Opinion
No. 2010-CA-1734.
July 8, 2011.
APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2008-8233, DIVISION "G-11" HONORABLE ROBIN M. GIARRUSSO, JUDGE.
VINCENT J. BOOTH, BOOTH BOOTH, APLC, NEW ORLEANS, LA, COUNSEL FOR PLAINTIFFS/APPELLANTS, BILLIE G. SEMMES AND GARRETT MOTOR CARS, L.L.C.
HENRY L. KLEIN, KLEIN-DAIGLE, LLC, NEW ORLEANS, LA, IN PROPER PERSON, DEFENDANT/APPELLANT, HENRY L. KLEIN.
Court composed of Chief Judge JOAN BERNARD ARMSTRONG, Judge CHARLES R. JONES, and Judge DENNIS R. BAGNERIS, SR.
Plaintiffs, Billie Garrett Semmes and Garrett Motor Cars, LLC (Garrett), and defendant, Henry Klein, appeal from a judgment of the trial court in favor of Mr. Klein, dismissing the legal malpractice claims of the plaintiffs at the defendant's cost. For the reasons that follow, we affirm the judgment of the trial court.
Plaintiffs alleged in their petition that their agent, Granville Martin Semmes, III, retained Mr. Klein to recover insurance proceeds for hurricane damage sustained by their immovable property located in Slidell, Louisiana. On or about August 22, 2006, Mr. Klein filed suit in St. Tammany Parish against plaintiffs' casualty insurer, Granite State Insurance Company (GSI). Plaintiffs alleged that Mr. Klein erroneously prepared the suit listing as plaintiff only the property's lessee, Robert Levis Chevrolet LLC (Levis). Shortly thereafter, attorney Richard Traina advised Mr. Klein that he represented Levis, that Mr. Klein's lawsuit had been filed without Levis' authority, and that Mr. Klein should dismiss the lawsuit he had filed against GSI. Mr. Klein withdrew as counsel on November 2, 2006, and the suit was dismissed on November 20, 2006. Nearly a year later, on or about September 20, 2007, Mr. Klein contacted GSI to pursue Mrs. Semmes' claim as an additional insured under the policy. He then filed an intervention in the litigation between Levis and GSI then pending in St. Tammany Parish. Mrs. Semmes and Garrett alleged in their petition in the instant case that, to their knowledge, the St. Tammany court had not granted Mr. Klein leave to file the intervention, nor did Mr. Klein take any substantive steps to prosecute their claims. The St. Tammany case was dismissed, reserving to Mrs. Semmes any rights she might have against the Levis interests, but there was no provision concerning her right to proceed against GSI under the policy. Mrs. Semmes and Garrett allege that because of Mr. Klein's negligence, their rights to pursue their damage claim against GSI prescribed on August 29, 2007.
Mr. Klein answered Mrs. Semmes' petition with exceptions of prescription, no right of action, and failure to join indispensable parties plaintiff (Mr. Semmes) and defendant (the firm of Chehardy, Sherman, Ellis, Breslin Murray), and answered Garrett's petition with the foregoing exceptions and an exception of no cause of action, claiming that Garrett was not a loss payee under the GSI policy.
Following a bench trial on the merits, the trial court rendered judgment as noted above. The trial court filed written reasons for judgment, and made the following findings:
1. The evidence clearly establishes a prima facie case of malpractice by Mr. Klein.
a. Mr. Semmes retained Mr. Klein to pursue insurance claims on behalf of Garrett and Mrs. Semmes.
b. Mr. Klein received the certificate of insurance for the property in question, which is evidenced by the fact that he filed suit against GSI under the policy, albeit on behalf of the wrong party.
c. After having withdrawn from that suit and allowing it to be dismissed, Mr. Klein did not follow up to file a new suit to protect the interests in the property of Mrs. Semmes and Garrett under the policy.
d. Mr. Klein's letters of September 2007, and January, February and March 2008 prove that he continued to represent Mrs. Semmes, that she was an additional insured under the policy, and that he believed she had a right to have her name on GSI's settlement check.
2. Legal malpractice having been proved, the burden of proof shifts to Mr. Klein, pursuant to Jenkins v. St. Paul Fire Marine Ins. Co., 422 So. 2d 1109, 1109-10 (La. 1982), to prove that the litigation against GSI would have been unsuccessful if suit had been filed timely and on behalf of and against the appropriate parties.
3. In this case on the date that the plaintiff alleges that the damages arose, the plaintiffs no longer held a legal interest in the insurance policy.
a. Mrs. Semmes, individually or through Garrett, owned two neighboring properties, one of which was leased to Levis.
b. As a condition of the lease, Levis was required to maintain insurance. Levis obtained a GSI policy, and the certificate of insurance named Levis as the primary insured and Mrs. Semmes as an additional insured.
c. On January 17, 2006, Mrs. Semmes entered into an agreement with Levis under which Levis would repair the storm-damaged property in exchange for entitlement to all of the proceeds of the GSI policy. Pursuant to this agreement, Mrs. Semmes transferred her entire legal interest in the policy to Levis, and, therefore, no longer had any legal interest in the insurance policy.
