St. Paul Fire & Marine Ins. Co. v. Touche Ross & Co.

• Decision Date: 29 October 1993
• Docket Number: No. S-91-258,S-91-258
• Citation: 507 N.W.2d 275,244 Neb. 408
• Court: Nebraska Supreme Court
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY, Appellant, v. TOUCHE ROSS & COMPANY, Now Known As Deloitte & Touche, and Deloitte & Touche, Appellees.

Page 275

507 N.W.2d 275

244 Neb. 408

ST. PAUL FIRE & MARINE INSURANCE COMPANY, Appellant, v. TOUCHE ROSS & COMPANY, Now Known As Deloitte & Touche, and Deloitte & Touche, Appellees.

No. S-91-258.

Supreme Court of Nebraska.

Oct. 29, 1993.

Syllabus by the Court

1. Demurrer: Pleadings. In considering a demurrer to a petition, a court must assume that the pleaded facts, as distinguished from any pleaded legal conclusions, are true as alleged and must give the petition the benefit of any reasonable inference arising from the facts alleged, but cannot assume the existence of a fact not alleged, make factual findings to aid the pleading, or consider evidence which might be adduced at trial.

2. Pleadings: Words and Phrases. A narrative of the events, acts, and things done or omitted which show a legal liability of the defendant to the plaintiff constitutes a statement of facts sufficient to state a cause of action.

3. Demurrer: Pleadings. In ruling on a demurrer, the petition is to be construed liberally; if as so construed it states a cause of action, the demurrer is to be overruled.

4. Demurrer: Pleadings. A general demurrer, that is, one grounded on the failure to state a cause of action, will not lie if from the facts stated in the petition it appears that the plaintiff is entitled to any relief.

5. Limitations of Actions: Pleadings. If a petition facially shows that a cause of action is barred by the statute of limitations, the plaintiff must allege facts sufficient to avoid the bar of the statute of limitations.

6. Limitations of Actions. The point at which the statute of limitations commences to run must be determined from the facts of each case; the cause of action accrues and the statute of limitations begins to run when the aggrieved party has the right to institute and maintain suit, even though such party may be ignorant of the existence of the cause of action.

7. Accountants: Negligence: Liability. Even in the absence of fraud, there exist circumstances under which an accountant who negligently performs a service for the accountant's client may become liable to a third party.

8. Limitations of Actions: Accountants: Negligence. The 2-year period of limitations specified in Neb.Rev.Stat. § 25-222 (Reissue 1989) applies to accountants alleged to have been negligent in the preparation of audits.

9. Limitations of Actions: Pleadings. For limitations purposes, an amended pleading in the same cause of action ordinarily relates back to the original pleading.

10. Limitations of Actions: Torts. A statute of limitations begins to run as soon as the action accrues, and a cause of action in tort accrues as soon as the act or omission occurs.

11. Limitations of Actions: Pretrial Procedure. Discovery, as applied to the statute of limitations, occurs when one knows of the existence of an injury or damage and not when he or she has a legal right to seek redress in court.

12. Limitations of Actions: Pretrial Procedure. Under the discovery principle, discovery occurs when there has been discovery of facts constituting the basis of the cause of action or the existence of facts sufficient to put a person of ordinary intelligence and prudence on inquiry which, if pursued, would lead to the discovery.

13. Limitations of Actions: Fraud: Malpractice. A single professional relationship will not be separated into various parts for the purpose of applying to one part of that relationship the fraud period of limitations found in Neb.Rev.Stat. § 25-207 (Reissue 1989) and to another part the malpractice period of limitations found in Neb.Rev.Stat. § 25-208 (Reissue 1989).

14. Actions. A cause of action consists of the fact or facts which give one a right to judicial relief against another.

15. Actions. A theory of recovery is not itself a cause of action.

William H. Selde, P. Shawn McCann, and Clark J. Vanskiver, of Sodoro, Daly & Sodoro, Omaha, for appellant.

John E. North and Thomas C. McGowan, of McGrath, North, Mullin & Kratz, P.C., Omaha, and John T. Behrendt, Jamie E. Stern, and Mary P. Donlevy, of Gibson, Dunn & Crutcher, New York City, for appellees.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, FAHRNBRUCH, and LANPHIER, JJ.

CAPORALE, Justice.

I. STATEMENT OF CASE

The defendants-appellees, Touche Ross & Company, now known as Deloitte & Touche, and Deloitte & Touche, hereinafter collectively referred to as Touche, successfully demurred to the operative petition filed against it by the plaintiff-appellant, St. Paul Fire & Marine Insurance Company, on the grounds that no cause of action had been stated and, further, that any cause of action which might have existed is time-barred. Following St. Paul's refusal to amend, the district court dismissed the lawsuit. St. Paul asserts, in summary, that in so ruling, the district court erroneously found (1) that the operative petition failed to plead facts imposing upon Touche a duty to exercise due care toward St. Paul and (2) that St. Paul had not seasonably pled fraud as a basis of recovery. We affirm in part, and in part reverse and remand for further proceedings.

