Anita Stewart and Craig Stewart VS Continental Casualty Company, Inc.
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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2011 CA 0505 ANITA STEWART AND CRAIG STEWART VERSUS CONTINENTAL CASUALTY COMPANY INC Judgment Rendered OV 211 e On Appeal from the 19th Judicial District Court In and for the Parish of East Baton Rouge y Docket No 564 713 The Honorable R Michael Caldwell Judge Presiding Dale R Baringer Benjamin J Klein B Aaron D Long Baton Rouge Louisiana Counsel for PlaintiffsAppellants Anita Stewart and Craig Stewart David S Daly Counsel for Defendant Appellee Elliot M Lonker Continental Casualty Company Metairie Louisiana Paul H Spaht Counsel for Defendant Appellee Keith J Fernandez Kathy D Underwood Baton Rouge Louisiana BEFORE GAIDRY McDONALD AND HUGHES JJ HUGHES J This is an appeal from a judgment dismissing the plaintiffs legal malpractice suit against the defendant attorney and her insurer on the basis of peremption For the reasons that follow we affirm FACTS AND PROCEDURAL HISTORY On March 4 2008 Anita Stewart and Craig Stewart filed the instant suit under Louisiana Direct Action Statute LSAR 22 formerly s S 1269 LSA R 22 against Continental Casualty Company Continental S 655 in its capacity as the legal malpractice insurer of Kathy D Underwood Ms Underwood was not made a party defendant to the suit until June 4 2010 In 2003 the Stewarts were involved in a personal bankruptcy proceeding in which they were advised by legal counsel to reaffirm a first mortgage held by Union Planters Bank N A Union Planters on their Zachary residence but not to reaffirm a second mortgage held by Bank One N Bank One A the home ostensibly because there was insufficient equity in The Stewarts were advised by counsel that the Bank One mortgage on their home would be discharged The Stewarts bankruptcy proceeding was subsequently concluded In 2005 the Stewarts obtained refinancing of the Union Planters indebtedness through mortgage broker Dedicated Lending Inc obtaining refinancing with lender LIME Financial Services Ltd LIME Kathy D Underwood was the closing attorney on the new financing and performed the title examination on the Zachary property to be mortgaged Ms The facts in this case are not in dispute and are recited herein as set forth in the trial court pleadings Z The refinancing package from LIME included a 122 loan secured by what the parties 00 400 believed would be a first mortgage and a 30 loan secured by a second mortgage on 90 600 the home 2 s Underwood title examination revealed that the Bank One mortgage remained on the public records Nevertheless Ms Underwood advised the Stewarts that the Bank One mortgage was discharged in the bankruptcy proceeding and that by means of a mandamus action the Bank One mortgage could be cancelled from the public records On the strength of this legal advice the LIME loans to the Stewarts were closed on September 16 2005 with the Stewarts granting two mortgages in LIME favor intended s to be first and second mortgages on their Zachary property Ms Underwood agreed to represent the Stewarts in and to file a mandamus proceeding to have the Bank One mortgage cancelled from the public records but apparently neglected to do so Subsequently Bank One assigned its mortgage on the Stewart property to SA Capital Partners On March 1 2007 SA sent a demand letter seeking payment of the 3 Bank One mortgage The Stewarts contacted Ms Underwood who began negotiations with SA which ultimately proved to be unsuccessful In October 2007 Ms Underwood advised the Stewarts to obtain other legal counsel with respect to the SA claim as well as relative to any claim of legal malpractice against her The Stewarts maintain that Ms Underwood acknowledged her malpractice and advanced funds to them to defray some 3 related expenses Meanwhile S A instituted a suit for executory process resulting in seizure of the Stewart Zachary home and when the instant suit was filed s We note that while prescription is interrupted when one acknowledges the right of the person against whom he had commenced to prescribe pursuant to LSA C art 3464 peremption may not be interrupted as stated in LSA art 3461 C M on March 4 2008 the home was scheduled to be sold in a sheriff sale on s March 19 2008 In this suit the Stewarts have asserted that Continental as Ms s Underwood insurer was liable to them for damages they suffered as a result of the legal malpractice she committed In brief to this court the Stewarts counsel stated that Ms Underwood was not originally named as a defendant o of professional courtesy ut Nevertheless because of plaintiffs failure to include Ms Underwood as a defendant Continental urged on May 5 2010 exceptions of no right of action and no cause of action contending Louisiana Direct Action Statute did not authorize a s direct action against the insurer without also suing the insured under the facts and circumstances of the case On June 4 2010 the plaintiffs amended their suit to add Ms Underwood as a defendant Thereafter both Ms Underwood and Continental filed separate exceptions pleading the objection of peremption contending that the failure to timely include Ms Underwood as a defendant led to the peremption of the action under LSA R 9 Following an S 5605 October 18 2010 hearing the trial court sustained the exceptions of both Ms Underwood and Continental and dismissed the plaintiffs suit with prejudice In finding the Stewarts claims were perempted the trial judge reasoned 4 After the March 4 2008 filing of this suit Continental sought an extension of time to answer the suit on March 31 2008 and was granted an additional fifteen days to file pleadings The record presented on appeal does not show any pleadings were filed between