Opinion
No. 2009 CA 0611.
September 11, 2009.
ON APPEAL FROM THE CITY COURT OF HAMMOND SEVENTH WARD IN AND FOR THE PARISH OF TANGIPAHOA STATE OF LOUISIANA DOCKET NO. 1-0509-0035 HONORABLE GRACE B. GASAWAY, JUDGE PRESIDING.
Jan P. Jumonville Covington, Louisiana, Counsel for Defendant/Appellee Mid-South Fire Protection, Inc.
Craig L. Kaster Zachary, Louisiana, Counsel for Plaintiff/Appellant Happy Haven Homes, Inc.
BEFORE: DOWNING, GAIDRY, AND McCLENDON, JJ.
Plaintiff appeals a trial court award of $12,081.83 in sanctions made pursuant to LSA-C.C.P. art. 863. For the following reasons, we reverse.
FACTUAL AND PROCEDURAL HISTORY
On September 23, 2005, Mid-South Fire Protection, Inc. (Mid-South) filed a petition against Happy Haven Homes, Inc. (Happy Haven) in the City Court of Hammond, alleging that it had a contract with Happy Haven to perform certain work on sprinkler systems at homes on Stein Road and Hinson Road in Hammond, Louisiana, and that Happy Haven refused to pay $4,078.22 for the work performed. Happy Haven answered the petition on October 10, 2005, generally denying the allegations. Happy Haven included in its answer a motion for sanctions pursuant to LSA-C.C.P. art. 863. In discovery responses provided by Mid-South to Happy Haven on November 22, 2005, Mid-South indicated that the services at issue were performed at the Hinson Road Home in 1999 and at the Stein Road Home in 2000.
Trial on the merits of Mid-South's suit was held on April 25, 2006. Prior to trial, Happy Haven orally moved to dismiss Mid-South's suit asserting that the claims had prescribed under the three-year liberative prescriptive period found in LSA-C.C. art. 3494. Mid-South opposed the motion, contending that the suit was subject to a ten-year liberative prescriptive period under a breach of contract theory. The trial court heard the exception, deferred its ruling, and proceeded to a trial on the merits. Following trial, the court took the matter under advisement and allowed the parties time to file post-trial memoranda.
On June 21, 2006, the trial court issued Reasons for Judgment, finding that no agreement or contract existed regarding the work. Without a contract, the court determined that the three-year prescriptive period pursuant to LSA-C.C. art. 3494 was applicable. Because the services were rendered in 1999 and 2000, and suit was not filed until 2005, the trial court granted Happy Haven's exception of prescription.
Thereafter, by letter dated September 10, 2006, counsel for Happy Haven informed the court that its reasons for judgment failed to address Happy Haven's claim for attorney fees and requested that the court amend its reasons to address the attorney fees claim. On November 14, 2006, the trial court issued Amended Reasons for Judgment to include attorney fees in the amount of $500.00. Judgment was also signed on November 14, 2006, granting Happy Haven's exception of prescription, dismissing Mid-South's claim, and awarding $500.00 in attorney fees against Mid-South. Mid-South then moved for a new trial, and Happy Haven filed an opposition to the motion and moved for an increase in the attorney fees. The motions of both parties were denied.
Mid-South appealed the award of attorney fees, and Happy Haven answered the appeal seeking an increase in the attorney fees award. Mid-South Fire Prot. v. Happy Haven Homes, Inc., 07-1744 (La.App. 1 Cir. 3/26/08) (Unpublished Opinion). On appeal, this court, citing LSA-C.C.P. art. 863(E) and McDonald Enterprises, Inc. v. Age, 00-1938, p. 4 (La. App. 1 Cir. 11/9/01), 818 So.2d 70, 72, noted that while LSA-C.C.P. art. 863 authorizes a court to impose sanctions, they can only be imposed "after a hearing at which any party or his counsel may present evidence or argument relevant to the issue of imposition of the sanction." 07-174 at p. 4. Because sanctions were imposed without a hearing, this court reversed the trial court's judgment and remanded the matter for a contradictory hearing on the motion for sanctions. Id. at 5.
Following remand, Happy Haven filed a Motion for Sanctions and the trial court set the matter for hearing on July 22, 2008. The trial court, in accord with a request by Mid-South, granted a continuance of the hearing date and reset the hearing for October 14, 2008. Counsel for Mid-South failed to appear at the October 14, 2008, hearing. At the hearing, counsel for Happy Haven presented an eleven-page statement, which reflected that she worked a total of 79.5 hoursat a rate of $150.00 per hour (for a total of $11,925.00) on the case and that $463.62 was spent on costs associated with the case.
Counsel for Happy Haven also attached her affidavit wherein she attested that the "charges are true and correct.
