TX: Collectibility, An Essential Element of Legal Malpractice Actions
Webb v. Brad Stockford, Texas Court of Appeals, January 10, 2011.
Facts: Plaintiffs filed an action for malpractice against the Defendant attorney for allegedly mishandling their suit against a seller and his real estate agent in connection with plaintiffs' purchase of their house.
The Defendant attorney contended, among other things, that the malpractice suit ought to be dismissed because plaintiffs could not establish collectibility of any judgment they might have received in the underlying suit, and therefore, could not establish any damages in the malpractice action.
Issue: Were plaintiffs required to establish collectibility of any underlying judgment to proceed with their malpractice suit against their former counsel?
Ruling: Yes.
The plaintiff must prove the final judgment in the underlying case would have been collectible on or after the date it was first signed. Additionally, if the evidence concerning collectibility relates to a date prior to the final judgment in the underlying case, the evidence must also show a reasonable probability that the defendant's financial condition did not change during the time before a judgment was signed in a manner that would have adversely affected collectibility.
Here, the Court ruled that plaintiffs had failed to show "collectibility" because they failed to show seller still had the sales proceeds, or any other evidence of seller's solvency, i.e. "current income, profits, or access to finances."
Lesson: In Texas, plaintiff must go one step further after showing that he or she would have prevailed in the underlying action but for the negligence of the attorney. Plaintiff must then establish damages by showing that any judgment obtained in the underlying action was, in fact, collectible from one or more of the underlying defendants.
Being extremely familiar with the original underlying case by plaintiffs, I believe the original underlying case would have been lost. The plaintiffs while in possession of a sellers disclosure that was not 100% accurate were not able and never would have been able to prove the inaccuracies were (1) deliberate on behalf of either the seller or sellers agent, or (2) that the inaccuracies of the disclosure resulted in any measurable or provable damages. I believe Plaintiffs went off the word of a neighbor that may have had an ax to grind with the seller and who, it appears, was not truthful. Plaintiffs did not engage this particular lawyer until some time had passed after the sale and had not used that timeframe to hire credible outside third party engineers to prove any damages. Additionally, plaintiffs hired an independent inspector prior to closing to inspect the property and the inspector found no issues and was willing to testify and stand by their original report of no issues. I believe the laywer was taken in by plaintiffs passionate belief they had been wronged due to lies from an ex neighbor and it serves as a reminder to us all as to the importance of really digging into the evidence and motivations before taking on this sort of case. The real loser here is the unfortunate seller who had to pay to defend themselves against what was nothing more than a baseless lawsuit. If there was any negligence on Mr. Stockfords end it was in pursuing this case to begin with given the appalling lack of any real evidence of damages.