Hoover v. Gregory

OPINION OVARD, Justice. Appellants Harry C. Hoover, Jr., C.D. Townsend, and Central Petroleum Corporation appeal the trial court’s award of summary judgment based on limitations in favor of appellees, William H. Gregory, Gregory Government Securities, Inc., Gregory Investment and Management, and Dean C. Richardson. Appellants sued appellees in connection with a tax-shelter package they purchased from appellees. In two points of error, appellants argue that (1) the statute of limitations had not run on their claims against appellees and (2) the trial court should have assessed sanctions against appellees because appellees’ motion for summary judgment was groundless and was either brought in bad faith or for the purpose of harassment. We overrule appellants’ points and affirm the trial court’s judgment. *670 FACTS The Gregory Program Between 1979 and 1981, appellants entered into “forward contracts” with appellees 1 for the deferred delivery of government-guaranteed mortgage certificates. Appellees sold appellants the forward contracts through a program referred to as the “Gregory Program.” Forward contracts are similar to futures contracts but they are not traded on a public exchange. Appellants participated in the Gregory Program to defer tax payments. In 1981, the Internal Revenue Service (IRS) began investigating the Gregory Program. It disallowed the tax deductions taken under the Program and issued Notices of Deficiency to each of the appellants. The Notices informed appellants that their Gregory Program deductions had been disallowed. The Notices stated that the IRS considered the Gregory Program transactions “shams entered into for tax avoidance purposes,” that they were “not bona fide,” and that they “lack[ed] economic substance.” Each appellant filed a petition in United States Tax Court challenging the IRS’s dis-allowance of their Gregory Program tax deductions. The tax court held that the Gregory Program was a fraudulent tax shelter. Brown v. Commissioner, 85 T.C. 968 (1985) (hereinafter referred to as Brown). The Ninth Circuit subsequently affirmed Brown, and the Supreme Court denied certiorari. Brown sub nom. Sochin v. Commissioner, 843 F.2d 351 (9th Cir.), cert. denied, 488 U.S. 824,109 S.Ct. 72,102 L.Ed.2d 49 (1988) (hereinafter Brown affirmed ). On July 11, 1989, appellants filed suit in state court against appellees alleging negligence, breach of fiduciary duties, professional malpractice, deceptive trade practices, fraud, and breach of contract. Appel-lees filed a motion for summary judgment contending that all of the appellants’ claims were barred by the applicable statutes of limitations. The trial court granted the summary judgment motion in favor of ap-pellees. The Timetable The pertinent undisputed dates are as follows: 1979 Appellee Gregory incorporates Gregory Investment and Management, Inc. and Gregory Government Securities, Inc. June 30, 1980 Appellant Central Petroleum enters into its last forward contract with appellees May 4, 1981 Appellant Townsend enters into his last forward contract with ap-pellees July 2,1981 Appellant Hoover enters into his last forward contract with appel-lees October 12, 1981 Appellee Gregory informs appellants by letter that IRS is examining Gregory Program tax deductions August 26, 1982 IRS sends its Examination Report to appellant Hoover stating that his Gregory Program deductions have been disallowed January 11, 1983 IRS sends Notice of Deficiency to appellant Hoover March 24, 1983 Appellant Hoover files petition in U.S. Tax Court challenging the disallowance November 2, 1983 IRS sends its Examination Report to appellant Townsend stating that his Gregory Program deductions on his 1980 tax return have been disallowed *671 May 23, 1984 Appellant Townsend files petition in U.S. Tax Court challenging the disallowance June 27, 1984 IRS sends its Examination Report to appellant Townsend stating that his Gregory Program deductions on his 1981 and 1982 tax returns have been disallowed IRS sends its Examination Report to appellant Central Petroleum stating that its Gregory Program deductions have been disallowed October 24, 1984 IRS sends Notice of Deficiency to appellant Central Petroleum November 14,1984 Appellant Central Petroleum files petition in U.S. Tax Court challenging the disallowance April 9, 1985 IRS sends Notice of Deficiency to appellant Townsend December 18, 1985 The Tax Court holds that the Gregory Program was a fraudulent tax shelter in Brown March 29,1988 The Ninth Circuit affirms Brown on appeal in Brown affirmed October 3, 1988 The Supreme Court denies application for certiorari on Brown July 11, 1989 Appellants file suit against appellees August 1, 1990 The trial court enters summary judgment in favor of appel-lees Gregory Government Securities, Inc., Gregory Investment and Management, Inc., and Dean C. Richardson February 28, 1991 The trial court enters summary judgment in favor of appel-lee William H. Gregory STATUTE OF LIMITATIONS ANALYSIS Standard of Review Summary judgment may be rendered only if the pleadings, depositions, admissions, and affidavits show (1) that there is no genuine issue as to any material fact, and (2) that the moving party is entitled to judgment as a matter of law. Tex. R.Civ.P. 166a(c); Rodriguez v. Naylor Indus., Inc., 763 S.W.2d 411, 413 (Tex.1989). Therefore, appellees, as defendants in the trial court and movants in the summary judgment proceeding, must either (1) disprove at least one element of each of the appellants’ theories of recovery, or (2) plead and conclusively establish each essential element of an affirmative defense, thereby rebutting appellants’ causes of action. