Opinion
No. 05-05-00724-CV
Opinion Filed May 26, 2006.
On Appeal from the 193rd District Court, Dallas County, Texas, Trial Court Cause No. 03-12534-L.
Affirm.
Before Justices RICHTER, LANG and MAZZANT.
MEMORANDUM OPINION
This is a "traditional" summary judgment case in which summary judgment was granted for the law firm of Looper, Reed, McGraw, P.C. against its former client, appellant Jerry D. Beck. On appeal, Beck asserts that the trial court erred in granting Looper Reed's motion for summary judgment We affirm the judgment of the trial court.
BACKGROUND
In 1993, Beck hired Looper Reed to restructure his company, Professional Association Services, Inc. (PAS), to protect it against third party claims. Looper Reed recommended and implemented a corporate restructuring that included the formation of International Financial Group, Inc. (IFG) and its wholly owned subsidiary, PAS Financial Group, Inc. After the formation of the two new Texas corporations, PAS Financial acquired 100% of the assets owned by PAS at fair market consideration. Because IFG's articles of incorporation required a vote of 85% of IFG's shares for liquidation, IFG issued less than 85% of its shares to Beck in order to prevent a forced liquidation. Three key IFG employees — Margaret Hart, James Chapman, and Larry Mosle — were to be given options to purchase the remaining unissued IFG shares after fulfilling specific performance criteria. According to Beck, he instructed Looper Reed to include the performance criteria in the employment contracts of the three employees.
The record reflects that Looper Reed issued the stock to Hart, Chapman, and Mosley in September, 1993, without consideration and prior to the fulfillment of the performance criteria. Beck claims that he did not discover the transfers until October, 1997. At the regular IFG corporate meeting on November 3, 1997, Beck told Hart and Mosley that their stock certificates had not been validly issued because the two employees had neither achieved the performance standards nor paid for the shares. At that time, acting upon the advice of an attorney not associated with Looper Reed, Beck redeemed the shares of Hart and Mosley for the token sums of $980 and $140, respectively.
Chapman had already left IFG and had returned his shares for no consideration.
In May, 1999, Beck sold 100% of the IFG stock to Bankers Insurance Group, Inc. for approximately $32,000,000. On November 1, 2000, Hart filed suit against Beck and IFG alleging that Beck had acquired her IFG stock by fraud and that she had been deprived of her rightful share of the proceeds from the transaction with Bankers. The court ordered the case to arbitration. On August 29, 2002, the arbitration panel awarded Hart damages, interest, attorney's fees, and costs. Beck paid Hart the full amount of the award ($1,234,960.90).
On November 24, 2003, Beck filed suit against Looper Reed, alleging legal malpractice and breach of fiduciary duty. Beck's legal malpractice claim was based upon Looper Reed's failure to follow Beck's instructions to include the performance criteria in Hart's employment agreement. Beck's claim for breach of fiduciary duty was based on Looper Reed's transfer of the shares to Hart without consideration or fulfillment of the performance criteria. In his first amended petition, Beck added the assertion that Looper Reed had failed to disclose the omission from the employment contract. Looper Reed subsequently filed a motion for summary judgment based on four grounds: (1) limitations; (2) collateral estoppel; (3) proximate cause; and (4) waiver. The trial court granted the motion without specifying the grounds upon which its decision was based.
There is no dispute that Hart's employment agreement did not contain performance criteria and that she received 700 shares of IFG stock without paying consideration.
This appeal ensued. In one issue, Beck contends that the trial court erred in granting summary judgment in favor of Looper Reed.
DISCUSSION
Limitations
We review motions for summary judgment using well-known standards. See Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). When, as here, a defendant moves for summary judgment based on the affirmative defense of limitations, the defendant must (1) prove when the cause of action accrued and (2) if the "discovery rule" is raised, prove that there is no genuine issue of material fact about when the plaintiff discovered, or in the exercise of reasonable diligence, should have discovered the nature of its injury. Murphy v. Mullin, Hoard and Brown, L.L.P., 168 S.W.3d 288, 291 (Tex.App.-Dallas 2005, no pet.).
1. The applicable statute of limitations
Legal malpractice is governed by the two-year statute of limitations. Tex. Civ. Prac. Rem. Code Ann. § 16.003(a); Murphy, 168 S.W.3d at 291. A claim for breach of fiduciary duty is governed by a four-year statute of limitations. Tex. Civ. Prac. Rem. Code Ann. § 16.004(a)(5). As it did in its motion for summary judgment, Looper Reed asserts on appeal that Beck's claim for breach of fiduciary duty was essentially a legal malpractice claim and that the four-year statute of limitations is not germane to this case. We agree that legal malpractice was the only cause of action before the trial court.
