In J.M.K. 6, Inc. v. Gregg & Gregg, P.C., No. 14-04-00849-CV, 2006 Tex. App. Lexis 2338 (Tex. App.–Houston [14th Dist.] 2006), the court held that the Hughes tolling rule – that when an attorney commits malpractice in the prosecution or defense of a claim that results in litigation, the statute of limitations on the malpractice claim against the attorney is tolled until all appeals on the underlying claim are exhausted or the litigation is otherwise finally concluded – does not apply to a malpractice claim against an attorney for negligence in effecting a condominium conversion.

The client was in the business of acquiring apartment complexes, converting them to condominiums, and selling the condominium units to third parties. The client, Karam, hired Gregg to incorporate the legal entities that would own the condominiums. The corporation would then hire Gregg to convert the apartments to the condominium form of ownership. Condominium units were sold to third parties. The City subsequently asserted that the condominium conversion was ineffective. The purchasers sued the client, who in turn sued the lawyer, asserting both the client’s own malpractice claim and a contribution claim. The lawyer asserted that the client’s own malpractice claim as barred by limitations because it was filed more than two years after the sale.

Generally, a legal malpractice claim accrues when the client sustains a legal injury or, in cases governed by the discovery rule, when the client discovers or should have discovered the facts establishing the elements of its claim. Hughes v. Mahaney & Higgins, 821 S.W.2d 154, 156, 35 Tex. Sup. Ct. J. 157 (Tex. 1991).

The time for accrual of a claim is a question of law. Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351, 33 Tex. Sup. Ct. J. 360 (Tex. 1990). Where applicable, the discovery rule defers the accrual of a claim until the plaintiff knew or, in the exercise of reasonable diligence, should have known of the wrongfully caused injury. Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 735, 44 Tex. Sup. Ct. J. 1090 (Tex. 2001). The plaintiff need not know the specific nature of each wrongful act that may have caused the injury for his claim to accrue under the discovery rule. Id. Rather, it accrues when the plaintiff discovers or, in the exercise of reasonable diligence, should discover the "nature of his injury." Childs v. Haussecker, 974 S.W.2d 31, 40, 41 Tex. Sup. Ct. J. 1101 (Tex. 1998). Thus, the discovery rule only defers accrual of a claim until the plaintiff discovers, or should have discovered through reasonable diligence, the injury and that it was likely caused by the wrongful acts of another. Id.

In addition, when an attorney commits malpractice in the prosecution or defense of a claim that results in litigation, the statute of limitations on the malpractice claim against the attorney is tolled until all appeals on the underlying claim are exhausted or the litigation is otherwise finally concluded. Apex Towing Co. v. Tolin, 41 S.W.3d 118, 119, 44 Tex. Sup. Ct. J. 470 (Tex. 2001). This is known as the Hughes rule. See Hughes v. Mahaney & Higgins, 821 S.W.2d 154, 156, 35 Tex. Sup. Ct. J. 157 (Tex. 1991).

The "prosecution or defense of a claim" is not limited to legal services provided in connection with litigation. For example, in Gulf Coast Investment Corp. v. Brown, GCIC hired Brown to conduct a non-judicial foreclosure sale of real property owned by the Smiths. 821 S.W.2d 159, 160-61, 35 Tex. Sup. Ct. J. 188 (Tex. 1991) (per curiam). Brown allegedly failed to give the Smiths proper notice before conducting the sale. Id. The Smiths prevailed in a wrongful foreclosure suit against GCIC, and after the case concluded nearly two years later, GCIC filed a legal malpractice action against Brown. Id. In response, Brown asserted that CGIC's malpractice suit was now barred by limitations. The Texas Supreme concluded that Brown's alleged malpractice in conducting the non-judicial foreclosure sale occurred "in the prosecution of a claim that resulted in litigation." Id. The "claim" was the GCIC's debt claim against the Smiths' property, and Brown "prosecuted" the claim by conducting the foreclosure sale. The prosecution of the claim resulted in litigation when the Smiths filed a wrongful foreclosure action against GCIC. Because these facts met the requirements of the Hughes rule, the Court concluded that limitations governing GCIC's malpractice claims against Brown were tolled until the Smith suit (i.e., the resulting litigation) concluded.

In J.M.K., the court found that, in contrast to Brown, J.M.K. did not have a "claim" that Gregg was hired "to prosecute or defend," whether inside or outside of a litigation context. The court said:

Here, J.M.K. alleges that Gregg was hired to convert the apartment complex to condominiums and to ensure that the property was ready for sale. Regardless of whether J.M.K. was later forced to adopt inconsistent positions concerning the adequacy of Gregg's work, the services do not constitute "the prosecution or defense of a claim." Because the work that Gregg allegedly performed improperly does not constitute "the prosecution or defense of a claim," we conclude the Hughes tolling rule does not apply.