IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-525
Filed: 20 December 2016
Buncombe County, No. 13 CVS 4413
KAREN HEAD, Plaintiff,
v.
GOULD KILLIAN CPA GROUP, P.A., G. EDWARD TOWSON, II, CPA, Defendants.
Appeal by plaintiff from order entered 31 December 2015 by Judge William H.
Coward in Buncombe County Superior Court. Heard in the Court of Appeals 17
October 2016.
Erwin, Bishop, Capitano & Moss, PA, by J. Daniel Bishop and Matthew M.
Holtgrewe, for plaintiff-appellant.
Sharpless & Stavola, P.A., by Brenda S. McClearn, for defendants-appellees.
TYSON, Judge.
Karen Head (“Plaintiff”) appeals from the trial court’s order granting Gould
Killian CPA Group, P.A.’s and G. Edward Towson, II, CPA’s (“Towson”) (collectively
“Defendants”) motion for partial summary judgment and amended motion for partial
summary judgment We affirm in part, reverse in part, and remand for trial on
Plaintiff’s professional negligence claim.
I. Factual Background
HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
Plaintiff hired Defendants to prepare her tax returns for the 2005 tax year and
subsequently employed them to prepare her taxes for tax years 2006, 2007, 2008 and
2009 respectively. Upon Defendants’ completion of the preparation of Plaintiff’s 2005
returns, Plaintiff came to Defendants’ office, met with Towson, reviewed and signed
her returns, tendered a check in the amount of taxes she owed, and requested that
Towson mail her taxes to the Internal Revenue Service (“IRS”) and several state tax
agencies for her. Towson agreed to do so as a courtesy to Plaintiff, and deposited her
completed returns in the mail.
For each of the ensuing four tax years, 2006 through 2009, Defendants were
engaged to prepare Plaintiff’s tax returns. However, these returns were not timely
filed, as neither Defendants nor Plaintiff submitted them to or filed them with the
IRS as required by the applicable deadlines.
On 4 November 2013, Plaintiff filed a complaint and alleged causes of action
against Defendants for professional negligence and fraudulent concealment. Plaintiff
also asserted a claim for punitive damages in connection with her fraudulent
concealment claim. Plaintiff’s complaint asserted Defendants had willfully and
wantonly deceived Plaintiff by concealing from her the fact that they had failed to
ensure her tax returns for tax years 2006 through 2009 were timely filed. As a result,
she incurred tax penalties and interest.
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Opinion of the Court
Defendants filed a motion to dismiss and motion for attorneys’ fees pursuant
to Rules 9(b) and 12(b)(6) of the North Carolina Rules of Civil Procedure. On 14 July
2014, the trial court entered an order denying this motion.
On 23 November 2015, Defendants filed a motion for partial summary
judgment, and filed an amended motion for partial summary judgment on 9
December 2015. Defendants’ amended motion sought summary judgment on
Plaintiff’s claims for professional negligence regarding her 2006 and 2007 tax returns,
as well as her fraudulent concealment and punitive damages claims. Defendants did
not move for summary judgment on Plaintiff’s professional malpractice claims
relating to her 2008 and 2009 tax returns.
In support of their motion for partial summary judgment, Defendants
submitted the following for consideration by the trial court: (1) a brief in support of
their motion; (2) Plaintiff’s complaint; (3) a document entitled “2006 Individual
Income Tax Cover Sheet” along with an accompanying document entitled “Filing
Instructions Individual Income Tax Return Taxable Year Ended December 31, 2006”
provided to Plaintiff explaining the steps she needed to take in order to submit her
prepared tax returns to the IRS; (4) a document entitled “2007 Individual Income Tax
Cover Sheet” along with an accompanying document entitled “Filing Instructions
Individual Income Tax Return Taxable Year Ended December 31, 2007” similar in all
material respects to the 2006 cover sheet provided to Plaintiff for her 2007 prepared
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Opinion of the Court
tax returns; (5) a deposition of Plaintiff; (6) IRS documents detailing Plaintiff’s
penalties and interest incurred in connection with her returns; (7) excerpts from a
deposition of Defendants’ expert, Michael Gillis, explaining Defendants’ tax
preparation procedures; and (8) a tolling agreement executed in 2013. Defendants
additionally submitted various cases and statutes in support of their position.
Plaintiff, in response, submitted: (1) a brief in support of her position; (2) a
series of emails between Towson, Plaintiff, and her assistant; (3) various
correspondence and documents from the IRS; (4) Defendants’ responses to
interrogatories; (5) the deposition of Edward Towson affirmatively stating that
Plaintiff’s prepared tax returns and accompanying instructions had been provided to
her along with instructions on how to file them and the importance of doing so in a
timely fashion; and (6) the log of IRS Revenue Officer Rosa Shade indicating she had
never had certain discussions with Towson concerning Plaintiff’s taxes despite his
assertion to the contrary. Plaintiff additionally submitted various cases and statutes
in support of her position.