II. SCOPE OF REVIEW

The scope of our review is established by the rule that in considering a demurrer to a petition, a court must assume that the pleaded facts, as distinguished from any pleaded legal conclusions, are true as alleged and must give the petition the benefit of any reasonable inference arising from the facts alleged, but cannot assume the existence of a fact not alleged, make factual findings to aid the pleading, or consider evidence which might be adduced at trial. See, Gallion v. Woytassek, 244 Neb. 15, 504 N.W.2d 76 (1993); Hamilton v. City of Omaha, 243 Neb. 253, 498 N.W.2d 555 (1993); LaPan v. Myers, 241 Neb. 790, 491 N.W.2d 46 (1992).

The foregoing standard of review is implemented through a series of other rules, beginning with the prescript that a narrative of the events, acts, and things done or omitted which show a legal liability of the defendant to the plaintiff constitutes a statement of facts sufficient to state a cause of action. See, Gallion v. Woytassek, supra; Hamilton v. City of Omaha, supra; Gerken v. Hawkins Constr. Co., 243 Neb. 157, 498 N.W.2d 97 (1993).

Moreover, in ruling on a demurrer, the petition is to be construed liberally; if as so construed it states a cause of action, the demurrer is to be overruled. Matheson v. Stork, 239 Neb. 547, 477 N.W.2d 156 (1991); Widga v. Sandell, 236 Neb. 798, 464 N.W.2d 155 (1991). A general demurrer, that is, one grounded on the failure to state a cause of action, will not lie if from the facts stated in the petition it appears that the plaintiff is entitled to any relief. See Central Nebraska Public Power and Irrigation District v. Walston, 140 Neb. 190, 299 N.W. 609 (1941).

On the other hand, if a petition facially shows that a cause of action is barred by the statute of limitations, the plaintiff must allege facts sufficient to avoid the bar of the statute of limitations. Broekemeier Ford v. Clatanoff, 240 Neb. 265, 481 N.W.2d 416 (1992); LaPan v. Myers, supra. The point at which the statute of limitations commences to run must be determined from the facts of each case; the cause of action accrues and the statute of limitations begins to run when the aggrieved party has the right to institute and maintain suit, even though such party may be ignorant of the existence of the cause of action. Interholzinger v. Estate of Dent, 214 Neb. 264, 333 N.W.2d 895 (1983).

III. FACTS AS ALLEGED

The issues raised require that we review both St. Paul's original and its operative petitions.

1. ORIGINAL PETITION

St. Paul filed its original petition on July 14, 1987, and alleged therein that it would suffer damages in the future as the consequence of the audits and related documents Touche negligently produced for its client, Commonwealth Company, Inc., covering the fiscal years ending March 31, 1982, 1983, 1984, and 1985. The pleading further asserted, in summary, that Touche produced these inaccurate and misleading documents to assist its client in obtaining various types of credit and bonds from St. Paul and that St. Paul relied upon them, as was intended that it should, in extending credit and issuing bonds to Commonwealth.

Touche demurred, averring that the petition did not state facts sufficient to constitute a cause of action. The district court agreed, sustained the demurrer, and dismissed St. Paul's petition.

St. Paul appealed, and we, in St. Paul Fire & Marine Ins. Co. v. Touche Ross & Co., 234 Neb. 789, 452 N.W.2d 746 (1990), determined that because it did not allege that it had been damaged, St. Paul had indeed failed to state a cause of action, but that it should have been granted leave to amend its pleading. We therefore remanded the cause to the district court.

2. OPERATIVE PETITION

Subsequently, and after a prior unsuccessful effort at amending its original petition, St. Paul, on August 17, 1990, filed the operative petition which asserts that St. Paul suffered damages because Touche negligently examined and reported on the financial condition of Commonwealth and its subsidiaries for the fiscal year ending March 31, 1981, and the fiscal years it had specified in its original petition, i.e., 1982, 1983, 1984, and 1985; claims that the various documents Touche prepared were inaccurate and misleading such as to constitute a negligent misrepresentation that Commonwealth was solvent in a significant degree; and avers that Touche made misrepresentations about Commonwealth's financial statements and condition which Touche knew were false when made or were made recklessly without knowledge of their truth, upon which St. Paul reasonably relied.

More specifically, St. Paul avers that the documents Touche produced were represented and certified to have been prepared and examined in accordance with generally accepted auditing standards or accounting principles, when in fact they were not so prepared; that the...