Filed 9 13 96 pub order and mod filed 10 10 96 see end of opn CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA by krt15251

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									Filed 9/13/96; pub. order and mod. filed 10/10/96 (see end of opn.)

                         CERTIFIED FOR PUBLICATION

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                 DIVISION SIX


RICHARD W. TALLEY,                                  2d Civil No. B094669
                                                  (Super. Ct. No. 145098)
     Plaintiff and Appellant,                         (Ventura County)

v.

HENRIKSEN, BOBROWSKE & ANDREWS et
al.,

       Defendants and Respondents.



            Richard W. Talley (Talley) appeals from the summary
judgment granted respondents, the accounting firm of Henriksen,
Bobrowske & Andrews, and Paul Henriksen (Henriksen).            Talley
filed suit against respondents for negligent preparation of his
tax returns.    He alleged that Henriksen erred in the depreciation
claimed for a business airplane.        The trial court granted summary
judgment because the two-year statute of limitations had run on
the accounting malpractice action.           Talley contends there are
triable issues of fact regarding delayed discovery of
respondents' malpractice.       We disagree and affirm the summary
judgment.
                                     FACTS
            In 1987, Talley, a stockbroker, retained Henriksen to
prepare his income tax returns.        Henriksen prepared Talley's tax
returns for the 1986 through 1989 tax years.          Talley states that
Henriksen acted as his accountant until the summer of 1992.
            In 1989, the Inte rnal Revenue Service (IRS) began
auditing Talley's 1987 tax return.        Later, the IRS broadened the
                                                                   2.

scope of its investigation to include Talley's 1988 tax return.
One of the issues raised by the IRS to Talley during 1989 was the
depreciation he claimed as the sole owner of an airplane.   Talley
jointly-owned the airplane with another individual.
          On January 28, 1992, the IRS sent a notice of
deficiency to plaintiff's home by certified mail regarding his
1987 tax return.   The notice specified the assessment of $4,985
in underpaid taxes, penalties and interest thereon.   On February
19, 1992, the IRS sent a notice of deficiency to plaintiff's home
by certified mail regarding Talley's 1988 tax return.   The 1992
notice specified additional taxes, penalties and interest Talley
owed to the IRS.   These notices stated that Talley had 90 days
from the respective notices to file a petition to contest these
deficiencies in the United States Tax Court.   The IRS found
Talley liable for payment of $7302.12 for the 1987 tax year and
for $25,028.04 for the 1988 tax year.
          On August 10, 1993, Talley filed an accounting
malpractice action against Henriksen for negligently preparing
his 1987 and 1988 tax returns.   The trial court dismissed the
action without prejudice because it was not properly served.     On
June 15, 1994, Talley filed the instant action alleging the same
malpractice against Henriksen.
          On March 6, 1995, Henriksen filed the instant motion
for summary judgment.   Henriksen asserted that Talley's action
was barred by the two-year statute of limitations applicable to
actions alleging accounting malpractice.   (Code Civ. Proc.,
§ 339, subd. 1.)   Henriksen maintained that Talley had actual and
constructive notice of the alleged negligent acts for more than
two years before he filed the instant complaint and that Talley
incurred actual, appreciable damages as a result of such
negligent acts more than two years before filing the complaint.
          After hearing the motion for summary judgment, the
trial court determined that Talley did not file the instant
action within two years of his receipt of the notices of
                                                                      3.

