A. Morrison Trucking, Inc. v Bonfiglio

[*1] A. Morrison Trucking, Inc. v Bonfiglio 2006 NY Slip Op 51784(U) [13 Misc 3d 1211(A)] Decided on September 18, 2006 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 18, 2006
Supreme Court, Kings County

A. Morrison Trucking, Inc., Plaintiff,

against

Thomas John Bonfiglio, Certified Public Accountant; Bonfiglio Tax Service, Inc. d/b/a BTS Income Tax and Accounting; Thomas John Bonfiglio, Attorney At Law; and Bonfiglio & Associates, LLC, Defendants.



25917/05



For Plaintiff:

David S. Shotten, Esq.

1707-26 Veterans Memorial Highway

Islandia, New York 11749

Defendant Thomas John Bonfiglio:

For Defendant Thomas John Bonfiglio, Esq.

Christopher T. Scanlon, Esq.

Clausen Miller, P.C.

1 Chase Manhattan Plaza

New York, New York 10005

Co-Counsel: For Defendant Thomas John Bonfiglio, CPA

Steve Hoffman, Esq.

Callan, Koster, Brady & Brennan, LLP

1 Whitehall Street

New York, New York 10004

Co-counsel: For Defendant Bonfiglio & Associates

Joseph J. Asterita, Esq.

Bonfiglio & Asterita, LLC

900 South Avenue, Suite 101

Staten Island, New York 10314

Carolyn E. Demarest, J.

Upon the foregoing papers, defendant Thomas John Bonfiglio (Bonfiglio) moves for an order, pursuant to CPLR 3211(a) (1), (3), (5) and (7), dismissing the first, second, sixth and seventh causes of action of plaintiff A. Morrison Trucking, Inc.'s (Morrison) complaint, as asserted against him in his individual capacity, on the grounds that: (1) the negligence and/or accounting malpractice claims asserted by Morrison are barred by the applicable statute of limitations; (2) the complaint fails to state a cause of action for negligence and/or accounting malpractice, breach of contract, attorney malpractice or fraud; and (3) Morrison previously executed a release in favor of Bonfiglio with respect to any and all claims arising out of the facts and circumstances alleged within the [*2]complaint.[FN1] Morrison opposes the instant motion on the grounds that: (1) the applicable statue of limitations was, in effect, tolled due to Bonfiglio's alleged concealment of damages resulting from misrepresentations made by Bonfiglio to Morrison; (2) the complaint sufficiently states causes of action for negligence, breach of contract and fraud; and (3) the subject release is invalid as it was allegedly obtained through fraud on the part of Bonfiglio.

As Bonfiglio seeks, at this juncture, only the dismissal of the first, second, sixth and seventh causes of action contained within the complaint, the court will limit its inquiry to the aforesaid claims. For the first cause of action, Morrison alleges that Bonfiglio, in his capacity as a Certified Public Accountant (CPA), contracted with Morrison to provide it with various accounting services, including "the overseeing, management, reporting and payment of any and all of Morrison's state and federal taxes." Morrison also alleges that Bonfiglio breached said contract by, inter alia, failing to make payroll tax deposits, file tax returns or respond to tax due notices in a timely fashion, resulting in tax penalties and interest being assessed against Morrison by the Internal Revenue Service (IRS) in the amount of $78,721.09. The second cause of action essentially levies the same allegations against Bonfiglio, but frames such averments within a negligence framework.

With respect to the sixth cause of action, Morrison alleges that Bonfiglio, in his capacity as an attorney, was retained by Bonfiglio Tax Service, Inc. d/b/a BTS Income Tax and Accounting (BTS), the corporation for which Bonfiglio acted as president, to prepare a release agreement, promissory note and affidavit of confession of judgment concerning Morrison's claims against Bonfiglio and BTS based upon their alleged negligence and breach of contract in allowing the subject tax interest and penalties to accrue against Morrison. The release agreement states that "Allan Keiser," a certified public accountant who was previously employed by BTS Accounting - and subsequently formed his own company, KTA, Inc., which continued to provide accounting services for Morrison - had performed the complained-of accounting services either while employed by BTS or by KTA, Inc. from March 31, 1999 through March 31, 2002, and, therefore, was solely responsible for the failure to timely file tax returns and pay taxes which resulted in the accrual of tax interest and penalties to Morrison.

