Iacurci v. Sax

• Decision Date: 30 September 2014
• Docket Number: No. 19119.,19119.
• Citation: 313 Conn. 786,99 A.3d 1145
• Court: Connecticut Supreme Court
• Parties: Arthur IACURCI v. Larry SAX et al.

313 Conn. 786

99 A.3d 1145

Arthur IACURCI

v.Larry SAX et al.

No. 19119.

Supreme Court of Connecticut.

Argued March 18, 2014.

Decided Sept. 30, 2014.

Benjamin Blue Hume, for the appellant (plaintiff).

Kerry R. Callahan, with whom, on the brief, was David R. Makarewicz, Hartford, for the appellees (defendants).

ROGERS, C.J., and PALMER, ZARELLA, EVELEIGH, McDONALD and ROBINSON, Js.

Opinion

ROBINSON, J.

The principal issue in this certified appeal is whether, under the specific circumstances of this case, a certified public accountant performing tax return preparation services had a fiduciary relationship with his client. The plaintiff, Arthur Iacurci, appeals, upon our grant of his petition for certification,¹ from the judgment of the Appellate Court affirming the trial court's grant of the motion for summary judgment filed by the defendants, Larry Sax, and Cohen, Burger, Schwartz & Sax, LLC, on the ground that the plaintiff's accounting malpractice action was time barred. See Iacurci v. Sax, 139 Conn.App. 386, 411, 57 A.3d 736 (2012). On appeal, the plaintiff claims that the Appellate Court improperly concluded that there was no genuine issue of material fact with respect to the tolling of the three year statute of limitations for torts, General Statutes § 52–577,² via the fraudulent concealment statute, General Statutes § 52–595.³ The plaintiff contends specifically, in connection with a claim of first impression regarding shifting the burden of proving fraudulent concealment in cases involving fiduciaries,⁴ that the Appellate Court improperly: (1) determined that the question of whether a fiduciary duty exists presents a question of law, rather than deferring to the trial court's factual finding that a fiduciary relationship existed between the parties; and (2) concluded that there was no fiduciary relationship on the facts of this case. We disagree and, accordingly, affirm the judgment of the Appellate Court.

The record reveals the following facts and procedural history.⁵ From 1989 to 2006, Sax, who is a certified public accountant, prepared federal and state income tax returns for the plaintiff on behalf of the accounting firm presently known as Cohen, Burger, Schwartz & Sax, LLC.⁶ Client engagement letters exchanged by the parties specified that the defendants would prepare the tax returns using information the plaintiff furnished, and also provide income tax advice to him. The engagement letters stated that, in the absence of instructions from the plaintiff, the defendants would use their professional judgment to resolve tax questions in his favor “whenever possible.” The engagement letters cautioned, however, that the plaintiff bore “the final responsibility for the income tax returns,” and instructed him to review the returns carefully before signing them.

From 1989 through 2003, the defendants filed tax returns for the plaintiff that reported his real estate investment income as capital gains using schedule D. From 2004 through 2006, however, the defendants filed tax returns for the plaintiff that reported his real estate investment income as ordinary income using schedule C. In January, 2007, the plaintiff hired Robert Walsh, a financial planner, to prepare his tax returns. Walsh also reviewed some of the plaintiff's previously filed tax returns. Walsh believed the defendants erred in reporting the plaintiff's real estate investment income using schedule C, rather than schedule D, and brought the change to the plaintiff's attention because Walsh thought it had caused a tax overpayment. It was at this point, in late January, 2007, that the plaintiff first discovered that the defendants had changed the way his real estate investment income was reported.

On November 10, 2009, the plaintiff commenced this action against the defendants. He alleged that, in February, 2007, he sent amended tax returns to the Internal Revenue Service (IRS) that sought reclassification of his real estate investment income under schedule D for the filings made from 2004 through 2006. The plaintiff further alleged that, following an audit, the IRS accepted the proposed reclassification and began reimbursing his overpayments. The plaintiff claimed that, as a result of the defendants' professional malpractice and negligence, he sustained damages arising from audit expenses and missed investment opportunities while the IRS possessed his overpayment funds. The plaintiff claimed these damages were caused by the defendants' arbitrary change to the way in which he reported his real estate investment income, as well as their failure to discuss the ramifications of this change with him.

