M & L Industries, LLC v. Derek Hailey

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

05-940

M & L INDUSTRIES, L.L.C.

VERSUS

DEREK HAILEY, ET AL.

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APPEAL FROM THE
SEVENTH JUDICIAL DISTRICT COURT
PARISH OF CONCORDIA, NO. 39818
HONORABLE LEO BOOTHE, DISTRICT JUDGE

**********

ULYSSES GENE THIBODEAUX
CHIEF JUDGE

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Court composed of Ulysses Gene Thibodeaux, Chief Judge, Marc T. Amy, and Glenn
B. Gremillion, Judges.

AFFIRMED.

Edmund McCollam
McMAHON & McCOLLAM
P. O. Box 1548
Houma, LA 70361-1548
Telephone: (985) 868-0104
COUNSEL FOR:
Plaintiff/Appellant - M & L Industries, L.L.C.

William H. Parker, III
ALLEN & GOOCH
P. O. Drawer 3768
Lafayette, LA 70502-3768
Telephone: (337) 291-1270
COUNSEL FOR:
Defendants/Appellees - Davis Insurance Agency and Shane Smith

Daniel J. McGlynn
McGLYNN, GLISSON & KOCH
P. O. Box 1909
Baton Rouge, LA 70821
Telephone: (225) 344-3555
COUNSEL FOR:
Derek Hailey

Kris Allan Perret
P. O. Box 1909
Baton Rouge, LA 70821
Telephone: (225) 344-3555
COUNSEL FOR:
Defendant/Appellee - Derek Hailey

THIBODEAUX, Chief Judge.

Plaintiff, M & L Industries, L.L.C. (hereinafter “M & L”), secured and

later cancelled four policies of insurance coverage through Davis Insurance Agency

and its employees. It asserted a loss of refund due to the agent’s and insurer’s failure

to advise of a minimum earned premium provision and the method of calculation. M

& L’s initially-filed suit in Terrebonne Parish was transferred to Concordia Parish

pursuant to a judgment granting an exception of improper venue filed by the

insurance agency. The Concordia Parish trial court then granted the insurer’s

exception of prescription and a motion for summary judgment, concluding that over

a year had passed between M & L’s knowledge of its cause of action and the filing

of suit in a proper venue.

We conclude that venue was waived in Concordia Parish and the trial

court was correct in finding that M & L’s claim was perempted. We affirm.

I.

ISSUES

We must decide:

(1) whether the venue ruling by Terrebonne Parish is
subject to review; and,

(2) whether the Concordia Parish district court erred in
granting Defendants’ Exception of Peremption and
Motion for Summary Judgment.

II.

FACTS AND PROCEDURAL HISTORY

Plaintiff, M & L Industries, L.L.C., located in Terrebonne Parish,

received word from their insurers that coverage would be cancelled on December 1,

2002, due to excessive claims in 2002. M & L’s former agent, Derek Hailey of East
1

Baton Rouge Parish, a defendant, offered to assist M & L in finding replacement

coverage. Hailey obtained the coverage through Shane Smith, Joseph Davis, and

Davis Insurance Agency of Concordia Parish (collectively hereinafter “Davis”). The

contracts were apparently negotiated over the telephone. Hailey faxed four

application forms to M & L on November 27, 2002 and arrived that evening to collect

a deposit of $179,173.00 to bind coverage. On December 5, 2002, M & L was

informed that the balance due was $529,537.55. M & L purchased the coverage but

informed all parties that less expensive coverage was being sought.

On February 21, 2003, M & L informed Davis by letter that coverage

would be cancelled effective February 28, 2003. M & L had not yet received the

policies purchased in December, but expected the refund of unearned premiums to be

calculated under a “short rate” cancellation method, not to exceed the “normal”

twenty-five percent (25%) rate.

On April 9, 2003, M & L’s attorney notified Davis by letter that despite

the cancellation in February, no unearned premiums had been refunded, that unearned

premiums were due on all four policies, property, auto, general liability, and an

umbrella policy, and that none of the policies had been received. The letter cited

La.R.S. 22:637, which states that refunds are due 30 days after cancellation and

La.R.S. 22:637.1 which provides for the accrual of interest on unpaid refunds.

