26,142 La.App. 2 Cir. 1/6/95, Anderson v. Collins

• Decision Date: 06 January 1995
• Parties: 26,142 La.App. 2 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 1371

648 So.2d 1371

26,142 La.App. 2 Cir. 1/6/95

Annie Mae Fuller ANDERSON, et al., Plaintiffs-Appellants, v. Elizabeth Smith COLLINS, et al., Defendants-Appellees.

No. 26142-CA.

Court of Appeal of Louisiana, Second Circuit.

Jan. 6, 1995.

Rehearing Denied Feb. 23, 1995.

Writ Denied April 21, 1995.

Paul D. Spillers, Theus, Grisham, Davis & Leigh, Monroe, for appellants.

F. Drake Lee, Jr., Cook, Yancey, King & Galloway, Shreveport, Paul B. Deal, Lemle & Kelleher, New Orleans, for appellees.

Before VICTORY and BROWN, JJ., and JONES, J. Pro Tem.

JONES, Judge Pro Tempore.

In this malpractice action by presumptive heirs against an administratrix's attorneys and their insurers in connection with the handling of an intestate succession, the plaintiffs appeal a judgment maintaining defendants' exception of no cause of action, and giving full faith and credit to two judgments rendered by Arkansas courts barring plaintiffs from litigating the validity and enforceability of certain promissory notes. The defendants answered, alleging the trial court erred in denying an exception of no right of action and in denying summary judgment. We reverse in part, affirm in part, and remand.

FACTS

Jo Anne Fuller died intestate on January 20, 1984, in Monroe, Louisiana. Four promissory notes, hereinafter referred to as the Newbern notes, were found among the decedent's effects by Wade R. Baggette, who initially served as the provisional administrator of the estate. Each of the notes was executed by David Newbern; was dated March 5, 1981; and was made payable on March 4, 1982 to Jo Anne Fuller. The principal amount of these notes is alleged to be in excess of 4.9 million dollars.

Mr. Baggette was replaced as succession representative by Elizabeth Smith Collins who hired the law firm of Cary & Cary to provide her legal assistance in her fiduciary capacity as administratrix of the succession. Ms. Collins posted a bond in the amount of $500,000 on which the surety was Great American Insurance Company.

On or about March 5, 1987, the Newbern notes prescribed while they were in the possession of the law firm. Subsequently, the lawyers arranged for Mr. E.H. Herrod, an attorney in Little Rock, Arkansas, to file a lawsuit against Newbern on behalf of Ms. Collins in her capacity as administratrix. Before the Arkansas suit on the promissory notes was filed in March 1988, Jo Anne Fuller's heirs, including Annie Mae Fuller Anderson, Eloise Fuller Wiggers, George Edward Wiggers, Nancy Wiggers Baggette and Wade R. Baggette, filed a lawsuit against the administratrix's lawyers, both individually and as a law firm, and also sued Ms. Collins, as well as her insurer, Great American Insurance Company. In addition to seeking recovery of the amount of the promissory notes plus accrued interest, the petition also alleged that the administratrix and her counsel had caused damage to the estate in the amount of $525,000 in connection with certain federal tax liability that should not have been incurred. On April 18, 1988, the Arkansas court granted summary judgment providing that the Newbern notes had prescribed, but also providing that the notes lacked consideration.

On September 29, 1988, the plaintiffs filed an amended petition alleging that the deceased was a co-maker on a note (Note 102) with David Newbern of Little Rock, Arkansas. The note was in the amount of $1,783,290.53, with a maturity date of April 13, 1984. Based on the administratrix's requests, Note 102 allegedly was repeatedly extended by its holder, Commercial National Bank. Plaintiffs allege that the administratrix and her counsel breached a duty of prudent management owed to the heirs of the estate by failing to timely liquidate certain certificates of deposit and apply their proceeds toward the payment of Note 102. This breach allegedly resulted in damages to plaintiffs in excess of $102,000. The amended petition also alleged several additional matters which were claimed to have resulted in damages to the petitioners. The liability of David Newbern as to Note 102 was tried by an Arkansas jury which found that Note 102 lacked consideration.

In May 1990, Great American Insurance Company, which had previously filed a cross-claim against Elizabeth Smith Collins, filed a motion to dismiss its demand against her for the reason that Great American had compromised and settled its claim against Ms. Collins. However, the motion for dismissal did not mention Great American's third party demands which it had filed against the Carys and their insurers. The court granted Great American's motion to dismiss against the administratrix.

