Moser, Independent Administrator for Estate of Whitsett v. Junell, Jr. and Andrews & Kurth L.L.P.

Opinion to: SJR TGT SN TJ EVK ERA GCH LCH JB

Opinion issued February 1, 2007

In The

Court of Appeals

For The

First District of Texas

NO. 01-04-00078-CV

THE ESTATE OF CAROL A. WHITSETT, Appellant

V.

WILLIAM E. JUNELL AND ANDREWS KURTH L.L.P., Appellees

On Appeal from the 151st District Court

Harris County, Texas

Trial Court Cause No. 1995-15976

O P I N I O N

The Estate of Carol A. Whitsett

appeals a summary judgment entered in favor of William E. Junell and Andrews

Kurth L.L.P. (“A&K”). In one issue, Whitsett contends the trial court

erred in granting summary judgment in favor of Junell and A&K because the Hughes

rule tolled the statute of limitations on her legal malpractice claims

against Junell and A&K until the Fifth Circuit dismissed her appeal in the underlying

litigation made the subject of this suit. Hughes v. Mahaney

& Higgins , 821 S.W.2d 154, 157 (Tex. 1991). We conclude that the trial court erred in granting summary

judgment because the Hughes rule is applicable to Whitsett’s legal malpractice claims. Id. We therefore

reverse and remand.

Background

In 1980, Whitsett’s husband

was killed in an airplane crash. After her husband’s death, Whitsett engaged Thomas

Dardas, an attorney, to pursue a wrongful death claim and handle the estate of

her late husband. During the representation, Dardas convinced Whitsett to make

him two loans, together totaling $95,000. Dardas defaulted on the loans.

In December 1981, Whitsett hired

Junell to represent her in a lawsuit against Dardas to obtain repayment of the

loans (the “Dardas litigation”). Junell filed suit against Dardas in December

1982. The lawsuit alleged breach of fiduciary duty, legal malpractice, breach

of contract, fraud, violations of the Deceptive Trade Practices Act (“DTPA”),

and sought recovery of punitive damages. Whitsett alleges that she asked

Junell to assert additional tort claims against Dardas in the lawsuit, and that

Junell advised against filing these claims because pursuit of them would be

futile. Dardas filed for bankruptcy shortly thereafter and Junell asserted

Whitsett’s claims in the bankruptcy proceeding.

In 1988, Junell left his former law

firm and joined A&K. Junell withdrew from his representation of Whitsett

in February 1991. Whitsett’s new attorney, Tom Dickens, pursued the Dardas

litigation in federal court and lost. Whitsett appealed the trial court’s take-nothing

judgment in the Dardas litigation. The Fifth Circuit dismissed the appeal on

March 30, 1993.

On March 30, 1995, two years after

the dismissal of the federal appeal, Whitsett filed this action against Junell

and A&K. Whitsett alleges that in the Dardas litigation, Junell (1) negligently

failed to pursue the tort claims he asserted against Dardas and (2) failed to

include additional unidentified “unasserted” tort claims. Junell and A&K

moved for partial summary judgment, asserting the affirmative defense of

limitations. The trial court granted the motion.

The trial court’s order granting

Junell and A&K’s partial motion for summary judgment states,

On June 20, 2000, the Court heard Defendants’ Motion

for Partial Summary Judgment Based on Limitations (the “Motion”). After

reviewing the pleadings and hearing arguments of counsel, the Court grants the

motion in part, and denies it in part.

The Motion was directed at the specific claims and

causes of action asserted by Carol Whitsett against William E. Junell, Jr. and

Andrews & Kurth, L.L.P., which arose out of alleged claims which Carol

Whitsett had against Thomas A. Dardas that were not included or asserted in

litigation filed by Whitsett against Dardas. It is ORDERED that the Motion is

granted as to those specific claims and causes of action against the Defendants

that Carol Whitsett had against Thomas A. Dardas that were not included or

asserted in litigation filed by Whitsett against Dardas, provided, however,

that it is further ORDERED that the Motion is denied as to Whitsett’s cause of

action alleging fraud and conspiracy to defraud.

