Elliott v. Parsons
| Citation | 918 P.2d 592,128 Idaho 723 |
| Decision Date | 17 June 1996 |
| Docket Number | No. 21825,21825 |
| Parties | Edward G. ELLIOTT and Mary L. Elliott, husband and wife, Plaintiffs-Appellants, v. William A. PARSONS and Parsons, Smith, Stone & Fletcher, Attorneys At Law, an Idaho general partnership, Defendants-Respondents. |
| Court | Idaho Supreme Court |
Charles J. Nicholas, Boise, for appellants.
Eberle, Berlin, Kading, Turnbow & McKlveen, Chtd., Boise, for respondents. Richard B. Kading, Jr. argued.
This is a legal malpractice case. The primary issue presented is when the clients sustained "some damage," which commenced the running of the two-year statute of limitations contained in I.C. § 5-219(4) (1990). We conclude that the statute of limitations bars the case because the clients sustained "some damage" seven years before bringing this action when they retained new counsel to resist Internal Revenue Service (I.R.S.) claims stemming from their former lawyer's allegedly negligent structuring and drafting of a transaction for the sale of their business.
Edward and Mary Elliott owned several business entities, including a wholly-owned corporation which operated a farm equipment dealership. In October 1982, the Elliotts consulted with their attorney, William Parsons, regarding a proposed sale and spin-off of various elements of their corporation and dealership. According to the Elliotts, Parsons was supposed to structure the transactions so the Elliotts would qualify for I.R.C. § 453(h) installment sales treatment, deferring their tax liability on the sales until they actually received the payments on the installment contracts. Parsons drafted the documents, and the transactions were completed.
The Elliotts filed their 1982 federal tax return based on the assumption that the transactions qualified for installment sales treatment. After an audit, I.R.S. concluded that the transactions did not qualify for installment sales treatment and that the tax liability for the sales could not be deferred. Accordingly, I.R.S. issued the Elliotts a "30-day letter" on February 14, 1986, claiming the Elliotts owed an additional $276,805 in taxes and $41,521 in interest for 1982. The Elliotts immediately retained a tax lawyer and pursued the administrative appeal process for tax disputes.
The I.R.S. administrative process did not resolve the matter, and I.R.S. issued a "90-day letter," or notice of deficiency. In response, the Elliotts instituted proceedings in the U.S. Tax Court. On the eve of the tax court trial, the Elliotts reached a settlement with I.R.S. in the summer of 1992. Based on that settlement, on November 2, 1992, I.R.S. issued an assessment against the Elliotts for $127,289 in unpaid taxes and $215,855 in interest.
On March 26, 1993, the Elliotts sued Parsons and his law firm, alleging that Parsons's negligent structuring and drafting of the transactions resulted in the Elliotts' failure to qualify for installment sales treatment. Parsons moved for summary judgment, asking The trial court concluded that the Elliotts suffered "some damage" when they received the 30-day letter from the I.R.S. in February 1986, seven years before they filed their complaint, and dismissed the Elliotts' claims. The Elliotts appealed.
the trial court to rule that the two-year statute of limitations for professional malpractice contained in I.C. § 5-219(4) barred the Elliotts' claims.
THE ELLIOTTS SUFFERED "SOME DAMAGE" WHEN THEY RETAINED NEW TAX COUNSEL TO RESIST THE I.R.S. CLAIMS.
The Elliotts assert that they did not sustain any damage until I.R.S. issued its enforceable assessment for unpaid taxes in November 1992. We disagree.
The two-year statute of limitations for professional malpractice in I.C. § 5-219(4) does not begin running until the party claiming malpractice suffers "some damage" as a consequence of the alleged malpractice. See, e.g., Chicoine v. Bignall, 122 Idaho 482, 835 P.2d 1293 (1992); Bonz v. Sudweeks, 119 Idaho 539, 808 P.2d 876 (1991). In accordance with the legislature's rejection of a discovery rule, the statute begins to run when there is "some damage," not when the party claiming malpractice discovers the damage. See Bonner v. Roman Catholic Diocese of Boise, 96.4 ISCR 128 (1996).
This Court first applied the "some damage" principle in a professional malpractice case in Streib v. Veigel, 109 Idaho 174, 706 P.2d 63 (1985). In Streib, which involved an accountant charged with malpractice in preparing a tax return, the Court concluded that "the Internal Revenue Service's assessment of penalties and...
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Stanley L. and Carolyn M. Watkins Trust v. Lacosta
...final effect. Instead, the cases look for some damage caused by an activity adverse to the damaged party. See, e.g., Elliott v. Parsons (Idaho 1996), 918 P.2d 592 (damages occurred not when faulty legal documents drafted and implemented for sales transactions, but rather four years later wh......
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...of control of property as in this case, hence no damage at the time the returns were erroneously prepared. In Elliott v. Parsons, 128 Idaho 723, 918 P.2d 592 (1996), an attorney negligently structured and drafted a transaction for the sale of the Elliott's business which resulted in the fai......
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Parsons Packing, Inc. v. Masingill, 29926.
...in the onion bins, there was no quantifiable damage other than the greater risk associated with the transaction. In Elliott v. Parsons, 128 Idaho 723, 918 P.2d 592 (1996), an attorney negligently structured and drafted a transaction for the sale of the Elliott's business which resulted in t......
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... ... limitations governing legal malpractice claims, which is ... Idaho Code § 5-219(4). Elliott v. Parsons , 918 ... P.2d 592, 594 (Idaho 1966) (“In accordance with the ... legislature's rejection of a discovery rule, the statute ... ...