March 31 2008 and May 5 2010 s Plaintiffs counsel forbearance in not naming Ms Underwood as a defendant in the original s petition out of professional courtesy and the defendants subsequent use of the consequences of that choice to obtain the dismissal of the action illustrates the maxim No good deed goes unpunished Attributed by Bartlett Familiar Quotations 16th ed 1992 variously to banker s Andrew W Mellon writer Clare Boothe Luce and or financier John P Grier F11 The socalled Tort Reform of 1996 Governor Foster changed all of that It now required that the insured be named s in the suit Ms Underwood was not originally named As Continental scounsel argues legal malpractice and some of the other professional malpractice statutes are pretty much suz generzs that is a law unto themselves They have different rules and different applications by the supreme court on a number of issues I have run into that many times during my time here on the bench in what seemed to be unusual or perhaps sometimes even inappropriate decisions based upon the wording in those statutes s That what the decision was and it was allowed to remain In this case the supreme court has to some extent Naghi v Brener 2008 2527 La 09 26 6 17 So 919 3d and that case very explicitly says there can be no interruption there can be no suspension there is nothing to relate back to an amended petition filed after the preemptive period attempts to name a new legal malpractice defendant or and Plaintiffs counsel makes a very spirited and very sound argument for various reasons why this should addressed this issue in not apply But the fact is I faced with a very explicit decision m under Louisiana Supreme Court at this point I bound to m So the exception of peremption filed by Ms follow Underwood is sustained With regard to Continental Casualty there is no basis for this is a liability where there is no action against the insured situation where there a bankruptcy or something else that s If a claim is somehow suspends the insured liability s perempted there is no claim against the insured at all So since there is no claim against the insured there can be no claim against the insurer so the exception of peremption filed by Continental is also sustained The plaintiffs have appealed the trial court judgment assigning as error the trial court finding of peremption s LAW AND ANALYSIS Where as in this case the facts are not disputed the doctrine of manifest error does not apply to an appellate court review of a trial court s decision Rather appellate review of questions of law is simply to determine whether the trial court was legally correct or legally incorrect See Cangelosi v Allstate Insurance Company 96 0159 p 3 La App 1 5 Cir 9 680 So 1358 1360 writ denied 96 2586 La 1 96 27 2d 96 13 2 692 So 375 2d On appeal the plaintiffs contend that their March 4 2008 petition was timely filed against Continental following their March 13 2007 discovery of Ms Underwood September 16 2005 malpractice Further the plaintiffs s maintain that the subsequent amendment of their suit on June 4 2010 to add Ms Underwood as a defendant related back to the filing of the original petition pursuant to LSAC arts 1151 and 1153 P C The applicable period for filing an action based on legal malpractice is governed by LSA R 9 which provides S 5605 A No action for damages against any attorney at law duly admitted to practice in this state any partnership of such attorneys at law or any professional corporation company organization association enterprise or other commercial business or professional combination authorized by the laws of this state to engage in the practice of law whether based upon tort or breach of contract or otherwise arising out of an engagement to provide legal services shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act omission or neglect or within one year from the date that the alleged act omission or neglect is discovered or should have been discovered however even as to actions filed within one year from the date of such discovery in all events such actions shall be filed at the latest within three years from the date of the alleged act omission or neglect B The provisions of this Section are remedial and apply to all causes of action without regard to the date when the alleged act omission or neglect occurred However with respect to any alleged act omission or neglect occurring prior to September 7 1990 actions must in all events be filed in a court of competent jurisdiction and proper venue on or before September 7 1993 without regard to the date of discovery of the alleged act omission or neglect The oneyear and three year periods of limitation provided in Subsection A of this Section are peremptive periods within the meaning of Civil Article 1 151 provides in pertinent part A plaintiff may amend his petition without leave of court at any time before the answer thereto is served Article 1153 provides When the action or defense asserted in the amended petition or answer arises out of the conduct transaction or occurrence set forth or attempted to be set forth in the original pleading the amendment relates back to the date of filing the original pleading 01 Code Article 3458 and in accordance with Civil Code Article 3461 may not be renounced interrupted or suspended C Notwithstanding any other law to the contrary in all actions brought in this state against any attorney at law duly admitted to practice in this state any partnership of such attorneys at law or any professional law corporation company organization association enterprise or other commercial business or professional combination authorized by the laws of this state to engage in the practice of law the prescriptive and peremptive period shall be governed exclusively by this