Norfolk Iron & Metal Co. v. Larry L. Behnke, P.C.

• Decision Date: 23 November 1988
• Docket Number: No. 87-127,87-127
• Citation: 432 N.W.2d 18,230 Neb. 414
• Parties: , 7 A.L.R.5th 1169 NORFOLK IRON & METAL CO., a Corporation, Successor In Interest to Nimco Steel Processors, Inc., Appellant, v. LARRY L. BEHNKE, P.C., and Larry L. Behnke, Individually, Appellees.
• Court: Nebraska Supreme Court

Page 18

432 N.W.2d 18

230 Neb. 414, 7 A.L.R.5th 1169

NORFOLK IRON & METAL CO., a Corporation, Successor In Interest to Nimco Steel Processors, Inc., Appellant, v. LARRY L. BEHNKE, P.C., and Larry L. Behnke, Individually, Appellees.

No. 87-127.

Supreme Court of Nebraska.

Nov. 23, 1988.

Syllabus by the Court

1. Limitations of Actions: Appeal and Error. Upon review of a district court's judgment on the issue of the statute of limitations, the findings and decision of that court, unless clearly wrong, will not be set aside.

2. Appeal and Error. Where a law action is tried to the court without a jury, the findings of the court have the effect of a verdict and will not be disturbed on appeal unless clearly wrong.

3. Appeal and Error. In an action at law tried without a jury, it is not the role of the Nebraska Supreme Court to resolve conflicts in or reweigh the evidence, and it will presume that the trial court resolved any controverted facts in favor of the successful party and will consider the evidence and permissible inferences therefrom most favorably to that party.

4. Limitations of Actions: Words and Phrases. Discovery, as applied to statutes of limitations, refers to the fact that one knows of the existence of an injury or damage and not that he or she has a legal right to seek redress in court.

5. Limitations of Actions: Words and Phrases. Discovery, as used in reference to a statute of limitations, means that an individual acquires knowledge of a fact which existed but which was previously unknown to the discoverer.

6. Limitations of Actions: Damages: Negligence. Nondiscovery of all damages is not the equivalent of nondiscovery of a cause of action as set out in Neb.Rev.Stat. § 25-222 (Reissue 1985) relating to the limitations of actions for professional negligence.

David A. Domina, of Domina, Gerrard & Copple, P.C., Norfolk, and J. Michael Fitzgerald, Omaha, for appellant.

William Jay Riley, of Fitzgerald & Brown, Omaha, for appellees.

Before HASTINGS, C.J., CAPORALE, and GRANT, JJ., and MORAN and BROWER, District Judges.

HASTINGS, Chief Justice.

Plaintiff has appealed from a judgment of the district court favoring the defendants, Larry L. Behnke, P.C., and Larry L. Behnke, individually, on the issue of the statute of limitations in a suit alleging professional negligence.

The plaintiff, Norfolk Iron & Metal Co., was the successor in interest to Nimco Steel Processors, Inc., having acquired the remaining 30 percent of the capital stock of Nimco by April of 1983. The Robinson family, including Richard, the president, had been and were the sole owners of Norfolk Iron. Behnke had performed certain accounting services for Nimco, including the preparation of monthly unaudited statements and regular annual audits from 1976 through June 30, 1983. It was on that latter date that Behnke last performed any services for Nimco. On July 1, 1983, Nimco was merged into Norfolk Iron.

The annual audit of the Nimco division for fiscal yearend June 30, 1984, performed by another accountant, disclosed a scrap This disclosure resulted in the filing of the present lawsuit, alleging professional negligence on the part of Behnke causing a previous overstatement of the inventory. The petition in the case was filed on May 21, 1985. It was plaintiff's theory that it could not determine when the error(s) occurred producing the 1984 discovered shortage, but it claimed that Behnke's relationship was a continuing one and the fact of negligence was not discovered or discoverable until the July 25, 1984, physical inventory. Behnke denied all negligence, but specifically alleged that Nimco's inventory changed essentially from one business day to the next; that each annual audit was a distinct occurrence; and that, therefore, plaintiff's claims as to any deficiency in audits before June 30, 1983, were barred by the applicable statute of limitations.

metal inventory shortage of approximately 27.5 million pounds (about 344 railroad carloads) valued at about $426,703. This amounted to somewhere in the neighborhood of 75 percent of its total stated inventory. The physical inventory for the 1984 annual audit was taken on July 25, 1984.

