97-0420 La.App. 4 Cir. 12/3/97, Perez v. Shook

• Decision Date: 03 December 1997
• Citation: 703 So.2d 821
• Parties: 97-0420 La.App. 4 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 821

703 So.2d 821

97-0420 La.App. 4 Cir. 12/3/97

August PEREZ, III v. Margaret A. SHOOK, et al.

No. 97-CA-0420.

Court of Appeal of Louisiana Fourth Circuit.

Dec. 3, 1997.

Robert S. Abdalian, Abdalian Law Firm, New Orleans, for Plaintiff/Appellant.

R. Patrick Vance, Virginia W. Gundlach, Timothy S. Cragin, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans; W.K. Christovich, Daniel A. Rees, Christovich & Kearney, L.L.P., New Orleans; Frederick R. Bott, Nancy Jane Marshall, Deutsch, Kerrigan & Stiles, L.L.P., New Orleans, for Defendants/Appellees.

Before LOBRANO, ARMSTRONG and JONES, JJ.

[97-0420 La.App. 4 Cir. 1] JONES, Judge.

On September 3, 1993, the plaintiff, August Perez, III, filed this malpractice suit against the defendants Margaret Shook, Douglas Draper, Douglas Draper, A Professional Corporation; Gordon F. Wilson, Jr., Gordon F. Wilson, Jr., A Professional Corporation, and ABC Insurance Company alleging that the defendants breached their professional duties to him in a 1987 bankruptcy proceeding in which Perez was denied discharge of his financial debts. The defendants moved to dismiss on the ground that Perez's claim had prescribed on its face. In defense, Perez argued that the prescriptive period on his legal malpractice claim was suspended under the continuous representation doctrine because the defendants continued to represent him until he discharged them on September 3, 1993. After a bench trial on the prescription exception, the district court sustained the defendant's exception and dismissed Perez's legal malpractice claim with prejudice. The plaintiff appealed. This Court reverses in part and affirms in part the trial court's judgment.

[97-0420 LA.APP. 4 CIR. 2] FACTUAL BACKGROUND:

August Perez, III ("Perez") is an architect who found himself among the countless individuals and business entities in Louisiana negatively impacted both by the oil recession in the early 1980s and the 1984 Worlds' Fair in New Orleans. In 1986 Perez retained Mr. Gordon Wilson ("Wilson") and the law firm of Friend, Wilson, Spedale & Draper ¹ to represent him and his corporations in various legal matters, particularly those legal matters stemming from his financial obligations. Wilson and Mr. Douglas Draper were partners and Ms. Margaret (Shook) Gravolet was an associate in the firm. In July 1987 Perez, in the midst of financial difficulties, filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code to obtain a client/debtor discharge. In January 1988 Hibernia Bank, one of Perez's creditors, challenged his entitlement to a discharge in bankruptcy. Hibernia alleged that Perez had engaged in various actions and transactions with the intent to defraud his creditors. On May 30, 1990, after a hearing on the matter, the bankruptcy court denied Perez's discharge holding that: 1) Perez failed to "explain satisfactorily" a change in his personal financial statements from 1985 to 1986 (the 1985 statement listed a number of items of jewelry, furs and household furniture which were omitted from the 1986 statement) in violation of 11 U.S.C. § 727(a)(2)(A); and 2) Perez's distribution of tax refunds, between he and his wife, were made "with intent to hinder, delay, or defraud a creditor ... within one year before the filing of the [bankruptcy] petition" in violation of 11 U.S.C. § 727(a)(2)(A). On appeal the United States District Court for the Eastern District of Louisiana upheld the bankruptcy court's finding. Hibernia National Bank v. Perez, 124 B.R. 704 (E.D.La.1991). Perez further appealed to the United States Fifth Circuit Court of Appeals which affirmed [97-0420 La.App. 4 Cir. 3] the District Court's decision on February 14, 1992. In re Perez, 954 F.2d 1026 (5 Cir.1992).