Morrison alleges that the release agreement and related promissory note and affidavit of confession of judgment were negligently prepared by Bonfiglio. Specifically, the complaint alleges that the following deficiencies in the subject documents existed as a result of Bonfiglio's negligence:

[Although the release agreement stated that Keizer was a CPA] Keizer was not a [*3][CPA]. Bonfiglio . . . knew or should have known that Keizer was not a [CPA] because Keizer had been a long term employee of BTS which . . . was a corporation owned and supervised by Bonfiglio . . . .

The [release agreement] was negligently prepared as it incorrectly stated Keizer's name as "Keiser." Bonfiglio . . . knew or should have known the proper spelling of Keizer's name in that Keizer had been a long term employee of BTS which . . . was a corporation owned and supervised by Bonfiglio . . . .

The [p]romissory [n]ote was negligently prepared as it incorrectly stated Keizer's name as "Kaizer."

* * *

The [a]ffidavit of [c]onfession of [j]udgment was negligently prepared as it also incorrectly stated Keizer's name as "Kaizer."

* * *

The fact that the [a]ffidavit of [c]onfession of [j]udgment was negligently prepared by Bonfiglio . . . in that it improperly stated Keizer's name as "Kaizer" made it impossible for Morrison to file [it] and obtain a judgment against Keizer and KTA[,Inc.] for their alleged wrongdoing.

The seventh cause of action alleges that the misspellings of Keizer's name in the subject documents were deliberately and fraudulently made "in order to prevent Morrison from obtaining a judgment against Keizer and KTA[,Inc.] which, upon execution, would diminish whatever funds Keizer and KTA[,Inc.] might have had to pay the debt they currently owed to Bonfliglio . . ."

Morrison also submits two affidavits in support of its opposition to the instant motion to dismiss. The affidavit of Martin W. Harper, the owner of Harper Associates, LLC, (Harper) describes the relationship between Bonfiglio, Keizer and Morrison as follows:

From in or about 1990, Morrison utilized the services of my company [Harper] for accounting and tax services. Such services included but were not limited to the timely making of payroll tax deposits, the timely filing of tax returns and/or timely responding to tax notices.

* * *

Harper employed a staff accountant by the name of Allan Keizer who, for the most [*4]part, handled Morrison's account. Keizer was under constant supervision by Harper's manager . . . . For the most part, Keizer was a competent accountant but needed constant supervision.

In or about 1996, Harper sold its commercial accounts only to [BTS ].

* * *

One of the commercial accounts sold to BTS was that of Morrison. Concurrently with the sale of commercial accounts to BTS, Allan Keizer left Harper and accepted employment from BTS.

* * *

At the time BTS purchased Morrison's account form Harper, the details of all of the services provided to Morrison and the procedures followed by Harper in the handling of Morrison's account were enumerated and thoroughly discussed with Bonfiglio.

Bonfiglio was acutely aware that Allan Keizer was inadequate if not constantly supervised. I say this because after BTS purchased Harper's commercial accounts and Keizer went to work for BTS, Bonfiglio asked me to attend several meetings at his office wherein the discussion surrounded Keizer's inadequacies. I made it very plain to Bonfiglio that Keizer was a competent accountant when supervised and I emphasized the requirement to Bonfiglio that Keizer be supervised at all times.

Audley Morrison, the president of Morrison, also submits an affidavit in support of Morrison's opposition to the instant motion. He states that Keizer, as an employee of BTS, was supervised by Bonfiglio. BTS was responsible for handling all tax matters from in or about the first calendar quarter of 1999. Thereafter, in or about 2000, BTS sold the Morrison account to Keizer. However, BTS prepared Morrison's corporate tax returns on March 13, 2001 and also prepared Mr. Morrison's personal tax returns on March 29, 2001. In or about July, 2001, Keizer formed a corporation known as KTA, Inc.

