Isaacson, Stolper & Co. v. Artisans' Sav. Bank
| Decision Date | 18 November 1974 |
| Citation | 330 A.2d 130 |
| Parties | ISAACSON, STOLPER & CO., a partnership, et al., Defendants Below, Appellants, v. ARTISAN'S SAVINGS BANK, a corporation of the State of Delaware, Plaintiff Below, Appellee. |
| Court | Supreme Court of Delaware |
Upon appeal from Superior Court. Reversed.
Wayne N. Elliott, of Prickett, Ward, Burt & Sanders, Wilmington, for defendants below, appellants.
Albert L. Simon, Wilmington, for plaintiff below, appellee.
Before DUFFY and McNEILLY, JJ., and BROWN, Vice Chancellor.
This is an appeal from a judgment of the Superior Court refusing to dismiss an action for malpractice against an accountant. The critical issue involves the Statute of Limitations. The basic facts are not in dispute.
From approximately 1952 until sometime in 1966, Isaacson, Stolper & Co., a partnership of Certified Public Accountants, (defendant) provided the accounting services, including preparation of federal income tax returns for Artisans' Savings Bank (plaintiff).
Prior to fiscal year 1962, plaintiff's accounting practice was such that there was a six-month lag in deducting interest paid to depositors. The President of plaintiff suggested to defendant that this practice was not correct, and in the Bank's Federal tax return for the fiscal year 1962 defendant changed the practice in a manner which eliminated the six-month lag. At the time the change was made defendant failed to obtain the consent for such change from the Secretary of the Treasury, or his delegate, as required by Section 446(e) of the Internal Revenue Code.
In 1966 plaintiff changed accountants, and in 1967 the Internal Revenue Service audited plaintiff's returns for several years. Following audit, defendant received its first communication of record from the IRS which was an eleven-page document dated November 14, 1967. The document put plaintiff on notice of an alleged tax deficiency which resulted from defendant's failure to obtain the consent of the Secretary of the Treasury or his delegate. Through the notice plaintiff, for the first time, became aware of defendant's failure to secure the necessary consent. This notice listed alleged tax deficiencies during a period of five years, and attached was the following statement from the District Director of the IRS:
'If you accept the findings, please sign and return the enclosed Waiver Form. If additional tax is due, you may prefer to make payment at this time. See paragraph 1 of the enclosed instructions for details.
If you do not accept the findings, we recommend that you request a conference to discuss the proposed adjustments with a member of our Conference Staff. Most cases considered at a conference are brought to a satisfactory conclusion.
If you do not desire a District conference, you may request a hearing with the Appellate Division of the Regional Commissioner's Office.
Your request for either a District conference or an Appellate hearing must be accompanied by a written protest. If a hearing is request, we will forward your protest to the Appellate Division. That Division will contact you to arrange a hearing. See paragraphs 2, 3 and 4 of the enclosed instructions for details concerning a District conference, preparation of a protest and representation.
If you do not respond within 30 days from the date of this letter, we will process your case on the basis of the adjustments shown in the examination report'.
Thereafter, plaintiff, through defendant and other tax experts, contested the deficiency, but, under date of September 30, 1968, the IRS notified plaintiff of a final determination of income tax deficiencies in the amount of $151,619.51. At that time plaintiff was given a period of ninety (90) days to file a petition with the Tax Court before action would be taken to collect the assessment. Plaintiff settled the claim in March, 1970, and this action was filed on September 28, 1971.
Defendant relies on the three-year statute of limitations, 10 Del.C. § 8106 which reads in part as follows:
'(N)o action to recover damages caused by an injury unaccompanied with force or resulting indirectly from the act of the defendant shall be brought after the expiration of 3 years from the accruing of the cause of such action'.
The sole question in this appeal is when the three-year period commenced to run, that is, when the cause of action 'accrued'.
The general law in this State is that the statute of limitations here involved begins to run at the time of the wrongful act, and, ignorance of a cause of action, absent concealment or fraud, does not stop it. The leading Delaware case on this point is Mastellone v. Argo Oil Corp., Del.Supr., 82 A.2d 379 (1950). In that case, plaintiff's stock certificates were wrongfully but non-fraudulently converted on defendant's books. Plaintiff did not know about this conversion until after three years had passed. In holding the statute applicable, the Court stated:
'Having decided that a conversion took place when stock certificate No. 571 was issued, we are next confronted by the contention that the Statute of Limitations, which under our law begins to run when the cause of action
Similarly, in Artesian Water Co. v. Lynch, Del.Ch., 283 A.2d 690 (1971), a brokerage house as agent for Artesian Water Company sent dividends to the wrong address, a fact not discovered for more than three years. In holding that the statute barred the claim the Court of Chancery stated:
'. . . Furthermore, the fact that the individual plaintiff was unaware of the mistake in question at the time it was made does not, under the circumstances of record, stand in the way of the running of the statute'.
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...limitations begins to run when a cause of action arises, even when a plaintiff is ignorant of the facts. Isaacson, Stolper & Co. v. Artisan's Savings Bank, 330 A.2d 130 (Del. Supr.1974). However, Delaware has developed an exception to this general rule where the action is "inherently unknow......
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...point because "the 'triggering' of [such a] cause of action depends on the action of a third party" (Isaacson, Stolper & Co. v. Artisan's Savings Bank, 330 A.2d 130, 133 [Dela.1974]. These two factors are generally cited in support of applying an Atkins test, and have led courts to utilize ......
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DiMedio v. Consolidated Rail Corp.
...discovery rule to actions controlled by 10 Del.C. § 8106, the general three-year statute of limitations. In Isaacson, Stolper & Co. v. Artisan's Savings Bank, 330 A.2d 130 (Del.1974), the Court relied on Layton in holding that section 8106 does not begin to run in an action for professional......
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..."inherently unknowable" exception in medical malpractice action--since altered by statute); and Isaacson, Stolper & Co. v. Artisan's Savings Bank, Del.Supr., 330 A.2d 130 (1974) (applying date-of-discovery rule in action alleging accounting malpractice). Suffice it to say, that both those c......