The “2006 Individual Income Tax Cover Sheet” and accompanying “Filing
Instructions Individual Income Tax Return Taxable Year Ended December 31, 2006”
document submitted to the trial court stated, in pertinent part, the following:
Sign and date the return on Page 2. Initial and date the
copy, and retain it for your records.
Mail the Form 1040 return by October 15, 2007 to:
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
Internal Revenue Service
Atlanta, GA 39901-0002
Your required federal estimated tax payments are shown
below. . . . Make each check payable to the United States
Treasury, write your social security number and “2007
Form 1040-ES” on the check.
....
Mail the Form 1040-ES payment voucher and check by the
due date indicated above to
Internal Revenue Service
P.O. Box 105225
Atlanta, GA 30348-5225
At the bottom of the cover sheet after “How Delivered:” the following was
written: “By Hand to Karen.” The corresponding 2007 cover sheet and instructions,
in turn, also similarly state: “How Delivered: Mailed to K. Head . . . Picked up on
12/12/08.”
On 31 December 2015, the trial court entered an order granting Defendants’
motions. Plaintiff filed notice of appeal on 19 January 2016.
II. Issues
Plaintiff argues the trial court erred in granting Defendants’ motion for
summary judgment and amended motion for partial summary judgment. She asserts
genuine issues of material fact exist concerning her professional negligence and
fraudulent concealment claims regarding her tax returns. We agree with Plaintiff
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
that a genuine issue of material fact exists as to her professional negligence claim,
and disagree with Plaintiff that the trial court erred in granting Defendants’ partial
summary judgment motion concerning her fraudulent concealment and punitive
damages claims.
III. Appellate Jurisdiction
Initially, we address whether this Court possesses jurisdiction over the present
appeal. It is undisputed the present appeal is interlocutory. See Mecklenburg Cnty.
v. Simply Fashion Stores, Ltd., 208 N.C. App. 664, 667, 704 S.E.2d 48, 51 (2010)
(citations omitted) (“An order is interlocutory when it does not dispose of the entire
case but instead, leaves outstanding issues for further action at the trial level.”).
Generally, there is no right of immediate appeal from an interlocutory order. Goldston
v. Am. Motors Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990).
An interlocutory order may be appealed, however, if the
order implicates a substantial right of the appellant that
would be lost if the order was not reviewed prior to the
issuance of a final judgment. It is the appealing party’s
burden to establish that a substantial right would be
jeopardized unless an immediate appeal is allowed.
Radcliffe v. Avenel Homeowners Ass’n, Inc., __ N.C. App. __, __, 789 S.E.2d 893, 901
(2016) (internal citations, quotation marks, and footnote omitted).
It is well settled that a substantial right is affected “‘where a possibility of
inconsistent verdicts exists if the case proceeds to trial.’” Heritage Operating, L.P. v.
N.C. Propane Exch., LLC, 219 N.C. App. 623, 627, 727 S.E.2d 311, 314 (2012) (quoting
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Opinion of the Court
Country Club of Johnston Cnty., Inc. v. U.S. Fidelity & Guar. Co., 135 N.C. App. 159,
167, 519 S.E.2d 540, 546 (1999), disc. review denied, 351 N.C. 352, 542 S.E.2d 207
(2000)).
To demonstrate that a second trial will affect a substantial
right, [the appellant] must show not only that one claim
has been finally determined and others remain which have
not yet been determined, but that (1) the same factual
issues would be present in both trials and (2) the possibility
of inconsistent verdicts on those issues exists.
Id. at 627-28, 727 S.E.2d at 314-15 (citation, internal quotation marks, and brackets
omitted).
“‘[S]o long as a claim has been finally determined, delaying the appeal of that
final determination will ordinarily affect a substantial right if there are overlapping
factual issues between the claim determined and any claims which have not yet been
determined.’” Carcano v. JBSS, LLC, 200 N.C. App. 162, 168, 684 S.E.2d 41, 47 (2009)
(quoting Davidson v. Knauff Ins. Agency, 93 N.C. App. 20, 26, 376 S.E.2d 488, 492,
disc. review denied, 324 N.C. 577, 381 S.E.2d 772 (1989)). “Issues are the ‘same’ if
the facts relevant to their resolution overlap in such a way as to create a risk that
separate litigation of those issues might result in inconsistent verdicts.” Hamilton v.
Mortg. Info. Servs., Inc., 212 N.C. App. 73, 79, 711 S.E.2d 185, 190 (2011) (citing
Davidson, 93 N.C. App. at 25, 376 S.E.2d at 491).