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 679 (Tex. 1979). Statute of limitations is an affirmative defense. Tex.R.Civ.P. 94. Thus, ap-pellees bear the burden of pleading and conclusively establishing each essential element of their plea of limitations. See Id.; Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 517 (Tex.1988). Application of the Discovery Rule A party seeking to avail itself of the discovery rule must plead it. Woods, 769 S.W.2d at 518. Although appellants did not openly plead the discovery rule, in their petition and briefs, they argue that they did not know they had causes of action until the Tax Court decided Brown in 1985. In effect, appellants argue that their causes of action arose when they discovered the nature and the amount of their injuries. Appellees argued consistently throughout their briefs and oral argument that the discovery rule determined accrual of appellants’ causes of action. Since the legal effect of a pleading is determined by its substance, allegations, and evident purpose, we will apply the discovery rule as though appellants pleaded it. See St. Louis S.W. Ry. v. Duke, 424 S.W.2d 896, 899 (Tex.1967); Hawkins v. Anderson, 672 S.W.2d 293, 295 (Tex.App.—Dallas 1984, no writ). The discovery rule provides that limitations run from the date the plaintiff discovers or should have discovered, in the exercise of reasonable care and diligence, the nature of the injury. Willis v. Maverick, 760 S.W.2d 642, 644 (Tex.1988). “Discovery” also occurs when a plaintiff had knowledge of such facts as would cause a reasonably prudent person to make an inquiry that would lead to discovery of the cause of action. It is not necessary that a party should know the details of the evidence by *672 which to establish his cause of action; it is enough that he knows that a cause of action exists in his favor, and when he has this knowledge it is his own fault if he does not avail himself of those means which the law provides for prosecuting or preserving his claim. Citizens State Bank v. Shapiro, 575 S.W.2d 375, 385 (Tex.App.—Tyler 1978, writ ref’d n.r.e.). The discovery rule expressly mandates the plaintiff to exercise reasonable diligence to discover facts of negligence or omission. Willis, 760 S.W.2d at 645-46; Black v. Wills, 758 S.W.2d 809, 815 (Tex.App.—Dallas 1988, no writ). DISCOVERY AND ACCRUAL OF APPELLANTS’ CAUSES OF ACTION Appellants complain on appeal that the trial court erred in granting appellees’ motion for summary judgment based upon limitations. Appellants argue that their causes of action could not have accrued until the IRS Commissioner made a final “assessment” of their tax deficiency. Appellants contend that the “assessment” in this case did not take place with regard to appellant Hoover until November 7, 1988, and never took place at all with regard to appellants Townsend and Central Petroleum. They conclude that their petition, filed on July 11,1989, was timely with respect to all their causes of action. In addition, appellants argue that their causes of action are not time barred because they did not arise until the tax court decided Brown on December 18, 1985. Appellants insist they did not and could not have discovered their injuries until after the Brown court conclusively decided ap-pellees’ fraud and negligence. Furthermore, they claim that the statutes of limitations on all of their claims were tolled until the Ninth Circuit affirmed Brown in Brown affirmed on March 29, 1988. Appellants conclude that their petition against appellees, filed on July 11, 1989, was timely with respect to the statutes of limitation applicable to each of their causes of action. Appellants rely primarily on the decisions in Atkins v. Crosland, 417 S.W.2d 150 (Tex.1967), and Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991). Appellees counter that the trial court properly granted summary judgment based on limitations. Applying the discovery rule, appellees argue that appellants’ causes of action accrued at the time they were discovered or could have been discovered with reasonable diligence. Ap-pellees contend that at the very latest, appellants discovered or should have discovered their causes of action between January 1983 and April 1985, when the IRS sent Notices of Deficiency to the appellants. Appellees maintain that appellants’ suit was filed more