Appeal from the Circuit Court of Cook County 06 L 9975 Honorable Allen S. Goldberg,Judge Presiding.
The opinion of the court was delivered by: Justice Lavin
JUSTICE LAVIN delivered the judgment of the court, with opinion.Presiding Justice Gallagher and Justice Pucinski concurred in the judgment and opinion.
This appeal involves an accounting malpractice claim stemming from certain partnerships' overpayment of taxes due to asset depreciation miscalculations by their accountant. The claim was dismissed by the circuit court due to the expiration of the applicable statute of limitations, despite plaintiffs' protestations to the contrary which were based on the discovery rule. For the reasons discussed below, we affirm the ruling of the trial court.
Plaintiffs, SK Partners I through IV and Sal's Holding Company (which has ownership interest in the partnership entities), are related entities that collectively own various real estate assets. Yvonne DiMucci is a trustee of the SK Partners entities and president of Sal's Holding Company, and she acted as their agent in the events that transpired in the underlying case.
Defendant, Metro Consultants, Inc., is an Illinois corporation which was first retained by plaintiffs in 2000 to provide accounting services for the purpose of filing income taxes. Ultimately, defendant prepared plaintiffs' federal income tax returns for the tax years of 2000, 2001, and 2002. Accordingly, defendant's accounting services were last used on or before April 15, 2003, and plaintiffs subsequently retained the accounting firm CJBS to perform their accounting services.
Jeffrey Stuart, an accountant with CJBS, testified during a deposition that he met Yvonne in 2000 and that he subsequently provided accounting services for her involving a variety of matters. It was not until February 11, 2004, however, that a written engagement letter was entered into, engaging CJBS to perform virtually all of plaintiffs' accounting tasks. In relation to his other accounting work for Yvonne, Stuart reviewed plaintiffs' previous years' tax returns and Stuart testified that in October 2003, "it appeared something wasn't correct about [the] basis."*fn1
According to Stuart, he believed there were inconsistencies in the previous tax documents, indicating that the depreciation of plaintiffs' real estate assets was understated, which would cause the tax returns to overstate income, resulting in a greater tax liability for plaintiffs. Stuart believed that the initial mistake occurred in 1999 and was carried through 2000 to 2002, which essentially comprised the time span that defendant prepared plaintiffs' tax returns. In November 2003, Stuart informed Yvonne that it could take up to a year to properly investigate the issue and file amended tax returns. When asked to interpret a depreciation schedule in an accounting document dated September 8, 2004, Stuart confirmed that by then it was "obvious" that depreciation had been miscalculated. An amended tax return was filed on September 11, 2004, for Sal's Holding Company, and amended returns for the SK Partners entities were filed in October 2004.
The Internal Revenue Service (IRS) conducted an audit after receiving the amended tax returns and subsequently issued a series of refund checks, the first being issued on December 13, 2004, and the last on April 21, 2006.*fn2 Plaintiffs commenced the underlying action on September 21, 2006, against defendant for accounting malpractice, claiming defendant was negligent in the preparation of plaintiffs' tax returns and causing damages by failing to claim a proper depreciation deduction. The complaint was later amended, but on April 16, 2007, defendant filed a motion to dismiss plaintiffs' complaint pursuant to section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2006)), arguing that the applicable statute of limitations period had expired. The circuit court granted defendant's motion to dismiss, leading to plaintiffs' timely appeal.
Plaintiffs first contend that the circuit court improperly dismissed their complaint under section 2-619, through an incorrect application of the statute of limitations to their claims. A section 2-619 motion to dismiss:
" 'admits the legal sufficiency of the complaint and raises defects, defenses or other affirmative matters, such as the untimeliness of the complaint, which appear on the face of the complaint or are established by external submissions which act to defeat the plaintiff's claim, thus enabling the court to dismiss the complaint after considering issues of law or easily proved issues of fact.' " MC Baldwin Financial Co. v. DiMaggio, Rosario & Veraja, LLC, 364 Ill. App. 3d 6, 22 (2006) (quoting Lipinski v. Martin J. Kelly Oldsmobile, Inc., 325 Ill. App. 3d 1139, 1144 (2001)).
We review a section 2-619 motion to dismiss de novo. Porter v. Decatur Memorial Hospital, 227 Ill. 2d 343, 352 (2008).
A cause of action based on professional negligence requires the following elements: "(1) the existence of a professional relationship, (2) a breach of duty arising from that relationship, (3) causation, and (4) damages." MC Baldwin Financial Co. v. DiMaggio, Rosario & Veraja, LLC, 364 Ill. App. 3d 6, 14 (2006). The applicable statute of limitations is controlled by section 13-214.2(a) of the Code, providing that:
"Actions based upon tort, contract or otherwise against any person, partnership or corporation registered pursuant to the Illinois Public Accounting Act, as amended, or any of its employees, partners, members, officers or shareholders, for an act or omission in the performance of professional services shall be commenced within 2 years from the time the person bringing an action ...