This appeal is taken from the district court's judgment dismissing appellant's claims on the basis of prescription. The primary issue is the applicable statute of limitations for claims based on negligent actions of an attorney serving as a mandatary under Louisiana law. Appellant also raises issues regarding insurance coverage. Because we AFFIRM the district court on the prescription issue, we do not reach the insurance issues.
This case stems from the "Deal of the Century" — a deal that definitely turned out to be too good to be true. Rudolph Gerdes, a Dutch citizen residing in Belgium, was the sole owner of all stock in ALCARU Investments (ALCARU), a corporation which owned the Rodeway Inn in Baton Rouge, Louisiana. Most of Gerdes' investments in the United States, including the investment in the Rodeway Inn, were found for him by his good friend and nonlicensed real estate broker, Aloysius (Al) Klijn. Maynard Cush, an attorney and friend of both Klijn and Gerdes, provided the legal work related to Gerdes' investments.
In 1982, Gerdes decided to sell his ownership in the Rodeway Inn by selling all the ALCARU stock. Gerdes was asking for $1.5 million cash, and to have the new owner assume two wrap-around mortgages. Mr. Klijn found a potential purchaser named Jack Martin. Martin offered to assume the mortgages and pay $1.358 million with a note paying 17.5% interest secured by a mortgage on an Oklahoma gravel pit. Martin told Klijn that the gravel pit was operational and made about $34,000 per month.
While Gerdes was out of the country, Cush, Klijn, and Martin put together the deal selling the ALCARU stock to Martin. Gerdes had two procurations, or powers of attorney, drafted: one authorized Cush, as Gerdes' mandatary, to sell all the ALCARU stock for $1.5 million cash and assumption of the wrap-around mortgages; the second authorized Cush, as Gerdes' mandatary, to sell the ALCARU stock for a secured note in the amount of $1.358 million and assumption
Neither Cush, Klijn, nor Gerdes became aware of the extent of the problems with the transaction until they learned that Jack Martin was arrested in Oklahoma. Martin had attempted to hire a hit man to kill Gerdes, Cush, Al Klijn, Klijn's wife Carolyn, Cush's secretary Pam Nesbitt, and Larry Butler, an attorney associated with Cush. Martin was subsequently convicted for solicitation for murder. In addition, an investigation ordered by Al Klijn revealed that the "gravel pit" which secured Martin's note was not an operating gravel pit and was essentially worthless. Gerdes eventually foreclosed on the hotel and on the gravel pit.
Gerdes alleges that during a telephone conference about ten days prior to the closing on the sale of the ALCARU stock, he instructed Cush to obtain information on Martin's creditworthiness and to inspect the gravel pit. The telephone conference took place in Cush's office, and was attended by Cush, the Klijns, and Pam Nesbitt. Neither Cush nor Klijn inspected the property. Prior to the sale, however, Martin provided Cush and Klijn with photographs of an operating gravel pit.
At trial, Gerdes' allegation was supported by his own testimony and the testimony of Pam Nesbitt. The Klijns denied that Cush was ever instructed to inspect the gravel pit. Also, by letter to his insurance company regarding the possibility of a malpractice claim being made by Gerdes, Cush represented that he provided legal services only, that he took no part in the negotiations leading up to the sale, and that he was never asked to obtain an appraisal of or to inspect the pit in Oklahoma. Exhibit P 39.