In answering the complaint, the defendants raised the special defense that the plaintiff's claims are time barred by the applicable three year statute of limitations, § 52–577. The defendants subsequently moved for summary judgment, asserting that the action was untimely under § 52–577 because it was commenced on November 10, 2009, a date more than three years after the last act on which the plaintiff's claims were based—namely, the defendants' completion and filing of his tax returns on April 17, 2006. The plaintiff objected to the motion for summary judgment, arguing that a genuine issue of material fact existed as to whether the defendants' alleged fraudulent concealment tolled the statute of limitations in accordance with § 52–595.⁷ On March 23, 2011, the trial court granted the defendants' motion for summary judgment on the basis that the plaintiff's action was time barred.

In concluding that the action was time barred, the trial court reasoned that the defendants had presented unrefuted evidence that the last act on which the plaintiff's claims were based occurred on April 17, 2006, more than three years prior to the commencement of the action on November 10, 2009. The trial court then concluded that, because the defendants made out a prima facie case for summary judgment, the burden shifted to the plaintiff to establish a genuine issue of material fact with regard to whether the fraudulent concealment statute tolled the statute of limitations. The trial court then cited Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, 281 Conn. 84, 105, 912 A.2d 1019 (2007), in which this court concluded that, in order to establish fraudulent concealment, a plaintiff must show that a defendant: “(1) had actual awareness, rather than imputed knowledge, of the facts necessary to establish the [plaintiff's] cause of action; (2) intentionally concealed these facts from the [plaintiff]; and (3) concealed the facts for the purpose of obtaining delay on the [plaintiff's] part in filing a complaint on their cause of action.” The trial court then cited to Falls Church Group, Ltd., for the proposition that nondisclosure is sufficient to satisfy the second element of fraudulent concealment “when the defendant has a fiduciary duty to disclose material facts.”⁸ (Internal quotation marks omitted.) Id., at 107, 912 A.2d 1019.

Applying Falls Church Group, Ltd., in this context, the trial court reasoned that the plaintiff presented evidence to satisfy the second element of fraudulent concealment via fiduciary nondisclosure. It observed that the plaintiff submitted an affidavit in which he attested to “[relying] on the defendants as tax experts with their superior knowledge and skill” and “trust [ing] the defendants to prepare his taxes for him for seventeen years....” The trial court also observed that Walsh signed an affidavit averring that the defendants owed the plaintiff a fiduciary duty and that, in his opinion, the “change in the plaintiff's tax status was a material fact that should have been disclosed.” Accordingly, the trial court determined that the plaintiff “submitted sufficient evidence to establish that the defendants had a fiduciary relationship with the plaintiff and [that] their failure to disclose his changed status on the tax returns was a breach of their duty to disclose material facts to [him].” Because, however, the plaintiff did not present any evidence with regard to the first or third elements of fraudulent concealment—namely, the defendants' actual awareness of the facts necessary to establish the plaintiff's cause of action and the defendants' withholding of such facts for purposes of delaying the plaintiff's filing of a complaint—the trial court held that the plaintiff had failed to demonstrate the existence of a genuine issue of material fact concerning the potential application of § 52–595. The trial court, therefore, reasoned that the plaintiff's claims were time barred and granted the defendants' motion for summary judgment.

The plaintiff appealed from the judgment of the trial court to the Appellate Court, claiming that, following its determination that the defendants owed him a fiduciary duty, the trial court improperly failed to shift the burden of proof to make the defendants responsible for demonstrating that one or more of the fraudulent concealment elements could not be satisfied.⁹

Iacurci v. Sax, supra, 139 Conn.App. at 394–95, 57 A.3d 736. The Appellate Court reasoned that this burden shifting claim was inextricably intertwined with the threshold question whether the plaintiff had presented evidence to the trial court that could support a determination that the parties had a fiduciary relationship. Id., at 396–97, 57 A.3d 736. The Appellate Court concluded that the plaintiff did not meet that burden because of, inter alia, an absence of evidence in the record that the relationship between the plaintiff and the defendants was one characterized by a unique degree of trust and confidence.¹⁰ Id., at 405, 57 A.3d 736. Accordingly, the Appellate Court affirmed the judgment of the trial court. Id., at 411, 57 A.3d 736.

Judge Lavine dissented, concluding that the trial court improperly granted the defendants' motion for summary judgment. Id., at 423, 57 A.3d 736. In his view, whether a fiduciary relationship existed between the parties was a question of...