The present appeal presents overlapping factual issues concerning Plaintiff’s
business relationship with Defendants, which speak directly not only to her claims
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Opinion of the Court
ruled upon by the trial court, but also her remaining professional negligence claims
concerning her 2008 and 2009 returns. With the potential for inconsistent verdicts
based upon a common factual nexus, we hold Plaintiff’s appeal of the trial court’s
order affects a substantial right and is properly before us.
IV. Standard of Review
Entry of summary judgment is proper if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show no
genuine issue exists concerning any material fact and that any party is entitled to
judgment as a matter of law. N.C. Gen. Stat. § 1A-1, Rule 56(c). “When considering
a motion for summary judgment, the [court] must view the presented evidence in a
light most favorable to the nonmoving party.” Dalton v. Camp, 353 N.C. 647, 651, 548
S.E.2d 704, 707 (2001) (citation omitted).
The party moving for summary judgment ultimately has
the burden of establishing the lack of any triable issue of
fact.
A defendant may show entitlement to summary judgment
by (1) proving that an essential element of the plaintiff's
case is non-existent, or (2) showing through discovery that
the plaintiff cannot produce evidence to support an
essential element of his or her claim, or (3) showing that
the plaintiff cannot surmount an affirmative defense.
Summary judgment is not appropriate where matters of
credibility and determining the weight of the evidence
exist.
Once the party seeking summary judgment makes the
required showing, the burden shifts to the nonmoving
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
party to produce a forecast of evidence demonstrating
specific facts, as opposed to allegations, showing that he
can at least establish a prima facie case at trial.
We review an order allowing summary judgment de novo.
If the granting of summary judgment can be sustained on
any grounds, it should be affirmed on appeal.
Wilkins v. Safran, 185 N.C. App. 668, 672, 649 S.E.2d 658, 661 (2007) (internal
citations and quotations omitted).
“Summary judgment is a drastic measure and it should be used with caution,
especially in a negligence case in which a jury ordinarily applies the reasonable
person standard to the facts of each case.” Harrison v. City of Sanford, 177 N.C. App.
116, 121, 627 S.E.2d 672, 676 (2006) (citation omitted).
V. Statute of Repose
Plaintiff argues the trial court erred in granting summary judgment in favor
of Defendants regarding professional negligence claims relating to her 2006 and 2007
tax returns. The trial court based its determination on finding Plaintiff’s professional
negligence claim is barred by N.C. Gen. Stat. § 1-15(c), the applicable statute of
repose.
“[I]n no event shall an action be commenced more than four years from the last
act of the defendant giving rise to the cause of action[.]” N.C. Gen. Stat. § 1-15(c)
(2015).
Furthermore,
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
[u]nlike the statute of limitations, the statute of repose
serves as an unyielding and absolute barrier that prevents
a plaintiff’s right of action even before his cause of action
may accrue, which is generally recognized as the point in
time when the elements necessary for a legal wrong
coalesce.
In order to decide whether the statute of repose bars
plaintiffs’ claim we must determine when the last act of
alleged negligence took place. To determine when the last
act or omission occurred we look to factors such as the
contractual relationship between the parties, when the
contracted-for services were complete, and when the
alleged mistakes could no longer be remedied.
Carle v. Wyrick, Robbins, Yates & Ponton, LLP, 225 N.C. App. 656, 661, 738 S.E.2d
766, 770-71 (2013) (internal citations, quotation marks, and footnote omitted).
In arguing Plaintiff’s professional negligence claim is barred by the statute of
repose, Defendants assert, as undisputed fact, the final act taken by Defendants in
regards to Plaintiff’s 2006 and 2007 tax returns occurred on 12 December 2008, when
Defendants purportedly hand delivered Plaintiff her prepared 2007 returns. We
disagree.
Defendants characterize the evidence, regarding if and when Plaintiff received
her tax returns from Defendants, as unrebutted fact. However, when viewed in the
light most favorable to Plaintiff, as the non-moving party, the 2006 and 2007 Income
Tax Cover Sheets and internal tracking presented by Defendants as evidence that
Defendants provided and delivered to Plaintiff her tax returns on the dates signified
in those documents is challenged and rebutted by Plaintiff’s deposition testimony.
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
Reading Plaintiff’s testimony from her deposition in the light most favorable
to her as the non-moving party, she was unsure about even being present in
Defendants’ office in 2007 and 2008, when the returns were purportedly hand
delivered, but she emphatically denies receiving either prepared returns or written
instructions. This evidence directly contradicts Defendants’ testimonial and
documentary evidence purporting Defendants hand delivered and Plaintiff received
in Defendants’ office her 2006 returns on 8 October 2007 and 2007 returns on 12
December 2008.
Viewing the Defendants’ evidence as conclusive fact Defendant delivered and
Plaintiff physically received her returns is error and does not view all the record
evidence, and every reasonable inference therefrom, in the light most favorable to
Plaintiff as the non-moving party. Dalton, 353 N.C. at 651, 548 S.E.2d at 707.
