Consolidated Management Services, Inc. v. Halligan

• Decision Date: 16 March 1988
• Docket Number: No. 75265,75265
• Citation: 186 Ga.App. 621,368 S.E.2d 148
• Parties: CONSOLIDATED MANAGEMENT SERVICES, INC., et al. v. HALLIGAN, et al.
• Court: Georgia Court of Appeals

Page 148

368 S.E.2d 148

186 Ga.App. 621

CONSOLIDATED MANAGEMENT SERVICES, INC., et al. v. HALLIGAN, et al.

No. 75265.

Court of Appeals of Georgia.

Decided March 16, 1988.

Rehearings Denied March 31, 1988.

Certiorari Granted May 4, 1988.

John M. Tatum, Savannah, for appellants.

Frank A. Lightmas, Jr., Atlanta, Joseph J. Berrigan, David R. Smith, Savannah, Robert H. Putnam, Jr., Atlanta, for appellees.

DEEN, Presiding Judge.

Plaintiffs Ray and Joan Guthrie were the sole owners of plaintiff Consolidated Management Services, Inc. The Guthries retained the defendant accounting firm to provide tax planning and to prepare returns for their individual income taxes for tax years 1977 through 1979 and the corporate return for fiscal year 1979. In April of 1984 the Internal Revenue Service notified the Guthries that an examination report showed underpayment of their individual income taxes for years 1978 and 1979 due to errors in reporting their taxable income. Ultimately, Ray Guthrie was indicted by the federal grand jury for the Middle District of Florida on two counts of fraudulent tax evasion for wilfully understating income from business on the joint individual returns filed by the Guthries for 1978 and 1979. In the meantime, plaintiffs filed this lawsuit alleging professional negligence against defendant accounting firm and its individual partners. Defendant obtained partial summary judgments on the ground some of plaintiffs' prayers for relief were barred by the applicable statute of limitation. After Ray Guthrie was tried and found guilty on both counts of the indictment, the various defendants moved for summary judgment on all remaining claims on the ground that plaintiffs were precluded from recovering from defendants by reason of Ray Guthrie's conviction for tax fraud. Summary Judgment was granted to defendants, and plaintiffs appeal.

1. Appellants first contend that the trial court erred in granting partial summary judgment on the basis of the statute of limitations for all acts prior to the four years before the filing of the complaint, because they filed their complaint within four years after they first discovered their injury and its causal connection to appellees' negligence.

Appellants are alleging negligence on the part of appellees, which purports to be a breach of duty in the accountant-client relationship. The evidence showed that appellees were employed to prepare individual tax returns for the years 1977, 1978, and 1979, and a corporate return for 1979. Appellants filed suit against appellees on March 13, 1984. The court below found that appellees were not liable for acts of negligence occurring prior to March 12, 1980, because all such claims were barred by the statute of limitations; and that they were not liable for acts of negligence occurring after June 30, 1980, the date of the dissolution of the accounting partnership.

A breach of duty of professional competence falls within the four-year statute of limitation as set forth in OCGA § 9-3-25. Riddle v. Driebe, 153 Ga.App. 276, 279, 265 S.E.2d 92 (1980). Allegations of accountant malpractice are clearly analogous to charges of attorney malpractice where issues of negligence of unskillfulness are raised.

Appellants seek to have the statute of limitations tolled in the same manner as provided under OCGA § 9-3-72, "Foreign objects left in body," which permits a patient to bring an action against a physician within one year after discovery of a foreign object which was negligently left in his body. Appellants also rely on Lumbermen's Mut. Cas. Co. v. Pattillo Constr. Co., 254 Ga. 461, 465, 330 S.E.2d 344 (1985), which applies to the "discovery rule" and holds that "a cause of action does not accrue until the injured party becomes aware, or in the exercise of reasonable diligence should have become aware, of his injury or damage." The court goes on to hold that the discovery rule is applicable to OCGA § 9-3-30 and § 9-3-33, which apply to damage to realty and injuries to the person, respectively. It does not apply to the type of injury contemplated in OCGA § 9-3-25, "breach of certain contracts; breach of implied promise." In a malpractice action for damages against an attorney, the statute of limitations runs from "the date of the breach of the duty and not from the time when the extent of the resulting injury is ascertained nor from the date of the client's discovery of the error." Peppers v. Siefferman, 166 Ga.App. 389, 304 S.E.2d 511 (1983). See also Jankowski v. Taylor, Bishop & Lee, 154 Ga.App. 752, 269 S.E.2d 871 (1980), affirmed 246 Ga. 804, 273 S.E.2d 16 (1980). This same rule applies in accountant malpractice cases.

