the Willard Law Firm, L.P. v. John Sewell , 464 S.W.3d 747 ( 2015 )

Reversed and Rendered and Opinion filed March 26, 2015.
In The
Fourteenth Court of Appeals
NO. 14-14-00621-CV
THE WILLIARD LAW FIRM, L.P., Appellant
V.
JOHN SEWELL, Appellee
On Appeal from the County Civil Court at Law No. 1
Harris County, Texas
Trial Court Cause No. 1012376
OPINION
The Williard Law Firm, L.P. (Williard) appeals from the trial court’s grant
of a judgment notwithstanding the verdict (JNOV) favoring John Sewell. Sewell, a
former client of Williard, sued for breach of fiduciary duty among other causes of
action. In response, Williard alleged among other defenses that Sewell’s claims
were barred by the applicable statute of limitations. Sewell, in turn, pleaded the
discovery rule. The jury found that Williard breached fiduciary duties it owed to
Sewell but also found a date by which Sewell should have discovered the breach.
Application of the date found by the jury would mean that Sewell did not timely
file his lawsuit. Upon Sewell’s motion for JNOV, the trial court disregarded the
jury’s discovery date finding and rendered judgment for Sewell based on breach of
fiduciary duty. We reverse and render a take-nothing judgment favoring Williard.
Background
In February 2007, Sewell and Williard entered into an attorney-client
agreement for Williard to represent Sewell in a matter against Panola Building Co.,
L.L.C., involving the alleged wrongful foreclosure of Sewell’s property on Surratt
Drive in Houston (the Surratt Property). This agreement contained the following
two paragraphs addressing the contingency fee to be paid to Williard in the event
of a recovery in the lawsuit:
2. In consideration of the services rendered and to be rendered to
Client by Attorney, Client does hereby assign, grant and convey to
Attorney the following present undivided interests in all his claims
and causes of action against Panola for and as a reasonable contingent
fee for Attorney’s fees, and said contingent Attorney’s fee will be
one-half (1/2) of any net property settlement or recovery made (after
deducting all third-party fees paid by attorney).
3. In the event Attorney is successful in having the title of the subject
property transferred into Client’s name, Client agrees to hold title
along with Attorney as tenants in common with tenant rights of
survivorship as payment of the fee set forth in Section no. 2.
Sewell signed the agreement, and Stephen M. Williard (Attorney) signed on behalf
of Williard.
The lawsuit against Panola was settled on July 26, 2007, with Panola
agreeing to deed the Surratt Property back to Sewell, free and clear of any liens,
and give Sewell $19,500 in cash.1 On September 6, 2007, Sewell received a check
1
Sewell testified that as part of the settlement agreement, he no longer owed $30,000 to
Panola as Panola had claimed in the lawsuit.
2
for $8,740.15, which represented the proceeds from the cash payment from Panola
minus litigation expenses and Williard’s 50 percent. Additionally, all dated the
same day, a warranty deed transferred a 50 percent interest in the Surratt Property
from Sewell to Williard, a second warranty deed then conveyed the same interest
back to Sewell, and a deed of trust created a vendor’s lien favoring Williard to
secure a $28,951.60 promissory note (at 10 percent interest) from Sewell to
Williard.2 On October 11, 2007, Sewell made his first payment of $300 on the
promissory note.3 This date and amount are indicated on a handwritten receipt in
the record and were testified to by Tiffany Baird, a Williard employee. Sewell
thereafter continued to make payments to Williard until March 2011, although
sometimes Sewell did not make the payments timely. Williard sent a foreclosure
notice to Sewell in November 2010 and foreclosed in December 2010.
Sewell apparently first consulted with new counsel upon learning in March
2011 that Williard had foreclosed on the property.4 On April 2, 2012, he filed the
present lawsuit against Williard, alleging breach of fiduciary duty, breach of
contract, unconscionability, wrongful foreclosure, and fraud involving real estate,
and seeking a declaratory judgment. In response, Williard pleaded the four-year
statute of limitations, among other defenses. Sewell then asserted the discovery
2
Sewell testified that he did not remember signing the deeds or the promissory note, but
he did recall signing a blank sheet of paper and the Attorney explaining that he would fill in the
details later. The Attorney testified that he explained all of the documents to Sewell and Sewell
signed them. The Attorney also stated that the reason the 50 percent interest in the property was
deeded back to Sewell in exchange for the promissory note was because Sewell wanted the
property in his name only.
