Streib v. Veigel

• Decision Date: 18 June 1985
• Docket Number: No. 15487,15487
• Citation: 706 P.2d 63,109 Idaho 174
• Court: Idaho Supreme Court
• Parties: , 54 USLW 2025 Glenn R. STREIB and Patricia M. Streib, Plaintiffs-Appellants, v. Carleton G. VEIGEL, Carleton G. Veigel dba Veigel & Associates, Carleton G. Veigel dba Veigel & Bussman, Carl G. Veigel dba Veigel, Bussman & Wilkerson, and Does I Through V, Fictitiously Named, Defendants-Respondents.

Page 63

706 P.2d 63

109 Idaho 174, 54 USLW 2025

Glenn R. STREIB and Patricia M. Streib, Plaintiffs-Appellants, v. Carleton G. VEIGEL, Carleton G. Veigel dba Veigel & Associates, Carleton G. Veigel dba Veigel & Bussman, Carl G. Veigel dba Veigel, Bussman & Wilkerson, and Does I Through V, Fictitiously Named, Defendants-Respondents.

No. 15487.

Supreme Court of Idaho.

June 18, 1985.

Allen B. Ellis, Boise, for plaintiffs-appellants.

Brian K. Julian, of Quane, Smith, Howard & Hull, Boise, for defendants-respondents.

SHEPARD, Justice.

This is an appeal by plaintiffs from a summary judgment in favor of defendants in an action for malpractice by defendants, professional accountants who had prepared plaintiffs' income tax returns. The trial court held that the cause of action accrued at the time defendants prepared the income tax forms, that plaintiffs had not initiated the action within the applicable two-year statute of limitations, and that therefore the action was barred. We reverse.

The truth of the alleged facts, of course, remains for ascertainment at trial. However, at the point of summary judgment, those facts are construed most strongly in favor of plaintiffs. Plaintiffs contend that, in preparing plaintiffs' tax returns for the years 1976 through 1980, defendants negligently identified certain liabilities as being tax deductible when, in fact, such liabilities were not deductible for tax purposes. It is asserted that defendants negligently delayed advising the plaintiffs of the fact that, by accepted tax principles, the deductions would be disallowed, and that plaintiffs remained ignorant of the defects in their return until approximately July 1982. At that time, plaintiffs discharged defendant Veigel and retained the services of another accountant. Plaintiffs contend that, as a result of defendants' negligence, the Internal Revenue Service disallowed the deductions and assessed additional liability in the form of interest and penalties of more than $150,000. Plaintiffs also incurred additional damages in the form of costs for accountants and attorneys.

Plaintiffs filed the instant action on April 25, 1983. At oral argument, it was represented that the specific date upon which the Internal Revenue Service assessed interest and penalties does not appear in the record, the trial judge having considered it irrelevant. Defendants do not assert that the cause of action is untimely if measured from the time of assessment of interest and penalties. Rather, defendants rely on their contention that plaintiffs' cause of action accrued at the time defendants prepared and filed the income tax returns.

Upon motion for summary judgment, the trial court stated:

"The injury occurred when the inadequate tax returns were filed. At that time, the plaintiffs incurred a legal obligation to the United States. Damage occurred at the time of filing since the plaintiffs were obligated to pay the full taxes due and were liable for interest and penalties and for taxes due and owing. The damage, while not final, existed and was easily ascertainable.... Both injury and damage occurred at the time of filing."

The trial court granted the motion for summary judgment and certified that judgment as final and appealable. See I.R.C.P. 54(b).

The specific issue posed in this case is, at what point in time does a cause of action accrue for professional accounting malpractice, such that the statute of limitations begins to run under the provisions of I.C. § 5-219(4). We specifically note that the statute is not restricted to professional malpractice, but appears to govern all actions for personal injuries. Thus, the provisions purporting to govern the accrual of causes of action for personal injuries outside the area of professional malpractice under this statute are more sweeping than has previously been noted by this Court. Here, the problem posed is professional malpractice in the form of negligent preparation of income tax returns, which alleged malpractice occurred more than two years prior to the time when the plaintiffs sustained damages of penalties and interest assessed by the Internal Revenue Service. In other cases in the general area of personal injury, it is not difficult to postulate situations wherein the act of the defendant will precede by more than two years the occurrence of damages to the plaintiff: the sale of a tainted but frozen piece of meat which is then stored by the purchaser for more than two years before it is prepared and eaten with resultant injuries; or a vintner's sale of a case of wine containing one poisoned bottle, which the customer more than two years later decants and consumes, sustaining tragic injuries as a consequence.

