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08/24/93 RUDY LEHNIG AND KAY LEHNIG v. NORBERT

August 24, 1993

RUDY LEHNIG AND KAY LEHNIG, PLAINTIFFS/APPELLANTS,
v.
NORBERT BORNHOP AND FRANK CONARD, DEFENDANTS/RESPONDENTS.



Appeal from the Circuit Court of the County of St. Charles. Hon. Donald E. Dalton.

Crahan

The opinion of the court was delivered by: Crahan

Rudy and Kay Lehnig ("Plaintiffs") appeal from the trial court's order sustaining Norbert Bornhop and Frank Conard's ("Defendants") motion to dismiss their claims with prejudice on the ground that they were barred by the applicable statute of limitations. We reverse and remand.

In reviewing the dismissal of a petition, we allow the pleading its broadest intendment, treat all facts alleged as true, and construe the allegations favorably to the plaintiffs. Martin v. Crowley, Wade & Milstead, Inc., 702 S.W.2d 57, 57 (Mo. banc 1985).

Plaintiffs' petition alleges that Defendant Conard, an attorney, suggested that they invest in a low risk limited partnership to shelter their earnings from taxes. Plaintiffs invested a total of $30,000. Conard made Plaintiffs' investments in Glenco Partners, Ltd. through a partnership known as Fairways Investment Company. Defendant Bornhop, an accountant, was the general partner of Fairways. Periodically, over the next few years, Plaintiffs asked Conard how their investment was doing. Conard assured them that everything was "going alright."

Sometime before July 30, 1986, the IRS notified Plaintiffs that the 1982 tax deduction resulting from their investment had been disallowed. Plaintiffs thereafter contacted Conard regarding the status of their 1982 tax deduction. Conard wrote to Plaintiffs on July 30, 1986, telling them that Bornhop had inquired into the matter and had told him that the IRS statements were false and none of the deductions had been disallowed. *fn1 Conard advised Plaintiffs to take a "wait and see attitude."

Plaintiffs made periodic requests to Conard and Bornhop to provide them with the offering memorandum for Glenco Partners. Despite the fact that Defendants had copies of the memorandum from the time Plaintiffs originally made their investment, Plaintiffs did not receive the offering memorandum, entitled "Confidential Private Placement Memorandum," until December, 1987. Plaintiffs then realized for the first time that they had entered into a very high risk investment for which they were not qualified under the express terms of the offering memorandum. On December 30, 1987, Conard sent Plaintiffs a letter advising them to sign a tax decision which represented a settlement of the 1982 tax deficiency relating to their investment.

On November 6, 1991, Plaintiffs filed suit against Defendants. On May 29, 1992, Plaintiffs filed a second amended petition. *fn2 Defendants filed a motion to dismiss Plaintiffs' petition on the ground that the claims were barred by the statute of limitations. The trial court entered an order sustaining Defendants' motion. *fn3 This appeal followed.

On appeal, Plaintiffs contend that the trial court erred in dismissing their petition because it was filed within five years of December, 1987, which they assert was when the action accrued. Specifically, Plaintiffs argue that the trial court erred in dismissing their action because the pleading did not clearly establish that the time under the applicable statute had run.

The statute of limitations is an affirmative defense. Rule 55.08; Schwartz v. Lawson, 797 S.W.2d 828, 835 (Mo. App. 1990). When the petition does not show on its face that it is barred by limitations, a motion to dismiss should not be sustained. Miller v. Larson, 712 S.W.2d 56, 58 (Mo. App. 1986). For an affirmative defense to be sustained upon a bare motion to dismiss, the defense must be irrefutably established by plaintiffs' pleadings. McLeod v. Marion Laboratories, Inc., 600 S.W.2d 656, 657 (Mo. App. 1980).

Plaintiffs' petition asserts claims of (1) fraudulent misrepresentation, (2) breach of fiduciary duty, and (3) attorney malpractice based on allegations that Defendants made false representations to them regarding the degree of risk involved, the availability of tax deductions and Plaintiffs' suitability for the investment. The parties agree that the applicable statute of limitations for all of the claims is five years. § 516.120 RSMo 1986. The issue on appeal is when the statute of limitations began to run.

The accrual of a fraud claim is governed by § 516.120(5), which provides:

(5) An action for relief on the ground of fraud, the cause of action in such case to be deemed not to have accrued until the discovery by the aggrieved party, at any time within ten years, of the facts constituting the fraud.

Accordingly, an action for fraud accrues not when the damage occurs or can be ascertained, but when "facts constituting the fraud are discovered." ...


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