Head v. Gould Killian Cpa Grp., P.A.
371 N.C. 2
| N.C. | 2018Background
- Karen Head hired CPA G. Edward Towson II / Gould Killian to prepare her tax returns (2005–2010). Defendants timely filed 2005 returns but 2006–2009 returns were not filed until 2012.
- From Aug 2011–Sept–Oct 2012 plaintiffs received IRS notices that 2006–2007 returns were not filed; Towson repeatedly represented he was handling the issue and communicated with the IRS or Taxpayer Advocate Service.
- Plaintiff informed Towson in Sept 2011 she was switching accountants, but Towson continued to work on her tax matters, requested a power of attorney, and later obtained signatures for 2006–2007 return pages; actual filings occurred 28 Sept and 18 Oct 2012.
- Plaintiff sued (Nov 2013) for professional negligence and fraudulent concealment (seeking compensatory and punitive damages). Defendants moved for partial summary judgment arguing fraud failed for lack of reasonable reliance and the four‑year statute of repose barred negligence for 2006–2007.
- Trial court granted partial summary judgment for defendants on fraud, punitive damages, and repose for 2006–2007; Court of Appeals split; the Supreme Court reviewed and addressed both the fraudulent concealment claim and the repose inquiry.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent concealment (actual and constructive fraud) — did genuine issue exist to survive summary judgment? | Head: Towson knowingly misrepresented filing/status, she reasonably relied on him while he continued to act on her behalf. | Defendants: Head could have learned the truth by exercising reasonable diligence (reading instructions, asking, contacting IRS, hiring another CPA); no duty after termination. | Reversed summary judgment — genuine issues of material fact exist as to both actual and constructive fraud; fraud and related punitive damages survive. |
| Scope of professional engagement — when did defendants' contracted duty end (i.e., last act) for statute of repose? | Head: Contracted services included preparing/filing and negotiating with IRS; last act was filing in Sept–Oct 2012, so repose not triggered earlier. | Defendants: Last act occurred when they delivered returns/filing instructions earlier (2008), so repose bars 2006–2007 claims. | Affirmed Court of Appeals on this issue — genuine issues of material fact exist about scope and timing; summary judgment on repose improper. |
| Whether reliance was reasonable given plaintiff's notice she had terminated engagement Sept 27, 2011 | Head: Despite notice, Towson continued performing acts (filed 2010 return Nov 2011, sought POA, obtained signatures) creating reasonable reliance. | Defendants: Plaintiff’s termination and hiring of new CPA ended any ongoing duty; misrepresentations were after termination. | Court found evidence of continued professional relationship and misleading communications sufficient to create triable issues on reasonable reliance. |
| Procedural pleading of constructive fraud (concurring/dissenting point) | Head: Constructive fraud may be supported by the record and should be considered on remand. | Defendants: Plaintiff failed to plead constructive fraud with particularity under Rule 9(b), so she cannot pursue that theory now. | Concurrence would bar constructive fraud on procedural grounds; majority allows constructive‑fraud theory to proceed because genuine factual disputes exist (but Justice Beasley would limit it). |
Key Cases Cited
- Ussery v. Branch Banking & Tr., 368 N.C. 325, 777 S.E.2d 272 (2015) (summary judgment de novo standard and appellate review)
- Dobson v. Harris, 352 N.C. 77, 530 S.E.2d 829 (2000) (nonmovant’s facts taken as true on summary judgment)
- Terry v. Terry, 302 N.C. 77, 273 S.E.2d 674 (1981) (distinguishing actual and constructive fraud)
- Watts v. Cumberland Cty. Hosp. Sys., Inc., 317 N.C. 110, 343 S.E.2d 879 (1986) (elements and standard for constructive fraud)
- Forbis v. Neal, 361 N.C. 519, 649 S.E.2d 382 (2007) (reasonableness of reliance in fraud claims)
- Dallaire v. Bank of Am., 367 N.C. 363, 760 S.E.2d 263 (2014) (definition and features of fiduciary relationships)
- Hargett v. Holland, 337 N.C. 651, 447 S.E.2d 784 (1994) (statute of repose principles and last‑act test)
- Christie v. Hartley Constr., Inc., 367 N.C. 534, 766 S.E.2d 283 (2014) (plaintiff’s burden to rebut repose defense)
- Sunbow Indus., Inc. v. London, 58 N.C. App. 751, 294 S.E.2d 409 (1982) (contract scope can create continuing duties that delay repose)
- Rhodes v. Jones, 232 N.C. 547, 61 S.E.2d 725 (1950) (elements to plead constructive fraud)
- Abbitt v. Gregory, 201 N.C. 577, 160 S.E. 896 (1931) (trust/confidence and domination as elements of fiduciary relationship)