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CDT8/25/2000
REVERSED AND REMANDED
In this accounting malpractice action, appellant CDT, Inc., challenges the trial court's order granting summary judgment in favor of appellees Addison, Roberts & Ludwig, P.C., and several of its individual shareholders (collectively, ARL) on statute of limitations grounds. We reverse.
BACKGROUND
Although most of the pertinent facts are essentially undisputed, we view the evidence and all reasonable inferences in the light most favorable to the party against whom summary judgment was entered. Doe v. Roe, 191 Ariz. 313, , 955 P.2d 951, (1998); Logerquist v. Danforth, 188 Ariz. 16, 18, 932 P.2d 281, 283 (App. 1996). CDT provides photocopying services in Arizona, California, Illinois , and Texas through the use of coin- or card- operated photocopy machines. In 1981, CDT hired Cox, an accounting firm, to provide accounting, auditing, and tax services, as well as management, financial, and tax advice, to CDT. In 1982, CDT expanded its business operations to California. From 1982 to 1990, Cox was responsible for ensuring that CDT was qualified to do business in California and operating in compliance with California tax laws. In late 1989 or early 1990, CDT terminated Cox's services and retained ARL, which provided accounting, auditing, and tax services for CDT's California activities through 1994.
In December 1994, the California State Board of Equalization (CSBE) began a routine audit of CDT's California use tax account for the period October 1986 through December 1994. Based on its position that CDT was obligated to pay sales tax on its California copy machine sales during that period, CSBE audited CDT's records for one week in March 1995. At the conclusion of the audit, a CSBE field investigator orally informed CDT that he "believed had a substantial tax liability." The auditor also informed CDT that "he intended to recommend that be assessed an intentional evasion penalty of 50% of the unpaid tax." In January 1996, the field investigator issued a written recommendation to CSBE, urging it to find CDT liable for unpaid taxes, interest, and penalties totaling over $3.2 million. CSBE formally adopted that recommendation and assessed that amount in a "Notice of Determination" issued to CDT in April 1996.
CDT contested the tax assessment through a series of administrative hearings. In addition, in September 1996, CDT filed this action against Cox. On July 9, 1997, CDT amended its complaint to add ARL as a defendant. As it had with Cox, CDT alleged claims for accounting malpractice, breach of fiduciary duty, negligent misrepresentation, and breach of contract against ARL. ARL moved for partial summary judgment on the first three counts, contending the two-year statute of limitations in A.R.S. ยง 12-542 barred those claims. In granting the motion, the trial court reasoned:
After the March 1995 audit by the CSBE, the plaintiff knew or should have known that the defendant was negligent in not detecting the plaintiff's failure to pay California sales tax for the period of October 1, 1986, through December 31, 1994. The plaintiff also had knowledge that it had suffered appreciable non-speculative damage as a result of the defendants' negligent conduct because of the auditor's March 1995 determination that the plaintiff had substantial sales tax liability and would likely face severe penalties. Whether the plaintiff would ultimately be legally required to pay this liability and the precise calculation of amounts due and owing is irrelevant to this Court's determination of the accrual of the plaintiff's cause of action.
This appeal followed the trial court's denial of CDT's motion for reconside
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