Baker v. Mallios

• Decision Date: 26 February 1998
• Docket Number: No. 05-96-00112-CV,05-96-00112-CV
• Citation: 971 S.W.2d 581
• Parties: Mark W. BAKER, Appellant, v. John C. MALLIOS d/b/a Mallios & Associates, Mallios & Associates, P.C., and James D. Blume, Appellees.
• Court: Texas Court of Appeals

Page 581

971 S.W.2d 581

Mark W. BAKER, Appellant, v. John C. MALLIOS d/b/a Mallios & Associates, Mallios &amp Associates, P.C., and James D. Blume, Appellees.

No. 05-96-00112-CV.

Court of Appeals of Texas Dallas.

Feb. 26, 1998.

Darrell D. Minter, Vineyard, Martin & Minter, Christina Hoffmann-Givaudan, Davis & Harvey, P.C., Dallas, for Appellant.

George M. Kryder, III, Carrington, Coleman, Sloman & Blumenthal, Jennifer S. Stoddard, Jennifer Stoddard, Dallas, for Appellees.

Before LAGARDE, JAMES and MOSELEY, JJ.

OPINION

LAGARDE, Justice.

Appellant Mark W. Baker sued appellees John C. Mallios d/b/a Mallios & Associates, Mallios & Associates P.C., and James D. Blume (hereafter "Mallios") for legal malpractice. The trial court granted Mallios summary judgment on the basis that Baker illegally assigned a portion of his claim to a third person. In a single point of error, Baker contends that the trial court erred in granting summary judgment. We agree. ¹ We reverse the summary judgment and remand this matter to the trial court.

Factual Background

The summary judgment record reflects that on March 4, 1990, Baker started drinking alcohol at approximately 3 p.m. at a softball game. After the softball game, he continued drinking, first at Stan's Blue Note and then at Mimi's Pub. After Baker left Mimi's Pub at approximately 2 a.m., Dallas police officers attempted to stop him, apparently for driving his motorcycle on the wrong side of the road. While trying to outrun the police officers, Baker lost control of his motorcycle and injured himself in a one-vehicle accident.

Baker retained Mallios to represent him in a personal injury lawsuit. On Baker's behalf, Mallios sued Shades Automotive Glass Tinters, Incorporated, whom he believed to be the owner of Mimi's Pub. The lawsuit alleged that the accident was the direct result of Mimi's Pub having violated a duty it owed Baker under both the Texas Alcoholic Beverage Code and the common law by selling and serving Baker alcohol when it was apparent Baker was intoxicated to the extent that he presented a clear danger to himself and others. When Shades Automotive did not answer the lawsuit, Baker took a default judgment against it for an amount in excess of one million dollars.

According to Mallios, Shades Automotive was judgment-proof and the default judgment was uncollectible. Baker, however, felt that Mallios was not trying hard enough to collect on the judgment. Baker responded to an advertisement T.G. Herron had placed in a local newspaper offering to buy judgments in excess of twenty-five thousand dollars. Herron investigated the matter and concluded that Mallios sued the wrong party because Shades Automotive was not the owner of Mimi's Pub. ² Because the statute of limitations had run, Baker could not pursue his personal injury claim further. Baker, Herron, and attorney Darrell D. Minter entered into a series of contracts, more fully described below, that basically provided that Minter would represent Baker in a malpractice action against Mallios. The lawsuit was to be financed by Herron in exchange for an assignment of fifty percent of any proceeds recovered by Baker.

On Baker's behalf, Minter filed this malpractice action against Mallios. Mallios moved for summary judgment, asserting he was entitled to judgment as a matter of law, because the agreement between Herron and Baker was an assignment of a legal malpractice claim which is not assignable under Texas law.

Standard of Review

The function of a summary judgment is not to deprive a litigant of the right to a full hearing on the merits of any real issue of fact but to eliminate patently unmeritorious claims and untenable defenses. Gulbenkian v. Penn, 151 Tex. 412, 416, 252 S.W.2d 929, 931 (1952). Appellate courts review summary judgments under the well-established standards set forth in Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985):

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a material disputed fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

To prevail on a summary judgment, a defendant as movant must either (1) disprove at least one element of each of the plaintiff's theories of recovery, or (2) plead and conclusively establish each essential element of an affirmative defense thereby rebutting the plaintiff's cause of action. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 679 (Tex.1979). A matter is conclusively established if ordinary minds cannot differ as to the conclusion to be drawn from the evidence. Triton Oil & Gas Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex.1982).