Section D The provisions of this Section shall apply to all persons whether or not infirm or under disability of any kind and including minors and interdicts E The peremptive period provided in Subsection A of this Section shall not apply in cases of fraud as defined in Civil Code Article 1953 Emphasis added The legal malpractice statute of limitations is strongly worded expressly stating that the period is peremptive and in accordance with Civil Code Article 3461 may not be renounced interrupted or suspended Therefore there is no doubt that the legislature intended that three years after the act omission or neglect the cause of action is extinguished regardless of when the negligence is discovered and regardless of whether a malpractice action may be brought within that threeyear period The legislature was aware of the pitfalls in this statute but decided within its prerogative to put a threeyear absolute limit on a person right to sue for s legal malpractice just as it would be within its prerogative to not allow legal malpractice actions at all Thus while a three year peremptive period may not be particularly generous it is not the court role to consider the policy s or the wisdom of the legislature in adopting a statute It is our province to determine only the applicability legality and constitutionality of the statute 7 See Reeder v North 970239 pp 9 10 La 10 701 So 1291 97 21 2d 1297 Peremption differs from prescription in several respects Although prescription prevents the enforcement of a right by legal action it does not terminate the natural obligation see LSAC art 1762 C 1peremption however extinguishes or destroys the right see LSA C art 3458 Public policy requires that rights to which peremptive periods attach are to be extinguished after passage of a specified period Accordingly nothing may interfere with the running of a peremptive period It may not be interrupted or suspended nor is there provision for its renunciation And exceptions such as contra non valentem are not applicable As an inchoate right prescription on the other hand may be renounced interrupted or suspended and contra non valentem applies an exception to the statutory prescription period where in fact and for good cause a plaintiff is unable to exercise his cause of action when it accrues Reeder v North 701 So at 2d 1298 Because the expiration of the peremptive time period destroys the cause of action itself and nothing may interfere with the running of a peremptive time period the supreme court held in Naghi v Brener that the 7 Article 1762 provides in pertinent part Examples of circumstances giving rise to a natural obligation are 1 When a civil obligation has been extinguished by prescription 8 Article 3458 provides Peremption is a period of time fixed by law for the existence of a right Unless timely exercised the right is extinguished upon the expiration of the peremptive period 9 The supreme court recited the facts of the Naghi case as follows Plaintiffs Benny and Ephraim Naghi were represented by Lisa Brener in connection with a claim for damages which arose on October 26 2005 when their property was damaged by Ere According to the plaintiffs Ms Brener failed to pursue the claim timely resulting in prescription of their claim on October 26 2006 On December 7 2006 the plaintiffs filed the instant legal malpractice suit against Lisa Brener and her professional law corporation The named plaintiffs were Benny and Ephraim Naghi In response Ms Brener filed a partial exception of no right of action and motion for summary judgment asserting that the property was actually owned by Mohtaram Inc and not by the Naghis personally and that therefore the Naghis had no right of action for 1 operation of LSAC art 1153 likewise cannot interfere with the LSA P C S 5605 R 9 peremptive period The Naghi court explained While the relation back of a pleading may not technically interrupt or suspend a prescriptive or peremptive period in the sense contemplated by Civil Code articles 3462 3472 there can be no escaping the fact that relation back interferes with the operation of the prescriptive or peremptive time period in that it avoids its operation As one commentator has stated that is the primary importance of LSA C art 1153 Because it is P well established that nothing may interfere with the running of and avoiding the peremptive period a peremptive period certainly interferes with the running ofthat period relation back of an amended or supplemental pleading adding a plaintiff is not allowed to avoid the running of a peremptive period such as that found in La R 9 Further the relation back theory S 5605 assumes that there is a legally viable claim to which the pleading can relate back Prescription only prevents the enforcement of a right by legal action it does not terminate the natural obligation Peremption however destroys the cause of action itself Because the cause of action no longer exists after the termination of the peremptive period and any right to assert the claim is destroyed there is nothing to which an amended or supplemental pleading filed after the peremptive period has expired can relate back Therefore because the Naghi s original petition filed within the peremptive period was brought by a party with no right of action to sue the First Supplemental Amending Petition filed after the peremptive party brought on behalf of the proper party plaintiff cannot relate back to the original timely filed petition Naghi v Brener 2008 2527 at pp 1011 17 So at 925 26 citations 3d omitted In Naghi v Brener the plaintiffs who timely filed the legal malpractice action were corporate shareholders who did not have the right to sue on the claim asserted and by the time the corporation who did have damage to the property The