On April 16, 2003, Fireman’s Fund refunded an amount on the property

policy later alleged to be $13,099.13 short.

On May 2, 2003, Evanston returned an amount on the general liability

policy alleged to be $41,284.56 short; Scottsdale Insurance returned an amount on the

auto policy alleged to be $11,274.82 short; First Specialty returned an amount on the

umbrella policy alleged to $6,975.00 short.

2

On May 5, 2003, according to M & L’s controller, the Evanston refund

on the general liability policy was received by M & L.

On May 13, 2003, M & L wrote Davis complaining that the refund on

the general liability policy, including interest, was short by $45,388.28.

On August 11, 2003, the liability policy was delivered, and M & L

learned that the policy had a minimum earned premium of $275,000.00 based upon

the prior year’s sales figures of $22,357,000.00 as reported by the agents. This figure

was not subject to audit, regardless of the actual sales figures of $4,191,871.00 for the

covered period of December 1, 2002 through February 28, 2003. M & L asserts that

had it known of this provision for a minimum earned premium in the policy, it would

have estimated the sales figures at a more realistic and lower rate, resulting in a lower

minimum earned premium.

M & L asserts that as a result of the agents’ failure to advise, it suffered

a loss of refund of $41,284.56 on the general liability policy plus approximately

$20,000.00 on the property, auto, and umbrella policies combined.

On August 29, 2003, M & L’s attorney wrote a demand letter to Davis

outlining the events that had transpired, asserting a loss of refund totaling $61,358.69,

and giving them fifteen (15) days to respond.

On April 29, 2004, seven months later, M & L filed suit against Davis

in Terrebonne Parish. Derek Hailey was never served while the suit was pending in

Terrebonne Parish.

On May 4, 2004, defendants, Smith and Davis and the Davis agency,

were served in Concordia Parish where the insurance agency is located. They filed

an Exception of Improper Venue and argue that the suit is an errors and omissions

suit against an insurer which is governed by La.R.S. 9:5606. It is delictual in nature

pursuant to Roger v. Dufrene, 613 So.2d 947 (La.1993). Therefore, venue is proper
3

under La.Code Civ.P. art. 74, where the work was done on the policies and where the

alleged wrongful conduct occurred. M & L asserts that the cause of action is breach

of contract and that venue was proper under La.Code Civ.P. art. 76.1 in Terrebonne

Parish where the contract was agreed to, paid for, and where the policies were

delivered.

The Terrebonne Parish district court granted Defendants’ Exception of

Improper Venue and ordered the suit transferred to Concordia Parish on July 14,

2004.

On August 16, 2004, M & L’s suit was filed in Concordia Parish. Davis

filed an Exception of Peremption and Motion for Summary Judgment asserting that

the suit against the insurance agency and its employees was not filed in a court of

proper venue within one year of M & L’s knowledge of its cause of action pursuant

to the governing statute, La.R.S. 9:5606. The Concordia Parish district court granted

Davis’s exception and motion and dismissed M & L’s suit. M & L filed this appeal

asserting errors in the judgments of both trial courts.

III.

LAW AND DISCUSSION

Standard of Review

An appellate court may not set aside a trial court’s findings of fact in

absence of manifest error or unless it is clearly wrong. Stobart v. State, Through

DOTD, 617 So.2d 880 (La.1993); Rosell v. ESCO, 549 So.2d 840 (La.1989). A two

tiered test must be applied in order to reverse the findings of the trial court:

a. the appellate court must find from the record that a
reasonable factual basis does not exist for the
finding of the trial court, and

4

b. the appellate court must further determine that the
record establishes that the finding is clearly wrong
(manifestly erroneous).

Mart v. Hill, 505 So.2d 1120 (La.1987).

Even where the appellate court believes its inferences are more

reasonable than the fact finders, reasonable determinations and inferences of fact

should not be disturbed on appeal. Arceneaux v. Domingue, 365 So.2d 1330

(La.1978). Additionally, a reviewing court must keep in mind that if a trial court’s

findings are reasonable based upon the entire record and evidence, an appellate court

may not reverse said findings even if it is convinced that had it been sitting as trier

of fact it would have weighed that evidence differently. Housely v. Cerise, 579 So.2d

973 (La.1991). The basis for this principle of review is grounded not only upon the

better capacity of the trial court to evaluate live witnesses, but also upon the proper

allocation of trial and appellate functions between the respective courts.