Mr. Morrison also states that, in or before May 2001, Morrison retained Bonfiglio, in his capacity as an attorney, to represent Morrison in an action commenced against Morrison by a local union.

In or about June 2002, Mr. Morrison became aware that there were serious delinquencies pertaining to Morrison's tax liabilities. Mr. Morrison states that he confronted Keizer, KTA. Inc. and discovered that Morrison's tax liabilities had been seriously mishandled from the first quarter of 1999 to March 2002. He demanded that the responsible party reimburse Morrison in the amount of the interest and penalties, [*5]$78,721.09. Keizer allegedly informed him that he could not pay anything to Morrison as all of his available funds were being paid to BTS for the accounts he had purchased from BTS. Thereafter, Mr. Morrison states that he met with Bonfiglio in late 2002 or early 2003 and Bonfiglio assured him that after Keizer's obligations had been met to Bonfiglio, Bonfiglio would prepare paperwork to insure that Keizer would make payments to Morrison of $3,000 per month until all of the losses were reimbursed.

Thereafter, in October 2003, Mr. Morrison met with Bonfiglio, Keizer and Gregg Mark, the vice president of BTS, and was presented with the subject release agreement, promissory note and affidavit of confession of judgment which were all prepared by Bonfiglio. Mr. Morrison states that he agreed the execute the documents because he "was le[d] to believe by Bonfiglio that Keizer was solely responsible for all of the wrongdoing committed against Morrison and that Keizer possessed the financial means to reimburse Morrison for the penalties and interest incurred as a result of the wrongdoing." However, Mr. Morrison states that Bonfiglio knew that he was liable for Morrison's damages, given that Keizer had been an employee of BTS who was supervised by Bonfiglio at the time of the alleged wrongdoing. Morrison also notes that Bonfiglio had acted as an attorney for Morrison for approximately two years in the unrelated union matter prior to Bonfiglio's drafting of the subject release documents. He also states that, at the time the release documents were executed by the parties, Bonfiglio knew that Keizer still owed him a substantial sum of money as a result of Keizer's purchase of some of BTS's accounts, yet despite such knowledge, Bonfiglio represented to Morrison that Keizer's debt to BTS and Bonfiglio had been satisfied.

After Mr. Morrison executed the documents, Keizer and KTA, Inc. defaulted on the promissory note. He subsequently attempted to commence an action against Keizer and KTA, Inc. on behalf of Morrison, but discovered that he was unable to do so due to the negligent preparation of the affidavit of confession of judgment which contained the misspelled version of Keizer's name. Sometime later, Keizer passed away and his estate was allegedly valueless.

In support of his instant motion, Bonfiglio submits an affidavit which states, in relevant part, that:

At no time did I individually or on behalf of [BTS] enter into a contract, written, oral or otherwise with [Morrison].

In October 2003 I provided legal services at the request of [Keizer] relevant to preparation of an agreement between [BTS, Keizer and Morrsion].

At that time, I also prepared a [p]romissory [n]ote and [a]ffidavit of confession of [j]udgment, both from [Keizer] to [Morrison] pursuant to the [release agreement] I drafted at the request of [Keizer]. [*6]

[Keizer] worked for [BTS] from 1996 when his employer, [Harper], was purchased by [BTS], until 2000, when [Keizer] purchased a portion of the business of [BTS], including the account of [Morrison].

In 2000, [Keizer] formed KTA, Inc. which provided non-professional accounting services to clients including [Morrison].

[BTS] performed no services, nor ever agreed to provide any services for [Morrison] after that portion of the business of [BTS] including the account of [Morrison] was purchased by [Keizer].

At no time did I make any representations to Morrison or any of its principals or officers nor did I ever perform or agree to perform services of any sort individually for [Morrison].

At no time did I of [BTS] obtain powers of attorney from clients, pay taxes on behalf of clients, or accept communications on behalf of clients directly from state of federal tax authorities.

If [Keizer] did any of the acts referred to in the preceding paragraph, he did so without the authority or knowledge of [BTS] and acted outside the scope and authority of his employment by [BTS].