deficiency, and that respondents are entitled to summary judgment
as a matter of law.     (Code Civ. Proc., §   339, subd. 1;
International Engine Parts Inc. v. Feddersen & Co. (1995) 9
Cal.4th 606; McKeown v. First Interstate Bank (1987) 194
Cal.App.3d 1225, overruled on other grounds as discussed in
International Engine Parts, supra, at pp. 617-618.)        The trial
court entered judgment in the matter and this appeal ensued from
the judgment.
                                DISCUSSION
             We independently review the summary judgment granted to
respondents to determine whether there are any triable issues of
fact and whether respondents are entitled to summary judgment as
a matter of law.     ( Ann M. v. Pacific Plaza Shopping Center (1993)
6 Cal.4th 666, 673-674.)     "The purpose of the summary judgment
procedure is to penetrate through evasive language and adept
pleading and ascertain the existence or absence of triable
issues.   [Citations.]"    ( Chern v. Bank of America (1976) 15
Cal.3d 866, 873; accord     Ann M., supra, at p. 673.)
             First, we dispose of two procedural issues Talley
raises:   1.    Talley may not assign error to various evidentiary
objections for which he did not obtain rulings in the trial
court, and 2.     the statute of limitations is not tolled during
the pendency of his initial action which was dismissed without
prejudice.     (Code Civ. Proc., §   437c, subd. (c);   Wood v. Elling
Corp. (1977) 20 Cal.3d 353, 358-360.)
             The statute of limitations for an action asser    ting
accounting malpractice is two years.     (Code Civ. Proc., §     339,
subd. (1); International Engine Parts, Inc. v. Feddersen & Co.,
supra, 9 Cal.4th at p. 608;      Liberty Mut. Ins. Co. v. Harris,
Kerr, Forster & Co. (1970) 10 Cal.App.3d 1100, 1104.)       A cause of
action for accountant malpractice accrues as soon as the injured
party discovers, or should have discovered, the loss or damage
suffered.      ( International Engine Parts, supra, at pp. 608, 619;
                                                                    4.

accord Schrader v. Scott (1992) 8 Cal.App.4th 1679.)        The client
must also suffer actual injury from the negligence before the
cause of action can be established.     (    International Engine Parts,
supra, at pp. 608, 614.)     In a tax deficiency case, actual injury
occurs when the IRS provides its notice of tax deficiency,
penalties and interest.     ( Id., at pp. 617, 620, 622.)
          Accordingly, such an action may be brought after the
injured party both discovers, or with reasonable diligence should
have discovered, the accountant's negligence, and the party
sustains actual, appreciable harm as a result of the negligence.
(International Engine Parts, Inc. v. Feddersen & Co., supra, 9
Cal.4th at p. 619;    Schrader v. Scott, supra, 8 Cal.App.4th at p.
1686, fn. 2.)    Here, the IRS provided Talley with its notice of
deficiency on January 28, 1992.    Talley did not file the instant
action until June 15, 1994.
                     When Actual Appreciable Harm
                           is Deemed Sustained
          Although Code of Civil Procedure section 339,
subdivision 1 does not expressly require actual injury before the
statute of limitations commences, courts have interpreted the
statute to require it.    ( International Engine Parts, Inc. v.
Feddersen & Co., supra, 9 Cal.4th at pp. 608, 613-614, esp. fn.
1; see also Schrader v. Scott, supra, 8 Cal.App.4th at pp. 1679,
1684, 1687.)    Actual injury or harm from accountant malpractice
in tax deficiency cases occurs when the IRS provides its notice
assessing the deficiency.    The notice triggers the right of the
IRS to collect the amounts due.    (   International Engine Parts,
supra, at pp. 608-609, 612-613, 617, 620.)       Until the deficiency
is assessed it is only a contingency.       In   International Engine
Parts, our Supreme Court ruled that "[t]he use of the date of
deficiency assessment to mark the date of actual injury in
accountant malpractice cases provides the parties with a bright
line that, once crossed, commences the limitations period under
                                                                    5.

