Eiland v. Turpin, Smith

• Decision Date: 30 March 2000
• Docket Number: No. 08-98-00279-CV,08-98-00279-CV
• Parties: (Tex.App.-El Paso 2000) PAIGE EILAND and ELAINE EILAND, Appellants, v. TURPIN, SMITH, DYER, SAXE & McDONALD and DICK SAXE, Individually, Appellees
• Court: Texas Court of Appeals

Page 461

16 S.W.3d 461 (Tex.App.-El Paso 2000)

PAIGE EILAND and ELAINE EILAND, Appellants, v. TURPIN, SMITH, DYER, SAXE & McDONALD and DICK SAXE, Individually, Appellees.

No. 08-98-00279-CV

COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS

March 30, 2000

Appeal from 118th District Court of Martin County, Texas (TC# 5111) Before Panel No. 1 LARSEN, McCLURE, and CHEW, JJ.

O P I N I O N

ANN CRAWFORD McCLURE, Justice

Paige Eiland ("Paige") and his wife appeal from the summary judgment entered against him on his legal malpractice claim against the law firm of Turpin, Smith, Dyer, Saxe & McDonald ("Turpin-Smith"). The sole issue presented was the proper application of the Hughes/Murphy rules to the affirmative defense of limitations. Because Paige's original petition was not filed within the limitations period, we affirm the judgment of the trial court.

SUMMARY OF THE EVIDENCE

Paige Eiland and his brother, Merwyn Eiland ("Merwyn"), were partners in a general partnership referred to as "Eiland & Eiland." Eiland & Eiland invested in several limited partnership oil and gas ventures. In July 1981, Eiland & Eiland formed a limited partnership, "EE & M," in order to invest in a partnership of Carlson Petroleum called "Durango B." EE & M secured a $300,000 letter of credit and Eiland & Eiland guaranteed $200,000 of the $300,000.

Merwyn experienced financial difficulties and on September 17, 1984, filed for bankruptcy relief pursuant to Chapter Eleven of the Bankruptcy Code. As a result, he was unable to meet his financial obligations to Eiland & Eiland. In response, Paige retained Turpin-Smith to handle the matters concerning Merwyn's insolvency. For a period of time, Paige made payments on behalf of Eiland & Eiland covering installments due on the $200,000 guarantee of the letter of credit. In November 1987, Paige attempted to pay only his one-half share of Eiland & Eiland's obligation, and in response Carlson Petroleum called the note due. The note was eventually paid by Paige.

During the course of the representation, Dick Saxe of Turpin-Smith advised Paige that he had a claim against Merwyn to recover the amounts paid on his behalf. On January 14, 1987, Merwyn filed a plan for reorganization in his bankruptcy proceeding. Under the Bankruptcy Code, any creditor asserting a claim against a debtor had to file a proof of claim or suffer discharge of the debt. Turpin-Smith did not file a proof of claim by the June 30, 1987 deadline. Consequently, on February 22, 1988, Merwyn's plan for reorganization was confirmed without a valid claim for the money expended by Paige on Merwyn's behalf.

In the spring of 1989, Richard Davis, another attorney with Turpin-Smith, began handling Paige's file. Davis filed a lawsuit in state court seeking to recover, under a contribution theory, the amounts paid by Paige on Merwyn's share of the Eiland & Eiland letter of credit. Suit was filed in Martin County on July 19, 1989. On March 2, 1990, Merwyn filed an adversary proceeding in the bankruptcy court ("Adversary I") asserting that he was discharged from the obligation claimed by his brother Paige. Sometime in July 1990, Davis left Turpin-Smith. Paige terminated his relationship with the firm and moved his file to Davis's new office.

On July 31, 1991, the bankruptcy court ruled in "Adversary I" that Paige "failed to timely file a proof of claim," and thus his claim against Merwyn in the Martin County suit was discharged under Section 1141 of the Bankruptcy Code. However, the bankruptcy court deferred to the Martin County district court the state law procedural question of whether Merwyn had waived his affirmative defense of discharge by failing to timely plead it. Thereafter, Paige gave notice of his malpractice claim against Turpin-Smith in a letter dated October 10, 1991. In his letter, Paige asserted that Turpin-Smith failed to properly file a proof of claim in the bankruptcy proceeding. The bankruptcy court entered a final order in "Adversary I" on November 15, 1991.

On May 6, 1993, the Martin County district court ruled on the issue deferred to it by the bankruptcy court, granting partial summary judgment in favor of Merwyn and finding that he had not waived his affirmative defense of bankruptcy discharge. On May 7, 1993, Merwyn instituted a second proceeding in bankruptcy court ("Adversary II"). Relying on the partial summary judgment granted in the Martin County lawsuit, Merwyn asked the bankruptcy court to order Paige to dismiss the Martin County lawsuit. Paige and Merwyn settled the controversy on June 10, 1994, and Paige non-suited the action on July 11, 1994.

