Apex Towing Co. v. Tolin

• Decision Date: 26 April 2001
• Docket Number: No. 99-1165,99-1165
• Parties: (Tex. 2001) Apex Towing Company, Apex Barge Company, and Apex Oil Company, Petitioners v. William M. Tolin, III, Benckenstein & Oxford, L.L.P. and Hebert, Mouledoux & Bland, Respondents
• Court: Texas Supreme Court

Page 118

41 S.W.3d 118 (Tex. 2001)

Apex Towing Company, Apex Barge Company, and Apex Oil Company, Petitioners v. William M. Tolin, III, Benckenstein & Oxford, L.L.P. and Hebert, Mouledoux & Bland, Respondents

No. 99-1165

SUPREME COURT OF TEXAS

Argued October 11, 2000

Decided March 1, 2001

Rehearing Overruled April 26, 2001.

On Petition for Review from the Court of Appeals for the Ninth District of Texas

Justice Hankinson delivered the opinion of the Court, in which Chief Justice Phillips, Justice Hecht, Justice Enoch, Justice Baker, Justice Abbott and Justice O'Neill joined.

In this cause we reexamine when the statute of limitations in a legal-malpractice case should be tolled. Petitioners sued respondent attorneys for mishandling the defense of a maritime personal-injury lawsuit. The trial court granted the attorneys' motions for summary judgment based on limitations. The court of appeals affirmed. 997 S.W.2d 903. It concluded that the tolling rule we announced in Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991), was modified by our later decision in Murphy v. Campbell, 964 S.W.2d 265 (Tex. 1997), and did not toll limitations in this case. 997 S.W.2d at 905. We conclude that Murphy did not modify the rule we announced in Hughes, and today we reaffirm that rule: When an attorney commits malpractice in the prosecution or defense of a claim that results in litigation, the statute of limitations on a malpractice claim against that attorney is tolled until all appeals on the underlying claim are exhausted or the litigation is otherwise finally concluded. We therefore reverse the court of appeals' judgment and remand this cause to the trial court for further proceedings.

Petitioners Apex Towing Company, Apex Barge Company, and Apex Oil Company (collectively "Apex") hired respondents William M. Tolin, III, of the Texas law firm of Benckenstein & Oxford (collectively "Oxford"), and later the Louisiana law firm of Hebert, Mouledoux & Bland (Bland), to defend them against a maritime personal-injury suit in a Texas court. The plaintiff seaman in that suit was injured while boarding a vessel when the wash of a tugboat owned by Apex caused him to fall from the gangplank. In its legal-malpractice case, Apex alleges among other things that Oxford and Bland failed to file a timely maritime limitation-of-liability pleading, leaving Apex exposed to a judgment in excess of the value of the vessel and its freight. On August 31, 1994, the trial court in the underlying personal-injury suit rendered judgment on a jury verdict for an amount in excess of any limit that could have been imposed had Apex's attorneys filed a timely maritime-limitation pleading. Apex hired additional counsel to file post-judgment motions and an appeal. The case was ultimately settled, and the court of appeals dismissed the appeal on May 19, 1995.

On August 31, 1995, Apex filed a legal-malpractice suit against Oxford and Bland in Louisiana. That case was later dismissed without prejudice. On February 19, 1997, Apex filed this lawsuit against both law firms, alleging among other things that the attorneys breached the standard of care by failing to file a timely maritime-limitation pleading, failing to investigate and pursue appropriate discovery, failing to file special exceptions, and failing to submit an appropriate jury charge and instructions. Oxford and Bland moved for summary judgment on the grounds that the two-year statute of limitations on Apex's malpractice claim began to run no later than January 27, 1995, when the parties purportedly agreed to settle the underlying personal-injury case. The trial court granted summary judgment for the attorneys.

The court of appeals affirmed the trial court's judgment. 997 S.W.2d 903. The court ruled that Apex sustained a legal injury no later than August 31, 1994, the date of the underlying judgment in excess of any maritime limit of liability, and that Apex discovered or should have discovered the elements of its malpractice claim at that time. Id. at 905. The court rejected Apex's contention that the Hughes rule tolled limitations while Apex's appeal was pending. Citing Murphy, the court concluded that "the [Supreme] Court has subsequently narrowed the tolling provision to situations where the client is continuing to use the same lawyer in the pending litigation." Id. The court then determined that "[i]nasmuch as Apex had replaced the appellees with new counsel by no later than January 27, 1995, the rule as originally stated in Hughes no longer applied." Id.