Genuine issues of material fact exist of whether Defendants were responsible
for filing, mailing, or providing Plaintiff with her completed returns, and whether, if
and when, Defendants did, in fact, provide Plaintiff with her returns. Defendants
contend that the preparation of the returns were the Defendants’ last acts pertaining
to Plaintiff’s 2006 and 2007 returns to accrue the statute of repose. However,
Defendants’ assertions are rebutted by the testimony of an expert witness, Michael
Gillis, on the standard of care, which shows the delivery of the completed returns to
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
the client, not completion of preparation, marks the conclusion of a tax preparation
engagement:
Q. So by your testimony, then, for each year, the
engagement of Gould Killian ended when they delivered a
prepared return to Karen Head?
A. Delivered, mailed, she picked up, whatever process it
was in which she received her returns, then it’s her
responsibility to sign and file at that point. (emphasis
supplied).
Generally, the start of the running of the statute of repose for professional
negligence occurs when a prospective defendant has completed the transaction he
was hired to complete, which concludes his professional obligation to his client. See
Carle, 225 N.C. App. at 665, 738 S.E. 2d at 772-73 (holding that defendants’ obligation
to plaintiffs was complete and statute of repose began to run when defendants
structured the completed transaction of stock into employee stock ownership plan);
Hargett v. Holland, 337 N.C. 651, 654, 447 S.E.2d 784, 787 (1994) (holding that last
act of defendants triggering the running of the statute of repose was the preparation,
delivery and supervised execution of a will); Babb v. Hoskins, 223 N.C. App. 103, 108,
733 S.E.2d 881, 885 (2012) (holding that the last act of defendants triggering the
running of the statute of repose was the preparation, delivery, and execution of trust
documents).
In this case, Plaintiff alleges a disputed issue of fact exists of whether the tax
returns were to be delivered to her or filed by Defendants. See Wilkins, 185 N.C. App.
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Opinion of the Court
at 672, 649 S.E.2d at 661. The facts are in dispute whether Defendants were
responsible for delivering or filing Plaintiff’s tax returns and whether they did, in
fact, deliver or file Plaintiff’s completed tax returns. The resolution of this disputed
fact is the basis to determine when the last act by Defendants occurred to trigger and
commence the running of the statute of repose.
If the parties’ understanding was that Defendants were responsible for
delivering, filing, or mailing Plaintiff’s 2006 and 2007 returns, and Defendants failed
to do so as alleged by Plaintiff, then the last act of Defendants for statute of repose
purposes would be their failure to provide Plaintiff with her returns at the times
immediately prior to the deadlines for which refunds could be claimed by Plaintiff on
those returns. Those points in time would be when “the alleged mistakes could no
longer be remedied.” Carle, 225 N.C. App. at 661, 738 S.E. 2d at 771. The statute of
repose would not have commenced to run until those points in time for each return
had passed. See id.
Genuine issues of material fact exist of whether Defendants were responsible
for delivering, mailing, or providing Plaintiff with her tax returns, and whether and
when they did so. These are classic issues of fact reserved for the jury to resolve. The
trial court’s conclusions that the statute of repose applies as a matter of law to affirm
summary judgment under these facts is error, when the dates and facts constituting
Defendants’ last acts or omissions are in dispute.
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Opinion of the Court
VI. Professional Negligence
Due to the trial court’s determination that Plaintiff’s professional negligence
claim is barred by the applicable statute of repose, it declined to address whether
Plaintiff has sufficiently alleged and pled the elements of professional negligence to
defeat Defendants’ motion for summary judgment. Our de novo review shows
Plaintiff has alleged and shown genuine issues of fact exist, which overcomes
Defendants’ motion for summary judgment on Plaintiff’s professional negligence
claim.
“In order to establish a claim of professional negligence, a plaintiff must show:
‘(1) the nature of the defendant’s profession; (2) the defendant’s duty to conform to a
certain standard of conduct; and (3) a breach of the duty proximately caused injury
to the plaintiffs.’” Michael v. Huffman Oil Co., 190 N.C. App. 256, 271, 661 S.E.2d 1,
11 (2008) (emphasis omitted) (quoting Associated Indus. Contr’rs, Inc. v. Fleming
Eng’g, Inc., 162 N.C. App. 405, 413, 590 S.E.2d 866, 872 (2004)).
“It is generally recognized that an accountant may be held liable for damages
naturally and proximately resulting from his failure to use that degree of knowledge,
skill and judgment usually possessed by members of the profession in a particular
locality.” Snipes v. Jackson, 69 N.C. App. 64, 73, 316 S.E.2d 657, 662, disc. rev. denied,
312 N.C. 85, 321 S.E.2d 899 (1984) (citation omitted).
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
Opinion of the Court
Viewed in the light most favorable to Plaintiff, as the non-moving party, the
evidence tends to show genuine issues of material fact exist regarding Defendants’
alleged professional negligence which precludes summary judgment. Wilkins, 185
N.C. App. at 672, 649 S.E.2d at 661. Defendant, Edward Towson, agrees in his
testimony that he and his co-Defendant firm owe a duty of care to Plaintiff.