The trial court concluded that the plaintiffs allege that they did not suffer any damage as a result of Mr. Klein's negligence until August 30, 2007. Because they had transferred their legal interest in the policy proceeds some nineteen months earlier, they were not damaged by the negligent acts.
It is this Court's duty on appeal to review the record in its entirety for errors of fact and errors of law. See, La.Const. Art. V, §§ 5(C) and 10(B) (West 2006). In reviewing the factual findings of a trial court, an appellate court is limited to a determination of manifest error. Hill v. Morehouse Parish Police Jury, 95-1100, p. 4 (La. 1/16/96), 666 So.2d 612, 614. Where there is a conflict in the testimony, reasonable evaluations of credibility and reasonable inferences of fact should not be disturbed on review, even though the appellate court may feel that its own evaluations and inferences are as reasonable. Where there are two permissible views of the evidence, the fact finder's choice between them cannot be manifestly erroneous or clearly wrong. When findings are based on determinations regarding the credibility of witnesses, the manifest error — clearly wrong standard demands great deference to the trier of fact's findings. It is only where documents or objective evidence so contradict a witness's story, or the story itself is so internally inconsistent or implausible on its face, that a reasonable fact finder would not credit the witness's story, that the reviewing court may well find manifest error in a finding purportedly based upon a credibility determination. But where such factors are not present, and a fact finder's finding is based on its decision to credit the testimony of one or more witnesses, that finding can virtually never be manifestly erroneous or clearly wrong. Rosell v. ESCO, 549 So.2d 840, 844-845 (La. 1989).
Mr. Semmes, Mr. Klein, and Robert Stassi testified at trial. The parties stipulated to the facts to which Mrs. Semmes would testify directly, and Mrs. Semmes testified at trial as a rebuttal witness for the plaintiffs.
The parties stipulated that, if Mrs. Semmes were to testify, she would testify to certain facts; however, the parties did not stipulate to the truth or accuracy of her testimony. Mrs. Semmes' stipulated testimony follows:
In approximately June of 2006, Granville Semmes, working on behalf of Mrs. Semmes, retained Mr. Klein in various property damage claims resulting from Hurricane Katrina.
One of the properties which Mr. Klein was asked to file an insurance claim on was a commercial property on I-10 in Slidell.
The I-10 property had been owned by Billie Semmes until June 10, 2005. On June 10, 2005 a limited liability company, Garrett Motor Cars, LLC, was created for the sole purpose of owning the I-10 property. Mrs. Semmes is the 100% owner of the LLC.
The stipulation indicates that Mr. Semmes is the 100% owner of Garrett Motor Cars, LLC. This appears to be a typographical error, as the testimony, including that of Mrs. Semmes as a rebuttal witness, consistently refers to Mrs. Semmes as the owner of the LLC.
Mrs. Semmes transferred her entire 100% ownership of the I-10 property to Garrett Motor Cars, LLC.
The I-10 property was leased to Robert Levis Chevrolet, LLC. As a condition of the lease, Robert Levis Chevrolet was required to maintain insurance over the property, including property damage.
The property was insured by GSI policy no. 026A6264151-2.
The certificate of insurance named Robert Levis Chevrolet, LLC as the primary insured and it listed Billie G. Semmes as an additional insured under the policy.
Although Garret Motor Cars, LLC had taken title to the property in June of 2005 a new certificate of insurance was not issued by the insurer prior to Hurricane Katrina striking St. Tammany Parish on August 29, 2005.
Mrs. Semmes executed an assignment of all rights which she had as an additional insured on the GSI policy No. 026A264151-2. This assignment was in favor of Garrett Motor Cars, LLC and was stated to be effective August 1, 2005.
Mrs. Semmes never had any authority to file a suit for Robert Levis Chevrolet, LLC relating to this property.
On January 17, 2006, Billie Semmes entered into an agreement with Robert Levis regarding repairs to several properties which Mr. Levis, through his automobile dealerships and LLCs leased from Mrs. Semmes and her company. According to the terms of that agreement, Robert Levis Chevrolet, LLC was required to pay for all repairs for hurricane damage at the I-10 property. In turn, Robert Levis Chevrolet, LLC would be entitled to all the insurance proceeds from the policy covering the property.
Robert Levis Chevrolet, LLC did not perform its obligations pursuant to that January 17, 2006 agreement. Robert Levis Chevrolet, LLC did not perform or pay for necessary storm damage repairs to the property. Instead, Mr. Levis and his company simply abandoned the property, leaving substantial damage which remains unrepaired at this time.
In connection with the stipulated testimony, the trial court admitted without objection the assignment of Mrs. Semmes' interest as an additional insured under the GIA policy to Garrett Motor Cars, LLC. This assignment of rights, dated October 29, 2009, states that it is retroactively effective to August 1, 2005.