After the partial summary judgment,

Whitsett’s remaining claims against Junell and A&K went to trial, including

claims for fraud, conspiracy to commit fraud, violations of the DTPA, and

breach of fiduciary duty. The trial court granted Junell and A&K’s motion

for directed verdict on all of Whitsett’s claims except the breach of fiduciary

duty claim. The jury, however, returned a verdict in favor of Junell and

A&K on the breach of fiduciary duty claim, and the trial court rendered a

final judgment that Junell did not engage in a clear and serious violation of

duty to Whitsett such that he should be required to forfeit his fee. [1]

Whitsett died in February 2002. Her

estate pursues this litigation on her behalf, appealing the partial summary

judgment that dismissed Whitsett’s legal malpractice claims based on

limitations. See Belt v. Oppenheimer, Blend, Harrison & Tate, Inc. ,

192 S.W.3d 780, 785 (Tex. 2006) (“l egal malpractice

claims alleging pure economic loss survive in favor of a deceased client’s

estate, because such claims are necessarily limited to recovery for property

damage”).

Statute of Limitations

Standard of Review

Our review of a summary

judgment is de novo. Provident Life & Accident Ins. Co. v. Knott ,

128 S.W.3d 211, 215 (Tex. 2003). Under the traditional standard for summary

judgment, the movant has the burden to show that no genuine issue of material

fact exists and that the trial court should grant a judgment as a matter of

law. Tex. R. Civ. P . 166a(c); KPMG

Peat Marwick v. Harrison County Hous. Fin. Corp. , 988 S.W.2d 746, 748 (Tex. 1999). We view all evidence in a light favorable to the nonmovant and indulge every

reasonable inference in the nonmovant’s favor. Provident Life , 128

S.W.3d at 215 .

“A defendant moving for summary

judgment on an affirmative defense must prove each element of its defense as a

matter of law, leaving no issues of material fact.” Garza v. Exel

Logistics, Inc. , 161 S.W.3d 473 , 475 n.10 (Tex. 2005). Statute of

limitations is an affirmative defense. Tex.

R. Civ. P . 94.

Equitable Tolling

A two-year statute of limitations governs

legal malpractice claims. Tex. Civ.

Prac. & Rem. Code Ann. § 16.003 (Vernon Supp. 2006); Willis v.

Maverick , 760 S.W.2d 642, 644 (Tex. 1988). The statute of limitations

begins to run when the claim accrues. Tex.

Civ. Prac. & Rem. Code Ann. § 16.003. A legal

malpractice claim accrues when the client sustains a legal injury or, in cases

governed by the discovery rule, when the client discovers or should have

discovered through the exercise of reasonable care and diligence

the facts establishing the elements of the claim. Hughes ,

821 S.W.2d at 156 ; see also S.V. v. R.V. , 933 S.W.2d 1, 4 (Tex. 1996) (legal injury rule); Willis , 760 S.W.2d at 646 (discovery rule). In Hughes

v. Mahaney & Higgins , the Texas Supreme Court established a tolling

rule for the statute of limitations in legal malpractice cases: “[W]hen an

attorney commits malpractice in the prosecution or defense of a claim that

results in litigation, the statute of limitations on the malpractice claim

against the attorney is tolled until all appeals on the underlying claim are

exhausted.” 821 S.W.2d at 157 ; see also Murphy v. Campbell , 964 S.W.2d

265, 272 (Tex. 1997). The Hughes rule applies even in cases in which the

attorney’s representation of the

client terminates after the act of negligence, but before the conclusion of the

litigation. Apex Towing Co. v. Tolin ,

41

S.W.3d 118 , 121–22 (Tex. 2001).

