Harvey v. Dixie Graphics, Inc.

• Decision Date: 16 May 1991
• Docket Number: No. 90-CA-1912,90-CA-1912
• Citation: 580 So.2d 518
• Court: Court of Appeal of Louisiana — District of US
• Parties: Theo H. HARVEY, Jr. v. DIXIE GRAPHICS, INC. and Touche Ross & Co. 580 So.2d 518

Page 518

580 So.2d 518

Theo H. HARVEY, Jr. v. DIXIE GRAPHICS, INC. and Touche Ross & Co.

No. 90-CA-1912.

580 So.2d 518

Court of Appeal of Louisiana, Fourth Circuit.

May 16, 1991.

Robert E. Tarcza, David B. Vitter, Feingerts & Kelly, P.L.C., New Orleans, for appellant.

H. Paul Simon, Charles C. Coffee, Simon, Peragine, Smith & Redfearn, New Orleans, for appellees.

Before SCHOTT, C.J., and LOBRANO and WARD, JJ.

LOBRANO, Judge.

The issue in this accountant malpractice case is the date prescription began to accrue. Plaintiff/appellant Theo H. Harvey, Jr. (Harvey) sued defendant/appellee Touche Ross and Company ¹ (Touche Ross) for accountant malpractice. Relying upon a Commissioner's recommendation, the Civil District Court for the Parish of Orleans granted the exception of prescription and dismissed Harvey's suit. Harvey filed this timely appeal.

FACTS:

The facts pertinent to resolving the prescription issue are as follows. ² Harvey seeks to recover the sums he paid the Internal Revenue Service in compromise of the tax deficiencies the IRS claimed were due because of the alleged faulty returns prepared by Touche Ross for Harvey Press Inc. (HPI). Harvey formerly owned all of the outstanding shares of HPI, and by agreement dated June 12, 1981, sold all of them to Dixie Graphics, Inc. (Dixie). Harvey later repurchased the shares on November 19, 1982. Three days later, November 22, 1982, Harvey sold the shares to Rebsamen Companies, Inc. (Rebsamen).

While Dixie owned HPI, Dixie engaged Touche Ross to prepare the income tax returns for itself and its subsidiaries, including HPI. Harvey alleges that because of Touche & Ross's negligence, the consolidated return substantially understated HPI's tax. He asserts that although Dixie and Touche Ross were aware of problems with the IRS as early as April, 1982, he was not notified by the IRS until July 1984. At that time, Harvey and HPI were notified that the IRS was examining the tax returns of Dixie and its present and former subsidiaries. Soon thereafter, a proposed tax liability of $157,438.00 was asserted against HPI. However, because the matter was compromised, no actual tax assessment was ever issued. Harvey made the first payment toward the tax liability in December, 1986, and ultimately paid the IRS the compromised figure of $91,542.00 in tax deficiencies. ³

Harvey filed suit against Dixie and Touche Ross on June 15, 1987. On April 10, 1990, Touche Ross filed a peremptory exception of prescription. ⁴ The exception was heard before a Commissioner who recommended that it be sustained. Harvey filed an exception to the Commissioner's report which was heard in the Civil District Court for the Parish of Orleans on July 31, 1990. By judgment dated August 8, 1990, the trial judge upheld the Commissioner's recommendation and dismissed Harvey's claim against Touche Ross with prejudice.

Harvey perfects this appeal and presents two arguments. First he asserts that, even though he was notified in July of 1984 that the IRS was proposing unfavorable adjustments to HPI's tax return, he did not actually sustain damage to begin the prescriptive period until he compromised the claim and made the first payment on December 29, 1986. Second, he argues that the doctrine of contra non valentum suspended the tolling of prescription.

For the following reasons, we reject both arguments and affirm.

As a general rule, in the absence of a guaranteed specific result, the action for accountant malpractice is one in tort, subject to the prescriptive rules of Civil Code Article 3492. Carey v. Pannell, Kerr, Foster, 559 So.2d 867 (La.App. 4th Cir.1990). That article provides: "Delictual actions are subject to a liberative prescription of one year. This prescription commences to run from the day injury or damage is sustained." Based on plaintiff's allegations, it is clear the one-year prescriptive period is applicable in this case.

We find the recent Supreme Court case of Braud v. New England Insurance Company, 576 So.2d 466 (La.1991), to be controlling. In that case, the plaintiffs sued their former attorney for alleged malpractice in obtaining default judgments in their favor. Those default judgments were attacked in a nullity action filed on April 30, 1985. However, the attorney-malpractice suit was not filed until September 12, 1986. The plaintiffs argued that prescription did not begin to run until they settled the nullity suit on August 13, 1986. They asserted that this was the date that they sustained damage. In rejecting this argument, the Supreme Court held that "[a]ny appreciable and actual harm flowing from the attorney's negligent conduct establishes a cause of action upon which the client may sue." 576 So.2d at 468 "Braud sustained appreciable and actual harm when the validity of his right or asset was attacked by a third party because of the alleged negligence of his former attorney and he was compelled to incur and pay attorney fees, legal costs and expenditures." Id.

In the instant case, Harvey was notified of the tax problems in July of 1984. In November of 1984 he sent his accountant and...