Paul Breaux v. Gulf Coast Bank

NOT DESIGNATED FOR PUBLICATION

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CA 11-192

PAUL BREAUX

VERSUS

GULF COAST BANK

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF VERMILION, NO. 92499 I
HONORABLE THOMAS R. DUPLANTIER, DISTRICT JUDGE

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SHANNON J. GREMILLION
JUDGE

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Court composed of Elizabeth A. Pickett, Billy Howard Ezell, and Shannon J.
Gremillion, Judges.

AFFIRMED.

Bernard Francis Duhon
Attorney at Law
P. O. Box 1169
Abbeville, LA 70511-1169
(337) 893-5066
Counsel for Defendant/Appellee:
Gulf Coast Bank

Jermaine Demetrie Williams
Attorney at Law
108 W. Congress Street
Lafayette, LA 70501
(337) 235-3989
Counsel for Plaintiff/Appellant:
Paul Breaux

Lauren E. Campisi
McGlinchey Stafford, PLLC
601 Poydras St., 12th Floor
New Orleans, LA 70130
(504) 586-1200
Counsel for Defendant/Appellee:
Gulf Coast Bank

GREMILLION, Judge.

Plaintiff, Paul Breaux, appeals the trial court’s grant of an exception of

prescription in favor of Defendant, Gulf Coast Bank. For the following reasons,

we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The facts of this case are not in dispute. Breaux hired attorney Kevin

Rees to represent him for injuries he received while working offshore for Jade

Marine. Rees settled Breaux’s claim against Jade Marine for $60,000, and upon

receipt of the settlement check, forged Breaux’s endorsement. On April 8, 2009,

Rees deposited the check into his business trust account at Gulf Coast Bank.

Rees never gave Breaux any of the settlement funds. On June 28, 2010, Breaux

filed a claim for damages against Gulf Coast. On September 15, 2010 Gulf

Coast filed Peremptory Exceptions of Prescription, No Right of Action, and No

Cause of Action. Following a November 2010 hearing, the trial court granted

Gulf Coast’s Peremptory Exception of Prescription. Breaux now appeals

arguing that the trial court erred in granting Gulf Coast’s exception of

prescription because contra non valentem applies to suspend prescription.

DISCUSSION

Breaux concedes that his claim is prescribed on the face of the petition.

Thus, the burden shifts to him to prove that it has not. Peak Performance Physical

Therapy & Fitness, LLC v. Hibernia Corp., 07-2206 (La.App. 1 Cir. 6/6/08), 992

So.2d 527, writ denied, 08-1478 (La. 10/03/08), 992 So.2d 1018. Breaux’s claim

for conversion against Gulf Coast is regulated by the provisions found in La.R.S.

10:3-420, which set forth a one year prescriptive period. 1 La.R.S. 10:3-420(f).

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La.R.S. 10:3-420 provides:
(a) An instrument is converted when

Breaux can only defeat prescription if he can show that it was interrupted or

suspended. We review a trial court’s factual findings as to whether a claim has

prescribed under the manifest error-clearly wrong standard of review. Marin v.

Exxon Mobil Corp., 09-2368, 09-2371 (La. 10/19/10), 48 So.3d 234.

Breaux’s argument is based on the doctrine of contra non valentem. The

supreme court has set forth four situations in which contra non valentem will apply

as a jurisprudential exception to defeat prescription. They are:

1. Where there was some legal cause which prevented the courts or
their officers from taking cognizance of or acting on the plaintiff’s
action.

2. Where there was some condition coupled with the contract or
connected with the proceedings which prevented the creditor from
suing or acting;

3. Where the debtor himself has done some act effectually to prevent
the creditor from availing himself of his cause of action; or

4. Where the cause of action is neither known nor reasonably
knowable by the plaintiff even though plaintiff’s ignorance is not
induced by the defendant.

Id.at 245.

The fourth category, otherwise known as the “discovery rule” is to be

applied in only the most extreme and exceptional circumstances. Id.

Breaux argues that his claim falls under the fourth category (the discovery

rule exception). Specifically, he claims that the fourth category of contra non

valentem applies regardless of who engaged in the fraudulent concealment. We

disagree. Assuming as true all of Breaux’s claims that he could not have known of

his attorney’s forged endorsement of his name until, at the earliest, July 2009, we

find no error in the trial court’s finding because the discovery rule exception is not

available to prevent the tolling of prescription in this case.