An action is subject to dismissal if said action is barred by either the applicable statute of limitations or a release executed by the plaintiff (see generally CPLR [a] [1], [3] and [5]). In addition, "[i]t is well settled that, as a general rule, on a motion to dismiss the complaint for failure to state a cause of action under CPLR 3211 (a) (7), the complaint must be construed in the light most favorable to the plaintiff and all factual allegations must be accepted as true" (Gruen v County of Suffolk, 187 AD2d 560, 562 [1992]). Additionally, "[t]he pleading is deemed to allege whatever can be implied from its statements by fair and reasonable intendment" (Components Direct, Inc. v European American Bank and Trust Co., 175 AD2d 227, 232 [1991]). "[I]f from [the complaint's] four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail" (Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]). "The criterion is whether the plaintiff has a cause of action and not whether he may ultimately be successful on the merits" (One Acre, Inc. v Town of Hempstead, 215 AD2d 359 [1995]). Accordingly, the dismissal of a complaint pursuant to CPLR 3211(a) (7), "will be warranted only in those situations in which it is conclusively established that there is no cause of action" (Town of North Hempstead v Sea Crest Construction Corp., 119 AD2d 744, 746 [1986]). Similarly, a dismissal [*7]motion, pursuant to CPLR 3211 (a) (1), " may be granted where documentary evidence submitted conclusively establishes a defense to the asserted action as a matter of law'" (Goldman v Metropolitan Life Insurance Co., 5 NY3d 561, 571 [2005], quoting Held v Kaufman, 91 NY2d 425, 430-431 [1998]).

Here, Bonfiglio is entitled to dismissal of the first and second causes of action contained within the complaint as said claims are barred by the applicable three year statute of limitations. The gravamen of such claims as pled is that Bonfiglio, a CPA, failed to exercise the standards of skill and care recognized by the accounting profession and his deviation therefrom caused Morrison to sustain tax interest and liabilities. Accordingly, the court finds that the first and second causes of action, albeit framed, respectively, as a breach of contract claim and negligence claim, are most properly construed as accounting malpractice claims. However, accepting Morrison's allegations as true, as this court is constrained to do, the complaint indisputably does not allege that any of the complained-of acts which resulted in the subject tax liability occurred beyond the period from March 1999 to March 2002. Although Morrison claims that it was not aware of the existence of the tax liability until either June 2003 or October 2003, it is well settled that an accounting malpractice cause of action accrues when the malpractice allegedly occurred, not when it was discovered by the plaintiff (see Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994]; cf. Kerbein v Hutchison, 30 AD3d 730, 731 [recognizing, in attorney malpractice case, that "the accrual date for a malpractice claim based on erroneous tax advice has been held to be calculable from the date the taxpayer receives and relies upon such advice, rather than when a deficiency is assessed against the taxpayer"]). Stated differently, "[w]here the cause of action alleges malpractice against an accountant, the claim accrues upon receipt of the accountant's work product as that is the juncture at which the client reasonably relies on the professional's skill and advice" (Fred Smith Plumbing and Heating Co. v Christensen, 233 AD2d 207, 208 [1996]).

Accordingly, the last date on which such action could have accrued was in March 2002. Moreover, the court notes that although "under certain circumstances, the statute of limitations [for accounting malpractice] is tolled during the period of time when professional services are being rendered" (Fred Smith Plumbing and Heating Co., 233 AD2d at 208), Morrison does not allege that any accounting services performed for it by Bonfiglio at any date later than March 2002. It is well settled that "[a] cause of action alleging [non-medical] professional malpractice, i.e., that a professional failed to perform services with due care and in accordance with the recognized and accepted practices of the profession is governed by the three year statute of limitations applicable to negligence actions stated in CPLR 214(6)" (id.). The three year statute of limitations is applicable whether the subject professional malpractice claim sounds in breach of contract (Morrison's first cause of action) or tort (Morrison's second cause of action) (see Matter of Kliment & Frances Halsbrand, Architects, 3 NY3d 538, 542 [2004]). Since the instant [*8]action was not commenced until August 22, 2005, approximately five months after the applicable three-year statute of limitations expired, the first and second causes of action at issue here, which are based upon a claim of accounting malpractice subject to such time limitation, must be dismissed as untimely. Accordingly, as Morrison's accounting malpractice claim is untimely, Bonfiglio's motion to dismiss the first and second causes of action, which are based upon such claim, is granted.