The essence of a claim for breach of an attorney's fiduciary duty to his client involves the "integrity and fidelity" of an attorney and focuses on whether an attorney obtained an improper benefit from representing the client. Gibson v. Ellis, 126 S.W.3d 324, 330 (Tex.App.-Dallas 2004, no pet.). Unlike a claim for breach of fiduciary duty, legal malpractice is based on negligence. Cosgrove v. Grimes, 774 S.W.2d 662, 664 (Tex. 1989) (op. on reh'g). The issue in a legal malpractice action is whether the attorney exercised that degree of care, skill, and diligence as lawyers of ordinary skill and knowledge commonly possess and exercise. Sullivan v. Bickel Brewer, 943 S.W.2d 477, 481 (Tex.App.-Dallas 1995, writ denied). A cause of action for legal malpractice arises from an attorney giving a client bad legal advice or otherwise improperly representing the client. Kimleco Petroleum, Inc. v. Morrison Shelton, 91 S.W.3d 921, 923 (Tex.App.-Fort Worth 2002, pet. denied). For example, an attorney can commit legal malpractice by disobeying a client's lawful instruction, by taking action when not instructed by the client to do so, or by failing to handle a matter entrusted to the attorney's care by the client. Id., at 923-24. Thus, regardless of the theory a plaintiff pleads, as long as the crux of the complaint is that the plaintiff's attorney did not provide adequate legal representation, the claim is one for legal malpractice. Id., at 924.
Here, Beck's assertions sound only in negligence. Beck does not claim that Looper Reed obtained improper benefit from its actions and omissions. Instead, his complaint is that Looper Reed did not provide adequate legal representation. Because Beck presented only claims for legal malpractice, the applicable statute of limitations is two years, as Looper Reed asserts.
2. Accrual of the cause of action
A cause of action generally accrues when a wrongful act causes some legal injury to the plaintiff, even if the fact of injury is not discovered until later, and even if all resulting damages have not yet occurred. Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex. 1997). However, there is a limited exception to this general rule called the "discovery rule," which defers the accrual of a cause of action until the plaintiff discovers, or in the exercise of reasonable diligence, should have discovered the nature of his injury. Id.
Here, Beck pled the discovery rule and argues that his cause of action did not accrue until the award was issued in the arbitration in 2002. Although Beck admits that he discovered the transfers in October of 1997, he nonetheless claims that he did not know that the performance criteria had been omitted from Hart's contract at that point and that he was not aware that he had been damaged by Looper Reed's actions and omissions until the arbitration award was announced on August 29, 2002.
In a legal malpractice case governed by the discovery rule, the attorney's conduct must raise only a risk of harm to the client's legally protected interests for the cause of action to accrue; the harm need not be finally established or be an inevitable consequence of the conduct. Brents v. Haynes Boone, L.L.P., 53 S.W.3d 911, 914-15 (Tex.App.-Dallas 2001, pet. denied). The summary judgment evidence reflects that Beck was fully aware that the shares had been issued to Hart without consideration and prior to fulfillment of the performance criteria at the corporate meeting on November 3, 1997, when he told Hart that the stock had not been validly issued. Therefore, he had been placed on notice that there was a risk of harm to his interests when he discovered that Hart was holding shares of IFG contrary to his instructions-and contrary to what he believed to be the requirements of the employment contract. In the exercise of reasonable care and diligence, Beck could have easily confirmed the omission from the employment contract before he assumed that the issuance of the stock was invalid and before he attempted to resolve the problem by purchasing Hart's shares.
We conclude that limitations on Beck's legal malpractice claim began to run, at the latest, on November 3, 1997. Beck did not file his suit until November 23, 2003, six years later; therefore, his claim is time-barred. Because the trial court could have correctly granted summary judgment based on limitations, we need not address Beck's arguments regarding the remainder of Looper Reed's grounds for summary judgment. See FM Properties Operating Co. v. City of Austin, 22 S.W.3d 868, 872-73 (Tex 2000) (when the court's order is silent as to its reason for granting the motion, summary judgment must be affirmed if any of the motion's several grounds is meritorious).
Accordingly, we overrule Beck's sole issue on appeal and affirm the trial court's judgment.