(iii) it is taken by transfer, other than a negotiation, from a person not entitled to enforce the
instrument or a bank makes or obtains payment with respect to the instrument for a person
not entitled to enforce the instrument or receive payment.
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Our colleagues in the first and second circuits have addressed this issue,

setting forth the reasoning why the discovery rule is inapplicable to check

conversion cases. In Costello v. Citibank (South Dakota), N.A., 45,518, p.8

(La.App. 2 Cir. 9/29/10), 48 So.3d 1108, 1113-1114, the court stated (emphasis

added):

The use of negotiable instruments was intended to facilitate the
rapid flow of commerce by providing certainty and finality in
commercial transactions. Strict application of the limitation period
serves this purpose. . . .

In Peak Performance, supra at 533, the First Circuit quoted
Pero’s Steak House v. Lee, 90 S.W.3d 614 (Tenn.2002), where the
Tennessee Supreme Court stated:

Negotiable instruments are intended to facilitate
the rapid flow of commerce by providing certainty and
finality in commercial transactions. These policies are
best served by refusing to apply the discovery rule and by
finding that the cause of action for conversion of
negotiable instruments accrues when the instrument is
negotiated. Of course, adoption of the majority rule also
fosters uniformity, which is a fundamental objective of
the Uniform Commercial Code . . . .

We find that the doctrine of contra non valentem does not apply
to suspend prescription of a cause of action for the conversion of a
negotiable instrument under La.R.S. 10:3-420(f), except in the event
of fraudulent concealment. Peak Performance, supra.

In Costello, an employee bookkeeper embezzled more than $280,000 from

her employer by writing checks on the company account to pay her personal

creditors. While the Costello court did not specify that the fraudulent concealment

must occur at the hands of the defendant, Peak Performance did in quoting the

Tennessee supreme court in Pero’s Steak House (emphasis added):

Reviewing the jurisprudence of other jurisdictions, the court noted
that “the vast majority of courts hold that in the absence of fraudulent
concealment on the part of the defendant asserting the statute-of-limitations
defense, the discovery rule does not apply to toll the statute of limitations on
an action for conversion of negotiable instruments.”

Peak Performance, 992 So.2d at 532.
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The Peak Performance court went on to state:

Not only does the jurisprudential doctrine of contra non
valentem run counter to the general public policy of certainty
underlying prescription, its application in these circumstances would
further circumvent the analogous and express policies of certainty and
uniformity upon which the UCC and our commercial laws adopting
the UCC’s provisions are based. UCC provisions should be construed
so that rights and liabilities of the parties, absent serious factual
dispute, are ascertainable without resort to expensive and delaying
litigation over each item that might be paid on an unauthorized
signature or endorsement, thereby facilitating commercial
transactions. Pargas, Inc. v. Estate of Taylor, 416 So.2d 1358, 1364-
65 (La.App. 3rd Cir.1982). We therefore hold that the equitable
doctrine of contra non valentem cannot be applied to suspend
prescription of a cause of action for the conversion of a negotiable
instrument under La.R.S. 10:3-420(f), except in the event of
fraudulent concealment by the defendant asserting prescription, a
limited application of the third category of contra non valentem.

Id. at 533.

Peak Performance involved another factual scenario in which an employee

was embezzling funds from her employer. While we are sympathetic that Breaux

was not in a situation in which he could have easily discovered the theft, the fact

remains that Gulf Coast did not conceal anything.

It is not necessary for us to adopt the more sweeping rule espoused by our

colleagues in the other circuits because, even applying a case-by-case examination,

we conclude that the doctrine does not apply to Gulf Coast. Every exception of

prescription necessarily involves a factual analysis. When a claim is facially

prescribed, the party against whom the exception is asserted must come forward

with facts sufficient to support the claim. See Younger v. Marshall Ind., Inc., 618

So.2d 866 (La.1993).

For instance, in Metro Electic & Maintenance, Inc. v. Bank One Corp., 05-

1045 (La.App. 3 Cir. 3/1/06), 924 So.2d 446, we noted that the employer was

better situated than his bank to determine whether the instrument had been forged.

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Conversely, in LaCombe v. Bank One Corp., 06-1374 (La.App. 3 Cir. 3/7/07), 953

So.2d 161, writ denied, 07-0746 (La. 6/01/07), 957 So.2d 177, the bank was better

positioned to detect that its customer was forging instruments made payable to the

customer’s employer. Therefore, this court determined that contra non valentem

applied.

In the present case, the instrument was deposited into Breaux’s lawyer’s

account. Attorneys’ banks regularly receive into their accounts funds that belong

to third parties. Such a bank is not well-positioned to detect conversions by those

attorneys. Therefore, the fourth element of contra non valentem will not be applied

in such a case.

CONCLUSION

The judgment of the trial court granting the defendant-appellee’s, Gulf Coast

Bank, exception of prescription is affirmed. All costs of this appeal are assessed

against the plaintiff-appellant, Paul Breaux.

AFFIRMED.

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