Richard v. Staehle

• Decision Date: 03 September 1980
• Citation: Richard v. Staehle, 70 Ohio App.2d 93, 434 N.E.2d 1379 (Ohio App. 1980)
• Parties: , 24 O.O.3d 121 RICHARD et al., Appellees, v. STAEHLE, d.b.a. Snedden & Company, Appellant.
• Court: Ohio Court of Appeals

Page 93

70 Ohio App.2d 93

434 N.E.2d 1379, 24 O.O.3d 121

RICHARD et al., Appellees, v. STAEHLE, d.b.a. Snedden & Company, Appellant.

Court of Appeals of Ohio, Ninth District, Summit County.

Sept. 3, 1980.

Syllabus by the Court

1. Actions against accountants for negligence in the performance of their duties are not governed by the one-year statute of limitations set forth in R.C. 2305.11(A); instead, such actions are governed by the general tort statute of limitations contained in R.C. 2305.09, which is four years.

2. A professional, such as an accountant, is not a guarantor of infallibility, but only of reasonable competence judged by the standards of the profession in similar localities.

Buckingham, Doolittle & Burroughs Co., L.P.A., and John N. Childs, Akron, for appellees.

Paul A. Borowski, Akron, for appellant.

BELL, Presiding Judge.

In 1979, the appellees brought a malpractice action against the appellant, who is their former accountant and a licensed attorney. They received a judgment in the Court of Common Pleas of Summit County for $14,888 which the appellant now challenges. For the reasons set forth below, we affirm.

The appellees, Henry S. Richard, Jr., and his wife Judith, went into the gasoline service station business in 1970. At that time, they retained a public accountant, James Snedden, d.b.a. Snedden & Company, to handle their financial affairs and business records. The Richards desired to pay their employees primarily through commissions, since they felt that this would provide a greater incentive than a straight salary. Accordingly, Mr. Snedden set up such a system for them.

Mr. Richard worked in the station as a mechanic and supervised the other employees, while Mrs. Richard was in charge of bookkeeping and other paper work. Once a week a Snedden & Company employee would come to the station and pick up the payroll records, invoices, etc., and take them back to the Snedden office. There, Mr. Snedden or his employees would compute the amount of pay due each of the Richards' employees, deduct the proper taxes, write checks to pay these and other obligations, and, in general, take care of all of the financial aspects of the Richards' business.

The appellees first met the appellant, Richard Staehle, sometime in 1974, when he was introduced to them as an attorney who had become associated with Snedden & Company. In fact, Mr. Snedden had retired and Mr. Staehle had bought the Snedden & Company business, although the Richards did not learn of this until later. During that year (1974), Mr. Staehle arranged for the incorporation of the Richards' business as Hank Richard Exxon, Inc., and also set up a pension plan for them (there was a cause of action involving the pension plan in the trial court which resulted in a judgment for the appellant, but that is not before us on this appeal).

Sometime toward the end of 1975, the appellees became aware that other service station operators in the area were being investigated by the Wage and Hour Division of the United States Department of Labor for minimum wage violations. Concerned, lest they should have the same problems, Mr. Richard approached the appellant on the matter, stating that he wanted to "be legal" on the minimum wage. The Richards still desired to pay their employees on a commission basis, if possible.

Mr. Staehle then recommended some changes in the payroll system to the Richards, which they adopted. Hourly employees were formerly paid a salary plus commission, but this was changed to a "guarantee" plus commission. Actual hours worked by each employee were now recorded, whereas previously they had not been.

On December 12 and 16 of 1975, appellant sent letters to the Richards and other clients, giving examples of how to comply with the overtime requirements of the Fair Labor Standards Act, Section 201 et seq., Title 29, U.S.Code (FLSA, commonly known as the minimum wage law). One portion of those letters said, in effect, that commissions paid to employees can be used to offset any deficiencies in overtime pay under the FLSA. Shortly thereafter, Mrs. Richard had occasion to discuss this matter personally with appellant, who reiterated that commissions could be used to make up overtime deficiencies. The payroll was computed accordingly.

In the following years, the Richards' business prospered, so that by the end of 1977, they were operating three service stations. However, in December of that year, they learned that they were being investigated by the Wage and Hour Division of the United States Department of Labor, for pay violations at all three stations.