Mr. Semmes testified that he first met Mr. Klein in connection with previous unrelated litigation in which Mr. Klein represented an opposing party. Mr. Semmes was impressed with Mr. Klein's performance, and, subsequent to Hurricane Katrina, met with Mr. Klein to represent him and his wife. Mr. Semmes testified, and Mrs. Semmes does not dispute, that he had his wife's authority to act on her behalf to discuss the proposed insurance claims, involving four separate cases, with Mr. Klein. The properties involved were held by various owners, including Mr. Semmes, Mrs. Semmes, and certain LLCs. Mr. Semmes brought Mr. Klein documents regarding the properties and the relevant insurance policies, and explained to him that, with respect to the Semmes' Slidell Mitsubishi and Chevrolet automobile dealerships, the Chevrolet dealership was owned entirely by Mrs. Semmes, while the Mitsubishi dealership was owned by both Mr. and Mrs. Semmes. He also advised Mr. Klein at the time of engagement of the specific parties that owned each of the individual pieces of property giving rise to insurance claims for hurricane damage. Included in this advice was the fact that, prior to Hurricane Katrina, the Chevrolet dealership's property, that is the subject of the instant litigation, was conveyed by Mrs. Semmes to Garrett Motor Cars, LLC, a company wholly owned by Mrs. Semmes. Mr. Semmes identified that notarial Act of Recission and Transfer and Exchange, dated June 8, 2005, by which Mrs. Semmes transferred her interest in the property to Garrett. On cross-examination, Mr. Semmes admitted that Garrett was not identified as a loss payee under the GSI certificate of liability insurance relating to the Chevrolet dealership property. Mr. Semmes was unable to recall definitively whether or not he told Mr. Klein, prior to his filing the St. Tammany suit, of Mrs. Semmes' transfer of her interest in the Chevrolet dealership property to Garrett.
Mr. Semmes testified that he pled guilty to theft of over $500.00 from Garrett Properties and paid restitution in the amount of $8,300.00. The owners of Garrett Properties are Mrs. Semmes and her sister, Debbie Garrett Levis.
The Semmes' unrelated hurricane claim against Mr. Levis for failure properly to insure the Mitsubishi dealership property was not handled by Mr. Klein.
The parties stipulated that, at Mr. Semmes' request, Mr. Klein filed petitions on hurricane damage claims on behalf of (1) Garrett Orleans, LLC covering five properties in Orleans Parish; (2) W.C. and Ruthie Marie, LLC and Heisler Properties, LLC by amended petition covering fourteen properties in Orleans Parish; and (3) Garrett Orleans, LLC and Daisey, LLC covering property located on Military Road in Slidell, Louisiana.
Mr. Semmes identified Robert Levis as his brother-in-law and former tenant of the Chevrolet dealership property. Mr. Semmes identified a certificate of liability insurance for the Chevrolet dealership property, naming Robert Levis Chevrolet, LLC as insured, and naming Billie G. Semmes and Granville Semmes as additional insureds. The certificate, dated March 7, 2005, shows coverage effective January 1, 2005 through January 1, 2006. Mr. Semmes testified that he gave this certificate to Mr. Klein in connection with his representation.
Mr. Levis is married to Mrs. Semmes' sister.
Mr. Semmes testified that he and Mrs. Semmes entered into an agreement with Levis that the Semmeses would handle the storm repairs on the Mitsubishi property out of the insurance proceeds that would come to them. Mr. Levis would undertake renovation of the Chevrolet property and would receive the insurance proceeds on that property to cover those renovations. Ultimately, following negotiations resolved by Leon Rittenberg, the parties entered into a handwritten agreement memorializing their understanding. Mr. Semmes identified the document on cross-examination. The agreement, dated January 17, 2006, provided:
Garrett Motor Cars, LLC Billie G. Semmes authorize Robert Levis Chevrolet, LLC to contract for all repairs to the building where its dealership is located. Robert Levis Chevrolet, LLC shall pay for all repairs and shall be entitled to all the insurance proceeds.
OST Dealerships, LLC Billie G. Semmes will contract for all repairs to the building where the Mitsubishi dealership is located and shall receive all insurance proceeds.
On cross-examination, Mr. Semmes could not recall whether or not he told Mr. Klein of this agreement when he engaged his legal services.
Although Mr. Semmes did not enter into a written contract with Mr. Klein for the latter's legal services, Mr. Semmes testified that he thought the claim would be subject to a contingency fee agreement, by which Mr. Klein would receive twenty percent of the settlement. Mr. Klein admitted on cross-examination that a written contract would have set out the names of the parties he was to represent on each of the insurance claims. According to Mr. Klein, he did not prepare such a contract because he and Mr. Semmes "had a lot of relationships together and were doing a lot of different things."