Naghis are directors and shareholders of Mohtaram Inc The trial court granted the exception and allowed plaintiffs ten days to their petition On March 12 2008 plaintiffs filed a First Supplemental Amending Petition to add and designate proper party plaintiff Mohtaram Inc Ms Brener then tiled an Exception of No Cause of Action amend Exception of Prescription Exception of Peremption Exception of No Right of Action and Motion for Summary Judgment essentially arguing that the claims asserted in the First Supplemental Amending Petition were perempted under La S 5605 R9 Naghi v Brener 2008 2527 at pp 1 2 17 So at 920 footnotes omitted The trial court in 3d Naghi held that the amended petition adding Mohtaram as a plaintiff related back to the original petition under La C art 1153 Naghi v Brener 2008 2527 at p 3 17 So at 921 P 3d to the right to sue was substituted the LSAR 9 time periods had S 5605 expired We recognize the circumstances presented in the instant case differ from those presented in Naghi v Brener in that the capacity of the plaintiffs was not at issue here rather it was the failure of the Stewarts to join the allegedly negligent attorney as a defendant along with her insurer until after the LSAR 9 time periods ran that is the issue in this S 5605 case Nevertheless we conclude that the precepts announced in Naghi v Brener and the earlier jurisprudence should be equally applicable under the facts and circumstances of this case Allowing the application of LSA C art 1153 to the instant case P would avoid the operation of the peremptive time period by allowing a pleading filed after the expiration of the period to relate back to the filing of an original and timely filed petition Because the avoidance of the time period interferes with the running of that time period relation back of a petition adding a new defendant is not permitted where the time period involved is peremptive Further because the expiration of a peremptive time period destroys the cause of action there is nothing for an amended or supplemental petition to relate back to under LSA C art 1153 Because P the plaintiffs in this case did not file suit against their former attorney before the peremptive time period of LSAR 9 expired the plaintiffs S 5605 10 The supreme court made no distinction between an attempt to have the addition of a plaintiff or a defendant relate back to the original petition under LSAC art 1153 when it stated P C Although this article speaks only to the relation back of an action or defense this Court has applied this article to allow the relation back of pleadings adding a defendant Ray v Alexandria Mall Through St Paul Property Liability Ins 434 So 1083 1983 or adding a plaintiff Giroir 2d v South Louisiana Medical Center Div of Hospitals 475 So 1040 La 2d 1985 supra if certain conditions are satisfied Plaintiffs assert that the amended petition meets the requirements set forth in Giroir and that therefore it should be allowed to relate back to the original timely filed petition Plaintiffs argue that relation back under this article does not interrupt or suspend the peremptive time period it merely applies the date of the original petition to the amended petition We disagree Naghi v Brener 20082527 at pp 78 17 So at 924 3d 10 amending petition attempting to do so cannot relate back to the original petition under LSA C P art 1153 Therefore Ms s Underwood exception of peremption was correctly granted See Naghi v Brener 2008 2527 p 11 La 6 17 So 919 926 09 26 3d Thus we conclude the suit against Ms Underwood was properly dismissed We also affirm the dismissal of Continental albeit on a different basis to the extent the trial court concluded the action against Continental had perempted The plaintiffs suit against Continental was filed within the time period allowed by LSAR 9 as it was filed within one year on S 5605 March 4 2008 of the plaintiffs March 13 2007 discovery of Ms s Underwood alleged September 16 2005 malpractice therefore it was not perempted However the Direct Action Statute LSA R 22 S 1269 provided no basis for suit against Continental alone Therefore the plaintiffs failed to state a cause of action as to Continental and the plaintiffs suit against it was properly dismissed 13 11 We find the plaintiffs argument that Scaglione v Juneau 20101734 La 7 40 So 10 27 3d 127 requires a different result unpersuasive as Scaglione dealt with an election case not a legal malpractice action Moreover the governing statute in Scaglione LSA R 18 S 1406 specifically authorized a trial court to allow the filing of amended pleadings for good cause shown and in the interest of justice See LSA R 18 S 1406 B 12 The Direct Action Statute allows an action to be brought against the insurer alone only when at least one of the following applies a The insured has been adjudged bankrupt by a court of competent jurisdiction or when proceedings to adjudge an insured bankrupt have been commenced before a court of competent jurisdiction b The insured is insolvent c Service of citation or other process cannot be made on the insured d When the cause of action is for damages as a result of an offense or quasi offense between children and their parents or between married persons e When the insurer is an uninsured motorist carrier f The insured is deceased See LSAR 22 S 1269 1 B An appellate court may notice the failure of the petition to disclose a cause of action LSA P C art 927 B 11 CONCLUSION For the reasons assigned herein the judgment of the trial court dismissing the suit of Anita Stewart and Craig Stewart as to Continental Casualty Company and Kathy D Underwood is affirmed appeal are to be borne by Anita Stewart and Craig Stewart 7ul3113 IW011 12 All costs of this
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