than four years after their causes of action accrued, taking them out of the longest applicable statute of limitation. Appellees rely on the discovery rule and attempt to distinguish Atkins and Hughes. Because we determine that the Notices of Deficiency announced facts from which appellants discovered or with reasonable diligence could have discovered their injuries, we conclude that the trial court properly granted summary judgment because each of appellants’ claims was barred by the applicable statutes of limitations. We rely on Atkins in our determination of accrual. In addition, we interpret Hughes narrowly and decide that its application should be limited to cases involving legal malpractice. Atkins v. Crosland Appellants contend that Atkins v. Cros-land governs this case. In Atkins, Roy D. Atkins hired Robert E. Crosland, an independent accountant, to prepare his 1960 income tax returns. Crosland prepared Atkins’s returns using the cash method of accounting rather than the accrual method. The evidence indicated that although Cros-land had attempted to prepare the returns by the cash method, he was unable to file the returns under that method because he failed to secure the consent of the Commissioner of Internal Revenue as required by the IRS Code. Accordingly, Crosland calculated Atkins’s returns by the accrual *673 method, thereby depriving Atkins of a $12,-297.32 tax savings. Atkins, 417 S.W.2d at 151-52. Atkins sued Crosland for professional malpractice, alleging that Crosland had been negligent in preparing his tax returns. Crosland moved for summary judgment claiming that Atkins’s cause of action was barred by the statute of limitations. The trial court granted summary judgment in favor of Crosland, and the Fort Worth Court of Appeals affirmed its judgment. Atkins v. Crosland, 406 S.W.2d 263, 264 (Tex.Civ.App.—Fort Worth 1966), rev’d, 417 S.W.2d 150 (Tex.1967). The Texas Supreme Court reversed the trial court and the court of appeals, holding that Atkins’s action was not barred by the statute of limitations. Atkins, 417 S.W.2d at 151. The court held that Atkins’s negligence cause of action did not begin to run until the IRS “assessed” a tax deficiency. The court concluded that based upon the facts, Atkins suffered no damage or injury until the IRS assessed a deficiency. It reasoned that: If a deficiency had never been assessed, the plaintiff [Atkins] would not have been harmed and therefore would have no cause of action. Thus, the use of the cash method, as opposed to the accrual method, was not in itself the type of unlawful act which, upon its commission, would set the statute in motion. In short, in the absence of assessment, injury would not have inevitably resulted. Id. at 153 (emphasis added). Atkins clearly focuses on injury — when and how it was established and when it was or could have been discovered. The court determined in Atkins that, but for the IRS assessment, Atkins would have sustained no discoverable injury. See Id. In our case, appellants focus on the term “assessment,” rather than the injury itself. They argue that Atkins establishes a general rule that until tax liability is determined, a taxpayer suffers no harm and has no cause of action. We, however, read Atkins as establishing a general rule that a taxpayer’s cause of action accrues on a fact specific basis when he discovers a risk of harm to his economic interests, whether that be at the time of assessment or otherwise. In Zidell v. Bird, 692 S.W.2d 550 (Tex. App.—Austin 1985, no writ), the Austin Court of Appeals agreed with our interpretation of Atkins. The court construed Atkins in line with the “legal injury” rule. Citing Atkins, the court pointed out that when a defendant’s act is not originally “unlawful,” the plaintiff’s cause of action does not accrue until a specific event, occurring subsequent to the date of defendant’s conduct and caused thereby, made it apparent that some legally protected interest in the plaintiff had indeed been exposed to a specific and concrete risk of harm which had theretofore remained only a logically possible consequence of defendant’s conduct. Id. at 556 (emphasis added). The focal point in the Zidell analysis is creation and notice of a risk of harm, not a finally established or inevitable harm. Id. at 557. The court concluded that the Atkins “assessment” did not represent inevitable injury to Atkins because it might not have been sustained after administrative and judicial adjudication. Id. Thus, contrary to appellants’ contentions here, the Zidell court, relying on Atkins, rejected the notion that a taxpayer’s cause of action does not accrue until all administrative and judicial challenges are exhausted. Id. Instead, it correctly relies on discovery of a risk of harm. See Id. Further, we find persuasive the Court of Appeals of Maryland’s decision in Leon-hart v. Atkinson, 265 Md. 219, 289 A.2d 1 (1972). As in Atkins, the Leonharts sued Atkinson for professional malpractice because he failed to obtain the necessary