THOMAS E GLEASON V ERNST & YOUNG LLP
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STATE OF MICHIGAN
COURT OF APPEALS
THOMAS E. GLEASON,
UNPUBLISHED
February 19, 2002
Plaintiff-Appellant,
v
No. 224506
Kent Circuit Court
LC No. 98-010215-CB
ERNST & YOUNG, LLP,
Defendant-Appellee,
and
NEILL SCHMEICHEL, ESSEL BAILEY, JIM
WIESE, and TOM FRANKE,
Defendants.
Before: Griffin, P.J., and Gage and Meter, JJ.
PER CURIAM.
Plaintiff appeals by right from the trial court’s order granting summary disposition to
defendant Ernst & Young (“defendant”) under MCR 2.116(C)(7) and (8). We affirm in part and
reverse and remand in part.
This case arises out of the sale of two businesses, Target Components, Inc., and Alofs
Manufacturing Company. Defendant was hired to arrange the sale. Plaintiff was a part owner of
the companies, and he decided buy out the other owners. After his purchase, the companies went
bankrupt, and plaintiff brought this lawsuit, alleging that in the course of arranging the sale
between plaintiff and the other owners, defendant gave fraudulent and misleading information to
plaintiff regarding the value of the companies and the nature of the sale and purchase.
Thereafter, defendant moved for summary disposition, arguing, among other things, that the
statute of limitations barred plaintiff’s lawsuit because he filed suit more than two years after the
sale of the companies. The trial court agreed.
Plaintiff claims that the statute of limitations did not operate to bar his malpractice
allegation because the claim did not accrue until he suffered damages, and these damages
occurred within two years of the filing of his lawsuit. Upon our de novo review, see Silver Creek
Township v Corso, 246 Mich App 94, 97; 631 NW2d 346 (2001) (setting forth the standard of
review for summary disposition cases), we disagree.
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MCL 600.5805 states, in part:
(1) A person shall not bring or maintain an action to recover damages for injuries
to persons or property unless, after the claim first accrued to the plaintiff or to
someone through whom the plaintiff claims, the action is commenced within the
periods of time prescribed by this section.
***
(5) Except as otherwise provided in this chapter, the period of limitations is 2
years for an action charging malpractice.
Thus, a plaintiff has two years from the date of accrual to file a claim of malpractice. See Ohio
Farmers Ins Co v Shamie (On Remand), 243 Mich App 232, 236; 622 NW2d 85 (2000). Accrual
in this case is governed by MCL 600.5838. See Ohio Farmers, supra at 236-240. MCL
600.5838 states, in part:
A claim based on the malpractice of a person who is, or holds himself or herself
out to be, a member of a state licensed profession accrues at the time that person
discontinues serving the plaintiff in a professional or pseudoprofessional capacity
as to the matter out of which the claim for malpractice arose, regardless of the
time the plaintiff discovers or otherwise has knowledge of the claim.
Here, defendant ceased serving plaintiff “in a professional . . . capacity as to the matter out of
which the claim for malpractice arose” (emphasis added) upon the completion of the sale on or
about December 20, 1995, and plaintiff did not file suit until October 2, 1998. See id.
Therefore, his malpractice action was untimely and was correctly dismissed by the trial court.1
See generally Ohio Farmers, supra at 236-243.2
Plaintiff contends that the malpractice statute of limitations was somehow extended here
by the doctrine of fraudulent concealment because the malpractice involved fraud and
misrepresentations. Plaintiff states that “[w]hen the basis of an action is fraud, the original fraud
is regarded as the continuing affirmative act and [the d]efendant’s silence is treated as
concealment” (emphasis in original). Essentially, plaintiff contends that because his malpractice
claim consisted of allegations of fraud, and because defendant was silent after perpetrating this
fraud, the malpractice statute of limitations was extended by the doctrine of fraudulent
concealment. This argument is disingenuous. Indeed, plaintiff made allegations of both
malpractice and fraud in his complaint; the separate allegation of malpractice is barred as
discussed above.
1
We note that plaintiff knew or should have known that his claim for malpractice existed at the
time the companies filed for bankruptcy. Because the date of bankruptcy was more than six
months before the date the lawsuit was filed, plaintiff’s claims were not saved by the alternative
six-months-from-discovery rule found in MCL 600.5838.
2
The Ohio Farmers Court specifically indicated that “[b]ecause § 5838 governs accrual of
plaintiff’s accounting malpractice claim against defendants, the date when plaintiff suffered
damages is irrelevant to the accrual of the claim.” Ohio Farmers, supra at 240.
