Legal Malpractice Forum
| Publication year | 1980 |
| Pages | 1868 |
1980, September, Pg. 1868. Legal Malpractice Forum
1868
This column is a supplement to the column which appeared in the April 1980, issue of The Colorado Lawyer (p. 704). It is hoped that readers of this column will derive some benefit from reviewing the fact patterns set forth below, the claims that arose from those factual settings, and from the suggestions set forth as to how the legal malpractice claim could have been avoided.
Parenthetically, as editor of this column, I would like to thank all those who have made contributions to the column, and I would deeply appreciate receiving additional submissions from readers of this column for future publication.
The insured lawyer failed to timely file claim for refund of federal income taxes with the Internal Revenue Service on behalf of his client, a life insurance company.
The claimant filed income tax returns for the years 1969 and 1970 wherein the tax paid was in the approximate amount of $11,000,000. Checks were forwarded to the Internal Revenue Service (IRS), and in 1972 an audit was conducted wherein the insured lawyer represented the claimant. After an examination and conference, the IRS determined that there was a tax deficiency for the two years in the approximate sum of $600,000. In December 1972, the claimant filed a required form, and after a bill was received from the IRS, the checks were forwarded to the government in 1973 representing the tax deficiency, which was to be contested.
Pursuant to the Internal Revenue Code, a claim for credit or refund must be filed within three years of the time the return was filed, or two years of the time the tax was paid, whichever period is shorter. In the instant circumstances, the claim for the refund would have had to have been filed prior to February 23, 1975. Unfortunately, this did not come up in the insured lawyer's tickler system until February 26, 1975, which was untimely. The insured lawyer, therefore, faces a malpractice claim with the exposure in the amount of the contested overpayment.
The insured lawyer maintained a detailed tickler system which contained index cards and a source document book. The index cards were listed alphabetically as well as monthly, and entries were made when the responsible attorney gave the information to the secretary who typed up the card and then submitted it to the attorney for approval, after which the card was filed. In the instant circumstances, the insured law firm erroneously prepared the index card in that it failed to indicate that the claim was for a refund.
A prudent attorney would have noted that it was unusual to file a claim for reimbursement on an original tax which had been indicated on the index card, inasmuch as the return is normally prepared in the taxpayer's favor, and there would, therefore, be a basic inconsistency on the card itself. This matter could have been avoided had the attorney closely scrutinized the index card and then ascertained that the proper information was placed in the source document book, which would have provided additional back-up to a timely filing.
The insured lawyer failed to timely file an answer resulting in a default judgment against the client in the sum of $45,000.
The claimant acquired property in Arizona which had been purchased from a former...
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