Children's Wish Found. Int'l Inc. v. Mccann

• Decision Date: 08 February 2011
• Docket Number: No. SC 90944.,SC 90944.
• Citation: 331 S.W.3d 648
• Court: Missouri Supreme Court
• Parties: CHILDREN'S WISH FOUNDATION INTERNATIONAL, INC., Appellant,v.MAYER HOFFMAN McCANN, P.C., et al., Respondents.

331 S.W.3d 648

CHILDREN'S WISH FOUNDATION INTERNATIONAL, INC., Appellant,

v.MAYER HOFFMAN McCANN, P.C., et al., Respondents.

No. SC 90944.

Supreme Court of Missouri, En Banc.

Feb. 8, 2011.

Michael W. Blanton, Law Office of Michael W. Blanton, Leawood, Kan., for Appellant.John C. Aisenbrey, Russell J. Keller, Robin K. Carlson, Stinson Morrison Hecker LLP, Kansas City, for Respondents.RICHARD B. TEITELMAN, Judge.

Children's Wish Foundation, International, Inc. (CWF) filed a professional negligence action against Mayer Hoffman McCann, P.C. (Mayer Hoffman) and CBIZ Accounting, Tax & Advisory of Kansas City, Inc. (CBIZ) relating to Mayer Hoffman's audit of CWF's financial statements and CBIZ's preparation of CWF's tax returns. The jury returned verdicts in favor of Mayer Hoffman and CBIZ.

In its sole point on appeal, CWF contends the trial court erred in submitting a contributory negligence instruction. The central premise of the comparative fault rule is that the law should allocate fault according to the parties' conduct. This premise holds true in professional negligence cases independent of the nature of the plaintiff's injury. Therefore, the trial court erred in submitting a contributory negligence instruction. The judgment is reversed, and the case is remanded.

FACTS

CWF is a charitable organization that provides gifts to terminally ill children. One of the fundraising methods was to accept “gifts in kind.” A gift in kind is a donation of property to a charity. CWF procured the gifts in kind by paying an administrative fee to two companies that would ship the gifts in kind to CWF. CWF then distributed the gifts in kind to hospitals and Ronald McDonald houses. The inventory of gifts in kind was handled and documented by CWF employees on a spreadsheet.

CWF retained Mayer Hoffman to audit CWF's financial statements and to express an opinion regarding the accuracy of the financial statements, including records pertaining to the gifts in kind. The audit engagement letter required CWF to provide complete, accurate financial records and information to Mayer Hoffman. CWF provided Mayer Hoffman with the spreadsheet reflecting the inventory of gifts in kind.

Mayer Hoffman discovered that in the year preceding the audit, CWF experienced a tenfold increase in gifts in kind. Mayer Hoffman further discovered that many of the gifts received by CWF already had been distributed. Mayer Hoffman consulted outside sources to determine the fair market value of the gifts in kind and concluded that the fair market value stated by CWF was materially accurate. Mayer Hoffman issued an audit report concluding that CWF's financial statements fairly represented CWF's financial position in accordance with generally accepted accounting principles. Mayer Hoffman forwarded the financial statements to CBIZ, which prepared CWF's 1999 tax return.

CWF's financial statements were not accurate. The records showed that CWF had received 17 pallets of a particular book when, in fact, it had received only seven pallets of books. The problem arose because the quantity of each gift in kind contributed by CWF was calculated by subtracting the number of pallets of the item remaining in CWF's inventory from the beginning number of pallets shown on the spreadsheet. Mayer Hoffman assumed the beginning number of each gift in kind shown on the spreadsheet was the quantity of the item received by CWF. In fact, the beginning number of each gift in kind shown on the spreadsheet was the quantity of the item ordered. Compounding the problem was the fact that CWF sometimes received fewer pallets of an item than it had ordered and did not have a process in place to record these discrepancies. The mistaken use of the quantity of each gift in kind ordered versus received as the “starting point” for calculating the quantity of each gift in kind contributed resulted in an overstatement of the value of gift in kind contributions on CWF's financial statements by approximately $1.31 million.

Although Mayer Hoffman was provided with the inventory spreadsheet, there was testimony at trial about waybills, which would accompany shipments of gifts in kind. CWF did not supply the waybills to Mayer Hoffman. The waybills were a record of what the shipper showed had been shipped. A CWF employee would “check in” an order and sign off on the waybills. The employee who checked in merchandise said she would note on the waybill if the inventory received differed from what the waybill indicated had been shipped. This employee testified that she did “not believe any of the counts came out wrong. Whatever they said was delivered pallet wise was delivered.” Although the waybills were not provided to Mayer Hoffman, it is not clear that the waybills would have revealed the discrepancy between the quantity of a gift in kind item ordered versus the quantity shipped and received.