The fact is undisputed that Defendants did timely submit, mail, and file
Plaintiff’s 2005 tax returns at her request. Even though the record shows Plaintiff
did not ask Defendants to mail her 2006 and 2007 tax returns, a genuine issue of fact
is raised by Plaintiff’s testimony about her understanding regarding whether
Defendants would file or mail her tax returns for 2006 and 2007 based on their prior
willingness to mail her returns in 2005.
Whether Defendants should have made it clearer, and did make it clear to
Plaintiff that they allegedly did not intend to file or mail her tax returns in those
years is a factual dispute. Having filed her returns the previous year, it would be
reasonable for Plaintiff to presume and expect Defendants would do the same in
succeeding years, particularly where federal and multiple state returns were required
to be prepared, signed, and filed.
Taking Plaintiff’s allegations and testimony as true, together with the
undisputed fact that Plaintiff’s 2005 tax returns were timely filed and her 2006 and
2007 returns were not filed when due, a genuine issue of material fact exists for the
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Opinion of the Court
jury to determine whether Defendants breached their duty of care by not timely filing
or by physically providing Plaintiff with her completed tax returns.
On the matter of injury incurred, the record shows Plaintiff’s 2006 and 2007
returns were not filed within three years of their original due date, which cost her
the ability to claim a refund or tax credit for overpayment. I.R.C. § 6511(b)(2)(A)
(2010). Plaintiff’s 2006 return reflected an overpayment of $60,019 to be applied to
the 2007 return. Based upon I.R.C. § 6511(b)(2)(A), Plaintiff could have claimed the
overpayment credit, if the 2006 return had been timely filed by October 15, 2007.
Viewing the evidence in the light most favorable to Plaintiff, a reasonable fact-
finder could determine Defendants negligently failed to file, deliver, or provide
Plaintiff with her completed tax returns for her to timely file, and their failure
resulted in Plaintiff’s inability to claim a tax refund or credit.
VII. Fraudulent Concealment
Plaintiff next contends the trial court erred by granting summary judgment in
Defendants’ favor as to her claim for fraudulent concealment. We disagree.
Fraudulent concealment is generally asserted as a claim
for damages. It is a form of fraudulent misrepresentation
entitling the claimant to damages or rescission of [a]
contract. To assert a claim for fraudulent concealment,
there must be a showing that the opposing party knew a
material fact, and failed to fully disclose that fact in
violation of a pre-existing duty to disclose.
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Opinion of the Court
Friedland v. Gales, 131 N.C. App. 802, 807, 509 S.E.2d 793, 797 (1998) (internal
citations and quotation marks omitted).
Plaintiff cites to portions of her deposition testimony, as well as a series of
emails including emails between her, Towson, and her assistant, and the log of Rosa
Shade, beginning on or around 28 March 2012. She asserts this evidence supports
her position that a genuine issue of material fact exists concerning her fraudulent
concealment claim. Significantly, however, these emails were exchanged after
Plaintiff had already terminated her employment of Defendants on 27 September
2011.
A cause of action for fraud is based on an affirmative
misrepresentation of a material fact, or a failure to disclose
a material fact relating to a transaction which the parties
had a duty to disclose. . . .
A duty to disclose arises in three situations. The first
instance is where a fiduciary relationship exists between
the parties to the transaction. . . .
. . . .
The two remaining situations in which a duty to disclose
exists arise outside a fiduciary relationship, when the
parties are negotiating at arm’s length. The first of these is
when a party has taken affirmative steps to conceal
material facts from the other. . . .
A duty to disclose in arm’s length negotiations also arises
where one party has knowledge of a latent defect in the
subject matter of the negotiations about which the other
party is both ignorant and unable to discover through
reasonable diligence.
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Opinion of the Court
Harton v. Harton, 81 N.C. App. 295, 297-98, 344 S.E.2d 117, 119 (1986) (internal
citations omitted).
“We have found no case stating that the relationship between accountant and
client is per se fiduciary in nature.” Harrold v. Dowd, 149 N.C. App. 777, 784, 561
S.E.2d 914, 919 (2002); see also CommScope Credit Union v. Butler & Burke, LLP, __
N.C. __, __, 790 S.E.2d 657, 660-61 (2016) (holding that there is no per se fiduciary
relationship between an independent auditor and its audit client). “For a breach of
fiduciary duty to exist, there must first be a fiduciary relationship between the
parties.” Dalton v. Camp, 353 N.C. at 651, 548 S.E.2d at 707 (citations omitted).
