Lima v. Schmidt

• Decision Date: 02 March 1992
• Docket Number: No. 91-C-1848,91-C-1848
• Citation: 595 So.2d 624
• Parties: Jose E. LIMA and Andrea K. Lima v. Jonathan R. SCHMIDT.
• Court: Louisiana Supreme Court

Page 624

595 So.2d 624

Jose E. LIMA and Andrea K. Lima v. Jonathan R. SCHMIDT.

No. 91-C-1848.

Supreme Court of Louisiana.

March 2, 1992.

John Dale Powers, Powers, Vaughn & Clegg, Baton Rouge, for applicant.

W. Paul Anderson, Leake & Anderson, New Orleans, for respondent.

HALL, Justice.

Plaintiffs filed this malpractice action against defendant attorney in November 1988, alleging that defendant, who represented them in a real estate transaction in June 1983, was negligent in failing to inform them of the existence of a $150,000 collateral mortgage encumbering the property that they acquired in the transaction and in failing to have that mortgage cancelled, which failure resulted in the mortgagee foreclosing upon the property in July 1985 and the property being sold at sheriff's sale in June 1987. The district court sustained defendant's exception of prescription and dismissed plaintiffs' suit. On plaintiffs' appeal, the court of appeal, in an unpublished opinion, affirmed, 583 So.2d 1244. We granted plaintiffs' application for writs, 589 So.2d 484 (La.1991), and now reverse and remand.

I.

The pleadings and exhibits in the record disclose the following facts. Plaintiffs, Jose and Andrea Lima, retained defendant attorney, Jonathan Schmidt, to handle an exchange transaction. On July 25, 1983, the Limas executed a power of attorney, appointing Schmidt as their agent and attorney-in-fact to execute the Act of Exchange and any other documents necessary to effectuate the exchange. While Schmidt billed the Limas for closing costs, which included a $700 title examination fee, no formal title opinion or report was rendered.

On July 29, 1983, the exchange transaction was closed with Schmidt signing the Act of Exchange on the Limas' behalf. Pursuant to the Act of Exchange, the Limas transferred various tracts of land and, in return, received a tract of land. The Limas also executed a $12,000 note secured by the property they acquired. While the Act of Exchange expressly provided for the assumption of various mortgages on the properties the Limas transferred, the Act contained no reference to any mortgages on the property the Limas acquired. Indeed the Limas allege in their petition that it was their intent, and that Schmidt expressly represented to them, that they would acquire the property free and clear of all encumbrances other than the $12,000 note executed by them. Nonetheless, on the date of the exchange, allegedly unbeknownst to the Limas, the property was encumbered by a $150,000 collateral mortgage in favor of First Guaranty Bank of Hammond ("Bank").

In July 1985, Bank commenced an executory proceeding pursuant to which the Limas were served with notice of seizure. Upon receiving notice, the Limas contacted Schmidt, who advised them that he would take steps to cancel the encumbrance. Thereafter, Schmidt discussed with the Limas steps that would be taken in an attempt to clear the title to the property. Also, on the Limas behalf, Schmidt hired and paid another attorney to defend the foreclosure suit. The defense proved unsuccessful, and on June 25, 1987, the property was sold at sheriff's sale for $30,191.19 to Bank. Thereafter, the Limas retained independent counsel.

On August 14, 1987, Schmidt wrote the Limas, advising them that he was negotiating the purchase of the property from Bank and attempting to secure the return of their $12,000 note. Schmidt further stated that his intent was to put the Limas "back in the original position which [they] were entitled."

On August 25, 1987, the Limas' counsel wrote Schmidt, responding that Schmidt's offer of "settlement" set forth in his August 14th letter was unsatisfactory. Additional correspondence followed.

On January 8, 1988, Schmidt wrote the Limas' counsel, advising that from the outset his intent was "the return of the Limas to the same position they would have enjoyed had the collateral been properly substituted and the property conveyed as originally intended." Schmidt again advised of his efforts to reacquire the property from Bank and to satisfy the outstanding note. Schmidt also stated that he had advised the Limas to seek other advice to explore any claim they have or had against him because of the "obvious error and omission." Schmidt also posed an alternative offer: that he transfer to the Limas another piece of property having a superior location, timber and development potential, and on January 20, 1988, Schmidt wrote the Limas' counsel enclosing a copy of the plat of the alternative property.