Venue

M & L did not appeal the Terrebonne Parish district court ruling or seek

supervisory review of the judgment granting the exception of improper venue. M &

L now contends for the first time that the original trial court in Terrebonne Parish

erred in maintaining the exception of venue in July 2004 and in ordering the transfer

of its suit to Concordia Parish. It asserts that the venue ruling was an interlocutory

ruling and is properly on appeal before this court “in connection with later rulings on

other related matters . . . which are final judgments.” M & L cites Savoie v. Rubin,

01-3275 (La. 6/21/02), 820 So.2d 486, and H.R. 10 Profit Sharing Plan v. Mayeaux,

03-0691 (La.App. 1 Cir. 9/17/04), 893 So.2d 887, writ denied, 05-0868 (La. 5/13/05),

902 So.2d 1031.

5

The Rubin case holds that a venue ruling is an interlocutory ruling, and

that dismissal based upon improper venue is not a termination of suit on the merits

that allows a party to go forward with a malicious prosecution suit. It does not

address whether a venue ruling that is not appealed, or made the subject of review,

within the established time delays for writs and appeals, can later be reviewed in

connection with a final judgment on the matter. The Mayeaux case follows the

Louisiana Supreme Court decision in Phillips v. Patterson Ins. Co., 97-2748 (La.

1/9/98), 704 So.2d 246. In Phillips, the defendant filed a timely exception of venue,

which was overruled. No writ or appeal was taken. The defendant then filed an

exception of prescription based on improper venue, and that exception was sustained.

Phillips is a two-page opinion and provides no detail as to how the same court denied

an exception to venue then granted an exception of prescription based upon improper

venue.

In Phillips, the Louisiana Supreme Court explained that the trial court’s

judgment overruling the exception to venue did not constitute the law of the case

where the appellate court had never reviewed the venue issue, nor did it preclude the

appellate court from inquiring into the propriety of the trial court’s previous venue

ruling. It then stated, “[e]ven though defendants did not seek supervisory writs after

the venue ruling, the trial court’s decision on venue was reviewable by the court of

appeal and by this court on appeal after trial on the merits, at least for prescription

purposes.” Phillips, 704 So.2d at 247. The Phillips court further stated, “to hold that

a defendant waives a timely filed objection of improper venue by not seeking

supervisory writs after the timely exception is overruled goes against the policy of not

presuming a waiver of rights, which should only be done expressly.” Id.

The Mayeaux case cited by M & L is a first circuit case that more closely

resembles the facts in this case as it involved the granting of a venue exception and
6

the transfer of the case to another parish. The Mayeaux court in its original opinion

characterized the first trial court judgment on venue as res judicata for the purposes

of the appeal of the second judgment from the transferee court dismissing the case

based upon peremption due to untimely filing in a court of proper venue. On

rehearing, the Mayeaux court decided that it was more appropriate to view the venue

judgment as law of the case, rather than under res judicata principles. The Mayeaux

court then found the law of the case doctrine inapplicable because the appellate court

had never before reviewed the venue issue, and a previous appellate ruling on the

identical issue is required before invoking the law-of-the-case doctrine, pursuant to

Avenue Plaza, L.L.C. v. Falgoust, 96-0173 (La. 7/2/96), 676 So.2d 1077.

The Mayeaux court stated that it had on two prior occasions held that

appeals taken by the plaintiffs seeking review of the venue ruling were untimely and

should be dismissed. However, the court then, without further addressing the

untimeliness issue, analogized and followed Phillips, deciding to review the venue

ruling. In so doing, the Mayeaux court stated that, “we do not believe the law of the

case doctrine precludes review of the venue judgment for the limited purpose of

deciding the preemption issue[.]” Mayeaux, 893 So.2d at 894. Clearly, the law of the

case did not preclude review of the venue issue because the law of the case doctrine

did not apply at all. However, that does not preclude other reasons for finding the

venue issue not a subject for review, such as untimeliness.

