Feldman v. Granger

• Decision Date: 16 October 1969
• Docket Number: No. 399,399
• Citation: 257 A.2d 421,255 Md. 288
• Parties: Joseph W. FELDMAN et ux. v. H. Harrell GRANGER et al., t/a Granger, Faw and Company.
• Court: Maryland Court of Appeals

Page 288

255 Md. 288

257 A.2d 421

Joseph W. FELDMAN et ux. v. H. Harrell GRANGER et al., t/a Granger, Faw and Company.

No. 399.

Court of Appeals of Maryland.

Oct. 16, 1969.

William D. Gould, Cambridge, and John C. North, II, Easton (North & North, Easton, on the brief), for appellants.

T. Hughlett Henry, Jr., Easton (Waller S. Hairston, and Henry, Henry & Adkins, Easton, on the brief), for appellees.

Before HAMMOND, C. J., and MARBURY, BARNES, FINAN and SMITH, JJ.

FINAN, Judge.

This case is before us on appeal from a decision by Judge Clark of the Circuit Court for Talbot County granting defendants' motion for summary judgment in a suit for professional malpractice against an accounting firm on the ground that the plaintiffs' cause of action was barred by the Statute of Limitations. The issue before this Court is the proper date from which the statute begins to run.

The suit below was filed on July 18, 1968, against appellees, Granger, Faw and Company, alleging negligence in the late filing of a document with the Internal Revenue Service. Appellant Mr. Feldman, was the sole shareholder of the Feldman Furniture Company, Inc. For the tax year beginning October 1, 1960, the corporation and its shareholder decided that they would attempt to elect sub-chapter S treatment as a small business corporation. In order to qualify for such treatment it is necessary that within 30 days prior to or after the beginning of a corporation's fiscal year that a Form 2553 be filed with the Internal Revenue Service. Defendants-appellees, the appellants' accountants at the time, went about preparing the Form 2553. There is no dispute but that it was mailed October 31, 1960, between 7:00 and 9:00 P.M from the post office in Easton, Maryland. It is the procedure at this post office to postmark mail received the evening of one day with the date of the following day. Thus the Form 2553 was postmarked November 1, 1960, 3:00 A.M.

On November 12, 1960, appellant Feldman was informed that the corporation's election to be taxed as a sub-chapter S corporation had been denied because the November 1 postmark was not within the statutory filing period. Appellants contend that this same day they notified an agent of appellees who assured them there was nothing to worry about. Appellees deny any such notice. In any event, appellants Mr. and Mrs. Feldman claimed the net operating loss of the corporation in the fiscal years 1961 and 1962 against their own personal income.

On January 6, 1964, the Internal Revenue Service sent appellants a statement of their income tax liability from 1958 through 1962. On January 28, 1964, the appellants filed a protest to the statement of liability. On April 20, 1964, the appellants or their agents, held a conference with the Internal Revenue Service regarding the tax liability stated in the declaration filed in these proceedings. On July 22, 1964, the Appellate Division of the Internal Revenue Service assessed a deficiency of $25,428.06 in back taxes, penalties, and interest. The appellants contested this deficiency in the Tax Court and on August 11, 1967, more than three years after the notice of deficiency, the Tax Court upheld the Commissioner and found that the notice was not filed within thirty days. ¹ A tort suit was then filed in the Circuit Court for Talbot County on July 18, 1968. From the trial court's decision granting defendants' motion for summary judgment, the appellants have taken this appeal.

The appellants would have us adopt the date of March 23, 1967, at which time the Tax Court sustained the deficiency assessment made by the Internal Revenue Service as the date when the statute of limitations began to run. They buttress their contention with the argument that it was not until this adjudication that their liability to the federal government for additional taxes had been positively established by the exhaustion of their administrative remedies. If this view prevails their suit against the appellee would have been instituted within the three year period of limitations.

