrarily, unreasonably, or without regard to guiding legal principles. Id. at

21. When reviewing a trial court’s decision under this standard, we must view the

evidence in the light most favorable to the trial court’s ruling and indulge every

presumption in its favor. Phillips & Akers, P.C. v. Cornwell, 927 S.W.2d 276, 279

                                         35
(Tex. App.—Houston [1st Dist.] 1996, no writ.). We have already held that the

trial court properly rendered summary judgment on the Investors’ breach of

contract claim, which is a claim that supports an award of attorney’s fees. See

TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (Vernon 2008) (permitting

recovery of attorney’s fees “in addition to the amount of a valid claim and costs” in

a breach of contract action). Thus, the only remaining question is whether the trial

court’s award of $500,000 in attorney’s fees was reasonable and necessary.

      Whether fees are reasonable and necessary is a question of fact. Bocquet,

972 S.W.2d at 21. The non-exclusive factors the factfinder may consider when

determining the reasonableness of a fee include: (1) the time and labor required,

the novelty and difficulty of the questions involved, and the skill required to

perform the legal service properly; (2) the likelihood that the acceptance of the

particular employment will preclude other employment by the lawyer; (3) the fee

customarily charged in the locality for similar legal services; (4) the amount

involved and the results obtained; (5) the time limitations imposed by the client or

by the circumstances; (6) the nature and length of the professional relationship

with the client; (7) the experience, reputation, and ability of the lawyer or lawyers

performing the services; and (8) whether the fee is fixed or contingent on results

obtained or uncertainty of collection before the legal services have been rendered.




                                         36
Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 561 n.7 (Tex. 2006); Arthur

Andersen & Co. v. Perry Equip. Co,, 945 S.W.2d 812, 818 (Tex. 1997).

      Although what constitutes reasonable attorney’s fees is a question of fact,

clear, direct, and uncontroverted evidence, even evidence from an interested

witness, will establish that attorney’s fees sought are reasonable, necessary, and

credible, where the opposing party had means and opportunity to disprove the

testimony but failed to do so. See Smith v. Patrick W.Y. Tam Trust, 296 S.W.3d

545, 547–48 (Tex. 2009); Rosenblatt v. Freedom Life Ins. Co., 240 S.W.3d 315,

321 (Tex. App.—Houston [1st Dist.] 2007, no pet.).

      Here, Stone’s affidavit averred that, based on the Arthur Andersen factors,

the time spent by his firm, and the services rendered, $142,400 in fees and

$12,675.54 in costs were reasonable and necessary. This evidence was clear,

direct, and uncontroverted. The Cleveland parties had the means and opportunity

to disprove the evidence but failed to do so. Thus, this evidence established that

the specific attorney’s fees and expenses sought by the Investors—$155,075.54—

were reasonable and necessary. See Smith, 296 S.W.3d at 547–48.

      However, Stone’s statement that 40% of the judgment would be a reasonable

and necessary fee in light of his firm’s 40% contingency fee agreement with the

Investors does not justify increasing the fee award beyond the specific amount

requested by the Investors. Attorney’s fees cannot be awarded as a percentage of

                                       37
an amount of damages based solely on the existence of a contingency fee contract.

See Arthur Andersen & Co., 945 S.W.2d at 818–19. To recover attorney’s fees

from the defendant, a plaintiff must request a specific sum for the attorney fees, not

expressed as a percentage of the damages. Id. at 819. While a contingent fee may

be “a reasonable fee from the standpoint of the parties to the contract[,]” that alone

does not make the fee “reasonable for purposes of shifting that fee to the

defendant.” Id. at 818–19.

      Therefore, we sustain the Cleveland parties’ fourth issue in part and modify

the portion of the trial court’s judgment awarding attorney’s fees by reducing the

amount awarded from $500,000 to $155,075.54.

                                    Conclusion

      We modify the judgment of the trial court to reduce the award of attorney’s

fees to the Investors to $155,075.54. We affirm the judgment of the trial court as

modified.




                                              Evelyn V. Keyes
                                              Justice

Panel consists of Justices Keyes, Bland, and Sharp.




                                         38