We are not convinced that the Mayeaux court properly applied Phillips,

or that the Supreme Court in Phillips intended such an expanded application of its

holding in a two-page opinion where no details were given. More specifically, in

Phillips, the venue exception was denied, rather than granted, as here. The plaintiff

in Phillips was allowed to go forward in the parish of its choosing, and there was

never the necessity of having two courts look at the issues. In the present case,
7

however, where the venue exception was granted and the case was transferred to a

second district court in another parish, M & L had to physically move its suit, and a

second court was called upon to handle the case. Yet, M & L failed to apply for a

supervisory writ or file an appeal and allowed the case to remain in the new venue

and go to trial there. We do not believe that Phillips was intended to treat the

granting of a venue exception resulting in transfer the same as a denial of a venue

exception.

Davis asserts that M & L’s objection to venue is untimely. They argue

that the granting of an exception of improper venue is an interlocutory judgment

which has been held to cause irreparable injury and must be reviewed or it is later

waived. Davis cites McGowan v. Gomez, 254 So.2d 307, 309 (La.App. 4 Cir. 1971),

which states:

Article 2083 of the Code of Civil Procedure provides that
appeals may be taken from final judgments or from
interlocutory judgments which may cause irreparable
injury. Judgments maintaining exceptions of improper
venue have been classified as interlocutory in nature, but
the courts have freely permitted appeals from such
interlocutory judgments when there was any reasonable
chance of irreparable injury being caused thereby. In this
case it is apparent that the judgment of the Nineteenth
Judicial District Court determining the Parish of East
Baton Rouge to be of improper venue was an appealable
interlocutory judgment. The very existence of the
plaintiff’s suit depended upon the correctness of his choice
of venue, and it can hardly be said that an adverse ruling on
this point would not have caused the plaintiff to suffer
irreparable injury.

Since the judgment of the Nineteenth Judicial
District Court was not appealed, it is final and
determinative of the question of the impropriety of the
plaintiff’s choice of venue.

See also, Glazer Steel Corp. v. LaRose Shipyard, Inc., 368 So.2d 205 (La.App. 1 Cir.

1979).

8

In the present case, we note that M & L did not attempt to avail itself of

any remedy whatsoever with regard to the adverse venue ruling and transfer of the

case to Concordia Parish. It did not seek to appeal the venue ruling as an

interlocutory judgment that might cause irreparable harm, nor did it seek supervisory

review of the venue ruling as an unappealable interlocutory judgment. In fact, at the

trial of the venue exception, the Terrebonne court asked what would happen to the

venue issue if the case were found to be a hybrid of tort and contract, and M & L’s

attorney responded, “Well, I would take a writ.”1 Yet, when the ruling came down

in favor of Davis, M & L did not seek review of any kind.

Other jurisprudence suggests that M & L cannot now seek review or

appeal of the interlocutory venue ruling in Terrebonne Parish after the Concordia

Parish district court has rendered a final judgment. More specifically, in Danny

Weaver Logging, Inc. v. Norwel Equipment Co., 33,793 (La.App. 2 Cir. 8/23/00), 766

So.2d 701, the plaintiff filed suit in Caddo Parish. The Caddo Parish district court

granted the defendant’s declinatory exception of improper venue, but rather than

transfer the suit to East Baton Rouge Parish, as argued by the defendant, the court

transferred the suit to Bienville Parish, which was clearly an adverse ruling for the

defendant. However, the defendant failed to appeal the Caddo ruling. When the

defendant again argued improper venue in Bienville Parish, the Second Circuit Court

of Appeal held that the defendant’s failure to timely appeal the Caddo Parish district

court’s order transferring the case to Bienville Parish resulted in the waiver of venue

in Bienville Parish. There, the second circuit, defining the Caddo ruling as an

appealable interlocutory judgment ruling, articulated as follows:

1
Shane Smith, Joe Davis and Davis Insurance Agency filed a Motion for Designation of
Record and attached the Terrebonne Parish transcript from the venue hearing for this court’s use in
deciding the venue issue. We grant their motion.

9

While the merits of the disputed articles on venue
have been twice considered in the district court rulings and
are now reurged to this court, we choose to affirm the
ruling that Bienville Parish is the proper venue not on the
merits of the venue articles, but on the flawed procedure
chosen by Norwel resulting in the waiver of venue in this
case.

