Beane v. Dana S. Beane & Co., P.C.

• Decision Date: 22 September 2010
• Docket Number: No. 2009–431.,2009–431.
• Parties: Alan F. BEANE v. DANA S. BEANE & CO., P.C. and another.
• Court: New Hampshire Supreme Court

160 N.H. 708

7 A.3d 1284

Alan F. BEANE

v.DANA S. BEANE & CO., P.C. and another.

No. 2009–431.

Supreme Court of New Hampshire.

Argued: March 31, 2010.

Opinion Issued: Sept. 22, 2010.

William S. Gannon, PLLC, of Manchester (William S. Gannon on the brief and orally), for the plaintiff.

Nelson, Kinder, Mosseau & Saturley, P.C., of Manchester (E. Tupper Kinder

and another on the brief, and Kenneth E. Rubinstein orally), for the defendants.

CONBOY, J.

The plaintiff, Alan F. Beane, appeals the decision of the Superior Court (McGuire, J.) dismissing his lawsuit alleging accounting malpractice as barred by the statute of limitations. We affirm.

Accepting the facts as alleged in the plaintiff's writ, the trial court found as follows. The defendants, D. Scott Beane (Scott Beane), the plaintiff's brother, and Dana S. Beane & Co., P.C. (Beane Co.), the company created by Alan and Scott Beane's father and currently run by Scott Beane, prepared and filed all of the plaintiff's federal tax returns for the years 1985 through 2002. Between 2001 and 2004, the Internal Revenue Service (IRS) conducted an audit of the plaintiff's tax returns for years 1998 and 1999. Due to medical issues, as well as his confidence in the defendants, the plaintiff did not participate in the IRS examination. Following the examination, the IRS increased the plaintiff's tax liability in late 2002 and again when it issued its Final Income Tax Examination Changes report on December 21, 2004. The defendants represented the plaintiff in an administrative appeal of the IRS's action. The administrative appeal failed, and the IRS issued notice of a $3,080,430 deficiency. Although the deficiency notice itself is dated January 5, 2005, the trial court accepted the plaintiffs representation that the actual date of the notice was April 5, 2005.

The plaintiff then retained two law firms: Palmer & Dodge, to obtain advice regarding the tax deficiency; and Proskauer Rose, to challenge the deficiency finding in the United States Tax Court. At some point after October 19, 2006, the defendants terminated their relationship with the plaintiff and refused to cooperate with him or his tax counsel. During the plaintiffs tax court trial on September 21, 2008, the IRS examiner testified as to the nature of her examination of the plaintiff's 1998 and 1999 tax liability. The tax court's decision was pending when the plaintiff filed this action against the defendants on December 22, 2008. The plaintiff asserts claims for breach of fiduciary duty, professional errors and omissions, and violation of the New Hampshire Unfair Trade Practices Act. On May 19, 2009, the trial court granted the defendants' motion to dismiss based on the statute of limitations. The court ruled that the plaintiff's December 2008 writ was time-barred because he knew or should have known of his cause of action against the defendants no later than April 5, 2005, the date of the IRS notice of deficiency.

The plaintiff asserts that the trial court's decision should be reversed because the court: (1) failed to conduct an evidentiary hearing; (2) failed to balance the equities as required by Shillady v. Elliot Community Hospital, 114 N.H. 321, 320 A.2d 637 (1974) ; (3) erred in concluding that the limitations period began to run no later than the date of the IRS deficiency notice; (4) erred in refusing to extend the limitations period based upon the defendants' failure to disclose their alleged breach of fiduciary duties to the plaintiff; (5) erred in refusing to extend the limitations period based upon the continuing representation doctrine; and (6) erred in ruling that the statute of limitations also barred the plaintiff's alleged "offset recoupment" against the defendants' claims in the plaintiff's bankruptcy case in Florida.

In reviewing an order granting a motion to dismiss, "we assume the truth of the facts as alleged in the plaintiff's pleadings and construe all reasonable inferences in the light most favorable to the plaintiff."

Perez v. Pike Inds., 153 N.H. 158, 159, 889 A.2d 27. "[W]e will uphold the granting of the motion to dismiss if the facts pled do not constitute a basis for legal relief." Id. at 159–60, 889 A.2d 27.