Consequently, Defendants owed no per se fiduciary duty to Plaintiff at the time
the emails were sent because Defendants had already been terminated by Plaintiff
and replaced by another accountant. Furthermore, Defendants and Plaintiff were in
no way “negotiating at arm’s length” about “the subject matter of [a] negotiation” at
the time the emails were sent. Harton, 81 N.C. App. at 298, 344 S.E.2d at 119.
No relationship, fiduciary or otherwise, existed between the parties at that
point in time, as Plaintiff had already terminated her relationship with Defendants,
hired a new CPA, and was not attempting to hire or pay Defendants for any new work
engagement.
We hold that Plaintiff has failed to proffer evidence demonstrating that a pre-
existing duty to disclose existed. She has failed to advance all of the elements of a
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Opinion of the Court
fraudulent concealment claim and to rebut Defendants’ evidence in support of their
motions for summary judgment and partial summary judgment. Plaintiff’s
arguments on this issue are overruled.
Because the trial court properly granted summary judgment in Defendants’
favor on Plaintiff’s fraudulent concealment claim, we also affirm its grant of summary
judgment in Defendants’ favor on Plaintiff’s claim for punitive damages. See Watson
v. Dixon, 352 N.C. 343, 348, 532 S.E.2d 175, 178 (2000) (citations omitted) (“As a rule
you cannot have a cause of action for punitive damages by itself. If the complainant
fails to plead or prove his cause of action, then he is not allowed an award of punitive
damages because he must establish his cause of action as a prerequisite for a punitive
damage award.”).
VIII. Conclusion
The trial court’s order granting partial summary judgment to Defendants on
Plaintiff’s fraudulent concealment claim and punitive damages claim is affirmed. The
trial court’s order granting Defendant partial summary judgment on the Plaintiff’s
professional negligence claim is reversed. We remand for trial on Plaintiff’s
professional negligence claim. It is so ordered.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED.
Chief Judge McGEE concurs.
Judge ENOCHS concurs in part and dissents in a separate opinion.
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No. COA16-525 – Head v. Gould Killian CPA Grp., P.A.
ENOCHS, Judge, concurring in part and dissenting in part.
Although I agree with my colleagues that the trial court properly granted
Defendants’ motion for partial summary judgment on Plaintiff’s fraudulent
concealment claim, I respectfully dissent from the majority’s position that the trial
court erroneously granted partial summary judgment on Plaintiff’s professional
negligence claims concerning her 2006 and 2007 tax returns. Because I believe that
Plaintiff’s professional negligence claims were properly barred by the applicable
statute of repose, I would affirm the trial court’s grant of partial summary judgement
on these claims as well.
Plaintiff contends that the trial court erred in granting summary judgement
in favor of Defendants as to her professional negligence claims relating to her 2006
and 2007 tax returns. “In order to establish a claim of professional negligence, a
plaintiff must show: ‘(1) the nature of the defendant’s profession; (2) the defendant’s
duty to conform to a certain standard of conduct; and (3) a breach of the duty
proximately caused injury to the plaintiffs.’ ” Michael v. Huffman Oil Co., 190 N.C.
App. 256, 271, 661 S.E.2d 1, 11 (2008) (emphasis omitted) (quoting Associated Indus.
Contr’rs, Inc. v. Fleming Eng’g, Inc., 162 N.C. App. 405, 413, 590 S.E.2d 866, 872
(2004)).
However, in the present case, the issue of whether Plaintiff successfully
established the elements of a professional negligence claim need not be reached as
her professional negligence claims relating to her 2006 and 2007 tax returns are
HEAD V. GOULD KILLIAN CPA GRP., P.A.
ENOCHS, J., concurring in part and dissenting in part
barred by the applicable statute of repose. N.C. Gen. Stat. § 1-15(c) (2015) states, in
pertinent part, that “in no event shall an action be commenced more than four years
from the last act of the defendant giving rise to the cause of action[.]”
It is well established that
statutes of repose are intended to mitigate the risk of
inherently uncertain and potentially limitless legal
exposure. Accordingly, such a statute’s limitation period is
initiated by the defendant’s last act or omission that at
some later point gives rise to the plaintiff’s cause of action.
The time of the occurrence or discovery of the plaintiff’s
injury is not a factor in the operation of a statute of repose.
Christie v. Hartley Constr., Inc., 367 N.C. 534, 539, 766 S.E.2d 283, 287 (2014)
(internal citations and quotation marks omitted) (emphasis added).
Moreover,
[u]nlike the statute of limitations, the statute of repose
serves as an unyielding and absolute barrier that prevents
a plaintiff’s right of action even before his cause of action
may accrue, which is generally recognized as the point in
time when the elements necessary for a legal wrong
coalesce.