consent from the IRS to submit their returns using the cash method rather than the accrual method of accounting. Upon receiving the Leonharts’ returns, which included unauthorized cash-method calculations, the IRS notified them that in order to comply with the law, they would have to pay additional tax. Almost two years later, the IRS advised the Leonharts that a *674 substantial deficiency had been assessed against them. The Leonharts challenged the assessment in the United States Tax Court and obtained an adverse ruling. After exhausting all efforts to get the assessment overturned, the Leonharts brought suit against Atkinson on April 1, 1971, almost eight years after the IRS notified them of their tax deficiency. Atkinson filed a special plea claiming the action was barred by limitations as the statute began running when the IRS notified the Leon-harts of their tax deficiency. As in the instant case, the Leonharts, in opposition, argued that the action was not barred by limitations, claiming that the statute did not begin running until the tax court affirmed the assessment. Accepting the Atkins rationale, the court rejected the Leonharts’ position and held that their cause of action accrued when the IRS notified them of a tax deficiency, not when it assessed a final grand total. Leon-hart, 289 A.2d at 5. The court found that any reasonable and prudent man, being in the place of the appellants, would have known or certainly should have known [when they received notice of the tax deficiency], that he had sustained legal harm as of that date.... Id. (citing Feldman v. Granger, 255 Md. 288, 257 A.2d 421, 424 (1969) (emphasis added)). We agree with the Zidell and Leonhart rationale. And, in accordance with Atkins we conclude that appellants’ causes of action accrued when they were or should have been aware with reasonable diligence that there was some concrete and specific risk of harm to their legally protected interests. Discovery of Appellants’ Causes of Action Based on our discussion above, we determine that appellants’ causes of action accrued when they knew or should have known with reasonable diligence that there was some concrete and specific risk of harm to their legally protected economic interest. After carefully reviewing the record, we conclude that upon receipt of the Notices of Deficiency, each appellant knew or should have known that there was a risk of harm that the Gregory Program deductions were unacceptable and that the IRS was assessing a deficiency against them. The Notices of Deficiency included a statement explaining how the deficiency was figured. They specifically informed appellants that the IRS was claiming that the Gregory Program transactions were “shams entered into for tax avoidance purposes,” were “not bona fide,” and “lack[ed] economic substance.” 2 The Notices also included calculation of “income tax liability required to be shown on return,” “underpayment,” and penalty additions. Finally, the Notices showed the calculated deficiency. After receiving the Notices, appellants knew or should have known that appellees' negligence, breach of fiduciary duty, malpractice, deceptive trade practices, fraud, and breach of contract, if any, had caused them the risk of concrete and specific harm to their legally protected economic interests. Accordingly, we hold that appellants’ causes of actions accrued as of the date of their Notice of Deficiency: Appellant Hoover — January 11, 1983 Appellant Central Petroleum — October 24, 1984 Appellant Townsend — April 9, 1985 3 Tolling of the Statutes of Limitations In addition to arguing that their causes of action did not accrue until Brown was *675 decided in 1985, appellants contend that the statutes of limitations of their actions were tolled until the Ninth Circuit’s final determination of Brown on March 29, 1988, in Brown affirmed. Appellants point to the recent decision by the Supreme Court of Texas in Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex.1991), to support this contention. Appellees respond that Hughes is not applicable to this case. They take the position that this is a fraud case and that Hughes is applicable only to legal malpractice cases. Hughes v. Mahaney & Higgins Hughes is a legal malpractice case. James and Patti Hughes sued attorney Robert M. Mahaney, his partner, and his law firm, alleging causes of action under the DTPA and negligence. The suit stemmed from Mahaney’s representation of the Hugheses in an adoption and parental-rights-termination action. Mahaney filed a motion for summary judgment against the Hugheses’ claims asserting that it was barred by the statute of limitations. The trial court granted Mahaney’s motion, and the Waco Court of Appeals affirmed its judgment. The Texas Supreme Court reversed the trial court and the court of appeals. It held that the Hugheses’ claims were not barred by limitations because the applicable statute was tolled until all appeals were exhausted on the underlying suit in which the malpractice allegedly