In Hughes , the Texas Supreme Court

expressed two policy reasons for tolling the statute of limitations when an

attorney commits malpractice in the prosecution or defense of a claim that

results in litigation. 821 S.W.2d at 156–57. The court first pointed out that

the legal injury rule and the discovery rule can force a client into the

untenable position of having to adopt inherently inconsistent litigation

postures in the underlying case and the malpractice case. Id. at 156 (noting

that party might be placed in position of asserting that her attorney committed

malpractice, and but for malpractice her claim would have succeeded, while at

same time asserting in underlying appeal that attorney’s actions were correct,

or at least not fatal to her claim). The court then explained that limitations

should be tolled for the malpractice claim because the viability of that claim

depends on the outcome of the underlying litigation. Id. at 157 .

The supreme court reinforced these policy considerations

in Sanchez v. Hastings , stating that “if the client must carefully

scrutinize every stage of the case for possible missteps it would erode the

trust between client and lawyer necessary for the successful prosecution of

litigation.” 898 S.W.2d 287, 288 (Tex. 1995). Since the Texas Supreme Court

adopted the tolling rule in Hughes , the court has applied the rule

without further qualification to every legal malpractice case meeting the Hughes

parameters. See Underkofler v. Vanasek , 53 S.W.3d 343, 347 (Tex.

2001); Apex Towing Co. ,

41

S.W.3d at 121–23; Sanchez ,

898 S.W.2d at 288 ; Am. Centennial Ins. Co. v. Canal Ins. Co. , 843 S.W.2d

480 , 483–84 (Tex. 1992); Gulf Coast Inv. Corp. v. Brown , 821 S.W.2d 159,

160 (Tex. 1991); Aduddell v. Parkhill , 821 S.W.2d 158, 159 (Tex. 1991), overruled

on other grounds , Underkofler ,

53

S.W.3d at 347 (holding that Hughes tolling rule does not apply to DTPA

claims against attorney).

In Apex Towing Co. v. Tolin , the Texas

Supreme Court instructed

lower courts to desist from re-examining whether the policy reasons behind Hughes

apply in each legal malpractice case presented and to “simply apply the Hughes

tolling rule to the category of legal-malpractice cases encompassed within its

definition.” 41 S.W.3d at 122 . The court stated, “in the area of limitations,

bright-line rules generally represent the better approach.” Id. The court also expressly disapproved of the intermediate courts of appeals cases upon

which Junell and A&K relied in seeking summary judgment from the trial

court in this case. Id.

Application of Equitable Tolling in

This Case

Here, Whitsett alleges

that Junell committed malpractice in the prosecution of her case

against Dardas by failing to pursue her tort claims, and by failing to file

related (though unidentified) tort claims in the first instance. Junell and

A&K respond that the Hughes rule does not apply because Whitsett’s

legal malpractice claims arise only from Junell’s negligent failure to file

tort claims against Dardas, and thus he could not have committed malpractice “during

[his] prosecution or defense of a claim that result[ed] in litigation,” because

the unidentified additional tort claims that Whitsett contends should have been

brought against Dardas were never actually litigated. Hughes , 821

S.W.2d at 157 . They further contend that the statute of limitations on

Whitsett’s legal malpractice claims should begin to run at the latest in

February 1991, when Junell withdrew from Whitsett’s case against Dardas.

In the years since the Hughes decision,

however, the Texas Supreme Court has held that the phrase, “in the prosecution

or defense of a claim,” includes claims that should have been brought, but were

not. See Sanchez , 898 S.W.2d at 288 . In Sanchez , Carlos Sanchez was electrocuted

when a portable crane mounted on his employer’s truck touched electrical

wires. Id . at 287. Carlos’s wife, Graciela, hired an attorney,

Steve Hastings, to represent her in a wrongful death action. Id. Hastings filed the wrongful death action against the manufacturer of the crane and

several other defendants. Id. Hastings did not sue Carlos’s employer,

Cedar Creek Fabricators. Id. The wrongful death action concluded on

August 29, 1990. Id. at 288 . On August 28, 1992, Graciela brought a

legal malpractice claim against Hastings, contending that Hastings was negligent in failing to sue all possible tortfeasors who could have

contributed to the death of her husband. Id. The Texas Supreme Court

applied the Hughes rule, holding that the statute of limitations on

Sanchez’s malpractice claim against Hastings was tolled until the underlying

wrongful death litigation concluded. Id. ( “We hold that the statute of

limitations for malpractice for failure to sue a tortfeasor is tolled until

litigation has concluded against other tortfeasors liable for the same

indivisible injury.”). The malpractice claim was therefore timely filed within the

two-year statute of limitations. Id.