In order to decide whether the statute of repose bars
plaintiffs’ claim we must determine when the last act of
alleged negligence took place. To determine when the last
act or omission occurred we look to factors such as the
contractual relationship between the parties, when the
contracted-for services were complete, and when the
alleged mistakes could no longer be remedied.
Carle v. Wyrick, Robbins, Yates & Ponton, LLP, 225 N.C. App. 656, 661, 738 S.E.2d
766, 770-71 (2013) (internal citations, quotation marks, and footnote omitted).
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ENOCHS, J., concurring in part and dissenting in part
Here, the unrebutted evidence reveals that the final act taken by Defendants
in regard to Plaintiff’s 2006 and 2007 tax returns occurred on 12 December 2008,
when Defendants hand delivered Plaintiff her 2007 prepared returns. Plaintiff filed
her complaint asserting professional negligence relating to the preparation of her
2006 and 2007 tax returns on 4 November 2013 — nearly 11 months after the
limitations period imposed by N.C. Gen. Stat. § 1-15(c) had expired as to the 2007
returns, and well after the limitations period relating to her 2006 returns had run.
It is important to note that Defendants’ preparation of Plaintiff’s returns for
each tax year were separate and distinct transactions for the purposes of the statute
of repose. Indeed, this is evidenced by Michael Gillis’ unrebutted deposition
testimony:
Q. So by your testimony, then, for each year, the
engagement of Gould Killian ended when they delivered a
prepared return to Karen Head?
A. Delivered, mailed, she picked up, whatever
process it was in which she received her returns, then it’s
her responsibility to sign and file at that point.
Moreover, the treatment of Plaintiff’s professional negligence claims by the parties
and the trial court below indicate that each prepared return was considered to be a
separate and distinct transaction. This is made even more apparent by the fact that
Plaintiff’s professional negligence claims for tax years 2008 and 2009 — which were
brought within the four-year window for statute of repose purposes — were allowed
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
ENOCHS, J., concurring in part and dissenting in part
by the trial court to advance to trial. Consequently, preparation of each of the tax
returns for tax years 2006, 2007, 2008, and 2009 constitute four separate completed
transactions for which the four-year statute of repose began to run at the time they
were delivered — or were erroneously not delivered due to an omission by Defendants
— to Plaintiff.
Plaintiff nevertheless contends on appeal, however, that Defendants’ final act
was not the delivery of the 2006 and 2007 tax returns to her — or Defendants’
omission in delivering them to her — but rather was the failure on the part of
Defendants to later cure any failure to file the returns by subsequently alerting
Plaintiff that she needed to file them before the assessment of interest and penalties
by the IRS. Significantly though, “[t]he issue, however, is not whether defendants
continued to represent plaintiffs after the transaction . . . . The issue is when the last
act alleged to have caused plaintiffs harm occurred.” Carle, 225 N.C. App. at 664, 738
S.E.2d at 772.
This Court addressed a similar situation in Carle, where we analyzed what
constituted a completed transaction triggering the start of the running of the statute
of repose. In that case, the plaintiffs brought a professional negligence action against
the law firm and attorney who created an employee stock ownership trust for them
in 2004. Id. at 656-57, 738 S.E.2d at 768. The transaction was supposed to be
structured so that the plaintiffs would be able to monetize their corporate stock while
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ENOCHS, J., concurring in part and dissenting in part
avoiding the capital gains taxes normally associated with doing so. Id. at 657, 738
S.E.2d at 768. However, the defendants improperly structured the trust and the
plaintiffs were later assessed with tax deficiencies by the IRS on the basis that the
plaintiffs did, in fact, owe capital gains taxes. Id. at 657-58, 738 S.E.2d at 768.
Significantly, as in the present case, the defendants in Carle continued to work
with the plaintiffs towards resolving issues with the transaction after its completion:
In August 2005, after the deal had closed, concerns
were raised regarding the transaction . . . which defendants
then investigated at plaintiffs’ request. Defendants later
helped prepare for plaintiffs’ 2007 IRS inquiry relating to
the tax implications of this transaction. Thus, it is clear
that although they considered these matter[s] separate and
billed plaintiffs for each matter[] separately, defendants
continued to represent plaintiffs well after 10 June 2005
and to assist plaintiffs with matters arising from the
transaction, even without any subsequent engagement
letter.
Id. at 663-64, 738 S.E.2d at 772.
The plaintiffs filed suit for, among other claims, professional negligence on 25
January 2010. Id. at 658, 738 S.E.2d at 769. The defendants moved for summary
judgment asserting the statute of repose. Id. The trial court granted the defendants’
motion and the plaintiffs appealed arguing that the statute of repose did not apply as
“their cause of action did not accrue until the IRS proceedings were completed on or
about 26 May 2010.” Id. at 659, 738 S.E.2d at 769.