Mr. Semmes identified the petition filed by Mr. Klein in the 22nd Judicial District Court for the Parish of St. Tammany on June 21, 2006, bearing #2006-12653, and entitled "Robert Levis Chevrolet, LLC versus Granite State Insurance Company", and noted that the property mentioned in the petition is the Chevrolet dealership owned by Garrett Motor Cars, LLC. Mr. Klein testified that Mr. Semmes told him to file this suit on behalf of Levis, but he had no idea why Mr. Semmes told him to do so. Mr. Klein testified that Mr. Semmes told him he had authority to request that all of the suits be filed. However, Mr. Klein also testified that no one ever asked him to represent Mrs. Semmes and denied "ever have[ing] an attorney/client relationship with Mrs. Semmes." On re-cross examination, however, Mr. Klein admitted that he filed the intervention on behalf of Mrs. Semmes, and referred to her as his client in correspondence with GSI's counsel.
On cross-examination, Mr. Semmes specifically denied that he had authorized Mr. Klein to file suit on behalf of Levis.
Mr. Klein was unable to provide evidence from his correspondence with the attorneys for Levis and for GSI that he advised any of them that he had filed the suit at Mr. Semmes' request. Mr. Klein identified his own letter of September 25, 2006 to Krystena Harper of Gieger Laborde Laperouse, GSI's counsel. In that letter, Mr. Klein wrote:
As you know from our recent conversations, due to miscommunication between me and the plaintiff in the referenced matter [Robert Levis Chevrolet, LLC v. Granite State Ins., USDC, Civil Action No. 06-3838], I inadvertently filed the lawsuit without the plaintiff's authority to do so. The plaintiff wishes this lawsuit dismissed. Accordingly, I have enclosed a Rule 41(a)(1)(ii) Stipulation of Dismissal. Please execute it and return it to me; I will then file it with the Court.
Mr. Klein admitted on cross-examination that he did not ask for copies of titles or any other documents evidencing the ownership of any of the properties prior to filing the lawsuits. It was not until June of 2008 that he sought those documents from Mr. Semmes.
Mr. Semmes testified that he learned of the lawsuit two or three months after it was filed, approximately in late Summer or early Fall of 2006, when he received what he described as an angry call from a representative of Mr. Levis stating that the Semmeses had no right to have filed suit on his behalf, and that the suit filed by Mr. Klein had interfered with Mr. Levis' suit then pending against the insurer. Mr. Semmes testified that he asked Mr. Klein about this issue, and that Mr. Klein told him he "would fix it." Mr. Klein never sent him any documents or letters detailing the status of his discussions with GSI or how the St. Tammany litigation would be concluded. On cross-examination, Mr. Semmes admitted that under cover letter dated June 21, 2006, Mr. Klein had sent him a copy, inter alia, of the petition. Mr. Semmes testified that although Mrs. Semmes' name did not appear on the petition, it was his understanding that Mr. Klein was representing her interest. Mr. Semmes admitted that he did not address the St. Tammany lawsuit during other contacts he had with Mr. Klein over the following year.
Mr. Semmes also testified to a claim he had referred to Mr. Klein for damages to property on Military Road in Slidell. The matter was not proceeding quickly, because Mr. Klein was "bogged down with other things". Ultimately, Mr. Semmes asked Mr. Klein to transfer the matter, together with his family's other hurricane damage claims, to Robert Stassi. Mr. Semmes called Mr. Stassi in the Fall of 2007 and asked him to evaluate the status of the Chevrolet dealership property claim as well. Mr. Klein agreed to the transfer of the claims to Mr. Stassi, and ultimately received a fee from the settlement of the claims. Mr. Semmes testified that he understood that Mr. Stassi sent the file relating to the Chevrolet dealership property back to Mr. Klein. Mr. Klein's testimony is unclear as to which files he sent to Mr. Stassi. He testified that he sent Mr. Stassi the entire files on the three lawsuits as to which there was no controversy. Mr. Klein testified that on September 20, 2007, he received an email from Mr. Stassi's secretary asking for the Mitsubishi file, and he replied that he did not believe that Mr. Semmes had an individual interest in that case. He then admitted that he was asked in September of 2007 to send Mr. Stassi the Chevrolet dealership file. Mr. Stassi confirmed in his testimony that he had asked Mr. Klein to deliver the Chevrolet dealership file to him on September 20, 2007, but did not receive the file until mid-December of that year. When asked whether he did not send the files Mr. Stassi requested until December of 2007, Mr. Klein testified he could not recall. He admitted that had he filed suit on behalf of Garret, Mrs. Semmes, and/or Mr. Semmes prior to August 29, 2007, the claims would not have been prescribed.