3
Sewell testified that he set the $300 payment amount himself and he thought he would
be making the payments for “about five years.” Although that would amount to a significant
sum, it would not cover the entirety of the $28,951.60 promissory note plus interest.
4
In his briefing, Sewell repeatedly urges April 1, 2011 as the day on which he first
consulted with his current counsel and learned of Williard’s wrongful conduct. Sewell does not,
however, provide any record citation supporting this date.
3
rule. The discovery rule exception to the statutes of limitations defers accrual of a
cause of action until the plaintiff knew, or in the exercise of reasonable diligence
should have known, the facts giving rise to a cause of action. Computer Assocs.
Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996).
At trial, Sewell testified that he did not think that Williard was to receive 50
percent of the property in the event of success in the underlying lawsuit against
Panola. Instead, he thought that Williard was only entitled to half of the cash
proceeds from the settlement with Panola. Sewell further testified that he only
received a third grade education and that he had vision problems that kept him
from being able to read the documents Williard prepared. He said that the
Attorney told him that he was getting a good deal and did not explain any of the
details. Sewell stated he believed that the amount reflected in the promissory note
was to compensate Williard for additional, post-settlement, legal work required to
return everything regarding the property back “like it was” before Panola
foreclosed, i.e., a deed in Sewell’s name, property tax issues remedied, etc.
At the conclusion of trial, the jury found that the attorney-client relationship
between Sewell and Williard began on February 6, 2007 and ended on October 25,
2007; Williard did not comply with its fiduciary duty to Sewell; Sewell was injured
before April 2, 2008 (four years before he filed suit); and Sewell was damaged in
the past in the amount of $28,951.60. The jury further found that in the exercise of
reasonable diligence, Sewell should have discovered the breach of fiduciary duty
by October 11, 2007 (more than four years before he filed his lawsuit), and that
Sewell and Williard were each responsible for 50 percent of Sewell’s damages.5 In
5
Question no. 4 in the jury charge read in pertinent part as follows:
By what date should Sewell, in the exercise of reasonable diligence have
discovered that [Williard] did not comply with its fiduciary duty to Sewell?
Answer with a date in the blank below.
4
the remainder of the charge, the jury declined to find that Williard had breached
either the attorney-client agreement or the promissory note, committed fraud in a
real estate transaction, or wrongfully foreclosed on Sewell’s property.
Williard moved for judgment based on application of the statute of
limitations and the jury’s finding that Sewell should have discovered the breach of
fiduciary duty by October 11, 2007. Sewell moved for JNOV, asking the court to
disregard the jury’s discovery date. The trial court granted Sewell’s motion and
awarded him judgment for $14,475.80, pre- and post-judgment interest, and costs
of court. The trial court did not offer a specific date on which Sewell discovered or
should have discovered the breach or provide further explanation of its holding.
Legal Underpinnings
As stated above, in its sole issue, Williard contends that the trial court erred
in disregarding the jury’s discovery rule finding and granting Sewell a JNOV. A
trial court may disregard a jury finding and render a JNOV if there is no evidence
to support the jury’s finding or if a directed verdict would have been proper.
Brown v. Bank of Galveston, 963 S.W.2d 511, 513 (Tex. 1998). We review such a
ruling under a legal-sufficiency standard, crediting favorable evidence if
reasonable jurors could and disregarding contrary evidence unless reasonable
jurors could not. Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830
(Tex. 2009). When examining a legal sufficiency challenge, we review the
evidence in the light most favorable to the challenged finding and indulge every
reasonable inference that would support it. See City of Keller v. Wilson, 168
S.W.3d 802, 822 (Tex. 2005). The evidence is legally sufficient if it would enable
a reasonable and fair-minded person to reach the verdict under review. Tanner,
289 S.W.3d at 830. It is the court’s charge, not some other unidentified law, that
Answer: 10-11-07
5
measures the sufficiency of the evidence when, as here, there was no objection to
the relevant portion of the charge. See St. Joseph Hosp. v. Wolff, 94 S.W.3d 513,
530 (Tex. 2002).
To be considered timely, claims for breach of fiduciary duty must be filed
within four years of the date the cause of action accrues. Tex. Civ. Prac. & Rem.
Code § 16.004(a)(5); Trousdale v. Henry, 261 S.W.3d 221, 233 (Tex. App.—
Houston [14th Dist.] 2008, pet. denied). Generally, a cause of action accrues, and
the statute of limitations begins to run, when facts come into existence that
authorize a claimant to seek a judicial remedy. Johnson & Higgins of Tex., Inc. v.
