AC, Inc. v. Baker

• Decision Date: 11 June 1993
• Citation: 622 So.2d 331
• Parties: AC, INC.; Robinson's Printing Company, Inc.; and D.G. Robinson Corporation v. Leon C. BAKER; S. David Johnston; and Johnston, Joyce & Wiginton. 1911862.
• Court: Alabama Supreme Court

Page 331

622 So.2d 331

AC, INC.; Robinson's Printing Company, Inc.; and D.G. Robinson Corporation v. Leon C. BAKER; S. David Johnston; and Johnston, Joyce & Wiginton.

1911862.

Supreme Court of Alabama.

June 11, 1993.

James L. North and J. Timothy Francis of James L. North & Associates and John W. Haley of Hare, Wynn, Newell & Newton, Birmingham, for appellants.

John D. Snodgrass of Balch & Bingham, Huntsville, for Leon C. Baker.

W. Stanley Rodgers and H. Harold Stephens of Lanier Ford Shaver & Payne P.C., Huntsville, for S. David Johnston and Johnston, Joyce & Wiginton.

HORNSBY, Chief Justice.

The plaintiffs, AC, Inc.; Robinson's Printing Company, Inc.; and D.G. Robinson Corporation (successor to Robinson's Printing), appeal from a summary judgment in favor of the defendants, Leon C. Baker; S. David Johnston; and Johnston, Joyce & Wiginton ("JJW"), in an action alleging breach of contract, unjust enrichment, and breach of warranty. We affirm.

Johnston is a certified public accountant and a partner in the accounting firm of JJW. The plaintiffs allege that beginning before 1981, and continuing thereafter, Johnston performed accounting services for them. Baker is an attorney, licensed to practice in New York, specializing in tax law; in addition, he is the sole owner and employee of Coleman Leasing Corporation ("Coleman"). In 1981, AC and Robinson's Printing entered agreements, separately, with Coleman to purchase computer equipment from it. Each plaintiff contends that it purchased this equipment solely in reliance on promises made by Johnston, JJW, and Baker that ownership of the equipment would provide legitimate tax deductions, through depreciation and interest expenses, to reduce each plaintiff's tax liability for the years 1981 through 1985. Under those 1981 purchase agreements, AC promised to pay Coleman $720,000, and Robinson's Printing promised to pay Coleman $100,000. Final payments under both contracts were made on December 31, 1992.

In 1986, the Internal Revenue Service ("IRS") and the Alabama Department of Revenue audited the plaintiffs' tax returns and disallowed the income tax deductions related to the computer equipment for all of the years 1981 through 1985. On September 4, 1991, the plaintiffs filed this action against Johnston, JJW, and Baker, alleging breach of contract, unjust enrichment, and breach of warranty. ¹ The defendants moved to dismiss this action. Pursuant to Rule 12(b)(6), Ala.R.Civ.P., the trial court treated the defendants' motion as a motion for a summary judgment, and entered a summary judgment as to all claims except the breach of contract claims against Johnston and JJW based on their preparation of the plaintiffs' 1985 tax returns, holding that the statute of limitations barred all other claims. ² The trial court then made its judgment final pursuant to Rule 54(b), Ala.R.Civ.P. The plaintiffs appealed.

The plaintiffs present two issues for review: (1) whether the trial court erred in treating the defendants' motion to dismiss as a motion for summary judgment when the defendants offered no evidence specifically supporting their statute of limitations defense; and (2) whether the summary judgment was improper as to the breach of contract and breach of warranty claims. Because the plaintiffs make no argument regarding the propriety of the summary judgment as to their unjust enrichment claim, we affirm the judgment as to that claim.

I. Dismissal Treated as a Summary Judgment

We hold that the trial court did not err in treating the defendants' motion to dismiss as a motion for a summary judgment. Even though the defendants presented no evidence specifically supporting their statute of limitations defense, counsel for both parties submitted affidavits, legal memoranda, letter briefs, and correspondence outside the pleadings, and the trial court considered those items in ruling on the defendants' motion to dismiss. Thus, the trial court's action was proper under Rule 12(b)(6), Ala.R.Civ.P.; see Garris v. Federal Land Bank of Jackson, 584 So.2d 791, 793 n. 1 (Ala.1991); Underwood v. Allstate Ins. Co., 590 So.2d 258 (Ala.1991).