The supreme court applied the Hughes rule

phrase “claim that results in litigation” broadly in Sanchez . 898 S.W.2d at 288 ; Hughes , 821 S.W.2d at

157 . Sanchez’s “claim” “result[ed] in litigation” because she filed individual

claims against some of the tortfeasors liable for her injury. Sanchez ,

898 S.W.2d at 288 ; Hughes , 821 S.W.2d at 157 . The fact that Sanchez

did not file an individual claim against Cedar Creek Fabricators was irrelevant

for the purposes of the Hughes rule because her “claim,” which the court

defined in terms of her singular injury, had “result[ed] in litigation.” Sanchez ,

898 S.W.2d at 288 ; Hughes , 821 S.W.2d at 157 .

As in Sanchez , Whitsett’s malpractice claims against Junell

and A&K arose from an alleged failure to include or pursue tort claims in

the Dardas litigation. Following Sanchez and Hughes , we hold

that Whitsett’s malpractice claims against Junell and A&K arose in the

prosecution of the Dardas litigation and therefore the Hughes rule

applies. See Sanchez , 898 S.W.2d at 288 ; Hughes , 821

S.W.2d at 157 (“[W]hen an attorney commits malpractice in the prosecution or

defense of a claim that results in litigation, the statute of limitations on

the malpractice claim against the attorney is tolled until all appeals on the

underlying claim are exhausted.”).

Junell and A&K failed to prove as a matter

of law that the scope of Junell’s representation of Whitsett was limited to

recovery of the two loans Whitsett made to Dardas, or that the additional

claims at issue constituted separate, divisible injuries for limitations

purposes. Rather, Whitsett offered deposition testimony that the scope of the

Dardas litigation was not limited to the issue of the notes, but extended to

other tort claims:

I asked him over and over again to please at least list the claims

that I wanted. Even though he knew that the two notes would be an easy

recovery, he felt—and for which there was only 100,000—why would we want to sue

for anything other than what we can recover. And I objected. I just literally

kept, as Ed Cain did, going back to that constantly, for him to at least see

the policy.

He advised us, Ed Cain and I, that there was not enough insurance

coverage to even bring up and these were easy to collect on. And although he

knew there were many more issues, that Dardas’ insurance malpractice was only

for 100,000 and these notes could easily be proved, and he mentioned that the

other issues are too complicated, convoluted for even a jury to understand.

In addition, the original petition in

the Dardas litigation alleges malpractice and breach of fiduciary duty as it

relates to Dardas’s representation of Whitsett generally and is not

specifically a suit to collect on the notes. Whitsett has therefore produced

some summary judgment evidence that Dardas’s legal representation of her in

matters incident to her husband’s estate constitutes a “claim that result[ed]

in litigation” and an “indivisible injury” for the purposes of the Hughes

tolling rule. See Sanchez , 898 S.W.2d at 288 ; Hughes , 821 S.W.2d at 157 .

In a case where an attorney represents a client on multiple claims arising out

of the same occurrence or subject matter, but negligently fails to file one or

more of those claims entirely, we hold that the Hughes rule tolls the

statute of limitations for a malpractice claim against the attorney until all

appeals for the underlying filed claims are exhausted. See Sanchez , 898

S.W.2d at 288 . Like the court in Sanchez , we construe

the phrase “claim that results in litigation” to include all claims for an

indivisible injury that an attorney is hired to pursue on behalf of a client,

as well as any claim the attorney must assert on behalf of the client in the

exercise of reasonable care. Id. [2] Because the facts of this case

fall within the Hughes rule, the statute of limitations on Whitsett’s

legal malpractice claims against Junell and A&K was tolled until March 30,

1993, the day the Fifth Circuit dismissed Whitsett’s appeal in the Dardas

litigation. Whitsett therefore timely filed her malpractice claims on March

30, 1995. See Tex.