Neb.Rev.Stat. § 25-222 (Reissue 1985) provides:

Any action to recover damages based on alleged professional negligence ... shall be commenced within two years next after the alleged act or omission ... Provided, if the cause of action is not discovered and could not be reasonably discovered within such two-year period, then the action may be commenced within one year from the date of such discovery or from the date of discovery of facts which would reasonably lead to such discovery, whichever is earlier....

Trial of the matter was bifurcated, and following a bench trial on the affirmative defense of the statute of limitations, the court made the following findings:

(1) Each annual financial statement required a separate physical inventory, and each separate physical inventory was furnished by Behnke.

(2) Once a year Behnke went out to the yard, took measurements, verified the measurements with books and records, and checked with employees of Nimco to verify the same.

(3) Other than the monthly and annual statements, Behnke did not perform bookkeeping functions for Nimco, nor did Behnke set up, establish, or maintain Nimco's records.

(4) The inventory maintained by Nimco changed essentially from one business day to another.

(5) Each annual audit was a distinct occurrence.

The court then found that the 2-year limitation prescribed by § 25-222 is applicable and that all claims of Norfolk Iron based on any alleged negligence of Behnke that occurred prior to May 21, 1983, are barred by § 25-222. In addition, any cause of action relating to the purchase of stock from shareholders of Nimco in preparation for the merger is barred by § 25-222. Trial on the remaining claims and allegations of damages would be limited to those occurring on or after May 21, 1983.

Appellant's assignments of error may be stated generally as follows:

(1) The trial court erred in holding that § 25-222 bars the appellant's claims based on alleged acts of professional negligence committed more than 2 years before the date when suit was commenced, even though the acts were not discovered, and could not have been reasonably discovered, until less than 1 year before suit was filed.

(2) The trial court erred in failing to hold that the relationship of Behnke with Nimco was undiscoverable until less than 1 year before suit was commenced. (Appellant's contention in this regard is somewhat foggy.)

(3) The trial court erred in concluding that Behnke had made annual inspections of the physical inventory of Nimco, and in concluding that separate engagement letters were used for each year Behnke performed audits.

Upon review of a district court's judgment on the issue of the statute of limitations, the findings and decision of that court, unless clearly wrong, will not be

set aside. Georgetowne Ltd. Part. v. Geotechnical Servs., 230 Neb. 22, 430 N.W.2d 34 (1988); League v. Vanice, 221 Neb. 34, 374 N.W.2d 849 (1985).

TWO-YEAR STATUTE OF LIMITATION PERIOD

Norfolk Iron first contends that the trial court erred in concluding that the 2-year limitation prescribed by § 25-222 applies to this case, because the cause of action was not discovered and could not have been reasonably discovered within the 2-year period. Although Behnke argues that Norfolk Iron alleged negligence on Behnke's part only in his failure to conduct a physical inventory when performing the 1983 audit, this is not accurate. Construing paragraph 9A and E of Norfolk Iron's petition, it is quite apparent that although the alleged negligence in the year 1983 was described in greater detail, those allegations as a whole encompassed the entire period of time that Behnke provided accounting services for Nimco. Therefore, it is necessary to examine in some detail the various aspects of the trial on the issue of the statute of limitations.

Behnke was the only witness called to testify. All other evidence was presented to the trial judge in the form of exhibits, many of which were depositions. The trial judge, considering Behnke's in-court testimony as well as his deposition, the depositions of employees of Nimco, and the depositions of directors of Norfolk Iron, resolved controverted facts in favor of the appellees. The trial judge found specifically as previously stated.

Where a law action is tried to the court without a jury, the findings of the court have the effect of a verdict and will not be disturbed on appeal unless clearly wrong. Fisbeck v. Scherbarth, Inc., 229 Neb. 453, 428 N.W.2d 141 (1988). In an action at law tried without a jury, it is not the role of the Nebraska Supreme Court to resolve conflicts in or reweigh the evidence, and it will presume that the trial court resolved any controverted facts in favor of the successful party and will consider the evidence and permissible inferences therefrom most favorably to that party. Id.

The trial court's findings of fact are not clearly wrong. The following is evidence in the record that supports the trial court's findings of fact:

(1) Behnke testified at trial that each audit each year required a separate and distinct physical inventory and that he conducted a physical inventory of the scrap metal once a year. William Kralicek, Nimco's yard foreman, testified during his deposition that he remembered Behnke's coming out to look at the inventory for yearend audits, and, to the best of his recollection, Behnke was there each year he did an audit.

Additionally, during his deposition Behnke testified that during the middle of June 1983, Nimco stopped shipping to Nucor, its principal purchaser. As a consequence, Nimco had a pile of slabs that had been processed through its equipment and piled on the ground by the office. It is a fair inference that Behnke would not have known these facts unless he had...