By this action commenced on August 5, 1975, the plaintiff seeks to shift to a firm of certified public accountants (accounting firm) the losses sustained by the plaintiff on certain investments made by it in 1967 and 1968 while acting on the advice of the defendant Hurwitz (defendant), a member of the accounting firm. The amended complaint alleges negligence and breaches of contractual and fiduciary relationships on the part of the defendant and includes a claim under G.L.c. 93A, § 11. The trial judge found for the defendants on all the counts of the complaint, and the plaintiff has appealed from the ensuing judgment of dismissal. We affirm the judgment, although not for all the reasons relied on by the judge. The following is a partial summary of the salient facts found by the judge and by us (see Fales v. Glass, 9 Mass.App.Ct. 570, 571 , and cases cited) which are material to our disposition of the case.
The plaintiff is a corporation primarily engaged in the manufacture of optical equipment, with its principal place of business in North Brookfield. The business was founded in 1945 by Frank Cooke, who was and is the plaintiff's president and the only person responsible for its management. In 1960 the plaintiff, acting on the advice of a member of its regular law firm (law firm), retained the accounting firm to do the plaintiff's accounting work. Substantially all that work was thereafter performed by or under the supervision of the defendant, who dealt directly with Cooke.
The defendant's services to the plaintiff were originally confined to accounting matters, but by the mid-1960's Cooke and the defendant had developed a close business relationship and the defendant's advice and services became more wide ranging. At that time Cooke was sitting on the local advisory boards of two banks and had become aware of the substantial amounts which could be earned through investment of idle funds. He expressed to the defendant his interest in investing a large sum belonging to the plaintiff which was not needed in its business and which was earning little or no return. Cooke asked the defendant whether he could
In 1966 the defendant advised Cooke that a local businessman in Worcester by the name of John R. Moynagh, Jr., was desirous of borrowing a substantial sum of money at an attractive rate of interest. The defendant told Cooke that Moynagh was his friend and client, that Moynagh ran a successful and profitable business, that he was well respected in the business community and had received substantial bank loans, but that he had reached his borrowing limits at the banks and was therefore looking for other sources of credit. The defendant expressed the opinions that Moynagh had sufficient collateral and that in view of the proposed rate of return a loan to Moynagh seemed to be the kind of investment in which Cooke was interested. As a result of their discussion the defendant arranged a $95,000 loan from the plaintiff to Moynagh and a business associate of the latter. The loan was repayable in ninety days, bore interest at the rate of twelve percent per annum and was secured by a pledge of shares of the capital stock of BSF Corporation (BSF). The loan was not repaid when due, but Cooke agreed to extend the time for payment and the loan was subsequently paid in full, with interest.
In 1967 the defendant learned that Moynagh was again in need of a loan. Moynagh held certain instalment notes of
On April 25, 1967, the plaintiff made a $57,000 loan to Moynagh which was evidenced by a note payable in monthly instalments, with interest at the rate of eleven percent per annum on the unpaid balance. The note recited as security four Overmeyer notes in the aggregate face amount of $56,855.29 and mortgages said to secure those notes. The defendant drafted and Moynagh executed a preliminary assignment of the Overmeyer notes to the plaintiff; a few days later Moynagh executed definitive assignments which had been prepared by Mr. Wolfson. The defendant placed the Moynagh note, the Overmeyer notes and the assignments of the latter in the plaintiff's safe deposit box. The mortgages referred to in the Moynagh note, if they ever existed, were never assigned to the plaintiff, and Overmeyer was never notified that its notes had been assigned to the
Late in 1967 Cooke told the defendant that he was interested in making further investments which would earn the plaintiff a rate of return comparable to that earned on the initial loan to Moynagh. The defendant agreed to inform Cooke if he should discover such an opportunity, and when Moynagh told the defendant of his need for a short term loan of $35,000, the defendant relayed that information to Cooke. The defendant informed Cooke that a piece of real estate owned by Moynagh was being taken by the Worcester Redevelopment Authority (WRA) and that Moynagh wanted a loan pending completion of the taking and payment therefor by the WRA. The possibility of obtaining a second mortgage on the real estate as security for the proposed loan was broached, but no such mortgage was actually executed or recorded until July of 1969.