Civ. Prac. & Rem. Code Ann. § 16.003; Hughes , 821 S.W.2d at 156–58 ; Kirkpatrick

v. Hurst , 484 S.W.2d 587 , 588–89 (Tex. 1972) (explaining that suit filed on same date, two years after claim arose, would not be

barred by two-year statute of limitations). The trial court erred in granting summary judgment in favor of

Junell and A&K on Whitsett’s legal malpractice claims on the basis of

limitations. See Hughes , 821 S.W.2d at 157 .

Conclusion

After the trial court

ruled on the limitations issue in this case, the Texas Supreme Court clarified

the scope of the Hughes tolling rule to include the legal malpractice claims

Whitsett asserts and disapproved of the authorities relied on in the trial

court for summary judgment. See Apex Towing Co. , 41 S.W.3d at 121–22; Sanchez , 898 S.W.2d at 288 . We hold that the Hughes

rule applies to Whitsett’s malpractice claims against Junell and A&K. See

Hughes , 821 S.W.2d at 157 . The trial court therefore erred

in granting Junell and A&K’s motion for partial summary judgment on the

basis of limitations. We reverse and remand the cause for further proceedings.

Jane Bland

Justice

Panel consists of Chief Justice

Radack and Justices Alcala and Bland.

[1] Whitsett contends that Junell failed to file

“additional tort claims,” and failed to pursue the tort claims that he did file

in the original petition in the Dardas litigation. It is unclear from the

record whether the trial court’s partial summary judgment includes claims that

Junell filed but did not pursue, or just tort claims that were never filed,

leaving the former for trial on the merits. We analyze both for limitations

purposes and leave the scope of the partial summary judgment for the trial

court to address on remand.

[2] Junell and A&K cite Sharpe v. Roman Catholic

Diocese of Dallas in support of their contention that the Hughes

rule does not apply to Whitsett’s legal malpractice claims. 97 S.W.3d 791 ,

796–97 (Tex. App.—Dallas 2003, pet. denied). In Sharpe , the plaintiff,

Francis Sharpe, searched through trash containers for documents discarded by

the Catholic Diocese. Id. at 793 . Sharpe then unsuccessfully sought to

interject himself into ongoing litigation against the Diocese (the “ Kos litigation”). Id. at 794 . Windle Turley, counsel for the plaintiffs in

the Kos litigation, eventually deposed Sharpe and had him produce the

documents he found in the dumpster. Id. Turley sent a letter to Sharpe

telling him that he was turning the documents over to the Diocese, but that he

would file a motion seeking their return to Sharpe . Id. Turley gave the documents to Randall Mathis, the attorney for the

Diocese. Id. The Diocese then filed a motion

in the trial court that had rendered judgment in the Kos litigation,

asserting that the documents produced by Sharpe at his deposition were

privileged and had been improperly taken. Id. The trial court granted

the motion. Id. Sharpe filed an appeal and a writ of mandamus pro se, asserting

the order was void because the trial court lacked jurisdiction. Id. The appeals court conditionally issued the writ, holding that the dispute over

ownership of the documents should be resolved by a suit in which Sharpe was a

party. Id. Sharpe late filed a legal malpractice action against

Turley and Mathis, which the trial court dismissed as barred by limitations. Id. at 795 . The Dallas Court of Appeals affirmed, holding, “there was no underlying

litigation out of which Sharpe’s claims arose” because Sharpe was not a party

in the Kos litigation. Id. at 797 . In contrast, Whitsett’s

legal malpractice claims against Junell and A&K arose from the underlying

Dardas litigation, in which she was a party with Junell as her counsel. Whitsett’s

case thus is distinguishable from Sharpe because Sharpe’s legal

malpractice claims against Turley and Mathis did not arise from the Kos

litigation because Sharpe was not a party to the Kos litigation; rather,

Sharpe was a deponent whom Turley had subpoenaed to produce some documents. Id. at 797 .