On September 2, 1993, Perez informed Wilson that he wished to sever and terminate all legal representation by Wilson and his firm. On September 3, 1993, one day later and three years after the 1987 bankruptcy proceeding, Perez filed suit against Margaret Shook, Douglas Draper, Douglas Draper, A Professional Corporation; Gordon F. Wilson, Jr., Gordon F. Wilson, Jr., A Professional Corporation, and ABC Insurance Company alleging that the defendants breached their professional duties to him in the bankruptcy proceeding. The defendants moved to dismiss on the ground that Perez's claim had prescribed on its face. Perez maintained that his cause of action was suspended under the continuous representation doctrine because Wilson and his law firm continued to represent him until he discharged them on September 3, 1993. Perez argued that a finding of continuous representation was supported by the following events: 1) Wilson gave Perez advice concerning "a pending dispute between the trustee of Augie's [Perez's] bankruptcy estate" by letter, dated March 26, 1993; 2) Wilson's incorporation of corporations on behalf of Mr. Perez, even ten days after the Fifth Circuit affirmed the discharge denial and in December 1992; 3) Wilson, beginning in March 1991, and thereafter continuously advised Perez that he could work without pay after the bankruptcy discharge denial and have his wife earn a salary without running afoul of the law; 4) Wilson advised Perez concerning garnishment matters as late as August 11, 1993; 5) Wilson on June 3, 1993, wrote the Hibernia Bank's attorney concerning Mr. Perez's deposition on a PEF garnishment matter, referring to Perez as "my client" in the letter; and 6) Wilson on June 10, 1993, wrote a letter to Mr. and Mrs. Perez concerning whether Mr. Perez could avoid garnishment by working for free.

[97-0420 La.App. 4 Cir. 4] After a bench trial on the prescription exception, the district court, applying the one year prescriptive period under La.Civ.Code Art. 3492, ² sustained the defendant's exception and dismissed Perez's claim with prejudice. The court acknowledged that the alleged legal malpractice claim arose out of the 1987 bankruptcy proceedings. However, the court found that Perez knew or should have known of the alleged malpractice no later than February 14, 1992, when the U.S. Fifth Circuit Court of Appeals, in affirming the bankruptcy court's decision, found that but for the pre-trial inserts submitted for the pre-trial order on behalf of Perez in the bankruptcy court by the defendant, Wilson, the violation of § 727(a)(2)(A) by Perez would not have become an issue to be decided in bankruptcy court. See In re Perez, 954 F.2d 1026 (5 Cir.1992). Thus, the court reasoned, Perez's September 3, 1993, malpractice suit, brought more than one year after the February 14, 1992, Fifth Circuit decision had prescribed on its face.

The district court then considered Perez's argument that the continuous representation rule had suspended prescription until September 3, 1993, when Wilson was discharged. The court found that the continuous representation rule did indeed apply, but it merely suspended the running of prescription through February 14, 1992, and not September 3, 1993. The court reasoned that any legal services performed by Wilson after the Fifth Circuit's decision on February 14, 1992, were incidental to a "general professional relationship" and not sufficiently related to the bankruptcy proceedings, for purposes of the continuous representation doctrine, to suspend prescription until September 2, 1993, the date of Perez's discharge letter. Furthermore, the court found that all subsequent representation in the bankruptcy proceedings--and in the denial of discharge [97-0420 La.App. 4 Cir. 5] proceedings was performed solely by Wilson, and not Douglas Draper or Margaret Shook (Gravolet). The court noted that Margaret Shook (Gravolet) was employed by the Wilson's law firm only from April 14, 1986, through August 31, 1989, and only worked on the schedules that were filed with the initial bankruptcy pleadings and had nothing to do whatsoever with the proceedings for the denial of discharge. Similarly, the court found that Douglas Draper only appeared in the bankruptcy proceedings at the time of the initial filing of the schedules and the creditor meetings but did not engage in any subsequent representation.

DISCUSSION:

Standard Of Review

Perez now seeks review of the district court's decision. He does not assign error to the factual findings regarding when he discovered the facts giving rise to his malpractice cause of action, nor does he find error in the court's application of the one year prescriptive period under Article 3492. Perez assigns error to the lower court's ruling that the services performed by the defendants "Wilson and his law firm" subsequent to February 14, 1992, were incident to a "general professional relationship" and did not constitute continuous representation so as to suspend the prescriptive period until September 3, 1993, the date of the discharge letter from Perez to Wilson.

The Louisiana Constitution provides that the appellate jurisdiction of a court of appeal extends to law and facts. La. Const.1974, Art.V, Sec.10(B). This provision, resulting from Louisiana's history as a civilian jurisdiction, has been interpreted as giving an appellate court the power to decide factual issues de novo. See Rosell v. ESCO, 549 So.2d 840, 844 (La.1989). The exercise of this power is limited, however, by the jurisprudential rule of practice that a trial court's finding will not be upset unless it is manifestly erroneous or clearly wrong. Id. [97-0420 La.App. 4 Cir. 6] Nevertheless, when the court of appeal finds that a reversible error of law or manifest error of material fact was made in the trial court, it is required to redetermine the facts de novo from the entire record and render a judgment on the merits. Id. Perez contends that the application of the facts to the final legal determination should be deemed an issue of law subject to plenary review. We agree. Whether the defendant's representation of Perez after the alleged act of malpractice was sufficient to suspend...