Stewart v. Continental Casualty Co.

79 So. 3d 1047, 2011 La.App. 1 Cir. 0505, 2011 La. App. LEXIS 1355, 2011 WL 5402352
CourtLouisiana Court of Appeal
DecidedNovember 9, 2011
DocketNo. 2011 CA 0505
StatusPublished
Cited by4 cases

This text of 79 So. 3d 1047 (Stewart v. Continental Casualty Co.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Stewart v. Continental Casualty Co., 79 So. 3d 1047, 2011 La.App. 1 Cir. 0505, 2011 La. App. LEXIS 1355, 2011 WL 5402352 (La. Ct. App. 2011).

Opinion

HUGHES, J.

12This 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’s Direct Action Statute, LSA-R.S. 22:1269 (formerly LSA-R.S. 22:655), against Continental Casualty Company (“Continental”), in its capacity as the legal malpractice insurer of Kathy D. Underwood.1 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.A. (“Bank One”), ostensibly because there was insufficient equity in the home. 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”).2 Kathy D. Underwood was the closing attorney on the new financing and performed the title examination on the Zachary property to be mortgaged. Ms. IsUnderwood’s 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’s favor, intended 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 S & A Capital Partners (“S & A”).

On March 13, 2007 S & A sent a demand letter seeking payment of the Bank One mortgage. The Stewarts contacted Ms. Underwood, who began negotiations with S & A, which ultimately proved to be unsuccessful. In October 2007 Ms. Underwood advised the Stewarts to obtain other legal counsel with respect to the S & A claim, as well as relative to any claim of legal malpractice against her. The Stew-arts maintain that Ms. Underwood acknowledged her malpractice and advanced [1049]*1049funds to them to defray some related expenses.3

Meanwhile, S & A instituted a suit for executory process, resulting in seizure of the Stewart’s Zachary home, and when the instant suit was filed |4on March 4, 2008, the home was scheduled to be sold in a sheriffs sale on March 19, 2008.

In this suit, the Stewarts have asserted that Continental, as Ms. Underwood’s 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]ut of professional courtesy.” Nevertheless, because of plaintiffs’ failure to include Ms. Underwood as a defendant, Continental urged, on May 5, 2010,4 exceptions of no right of action and no cause of action, contending Louisiana’s Direct Action Statute did not authorize a 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.S. 9:5605. Following an October 18, 2010 hearing, the trial court sustained the exceptions of both Ms. Underwood and Continental and dismissed the plaintiffs’ suit, with prejudice.5

In finding the Stewarts’ claims were perempted, the trial judge reasoned:

IsThe so-called Tort Reform of 1996, Governor Foster changed all of that. It’s now required that the insured be named in the suit. Ms. Underwood was not originally named.
As [Continental’s counsel] argues, legal malpractice, and some of the other professional malpractice statutes are pretty much [sui generis ], 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. That’s what the decision was and it was allowed to remain.
In this case, the supreme court has, to some extent, addressed this issue in ... [Naghi v. Brener, 2008-2527 (La.6/26/09), 17 So.3d 919,] ..., 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 [Plain[1050]*1050tiffs’ counsel] makes a very spirited and very sound argument for various reasons why this should not apply.
But the fact is, I’m faced with a very explicit decision under Louisiana Supreme Court, at this point, I’m bound to follow. So the exception of peremption filed by Ms. Underwood is sustained.
With regard to Continental Casualty, there is no basis for liability where there is no action against the insured — this is a situation where there’s a bankruptcy or something else that somehow suspends the insured’s liability. If a claim is 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’s finding of peremption.

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’s review of a trial court 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 Cir. 9/27/96), 680 So.2d 1358, 1360, writ denied, 96-2586 (La.12/13/96), 692 So.2d 375.

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’s September 16, 2005 malpractice. Further, the plaintiffs maintain that the subsequent amendment of their suit on June 4, 2010, to add Ms.

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79 So. 3d 1047, 2011 La.App. 1 Cir. 0505, 2011 La. App. LEXIS 1355, 2011 WL 5402352, Counsel Stack Legal Research, https://law.counselstack.com/opinion/stewart-v-continental-casualty-co-lactapp-2011.