The court finds, however, that plaintiff's fraud claim, brought against Bonfiglio in his capacity as an attorney, states a cause of action sufficient to withstand the instant motion to dismiss. "It long has been the rule that an attorney cannot be held civilly liable to a third party for his or her actions taken on behalf of a client except upon a showing of fraud or collusion, or a malicious or tortious act" (State v Poulson, 26 AD3d 650, 651 [2006]; see also good Old Days Tavern, Inc. v Zwirn, 259 AD2d 300, 300 [1999]; Doo v Berger, 227 AD2d 435, 436 [1996]). Indeed, it has been recognized that where a plaintiff fails to expressly allege that the attorney in question was motivated by malicious intentions, the conduct complained of does not give rise to liability as a matter of law (State v Poulson, 26 AD3d at 651). In addition, the fraud alleged must be pled with the requisite particularity as to the elements of the claim, namely, misrepresentation of a material fact, falsity, knowledge, reliance and damages (see Contractors Casualty and Surety Co. v I.E.A. Electric Group, Inc., 181 Misc 2d 469, 473 [1999]). Although "[m]ere allegations of fraudulent intent are insufficient" (New York City Health and Hospitals Corp. v St. Barnabus Community Health Plan, 22 AD3d 391, 391 [2005], the particularity requirement "is not construed so strictly so as to prevent an otherwise valid cause of action where it would be impossible for the plaintiff to state in detail the circumstances of the fraud because the knowledge of those details is in the exclusive possession of defendants" (Auguston v Spry, 282 AD2d 489, 490 [2001]).

Here, Morrison has adequately pled, via the complaint itself and the affidavits submitted in opposition to the instant motion, which shall be construed by the court as rectifying any existing pleading deficiencies (see Fresh Direct, LLC v Blue Martini Software, Inc., 7 AD3d 487, 487 [2004]), that it executed the subject release documents in reliance upon Bonfiglio's representations that Keizer was solely responsible for Morrison's tax liability, although Bonfigio allegedly had employed Keizer and supervised him during the time period in which the tax liability accrued and, therefore, was also a potentially liable party. It is well settled that "Business Corporation Law § 1505(a) provides that a shareholder, employee, or officer of a professional corporation shall be liable only for negligent or wrongful acts committed by him or under any person under his direct supervision while rendering services on behalf of the corporation"(Ecker v Bernstein, P.C., 240 AD2d 360, 361 [1997]; see also Moller v Taliuaga, 255 AD2d 563, 565 [1998]; Sucese v Kirsch, 199 AD2d 718, 719 [1993]). Accordingly, the gravamen of Morrison's fraud claim is that it relied on misrepresentations made by Bonfiglio that Keizer was the sole responsible party and, therefore, it executed a release which [*9]precluded it from pursuing potentially valid claims against Bonfiglio of which it was unaware. Moreover, such representations allegedly took place after Bonfiglio had provided legal representation to Morrison for approximately two years on another matter and so had developed a confidential attorney-client relationship with Morrison upon which Morrison generally relied. Morrison also avers that Bonfiglio represented that Keizer had fulfilled his financial obligation to Bonfiglio, and therefore would now be able to fulfill his financial obligations to Morrison, although at the time of said representation Keizer still owed Bonfiglio a substantial sum of money. Morrison further alleges that the deficiencies contained within the documents, including the various misspellings of Keizer's name, were deliberately created by Bonfliglio in an attempt to render the promissory note and affidavit in confession of judgment unenforceable so that any of Keizer's existing assets would be available to satisfy the debt he owed to Bonfiglio and, concomitantly, would not be available to Morrison. Despite Bonfiglio's contentions to the contrary, Morrison does plead that it attempted to commence an action against Keizer to enforce the affidavit of confession of judgment but discovered, at that time, that it was unable to do so due to the misspelling of Keizer's name. Accordingly, the favorable inference to be drawn from Morrison's allegations concerning damages is that it was constrained by Bonfiglio's misrepresentations to sign a release preventing it from pursuing legitimate claims against Bonfiglio, the existence of which Bonfiglio was aware, and was also prevented by Bonfiglio's fraudulent drafting of the subject release document from enforcing the affidavit of confession of judgement with respect to its claims against Keizer.