Similarly, in July 1990, a motion for dismissal was filed by the plaintiffs, including Wade R. Baggette, appearing "individually and in his capacity as Administrator of the Succession of Helen Smith Collins and as Successor Administrator of the Succession of Jo Anne Fuller", requesting the court to dismiss the lawsuit against Elizabeth Smith Collins and Great American Insurance Company, with prejudice, because the plaintiffs had compromised and settled their claims against Elizabeth Smith Collins. The trial court also granted this motion to dismiss. Neither the motion nor the order referred to the cross-claim which Elizabeth Smith Collins had filed against the Carys and their insurers.

On April 19, 1993, the plaintiffs filed a second amended petition which added additional mismanagement claims against the Carys and joined their professional liability insurers, New England Insurance Company and the Home Insurance Company as additional defendants. The second amended petition also made further allegations in connection with the Newbern notes:

13.

Arkansas counsel was retained by Curtis W. Cary and Paul W. Cary for the sole purpose of obtaining a Judgment from the Arkansas Court that the Newbern Notes were lacking in consideration and, therefore, were worthless assets on the date of death of Jo Anne Fuller.

14.

Pursuant to instructions and directions from Paul W. Cary and Curtis W. Cary, Arkansas counsel filed suit on the Newbern Notes for the sole purpose of proving the notes were worthless on the date of Jo Anne's death. Arkansas counsel, acting pursuant to the instructions from Paul W. Cary and Curtis W. Cary, was successful in his efforts to obtain a Judgment of the Arkansas court which held the Newbern Notes were lacking in consideration and, therefore, were unenforceable.

15.

Arkansas counsel hired by Curtis W. Cary and Paul W. Cary filed a lawsuit in Pulaski County, Arkansas, in proceedings captioned "Elizabeth Smith Collins, Administratrix of the Estate of Jo Anne Fuller vs. David H. Newbern", Suite No. 88-1379 on the docket of the Circuit Court of Pulaski County, Arkansas, Second Division. The four Newbern Notes were the subject matter of that litigation.

16.

After being served with the lawsuit, David H. Newbern asserted, by way of a Motion for Summary Judgment, two defenses:

1) Prescription; and

2) Lack of Consideration.

17.

Acting pursuant to the instructions and direction of Curtis W. Cary and Paul W. Cary, their Arkansas counsel did not oppose the Motion for Summary Judgment and, accordingly, the court granted the Motion for Summary Judgment and held:

1) The Newbern Notes had prescribed; and

2) The Newbern Notes lacked consideration.

18.

Curtis W. Cary and Paul W. Cary had a conflict of interest when they retained Arkansas counsel to represent the Estate of Jo Anne Fuller in connection with the Newbern Notes. When Arkansas counsel was retained Curtis W. Cary and Paul W. Cary had notice that their failure to timely file suit to collect the notes would be the subject of a malpractice action against them.

19.

The Judgment of the Arkansas Court rendered in response to the Motion for Summary Judgment pertaining to the Newbern Notes was obtained by fraud and ill practices.

The remaining defendants filed motions for summary judgment and exceptions of no cause of action. An exception of no right of action also was filed as well as an exception of prescription, although the latter exception was never set for hearing.

The trial court sustained the exceptions of no cause of action and overruled the exception of no right of action. The court also denied the motions for summary judgment. It should be noted that the trial court apparently made its rulings on the exception of no right of action and the motions for summary judgment prior to its ruling on the exceptions of no cause of action, even though all the motions and exceptions were ruled on the same day. Finally, the Cary defendants also filed a motion in limine requesting that the trial court give full faith and credit to the final judgments entered by the Arkansas courts concerning the validity and enforceability of the promissory notes previously discussed. Earlier on the same day that the court ruled on the exceptions and motions for summary judgment, the court also granted the motion in limine.

The plaintiffs appealed, alleging that the trial court erred in granting the exceptions of no cause of action and in granting the motion in limine. The defendants answered the appeal, alleging that the trial court erred in dismissing the exception of no right of action and motions for summary judgment.

EXCEPTIONS OF NO CAUSE OF ACTION AND NO RIGHT OF ACTION

The judgments in this case reflect a confusion of the distinction between an exception of no cause of action and an exception of no right of action. In Babineaux v. Pernie-Bailey Drilling Company, 261 La. 1080, 262 So.2d 328, 333 (1972), the supreme court provides a good discussion of the difference between the two exceptions:

There has been much discussion about the purpose of the exception of no right of action, and many attempts to differentiate that exception from the exception of no cause of action. One of the best statements of the definition of no right of action and of the basis of the distinction between it and no cause of...