Reggio v. E.T.I., 2007-C-1433.

• Decision Date: 12 December 2008
• Docket Number: No. 2007-C-1433.,2007-C-1433.
• Citation: 15 So.3d 951
• Parties: Frances Orlando wife of/and Nicholas REGGIO v. E.T.I., ABC Inc. and City of New Orleans through New Orleans Aviation Board.
• Court: Louisiana Supreme Court

15 So.3d 951

Frances Orlando wife of/and Nicholas REGGIO v. E.T.I., ABC Inc. and City of New Orleans through New Orleans Aviation Board.

No. 2007-C-1433.

Supreme Court of Louisiana.

December 12, 2008.

Daigle, Fisse & Kessenich, Michael David Fisse, Jonathan Harold Sandoz, Patrick Edward Moore, Covington, for applicant.

Goins Aaron Law Corporation, William David Aaron, Jr., Leola M. Anderson, DeWayne L. Williams, Mark Christopher Carver, New Orleans, Bruce Henry Lizana, Metairie, for respondent.

JOHNSON, Justice.

We granted this writ application to address whether a third party claim for indemnity, which was filed three years after the main demand was served, is prescribed. The lower courts held that because the City of New Orleans (New Orleans Aviation Board) filed its third party demand three years after the principal demand was filed, its demand was prescribed under both LSA-C.C.P. art. 1067 and LSA-C.C. art. 3492. However, it is well settled that prescription does not commence on a claim for indemnity or contribution until the party seeking it has sustained a loss, either through payment, settlement or an enforceable judgment. For the following reasons, we reverse the rulings of the lower courts and remand the matter for further proceedings.

FACTS AND PROCEDURAL HISTORY

This matter arrived in this Court in a pre-trial posture; therefore, the facts have been extrapolated from the various pleadings. On June 6, 2001, Exceptional Temporaries Inc., ("ETI") entered into a contract with the City of New Orleans Aviation Board ("NOAB") to provide sound-deadening insulation to residences in close proximity to Louis Armstrong Airport as part of the Airport Capital Improvements Program. On October 8, 2001, plaintiffs, Frances Orlando and Nicholas Reggio, contracted with NOAB to have their Kenner residence insulated. The work actually began on or about March 23, 2002. In the process of renovating the house, ETI allegedly broke a window's glass, then failed to remove some pieces of the broken glass. Frances Orlando alleged that she stepped on the glass and cut her foot on April 21, 2002, causing severe bodily injuries. On March 7, 2003, she and her husband filed suit against ETI and NOAB alleging negligence on the part of NOAB in contracting with ETI to perform the repairs, and negligence on the part of ETI in performing "shoddy work in violation of LSA-C.C. art. 2762."¹ NOAB was served with the petition on March 26, 2003. ETI was never served with the original petition.

On February 27, 2006, NOAB filed a Third Party Demand against ETI, seeking contribution and/or indemnity for damages arising out of the plaintiffs' tort claim. Particularly, NOAB argued that it "is entitled to complete indemnity and/or contribution from ... ETI to the degree that the accident sued upon was caused ... by the negligence and/or strict liability of ETI." ETI filed an exception of prescription based on LSA-C.C.P. art. 1067, which the trial court maintained, dismissing NOAB's third party demand.

The trial court noted that NOAB filed its third party demand almost three years after the main demand was filed and served. Although NOAB alleged a cause of action in contract, pursuant to an indemnity provision, the trial court determined that the contract between ETI and NOAB contains no such provision. The court held that NOAB's cause of action sounded in tort, and concluded that because NOAB brought suit against ETI more than 90 days after service of the main demand, pursuant to LSA-C.C.P. art. 1067, NOAB's third party demand was prescribed.

In affirming the trial court's ruling, the court of appeal found that the main demand clearly alleged a claim in tort, with a one year prescriptive period, although NOAB argued that a quasi contract existed between the parties. Reggio v. E.T.I., 07-0049 (La.App. 4 Cir. 6/13/07), 961 So.2d 1269. The court of appeal also concluded that there was no specific indemnity provision included in the contract between the NOAB and ETI; therefore, the NOAB's only redress was in tort, and the cause of action was prescribed pursuant to LSA-C.C. art. 3492.² In finding no contract of indemnity, the court noted:

"A contract of indemnity whereby the indemnitee is indemnified against the consequences of his own negligence is strictly construed, and such a contract will not be construed to indemnify an indemnitee against losses resulting to him through his own negligent acts unless such an intention is expressed in unequivocal terms." Soverign Ins. Co. v. Texas Pipe Line Co., 488 So.2d 982 (La.1986); Polozola v. Garlock, 343 So.2d 1000 (La.1977); Berry v. Orleans Parish School Bd., 2001-3283 (La.5/21/02), 830 So.2d 283.

