Farah v. Mafrige & Kormanik, P.C.

• Decision Date: 11 July 1996
• Docket Number: No. 01-95-00027-CV,01-95-00027-CV
• Citation: 927 S.W.2d 663
• Parties: F.G. FARAH, Appellant, v. MAFRIGE & KORMANIK, P.C., Michael Boswell, and Scott Reiter Link, Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 663

927 S.W.2d 663

F.G. FARAH, Appellant, v. MAFRIGE & KORMANIK, P.C., Michael Boswell, and Scott Reiter Link, Appellees.

No. 01-95-00027-CV.

Court of Appeals of Texas Houston (1st Dist.).

July 11, 1996.

Rehearing Overruled Aug. 6, 1996.

Michael C. O'Connor, Houston, for appellant.

Donald B. McFall, Richard A. Sheehy, Kenneth R. Breitbeil, Lauren L. Beck, Houston, for appellees.

Before O'CONNOR, HUTSON-DUNN and ANDELL, JJ.

OPINION

O'CONNOR, Justice.

This is an appeal from a take-nothing summary judgment rendered against the appellant, F.G. Farah, in a legal malpractice action arising out of a lender liability lawsuit against three First City banks (collectively, the "First City entities"). We reverse in part and remand for further proceedings consistent with this opinion.

The Underlying Litigation

Farah is a homebuilder who financed his business between 1963 and 1984 with loans from two related Houston banks: First City National Bank of Houston, a/k/a First City-Downtown (FCD); and First City-Westheimer (FCW). Farah, who was the custodian of large sums of his relatives' money, entered into an oral agreement with FCD in 1963 to use this money to provide real estate financing for his construction business. The accounts Farah maintained with FCD were non-interest bearing. The parties agreed FCD would provide financing for Farah's business so long as Farah maintained accounts with FCD in excess of 15 percent of the total amount of the loans and complied with the terms and conditions of the individual loan agreements. Farah testified in deposition FCD obligated itself to make any reasonable loans Farah would ask for in relation to the agreement. The parties operated under this oral agreement between 1963 and 1982.

In 1982, FCD established a new policy that prohibited real estate loans under $1,000,000. Farah's loans with FCD had been for less than $1,000,000. Fred Herring, the executive vice-president of FCD, notified Farah of the new policy in November 1982 but said Farah could still borrow less than $1,000,000 if FCW were brought into the contractual banking relationship Farah had with FCD. Herring told Farah that FCW would expect a couple of deposits, but the remainder of the money should be left at FCD. In December 1982, Farah met with officers of FCW and they agreed Farah could conduct business with FCW under the same conditions he had conducted business with FCD since 1963. FCD did not make any new loans to Farah after December 1982, but it did renew an existing loan and kept large amounts of Farah's money he had deposited pursuant to the original agreement.

On August 17, 1984, FCW notified Farah for the first time he would not receive approval for a construction loan. FCW's officers refused to tell Farah the reason for FCW's decision. Farah requested a $100,000 working capital loan from FCD on September 9, 1994, but it was refused for no stated reason.

Farah retained the law firm of Mafrige & Kormanik, P.C. (the firm) in June 1987 to pursue legal action against FCD, FCW, and their holding corporation, First City Bancorporation of Texas, Inc. (FCB). J. Michael Boswell and Scott Reiter Link were employed by the firm, and they filed suit against the First City entities on behalf of Farah (the "underlying suit"). The record does not contain the pleadings in Farah's underlying suit; the only pleading from that suit is an order granting partial summary judgment. The trial court granted a partial summary judgment for FCD and FCB on all of Farah's claims based on the statute of limitations, and for FCW on Farah's tort claims based on limitations. Because FCW did not seek summary judgment on Farah's breach of contract claim against FCW, the court did not address this cause of action.

In April 1991, the remainder of Farah's suit, which consisted of his contract claim against FCW, was dismissed for want of prosecution. In August 1991, Farah met with Steven Mafrige and Link and learned the underlying suit had been dismissed because of errors by the firm. The firm attempted to appeal the dismissal, but the Supreme Court of Texas dismissed the appeal for want of jurisdiction on November 8, 1991.