Kenneco Energy, Inc., 962 S.W.2d 507, 514 (Tex. 1998). The discovery rule is a
narrow exception to limitations and should be construed strictly. See Seureau v.
ExxonMobil Corp., 274 S.W.3d 206, 227 (Tex. App.—Houston [14th Dist.] 2008,
no pet.) (citing Computer Assocs., 918 S.W.2d at 455 and S.V. v. R.V., 933 S.W.2d
1, 25 (Tex. 1996)). As mentioned above, when applicable, the discovery rule
defers accrual of a cause of action until the plaintiff knew, or in the exercise of
reasonable diligence should have known, the facts giving rise to the cause of
action. Computer Assocs., 918 S.W.2d at 455.
Neither party disputes that the discovery rule properly applies to this case;
however, they disagree as to the date by which Sewell should have known about
the facts giving rise to his cause of action. A plaintiff who successfully invokes
the discovery rule still must have sought information about his injuries and their
likely cause once apprised of facts that would prompt a reasonably diligent person
to make an inquiry that would lead to discovery of the cause of action. Seureau,
274 S.W.3d at 228. The specific date by which a plaintiff knew or should have
known of an injury is generally a question of fact for the jury, see Childs v.
Haussecker, 974 S.W.2d 31, 47 (Tex. 1998). Unless evidence conclusively
6
establishes when a party should have known of facts giving rise to a claim, the
question is one for the jury. See Barker v. Eckman, 213 S.W.3d 306, 312 (Tex.
2006); Weaver & Tidwell, L.L.P. v. Guarantee Co. of N. Am. USA, 427 S.W.3d
559, 566 (Tex. App.—Dallas 2014, pet. filed). The party seeking to benefit from
the discovery rule has the burden of obtaining findings to support its application.
Barker, 213 S.W.3d at 312; Woods v. William M. Mercer, Inc., 769 S.W.2d 515,
518 (Tex. 1988).
Because fiduciaries are presumed to possess superior knowledge to that of
the client, “it may be said [in the fiduciary context] that the nature of the injury is
presumed to be inherently undiscoverable, although a person owed a fiduciary duty
has some responsibility to ascertain when an injury occurs.” Computer Assocs.,
918 S.W.2d at 456 (citing Courseview, Inc. v. Phillips Petroleum Co., 158 Tex.
397, 312 S.W.2d 197, 205 (Tex. 1957)). “While a person to whom a fiduciary duty
is owed is relieved of the responsibility of diligent inquiry into the fiduciary’s
conduct, so long as that relationship exists, when the fact of misconduct becomes
apparent it can no longer be ignored, regardless of the nature of the relationship.”
S.V., 933 S.W.2d at 8. “Facts which might ordinarily require investigation likely
may not excite suspicion where a fiduciary relationship is involved.” Willis v.
Maverick, 760 S.W.2d 642, 645 (Tex. 1988). That said, even in a breach of
fiduciary duty case, the claim accrues when the claimant knows, or in the exercise
of ordinary diligence should know, of the wrongful act and resulting injury. See
Murphy v. Campbell, 964 S.W.2d 265, 271 (Tex. 1997); Dunmore v. Chicago Title
Ins. Co., 400 S.W.3d 635, 642 (Tex. App.—Dallas 2013, no pet.).
Discussion
Here, the jury found that, in the exercise of reasonable diligence, Sewell
should have discovered the breach of fiduciary duty by October 11, 2007, the date
7
on which he made his first payment on the promissory note. Sewell filed suit on
April 2, 2012, which was more than four years past the date on which the jury
found he should have discovered the breach of fiduciary duty. In his motion for
JNOV, which the trial court granted, Sewell asserted that the evidence was legally
insufficient to support the jury’s discovery rule finding, and instead, the evidence
conclusively established April 1, 2011—the day that he first conferred with his
current counsel—as the date on which he should have discovered Williard’s breach
of fiduciary duty.
Williard contends that the record contains legally sufficient evidence to
support the jury’s finding that Sewell should have discovered that Williard did not
comply with its fiduciary duty by October 11, 2007, and the trial court therefore
erred in granting the JNOV. See Tanner, 289 S.W.3d at 830. We agree. As
described above, the evidence demonstrated that Sewell made his first payment of
$300 on that date to Williard on the promissory note. There is no way to tell
whether the jury believed Williard or Sewell regarding the circumstances
surrounding execution of the promissory note, i.e., whether the Attorney accurately
described the note and the related deeds to Sewell, whether Sewell actually signed
the documents, or just what Sewell thought was the purpose of his $300 payments.