Mr. Klein identified a document dated December 12, 2007 directing the delivery of Mr. Klein's "Katrina claim file" to Mr. Stassi. Mr. Stassi testified that he wrote to Mr. Trainer on December 14, 2007, asking if he was able to claim any additional amounts for Levis and the Levis interests under the GSI policy that might allow his clients to intervene in the litigation. He received no response from Mr. Trainer. Mr. Stassi testified that there were many problems with the claim, including irreversible actions that had been taken when the file was being handled by Mr. Klein and the prescription issue. Upon having determined that his clients would receive no cooperation from the other parties in the pending litigation insofar as being allowed to intervene, and considering the problems that arose from Mr. Klein's handling of the claim, Mr. Stassi was unwilling to undertake the file. Mr. Stassi testified that he spoke to Mr. Klein about the file, and expressed his concerns and his conclusions. He returned the file to Mr. Klein under cover letter dated December 20, 2007. Thus, Mr. Stassi had the Chevrolet dealership file for only eight days, from December 12, 2007 to December 20, 2007.
According to Mr. Stassi's testimony, at no time did Mr. Klein advise him that he did not represent Mrs. Semmes or that there was a problem with her right to recover in the case. Mr. Stassi denied having advised Mr. Klein to file an intervention on behalf of Mrs. Semmes, and understood that Mr. Klein would seek to reinstate the suit in federal court, which Mr. Stassi believed might be Mr. Klein's best chance of saving the situation. Mr. Stassi specifically denied having encouraged or instructed Mr. Klein at a luncheon meeting to file an intervention on behalf of Mrs. Semmes in the Chevrolet dealership litigation in St. Tammany parish. This testimony is consistent with Mr. Stassi's email dated February 22, 2008 to Mr. Klein, sent two months after he returned the file to Mr. Klein, indicating that following Mr. Klein's conversation with him, he had advised the Semmeses of Mr. Klein's decision to file an intervention on their behalf.
Mr. Klein then identified the letter he received from Mr. Stassi returning the Chevrolet dealership file. Mr. Stassi wrote, "I understand that you will seek to reinstate the lawsuit in federal court on the grounds that it shouldn't have been dismissed in the first place because the pending lawsuit in state court was on an entirely different insurance policy. Good luck! If you collect anything I trust that I will be compensated for my time." Although Mr. Klein testified that in that letter Mr. Stassi wished him good luck on the intervention, the letter does not refer to an intervention.
Mr. Klein identified his letter of January 31, 2008 to GSI's counsel, Mrs. Harper, in which he advised GSI that Mr. and Mrs. Semmes were listed on the insurance policy as additional insureds, and sought copies of the settlement checks paid to Levis. Mrs. Harter advised him by letter dated February 21, 2008 that the matter had been compromised and his questions should be directed to Richard Traina, Levis' counsel. The next day he wrote to Judge Lawrence J. Green of the 22nd Judicial District Court, in whose court the Levis case had been pending, enclosing a copy of his motion to intervene in the suit and requesting that the case not be dismissed until he had an opportunity to present that motion. Mr. Klein testified that he attended a conference with Judge Green, who denied the intervention motion, reserving any rights that the Semmes' would have against Levis.
Mr. Klein testified that he filed the intervention because he was asked to by Mr. Stassi, and it was only later that he learned that the Semmeses were attempting to obtain leverage in their negotiations with Levis. Mr. Stassi testified, however, that Mr. Klein advised him during a conversation on February 21, 2008, memorialized in the email of February 22, 2008 from Mr. Stassi to Mr. Klein, copied to Mr. Semmes, that Mr. Klein planned to file an intervention on February 22, 2008.
Mr. Semmes learned that Mr. Klein had filed an intervention in the Levis suit, and testified that he and his wife received nothing from that action. He believed the reason for this was that the intervention was not filed timely. Mr. Klein, on cross-examination, admitted that from the time he withdrew from the Levis suit on November 2, 2006, until he filed the petition for intervention on February 22, 2008, he took no action to pursue his clients' insurance claims. It was his belief that the intervention would relate back to the filing of the Levis suit, and thus, would not be subject to dismissal on an exception of prescription. Furthermore, he admitted that he took no action between September 20, 2007, when he wrote to GSI's counsel, and January 31, 2008, when he sent an identical letter to the same counsel, in pursuit of the claims.
Mr. Klein further admitted that although he had testified earlier in the trial that he did not have authority to file an individual lawsuit on behalf of Mr. or Mrs. Semmes, he nonetheless filed the petition for intervention in the Levis suit. Mr. Klein claimed that he filed the intervention at Mr. Stassi's request, following a meeting with Mr. Stassi and Mr. Semmes in April of 2008. Mr. Klein was then confronted with his certificate of service, showing that he filed the intervention on February 22, 2008, over a month prior to the meeting. Mr. Klein then testified that there had been earlier meetings at the same place at which time Mr. Stassi suggested that he file the intervention.
Mr. Klein then identified his letter of March 5, 2008 to Ms. Harter. In that letter he said, "I am interested in determining how the case was settled without the inclusion of my clients as loss payees."
