OPINION OF THE COURT
This action, brought by a client against an accountant, requires consideration of the interplay between claims of accounting malpractice and claims of fraud by an accountant.
In 1993, plaintiff Catherine Mitschele was hired by Richard Schultz, the president of Triad Securities Corporation, to work as a broker at Triad. Richard Schultz thereafter introduced plaintiff to his. cousin, defendant Leonard Schultz, an accountant, whom plaintiff retained in 1994 along with his accounting firm, Kaplan & Schultz C.PA, to provide accounting services to
In June 1996, plaintiff was transferred by Triad to London, where she was responsible for opening, managing, and operating the office of Triad’s new foreign affiliate, Triad Securities, Ltd. In conjunction with this move to London, plaintiff consulted with Schultz regarding her tax status and tax liability as a United States citizen living and working in London. Defendant Schultz proposed a compensation arrangement through which, he erroneously asserted, plaintiff could best maximize her income and minimize her tax liability. This involved (1) the use of a foreign income exclusion, (2) the establishment of an offshore bank account in the Isle of Jersey, and (3) categorization by Triad of certain compensation to plaintiff as “1099” “outside contractor” income.
The specific acts of misconduct concern (1) preparing tax returns for plaintiff for calendar years 1997-1999 which failed to utilize the foreign income exclusion for income received in the offshore account; (2) advising plaintiff that she could deposit $70,000 to $80,000 per year in an offshore account on the Isle of Jersey without incurring any tax liability; and (3) arranging for Triad to treat plaintiff as an “outside contractor” instead of an employee, for monthly payments of $4,700 per month, and therefore withholding no taxes for that compensation. Although plaintiff said she believed it was wrong of Triad to use form 1099’s and to fail to withhold taxes on those payments, Leonard Schultz, along with Richard Schultz, and Triad’s accountants, assured her that the way they had set up her compensation was the best and only way.
The final U.S. tax return which defendant Leonard Schultz prepared for plaintiff was for the 1999 tax year, which he mailed to her on January 4, 2000.
In July 2000, plaintiff was terminated from her employment with Triad. She negotiated a settlement, receiving a gross amount of $1.3 million in'November 2000. Although plaintiff notified Leonard Schultz, he provided no tax advice concerning the settlement.
In March 2001, when plaintiff contacted defendant Schultz about preparing her tax return for 2000, he told her that he could no longer handle her accounting or tax matters in view of her termination from Triad. When plaintiff thereupon retained
On April 7, 2003, plaintiff commenced this lawsuit, including causes of action for fraud, malpractice, and breach of contract.
Defendants moved for summary judgment dismissing all plaintiff’s claims as time-barred. The IAS court granted defendants’ motion, dismissing the complaint in its entirety.
Initially, the IAS court was correct in dismissing the breach of contract claim. Plaintiffs assertion in support of the claim is that defendant accountants violated their agreement to provide professional services in accordance with good and accepted professional standards. This is nothing more than a rephrasing of the claim of malpractice in the language of breach of contract, and is specifically covered by the three-year statute of limitations of CPLR 214 (6), which applies “regardless of whether the underlying theory is based in contract or tort” (see 6645 Owners Corp. v GMO Realty Corp., 306 AD2d 97, 98 [2003]).
As to the accounting malpractice claim, absent fraud, such a claim accrues when the injury occurs, which is “when all the facts necessary to the cause of action have occurred,” regardless of whether the plaintiff has yet become aware of the error (see Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994]). A claim of negligently given incorrect accounting information or advice therefore normally accrues, under Ackerman, upon receipt of negligently prepared tax documents (id. at 543).
Here, the complained-of erroneous advice was incorporated in plaintiffs 1997-1999 tax returns, and in any event was given more than three years prior to commencement of this action.