The court of appeals in this case is not alone in its view that our decision in Murphy narrowed or limited application of the Hughes rule to situations in which a party is forced to obtain new counsel. See Eiland v. Turpin, Smith, Dyer, Saxe & McDonald, 16 S.W.3d 461, 469 (Tex. App. - El Paso 2000, pet. filed); Brents v. Haynes & Boone, L.L.P., 10 S.W.3d 772, 777-78 (Tex. App. - Dallas 2000, pet. filed); Nunez v. Caldarola, 2 S.W.3d 755, 759 (Tex. App. - Corpus Christi 1999, pet. filed); Swift v. Seidler, 988 S.W.2d 860, 861-62 (Tex. App. - San Antonio 1999, pet. denied); Norman v. Yzaguirre & Chapa, 988 S.W.2d 460, 462-63 (Tex. App. - Corpus Christi 1999, no pet.). One court of appeals has held to the contrary, see Edwards v. Kaye, 9 S.W.3d 310, 314 (Tex. App. - Houston [14th Dist.] 1999, pet. denied), while in other cases courts have applied Hughes without mentioning Murphy or without noting any tension between the two. See Vanasek v. Underkofler, 1999 WL 314822 (Tex. App. - Dallas 1999), rev'd in part on other grounds, ___ S.W.3d ___ (Tex. 2001); Guillot v. Smith, 998 S.W.2d 630, 633 (Tex. App. - Houston [1st Dist.] 1999, no pet.). We granted Apex's petition for review to clarify when the Hughes tolling rule applies.

Apex argues that the bright-line rule we established in Hughes was not modified or limited by Murphy. It emphasizes that in Murphy the Court held only that the tolling rule does not apply to accounting-malpractice cases; thus in legal-malpractice cases, limitations remains tolled until the terminal point in the underlying litigation, regardless of when the malpractice defendant ceased to have an attorney-client relationship with the malpractice plaintiff. In Murphy, in a section responding to one of the dissenting opinions in that case, the Court stated that Hughes "is expressly limited to claims against a lawyer arising out of litigation where the party must not only assert inconsistent positions but must also obtain new counsel." 964 S.W.2d at 273. According to Apex, if that description of the Hughes rule were true, then Hughes itself was wrongly decided because the defendant attorney in Hughes had withdrawn more than two years before the clients filed suit. See also Gulf Coast Inv. Corp. v. Brown, 821 S.W.2d 159, 160-61 (Tex. 1991) (applying Hughes to case in which new counsel was hired more than two years before malpractice claim filed).

Oxford and Bland respond that in Murphy the Court modified the Hughes rule so that the statute of limitations begins to run not later than when a party hires new counsel to handle the underlying litigation. Once new counsel is hired, they argue, the policy reasons behind the Hughes rule no longer apply. They also argue that the policy reasons behind Hughes no longer apply once parties agree to settle the underlying case because a settlement obviates the risk that the client will be forced to take inconsistent positions, and fixes the amount of damages caused by the malpractice. Thus the attorneys argue that the Hughes tolling rule should apply on a case-by-case basis, only when the policy reasons behind the rule also apply directly to the facts of the specific case under review.

We begin with the rule that a two-year statute of limitations governs legal-malpractice claims, whether they sound in tort, contract, or other theory. See Tex. Civ. Prac. & Rem. Code § 16.003(a); Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988). Limitations generally begins to run when the cause of action accrues, which we have determined means when facts have come into existence that authorize a claimant to seek a judicial remedy. Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514 (Tex. 1998); Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990). We have further determined that the discovery rule applies to legal-malpractice cases, so that in such cases, limitations does not begin to run until the client discovers or should have discovered through the exercise of reasonable care and diligence the facts establishing the elements of a cause of action. Willis, 760 S.W.2d at 646. In Willis, we extended the discovery rule to legal-malpractice actions based in part on the special relationship between attorney and client and on the difficulty posed for a client in determining whether or when malpractice may have occurred. Willis, 760 S.W.2d at 645. Additional considerations formed the basis for our decision in Hughes to toll the statute of limitations in certain types of legal-malpractice actions.

In Hughes, we articulated two policy considerations as the bases for tolling the statute of limitations when an attorney commits malpractice in the prosecution or defense of a claim that results in litigation until all appeals on the underlying claim are exhausted. Hughes, 821 S.W.2d at 156-57. We 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. We then explained that limitations should be tolled for the malpractice action because the viability of that action depends on the outcome of the underlying litigation. Id. at 157. Since we adopted the tolling rule in Hughes, we have applied that rule without further qualification in every legal-malpractice case meeting the Hughes parameters. S...