On October 21, 2008, the trial court, in its reasons for judgment, found that Mid-South "failed to file a claim which was well grounded in fact as required by LSA-C.C.P. article 863" and awarded Happy Haven $10,000.00 as sanctions, which the court deemed "reasonable based upon the evidence in support of the legal services rendered and the costs expended." A written judgment was signed that same day.
On October 24, 2008, Mid-South filed an Application for New Trial contending that the judgment awarding sanctions was contrary to law. In response, Happy Haven requested additional sanctions pursuant to LSA-C.C.P. 863 insofar as it asserted it was forced to defend "a baseless and frivolous Motion for New Trial." Following a hearing, the trial court, on January 28, 2009, denied Mid-South's motion, finding that Mid-South provided no factual basis to support its conclusory allegation that the prior sanction ruling was contrary to law. Additionally, the court found that Happy Haven was entitled to additional sanctions in the amount of $2,081.83 based upon the "reasonable attorney's fees and costs proven" in having to oppose the motion. A written judgment to that effect was signed on the same day.
In accord with an agreement with opposing counsel, Happy Haven's attorney, following the hearing, submitted an updated statement along with an affidavit verifying the amounts reported therein.
On February 2, 2009, the trial court signed an amended judgment to award Happy Haven judicial interest on the award of attorney fees and all costs from the date of judicial demand until paid.
Mid-South has filed the underlying appeal asserting that the trial court's award of sanctions under LSA-C.C.P. art. 863 was clearly wrong. Mid-South also asserts that the amount of attorney fees awarded was unreasonable.
DISCUSSION
Louisiana Code of Civil Procedure article 863 provides, in pertinent part:
A. Every pleading of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. A party who is not represented by an attorney shall sign his pleading and state his address.
B. Pleadings need not be verified or accompanied by affidavit or certificate, except as otherwise provided by law, but the signature of an attorney or party shall constitute a certification by him that he has read the pleading; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact; that it is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
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D. If, upon motion of any party or upon its own motion, the court determines that a certification has been made in violation of the provisions of this Article, the court shall impose upon the person who made the certification or the represented party, or both, an appropriate sanction which may include an order to pay the other party or parties the amount of reasonable expenses incurred because of the filing of the pleading, including a reasonable attorney's fee.
Article 863 applies to the signing of pleadings, motions and other papers, imposing upon attorneys and litigants affirmative duties as of the date a document is signed. Sanchez v. Liberty Lloyds, 95-0956, p. 5 (La.App. 1 Cir. 4/4/96), 672 So.2d 268, 271, writ denied, 96-1123 (La. 6/7/96), 674 So.2d 972. The court must determine whether the individual, who certified the document purported to be violative, has complied with those affirmative duties. Id. The obligation imposed upon litigants and their counsel who sign a pleading is to make an objectively reasonable inquiry into the facts and the law. 95-0956, p. 6, 674 So.2d at 271. Article 863 is intended to be used only in exceptional circumstances and does not empower a trial court to impose sanctions simply because a particular argument or ground for relief is subsequently found to be unjustified; failure to prevail does not trigger an award of sanctions. First American Bank Trust v. First Guar. Bank, 615 So.2d 1060, 1063 (La.App. 1 Cir. 1993). Where there is even the slightest justification for the assertion of a legal right, sanctions are not warranted. Sanchez, 95-0956 at p. 8, 672 So.2d at 273.
The standard of review in the factual finding that sanctions are justified is the manifestly erroneous or clearly wrong standard. The determination of the type and amount of the sanctions is reviewed under the abuse of discretion standard. Matter of Succession of Thomas, 602 So.2d 1108 (La.App. 1 Cir. 1992).
Mid-South filed suit against Happy Haven on September 23, 2005. Happy Haven contends that if Mid-South's counsel, prior to filing suit, had made a "reasonable inquiry" to determine whether the suit was "well grounded in fact," he would have discovered that the services at issue were performed in 1999 and 2000 and were subject to the three-year prescriptive period applicable to compensation for services rendered and/or actions on open account under LSA-C.C. art. 3494. Moreover, Happy Haven contends that Mid South's counsel would have discovered that the matter had prescribed under Article 3494 no later than November 22, 2005, when he forwarded Mid-South's discovery responses to Happy Haven. On the other hand, Mid-South contends that it believed its action was based on breach of contract and subject to the ten-year prescriptive period provided under LSA-C.C. art. 3499. See Corbello v. Iowa Production, 02-0826, p. 26 (La. 2/25/03), 850 So.2d 686, 705.
Louisiana Civil Code article 3494 provides, in pertinent part:
The following actions are subject to a liberative prescription of three years: (1) An action for the recovery of compensation for services rendered, including payment of salaries, wages, commissions, tuition fees, professional fees, fees and emoluments of public officials, freight, passage, money, lodging, and board;
(4) An action on open account; and. . . .