Danny Weaver Logging, Inc., 766 So.2d at 703. The court then explained:

The Louisiana Supreme Court has indicated that an
interlocutory ruling denying an exception of venue is
appealable either by ordinary appeal under La. C.C.P. art.
2083 or through the supervisory writ process pursuant to
La. C.C.P. art. 2201. Chambers v. LeBlanc, 598 So.2d 337
(La.1992) and Herlitz Construction Co. Inc. v. Hotel
Investors of New Iberia, Inc., 396 So.2d 878, note 1
(La.1981). The error of a trial court in denying a proper
venue exception or in transferring the case to an improper
venue cannot "as a practical matter" be corrected on appeal
after final judgment. Herlitz, [396 So.2d 878 (emphasis
added)], and Caldwell v. VAC Federal Credit Union, 545
So.2d 697 (La.App. 2d Cir.1989) (where this court allowed
an appeal by the plaintiff of the interlocutory order
transferring the case to another district court following the
grant of an exception of venue).

....

Generally speaking, both avenues of appeal —
ordinary appeal and supervisory writ appeal — are subject
to time constraints which an appellant must follow in
bringing the appeal. La. C.C.P. arts. 2087 and 2123
establish the delays for taking devolutive and suspensive
appeals. Rule 4-3 of the Uniform Rules--Courts of Appeal
provides for a period “not to exceed thirty days from the
date of the ruling at issue” in which the party aggrieved by
the interlocutory ruling must begin the supervisory writ
process.

However, for the ordinary appeal of an interlocutory
ruling under La. C.C.P. art. 2083, the statutory events
commencing the running of appellate time delays, which
are the same for both devolutive and suspensive appeals,
do not occur, leaving the timing for the taking of such
appeal unclear. The events listed in La. C.C.P. arts.
2087(A)(1) and (2) and 2123(A)(1) and (2) commence the
appellate delays upon “any of the following:

(1) The expiration of the delay for applying
for a new trial or judgment notwithstanding
10

the verdict, as provided by Article 1974 and
Article 1811, if no application has been
timely.

(2) The date of the mailing of notice of the
court’s refusal to grant a timely application
for a new trial or judgment notwithstanding
the verdict, as provided under Article 1914.”

Although these procedural events do not follow after the
denial of an exception for venue or an order transferring
the case to an improper venue, the timely exercise of the
right of appeal of such interlocutory rulings should
nevertheless occur before a party chooses to further utilize
the judicial process in the wrong venue. Otherwise, the
party will waive reassertion of the venue issue.

Erroneous interlocutory rulings falling outside the
appellate protection of La. C.C.P. art. 2083 are “not
independently and immediately appealable” and “must
await rendition of an appealable judgment in the cause.”
People of Living God v. Chantilly Corporation, 251 La.
943, 207 So.2d 752, 753 (1968). For venue, however, the
jurisprudence has required the early appeal of an
erroneous ruling because “once the case is tried on the
merits in the wrong venue, an appellate court has no
practical means of correcting the error on appeal.”
Herlitz, [396 So.2d 878]. Any disadvantage that an
incorrect ruling on venue may pose to the defendant does
not impact the merits of the case, and therefore does not
outweigh the costs of the subsequent employment of the
resources of the judicial process in that venue. Tinsley,
[602 So.2d 1153]. For judicial efficiency and other
“practical” considerations, the defendant is deemed to
waive the right to reurge the venue issue once the case
proceeds. Cf. Hebert v. Mid South Controls and Services,
Inc., 96-378 (La.App. 3d Cir.10/9/96), 688 So.2d 1171,
cert. denied, 522 U.S. 814, 118 S.Ct. 61, 139 L.Ed.2d 24
(1997).

Id. at 703-04 (emphasis added). The court further stated:

An additional reason for requiring a timely appeal of
an adverse interlocutory venue ruling is to prevent the
defendant from seeking other rulings from the district court
while indefinitely withholding the erroneous venue ruling
for later appeal before trial on the merits. For example,
without a requirement for the timely appeal of an adverse
interlocutory venue ruling, a defendant could seek
summary judgment from the district court of wrong venue

11

to first test the defense in that court before choosing
whether to appeal or waive the venue issue.

