London Towne Condo. Homeowner's Ass'n v. London Towne Co. - 2006-401 ( La. 10/17/2006), 939 So. 2d 1227

Rule:

Under the clear wording of La. Civ. Code Ann. art. 2041, prescription on a revocatory action begins to run from (1) the time the obligee learned or should have learned of the act of the obligor that the obligee seeks to annul, or (2) the time the obligee learned or should have learned of the result of the failure to act of the obligor that the obligee seeks to annul. However, in all cases, a revocatory action is perempted three years from the date of the act or the result of the failure to act. The date the obligee learned or should have learned of the act or the result of the failure to act is determined by considering all the relevant facts and circumstances of the particular case. Where the obligee is seeking to annul an act of the obligor, the act of recordation in the public records does not, standing alone, provide constructive knowledge of the act.

Facts:

In the underlying matter, the obligee association filed suit against the condominiums to collect association dues and for defects in the condominiums. After the suit was filed, the condominiums purportedly sold the property to the obligor corporation. The association alleged that shortly after obtaining its judgment against the condominiums, the association learned of the transfer of the property. The association filed a petition for declaratory judgment, challenging the transfer under both the revocatory action and simulation articles of the Louisiana Civil Code and seeking to have the transfer adjudged either an absolute or relative nullity. Obligor corporation filed peremptory exceptions of no cause of action and no right of action, which were denied. The court of appeals reversed the judgment of the trial court, holding that the obligor corporation met its burden of proof to show that the obligee association’s revocatory action had prescribed, since over a year has passed from the date on which the association received constructive notice of the sale. 

Issue:

Did the corporation carry its burden of proof to show that the association’s revocatory action had prescribed? 

Answer:

No.

Conclusion:

The supreme court granted the writ application to resolve a split among the circuits as to the correct interpretation of La. Civ. Code Ann. art. 2041, which provided the prescriptive and peremptive periods for bringing a revocatory action. Article 2041 clearly provided for constructive notice to trigger the running of prescription. The supreme court held that, where an obligee sought to annul an act of the obligor, the relevant date for prescriptive purposes was the date the obligee knew or should have known of the act. In this case, the relevant date was one year from the time the association learned, or should have learned, of the act. The date of recordation of the act did not, standing alone, commence the running of prescription. The corporation failed to carry its burden of proof. The supreme court reversed the trial court’s judgment.