On cross-examination, Mr. Semmes identified an April 22, 2008 letter he received from Mr. Klein following an earlier conversation among Mr. Semmes, Mr. Klein, and Mr. Stassi. In that letter, Mr. Klein denied that he was to blame for any loss of insurance proceeds, and stated: "The reason why the court denied the intervention is because no one stepped forth to apprise the court that Gran [Mr. Semmes] and/or Billie had an interest in the claim. This could have and should have been done while Bob had the file." Mr. Semmes also identified a June 5, 2008 letter he received from Mr. Klein repeating what purported to be an earlier request for the title papers showing that Mr. and/or Mrs. Semmes owned the dealership property, as well as copies of any checks showing that they made payments to restore the property after the storm. The letter states, "I would like to know what is involved so that we can proceed to see if this matter can be amicably resolved." Mr. Semmes testified that he had given all the documents in his possession to Mr. Klein, and that Mr. Klein had been asking for documents Mr. Semmes had already given to him. On cross-examination, Mr. Klein was confronted with his letter of September 20, 2007 to Ms. Harper, indicating that he was aware of the names listed on the GSI certificate of insurance at that time, some nine months prior to his letter of June 5, 2008, requesting documentation from Mr. Semmes.
As noted, Mr. Stassi had possession of the file for review for a total of eight days, including the day he received it and the day he returned it to Mr. Klein.
Initially, Mr. Klein denied that he sent the June 5, 2008 letter in response to the Semmeses' malpractice claim; however, on cross examination, he admitted that he sent the letter in response to the demand made upon him that ultimately led to the instant malpractice action, filed two months later.
As plaintiffs in a legal malpractice suit, Mrs. Semmes and her limited liability company, Garrett Motor Cars, LLC, bear the burden of establishing that Mr. Klein did not exercise that degree of care, skill, and diligence exercised by prudent attorneys practicing in his locality. To maintain a legal malpractice claim, plaintiffs must prove that (1) there was an attorney-client relationship; (2) the attorney was negligent; and (3) that negligence caused plaintiff some loss. The plaintiffs bear the burden of proof of each of these elements, and the failure to prove even one is fatal to the claim. St. Paul Fire and Marine Ins. Co. v. GAB Robins North America, Inc., 08-0331, p. 8 (La. App. 4 Cir. 11/19/08), 999 So. 2d 72, 77. The existence of an attorney-client relationship turns largely on the client's subjective belief that it exists, which belief must be reasonable under the circumstances. St. Paul Fire and Marine Ins. Co. v. GAB Robins North America, Inc., supra, at pp. 8-9, 999 So. 2d at 77. The relationship may be found to exist upon proof of an initial communication, oral, written, or otherwise, between the attorney and client. Id. The evidence of record clearly supports the conclusion that an attorney-client relationship existed between Mr. Klein and the various Semmes interests.
The record also supports the reasonableness of the trial court's finding that the plaintiffs proved the presence of legal malpractice. The defendant was retained by the Semmes interests to pursue their claims for insurance proceeds arising out of hurricane damage sustained to their property. He was provided a certificate of insurance, and proceeded, without further inquiry or investigation, to file suit on behalf of the wrong party, in fact, on behalf of a party he did not represent. Upon discovery of the error, he did not conduct a basic inquiry into the ownership, contact his clients to assist in his investigation, or take other action toward filing a timely suit on behalf of the property owner and additional insureds under the policy. He also did not deliver the file to alternate counsel until after prescription had run on the insurance claim. Mr. Klein's correspondence in fall of 2007 and in winter of 2008 demonstrates that he was continuing his representation of Mrs. Semmes, and was aware that she was named an additional insured under the GSI policy, but took no timely action to have her included as a payee on the settlement check. Thus, plaintiffs established the initial elements of their legal malpractice claim, and a prima facie case.
Once a client has presented a prima facie case of legal malpractice, the burden of proof shifts to the defendant, who, in order to avoid liability, must overcome the client's prima facie case by proving that the client could not have succeeded on the original claim, failing which, the causation and damage issues are decided by the trier of fact. Gibson v. Herman, Herman, Katz Cotlar, LLP, 04-2204, p. 11 (La. App. 4 Cir. 2/15/06), 927 So. 2d 1178, 1184;Jenkins v. St. Paul Fire Marine Insurance Co., supra, 422 So. 2d at 1110. The trial court correctly cited the Jenkins principle in its reasons for judgment, imposing the correct burdens of proof on the plaintiffs and on the defendant, and finding that the plaintiffs had established a prima facie case of legal malpractice.
The trial court noted correctly that an attorney's failure to assert a timely insurance claim for his client can cause a loss only if the client has a legal interest in the policy. The malpractice had its effect when the plaintiffs' claims under the GSI policy prescribed, on August 29, 2007. Based on the foregoing jurisprudence, and the finding of malpractice by the trial court, it is clear that Mr. Klein had the burden of proving that Mrs. Semmes made a valid and enforceable transfer of her interest in the insurance policy proceeds, on behalf of herself and of Garrett, to Levis, that would have barred his clients' claim to the portion of the insurance proceeds covering damage to their property.