Maynard Cush died in January, 1985. On May 7, 1985, Gerdes filed suit against the Estate of Cush, Ann Fiske, the administratrix of the estate, Al and Carolyn Klijn, New England Life Insurance Company and Hartford Insurance Company. A subsequent amended complaint dismissed New England Life Insurance Company and Hartford Insurance Company and added National Union Fire Insurance Company. Gerdes brought claims alleging legal malpractice by Cush, and breaches of fiduciary duty by Cush and the Klijns. Gerdes' legal malpractice claims against Cush were dismissed
After a non-jury trial on the breach of fiduciary duty and insurance coverage claims, the district court issued an order on July 18, 1988 stating that it would dismiss Gerdes' claims, but withheld entry of final judgment until the court issued its findings of fact and conclusions of law. (Written findings of fact and conclusions of law were never issued.) Upon motion of Gerdes, the court reopened testimony in the case because Carolyn Klijn (now Carolyn Fulton) wished to change her testimony. At trial she testified that Gerdes did not instruct Cush to inspect the gravel pit; her revised testimony was that Gerdes instructed Cush, and Cush agreed to inspect the gravel pit. On July 2, 1990, after Klijn-Fulton testified, the district court orally rendered judgment in favor of all defendants finding that the basis of Gerdes' claims was legal malpractice,
At issue is whether an action against an attorney who acts pursuant to a mandate is governed by Louisiana's one year prescriptive period for attorney malpractice, the ten year prescriptive period for breach of fiduciary duty, or the one year prescriptive period for delictual actions. Gerdes contends that as part of Cush's mandate, Cush was required to check Martin's creditworthiness and inspect the "gravel pit" in Oklahoma; Gerdes also contends that Cush's failure to do so was a breach of fiduciary duty subject to a ten year prescriptive period.
Article 2985 of the Louisiana Civil Code provides:
Under Louisiana law, the relationship of mandate has become equated with the common law principal-agent relationship. Yiannopoulos, Brokerage, Mandate, and Agency in Louisiana: Civilian Tradition and Modern Practice, 19 LA.L.REV. 777, 795 (1959). A mandatary may be responsible to the principal for damages resulting from non-performance of his duty, unfaithfulness, fault or neglect.
An action for breach of fiduciary duty is a personal action with a ten year prescriptive period. La.Civ.Code art. 3499. A fiduciary relationship has been described as follows:
Plaquemines Parish Commission Council v. Delta Development Co., 502 So.2d 1034, 1040 (La.1987) (quoting Anderson v. Thacher, 76 Cal.App.2d 50, 172 P.2d 533, 543 (1946)). The duty of loyalty which results from the position of trust distinguishes the fiduciary relationship. A cause of action for breach of fiduciary duty requires proof of fraud, breach of trust, or an action outside the limits of the fiduciary's authority. Crabtree Investments, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 577 F.Supp. 1466 (M.D.La. 1984), aff'd without opinion, Crabtree Investments v. Merrill Lynch, 738 F.2d 434 (5th Cir.1984).
While a mandatary is a fiduciary, it does not necessarily follow that every action against a mandatary is subject to the ten year prescriptive period. For example, because lawyers appear in a representative capacity, a general contract between an attorney and client is often considered a mandate under Louisiana law. Board of Commissioners v. Commission on Ethics for Public Employees, 457 So.2d 802 (La.App. 1st Cir.1984); see Louque v. Dejan, 129 La. 519, 56 So. 427 (1911); Gurley v. New Orleans, 41 La.Ann. 75, 5 So. 659 (1889); Saucier v. Hayes Dairy Products, Inc., 373 So.2d 102, 106-108 (La.1978) (Tate, J., dissenting). The prescriptive period for claims of legal malpractice (i.e. negligence of the attorney/mandatary) is one year. Braud v. New England Insurance Co., 576 So.2d 466 (La.1991). Where the attorney has breached the fiduciary duty to the client by engaging in self-dealing, however, the ten year prescriptive period applies. Plaquemines Parish, 502 So.2d 1034.
Actions based on negligence of a mandatary under Article 3003 have been equated with ordinary delictual actions under Article 2315 of the Louisiana Civil Code. Batiste v. Security Insurance Group, 416 So.2d 279 (La.App. 3d Cir.1982) (negligence of an insurance broker/mandatary). In Manion v. Pollinque, 524 So.2d 25 (La.App. 3d Cir.), cert. denied, 530 So.2d 572 (La.1988), the court held that "[a]ny tort claims against [the attorney for an estate] or [the administrator of an estate] for breach of fiduciary duty would be classified as delictual actions and as such would have prescribed ... one year after the judgment of possession was signed." Id. at 32.
Whether Gerdes' claim arises from Cush's actions (and inaction) as a lawyer or from separate obligations owed pursuant to the mandate, Gerdes' claim fails.
For the foregoing reasons, the judgment of the district court is AFFIRMED.
Exhibits 8 & 9.
Record on Appeal, vol. 10 p. 104.
La.Civ.Code Art. 3002.
La.Civ.Code art. 3003.