Accepting these allegations as true, and drawing all reasonable inferences in favor of Morrison, the court finds that Morrison has sufficiently pled a cause of action for fraud committed in the course of Bonfiglio's legal representation of Keizer and/or BTS and, concomitantly, has also sufficiently pled that the subject release is invalid as it was obtained by allegedly obtained through such fraud (see generally Kavoukian v Kaletta, 294 AD2d 646, 647 [2002]). Although Bonfiglio has submitted a conclusory affidavit denying that he performed any accounting services for Morrison, such affidavit does not address the issue of the services, if any, provided to Morrison by Keizer while Keizer was an employee of BTS, an entity which Morrison pleads operated, in essence, as a professional services corporation, or the nature of the supervision, if any, of Keizer by Bonfiglio during such employment. "[I]t is axiomatic that in considering a motion to dismiss pursuant to CPLR 3211, the court must assume as true the facts alleged in the complaint" (Marcus v Hemphill Harris Travel Corp., 193 AD2d 543, 544). Accordingly, even where evidentiary matter extrinsic to the pleadings, such as supporting affidavits, is submitted by the moving party, dismissal is not appropriate "unless it has been shown that a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it" (Guggenheimer, 43 NY2d at 275). Bonfiglio's affidavit does little to shed light on such issues as the nature of the services [*10]he, BTS or Keizer did provide to Morrison, if any, the alleged difference between the services he and BTS offered and accounting services, the details of the working relationship between Keizer, an employee, and Bonfiglio, a principal of BTS and the circumstances surrounding the preparation of the subject release documents and Morrison's execution of same. Moreover, although Keizer allegedly acquired accounts from BTS, including the Morrison account, in 2000 and thereafter formed his own corporation, Morrison alleges that Keizer was supervised by Bonfliglio during the entirety of the relevant time period, and Bonfiglio's affidavit contains no evidence refuting this claim nor does it provide any details as to the purchase of such accounts by Keizer, including any distribution of liabilities which occurred pursuant to such sale, or the nature of Keizer's employment status with BTS or supervision by Bonfiglio, if any, subsequent to such purchase. Rather, Bonfiglio's affidavit merely highlights the existence of numerous questions of fact which necessitate discovery and does not conclusively show "that a material fact as claimed by the pleader to be one is not a fact at all" (Guggenheimer, 43 NY2d at 275).

As a result, the court denies Bonfiglio's motion to dismiss with respect to the seventh cause of action alleging fraud. The court does, however, dismiss the sixth cause of action. Such cause of action is premised upon facts almost identical to those alleged in support of the seventh cause of action, but couches such averments entirely in terms of negligence and, therefore, does not allege the requisite malicious intention necessary to impose liability upon an attorney for damages allegedly sustained by a third party as a result of the attorney's representation of his or her client (see Poulson, 26 AD3d at 525 [dismissing complaint premised on professional negligence brought by a third party against attorney where "the complaint as a whole [was] couched in negligence. Nowhere [were] there any allegations of collusion or fraud and [the attorney was] not accused of conduct motivated by malicious intent"]).

As a result, Bonfiglio's motion to dismiss is granted with respect to the first, second and sixth causes of action, to the extent that such claims are asserted against him in his individual capacity either as a CPA or an attorney. Said motion to dismiss is denied, however, with respect to the seventh cause of action.

The foregoing constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1: The court notes that, in the instant motion, Bonfiglio solely seeks dismissal of the causes action of asserted against him in his individual capacity both as a CPA (the first and second causes of action) and an attorney (the sixth and seventh causes of action).