Id. at 704-05. See also, Bamburg Steel Buildings, Inc. v. Lawrence General Corp.,

36,005 (La.App. 2 Cir. 5/8/02), 817 So.2d 427.

The above reasoning applies herein. Whether a venue ruling is

appealable because it causes irreparable harm or reviewable pursuant to an

application for supervisory writs, review must be sought in a timely manner or the

venue issue is waived. Accordingly, M & L waived venue in Concordia Parish by

failing to timely file an appeal or seek writs when Davis’s exception to venue was

granted by Terrebonne Parish district court and M & L’s case was transferred to

Concordia Parish in July 2004.

Peremption

M & L does not deny that the one-year peremptive period applies under

La.R.S. 9:5606, governing actions against insurance companies and its agents,

regardless of whether the cause of action is in tort or breach of contract. It asserts that

the Concordia Parish district court erred in granting Davis’s Exception of Peremption

and Motion for Summary Judgment because M & L discovered the breach by the

agents when it received and read the liability policy on August 11, 2003, filed suit in

Terrebonne Parish on April 29, 2004, and perfected service on the Davis defendants

on May 4, 2004, all within one year of the discovery of the cause of action in August

2003. M & L argues that where the suit was filed and service obtained prior to the

expiration of the peremptive period, even though deemed to have been filed in an

improper venue, the expiration of the peremptive period does not affect a pending

lawsuit which has been transferred to a court of alleged proper venue. In support of

this proposition, M & L cites the official comment to La.Civ.Code art. 3461.

12

Louisiana Civil Code Article 3461 provides that peremption can not be

renounced, interrupted, or suspended; but its comment states that, nevertheless, when

an action subject to peremption has been commenced or served, the right has been

exercised and peremption does not extinguish the right. La.Civ.Code art. 3461, and

comment (c). M & L also cites Farrell v. Farrell, 555 So.2d 39 (La.App. 1 Cir.

1989); Mayeaux, 893 So.2d 887; Phillips, 704 So.2d. 246; Capitol House

Preservation Co., L.L.C. v. Perryman Consultants, Inc., 98-1514 (La.App. 1 Cir.

12/10/98), 725 So.2d 523.

Davis asserts that the trial court properly found the suit perempted

because the suit was not filed in either court until over a year after M & L knew or

should have known that it had a cause of action. Primarily, the Davis defendants

argue that M & L had knowledge of a cause of action against them on April 9, 2003,

when M & L’s attorney wrote them requesting the overdue refunds and citing the

statutes indicating a cause of action; yet, M & L did not file suit in a proper venue

until August 16, 2004, well over a year later, when the suit was filed in Concordia

Parish. Davis also points to the letter of May 13, 2003 written by M & L’s controller

after having received the liability policy refund. This letter calculates the refund and

shortage, and makes demand on the amount due. Davis asserts that this letter also

proves knowledge and was written over a year before filing suit in the proper venue

on August 16, 2004. Davis further argues that even using the date alleged by M &

L as the date it became aware of a cause of action, August 11, 2003, when M & L

received and read the policy provision, M & L still failed to file suit in the proper

venue until August 16, 2004, which is over a year after discovery of its cause of

action.

Finally, Davis argues that even the first suit was prescribed, where it was

filed in Terrebonne Parish on April 29, 2004, over a year after M & L’s attorney

13

wrote to Davis on April 9, 2003 requesting the unpaid refunds and citing the statutes

indicating a cause of action.

Davis cites Burns v. Goudeau, 04-821 (La.App. 3 Cir. 11/10/04), 888

So.2d 1031, a legal malpractice case governed by La.R.S. 9:5605, which contains

identical language as the statute at issue herein with regard to the necessity of filing

timely in a court of proper venue. The statute at issue in this case provides in

pertinent part as follows:

[La.R.S. 9:]5606. Actions for professional insurance agent
liability

A. No action for damages against any insurance
agent, broker, solicitor, or other similar licensee under this
state, whether based upon tort, or breach of contract, or
otherwise, arising out of an engagement to provide
insurance services shall be brought unless filed in a court
of competent jurisdiction and proper venue within one year
from the date of the alleged act, omission, or neglect, or
within one year from the date that the alleged act,
omission, or neglect is discovered or should have been
discovered. However, even as to actions filed within one
year from the date of such discovery, in all events such
actions shall be filed at the latest within three years from
the date of the alleged act, omission, or neglect. (Emphasis
added).

