Opinion ID: 1662286
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Heading Rank: 2

Heading: Prescription and the Cause of Action

Text: The Civil Code establishes the general rule that all personal actions are prescribed by ten years, unless the specific action is governed by some other term of prescription. C.C. 3544. Only two other prescriptive periods might have application to this case: the prescription of three years, C.C. 3538, and the prescription of five years, C.C. 3540. Before determining the applicable period of prescription, however, another issue must be considered. In various pleadings, the City of Pineville has consistently maintained that the obligation underlying the agreement is unenforceable, and that no cause of action exists for the collection of the debt. Reliance is placed upon two statutes involving the State Bond and Tax Board. One of these, R.S. 47:1803, states in part: Hereafter, no ... municipality, ... shall have authority to borrow money, incur debt, or to issue bonds, or other evidences of debt, or to levy taxes, or to pledge uncollected taxes or revenues for the payment thereof, where [it is] authorized by the constitution or laws of the state so to do, without the consent and approval of the board. Failure to comply with this provision is a misdemeanor offense; in addition, R.S. 47:1806 provides in part: Any contract, debt, obligation, bond, or other evidence of indebtedness whatsoever, incurred or issued in violation of this Part, and without the consent and approval of the board, shall be null and void, and no court of this state shall have jurisdiction to enforce the payment thereof, or of any suit or other proceeding affecting or involving the same. The city contends that no approval or consent was obtained from the board prior to the execution of its agreement with the department. An affidavit supporting this contention appears in the record, signed by an associate director of the State Bond Commission (which became the successor to the State Bond and Tax Board pursuant to R.S. 39:1408). The affidavit states that, after a thorough search of the commission's records, no evidence can be found indicating that the city had obtained approval to incur the debt. The department itself made a written admission that it did not attempt to obtain such approval on the city's behalf, and disclaimed knowledge of whether such approval had in fact been obtained. The failure of either court below to address the issue of the invalidity of the agreement between the city and the department was error. The nature of a cause of action must be determined before it can be decided which prescriptive term is applicable. In the present case, there is no doubt that the department alleges that the city is obligated to it for the repayment of the sums it had advanced. The classification of the source of that obligation is essential: if, as the city has alleged, the agreement is an absolute nullity, it is self-evident that no cause of action would lie for the enforcement of the written obligation. Under the terms of R.S. 47:1806, such obligations, when incurred without approval of the state agency, are void ab initio. Despite the city's well pleaded allegations to the contrary, both courts below simply assumed that the contract was valid, and proceeded to determine which period of prescription applied to the action. The assumption was not warranted. The city's motion for summary judgment was premised on the invalidity of the written agreement under R.S. 47:1806. The city alleged that it did not obtain the necessary approval from the State Bond and Tax Board. The department did not deny this allegation. The motion for summary judgment was also accompanied by a supporting affidavit in the record, which clearly states that no record can be found indicating that the city obtained the requisite approval. Summary judgment is proper where there is no genuine issue of material fact, and where judgment may be entered as a matter of law. C.C.P. 966; Cates v. Beauregard Electric Coop., 328 So.2d 367 (La.1976). Since the department failed to dispute the city's allegation that no approval of the agreement had been obtained under the terms of R.S. 47:1803, it appears that there is no genuine issue on this score. The city's factual allegation is supported by the accompanying affidavit. And, as a matter of law, R.S. 47:1806 dictates that the agreement cannot be enforced. It is a nullity, confected in contravention of a prohibitory law. C.C. 12. The city's motion for summary judgment therefore should have been granted: the written obligation is unenforceable. Since the department is without a cause of action to enforce the written contract, it follows that the written contract is irrelevant for the purposes of determining the applicable period of prescription. The cause of action cannot be characterized as seeking enforcement of a written obligation, which was the notion upon which the Court of Appeal rested its opinion. That opinion must be vacated. [5] The determination that the department cannot enforce its agreement with the city does not mean that the department is without a remedy. This court has held that, when a city incurs an obligation in violation of a prohibitory law, the city's obligees may nevertheless recover the sums owed them under the theory of unjust enrichment established in C.C. 1965. Coleman v. Bossier City, 305 So.2d 444 (La.1974). See also West Baton Rouge School Board v. T. R. Ray, Inc., 367 So.2d 332 (La.1979). In the Coleman case, one of the statutes which rendered the city's contract a nullity was the same one which is implicated here, R.S. 47:1806. It should be noted that the department's second petition was not filed until after the Coleman decision was rendered, and the petition itself recognized that the claim could be characterized in more than one way. In fact, the petition made an alternative prayer for recovery even in the event that the contractual obligation was held to be null; the issue of unjust enrichment was also raised in brief. The department's action plausibly can be founded upon the theory of unjust enrichment [6] or some other form of quasi-contract. Actions on quasi-contracts are governed by the general ten year prescriptive term of C.C. 3544. See, e. g., Minyard v. Curtis Products, Inc., 251 La. 624, 205 So.2d 422 (1967) (unjust enrichment); Gaude v. Gaude, 28 La.Ann. 181 (1876) (negotiorum gestio); Smith v. Phillips, 175 La. 198, 143 So. 47 (1932) (payment of a thing not due). Given this characterization of the cause of action, the department's suit was timely. The posture in which this case has been presented is similar to the situation in Lagarde v. Dabon, 155 La. 25, 98 So. 744 (1923). The plaintiff in that action alleged that she and the defendants' decedent had made an agreement to form a partnership, with each of them to share equally in the property which the partnership acquired. Her suit to recover half of the partnership assets was successfully defended by way of an exception of no cause of action, based on the fact that the partnership agreement had not been reduced to writing. C.C. 2834. While this court recognized that an unwritten partnership agreement was invalid and unenforceable, it also observed that the plaintiff had made an alternative demand, for the recovery of all sums that she had invested in the enterprise. Such a claim, it was determined, stated a cause of action in quasi-contract, for the recovery of a payment not due. The ten year prescriptive term was held to apply to such an action, and the case was remanded to the trial court to determine whether a partnership agreement had in fact been made. We make the same disposition here. The department's action is for the recovery of sums in advance to the city. Although the agreement binding the city to fulfill this obligation is unenforceable, the formal source of the city's obligation may nevertheless be based upon a quasi-contract. The department's petition sets forth a cause of action on that basis, and this suit was filed within ten years from the time the cause of action arose. For reasons different from those of the Court of Appeal (which we find incorrect), the judgment of the Court of Appeal is affirmed, and the case is remanded to the district court for further proceedings consistent with this opinion. The costs of this proceeding are taxed to the defendant. DENNIS, J., dissents with reasons. WATSON and MARCUS, JJ., dissent.