There are circumstances where the statute of limitations is tolled, precluding dismissal on timeliness grounds although the
Here, plaintiff received the accountant’s final work product, her 1999 tax return, on January 5, 2000, but did not commence this action until April 7, 2003. Although it is asserted that there were telephone conversations between plaintiff and defendant Schultz, there are no specific allegations that further tax or accounting advice was given to plaintiff subsequent to January 5, 2000. Indeed, defendant Schultz’s March 2001 statement that he could no longer represent plaintiff is the antithesis of continuous representation, since the rationale of the continuous representation doctrine is that “a client cannot reasonably be expected to assess the quality of the professional service while it is still in progress” (Zaref, 192 AD2d at 347). Nor does his April 13, 2001 attempt to persuade plaintiff not to revise her prior tax returns establish continuous representation, particularly since by the time of that statement plaintiff had already retained a new accountant. The other April 2001 actions pointed to by plaintiff, namely asserting to plaintiffs new accountant that the old tax returns were proper, and instructing a Triad employee to create and place in plaintiffs personnel file a protective document asserting that the 1099 income was based upon consultation services provided in the U.S., are actions that defendant Schultz took to protect himself, not to represent plaintiff.
Consequently, the continuous representation doctrine does not save plaintiffs malpractice claim from dismissal on timeliness grounds.
Nor is equitable estoppel appropriate to protect the malpractice claim from the time bar. It was not the claimed fraud which induced plaintiff to refrain from filing a timely action (cf. Simcuski v Saeli, 44 NY2d 442, 448-449 [1978]).
We reject the contention that plaintiffs fraud claim must be dismissed as untimely because it is not “separate and distinct from the customary cause of action for malpractice” (see La-Brake v Enzien, 167 AD2d 709, 711 [1990]). The LaBrake case discussed the type of scenario in which an attorney commits legal malpractice by failing to properly commence a lawsuit, and then lies to the client with assurances that the matter is underway, and claims for both malpractice and fraud are interposed. The Court there reiterated that “a defendant’s concealment or failure to disclose his own malpractice without more does not give rise to a cause of action for fraud or deceit separate and distinct from the customary malpractice action” (167 AD2d at 711). It looked to the case of Simcuski v Saeli (supra), a case of physician malpractice followed by the physician’s concealment of the malpractice, with regard to the elements that must be established to prove a cause of action for fraud separate from the malpractice claim, concluding that without damages separate from those arising from the malpractice, a fraud claim is not made out (167 AD2d at 711-712).
Here, however, defendants’ alleged fraud is not simply the failure to disclose the malpractice based upon accounting errors. Rather, defendants are alleged to have perpetrated a fraud on plaintiff from the time they were retained to provide accounting services, in failing to disclose their concern with protecting the interests of another entity, namely, plaintiffs employer.
The elements of a fraudulent concealment claim — concealment of a material fact which defendant was duty-bound to dis
As this Court said in Serio v PricewaterhouseCoopers LLP (9 AD3d 330, 331 [2004]), when reinstating a fraud claim despite the prior dismissal, as time-barred, of accounting malpractice and related claims based upon the same professional relationship, fraud may still be “viable irrespective of whether some, of the alleged acts and misrepresentations were mentioned in connection with the untimely causes of action sounding in professional malpractice.”
Since plaintiffs fraud cause of action is not merely a malpractice claim with a claim for concealment of malpractice superimposed on it, the parallel nature of the damages is not determinative of whether the fraud claim is governed by the shorter statute of limitations.
We are cognizant of the Court’s concern, expressed in Simcuski v Saeli (supra), that we guard against permitting a fraud claim which is actually “subjecting [a professional] to greater exposure to liability [than the Legislature intended] in consequence of errors of professional judgment” (44 NY2d at 453). Here, however, since the fraud claim is not based simply upon errors in professional judgment, but is also “predicated on proof of the commission of an intentional tort” (id.), reinstating plaintiffs claim of fraud is not contrary to legislative intention.
Finally, we cannot determine on the record before us whether the fraud cause of action is time-barred. An action for fraud must be brought within “the greater of six years from the date the cause of action accrued or two years from the time the
Accordingly, the order of the Supreme Court, New York County (Debra A. James, J.), entered August 2, 2005, which granted defendants’ motion for summary judgment dismissing the complaint, should be modified, on the law, to deny the motion as to plaintiffs fraud cause of action, and otherwise affirmed, without costs.
Buckley, PJ., Williams, Sweeny and Malone, JJ., concur.
Order, Supreme Court, New York County, entered August 2, 2005, modified, on the law, to deny defendants’ motion for summary judgment as to plaintiff’s fraud cause of action, and otherwise affirmed, without costs.