In October 2000, the Pennsylvania court filed an order to show cause against CWF. The order to show cause related, in part, to the overstated value of the gift in kind contributions shown on CWF's 1999 tax return. After Pennsylvania opened its investigation, CWF conducted an internal investigation and discovered the erroneous records. CWF then filed the instant professional negligence action against Mayer Hoffman and CBIZ.

At trial, Mayer Hoffman and CBIZ defended by asserting that CWF failed to provide accurate records in support of the audit. Mayer Hoffman and CBIZ offered a contributory negligence instruction, which was submitted to the jury over CWF's objection. The jury returned verdicts in favor of Mayer Hoffman and CBIZ.

In its sole point on appeal, CWF asserts that the trial court erred by submitting a contributory negligence instruction. More specifically, CWF argues that contributory negligence should not apply in a negligence action that involves only economic damages and no personal injury.

STANDARD OF REVIEW

“This [C]ourt reviews de novo, as a question of law, whether a jury was properly instructed.” Harvey v. Washington, 95 S.W.3d 93, 97 (Mo. banc 2003). “A faulty instruction is grounds for reversal if the defendant has been prejudiced.” State v. Carson, 941 S.W.2d 518, 523 (Mo. banc 1997) (citing State v. Betts, 646 S.W.2d 94, 99 (Mo. banc 1983)).

ANALYSIS

The disputed instruction in this case is Instruction No. 11, which instructed the jury as follows:

You must find plaintiff contributorily negligent if you believe:

First, plaintiff erroneously stated to defendant Mayer Hoffman McCann, P.C. that its accounting records reflected the gifts-in-kind plaintiff had received, or plaintiff provided to defendants Mayer Hoffman McCann, P.C. and CBIZ Accounting, Tax & Advisory of Kansas City, Inc. erroneous shipping records to Ronald McDonald House, and

Second, plaintiff, in one or more of the respects submitted in Paragraph First, was thereby negligent, and

Third, such negligence of plaintiff directly contributed to cause its injury.

The term “negligent” or “negligence” as used in this instruction means the failure to use that degree of care that an ordinarily careful person would use under the same or similar circumstances.¹

CWF asserts that Instruction No. 11 was erroneous because Gustafson v. Benda, 661 S.W.2d 11 (Mo. banc 1983), abrogated contributory negligence in favor of comparative fault. CWF argues that the jury should have been instructed on comparative fault. Gustafson, however, involved a claim for personal injury, and subsequent cases have yielded conflicting answers regarding the applicability of comparative fault to negligence actions that do not involve personal injury. Consequently, this appeal presents the unresolved issue of whether comparative fault applies in a professional negligence action alleging only economic damages.

I. Comparative fault applies to CWF's professional negligence claim

Prior to Gustafson, Missouri followed the contributory negligence rule. Under the contributory negligence rule, a plaintiff could not recover damages if the plaintiff's own negligence directly contributed in any way to the injuries sustained. Gramex Corp. v. Green Supply, Inc., 89 S.W.3d 432, 439 (Mo. banc 2002), citing Moore v. Kansas City & I. Rapid–Transit Ry., 126 Mo. 265, 29 S.W. 9, 12 (1894). Therefore, even if the defendant's conduct was the primary cause of the plaintiff's injury, the defendant could escape all liability under the contributory negligence rule. The contributory negligence rule proved unsatisfactory as courts came to recognize that negligence actions are premised on the culpability of the parties. Id. In other words, negligence actions, which are based on the breach of a legal duty of care, fundamentally are premised on the concept of fault. See, e.g., Bell v. Poplar Bluff Physicians Group, Inc., 879 S.W.2d 618, 623 (Mo.App.1994) (“malpractice, negligence, error, and mistake all connote some type of fault, whether or not intentional”). The all-or-nothing allocation of fault under contributory negligence ignored the fact that the parties to a negligence action generally are held to some standard of care and that, in some cases, the injury at issue was caused by a breach of the standard of care by both parties. Therefore, the contributory negligence rule operated to “irrationally impose total responsibility upon one party for the consequences of the conduct of both parties.” Earll v. Consolidated Aluminum Corp., 714 S.W.2d 932, 936 (Mo.App.1986).

To ameliorate the shortcomings of the contributory negligence rule, Gustafson adopted a “comprehensive system” of comparative fault in which the jury decides the relative fault of the parties and assesses damages accordingly. Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104, 107 (Mo. banc 1996). Gustafson held that “[i]nsofar as possible this and future cases shall apply the doctrine of pure comparative fault in accordance with the Uniform Comparative Fault Act §§ 1–6, 12 U.L.A. Supp. 35–45 (1983).” 661 S.W.2d at 15. Altho...