The Present Suit

Farah filed suit against the firm for legal malpractice. On November 5, 1993, in his first amended original petition, Farah asserted causes of action for negligence and violations of the Texas Deceptive Trade Practices Act (DTPA) against the firm, Boswell, and Link. Farah alleged six acts or omissions of negligence and four violations of the DTPA that caused him damages. Farah alleged that, because of the firm's malpractice, he was unable to recover from the First City entities on all of his causes of action. Farah sought at least $1,000,000 in damages from the firm because that is what he alleged he would have recovered had the firm exercised proper care. Farah also sought treble damages and attorney's fees pursuant to his DTPA cause of action.

In their first amended original answer and special exception, the defendants generally denied all of Farah's allegations and asserted several affirmative defenses, including limitations and the statute of frauds. The defendants also filed a motion for partial summary judgment on two grounds. First, the defendants asserted they had conclusive proof their negligence, if any, in handling the underlying suit could not have caused injury to Farah on any of his causes of action except for the breach of contract claim against FCW. Second, the defendants asserted all of Farah's causes of action against Boswell and Link in the malpractice suit were barred by limitations because neither party was timely joined in Farah's first amended original petition.

Farah filed a response to the defendants' motion for partial summary judgment in which he argued the defendants had not disproved causation in the underlying suit as a matter of law, and the joinder of Boswell and Link in the present suit was timely. Farah filed a second amended petition and asserted the firm was negligent in handling the underlying suit for the following reasons: (1) the firm should have alleged causes of action against the First City entities for defamation and tortious interference with contractual relations arising from the defamation; (2) the firm should have alleged an alter-ego or agency relationship between the First City entities; and (3) the firm should have asserted alter-ego in its response to the First City entities' motion for summary judgment in the underlying case.

The defendants filed a supplemental motion for summary judgment in response to Farah's response and requested "complete summary judgment." This supplement was based in part on the new allegations in Farah's second amended petition. The firm also asserted additional reasons Farah could not prove causation on his underlying claims against the First City entities.

Farah filed a third amended petition in response to the defendants' supplemental motion for summary judgment and asserted the firm committed legal malpractice because it should have alleged promissory estoppel and fraudulent and negligent misrepresentations in the underlying suit. Farah also filed a brief response to the firm's supplemental motion. The defendants did not file an amended or supplemental motion for summary judgment to address the additional claims in Farah's third amended petition.

The trial court rendered a take-nothing summary judgment on all of Farah's claims against the firm. The order did not state the grounds for the ruling. Farah filed a motion for new trial, which was overruled by operation of law. This appeal followed.

Standard of Review

Generally, to recover on a claim of legal malpractice, a plaintiff must prove: (1) the attorney owed the plaintiff a duty; (2) the attorney breached that duty; (3) the breach proximately caused the plaintiff's injuries; and (4) damages occurred. Peeler v. Hughes & Luce, 909 S.W.2d 494, 496 (Tex.1995). A cause of action for legal malpractice is in the nature of a tort and is thus governed by the two-year statute of limitations. Willis v. Maverick, 760 S.W.2d 642, 644 (Tex.1988); Utica Ins. Co. v. Pruitt & Cowden, 902 S.W.2d 143, 147 (Tex.App.--Houston [1st Dist.] 1995, no writ).

A party moving for summary judgment has the burden of proving there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Nixon v. Mr. Property Mgmt., 690 S.W.2d 546, 548 (Tex.1985); Long v. State Farm Fire & Cas. Co., 828 S.W.2d 125, 126-27 (Tex.App.--Houston [1st Dist.] 1992, writ denied); TEX.R.CIV.P. 166a(c). In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true. Nixon, 690 S.W.2d at 548-49. Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Nixon, 690 S.W.2d at 548-49; Long, 828 S.W.2d at 127.

When a defendant moves for summary judgment, he must either: (1) disprove at least one element of the plaintiff's cause of action; or (2) plead and conclusively establish each essential element of his affirmative defense, thereby rebutting the plaintiff's cause of action. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex.1995); Liggett v. Blocher, 849 S.W.2d 846, 850 (Tex.App.--Houston [1st Dist.] 1992, no writ). In the present case the defendants moved for summary judgment based both upon Farah's causes of action in the underlying suit and upon the affirmative defense of limitations in the present suit. Therefore, the defendants had the burden of conclusively establishing: (1) the defendants' negligence, if any, did not cause Farah damages in the underlying suit because he could not have recovered from the First City entities on any claims the defendants asserted or should have asserted; and (2) the claims against Boswell and Link in the malpractice suit were barred by limitations.

A. Overbreadth of Judgment

Farah contends in point of...