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
ENOCHS, J., concurring in part and dissenting in part
On appeal, this Court affirmed the trial court’s grant of summary judgment,
holding that
[c]onsidering the evidence in the light most
favorable to plaintiffs, the last act giving rise to plaintiffs’
claim took place on 10 June 2005 because at that point
defendants’ role in the transaction was complete and
nothing could have been done to remedy the alleged
omissions. Plaintiffs commenced this action on 25 January
2010, more than four years after the last act of defendants
giving rise to plaintiff’s cause of action. Even if plaintiffs
are correct that their action did not accrue until the IRS
issued its final assessment, the action would still be barred
by the statute of repose. If the action is not brought within
the specified period, the plaintiff literally has no cause of
action. Therefore, defendants are entitled to judgment as
a matter of law and we affirm the trial court’s order
granting defendants’ motion for summary judgment.
Id. at 665, 738 S.E.2d at 772-73 (internal citations and quotation marks omitted); see
also Hargett v. Holland, 337 N.C. 651, 656, 447 S.E.2d 784, 788 (1994) (holding
plaintiffs’ professional negligence claim barred by statute of repose where plaintiffs’
claim brought more than four years after defendant drafted will and “plaintiffs’
complaint allege[d] a contractual relationship between defendant and testator to
draft a will and that defendant supervise[] execution of the will. After defendant
completed these acts, he had performed his professional obligations; and his
professional duty to testator was at an end”); Babb v. Hoskins, 223 N.C. App. 103,
108, 733 S.E.2d 881, 885 (2012) (“Because the ‘nature of the services he agreed to
perform’ was solely limited to the drafting of three [trust] documents, we conclude
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
ENOCHS, J., concurring in part and dissenting in part
that [the defendant-attorney’s] professional duty to [the plaintiffs] ended upon
completion of the Trust restatement on 9 October 2006, and, consistent with the
above authority, [the defendant-attorney] owed no continuing fiduciary duty beyond
that date[.] . . . Therefore, plaintiffs’ claim for breach of fiduciary duty by [the
defendant-attorney] for actions before 31 May 2007 was properly dismissed pursuant
to N.C.G.S. § 1A-1, Rule 12(b)(6) because those actions are beyond the four year
statute of repose provision contained in N.C.G.S. § 1-15(c).” (internal citation
omitted)).
Therefore, whether Defendants delivered Plaintiff her 2006 and 2007 tax
returns to file — as their evidence tends to show — or whether Defendants never
delivered Plaintiff’s 2006 and 2007 tax returns to her after their preparation through
an omission on their part — as Plaintiff claims — the statute of repose would have
begun to run in either scenario on 12 December 2008 as to her 2007 returns and well
before that for her 2006 returns at the time these individual transactions were
deemed completed. It is immaterial that Towson later purported to help Plaintiff to
resolve issues surrounding her 2006 and 2007 tax returns in light of Carle, as those
transactions, based on the unrebutted evidence, were already deemed to be
completed.
Furthermore, even assuming arguendo as Plaintiff’s evidence tends to show
that Defendants had affirmatively agreed and represented to Plaintiff that they
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
ENOCHS, J., concurring in part and dissenting in part
would file her 2006 and 2007 tax returns for her on her behalf and had failed to do
so, this would, at the most, amount to an omission by Defendants occurring — at the
latest — on 12 December 2008 given that a statute of repose’s “limitation period is
initiated by the defendant’s last act or omission that at some later point gives rise to
the plaintiff’s cause of action.” Christie, 367 N.C. at 539, 766 S.E.2d at 287 (internal
quotation marks omitted) (emphasis added). Therefore, Plaintiff’s claims would be
barred on statute of repose grounds on this basis as well even when taking her
evidence as true.
In sum, either Defendants (1) properly delivered Plaintiff’s 2006 and 2007 tax
returns to her; or (2) omitted to do so despite their obligation to do so. Either way the
“statute’s limitation period is initiated by the defendant’s last act or omission that at
some later point gives rise to the plaintiff’s cause of action. The time of the occurrence
or discovery of the plaintiff’s injury is not a factor in the operation of a statute of repose”
Id. (internal citations and quotation marks omitted) (emphasis added), and “[u]nlike
the statute of limitations, the statute of repose serves as an unyielding and absolute
barrier that prevents a plaintiff’s right of action even before his cause of action may
accrue[.]” Carle, 225 N.C. App. at 661, 738 S.E.2d at 770 (citation and quotation
marks omitted) (emphasis added).
As a result, for all of the above reasons, I would affirm the trial court’s grant
of partial summary judgment on Plaintiff’s professional negligence claims concerning
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HEAD V. GOULD KILLIAN CPA GRP., P.A.
ENOCHS, J., concurring in part and dissenting in part
her 2006 and 2007 tax returns based upon the applicable statute of repose. I therefore
respectfully dissent from the majority’s opinion on this issue.
9