section 339, subdivision 1" even though injury may be clear
before such notice is provided in some cases.     (   Id., at p. 621-
622.)
          Here, actual appreciable inj ury occurred on January 28,
1992 and February 19, 1992, when the IRS provided Talley with its
notices of deficiency, penalties and interest by certified mail
for the 1987 and 1988 tax years.
                         Date to Discover Harm
          Talley argues that he has raised triable issues of fact
as to his claim that he did not discover the precise reason for
the assessed deficiency, the improper depreciation deductions for
the business airplane, until June 23, 1993.     We disagree.
          California courts have ruled that "'. . . a cause of
action for malpractice does not accrue until the plaintiff knows,
or should know, of the negligent act.     [Citation.]'"
International Engine Parts, Inc. v. Feddersen & Co., supra, 9
Cal.4th at p. 619;    Neel v. Magana, Olney, Levy, Cathcart &
Gelfand (1971) 6 Cal.3d 176, 179;      Schrader v. Scott, supra, 8
Cal.App.4th at p. 1686, fn. 2;     Electronic Equipment Express, Inc.
v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 848.)
          Under this delayed discovery rule, "the statute of
limitations begins to run when the plaintiff suspects or should
suspect that [his] injury was caused by wrongdoing, that someone
has done something wrong    . . . ."   ( Jolly v. Eli Lilly & Co.
(1988) 44 Cal.3d 1103, 1110.)    The statute begins to run when the
plaintiff "'"'has notice or information of circumstances to put a
reasonable person    on inquiry . . . .'"'   [Citations]"   ( Id., at
pp. 1110-1111; original italics.)
          "A plaintiff need not be aware of the specific 'facts'
necessary to establish the claim; that is the process
contemplated by pretrial discovery.     Once the plaintiff has a
suspicion of wrongdoing,    . . . , [he] must decide whether to file
suit . . . .   So long as a suspicion exists, it is clear that the
                                                                            6.

plaintiff must go find the facts; [he] cannot wait for the facts
to find [him]."    ( Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at
pp. 1110-1111.)    Where one becomes "aware of facts which would
make a reasonably prudent person suspicious, [he] had a duty to
investigate further, and [he is] charged with knowledge of
matters which would have been revealed by such an investigation."
(Miller v. Bechtel Corp. (1983) 33 Cal.3d 868, 875.)
             The date of discovery is deemed to be no later than the
date of actual harm.    (See   McKeown v. First Interstate Bank,
supra, 194 Cal.App.3d at p. 1230;      Budd v. Nixen (1971) 6 Cal.3d
195, 201.)    In cases concerning accountant malpractice, the date
of actual harm is deemed to be no later than the date the client
receives the notice of tax deficiency.       (     International Engine
Parts, Inc. v. Feddersen & Co., supra, 9 Cal.4th at p. 621 [date
of notice of deficiency deemed date of actual injury];           Schrader
v. Scott, supra, 8 Cal.App.4th at p. 1687.)          By that time, the
taxpayer has been through an exhaustive audit, has received
findings thereon, and has had the opportunity to protest the
findings at an appeals' hearing.      (See       International Engine
Parts, Inc., supra, at pp. 612-613.)         Such notice of assessment,
as here, states there is a deficiency, it states the amount
thereof and it shows how the IRS figured the deficiency.
             One may discover the harm before the notice of tax
deficiency assessment.    That is what happened here. Talley
declared that "[i]n 1989, my wife and I were 'audited'.         The
audit was extensive and focused on a variety of issues.               The
airplane I owned jointly was only one of several issues . . . ."
(Italics added.)    It is irrelevant that Talley may not have
discovered the precise reason for the assessment of tax
deficiency until June 1993.    He was placed on inquiry notice by
the IRS no later than 1989.    (See    Miller v. Bechtel Corp., supra,
33 Cal.3d at p. 875, fn. 6.)
                                                                    7.

          Even if he had not been placed on such notice, he would
be deemed to have discovered the harm no later than January 28,
1992, the date IRS provided certified notice of its assessment of
tax deficiency.   The filing of the instant complaint in June 1994
was untimely.
          We note that in some cases, allegations of negligent
misrepresentation or fraud may extend the statute.       (See
generally United States Liab. Ins. Co. v. Haidinger-Hayes, Inc.
(1970) 1 Cal.3d 586, 596.)   This is not such a case.      Here, aside
from Talley's discovery in 1989 that the IRS was concerned about
his deductions for the plane, Talley only pled negligence against
defendants in the instant suit.     It is irrelevant that Talley
also pled the conclusion that he "justifiably" relied on
defendants' assurances that his returns were properly prepared.
Although Henriksen admitted in his deposition that he never told
Talley that the IRS "had a problem with the plane        . . . ," th ere
are no factual allegations or evidence that defendants' conduct
was fraudulent.   Estoppel exists only when "a party has, by his
own statement or conduct, intentionally and deliberately led
another to believe a particular thing is true and to act upon
such belief . . . ."   (Evid. Code, § 623;     Ovadia v. Abdullah
(1994) 24 Cal.App.4th 1100, 1111;     Rinaldi v. Workers' Comp.
Appeals Bd. (1988) 199 Cal.App.3d 217, 223.)     No evidence is
proffered that defendants may have engaged in such conduct in the
instant case.
          Talley also argues that the statute of limitations
should be tolled as a result of Henriksen's continued
representation of him after February 1992.    Although
International Engine Parts did not reach the question of whether
the statute should be tolled during a period of continuous
representation, it did state, "We believe any broadening of the
continuous representation rule should come from the Legislature."
(International Engine Parts, Inc. v. Feddersen & Co., supra, 9
                                                                     8.

