Crews v. Wahl

• Decision Date: 08 July 1999
• