Legal Definitions
Criminal Statutes
An example of a violation of a criminal statute that sometimes arises in legal malpractice cases is “misapplication of fiduciary property”, in violation of Texas Penal Code Section 32.45. Under this criminal statute, a fiduciary who misapplies fiduciary property of the value of $1,500.00 or more, whose conduct subjects the property to “substantial risk of loss”, is guilty of a felony. “Misapply”, as used in this statute, means to deal with the property contrary to a law (or an agreement) prescribing the custody or disposition of the property. “Substantial risk of loss” simply means that it is more likely than not that a loss will occur.
In addition to being a crime, a civil jury finding that the fiduciary has engaged in “misapplication of fiduciary property” may be liable for unlimited exemplary damages in a civil case. That is, while exemplary damages are typically “capped” at not more than four times the actual damages by Texas Civil Practice & Remedies Code Section 41.008, a finding of a misapplication of fiduciary property of $1,500.00 or more, or theft over $20,000.00, will allow a civil jury to award more in exemplary damages. The only limitation on the award would be the Eighth Amendement to the United States Constitution, which prohibits “excessive fines and penalties”. Courts considering those limitations have found that awards of eight (8) times the amount of actual damages were not “excessive”.
Breach of Feduciary Duty
A “fiduciary” relationship exists when one justifiably places trust and confidence in another to act in one’s best interest. Subjective trust and feelings alone, however, do not transform arm’s length dealings into a relationship of trust and confidence, however. See, Pattern Jury Charges, 104.1 (2010).
There are two types of fiduciary relationships—formal and informal. Formal fiduciary relationships exist in the case of attorney-client, principal-agent, partner-partner, trustee-beneficiary, guardian-ward, and the like, and Texas courts recognize the fiduciary duties to exist as a matter of law in these instances.
Informal fiduciary relationships are more often disputed, but may arise from all manner of trust and confidences reposed. However, they will not be found merely because, for instance, one businessperson trusts another and relies of a promise to perform a contract; where the relationship has been cordial and long; where the parties have had prior dealings and subjectively trust one another; or where the plaintiff has merely complied with all of the requests of the defendant. The courts have required a “relationship of trust and confidence” arising from moral, social, domestic, and/or personal relationships. As an example, courts often find a spouse to be a fiduciary with respect to another spouse, or a relative who is caring for the property of a disabled relative. See, Pattern Jury Charges, 104.1, Comment.
The duty of the fiduciary to the beneficiary of the fiduciary relationship is often referred to as “the highest duty in the law”, and consists of the following duties, and the fiduciary will have the burden to establish compliance with each of these duties.
a. That all transactions were fair and equitable to the beneficiary;
b. That the fiduciary made reasonable use of all confidences placed in the fiduciary by the beneficiary;
c. That the fiduciary acted with the utmost good faith and exercised the most scrupulous honesty toward the beneficiary;
d. That the fiduciary placed the interests of the beneficiary before his own, and did not use the advantage of his position to gain any advantage at the expense of the beneficiary, and did not place himself in a position where his self-interest might conflict with his obligations as a fiduciary;
e. That the fiduciary fully and fairly disclosed all important information to the beneficiary, including mistakes, acts and omissions in violation of the fiduciary duty.
See, Pattern Jury Charges, 104.2, Comment.
Negligence
“Negligence, when used with respect to an attorney, is the failure to use ordinary care, that is, failing to do what an attorney of reasonable prudence could do under the same or similar circumstances, or doing that which an attorney of ordinary prudence would not do under the same or similar circumstances”.
“Ordinary Care” when used with respect to the conduct of an attorney, means that degree of care that an attorney of ordinary prudence could use under the same or similar circumstances”.
Pattern Jury Charges, 60.1 (2010), Cosgrove v. Grimes, 774 S. W. 2d 662, 665 (Tex. 1989).
An attorney engaging in the practice of law and contracting to represent a client as an attorney impliedly represents that he/she possesses the requisite degree of skill, learning and ability that is necessary to practice the profession and that others similarly situated ordinarily possess; will exert his or her judgment in the legal matter thus entrusted; and will exercise reasonable and ordinary care and diligence in applying the skill and knowledge at hand. See Cook v. Irion, 409 S.W. 2d 475, 477 (Tex. Civ. App.—San Antonio 1966 , no writ).
An example of a violation of a criminal statute that sometimes arises in legal malpractice cases is “misapplication of fiduciary property”, in violation of Texas Penal Code Section 32.45. Under this criminal statute, a fiduciary who misapplies fiduciary property of the value of $1,500.00 or more, whose conduct subjects the property to “substantial risk of loss”, is guilty of a felony. “Misapply”, as used in this statute, means to deal with the property contrary to a law (or an agreement) prescribing the custody or disposition of the property. “Substantial risk of loss” simply means that it is more likely than not that a loss will occur.
In addition to being a crime, a civil jury finding that the fiduciary has engaged in “misapplication of fiduciary property” may be liable for unlimited exemplary damages in a civil case. That is, while exemplary damages are typically “capped” at not more than four times the actual damages by Texas Civil Practice & Remedies Code Section 41.008, a finding of a misapplication of fiduciary property of $1,500.00 or more, or theft over $20,000.00, will allow a civil jury to award more in exemplary damages. The only limitation on the award would be the Eighth Amendement to the United States Constitution, which prohibits “excessive fines and penalties”. Courts considering those limitations have found that awards of eight (8) times the amount of actual damages were not “excessive”.
Breach of Feduciary Duty
A “fiduciary” relationship exists when one justifiably places trust and confidence in another to act in one’s best interest. Subjective trust and feelings alone, however, do not transform arm’s length dealings into a relationship of trust and confidence, however. See, Pattern Jury Charges, 104.1 (2010).
There are two types of fiduciary relationships—formal and informal. Formal fiduciary relationships exist in the case of attorney-client, principal-agent, partner-partner, trustee-beneficiary, guardian-ward, and the like, and Texas courts recognize the fiduciary duties to exist as a matter of law in these instances.
Informal fiduciary relationships are more often disputed, but may arise from all manner of trust and confidences reposed. However, they will not be found merely because, for instance, one businessperson trusts another and relies of a promise to perform a contract; where the relationship has been cordial and long; where the parties have had prior dealings and subjectively trust one another; or where the plaintiff has merely complied with all of the requests of the defendant. The courts have required a “relationship of trust and confidence” arising from moral, social, domestic, and/or personal relationships. As an example, courts often find a spouse to be a fiduciary with respect to another spouse, or a relative who is caring for the property of a disabled relative. See, Pattern Jury Charges, 104.1, Comment.
The duty of the fiduciary to the beneficiary of the fiduciary relationship is often referred to as “the highest duty in the law”, and consists of the following duties, and the fiduciary will have the burden to establish compliance with each of these duties.
a. That all transactions were fair and equitable to the beneficiary;
b. That the fiduciary made reasonable use of all confidences placed in the fiduciary by the beneficiary;
c. That the fiduciary acted with the utmost good faith and exercised the most scrupulous honesty toward the beneficiary;
d. That the fiduciary placed the interests of the beneficiary before his own, and did not use the advantage of his position to gain any advantage at the expense of the beneficiary, and did not place himself in a position where his self-interest might conflict with his obligations as a fiduciary;
e. That the fiduciary fully and fairly disclosed all important information to the beneficiary, including mistakes, acts and omissions in violation of the fiduciary duty.
See, Pattern Jury Charges, 104.2, Comment.
Negligence
“Negligence, when used with respect to an attorney, is the failure to use ordinary care, that is, failing to do what an attorney of reasonable prudence could do under the same or similar circumstances, or doing that which an attorney of ordinary prudence would not do under the same or similar circumstances”.
“Ordinary Care” when used with respect to the conduct of an attorney, means that degree of care that an attorney of ordinary prudence could use under the same or similar circumstances”.
Pattern Jury Charges, 60.1 (2010), Cosgrove v. Grimes, 774 S. W. 2d 662, 665 (Tex. 1989).
An attorney engaging in the practice of law and contracting to represent a client as an attorney impliedly represents that he/she possesses the requisite degree of skill, learning and ability that is necessary to practice the profession and that others similarly situated ordinarily possess; will exert his or her judgment in the legal matter thus entrusted; and will exercise reasonable and ordinary care and diligence in applying the skill and knowledge at hand. See Cook v. Irion, 409 S.W. 2d 475, 477 (Tex. Civ. App.—San Antonio 1966 , no writ).
Legal Malpractice
Legal malpractice is a shorthand reference to a number of different civil liability claims that can be asserted against a lawyer, including violations of disciplinary rules, civil statutes, criminal statutes, common-law torts including “negligence”, “breach of fiduciary duty”, fraud and constructive fraud. The remedies can include damages, fee forfeiture, injunctive relief, disqualification, sanctions, and professional discipline. “Legal Malpractice” includes not only claims by a client against a lawyer, but can in limited circumstances include claims by a non-client against another person’s lawyer, such as fraud and negligent misrepresentation. Deutsch vs. Hoover, Bax & Slovacek, LLP, 97 S. W. 3d 179, 184 n.1 (Tex. App.—Houston [14th Dist.] 2003 no pet.).
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