Mrs. Semmes and Garrett contend that the trial court erred in holding that they had transferred all legal interest in the insurance policy over to Levis and, therefore, had no legal interest in the policy. It is uncontroverted that on January 17, 2006, Mrs. Semmes entered into a bilateral agreement with Mr. Levis by which Levis Chevrolet LLC agreed to contract and pay for all repairs to the property, Mrs. Semmes authorized the Levis LLC to do so, and the Levis LLC "shall be entitled to all the insurance proceeds." The evidence is also uncontroverted that Levis did not make the repairs contemplated by the agreement, but abandoned the dealership in its unrestored condition. There is no evidence that Levis carried out any of the obligations it undertook pursuant to the handwritten agreement. Both Mr. and Mrs. Semmes testified that Levis took the insurance proceeds, but made no repairs to the property.
The agreement also provided that the Semmes interests would contract for all repairs to the Mitsubishi dealership's buildings and receive all the insurance proceeds.
The trial court found that this agreement constituted an assignment of the Semmes interests' rights to the insurance proceeds to the Levis LLC. This Court's decision in R. L. Lucien Tile Company v. American Security Insurance Company, 08-1190 (La. App. 4 Cir. 3/11/09), 8 So. 3d 753, is instructive on what is required to prove assignment of an insured's rights under an insurance policy. In 2004, the plaintiff purchased a home from the Cages by quitclaim deed. The Cages also executed a document entitled, "Assignment and Transfer of All Rights and Claims" in which they, on behalf of themselves, their heirs, successors, and other transferees, "transfer, assign and convey all rights, claims, chose [sic] of actions whatsoever we may have against [the mortgagee], including any of its assigns, transferees arising out of the mortgage we executed . . . to R. L. Lucien Tile Company. . . . R. L. Lucien Tile Company is entitled to act in our stead to file suit, litigate, settle or otherwise dispose of our claims or actions, as they were us [sic]." The plaintiff did not refinance or assume the Cages' mortgage, but paid the monthly note to the mortgagee. The home was insured for wind and rain damage, with the mortgagee the named insured and the Cages listed as additional insureds. Following Hurricane Katrina, the insurer received a notice of damage from Mrs. Cage naming the mortgagee as the insured and the Cages as additional insureds. The insurer paid the proceeds to the mortgagee and the Cages. Plaintiff then sued the insurer claiming benefits under the policy. Over a year later, the Cages executed a supplement to their original assignment to the plaintiff stating that "in addition to and included under" the previous assignment, are "all claims . . . against anyone . . . arising out of the ownership of or related to our previous ownership" of the home. This Court held that the original assignment's language related to a fair debt collection claim the Cages had against their mortgagee and was insufficient to assign the insurance claim. R. L. Lucien Tile Company v. american Security Insurance Company, supra, at pp. 5-6, 8 So. 3d at 757. Furthermore, the supplemental assignment was likewise held to be insufficient to result in an assignment of the insurance claim. Id.
Louisiana law does not place any specific formal requirements on assignments of rights, which may be written or oral. However, an assignment or transfer of rights must be proven as a fact. In Chappetta v. Bowman Transportation, Inc., 415 So. 2d 1019, 1021(La. App. 4th Cir. 1982), this Court held that the assignment may be made orally and may be proven like any other fact, citing Rond v. Sims, 355 So. 2d 591 (La. App. 4th Cir. 1978). Thus, the fact that the document is handwritten, does not recite that it is an assignment or transfer of rights, per se, and contains scratch-outs is of no moment. To constitute a valid assignment of rights under La. Civ. Code art. 2642, the language of the assignment must clearly reflect an intent to transfer ownership of the claim or cause of action, empowering the assignee to prosecute the claim. Plaintiffs cite Lewis v. Kubena, 00-2362, pp. 6-7 (La. App. 4 Cir. 10/24/01), 800 So. 2d 68, 72, in support of their position that the agreement does not constitute a valid assignment. However, that case involved language by which one party granted to its creditor a "lien against the proceeds" of a lawsuit. This Court noted that because the language of the agreement does not clearly reflect an intent to transfer ownership of the cause of action, there was no valid assignment under La. Civ. Code art. 2642. The words "grant a lien" do not establish any preference or priority for this credit ahead of others because a lien, unlike a mortgage, cannot be created by convention or contract between the debtor and creditor unless there is a statute declaring that such a contract shall create the lien.
Art. 2642. Assignability of rights.
All rights may be assigned, with the exception of those pertaining to obligations that are strictly personal. The assignee is subrogated to the rights of the assignor against the debtor.