....

D. The one-year and three-year periods of limitation
provided in Subsection A of this Section are peremptive
periods within the meaning of Civil Code Article 3458 and,
in accordance with Civil Code Article 3461, may not be
renounced, interrupted, or suspended.

In Burns v. Goudeau, where the issue was legal malpractice, and the

language of the legal malpractice statute, La.R.S. 9:5605, is identical in pertinent part

to La.R.S. 9:5606 above, the suit was initially filed in Bossier Parish in October of

2001. An exception of improper venue was filed, and the suit was transferred to St.

Landry Parish on February 6, 2002. The defendants filed an exception of peremption.

Finding that the plaintiff knew of his cause of action in October of 2000, the St.

14

Landry district court granted the defendants’ exception and dismissed the plaintiff’s

suit. In affirming the trial court, this court articulated as follows:

Furthermore, La.R.S. 9:5605(A) requires that a suit must
be “filed in a court of competent jurisdiction and proper
venue” within the one year of discovery or imputed
discovery. In this case, venue was proper in St. Landry
Parish, not Bossier Parish. Although transferred earlier,
the matter was not filed in St. Landry Parish until February
6, 2002. Thus, the matter was not timely filed unless the
date of the plaintiff’s discovery or constructive discovery
of the failure to file was after February 6, 2001. As seen
above, the trial court’s reasons reveal a finding that the
date of discovery or constructive discovery was well before
this date.

Burns, 888 So.2d at 1036.

In the present case, our first task is to determine the date on which M &

L became aware of its cause of action against the Davis defendants. Davis asserts

that the date was April 9, 2003 when M & L wrote Davis citing the precise statutes

indicating a cause of action against them.

The letter of April 9, 2003 from M & L’s attorney referenced the

cancellation date of February 28, 2003, the $708,746.55 paid by M & L in premiums

on the four policies, a request for adjustments due to coverage changes, the fact that

M & L had received neither refunds nor policies, and further contained the following

paragraph:

Under Louisiana Law, La.R.S. 22:637 et seq. refund
of unearned premiums must be made within Thirty (30)
days following such cancellation. Interest under 22:637.1
becomes due after the 30 day period has expired on all
such refunds due.

It is clear from the above correspondence that M & L through its legal

representative knew of a cause of action for obtaining the refunds on April 9, 2003

when the letter was written. If no refunds had been forthcoming, M & L could have

sued for the refunds. However, the refunds began to come in by April and early May

15

2003, and the record indicates refunds were received in the total amount of

$485,561.12. The first suit was not filed until April 29, 2004. Therefore, this suit is

not for unpaid refunds. The suit was filed because Davis reported higher sales figures

than M & L wanted to report and failed to inform M & L of the provision in the

policies regarding the calculation of refunds, and in particular the provision in the

liability policy requiring a minimum earned premium of $275,000.00.

M & L asserts that it was not until the policies began to come in on

August 11, 2003, that it learned of the language in the policy regarding the minimum

earned premium and, therefore, learned of the cause of action. However, we find

evidence of knowledge in the May 13, 2003 letter written by M & L’s controller, Mr.

Charles Williams, CPA, to Davis. That letter states in pertinent part as follows:

In reviewing the General Liability Insurance refund
received May 5, 2003, there was a substantial
underpayment on the premium refund. The way I
understand it, the premium is calculated on the estimated
annual sales of $22,357,000 with a rate of $12.30 per
thousand which when computed the amount is
approximately $275,000.00. . . . On March 2, 2003, I sent
an e-mail to Shane Smith informing him of our actual sales
for the period December 1, 2002 through February 28,
2003 as $4,191.87[]. The premium based on $12.30 per
thousand should be calculated as follows:

$4,191,871/1000 = 4192 x 12.30 = $51,561.60 in earned
premium

The letter from Mr. Williams further broke down the total premium paid,

deducted the actual earned premium, showed the overpayment, actual refund, interest

due, and requested an additional $45,388.28 due on the refund. The last paragraph

stated:

Interest is accruing on the unpaid balance at $20.36 per
day. This interest is mandated by the State of Louisiana on
any refund amount that is not refunded within 30 days of
cancellation of the policy. I intend on pursuing collection
of the refund due us as well as the interest incurred.