The Limas filed suit for damages resulting from Schmidt's professional malpractice in November 1988, more than five years after the alleged act of malpractice; more than three years after the commencement of Bank's foreclosure proceeding and the Limas admitted knowledge of the alleged malpractice; and more than a year after the foreclosure sale, the Limas' employment of another attorney, and Schmidt's August 14th letter advising the Limas of his intention to make them whole; but less than a year after Schmidt's January 8th letter reaffirming his intent to make the Limas whole. In their petition, the Limas allege that Schmidt failed to inform them of Bank's superior mortgage and failed to have that mortgage cancelled, and pray for $110,000 in damages as a result of being deprived of the ownership, enjoyment, use, fruits and revenues of the property.

Schmidt filed an exception of prescription, which the trial court sustained without oral or written reasons. The court of appeal, in an unpublished opinion, affirmed. Relying on Rayne State Bank & Trust Co. v. National Union Fire Insurance Co., 483 So.2d 987 (La.1986), the court of appeal found that the Limas sustained damage sufficient to state a cause of action against Schmidt in July 1985, when, by virtue of the notice of seizure, they obtained knowledge of Bank's mortgage. As the Limas' petition on its face revealed that prescription had run, the court of appeal found that the Limas had the burden of proving prescription was interrupted or renounced. Interruption, the court of appeal reasoned, could have occurred only during the one year from July 1985 to 1986, as once prescription has accrued, it cannot be interrupted. The court of appeal found the record devoid of any evidence of an acknowledgment sufficient to interrupt prescription; none of the correspondence between Schmidt and the Limas and their attorney was sent during the relevant period, nor did the Limas offer any evidence of acts or statements by Schmidt during that period that could have served as an acknowledgment. The court of appeal likewise concluded that the correspondence from Schmidt, which the Limas relied upon to support a renunciation failed to evidence the requisite intent to renounce, reasoning:

The correspondence illustrates a relationship between an attorney (Schmidt) and his former clients (Limas) whereby the attorney attempts to resolve an undesired result, but for which he admits no personal legal culpability. The language is clear that Schmidt felt that an error and omission was made and that he was willing to make an effort to correct it. However, we find no admission by Schmidt that the error was his or that an agreement between him and the Limas had been reached regarding method or measure of resolution. We certainly find no intent, either express or tacit, to renounce the benefits of prescription which has accrued.

Thus, the court of appeal found that the Limas' claim prescribed in July 1986, one year after prescription began to run. For the reasons that follow, we find that the Limas' claim has not prescribed, and reverse and remand.

II.

As a general rule, an action for legal malpractice is a delictual action governed by the one-year prescription of LSA-C.C. Art. 3492. ¹ Braud v. New England Insurance Co., 576 So.2d 466 (La.1991); Rayne State Bank & Trust Co. v. National Union Fire Insurance Co., 483 So.2d 987 (La.1986). While this rule is subject to certain limited exceptions, ² an examination of the pleadings filed in this case reveals that the parties do not dispute that this action is governed by the one-year period set forth in LSA-C.C. Art. 3492. Nor do the parties dispute, as found by the court of appeal, that prescription commenced to run [absent suspension as discussed later in this opinion] in July 1985, when the Limas obtained actual knowledge of Bank's mortgage by virtue of the notice of seizure. ³

When, as in the instant case, the plaintiff's petition on its face reveals that prescription has run, the burden is on the plaintiff to show why the claim has not prescribed. See Bock v. Harmon, 526 So.2d 292 (La.App. 3rd Cir.), writ denied, 531 So.2d 275 (La.1988); Emery v. Cabral, 400 So.2d 340 (La.App. 4th Cir.), writ denied, 405 So.2d 533 (La.1981); Andrus v. Patton, 394 So.2d 714 (La.App. 3rd Cir.1981) (collecting cases); See also Sun Oil Co. v. Tarver, 219 La. 103, 52 So.2d 437 (1951) (setting forth as well-settled rule that party relying upon interruption or suspension of prescription bears burden of proof). The jurisprudence has recognized three theories upon which a plaintiff may rely to establish that prescription has not run: suspension, interruption and renunciation.

In support of the contention that their claim has not prescribed, the Limas rely upon all three theories. Suspension applies, the Limas argue, because during Schmidt's continued representation of them prescription was suspended, or did not commence to run, under contra non valentem principles, at least until June 1987, when the property was sold at sheriff's sale and they retained independent counsel. The Limas concede, however, that since their suit was not filed until November 1988, their claim would have prescribed absent a subsequent interruption or renunciation. Continuing, the Limas argue that a subsequent interruption occurred when Schmidt acknowledged, tacitly or expressly, their right, particularly evidenced in his ...