Louisiana Civil Code article 3499 provides:
Unless otherwise provided by legislation, a personal action is subject to a liberative prescription of ten years.
In denying recovery following trial, the court determined that "the parties did not have a contract and there was absolutely no agreement or contract regarding the work performed for which outstanding funds are allegedly due forming the basis of this claim." Accordingly, the trial court apparently found that the ten-year prescriptive period pursuant to LSA-C.C. art. 3499 could not apply. However, the trial court, recognizing that Mid-South had performed workat the two Happy Haven homes, also found that its claims were subject to the three-year prescriptive period found in Article 3494 and had prescribed. Thereafter, the trial court awarded sanctions because it found that Mid-South "failed to file a claim which was well grounded in fact" and forced Happy Haven "to defend an action which was prescribed."
To the extent that the trial court's reasons may indicate that there was no contract between Mid-South and Happy Haven, we note that the evidence presented at trial indicated that Mid-South nonetheless had a sufficient basis to assert its claims. At trial, Ken Alderman, Mid-South's general manager, testified that on June 25, 1999, Cassandra Smith, Happy Haven's director, called Mid-South and requested that Mid-South replace the sprinkler heads at the home on Hinson Road. The record further reflects that Mid-South replaced the sprinkler heads on July 8 and 9, 1999. Ms. Smith also testified that she contacted Mid-South to inspect and determine what repairs were necessary with regard to the fire sprinkler system at the home on Stein Road. Mr. Alderman and Ms. Smith both indicated that Mid-South performed services to address this issue on April 3, 2000, and the record reflects that a work order to that effect was signed by Lyddie Price after the work had been completed. As such, we must conclude that Mid-South had at least some basis to assert claims for payment related to its work at Happy Haven's homes, although the parties dispute the extent of the work agreed upon and the amounts charged for completion of the work.
Cassandra Smith is erroneously referred to as "Cassandra Short" in portions of the transcript and on Mid-South's invoices.
This is reflected on a work order prepared by Arnie Jones, Mid-South's special hazard manager. Mr. Jones, however, was not called to testify at trial.
The work order related to the work performed on Stein Road was also prepared by Arnie Jones. The record does not reflect the capacity in which Ms. Price signed.
Notwithstanding whether Mid-South had even the slightest justification for asserting that the prescriptive period provided under LSA-C.C. art. 3499 was applicable herein, we conclude that sanctions are unwarranted merely because Mid-South filed claims that had prescribed under LSA-C.C. art. 3494. Although prescription bars the remedy sought to be enforced and terminates the right of access to the courts for enforcement of the existing right, it does not destroy the underlying right or natural obligation itself. Borel v. Young, 07-0419, p. 8 (La. 11/27/07), 989 So.2d 42, 49; Pounds v. Schori, 377 So.2d 1195, 1198 (La. 1979). See also LSA-C.C. art. 1760—62. Prescription will not bar judicial enforcement of an obligation unless affirmatively pleaded by the defendant. Kerr-McGee Corp. v. McNamara, 00-0770, p. 5 (La.App. 1 Cir. 6/22/01) 826 So.2d 1, 4; Firmin, Inc. v. Denham Springs Floor Coverings, Inc., 595 So.2d 1164, 1171 (La.App. 1 Cir. 1991). See also LSA-C.C.P. art. 927. In Firmin, for instance, this court affirmed a district court's award of damages even though the action was "vulnerable to an objection of prescription" had it been properly plead. Firmin, 595 So.2d at 1171.
We note that parties in other cases, in attempts to warrant application of the ten-year prescriptive period provided in article 3499 as opposed to the three-year period provided in article 3494, have advanced arguments similar to those raised by Mid-South when the parties had entered a contractual agreement. See e.g. Wells Parker Architects, Inc. v. Monroe McKeen Plaza Housing Dev. Corp., 556 So.2d 191 (La.App. 2 Cir. 1990).
Under these circumstances, we are constrained to conclude that sanctions should not have been imposed on Mid-South for seeking to enforce its right to payment, even though that right was barred because Happy Haven chose to plead prescription. See also Currie v. Schon, 704 F.Supp. 698, 702 (E.D. La. 1989), wherein the federal court, interpreting Louisiana's prescription statutes, determined that it would "never impose sanctions [under Rule 11 of the Federal Rules of Civil Procedure] on a plaintiff who seeks to enforce an alleged extant right, albeit that enforcement may be barred if the defendant chooses to plead prescription." Mid-South's assignment of error is meritorious.
CONCLUSION
For the reasons above, the trial court's October 21, 2008, and January 28, 2009, judgments awarding damages for sanctions pursuant to LSA-C.C. art. 863 are reversed. Each party is to bear its own costs for this appeal.