Plaintiffs also cite this Court's opinion in Mahayna, Inc. v. Poydras Center, 96-2089 (La. App. 4 Cir. 4/30/97), 693 So. 2d 355. In that case, this Court held that a transferee under an assignment has the present and immediate right to pursue the underlying judgment. We noted that a transaction can be a valid assignment and transfer of ownership of a claimed right even though the assignment was conditioned on a party's not having repaid his loan prior to payment of the funds due to the transferring party, citing Dauzat v. Simmesport State Bank, 167 So. 2d 681 (La. App. 3rd Cir. 1964). We find that these holdings support the trial court's conclusion that the rights of the Semmes interests to the policy proceeds relating to the Chevrolet dealership were validly assigned to Levis in 2006. The language of the Semmes-Levis agreement finds clarity in its simplicity. The Semmes interests and Levis agreed to divide their obligations and insurance proceeds in such a way that Levis would receive the proceeds of the policy relating to the Chevrolet dealership's damage and the Semmes interests would receive the proceeds relating to the Mitsubishi dealership. The trial court was not manifestly erroneous in finding in the language a clear intent to transfer ownership of the insurance claims as set forth in the agreement.
The assignment of a right is effective against the debtor and third persons only from the time the debtor has actual knowledge, or has been given notice of the assignment. La. Civ. Code art. 2643. While there is no evidence that Levis produced the agreement to GSI in connection with its claim, we may infer GSI's knowledge of the agreement from the fact that it issued the check to Levis alone, without having included the additional insureds as payees.
The trial court found that the agreement constituted a valid and effective transfer of rights, and we do not find that factual conclusion to be manifestly erroneous or clearly wrong.
Alternatively, the plaintiffs contend that even if the Semmes-Levis agreement constitutes a valid assignment of the Semmes interests' insurance claims, GSI (and, by extension, Mr. Klein) could not have availed itself of that defense under the Louisiana collateral source rule. This principle, adopted from the common law, holds that a tortfeasor may not benefit, and an injured plaintiff's tort recovery may not be reduced, because of monies received by the plaintiff from sources independent of the tortfeasor's procuration or contribution. Louisiana Dept. of Transp. Dev. v. Kansas City Southern Railway Co., 02-2349, p. 6 (La. 5/20/03), 846 So. 2d 734, 739. While usually applied in the context of insurance recovery, Louisiana courts have given the collateral source rule wider application as noted above.
Mrs. Semmes and Garrett contend that the trial court erred in holding that they were not entitled to recover damages resulting from Mr. Klein's clear acts of legal malpractice. Mrs. Semmes testified that had Mr. Klein originally filed suit in her name as an additional insured, as noted on the insurance policy, she would have had the opportunity to press Levis to complete the repairs required under the Chevrolet dealership lease agreement. Had her name been on the $350,000.00 insurance settlement check, she could have refused to endorse the check until Levis made the required repairs. By the time of trial, Mrs. Semmes estimated she and her husband had spent over $100,000.00 in repairing hurricane damage to the dealership building, probably in 2009 and 2010. She also testified that Mr. Klein never advised her that there could be a problem arising out of the fact that the name of the owner of the property was not the same as the named insured.
It is unclear from plaintiffs' brief precisely what should be considered the "collateral source" of recovery in the instant case. Plaintiffs argue in brief:
The agreement which Mr. and Mrs. Semmes negotiated with their tenant, Robert Levis Chevrolet, was designed to allocate the burdens of making the repairs on the dealership properties and appropriately arrange for compensation those repairs [sic]. Thus, plaintiffs maintain that this agreement should be subject to Louisiana's collateral source rule.
This argument misapprehends the effect of the Semmes-Levis agreement. It is not the recovery, if any, of the insurance proceeds relating to the Mitsubishi property that precludes plaintiffs' recovery of damages from Mr. Klein. The result would have been the same had the Semmes interests taken nothing on the policy. The essential fact is that at the time the Semmes interests claim to have sustained damage caused by Mr. Klein's malpractice, neither of the plaintiffs had an interest in the insurance proceeds for the Chevrolet dealership that arguably were lost as a result of that negligence. The collateral source rule is not relevant to the issue of the existence, vel non, of damage to the plaintiffs caused by the defendant.
Mr. Klein appealed, and this Court, by Order dated May 11, 2011, granted Mr. Klein's motion voluntarily to dismiss and withdraw his appeal and to abandon his claims that the trial court rendered an advisory opinion and that the plaintiffs' appeal was frivolous.
The record amply supports the trial court's factual findings that an attorney-client relationship existed between Mr. Klein and the Semmes interests. There is also ample support for the trial court's conclusion that Mr. Klein's handling of the Chevrolet dealership file breached the standard of care of an attorney practicing in this State. Had Mr. Klein made even a cursory examination of the public record he would have determined the identity of the specific entities that owned the property and the building, and an examination of the GSI policy would have identified all insured parties. Timely investigation and correct filings would have avoided the loss of the Semmes interests' right to recover their damages sustained at the Chevrolet dealership as a result of Hurricane Katrina.
For the foregoing reasons, we affirm the judgment of the trial court.