Title: McLaughlin v. Pannell Kerr Forster
Citation: 504 So. 2d 264
Docket Number: N/A
State: Alabama
Issuer: Alabama Supreme Court
Date: February 27, 1987

504 So. 2d 264 (1987)
M.V. McLAUGHLIN, et al.
v.
PANNELL KERR FORSTER, et al.
85-992.

Supreme Court of Alabama.
February 27, 1987.
James J. Duffy, Jr., and Dennis P. McKenna of Inge, Twitty, Duffy &amp; Prince, Mobile, for appellants.
Broox G. Holmes and David A. Bagwell of Armbrecht, Jackson, DeMouy, Crowe, Holmes &amp; Reeves, Mobile, for appellees.
HOUSTON, Justice.
This is a fraud action. A summary judgment was granted to the defendants on their affirmative defense that the action was time barred. The plaintiffs appeal. We reverse and remand.
This action was filed in April 1984, at which time fraud claims were governed by Alabama's one-year statute of limitations. See § 6-2-39(a)(5), Code 1975 (repealed by Act 85-39, Ala.Acts 1984-85, effective January *265 9, 1985; causes of action governed by that one-year statute were transferred to the two-year statute, § 6-2-38). This appeal involves the § 6-2-3 exception to the statute of limitations for fraud, which provides:
In Gonzales v. U-J Chevrolet Co., 451 So. 2d 244, 247 (Ala.1984), this Court held:
In State Security Life Insurance Co. v. Henson, 288 Ala. 497, 504, 262 So. 2d 745, 751 (1972), this Court wrote:
This Court has decided that under certain circumstances the time of the discovery of the fraud or the time the fraud should have been discovered can be determined as a matter of law. In so determining, this Court does not make delphic pronouncements, but has before it either uncontroverted evidence that plaintiffs had such notice. Davis v. Davis, 494 So. 2d 393 (Ala. 1986); Kelly v. Smith, 454 So. 2d 1315 (Ala. 1984); Retail, Wholesale, &amp; Department Store Employees Union, Local 453 v. McGriff, 398 So. 2d 249 (Ala.1981); Moulder v. Chambers, 390 So. 2d 1044 (Ala.1980); Seybold v. Magnolia Land Co., 376 So. 2d 1083 (Ala.1979), or uncontroverted evidence that a plaintiff, with the ability to read, had in his/her possession a document from which the fraud could have been ascertained by a simple investigation, Colafrancesco v. Crown Pontiac-GMC, Inc., 485 So. 2d 1131 (Ala.1986); Cooper Chevrolet, Inc. v. Parker, 494 So. 2d 386 (Ala.1985); Gonzales v. U-J Chevrolet Co., supra; Sexton v. Liberty National Life Ins. Co., 405 So. 2d 18 (Ala.1981).
The plaintiffs in this fraud action are shareholders in Ono Development Company, Inc., and Ono East, Inc., who on behalf of themselves and other shareholders of those companies, have brought suit against Pannell Kerr Forster, an independent certified public accounting firm and two of its CPA employees (the firm and the CPAs will be referred to as "defendants-accountants"), for misrepresentations made in connection with annual audits by defendants-accountants of Ono Development and Ono East relating to the improper manner in which commissions were paid to and by Jere Austill, Evan Austill, and Phillip Schock, three of the principal officers and directors of Ono Development.
Defendants-accountants moved for summary judgment "on the ground that as to the running of the statute of limitations there is no dispute as to any material fact."
The motion for summary judgment was not supported by affidavits. A defendant may file a motion for summary judgment with or without supporting affidavits. Rule 56(b), Ala.R.Civ.P. However, this motion, based on the statute of limitations defense, should not have been granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," showed that there was no genuine issue as to the statute of limitations defense.
The complaint, as amended, does not show on its fact that the claim is time-barred. *266 The only filing in this case, other than the complaint and the motion for summary judgment, is the motion to dismiss, which challenges plaintiffs' standing under Rule 23.1, Ala.R.Civ.P., "Derivative Actions by Shareholders," and which does not raise the statute of limitations defense.
There were no depositions taken, interrogatories propounded or answered, or admissions made in this case insofar as this court can determine from the record.
Five exhibits are attached to the motion for summary judgment. We first must determine whether it was permissible for the trial court to consider any of these exhibits in ruling on the motion. Welch v. Houston County Hospital Board, 502 So. 2d 340 (Ala.1987).
The first exhibit was what purported to be minutes of a July 27, 1973, stockholders' meeting of Ono Development. These were not authenticated or certified in any way, and their authenticity was not established by the sworn testimony of a custodian. Ordinarily these minutes could not be considered by the trial court in ruling on this motion. However, in the motion for summary judgment it was asserted that these minutes were offered in evidence in the trial of McLaughlin v. Austill, CV-84-832-Z, in the same court as that in which the motion for summary judgment was pending. Likewise, Exhibit B was the docket sheet in that prior proceeding, and Exhibits C, D, and E were designated pages from depositions taken in that prior proceeding.
In Garrett v. Gilley, 488 So. 2d 1360 (Ala. 1986), this Court wrote:
488 So. 2d  at 1362.
Having reviewed these minutes, the docket sheet, and the designated pages from the depositions, we are not persuaded that the time of the discovery of the fraud or the time the fraud should have been discovered can be determined as a matter of law.
Defendants-accountants were not parties to the McLaughlin v. Austill lawsuit. It appears from the record before us that that lawsuit, and the proceedings at the July 27, 1973, stockholders' meeting *267 involved the acquisition by the Austills and Schock of a certain corporate opportunity which should have inured to Ono Development. The suit was a successful attempt to recapture for Ono Development the stock of the Austills and Schock in Ono East. It appears to us that that previous lawsuit involved questions relating to the acquisition and holding of Ono East stock and did not involve questions of how commissions were being paid to the Austills and Schock on sales of lots which they made for Ono Development. We cannot say as a matter of law that the plaintiffs should have discovered the fraud of the defendants-accountants during the course of the McLaughlin v. Austill lawsuit. The annual audits are the very things which persons of ordinary prudence would rely on to determine if the principal officers and directors are properly discharging their fiduciary duty. To hold as a matter of law that stockholders have a duty to discover misrepresentations in unqualified audit reports prepared by reputable CPAs, merely because the stockholders had employed attorneys to represent them in a complicated action, not directly involving the matters allegedly misrepresented, would go farther than this Court has gone or is willing to go.
The plaintiffs filed the following affidavit of Shelby Trice, a CPA retained by plaintiffs' attorney to review the corporate records and to testify in the preceding lawsuit, in opposition to the motion for summary judgment:
This suit was filed within one year of April 26, 1983. The trier of fact may determine that the plaintiffs "ought to or should have discovered" more than one year before this action was filed "facts which would provoke inquiry by a person of ordinary prudence, and, by simple investigation of the facts, the fraud would have been discovered." Gonzales v. U-J Chevrolet Co., supra; but this cannot be determined as a matter of law from the record before us.
The trial court erred in granting summary judgment for defendants-accountants on their statute of limitations defense.
REVERSED AND REMANDED.
TORBERT, C.J., and MADDOX, SHORES and BEATTY, JJ., concur.
[1]  Act 85-39, Ala.Acts 1984-85, effective January 9, 1985, also changed the "one year" provision in § 6-2-3 to "two years."