The majority of the decisions of this Court involving statute of limitations defenses have concerned medical malpractice. In 1964, in construing the statute of limitations then effective for malpractice cases, this Court adopted the "discovery rule," to the effect that a cause of action for medical malpractice did not accrue until the patient learned, or in the exercise of reasonable care and diligence should have learned, of the damages resulting from the doctor's negligence. See Billings v. Sisters of Mercy of Idaho, 86 Idaho 485, 498, 389 P.2d 224, 232 (1964). Billings treated only the problem of foreign objects left in the patient's body, but that rule was extended to cover misdiagnosis cases, in Renner v. Edwards, 93 Idaho 836, 475 P.2d 530 (1970). Apparently in response to Renner, the legislature, in 1971, amended I.C. § 5-219(4) to provide that the discovery rule would not apply to malpractice cases, but at the same time incorporated therein two expressly-defined exceptions for foreign objects left in a patient's body and for fraudulent concealment of negligence. The statute presently limits the time for filing suit for professional malpractice to two years, as follows:

"5-219. Actions against officers, for penalties, on bonds, and for professional malpractice or for personal injuries.--Within two (2) years:

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"4. An action to recover damages for professional malpractice, or for an injury to the person, or for the death of one caused by the wrongful act or neglect of another, including any such action arising from breach of an implied warranty or implied covenant; provided, however, when the action is for damages arising out of the placement and inadvertent, accidental or unintentional leaving of any foreign object in the body of any person by reason of the professional malpractice of any hospital, physician or other person or institution practicing any of the healing arts or when the fact of damage has, for the purpose of escaping responsibility therefor, been fraudulently and knowingly concealed from the injured party by an alleged wrongdoer standing at the time of the wrongful act, neglect or breach in a professional or commercial relationship with the injured party, the same shall be deemed to accrue when the injured party knows or in the exercise of reasonable care should have been put on inquiry regarding the condition or matter complained of; but in all other actions, whether arising from professional malpractice or otherwise, the cause of action shall be deemed to have accrued as of the time of the occurrence, act or omission complained of, and the limitation period shall not be extended by reason of any continuing consequences or damages resulting therefrom or any continuing professional or commercial relationship between the injured party and the alleged wrongdoer, and, provided further, that an action within the foregoing foreign object or fraudulent concealment exceptions must be commenced within one (1) year following the date of accrual as aforesaid or two (2) years following the occurrence, act or omission complained of, whichever is later. The term 'professional malpractice' as used herein refers to wrongful acts or omissions in the performance of professional services by any person, firm, association, entity or corporation licensed to perform such services under the law of the state of Idaho." (Emphasis supplied.)

In the area of accounting malpractice, there are not many decisions dealing with the problem of the statute of limitations and the time of accrual of causes of actions. Even fewer in number are cases dealing with the negligent preparation of income tax returns and resultant Internal Revenue Service assessments following the expiration of statutes of limitations.

In Moonie v. Lynch, 256 Cal.App.2d 361, 64 Cal.Rptr. 55 (1967), the court, as here, had for its consideration the negligent preparation of income tax returns, with an Internal Revenue Service assessment having been imposed beyond the time of the ordinarily applicable statute of limitations. The court held, "[I]n a malpractice action against an accountant the statute of limitations does not run until the negligent act is discovered, or with reasonable diligence could have been discovered." 64 Cal.Rptr. at 58.

In Isaacson, Stolper & Co. v. Artisan's Savings Bank, 330 A.2d 130 (Del.1974), the court considered an action for accounting malpractice in the preparation of income tax returns and an assessment by the Internal Revenue Service at a time later than the expiration of the statute of limitations. The court held, 330 A.2d at 132, "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." Nevertheless, the Delaware court, citing Moonie v. Lynch, supra, and its "discovery rule," stated, 330 A.2d at 133-134, "We agree in principle with the California Courts but not necessarily with a broad application of the rule to all malpractice cases. Application of the 'time of discovery' rule is limited, and each case must stand or fall on its own facts, and those facts will determine whether it is an exception to the [Delawa...