The court of appeal held, as well, that the NOAB had ninety (90) days from service of the main demand to seek indemnification, and failed to do so; thus, NOAB's third party demand was prescribed. NOAB applied for a writ of certiorari, alleging error in the lower courts' application of LSA-C.C.P. art. 1067 to an incidental demand for indemnification, and this Court granted NOAB's writ of certiorari. Reggio v. ETI, 07-1433 (La.10/12/07), 966 So.2d 536.

DISCUSSION

The standard controlling review of a peremptory exception of prescription requires that this Court strictly construe the statute against prescription, and in favor of the claim that is said to be extinguished. Louisiana Health Service and Indemnity Company v. Tarver, 93-2449, pp. 11-12 (La.4/11/94), 635 So.2d 1090, 1098; Fontaine v. Roman Catholic Church of Archdiocese of New Orleans, 625 So.2d 548, 551 (La.App. 4th Cir.1993), writ denied, 93-2719 (La.1/28/94), 630 So.2d 787.

When an exception of prescription is filed, ordinarily, the burden of proof is on the party pleading prescription. However, when prescription is evident on the face of the pleadings, the burden shifts to the plaintiff to show the action has not prescribed. Alex Spott v. Otis Elevator Company, 601 So.2d 1355 (La.1992); Eastin v. Entergy Corp., 03-1030 (La.2/6/04), 865 So.2d 49.

In the present case, the plaintiffs' Petition for Damages was filed on March 3, 2003, while NOAB's Third Party Demand was filed on February 27, 2006, nearly three years after the original Petition was filed. ETI contends that NOAB's Third Party Demand is prescribed on its face, arguing that the one year prescriptive period, provided for in LSA-C.C. art. 3492, expired on March 3, 2004. Additionally, ETI argues that the Third Party Demand is prescribed on its face, pursuant to LSA-C.C.P. art. 1067.

Since NOAB's third party demand is seeking indemnification pursuant to the terms of a contract, we must examine the basic law of indemnity to better understand the potential cause of action.

Indemnity

NOAB argues first that the contract between the City of New Orleans and ETI includes indemnity language in favor of NOAB, and points to the clause where St. Paul Fire and Marine Insurance Company appears as surety. The record shows that St. Paul Fire and Marine Insurance Company intervened in the contract as Surety for the faithful performance of all work, and to fully secure and protect the City of New Orleans from all losses arising from failure or neglect on the part of ETI.³

An action for indemnity is a separate substantive cause of action, arising at a different time, independent of the underlying tort, with its own prescriptive period. This Court defined "indemnity" in Nassif v. Sunrise Homes, Inc.,⁴ 98-3193, pp. 2-3 (La.6/29/99), 739 So.2d 183, 185:

Indemnity ... means reimbursement, and may lie when one party discharges a liability which another rightfully should have assumed.... It is based on the principle that everyone is responsible for his own wrongdoing, and if another person has been compelled to pay a judgment which ought to have been paid by the wrongdoer, then the loss should be shifted to the party whose negligence or tortious act caused the loss. [Citations omitted].

At oral argument in this Court, NOAB suggested that the contract between ETI and NOAB clearly sets forth the parties' intent to provide indemnity for "... all loss or expense of any kinds, including all costs of Court and attorneys' fees, made necessary or arising from the failure, refusal or neglect of the aforesaid ETI, Contractor, to comply with all of the obligations assumed by it."

While NOAB makes the argument here, the record shows that NOAB conceded in the lower courts that there was no contractual indemnity. In NOAB's Memorandum In Support of Motion to Reconsider Judgment, it acknowledged in its conclusion that "no express contract provision exists that specifically provides for indemnity." After reviewing the four corners of the contract, we conclude, as well, that there is no express language to support contractual indemnity between ETI and NOAB. Thus, there is no express contractual indemnity.

Third Party Demands

A third party demand is an incidental demand allowed by the Louisiana Code of Civil Procedure. "Incidental demands are reconvention, crossclaim, intervention, and the demands against third parties." LSA-C.C.P. art. 1031(B). LSA-C.C.P. art. 1067 provides that:

An incidental demand is not barred by prescription or peremption if it was not barred at the time the main demand was filed and is filed within ninety days of date of service of the main demand or in the case of a third party defendant within ninety days from service of process of the third party demand.

This Court has determined that "Article 1067 was initially added to protect defendants from being lulled into the loss of their right to assert actions and defenses through reconvention by plaintiffs' guile and delay in bringing forward their ultimate and true demands. Act 472 of 1970." Moore v. Gencorp, Inc., 93-0814 (La.3/22/94), 633 So.2d 1268, 1272. In Moore, we determined that the fundamental purpose of prescription statutes is "to afford a defendant security of mind and affairs" if the claim is filed untimely and "to protect him...