occurred. The court reasoned that if an attorney commits malpractice while providing legal services in the prosecution or defense of a claim that results in litigation, the legal injury and discovery rules can force the client into the untenable conflict of adopting inherently inconsistent litigation postures in the underlying case and in the malpractice case: Had the Hugheses sued Mahaney for ' malpractice while seeking to overturn the Waco court of appeals decision, they would have been placed in the position of claiming that Mahaney committed malpractice in the handling of their termination of parental rights suit and that, but for Mahaney’s negligence, the termination of parental rights and subsequent adoption would have succeeded. In pursuing their appeal of the underlying claim, however, the Hugheses had to make the inconsistent claim that Maha-ney’s actions were correct, or, at least not fatal to their claims. As a result of this conflict, the likelihood of their success would have been compromised. Hughes, 821 S.W.2d at 157. The Court concluded that “limitations are tolled for the second cause of action because the viability of the second cause of action depends on the outcome of the first.” Id. (emphasis added). Moreover, the Court used specific language designed to limit Hughes’s application to legal malpractice claims against an attorney in the course of litigation: Therefore, we hold 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. Id. (emphasis added). We interpret Hughes narrowly as controlling in legal malpractice cases when a malpractice suit is brought against an attorney in the course of litigating the complainant’s underlying claim. We recognize the uniqueness of the confidential relationship between an attorney and a client and determine that it is the special nature of this relationship that the Hughes court intended to protect. We do not believe Hughes to be applicable to the instant case. Specifically, we conclude that resolution of the appellants’ tax case is not dispositive of their complaints that appellees acted negligently, breached their fiduciary duty, engaged in deceptive trade practices, committed fraud, or breached their contracts. With regard to appellants’ claims against appellees for professional malpractice, appellants urge this Court to extend the Hughes analysis to all malpractice actions, not to limit it to legal malpractice actions. Our research reveals no case in which the *676 Supreme Court of Texas has extended Hughes to include malpractice actions other than legal malpractice. 4 We decline the invitation to expand Texas law past the limits the Texas Supreme Court has expressly placed upon it. See Swilley v. McCain, 374 S.W.2d 871, 875 (Tex.1964). Accordingly, we construe Hughes narrowly and conclude it is not applicable to appellants’ causes of action against appellees. Accrual of Appellants’ Causes of Action Two-Year Statutes — Negligence, Breach of Fiduciary Duty, Malpractice, and DTPA Appellants’ tort causes of action for negligence, breach of fiduciary duty, malpractice (professional negligence), and DTPA violations have two-year statutes of limitations. See Tex.Civ.PRAc. & Rem.Code Ann. § 16.003 (Vernon 1986) (negligence); Redman Indus, v. Couch, 613 S.W.2d 787, 789 (Tex.App.—Houston [14th Dist.] 1981, writ ref’d n.r.e.) (breach of fiduciary duty); Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988) (malpractice); Tex.Bus. & Com.Code Ann. § 17.565 (Vernon 1987) (DTPA). Normally a tort cause of action accrues when the allegedly tortious act is committed. See Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990). This rule is followed despite difficulty in ascertaining damages until a later date. Id.; Atkins, 417 S.W.2d at 153. Consequently, appellants’ tort causes of action accrued, if at all, in 1980-1981, when the Gregory Program allegedly failed to enter into forward contracts that would yield expected tax benefits and survive IRS scrutiny. Application of the discovery rule tolls the normal accrual period until appellants discovered or should have discovered in the exercise of reasonable care and diligence the facts that gave rise to their causes of action. Willis, 760 S.W.2d at 644. As discussed above, we determine that the IRS Notices of Deficiency triggered this knowledge. Therefore, appellant Hoover’s tort causes of action accrued, if at all, on January 11,1983, and, according to the two-year statute, expired in January 1985, approximately four and one-half years before he filed suit. Appellant Central Petroleum’s tort causes of action accrued, if at all, on October 24, 1984, and, according to the two-year statute, expired in October 1986, approximately two and one-half years before it filed suit. Appellant Townsend’s tort causes of action accrued, if at all, at the latest, on April 9, 1985, and, according to the two-year statute, expired in April 1987, approximately two years and three months before he filed suit. All of appellants’ tort causes of action are barred by the