Regardless, it was reasonable for the jury to conclude that, in the exercise of
reasonable diligence, Sewell should have made inquiries at least by the time he
was to begin paying additional money to Williard beyond the fee he knew Williard
had already received and that diligent inquiries would had led Sewell to discover
the nature of his injury. See Childs, 974 S.W.2d at 40.6 The evidence establishing
6
As set forth above, the relevant charge question asked “[b]y what date should Sewell, in
the exercise of reasonable diligence have discovered that Williard did not comply with its
fiduciary duty?” See supra n.2; Wolff, 94 S.W.3d at 530 (explaining that sufficiency of the
evidence is assessed under the charge as given).
8
this date includes Williard employee Baird’s testimony and a handwritten receipt.
Sewell insists that he did not have either the educational background or the
physical ability to discover Williard’s wrongful conduct until he consulted with his
current counsel on April 1, 2011. As mentioned, Sewell testified that he did not
have any formal education past the third grade and his vision had become so bad
that he could not read the documents that Williard prepared. Sewell additionally
argues that because Williard presented no evidence contradicting his clear, direct,
positive testimony on these matters, which was free from contradiction,
inaccuracies, and circumstances tending to cast suspicion thereon, the jury was
compelled to take the testimony as true, citing Ragsdale v. Progressive Voters
League, 801 S.W.2d 880, 882 (Tex. 1990). However, even if the jury was required
to accept as true Sewell’s testimony regarding his education and physical
abilities—a question we need not and do not decide in this case—it still could have
reasonably deduced that he should have discovered the nature of his injuries by the
time he began making payments on the promissory note. The payment of money
was, in short, a significant event that the jury could have reasonably believed
should have caused Sewell to ask questions. See Trousdale, 261 S.W.3d at 234
(“Discovery occurs when a plaintiff has knowledge of such facts, conditions, or
circumstances as would cause a reasonably prudent person to make an inquiry that
would lead to discovery of the cause of action.”).
Sewell further asserts that he possessed no background or information which
would have allowed him to determine that his attorney was breaching a fiduciary
duty.7 The focus of the discovery rule, however, is not on discovery of a particular
7
Sewell specifically points out that he had no knowledge of the Texas Disciplinary Rules
of Professional Conduct or their application to these facts, but these rules do not provide a basis
for a breach of fiduciary duty cause of action. See Fleming v. Kinney ex rel. Shelton, 395 S.W.3d
917, 931 (Tex. App.—Houston [14th Dist.] 2013, pet denied).
9
cause of action, it is on discovery of facts, including injury, giving rise to a cause
of action. See Murphy, 964 S.W.2d at 271; Computer Assocs., 918 S.W.2d at 455;
see also Arabian Shield Dev. Co. v. Hunt, 808 S.W.2d 577, 583 (Tex. App.—
Dallas 1991, writ denied) (explaining in the discovery rule context that “accrual of
the cause of action does not await the plaintiff’s recognition that he has grounds for
a lawsuit.”). Sewell does not cite any cases supporting his suggestion that he
needed to have understood what constitutes a breach of fiduciary duty before he
should have been required to make inquiries about an injury.
Because the evidence was sufficient to support the jury’s finding that Sewell
should have discovered the facts giving rise to his breach of fiduciary duty claim
by October 11, 2007, more than four years before he filed his lawsuit, the trial
court erred in disregarding this jury finding and awarding a JNOV favoring
Sewell.8 Accordingly, we sustain Williard’s sole issue.
We reverse the trial court’s judgment and render a take-nothing judgment
favoring Williard.
/s/ Martha Hill Jamison
Justice
Panel consists of Justices Jamison, Busby, and Brown.
8
Because we hold the evidence sufficient to support the jury’s discovery rule finding, we
need not analyze in depth Sewell’s argument that he conclusively established April 1, 2011 as
the date on which he should have discovered Williard’s breach of fiduciary duty (which would
be required for a JNOV). See generally Barker, 213 S.W.3d at 312 (“A party seeking to benefit
from the discovery rule has the burden of obtaining findings to support its application.”). The
evidence supporting the jury’s finding negates Sewell’s contention.
10