The Wage and Hour Division audit uncovered a large deficiency for the years of 1976 and 1977 in the pay of the Richards' employees who were receiving a guarantee plus commission. This shortage consisted mostly of unpaid overtime, with a small amount representing minimum wage violations.

It was at this time that the appellees first learned of Section 7(i) of the FLSA, Section 207(i), Title 29, U.S.Code. This section exempts employers who pay commissions from the normal overtime pay requirements of the Act, if their employees receive a base salary exceeding one and one-half times the minimum wage rate for all hours worked. Had the Richards complied with this section, they would have avoided the deficiency.

The audit and subsequent negotiations continued through early April of 1978. The preliminary calculations of the Wage and Hour Division investigators showed a deficiency of $17,238.85. This was later reduced to $16,820.45, and an administrative settlement for that amount was reached in April of 1978. Under the terms of the agreement, no fines or penalties were assessed; the appellees simply had to pay their employees the back wages. A plan was arranged whereby the Richards were permitted to make installment payments for a year rather than having to pay in one lump sum. Even so, there was evidence that they were forced to close one of their stations to meet this obligation.

The appellees terminated the appellant's services at two of their stations shortly after the settlement was reached but continued to use him at the third station for a few more months until it was closed in August of 1978. Their business relationship ended at that time.

The instant action in malpractice was brought in March of 1979 to recover, as damages, the amount of the deficiency which they had to pay. Plaintiffs prayed for $14,888.88, instead of the full amount of the assessment, because some former employees had moved and could not be located; and, thus, some money had not actually been paid out. The trial court found that the appellant had been negligent in his advice to the Richards on how to properly pay overtime wages, and also in not advising them as to the provisions of Section 7(i) of the FLSA. Accordingly, the court rendered judgment for the Richards in the amount of $14,888 and costs, and Mr. Staehle now appeals.

Assignment of Error No. 1

"The trial court erred in granting judgment on plaintiffs' first cause of action which was barred by the statute of limitations resulting in a verdict which is contrary to law."

It is hornbook law that the statute of limitations begins to run when the cause of action accrues. However, when this maxim is applied to actual facts it is often difficult to determine exactly when that point in time might be. The problem is complicated further by the fact that the appellant is both an accountant and an attorney and was acting in a dual capacity, since he was offering an interpretation of the minimum wage law.

In the present case, there are four events which might be considered to mark the time when the cause of action accrued:

(1) The time the advice was given (December 1975);

(2) The time when the Richards first learned that they would be liable for a deficiency (January 1978);

(3) The time when the administrative settlement was reached (April 1978); or,

(4) The time when the professional relationship between the parties ended (August 1978).

The statute of limitations for malpractice, R.C. 2305.11(A), is one year. This statute applies to attorneys. Richardson v. Doe (1964), 176 Ohio St. 370, 199 N.E.2d 878. The Ohio Supreme Court has rejected the "discovery rule," which would allow a cause of action for malpractice to accrue at the time the injury is discovered, in favor of the "termination rule." Accordingly, the court has held that "(a) cause of action for malpractice against an attorney accrues, at the latest, when the attorney-client relationship finally terminates." Keaton Co. v. Kolby (1971), 27 Ohio St.2d 234, 271 N.E.2d 772 syllabus. Although the phrase "at the latest" seems to imply that the cause of action might accrue earlier, the Supreme Court has apparently rejected that argument. In Ishler v. Miller (1978), 56 Ohio St.2d 447, 450, 384 N.E.2d 296, it was held that that phrase means only that the cause of action cannot accrue any later than the termination of the professional relationship.

Since the relationship between the parties here ended in August of 1978 and since the case at bar was brought in March of 1979, we hold that this action was timely commenced against the appellant in his capacity as an attorney.

Appellant is also an accountant and argues that "malpractice" by professionals such as accountants is governed by the one-year statute of limitations in R.C. 2305.11(A). However, our Supreme Court has interpreted that statute very restrictively, refusing to extend it beyond the common law professions of law and medicine, or professions specifically named therein. Therefore, actions against accountants are not within the ambit of R.C. 2305.11(A). Hocking Conservancy District v. Dodson-Lindblom Associates (1980), 62 Ohio St.2d 195, 404 N.E.2d 164.

Instead, such actions are governed by the general tort statute of limitations, R.C. 2305.09, which contains a limit of four years. A cause of action for negligence accrues when...