Blumberg v Altman

[*1] Blumberg v Altman 2007 NY Slip Op 51060(U) [15 Misc 3d 1140(A)] Decided on May 25, 2007 Supreme Court, New York County Stallman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 25, 2007
Supreme Court, New York County

Theodore L. Blumberg, Plaintiff,

against

Harvey M. Altman and Harvey Altman & Co., CPA, P.C., Defendants.



118264/06



For Plaintiff:

Theodore L. Blumberg

Plaintiff Pro Se

230 Park Avenue, Suite 1000

New York, New York 10169

For Defendants:

Martin Clearwater & Bell, LLP

By: Michael F. Lynch, Esq.

220 East 42nd Street

New York, New York 10017

Michael D. Stallman, J.

Upon the foregoing papers, it is ordered that defendants' motion to dismiss the complaint is granted to the extent that the first, third, and fourth causes of action are dismissed as duplicative of the second cause of action, and is otherwise denied; and it is further ordered that the cross motion for summary judgment is denied.

In this action, plaintiff pro se alleges that defendants agreed to prepare plaintiff's city, state, and federal tax returns for the tax years 2004 and 2005. According to plaintiff, defendants filed the returns late and did not obtain an extension for filing for the tax year 2005, causing plaintiff to incur penalties, interest, and late fees. Plaintiff claims that when he inquired about the 2005 extension, defendants alleged told him that an extension had been filed, but no extension was allegedly obtained. The complaint alleges causes of action for negligence, malpractice, fraud, and breach of fiduciary duty.

As defendants point out, the causes of action for negligence, fraud, and breach of fiduciary are duplicative of the cause of action for malpractice. See e.g. Wolkstein v Morgenstern, 275 AD2d 635, 637 (1 Dept 2000). These other causes of action are predicated on the same set of allegations and allege the same injury.

The complaint states a cause of action against defendants for accounting malpractice, based on their alleged failure to file returns on time and to obtain any necessary extensions of the filing deadline. Defendants' reliance on McMahan v Commr. of Internal Revenue (114 F3d 366 [2d Cir 1997]) is misplaced. The fact that a taxpayer has a non-delegable duty to file returns on time does not foreclose any remedies against a tax preparer or accountant engaged to prepare those returns on the taxpayer's behalf. The Court in McMahan specifically stated, "McMahan may well be able to recover the amount of the penalty he must pay from his attorney through a malpractice action or a claim for breach of fiduciary duty under state law." McMahan, 114 F3d 366 at 371.

(Continued . . . ) [*2]

Although New York courts are familiar with accounting malpractice based on late filings (Ecker v Zwaik & Bernstein, P.C. 240 AD2d 360 [2d Dept 1997]; MTG Enter. v Berkowitz, 182 AD2d 388 (1st Dept 1992), it appears that they have not had occasion to reach the issue of whether an accountant's failure to file returns on time and file the appropriate extensions states a valid cause of action for accounting malpractice. However, courts in other jurisdictions have expressly recognized these allegations as a valid cause of action. See e.g. Jerry Clark Equip. Inc . v Hibbits, 245 Ill App 3d 230 (1993) (failure to prepare corporate return); Consolidated Mgt. Serv., Inc. v Halligan, 186 Ga App 621 (1988) (failure to file personal and corporate returns and form 1099); Cameron v Montgomery, 225 NW2d 154 (Iowa 1975) (late estate tax return); L.B. Lab., Inc. v Mitchell, 39 Cal 2d 56 (1952) (late corporate tax return).

Penner v Hoffberg, Oberfest, Burger & Berger (303 Ad2d 249 [1st Dept 2003]) is distinguishable. There, the Court dismissed a cause of action based on an accountant's alleged failure to submit quarterly tax vouchers to the taxpayer's attention, thus alerting him of estimated payments due. To accept defendants' broad reading of Penner would amount to holding that tax preparers and accountants are not liable for any malpractice that results in a failure to file tax returns on time, even though a tax preparer or accountant may have been specifically engaged to prepare and file the tax returns.

As defendants point out, plaintiff is not entitled to recover as damages the interest payments due to the IRS, because "such interest was not damages suffered by plaintiff but rather was a payment to the IRS for his use of the money during the period of time when he was not entitled to it." Alpert v Shea Gould Climenko & Casey, 160 AD2d 67, 72 (1st Dept 1990). However, this rationale does not apply to any penalties that plaintiff may have incurred for failing to file or for failing to pay in full. Thus, defendants have not shown that, as a matter of law, the element of damages has not been adequately pled.

Lastly, the documentary evidence does not conclusively establish that defendants filed and obtained an tax filing extension for tax year 2005.

Plaintiff's cross motion is denied without prejudice. Inasmuch as plaintiff did not include a copy of the answer to his moving papers, it appears that summary judgment is premature. The branch of plaintiff's motion for leave to amend is also denied, because plaintiff does not attach a copy of the proposed amended complaint. Goldner Trucking Corp. v Stoll Packing Corp., 12 AD2d 639 (2d Dept 1960).

The parties are directed to appear at a preliminary conference on July 19, 2007 at 9:30 am in IAS Part 7, 111 Centre St Rm 949. Copies to counsel. [*3]

Dated: 5/25/07s/

J.S.C.