As to the plaintiff's first claim of error, we note that a trial court's evaluation of a motion to dismiss does not necessarily require an evidentiary hearing. "The standard of review in considering a motion to dismiss is whether the plaintiff's allegations are reasonably susceptible of a construction that would permit recovery." Perez, 153 N.H. at 159, 889 A.2d 27 (quotation and brackets omitted). This threshold inquiry involves testing the facts alleged in the pleadings against the applicable law. Williams v. O'Brien, 140 N.H. 595, 597–98, 669 A.2d 810 (1995). Dismissal is appropriate "[i]f the facts pled do not constitute a basis for legal relief." Hobin v. Coldwell Banker Residential Affiliates, 144 N.H. 626, 628, 744 A.2d 1134 (2000) (quotation omitted). The trial court may also consider documents attached to the plaintiff's pleadings, see Chasan v. Village District of Eastman, 128 N.H. 807, 813, 523 A.2d 16 (1986), or "documents the authenticity of which are not disputed by the parties ... official public records ... or ... documents sufficiently referred to in the complaint," Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993). The trial court "need not accept allegations in the writ that are merely conclusions of law." Konefal v. Hollis/Brookline Coop. School Dist., 143 N.H. 256, 258, 723 A.2d 30 (1998) (quotation omitted). Here, the trial court held a hearing on the motion to dismiss, accepted the truth of the plaintiff's allegations, and ruled based upon the plaintiff's pleadings. Because the issues before the trial court were limited to legal analysis of the facts asserted by the plaintiff, an evidentiary hearing was not required.

The plaintiff's remaining five arguments center on the application of the statute of limitations and its tolling provisions. "Statutes of limitation ... place a limit on the time in which a plaintiff may bring suit after a cause of action accrues." Big League Entm't v. Brox Indus., 149 N.H. 480, 483, 821 A.2d 1054 (2003) (citation omitted). Although a cause of action arises as soon as all of the necessary elements are present, Conrad v. Hazen, 140 N.H. 249, 252, 665 A.2d 372 (1995), it does not accrue "until the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, both the fact of an injury and the cause thereof." Id. at 251, 665 A.2d 372 (quotation and brackets omitted).

The plaintiff argues that the trial court erred in concluding that the limitations period began to run no later than the date of the IRS notice of deficiency. He claims that he did not discover the defendants' negligence until September 23, 2008, when he heard the IRS examiner testify at the tax court trial. He contends that the trial court erred in failing to apply Shillady, which states that "the discovery rule and the fraudulent concealment doctrine require that the interests of the opposing parties be identified, evaluated and weighed in arriving at a proper application of the statute [of limitations]." Shillady, 114 N.H. at 325, 320 A.2d 637. Shillady is inapplicable, however, because in that case we interpreted a prior version of RSA 508:4 (Supp.1973), which did not expressly set forth a discovery rule standard. Here, the trial court properly applied the current version of RSA 508:4, which provides in pertinent part:

Except as otherwise provided by law, all personal actions, except actions for slander or libel, may be brought only within 3 years of the act or omission complained of, except that when the injury and its causal relationship to the act or omission were not discovered and could not reasonably have been discovered at the time of the act or omission, the action shall be commenced within 3 years of the time the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the injury and its causal relationship to the act or omission complained of.

RSA 508:4, I (2010).

"[T]he statute of limitations constitutes an affirmative defense, and ... the defendant bears the burden of proving that it applies in a given case." Glines v. Bruk, 140 N.H. 180, 181, 664 A.2d 79 (1995) (citations omitted). "That burden, however, is met by a showing that the action was not ‘brought within 3 years of the act or omission complained of.’ " Id. (quoting RSA 508:4, I (Supp.1994)) (ellipses omitted). "Once the defendant has established that the statute of limitations would bar the action, the plaintiff has the burden of raising and proving that the discovery rule is applicable to an action otherwise barred by the statute of limitations." Id. The statutory discovery rule "is designed to provide relief in situations where the plaintiff is unaware of either his injury or that the injury was caused by a wrongful act or omission." Id. at 182, 664 A.2d 79.

The discovery rule "is a two-pronged rule requiring both prongs to be satisfied before the statute of limitations begins to run." Big League Entm't, 149 N.H. at 485, 821 A.2d 1054. "First, a plaintiff must know or reasonably should have known that it has been injured; and second, a plaintiff must know or reasonably should have known that its injury was proximately caused by conduct of the defendant." Id. "Thus, the discovery rule exception does not apply unless the plaintiff did not discover, and could not reasonably have discovered, either the alleged injury or its causal connection to the alleged negligent act." Perez, 153 N.H. at 160, 889 A.2d 27.

Although the discovery rule tolls the limitations period until a plaintiff discovers, or should reasonably have discovered, the causal connection between the harm and the defendant's negligent or wrongful act, this rule "is not intended to toll the statute of limitations until the full extent of the plaintiff's injury has manifested...