Krohn v. Sarna CA2/6

Filed 10/13/15 Krohn v. Sarna CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

SHELLEY KROHN, as Trustee in 2d Civil No. B257183 Bankruptcy, (Super. Ct. No. 56-2013- 00442256-CU-PN-VTA) Plaintiff and Appellant, (Ventura County)

v.

DENNIS SARNA et al.,

Defendants and Respondents.

When a series of development projects soured, the secured lenders foreclosed on the properties and obtained judgments against the contractor and developer, debtor William Plise, for the deficiency balance. In the instant case, the bankruptcy trustee sued an accountant and his firm (collectively, Sarna) for alleged negligence in preparing the financial statements and tax returns upon which Plise relied when applying for the development loans. The trial court granted summary judgment for Sarna based on the two-year statute of limitations. The sole issue before us is whether Plise had constructive notice of Sarna's alleged negligence at the time he was sued by the secured lenders. We conclude that he did and therefore affirm the judgment.

FACTS AND PROCEDURAL HISTORY Plise controlled a corporate entity that owned 126 acres of real property in Henderson, Nevada (the City Crossing property). Plise divided the City Crossing property into 15 parcels, which he distributed among 15 companies that he created (the City Crossing entities). The City Crossing entities obtained development loans secured by the City Crossing property and personally guaranteed by Plise. In deciding to apply for the loans, Plise allegedly relied on financial statements and tax returns prepared by Sarna that "grossly exaggerated" the City Crossing entities' assets and income. When the City Crossing entities ran out of funds before the development project was complete, the lenders foreclosed on their security interests. In addition, they sued Plise for breach of contract and fraud, obtaining judgments against him for the deficiency balance. Plise subsequently filed for bankruptcy. More than two years after the first of the judgments against Plise, the bankruptcy trustee sued Sarna for accounting malpractice.1 She alleged that Sarna was negligent in preparing the financial statements and tax returns. Sarna moved for summary judgment on the ground that the two-year statute of limitations had passed. The trial court granted the motion, finding that "Plise was on inquiry notice as to Sarna's wrongful conduct no later than [the date] when . . . the first action by a lender for a deficiency judgment resulted in judgment against Plise." DISCUSSION "We independently review the trial court's order granting summary judgment and determine if the undisputed facts establish that [Sarna] is entitled to judgment as a matter of law on its statute of limitations defense. [Citations.]" (Falk v. Children's Hospital Los Angeles (2015) 237 Cal.App.4th 1454, 1462.) As the parties recognize, the two-year statute of limitations for professional negligence (Code Civ. Proc., § 339, subd. (1)) governs causes of action for accounting malpractice. (Sahadi v. Scheaffer (2007) 155 Cal.App.4th 704, 707.) The suit must