119 So. 3d 582
La.2013Background
- Specialized filed a damages suit on Aug 26, 2010, against Assurant, American Security, January, Capital One over a forged insurance check related to January's property.
- The check was issued by American Security after a June 2009 fire; January allegedly negotiated the check to Capital One Bank without Specialized's endorsement.
- Specialized learned that January cashed the check on July 15, 2009, but later received contested details from Assurant; Capital One rejected a fraud claim on Feb 8, 2010.
- Specialized asserted a conversion claim under the Louisiana U.C.C., La. R.S. 10:3-120 and 10:3-420, arguing contra non valentem tolled prescription until discovery of the conversion.
- Capital One raised a peremptory exception of prescription, arguing a one-year prescriptive period from July 15, 2009, applying to the conversion claim.
- Lower courts split on whether the fourth category of contra non valentem (discovery rule) can suspend the one-year period; the Louisiana Supreme Court granted cert to resolve the issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can the discovery rule toll La. R.S. 10:3-420 one-year prescription? | Specialized argues discovery tolls until knowledge of the conversion. | Capital One contends discovery rule does not apply to U.C.C. conversion claims. | No; discovery tolling does not apply to La. R.S. 10:3-420. |
| Should contra non valentem suspend prescription in this conversion case given the record? | Discovery of the cashing constitutes lack of knowledge; discovery rule applies. | Uniform commercial code policy favors finality; discovery rule undermines certainty. | Discovery rule cannot suspend the one-year period. |
| Does applying discovery tolling promote uniformity under the U.C.C. or violate statutory text? | Uniformity supports applying discovery rule as some states do. | Louisiana law requires a one-year period; discovery rule would supplant statutory text. | Uniformity goals are served by a clear one-year limit; discovery tolling rejected. |
Key Cases Cited
- Daube v. Bruno, 493 So.2d 606 (La. 1986) (established delictual action approach for conversion prior to 1994 U.C.C. amendments)
- Wimberly v. Gatch, 635 So.2d 206 (La. 1994) (contra non valentem as an exceptional tolling mechanism)
- Rodrigue v. Olin Employees Credit Union, 406 F.3d 434 (7th Cir. 2005) (discovery rule considerations in U.C.C. conversion contexts (federal perspective))
- Menichini v. Grant, 995 F.2d 1224 (3d Cir. 1993) (recognizes discovery rule in tort contexts and debates uniformity)
- Pero’s Steak & Spaghetti House v. Lee, 90 S.W.3d 614 (Tenn. 2002) (no discovery rule for negotiable instrument conversion; finality)
- Kuwait Airways Corp. v. American Sec. Bank, N.A., 890 F.2d 456 (D.C. Cir. 1989) (exemplifies three-year perspectives in some jurisdictions)
- Palmer Mfg. & Supply, Inc. v. BancOhio Nat’l Bank, 93 Ohio App.3d 17, 637 N.E.2d 386 (Ohio App. 1994) (timeliness and discovery considerations in conversion-related actions)
- Branford State Bank v. Hackney Tractor Co., 455 So.2d 541 (Fla. Dist. Ct. App. 1984) (early supports for discovery rule in some conversion contexts)
- DeHart v. First Fidelity Bank, N.A./South Jersey, 67 B.R. 740 (D.N.J. 1986) (bankruptcy context; tolling consideration for discovery rule)
- Stjernholm v. Life Ins. Co. of N. Am., 782 P.2d 810 (Colo. Ct. App. 1989) (recognizes discovery rule in certain contexts)