Paige filed his malpractice claim on August 31, 1995. Turpin-Smith moved for summary judgment based upon the affirmative defense of limitations. Without specifying any grounds for its order, the trial court granted Turpin-Smith's motion.

STANDARD OF REVIEW

We review this appeal under the three-prong standard enunciated in Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548-49 (Tex. 1985). The burden rests on the movant to demonstrate that there are no issues of material fact and that it is entitled to judgment as a matter of law. We take as true all evidence favorable to non-movant, indulge every reasonable inference, and resolve all doubts in favor of the non-movant. Id. When a summary judgment is based on an affirmative defense, such as limitations, the movant must conclusively establish that the limitations period expired before the suit was filed. See Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76, 80-81 (Tex. 1989). When a trial court's order granting summary judgment does not specify the ground or grounds relied on for its ruling, an appellate court will affirm a summary judgment if any of the theories advanced are meritorious. Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989).

LIMITATIONS

In his sole point of error, Paige argues that the trial court erroneously found that the statute of limitations barred his malpractice claim. Relying upon Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991), Paige asserts that the limitations period was tolled and did not begin to run until August 8, 1994, the date that the order non-suiting the Martin County action became final and non-appealable. Although Paige complains that the trial court did not take his version of the facts as true, an independent review of the record reveals that the parties are in agreement about the basic facts. What remains is solely a dispute about the law governing this case. The parties agree that Paige's claims for malpractice are governed by a two-year statute of limitations. Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988), citing TEX.CIV.PRAC.&REM.CODE ANN. 16.003 (Vernon 1986).

Legal Injury

The accrual of a cause of action is a question of law, which we review de novo. Willis, 760 S.W.2d at 644. A cause of action for legal malpractice accrues when the client sustains a legal injury. S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996). The general rule is that legal injury occurs when the tort is committed, notwithstanding the fact that the damages or their extent are not ascertainable until a later date. Atkins v. Crosland, 417 S.W.2d 150, 153 (Tex. 1967); Sunwest Bank of El Paso v. Basil Smith Engineering Co., Inc., 939 S.W.2d 671, 674 (Tex.App.--El Paso 1996, writ denied). Under ordinary circumstances, the statute of limitations begin to run at the moment of the injury. Pack v. Taylor, 584 S.W.2d 484, 486 (Tex.Civ.App.--Fort Worth 1979, writ ref'd n.r.e.). The date of the legal injury is not to be confused with the time it is discovered or the date when actual damage is fully ascertained. Id. In a legal malpractice case, the attorney's conduct must raise only a risk of harmto the client'slegally protected interest for the tort to accrue. Zidell v. Bird, 692 S.W.2d 550, 557 (Tex.App.--Austin 1985, no writ).

The undisputed facts establish that Paige hired Turpin-Smith to pursue his claim for reimbursement from his insolvent brother, Merwyn. Merwyn filed a plan for reorganization, which required that all creditors be listed or their claims discharged. Turpin-Smith did not file a proof of claim by the mandatory deadline of June 30, 1987. Accepting as true Paige's contention that this constituted malpractice, we conclude that Paige sustained legal injury when the bankruptcy court no longer had the power to modify the reorganization plan so as to include a late-filed proof of claim. For the sake of this appeal, we will assume that date to be February 22, 1988, when Merwyn's plan for reorganization was confirmed.

The Discovery Rule

While under ordinary circumstances the limitations period would run from the date of legal injury, the discovery rule has been applied to legal malpractice cases. Burns v. Thomas, 786 S.W.2d 266, 267 (Tex. 1990). The discovery rule tolls the running of the statute of limitations until the injured party discovers or reasonably should have discovered the facts establishing his cause of action. Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990); Haussecker v. Childs, 935 S.W.2d 930, 934 (Tex.App.--El Paso 1996), aff'd, 974 S.W.2d 31 (Tex. 1998). The undisputed facts establish that Paige was aware of the bankruptcy court's July 1991 ruling in Adversary I, which established that Paige's claims were barred due to his failure to file a proof of claim. Additionally, the record reflects a letter dated October 10, 1991, in which Paige asserts that Turpin-Smith breached its duty by not filing a proof of claim. From this evidence, we conclude that Paige was aware of the facts establishing his cause of action against Turpin-Smith, no later than October 1991.

The Hughes Rule

Ordinarily the limitations period for a legal malpractice claim would run from the moment that the legal injury is discovered, but Paige contends his case is governed by the specialized tolling rule established in Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1...