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Plaintiff next argues that his claim for fraud was not controlled by the malpractice statute
of limitations. He states in his appellate brief that the complaint “alleges intentional
misrepresentation and contains all necessary elements therefor.” We agree that the fraud claim
survives.3
In Kuebler v Equitable Life Assurance Soc of the United States, 219 Mich App 1; 555
NW2d 496 (1996), the plaintiff brought claims of malpractice against the defendant insurance
agent, alleging that he had concealed and misrepresented the nature of certain insurance policies
he had sold the plaintiff. Id. at 3-4. As a defense, the defendant raised the two-year statute of
limitations for malpractice. Id. This Court, deciding that the fraud count should not be governed
by the malpractice statute of limitations, stated that “[w]hen a complaint alleges all the necessary
elements of fraud as well as malpractice, the statute of limitations governing fraud actions will
apply to the fraud count.” Id. at 6. Similarly, in the context of a legal malpractice claim, this
Court, in Brownell v Garber, 199 Mich App 519, 532-533; 503 NW2d 81 (1993), stated that
[f]raud is no less actionable because it is committed by an attorney with whom the
plaintiff has an attorney-client relationship. If a client attempts to characterize a
malpractice claim as a fraud or other type of claim, a court will look through the
labels placed on the claim and will make its determination on the basis of the
substance and not the form. However, when a complaint alleges not only
malpractice but also all the necessary elements of fraud, the statute of limitations
governing fraud actions will apply to the fraud count and, if such count is not
barred, the plaintiff may proceed on that count to collects damages proximately
caused by the alleged fraud. [Citation omitted.]
In order to establish a claim of fraud, a plaintiff must assert (1) that the defendant made a
material representation, (2) that the representation was false, (3) that the defendant knew the
representation was false when he made it, (4) that the representation was made with the intent
that the plaintiff rely on the representation, (5) that the plaintiff did rely on the representation,
and (6) that the plaintiff suffered injury as a result of the representation. Id. at 533. In the instant
case, plaintiff’s complaint asserts in Count IV, his fraudulent misrepresentation count, that
defendant intentionally “made false representations of material facts both by affirmative
statements and silence where there was a duty to speak to plaintiff regarding the value of [the
companies].” Defendant’s alleged misrepresentations included statements concerning the
payables and receivables schedules, computation of value, availability of financing, and terms of
the sale. Plaintiff claimed that defendant knew its statements were false when they were made
and that plaintiff relied on these representations during the sale of the companies. Plaintiff also
claimed that he suffered substantial economic losses. Thus, plaintiff alleged all the elements of a
fraud claim, and, contrary to defendant’s assertion, we conclude that he alleged them with
sufficient particularity. Therefore, following this Court’s precedent in Kuebler and Brownell, the
six-year statute of limitations found in MCL 600.5813 governs plaintiff’s fraud claim, and the
trial court erred in dismissing it.
3
Besides malpractice and intentional misrepresentation, plaintiff made other, variously-titled
claims in his complaint. Appellant does not raise these claims as issues on appeal, so we do not
address them.
-3-
Defendant contends that the fraud claim was properly dismissed here because under the
accountant liability statute, MCL 600.2962,4 fraud is defined as merely a subspecies of a
malpractice action, making the fraud claim in the instant case governed by the two-year statute of
limitations for malpractice actions. We do not accept this argument. Indeed, in our opinion, the
fraud claim sufficiently accrued at the time of closing in December 1995,5 before the March 28,
1996 effective date of MCL 600.2962. Therefore, MCL 600.2962 does not apply to abrogate the
claim. See generally Ohio Farmers, supra at 242-243.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with
this opinion. We do not retain jurisdiction.
/s/ Richard Allen Griffin
/s/ Hilda R. Gage
/s/ Patrick M. Meter
4
This statute states, in relevant part:
This section applies to an action for professional malpractice against a
certified public accountant. A certified public accountant is liable for civil
damages in connection with public accounting services performed by the certified
public accountant only in 1 of the following situations:
***
(b) An act, omission, decision, or conduct of the certified public accountant that
constitutes fraud or an intentional misrepresentation.
5
We acknowledge that fraud does not necessarily fall within MCL 600.5838, which, as noted
earlier, indicates that a malpractice claim accrues “at the time [the professional] discontinues
serving the plaintiff in a professional . . . capacity as to the matter out of which the claim for
malpractice arose.” Nevertheless, we are convinced that at the time of closing, the elements of
defendant’s fraud claim were sufficiently established such that the claim accrued as of that date.
Indeed, while the full extent of the damages may not have been incurred at that point, plaintiff,
by purchasing the allegedly troubled companies, had incurred at least some damages as of the
closing. See generally Connelly v Paul Ruddy’s Equipment Repair & Service Co, 388 Mich 146,
151; 200 NW2d 70 (1972) (“Once all of the elements of an action for personal injury, including
the element of damage, are present, the claim accrues and the statute of limitations begins to run.
Later damages may result, but they give rise to no new cause of action. . . .”).
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