Assignment of Legal Malpractice Claims

The general rule in Texas is that causes of action are assignable. See TEX. PROP.CODE ANN. § 12.014 (Vernon 1984). Legal malpractice claims, however, are not assignable. The San Antonio Court of Appeals established this exception to the general rule in Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313, 318 (Tex.App.--San Antonio 1994, writ ref'd). The Texas Supreme Court, by adding the notation "writ refused" to Zuniga, declared that the court of appeals' judgment was correct and the principles of law set forth in the opinion were correctly determined. See TEX.R.APP. P. 56.1(c). Thus, Zuniga has the same precedential value as an opinion of the supreme court. TEX.R.APP. P. 56.1(c); see also San Diego I.S.D. v. Central Educ. Agency, 704 S.W.2d 912, 915 (Tex.App.--Austin 1986, writ ref'd n.r.e.). This Court followed Zuniga in City of Garland v. Booth, 895 S.W.2d 766, 769 (Tex.App.--Dallas 1995, writ denied). In doing so, this Court specifically agreed with the reasoning in Zuniga. See Booth, 895 S.W.2d at 769. Thus, we review the summary judgment record in this case to determine whether Mallios proved as a matter of law that the series of contracts among Herron, Baker, and Minter amounted to an assignment of a legal malpractice claim prohibited by Zuniga. To address this issue, we will examine the Zuniga holding and the contracts at issue, then apply the law set forth in Zuniga to the facts in this case.

Zuniga v. Groce, Locke & Hebdon

The Zunigas brought a personal injury suit against Bauer Manufacturing Company and other defendants. Zuniga, 878 S.W.2d at 314. Bauer's insurer became insolvent, and Bauer feared that a large judgment would drive it into bankruptcy. Id. Bauer therefore agreed to a twenty-five million dollar settlement in which it assigned its malpractice claim against its attorneys to the Zunigas. Id. Bauer transferred all of its assets except the legal malpractice claim against its attorneys to a new corporation. The parties agreed that the transfer was not fraudulent, and the Zunigas waived their rights to the new entity's assets. Id. The Zunigas then sued Bauer's attorneys. Id. In affirming the dismissal of the Zunigas' suit against the attorneys, the San Antonio Court of Appeals held that an assignment of a legal malpractice claim arising from litigation is invalid. Id. at 318.

In disallowing the assignment, the court relied on policy considerations set forth in Goodley v. Wank & Wank, Inc., 62 Cal.App.3d 389, 133 Cal.Rptr. 83 (1976) and other cases, including the following:

1. a market in malpractice claims may demean the legal profession;

2. a risk of collusion exists between the assignor and assignee;

3. assignability of legal malpractice claims may deter attorneys from zealous advocacy on behalf of their clients;

4. an assignment may cause legal services to be less available, especially to clients with inadequate insurance or assets; and

5. an illogical reversal of roles is inherent in allowing a party to sue the adverse party's attorney.

Zuniga, 878 S.W.2d at 317-18; see also Booth, 895 S.W.2d at 769-70.

Baker, Herron, Minter Contracts

There are three contracts or agreements at issue in this case. The first is between Baker and Herron. This contract is labeled "Agreement." Baker is denominated as the assignor and Herron as the assignee. The agreement states, among other things, that:

1. Baker desires to pursue claims against Mallios but is without the necessary resources;

2. Baker "needs assistance in the form of coordination of the various matters" relating to the claim;

3. Herron agrees to provide the financial assistance and assist in coordination of issues;

4. In consideration of his services, Herron will receive fifty percent of any net recovery from the lawsuit against Mallios;

5. Herron shall be reimbursed for his expenses from Baker's share of any recovery;

6. Herron can recommend an attorney to Baker and negotiate the terms and conditions of the employment contract with the attorney; and

7. Baker and Herron agree that no settlement of the claims shall be entered into without the consent of the other, which consent will not be unreasonably withheld.

The second contract is an attorney's fee contract between Baker and Minter. That contract provides that Baker retains Minter to represent him in a malpractice action against Mallios and Baker agrees to pay Minter the hourly rate set forth in the contract and reimburse his costs and expenses.

The third contract is a "guaranty agreement and compensation contract" entered into by Baker, as client, Minter, as attorney, and Herron, as guarantor. In this agreement, Herron absolutely and unconditionally guarantees payment of the attorney's fee contract. In exchange, Minter agrees to accept a "reduced hourly rate set forth in the contract in consideration for the payment of the contingency fee by [Herron] in the amount of 10% of all net recovery paid to [Herron] pursuant to the terms of the Agreement [between Herron and Baker]." Mallios...