2. After partial summary judgment was granted, the issue of the liability of appellees Halligan, Meehan, Shuman and the accounting partnership for appellee Meehan's negligence between March 12, 1980, and June 30, 1980, remained in the case as an issue for trial. Appellees again moved for summary judgment, relying exclusively upon Ray Guthrie's criminal conviction in federal court for tax fraud in the transactions which form the basis for his complaint. Appellants objected to the introduction of Guthrie's conviction record into evidence.

" 'The rule supported by the great weight of authority is to the effect that a judgment of conviction or acquittal rendered in a criminal prosecution cannot be given in evidence in a purely civil action, to establish the truth of the facts on which it was rendered.' [Cits.]." Pierce v. Pierce, 241 Ga. 96, 100, 243 S.E.2d 46 (1978). "The general rule in this state is that the criminal conviction is no bar to a subsequent civil action arising from the same occurrence and is not competent evidence in such civil action. [Cits.]" Keating v. Dept. of Natural Resources, 140 Ga.App. 796, 798, 232 S.E.2d 84 (1976), aff'd Dept. of Natural Resources v. Keating, 238 Ga. 605, 234 S.E.2d 519 (1977).

Accordingly, we find that the court below erred in admitting into evidence and considering appellant Ray Guthrie's conviction.

3. Guthrie filed an affidavit stating that he had employed appellee Meehan to prepare his and his wife's personal income tax return, that he delivered complete records regarding the return to Meehan, but Meehan failed to properly prepare the return. As a result, he has incurred considerable expense in connection with the subsequent Internal Revenue Service investigation. In response to interrogatories, Guthrie stated that Meehan failed to file IRS Form 1099 to report a corporate payment to Mrs. Guthrie for secretarial services and failed to report this amount on the couple's joint individual tax return. Appellees do not dispute that Meehan signed the return, or that it failed to include the $6,000, or that Meehan admitted his error to Guthrie's Florida counsel that he failed to prepare the personal and corporate tax returns in a timely fashion. Appellees made only general denials to these allegations.

Applying the rules of construction pertaining to the grant of summary judgment, we find that a genuine issue of fact remained which required jury resolution. Hansford v. Robinson, 255 Ga. 530, 340 S.E.2d 614 (1986).

Judgment reversed.

CARLEY, SOGNIER, BENHAM and BEASLEY, JJ., concur.

BIRDSONG, C.J., McMURRAY and BANKE, P.JJ., and POPE, J., dissent.

POPE, Judge, dissenting.

I dissent from the holding of the majority that plaintiffs' claims are not estopped by the criminal conviction of plaintiff Ray Guthrie. The rule set forth in Pierce v. Pierce, 241 Ga. 96, 100, 243 S.E.2d 46 (1978), "that a judgment of conviction or acquittal rendered in a criminal prosecution cannot be given in evidence in a purely civil action, to establish the truth of the facts on which it was rendered," clearly applies where, as in Pierce, the defendant in a negligence action seeks to introduce the dismissal or acquittal on criminal charges as evidence of lack of negligence. See, e.g., Smith v. Goodwin, 103 Ga.App. 248(3), 119 S.E.2d 35 (1961); Clough v. Greyhound Corp., 91 Ga.App. 246(1), 85 S.E.2d 476 (1954), rev'd on other grounds, 211 Ga. 574, 87 S.E.2d 387 (1955). See also Webb v. McDaniel, 218 Ga. 366, 127 S.E.2d 900 (1962) (where, in a civil action concerning the defendant's right to inherit from his deceased wife, it was found to be error to permit the defendant to introduce his acquittal on charges of murder as evidence he did not intentionally kill his wife); Palmer v. Wilkins, 163 Ga.App. 104(5), 294 S.E.2d 355 (1982) (where the trial court properly refused to admit evidence that a grand jury had investigated the facts involved in the civil action and had found no ground to indict defendant on criminal charges). The rule has also been applied where the plaintiff in a negligence action seeks to introduce defendant's conviction on criminal charges as evidence of his civil liability for the criminal acts. See, e.g., Keebler v. Willard, 91 Ga.App. 551(1), 86 S.E.2d 379 (1955).

However, the facts of this case are distinguishable from those involved in the cases cited above. Here, the defendants, in their respective motions for summary judgment, presented evidence that the plaintiff Ray Guthrie had been found criminally guilty of the very acts (or, more appropriately, omissions) of which plaintiffs accused defendants in their civil negligence action. Plaintiffs here allege, inter alia, that defendants negligently omitted income from their joint income tax return "without plaintiffs' knowledge." On the other hand, defendants have shown that Ray Guthrie was convicted on indictments accusing him of knowingly understating income from his joint income tax return. Thus, the issue of Ray Guthrie's knowledge of the omission has already been litigated and decided in the criminal case. To permit plaintiffs to recover in this action would permit them to avoid the legal consequences of Ray Guthrie's conviction. In effect, the bringing of this civil action is an impermissible attempt to...