Cal.4th at p. 622.)      Presumably, our Legislature is aware of the
long-standing special limitations statutes regarding medical and
legal malpractice cases.      (See Code Civ. Proc., §§   340.5 and
340.6 enacted in 1970 and 1977, respectively.)      Section 340.6 not
only extended the statute of limitations for legal malpractice
actions, but it adopted the continuous representation rule.      Our
Legislature has declined to do so for accounting malpractice
cases.   We decline the invitation to create an exception to
section 339 in the instant case.
             The judgment is affirmed.   Costs to respondents.




                                   GILBERT, J.

We concur:



             STONE, P. J.



             YEGAN, J.
                                                                9.

                        Ken W. Riley, Judge

                 Superior Court County of Ventura

                  ______________________________


          Richard I. Wideman, for Plaintiff and Appellant.


           Randall J. Dean and Michael R. O'Neill, for Defendants
and Respondents.
                                                                     10.



                       CERTIFIED FOR PUBLICATION
                        [NO CHANGE IN JUDGMENT]

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                       SECOND APPELLATE DISTRICT

                              DIVISION SIX


RICHARD W. TALLEY,                               2d Civil No. B094669
                                               (Super. Ct. No. 145098)
     Plaintiff and Appellant,                      (Ventura County)

v.
                                              ORDER MODIFYING OPINION
HENRIKSEN, BOBROWSKE & ANDREWS et              AND DENYING REHEARING;
al.,                                       CERTIFICATION FOR PUBLICATION

      Defendants and Respondents.


THE COURT:
             It is ordered that the opinion filed herein on
September 13, 1996, be modified in the following particulars:
             On page 1, insert the following paragraph before the
first paragraph:
             When does the statute of limitations begin to run for
an action against an accountant for negligently preparing a tax
return?   When plaintiff receives a notice of tax deficiency from
the Internal Revenue Service (IRS).    (     International Engine Parts,
Inc. v. Fedderson & Co. (1995) 9 Cal.4th 606.)       That is also the
date on which the plaintiff suffers harm and knows or should know
that his accountant may have caused the harm.
             On page 2, the first line of the second full paragraph,
delete "Internal Revenue Service (IRS)" and insert "IRS" so that
the sentence reads:
             In 1989, the IRS began auditing     Talley's 1987 tax
return.
                                                                 11.

          On page 3, line 6 of the first full paragraph,
reference to International Engine Parts is changed to read:
          International Engine Parts, Inc. v. Fedderson & Co.,
supra, 9 Cal.4th 606.
          On page 7, first full paragraph, first sentence, the
word "even" is to be inserted between the words "harm" and
"before" so that the sentence reads:
          One may discover the harm even before the notice of tax
deficiency assessment.
          On page 7, before the first full paragraph, insert a
new paragraph which reads:
          In International Engine Parts , the accountant admitted
his negligence during the audit by the IRS, several years before
the notice of tax deficiency.   Here there was no such admission.
It does not matter.   The result is the same.   The notice of tax
deficiency satisfies both prongs of    International Engine Parts .
          Appellant's petition for rehearing is denied.
          The opinion in the above entitled matter filed
September 13, 1996, was not certified for publication in the
Official Reports.   For good cause it now appears that the opinion
should be published in the Official Reports and it is so ordered.
          There is no change in judgment.

								
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