Court Opinion

ID: 9615978
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:42:20.948782+00
Date Added: 2024-06-11T18:03:54.167373
License: Public Domain

SHEPARD, Justice,
dissenting.
In the words of the well-reasoned opinion of the trial court, “In 1978, Shoemaker and Interstate Mack entered into an agreement for the purchase, by Shoemaker of five million dollars ($5,000,000.00) worth of new and used trucks and trailers. The truck dealer, Interstate Mack, requested that MFC finance Shoemaker’s purchases and, agreed to stand behind Shoemaker’s obligations as guarantor.” Shoemaker agreed to submit audited financial statements and hired Smith Bailey & Company to perform audits for the years 1978, 1979 and 1980. The financial statements for the year 1980 were submitted by Smith Bailey & Company on March 17, 1981, and April 14, 1981.
Shoemaker purchased from Interstate Mack certain vehicles beginning in November 1978 and continuing to and including July 1980. Each vehicle was sold on individual installment sales contracts, each of which contracts were sold by Interstate Mack to MFC.
Shoemaker filed a bankruptcy petition on April 17, 1981, and MFC upon notice thereof engaged the service of Arthur Anderson & Company to furnish an independent report of Shoemaker’s financial condition. The Anderson report was received by MFC in June of 1981 and MFC has alleged that the Anderson report identified errors in the auditing of Shoemaker’s financial statements made by Smith Bailey & Company. MFC has alleged that the Shoemaker bankruptcy caused damage to MFC because it placed Interstate Mack in a position of financial distress.
On March 10, 1982, Interstate Mack filed an action against Smith Bailey & Company for negligent accounting services rendered in its auditing and statements in relation to Shoemaker’s financial condition. MFC’s instant lawsuit against Smith Bailey & Company was not filed until April 23, 1984.
MFC asserted its claims based on a number of theories including negligent misrepresentation, fraud, and breach of a contract of which MFC was a third party beneficiary. In my view the trial court correctly rejected MFC’s theories excepting that of negligent professional malpractice. There*13after MFC argued that the cause of action against Smith Bailey & Company did not arise until the filing of bankruptcy by Interstate Mack on September 9, 1983. Clearly all of the above events, with the exception of the bankruptcy of Interstate Mack, took place more than two years prior to the filing of the instant claim by MFC against Smith Bailey & Company.
The trial court held that MFC’s cause of action, if any, occurred upon the filing of the Shoemaker bankruptcy on April 17, 1981. The trial court relied upon Ralphs v. City of Spirit Lake, 98 Idaho 225, 560 P.2d 1315 (1977), that the critical information to trigger the running of the statute of limitations is knowledge of the fact of injury, not the full extent of that injury.
If as MFC alleges that it would not have purchased the contracts from Interstate Mack if it had known the true financial condition of Shoemaker, and hence was damaged by Smith Bailey & Company’s negligently prepared financial reports, it cannot be legitimately argued that after Shoemaker’s bankruptcy MFC still believed Shoemaker was in a sound financial condition, nor can it be legitimately argued that after the receipt of the Arthur Anderson audit that MFC still believed and relied upon the legitimacy of the Smith Bailey & Company reports.
As was well pointed out in the trial court’s decision, at the time of the Shoemaker bankruptcy, MFC immediately sustained damage in that it could not collect interest, attorney fees, or collection costs under the installment sales contracts it had purchased from Interstate Mack. I.C. § 5-219 in pertinent part provides:
“Within two (2) years:
“4. An action to recover damages for professional malpractice ... but in all other actions, whether arising from professional malpractice or otherwise, the cause of action shall be deemed to have accrued as of the time of the occurrence, act or omission complained of, and the limitation period shall not be extended by reason of any continuing consequences or damages resulting therefrom____” (Emphasis added.)
MFC complains of Smith Bailey’s financial reports as they relate to the financial condition of Shoemaker. It is simply inconceivable to me that when Shoemaker filed bankruptcy and Arthur Anderson allegedly pointed out errors in the Smith Bailey financial statements, that MFC was not on notice of the existence of a cause of action against Smith Bailey.
The majority bases its conclusion on Streib v. Veigel, 109 Idaho 174, 706 P.2d 63 (1985). In my view, Streib is clearly distinguishable from the instant case. There, plaintiff had no knowledge of the malpractice until the IRS assessment notice. Here, plaintiff, by its own statements and pleadings, was aware of the alleged malpractice no later than the receipt of the Arthur Anderson audit.
Also, I view MFC’s assertions that it was not damaged by Shoemaker’s bankruptcy to be spurious and a red herring. If MFC’s assertion is taken literally and at face value, then the negligence of Smith Bailey was not a causative factor in the damages MFC sustained from Interstate Mack’s bankruptcy.
I would affirm the decision of the trial court.