Murphy v. Mullin, Hoard & Brown, L.L.P.

Citations: 168 S.W.3d 288; 2005 Tex. App. LEXIS 5036Docket: No. 05-04-00433-CV

Court: Court of Appeals of Texas; June 30, 2005; Texas; State Appellate Court

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The trial court granted a summary judgment in favor of the appellees in a legal malpractice case, resulting in a take-nothing judgment against the appellants. The appellants raised five issues on appeal, claiming the trial court erred by (1) misapplying the discovery rule, (2) failing to apply the Hughes tolling rule, (3) incorrectly concluding that claims against Kane, Russell, Coleman, Logan (KRCL), and William Elliott were time-barred despite alleged malpractice occurring within the limitations period, and (4) not granting a continuance for the appellants. 

The background details reveal that in 1994, the appellants and their mother retained legal counsel to create family limited partnerships to minimize estate taxes. Following their mother's death, the appellants consulted various professionals regarding the estate tax return. In 1997, the IRS disputed the valuations of the partnerships, leading to a notice of deficiency in 1998, which claimed a significant increase in the taxable estate. A tax court petition was filed in 1998, which ultimately settled in 2000. The appellants alleged that the appellees had negligently drafted partnership agreements and failed to timely notify them of issues. 

The appellees filed motions for summary judgment, asserting that the claims were barred by limitations. The appellants argued that they were not aware of any claims until informed by counsel in May 2000 and that the claims should be tolled until the tax case concluded. The trial court, after reviewing the motions and evidence, sided with the appellees, leading to the appeal. The appellate court affirmed the trial court's decision, overruling the appellants' issues.

Motions for summary judgment are reviewed under established legal standards. When a defendant asserts the affirmative defense of limitations, they must demonstrate that the lawsuit is barred by limitations as a matter of law. This requires the defendant to conclusively establish when the cause of action accrued and, if applicable, negate the discovery rule by proving there is no genuine issue of material fact regarding when the plaintiff discovered or should have discovered the injury. The Hughes rule may also toll the statute of limitations for certain legal malpractice cases until the conclusion of malpractice litigation. In this instance, the appellants' legal malpractice claim is subject to a two-year statute of limitations. The appellants filed their suit more than two years after significant events, including the formation of family limited partnerships and the receipt of an IRS notice of deficiency. The court evaluated whether the discovery rule delayed the accrual of their claims. It determined that the discovery rule did not apply, as the injury from faulty professional advice accrues when the advice is acted upon, which is objectively verifiable. The latest accrual date for their claims was the receipt of the deficiency notice on June 25, 1998. Since the appellants did not file suit until March 7, 2002, their claims are barred. The court rejected the appellants’ argument regarding the applicability of precedent, clarifying that they were made aware of the IRS's concerns regarding their partnership agreements as early as September 1997, contradicting their claim of lack of notice until May 2000.

The deficiency notice indicated the revaluation of family limited partnerships and the resulting tax deficiency. Appellants argue that appellees provided incorrect advice about the tax benefits of these partnerships. However, it was determined that after the deficiency notice, appellants were aware or should have been aware of potential harm due to appellees’ negligence in drafting or reviewing the partnership agreements. The appellants contended that the trial court mistakenly granted summary judgment to appellees by not applying the Hughes tolling rule, which suspends the statute of limitations in cases of attorney malpractice until appeals on the underlying claim are resolved. However, it was concluded that the Hughes rule does not apply to claims of attorney malpractice relating to transactional work, as established in prior case law, including Vacek Group, Inc. v. Clark. Therefore, the alleged malpractice regarding the family limited partnerships did not fall within the Hughes definition, and the appellants’ related argument was overruled. Furthermore, the appellants claimed that even if the statute of limitations had expired against some appellees, it had not for others due to alleged ongoing malpractice. However, they failed to provide adequate legal authority to support this assertion, as required by appellate procedure rules. Consequently, the court has the discretion to dismiss these inadequately briefed points of error.

Appellants failed to adequately argue their claims regarding the accrual date applicable to KRCL and Elliott, lacking both citations to legal authority and meaningful content, resulting in a failure to preserve any potential error for review. Similarly, their argument concerning the trial court's denial of a motion for continuance was inadequately briefed, consisting of only three sentences without citations or application of case facts to law. Consequently, the court affirmed the trial court's judgment. The appellants alleged malpractice and breach of fiduciary duty, primarily focusing on negligent drafting and failure to inform about document defects, rather than on any improper benefit received by the appellees. Therefore, the claims were deemed to be solely for legal malpractice. Elliott initially worked on the estate tax return at Cowles, Thompson, before moving to KRCL. The appellants also included Wilson and Chambless, Wilson, in their suit, but did not contest the trial court's summary judgment ruling based on limitations on appeal.