II. Validity of the Summary Judgment

"In reviewing the disposition of a motion for summary judgment, we utilize the same standard as the trial court in determining whether the evidence before [it] made out a genuine issue of material fact" and whether the movant was "entitled to a judgment as a matter of law." Bussey v. John Deere Co., 531 So.2d 860, 862 (Ala.1988) (citing Chiniche v. Smith, 374 So.2d 872 (Ala.1979)); Rule 56(c), Ala.R.Civ.P. When the movant has carried the burden of making a prima facie showing, by admissible evidence, that there is no genuine issue of material fact and that the movant is entitled to a judgment as a matter of law, the party opposing the summary judgment motion has the burden of presenting substantial evidence creating a genuine issue of material fact. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797-98 (Ala.1989); Ala.Code 1975, § 12-21-12. "Substantial evidence" is "evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989); Ogle v. Long, 551 So.2d 914, 915 (Ala.1989).

Our review is further subject to the caveat that this Court must review the record in a light most favorable to the nonmovant, resolving all reasonable doubts against the movant. Hanners v. Balfour Guthrie, Inc., 564 So.2d 412, 413 (Ala.1990); Wilson v. Brown, 496 So.2d 756, 758 (Ala.1986); Harrell v. Reynolds Metals Co., 495 So.2d 1381, 1383 (Ala.1986).

The plaintiffs' breach of contract claims and breach of warranty claims are based on various oral and written contracts between the plaintiffs and the defendants. We will discuss these contracts in connection with each of the plaintiffs' claims. The statute of limitations for a claim based on a contract is six years. Ala.Code 1975, § 6-2-34(9). This six-year period begins to run when the contract is breached. Stephens v. Creel, 429 So.2d 278, 280 (Ala.1983); Lipscomb v. Tucker, 294 Ala. 246, 258, 314 So.2d 840, 850 (1975).

A. Breach of Contract

1. Johnston and JJW

This Court has held that when an accountant enters into an express agreement to perform his duties in accordance with generally accepted accounting principles and fails to meet this standard, the other party to the contract may sue alleging breach of contract. Blumberg v. Touche Ross & Co., 514 So.2d 922, 925 (Ala.1987). For purposes of this appeal, we accept the plaintiffs' uncontroverted allegations that for the tax years 1981 through 1985, AC and Robinson's Printing had express agreements with Johnston and JJW that the latter would prepare and review the plaintiffs' income tax returns. We also accept, for the purpose of reviewing the summary judgment, the plaintiffs' allegations that Johnston and JJW breached those agreements by recognizing deductions related to computer equipment that were not legitimate. In determining the propriety of the trial court's holding that the six-year statute of limitations barred the plaintiffs' breach of contract claims, except those claims based on the 1985 tax returns, we find ourselves faced with an issue of first impression in this State: whether the nature of the plaintiffs' agreements, as either entire contracts or separate contracts, impacts on the running of the statute of limitations.

"If there is a single assent to a whole transaction involving several things or acts, there is only one contract; if there are separate assents to several things, there is more than one contract.

"In the determination whether a particular transaction results in one entire contract or in several separate contracts, the intention of the parties is to be ascertained from the whole instrument viewed in connection with the conditions when the contract was made. ... [A]n important factor in the determination of whether an instrument represents a single entire contract or several separate contracts is whether the consideration is stated to be given for each part as a separate unit or whether there is a single consideration covering various parts."

17A Am.Jur.2d Contracts § 390 (1991); see Kirkland v. Oates, 25 Ala. 465, 467 (1854); Blythe v. Embry, 36 Ala.App. 596, 597, 61 So.2d 142, 143 (1952).

If the agreements in this case constituted several, separate annual agreements under which Johnston and JJW prepared and reviewed the plaintiffs' tax returns from 1981 to 1985, then a breach of contract action accrued on each contract, individually, for purposes of the six-year limitations period, when performance under each contract was complete. Cannell v. Bulicek, 8 Ohio App.3d 331, 457 N.E.2d 891, 896 (1983); Intermedics, Inc. v. Grady, 683 S.W.2d 842 (Tex.App.1984). Under this interpretation of the parties' contractual relationships, the trial court's judgment would be affirmed, because the statute of limitations would bar all of the plaintiffs' breach of contract claims except the claims based on the 1985 tax returns.

However, each plaintiff contends that the accounting services performed by Johnston and JJW from 1981 to 1986 and related to deductions taken on computer equipment should be treated as services rendered under an entire contract, spanning continuously from 1981 to 1986. Further, we infer from each plaintiff's argument that each is contending that if its relationship with Johnston and JJW constituted an entire contract, then the six-year limitations periods for its breach of contract action would not begin to run until April 15, 1986, when the last returns claiming deductions were filed. See Estate of Cass, 753 S.W.2d 632 (Mo.App.1988) (if the services contracted for are properly characterized as single, entire, and continuous in nature, a contract cause of action accrues on the last date upon which...