In early 1968 Cooke was contacted by an Assistant United States Attorney in Boston who was participating in a grand jury investigation into the affairs of one of the promoters of BSF and who asked Cooke for information as to the plaintiff's possible involvement in the affairs of that corporation, some of the shares of which had been pledged as collateral for the initial $95,000 loan to Moynagh and his business associate. Cooke, who at the time of making that loan had
In July of 1969 the defendant learned that the mortgage supposedly securing the $35,000 loan to Moynagh had only then been recorded and that no title search had been done in connection therewith. Such a search would have revealed the fact that Moynagh had conveyed out his interest in the real estate in question in May of 1968, approximately four months after the $35,000 loan was made. In 1970 or 1971 the WRA completed its taking of the real estate, and the plaintiff discharged the mortgage which had been recorded in 1969. The net amount Moynagh received from the WRA was only $18,000, no part of which was ever paid to the plaintiff.
In early 1970 the defendant learned from Moynagh that Overmeyer, which he knew had been making payments directly to Moynagh on the notes which supposedly secured the $57,000 loan, had begun to resist payment of those notes and that litigation with respect thereto was likely to ensue. The defendant did not advise either Cooke or the plaintiff's
The defendant continued to provide accounting services to the plaintiff until 1975. He met with Cooke periodically to review the plaintiff's financial situation, and at least annually he prepared unaudited balance sheets and profit and loss statements for the plaintiff. The two outstanding loans to Moynagh were reflected in the financial statements, as was the fact that payments were not being received on the loans; but as the defendant believed that the loans would be repaid, he gave no indication in the statements that they were of doubtful collectibility. The defendant had also prepared annual financial statements for Moynagh for the years 1966 through 1971, during which Moynagh's business appeared to be prosperous. The condition of that business deteriorated sharply during 1972. During the summer of 1973 (several months after he had completed and submitted the plaintiff's financial statements for the fiscal year 1972) the defendant, while engaged in the preparation of Moynagh's financial statements for calendar 1972, learned facts from which he should have concluded that unsecured obligations of Moynagh might not be collectible. Nothing learned was reflected in any of the financial statements subsequently submitted to the plaintiff. Events which came to the attention of the defendant in 1974 furnished ample additional evidence of Moynagh's financial plight. In 1975 Moynagh filed a voluntary petition in bankruptcy. The present action was commenced several months later.
Further facts, or the absence thereof, will appear at later points in this opinion.
The general rules are that a cause of action in contract accrues at the time of the breach (Boston Tow Boat Co. v. Medford Natl. Bank, 232 Mass. 38, 41 ; Campanella & Cardi Constr. Co. v. Commonwealth, 351 Mass. 184, 185 ) and that a cause of action in tort accrues at the time of the injury to the plaintiff (Cannon v. Sears, Roebuck & Co., 374 Mass. 739, 740-743 ). However, there are situations in which a cause of action in either contract or tort which is based on an inherently unknowable wrong may not accrue until the person injured knows or in the exercise of reasonable diligence should know the facts giving rise to the cause of action. See, e.g., Hendrickson v. Sears, 365 Mass. 83, 88-91 (1974); Friedman v. Jablonski, 371 Mass. 482, 484-487 (1976); Nantucket v. Beinecke, 379 Mass. 345, 350 (1979). Further, the statute of limitations may be tolled under G.L.c. 260, § 12, if the wrongdoer, either through actual fraud or in breach of a fiduciary duty of full disclosure, keeps from the person injured knowledge of the facts giving rise to a cause of action and the means of acquiring knowledge of such facts. See Nudd v. Hamblin, 8 Allen 130, 133-134 (1864); Brackett v. Perry, 201 Mass. 502, 505 (1909); Stetson v. French, 321 Mass. 195, 196-199 (1947); Tracerlab, Inc. v. Industrial Nucleonics Corp., 313 F.2d 97, 101-102 (1st Cir.1963) (decided under Massachusetts law).