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Therefore I am demanding immediate payment of the
above.

Based upon the foregoing, M & L knew before May 13, 2003 that the

sales figure used for calculating the earned premium was $22 million plus, which

resulted in an earned premium of $275,000.00. Moreover, the May 13 letter states

that M & L had already sent an e-mail to Davis on March 2, 2003 giving them actual

sales figures of only $4 million plus to use in calculating the earned premium. Our

question is: why send the e-mail if not already aware that the wrong figures were

reported and that the refund would be based upon an earned premium of

$275,000.00? We do not have the answer to that question. What we do know is that

when the refund was received on May 5, 2003, M & L knew, or should have known,

that it was short, and with Mr. Williams, CPA, aboard, could have quickly calculated

the shortage and how it occurred.

Accordingly, our query for the date of first knowledge might end here

with the May 5, 2003 receipt of the liability policy refund. However, the deposition

of M & L’s controller, Mr. Williams, CPA, indicates that the general liability policy

was not the first received, and that the general liability refund was not the first refund

received. In fact, an August 29, 2003 letter to Davis from M & L’s attorney,

demanding exact shortages on all four policies, states as follows:

Although cancellations were effective on February
28, 2003, despite repeated requests directed to the agency,
the first return of unearned premiums did not occur until
April 16, 2003, wherein a refund in the amount of
$54,110.87 was received from Fireman’s Fund McGee.
Thereafter the following refunds were received. . . .

It is true that the Fireman’s Fund refund was only $13,099.13 short,

based upon the above-referenced correspondence and our reconciling the property

policy coverage with the Fireman’s Fund refund. However, M & L knew or should

have known, because of this shortage on April 16, 2003 when it received the first

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refund, that the calculation method of Davis differed from the calculation method of

M & L, that the refunds were going to be short, and that a battle would ensue. This

is particularly true in light of the e-mail sent on March 2, 2003 providing correct sales

figures and indicating that calculations were underway. This is also true in light of

the level of sophistication of the parties involved. M & L is apparently a successful

business; its controller is a CPA; and it had its attorney involved twelve days after the

30-day delay period for the refunds. Our jurisprudence holds:

Prescription commences when a plaintiff obtains actual or
constructive knowledge of facts indicating to a reasonable
person that he or she is the victim of a tort. A prescriptive
period will begin to run even if the injured party does not
have actual knowledge of facts that would entitle him to
bring a suit as long as there is constructive knowledge of
same. Constructive knowledge is whatever notice is
enough to excite attention and put the injured party on
guard and call for inquiry. Such notice is tantamount to
knowledge or notice of everything to which a reasonable
inquiry may lead. Such information or knowledge as ought
to reasonably put the alleged victim on inquiry is sufficient
to start running of prescription.

Roadhouse Bar-B-Que, Inc. v. Certain Underwriters at Lloyds, 04-1697 (La.App. 3

Cir. 5/4/05), 909 So.2d 619, 623 (quoting Campo v. Correa, 01-2707 pp. 11-12 (La.

6/21/02), 828 So.2d 502, 510-511 (citations omitted)).

Accordingly, we find that M & L had constructive knowledge of a cause

of action against Davis for the shortages complained of on April 16, 2003, when M

& L received the first refund after previous correspondence from its attorney,

requesting the refunds and interest, and from its controller, delivering correct figures

to be used in calculating the refunds.

Because the first refund putting M & L on notice of a cause of action for

the shortages was received on April 16, 2003, and the first suit was not filed until

April 29, 2004, we find that the cause of action is perempted without determining

whether the first suit was filed in a court of proper venue pursuant to La.R.S. 9:5606.

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IV.

CONCLUSION

Based upon the foregoing, we affirm the judgment of the Concordia

Parish district court granting Defendants’ Exception of Peremption and Motion for

Summary Judgment. All costs are assessed against Plaintiff, M & L Industries,

L.L.C.

AFFIRMED.

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