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American Realty Trust, Inc. v. Andrews Kurth, LLP

Court of Appeals of Texas, Fifth District, Dallas

May 8, 2018

AMERICAN REALTY TRUST, INC. AND ART MIDWEST, INC., Appellants
v.
ANDREWS KURTH, LLP, Appellee

          On Appeal from the 44th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-04-05724

          Before Justices Bridges, Evans, and Whitehill

          MEMORANDUM OPINION

          EVANS JUSTICE

         American Realty Trust, Inc. and ART Midwest, Inc. (collectively ART) appeal from the trial court's take-nothing summary judgment on legal malpractice claims they asserted against Andrews Kurth, LLP (AK). The summary judgment was based on AK's affirmative defense of limitations. In two issues, ART asserts the trial court erred in granting summary judgment because (1) when liberally construed, their first amended petition timely asserted a claim based on AK's March 1999 actions relating to the termination of real estate transaction, and (2) the Hughes[1] tolling doctrine applies to their March 1999 termination claims and, therefore, those claims were timely asserted in their second amended petition. Because we resolve both issues against ART, we affirm the trial court's judgment.

         BACKGROUND

         In 1997, ART retained AK to represent them in acquiring numerous apartment complexes in several states from David Clapper and related business entities (Clapper). AK provided advice and drafted documents in furtherance of ART's acquisition. Specifically, in November 1998, AK drafted a first amendment to the contract between ART and Clapper. In March 1999, however, ART discussed with AK the possibility of terminating the Clapper deal. According to ART, AK advised that ART could terminate the transaction without breaching the contract because Clapper had previously breached the contract. AK then drafted a termination letter on ART's behalf which was sent to Clapper on March 22, 1999. Clapper responded with a letter dated March 24, 1999, asserting ART's termination was wrongful. Nevertheless, in both letters, the parties continued to express willingness for ART to acquire the properties if they could agree on the terms.

         Ultimately, the dispute between ART and Clapper resulted in litigation.[2] In January 2001, ART and AK signed a tolling agreement with respect to legal malpractice claims ART could potentially assert against AK. On appeal, ART asserts the tolling agreement did not apply to claims arising from AK's actions in November 1998 because limitations had expired on those claims before the tolling agreement was executed. ART further stated that the purpose of the tolling agreement was to extend the deadline to file any claims based on the March 1999 termination advice and actions until March 24, 2005.

         On March 24, 2005, the last day before the tolling agreement expired, ART filed their first amended petition in a lawsuit against AK asserting malpractice claims pertaining to its handling of the Clapper transaction. It was not until August 2014, however, shortly after the federal trial court rendered final judgment against them, that ART filed a second amended petition specifically addressing and detailing their complaints about AK's termination advice and actions. AK filed its first summary judgment motion based on limitations in August 2015. In their response to the first motion for summary judgment, ART argued AK was wrongfully conflating two separate, distinct and mutually exclusive acts of legal malpractice: the November 1998 faulty drafting of the first amendment to the Clapper contract that they admitted was time barred, and the March 1999 negligent advice and actions relating to the termination of the Clapper deal which was not.[3] ART does not appeal the trial court's first summary judgment rendered on February 8, 2016, dismissing the November 1998 claims based on limitations.[4]

         AK filed a second motion for summary judgment in July 2016 arguing that ART's termination claims were also time barred because their first amended petition complained only of negligent drafting, all of which occurred in 1998, and did not mention "termination" or discuss anything about AK's termination-related advice. ART countered that their broadly worded first amended petition adequately pled negligence in AK's representation of ART with respect to the entirety of the Clapper transaction. They further argued their use of the term "transaction documents" in the first amended petition necessarily included AK's March 1999 termination letter and related correspondence conveying AK's advice to ART throughout the Clapper transaction. As an additional basis to defeat summary judgment, ART asserted the Hughes equitable tolling rule applied to their claims. The trial court granted AK's motion and rendered judgment that ART take nothing by their claims. ART filed this appeal.

         ANALYSIS

         A. Standard of Review

         We review the trial court's summary judgment under well-known standards. See Diaz v. Westphal, 941 S.W.2d 96, 97-98 (Tex. 1997). A defendant who moves for summary judgment based on limitations must establish the defense as a matter of law, and thus, must conclusively negate any relevant tolling doctrines the plaintiff asserted in the trial court. Id. at 98.

         B. Clapper Deal Termination Claims

         In their first issue, ART contends the trial court erred by granting AK's second motion for summary judgment on limitations because their first amended petition sufficiently notified AK that they were asserting malpractice claims generally based on AK's representation of ART in the Clapper deal which ...


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