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Head v. Gould Killian CPA Group, P.A.

Supreme Court of North Carolina

May 11, 2018


          Heard in the Supreme Court on 5 February 2018.

          Appeal pursuant to N.C. G.S. § 7A-30(2) from the decision of a divided panel of the Court of Appeals, __ N.C.App. __, 795 S.E.2d 142 (2016), affirming in part and reversing in part and remanding an order granting partial summary judgment entered on 31 December 2015 by Judge William H. Coward in Superior Court, Buncombe County. On 16 March 2017, the Supreme Court allowed plaintiff's petition for discretionary review of additional issues.

          Erwin, Bishop, Capitano & Moss, PA, by J. Daniel Bishop, for plaintiff-appellant/appellee.

          Sharpless & Stavola, P.A., by Brenda S. McClearn, for defendant-appellants/appellees.

          NEWBY, JUSTICE.

         In this case we address a claim for fraudulent concealment and the application of the statute of repose to a claim of professional negligence in the context of summary judgment. Summary judgment is proper if no genuine issue of material fact exists when viewed in the light most favorable to the nonmoving party. The record here, when viewed in that light, presents genuine issues of material fact regarding plaintiff's fraudulent concealment claim and the scope and timing of defendants' duties to plaintiff, thus making summary judgment improper in both instances. Accordingly, we affirm in part and reverse in part the decision of the Court of Appeals.

         This case is currently in the summary judgment stage; thus, we review the facts in the light most favorable to plaintiff, the nonmoving party. Plaintiff Karen Head must annually file her federal tax return as well as several returns for different states. Plaintiff first hired G. Edward Towson, II, CPA (Towson) and his firm Gould Killian CPA Group, P.A. (collectively, defendants)[1] to prepare her 2005 tax returns. Defendants prepared and timely filed plaintiff's 2005 tax returns after plaintiff had provided the necessary information and signatures. Plaintiff subsequently engaged defendants for tax years 2006 through 2010. Plaintiff's federal and state tax returns for 2006, 2007, 2008, and 2009 were not filed with the various taxing authorities until 2012, however, giving rise to the present case.

         On 11 and 12 August 2011, plaintiff received two notices from the Internal Revenue Service (IRS) stating that she had not filed her 2006 and 2007 tax returns. Plaintiff forwarded the notices to Towson, who responded, "I need to roll up my sleeves and sort out this mess." Towson later stated that he believed the IRS had made an error because he had provided the completed returns and filing instructions to plaintiff.

         On 27 September 2011, plaintiff informed Towson that she was "leaving [Towson's] accounting firm. Shortly you will be receiving information from Wayne Roddy [plaintiff's newly hired CPA] to begin the transfer of information." Nevertheless, Towson responded by expressing his intent to keep working on plaintiff's behalf: "We are almost finished with the 2010 income tax returns . . . . I will/should have them ready early next week and will call to coordinate the signing. After that, I will be happy to provide whatever is needed for Wayne Roddy." During his deposition, Towson stated that he understood this exchange to mean that plaintiff terminated him, but he continued to take action for the next twelve months in connection with plaintiff's tax matters because "[w]e were trying merely to assist with resolving the question . . . . [W]e were not her engaged CPA firm at that point." Towson did not have the 2010 returns ready as promised but did file electronically the federal return on 21 November 2011.

         In response to repeated requests to transfer the information to Roddy in October and November 2011, Towson responded that they were working on "amendments" to the 2008 and 2009 tax returns, which they would complete before transferring since "it would be more difficult for [Roddy] to step into these." Later plaintiff received additional notices from the IRS for failing to file her 2006 and 2007 tax returns. Towson informed plaintiff that they would respond to and "rebut" these tax assessments and would "keep [plaintiff] up to date on the progress." Towson stated during his deposition, however, that he knew he could not speak directly with an IRS agent on plaintiff's behalf because he did not have a power of attorney from plaintiff at that point, which the IRS required.

         Following more IRS notices in March 2012, Roddy directly contacted Towson, specifically noting that "[t]hese notices seem to be saying that a return was never filed for these years. . . . [W]ould it be possible to get a copy of the tax returns that were filed for these years?" In response, Towson did not acknowledge that the returns had not been filed. Instead, Towson stated that he would work with the IRS's Taxpayer Advocate Service to "personally see to it that they get the account straightened out." Additionally, Towson affirmed that they would provide copies of the 2006 and 2007 tax returns to Roddy; defendants did not provide these copies.

         Throughout April 2012, Towson represented to plaintiff that he was communicating with the Taxpayer Advocate Service and working on a resolution. Towson nevertheless stated during his deposition that defendants did not have direct communication at any point with anyone at the Taxpayer Advocate Service, and that organization likewise has no record of communications with Towson.

         In July 2012, the IRS sent plaintiff a final notice of intent to levy. Towson requested that plaintiff provide a power of attorney to allow him to communicate with the IRS on her behalf, and plaintiff obliged. During August 2012, Towson used this power of attorney to communicate with the assigned revenue officer at the IRS, but Towson consistently misrepresented these communications to plaintiff. Pertinently, Towson asserted that the revenue officer had "put a hold on collection efforts" and would "help to get the account corrected" once Towson provided additional information; however, the IRS records show that the revenue officer instead communicated the IRS would seek a lien on plaintiff if the returns were not filed by 17 August 2012. On 17 August 2012, Towson requested an extension, which the IRS granted, to "re-prepare" the returns. Towson did not notify plaintiff of this extension but instead implied that the IRS needed more time to complete the necessary corrections.

         On 4 September 2012, the IRS filed a lien against plaintiff. On 27 September 2012, plaintiff contacted Towson declaring her intention to "retain[ ] [legal] counsel to help resolve this matter." The same day, Towson responded: "I actually [met] with [the IRS revenue officer] today and I think the administrative remedies will resolve this." Furthermore, Towson asked that plaintiff sign 2006 and 2007 tax return signature pages, without the whole returns, "to facilitate the proper processing." Plaintiff provided the signatures on 27 September 2012. Towson replied that the revenue officer would now have everything she needed to "correct the account by re-imputing [sic] the tax return data." Again, Towson did not mention that he had not yet filed the returns nor that he intended to file the returns. Towson filed the 2006 and 2007 tax returns with the IRS on 28 September 2012. Towson later filed the 2008 and 2009 tax returns on 18 October 2012.

         On 4 November 2013, plaintiff filed her complaint asserting claims against defendants for professional negligence and fraudulent concealment, and seeking compensatory and punitive damages. Plaintiff alleged defendants failed to properly prepare and file her delinquent tax returns for tax years 2006 through 2009 and intentionally deceived her about the status of the returns. On 2 May 2014, defendants ...

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