(a) The defendants contend that many of the causes of action alleged by the plaintiff accrued prior to August 5, 1969, and that all claims based thereon were barred by either or
If it be assumed that the plaintiff reasonably relied on the defendant for investment advice and services, the alleged shortcomings in such advice and services would not have been apparent without an unreasonable degree of surveillance by the plaintiff. Compare Hendrickson v. Sears, 365 Mass. at 90; Friedman v. Jablonski, 371 Mass. at 486-487.
In the absence of a fiduciary duty of full disclosure, the period of limitations was not tolled under G.L.c. 260, § 12, unless the defendant concealed the existence of a cause of action through some affirmative act done with intent to deceive. Stetson v. French, 321 Mass. at 198, and cases cited. The judge found that until the summer of 1973 the defendant knew no more about the doubtful collectibility of
We conclude that no cause of action in contract or tort arising out of the investment advice and service rendered by the defendant prior to the summer of 1969 was saved under G.L.c. 260, § 12, and that each such cause was barred by G.L.c. 260, §§ 2 and 2A.
(b) We now turn to the question whether certain other claims sounding in tort were barred by the two-year period of limitations found in G.L.c. 260, § 2A, as then in effect. The plaintiff contends that the defendant was negligent in failing to inform it or its law firm that Overmeyer was resisting payment of its notes and that litigation with respect thereto was likely to ensue; that the defendant, upon learning that no title search had been done on the real estate which was supposed to have secured the $35,000 loan, should have undertaken to obtain such a search; and that the defendant should also have undertaken to protect the plaintiff's interests when that real estate was finally taken by the WRA.
In asserting these claims the plaintiff had the benefit of the usual rule that a cause of action in tort does not accrue until the plaintiff sustains some injury as the result of a wrongful act on the part of the defendant. See Sullivan v. Old Colony St. Ry., 200 Mass. 303, 307-308 (1908); Cannon v. Sears, Roebuck & Co., 374 Mass. at 740-743. Conversely,
We are thus led to an inquiry as to when the plaintiff's losses were sustained. On this question the judge found only that the collectibility of the $57,000 note had become "doubtful" by the summer of 1973 and that the defendant should have known by some time in 1974 that the "$35,000 note was of doubtful value because at that time he knew about Moynagh's financial difficulties and he did not think the note was properly secured." The available evidence is much more explicit. The last of the Overmeyer notes securing Moynagh's note for $57,000 was paid off in January of 1972; the WRA settled its liability for the taking of the real estate which was supposed to have been security for the $35,000 note some time in 1970 or 1971; and the last complete financial statements for Moynagh's principal business disclose that it had a $63,322.46 net operating loss during the year ending December 31, 1972, and a net worth of only $268.70 on that date.
We conclude that the plaintiff failed to sustain its burden of proving that any of the losses complained of was suffered during but not before the two-year period immediately preceding the commencement of the present action on August 5, 1975. On the record, there is no more basis for invoking the provisions of G.L.c. 260, § 12, with respect to the claims considered in this part of our opinion than there was with respect to the claims considered in part (a) hereof. Accordingly, we hold that all claims set out in this part were barred by G.L.c. 260, § 2A.
2. The plaintiff also asserts a claim in the nature of accounting malpractice which is grounded principally on the contentions that the defendant should have discovered during the course of preparing Moynagh's financial statements for the calendar year 1971 that Overmeyer was paying its
3. Finally, the plaintiff asserts a claim under G.L.c. 93A, § 11, arising out of the defendant's failure to disclose Moynagh's deteriorating financial condition and his representing to the plaintiff that the loans were collectible. The judge found that the defendant made "no intentional or negligent misrepresentation at a time when the plaintiff probably [c]ould have collected on the notes if the plaintiff had accurately understood Moynagh's financial condition." That finding was amply supported by the evidence summarized in part 1(b) hereof. General Laws c. 93A, § 11, inserted by St. 1972, c. 614, § 2, and as subsequently amended, has always been explicit on the point that a plaintiff proceeding under that section must show that he has suffered a "loss of money or property ... as a result of the use or employment by another person ... of ... an unfair or deceptive act or practice." Frank J. Linhares Co. v. Reliance Ins. Co., 4 Mass.App.Ct. 617, 620-621 (1976) (1976). Compare Baldassari v. Public Fin. Trust, 369 Mass. 33, 44-46 (1975) (decided under G.L.c. 93A, § 9, as amended