applicable statutes of limitations. Four-Year Statutes — Fraud and Breach of Contract Appellants’ causes of action for fraud are governed by a four-year statute of limitations. Williams v. Khalaf, 802 S.W.2d 651, 658 (Tex.1990). Normally, a fraud cause of action accrues when the defendants make false representations or omissions. Woods, 769 S.W.2d at 517; Quinn v. Press, 135 Tex. 60, 140 S.W.2d 438, 440-41 (1940). Appellants’ fraud causes of action accrued, if at all, in 1980 during Gregory Program negotiations when appellees allegedly made false misrepresentations or omissions that allegedly caused appellants to participate in the Program. Application of the discovery rule tolls the normal accrual until appellants received their IRS Notices of Deficiency. Upon receipt of these Notices, we determine appellants discovered or should have discovered in the exercise of reasonable diligence that appellees had made false representations or omissions. Under our determination, appellant Hoover’s fraud cause of action accrued, if at *677 all, on January 11, 1983, and expired in January 1987, approximately two and one-half years before he filed suit. Appellant Central Petroleum’s fraud cause of action accrued, if at all, on October 24, 1984, and expired in October 1988, approximately six months before it filed suit. Appellant Townsend’s fraud cause of action accrued, if at all, on April 9, 1985, and expired in April 1989, approximately three months before he filed suit. All of appellants’ fraud causes of action are barred by the applicable statutes of limitations. Appellants’ causes of action for breach of contract are also governed by a four-year statute of limitations. Tex.Civ. Prac. & Rem.Code Ann. § 16.004 (Vernon 1986). Contract claims generally accrue when the contract is breached. Wichita Nat’l Bank v. United States Fidelity & Guar. Co., 147 S.W.2d 295, 297 (Tex.Civ. App.—Fort Worth 1941, no writ). A breach occurs when a party fails to perform a duty required by the contract. Here, the alleged breach was appellees’ purported failure in 1980-1981 to enter into forward contracts which would create expected tax benefits and survive IRS scrutiny. Applying the discovery rule and our determination of accrual to the normal breach of contract accrual, appellant Hoover’s limitations period expired about two and one-half years before he filed suit, appellant Central Petroleum’s limitations period ran about six months before it filed suit, and appellant Townsend’s limitations period terminated about three months before he filed suit. All of appellants’ breach of contract causes of action are barred by statutes of limitations. CONCLUSION We hold that all appellants’ causes of action against appellees are barred by the applicable statutes of limitations. We overrule appellants’ first point of error. Because we find merit in appellees’ motion for summary judgment, we hold that the trial court did not err in failing to assess sanctions against appellees under rule 13 of the Texas Rules of Civil Procedure. Tex.R.Civ.P. 13; See Caserotti v. State Farm Ins. Co., 791 S.W.2d 561, 566-67 (Tex.App.—Dallas 1990, writ denied). We overrule appellants’ second point of error and affirm the trial court’s judgment. *678 [[Image here]] *679 [[Image here]] *680 [[Image here]] *681 [[Image here]] *682 [[Image here]] *683 [[Image here]] Footnotes [1] Although each of the appellees played a some- ■ what distinct role in the Gregory Program, they are treated collectively in Appellants’ petition and will be treated collectively for purposes of this appeal. For the record, however, we note their separate functions: William H. Gregory — incorporated Gregory Investment and Management, Inc. and Gregory Government Securities, Inc. Gregory Investment and Management, Inc.— an investment advisor organized to manage its clients' accounts in U.S. Government securities Gregory Government Securities, Inc. — a broker/dealer that was a party to the forward contracts entered into by appellants Dean C. Richardson — an independent broker/dealer who presented the Gregory Program to appellant Hoover [2] Each appellant received a separate Notice informing him of his individual deficiencies; however, the language of all the Notices is substantially the same and contains the quoted language. A copy of appellant Hoover’s Notice of Deficiency is attached to the opinion as Exhibit A. The record indicates that appellant Hoover made the notations that appear on the fifth page of the Notice. [3] Although the evidence demonstrates that appellant Townsend received his initial Notice of Deficiency on February 24, 1984, we base our calculations on the date he received a second notice, April 9, 1985. [4] The only application of Hughes thus far has been in Gulf Coast Investment Corp. v. Brown, 821 S.W.2d 159, 160 (Tex.1991) and Aduddell v. Parkhill, 821 S.W.2d 158, 159 (Tex.1991). We note, however, that because Brown and Adud-dell are legal malpractice case, they did not require the court to extend its holding in Hughes.