The appellees, to the contrary, relying on their interpretation of the 'discovery rule', rather than pressing for the date of the occurrence of the negligent act, contend that limitations began to run on November 12, 1960, the day on which the appellants learned that the appellees had failed to file on time the election form (I.R.S. Form 2553) required by the Internal Revenue Service. The appellees, however, are quick to agree that, while they advance the argument that limitations should have commenced running on November 12, 1960, none the less, they will be satisfied should this Court adopt the view taken by the lower court, namely, that the date of July 22, 1964, the day on which the appellants were notified of the assessment of the tax deficiency made by the Appellate Division of the Internal Revenue Service, was the date on which limitations began to run. Either of these latter mentioned dates would place the appellants' cause of action beyond the three year statutory period of limitations. ²

The appellants would have us adopt the this Court had adopted the 'discovery rule' in medical malpractice cases, citing Waldman v. Rohrbaugh, 241 Md. 137, 215 A.2d 825 (1966) and Hahn v. Claybrook, 130 Md. 179, 100 A. 83, L.R.A.1917C, 1169 (1917); however, their brief was filed before the publication of our opinions in Mattingly v. Hopkins, 254 Md. 88, 253 A.2d 904 (1969) and Mumford v. Staton, Whaley & Price, Md.App., 255 A.2d 359 (1969), wherein we applied the 'discovery rule' to professional malpractice cases involving a surveyor and an attorney, respectively.

The appellants would eschew the 'discovery rule' as applied by this Court in Mumford, Mattingly, Waldman and Hahn, and urge upon us the proposition that 'no claim accrues for the purpose of commencing the running of the statute of limitations until all events have occurred which fix liability and upon which claimant would be entitled to sue.' (emphasis supplied) Stevanus v. United States, 149 F.Supp. 655, 138 Ct.Cl. 149 (1957). Actually, the appellants in so urging are contending that the statute did not start to run until they had exhausted all administrative remedies to obtain relief from the appellees' negligence.

In Mattingly, we recognized the problem frequently encountered in determining when the statute of limitations commences to run, stating:

'* * * Much has been written as to when 'limitations' should start to run. Some courts have held the cause of action accrues when the defendant commits his wrong, others when the plaintiff discovers the wrong, and still others have held that it does not accrue until the maturation of harm. Sometimes the happening of the wrong, the knowledge of it and the maturation of the harm are simultaneous. When this occurs the recognition of the accrual of the cause of action is simple, when these elements happen sequentially it can become complex. * * *.' Id. p. 92, 253 A.2d p. 907.

'* * * We see no basic distinction between the application of the 'discovery rule' in a medical malpractice case and in the instant case, which assuming that engineering is a profession, is in essence a professional malpractice situation. * * *.' Id. p. 94, 253 A.2d p. 908.

'In the case at bar, Mr. Mattingly, who is a practicing member of the Maryland Bar, certainly had strong reason to believe that he had sustained legal harm when he noted the discrepancy between the placement of the iron pipes on the ground and their location on the plats in the summer of 1959 and this was unquestionably confirmed when the appellees correctly replaced the iron pipes in May or June of 1960. We think the mistake caused by the appellees' negligence was discovered at that time or with the exercise of reasonable diligence should have been discovered. He knew that he had made conveyances of property based on the location of the iron pipes on the ground to several individuals during the years 1953 to 1959 and that the error on the ground thus compounded by the adverse conveyance he had made, not only cast a cloud on the title to his own land but those of his grantees, if not in law, then certainly in equity.

'The appellant contends that until the Houston case and that of Branson, another grantee, were decided against him, that he had not been damaged and that the statute of limitations does not start to run until the maturation of damages. This is certainly the law in some jurisdictions. Fort Myers Seafood Packers v. Steptoe & Johnson, 127 U.S. App.D.C. 93, 381 F.2d 261, 18 A.L.R.3d 974 (1967). However, we think that the case at bar clearly comes within the 'discovery rule' as established by Hahn, supra, and Waldman, supra. Both Hahn and Waldman fall short of bringing this Court within the ambit of those jurisdictions...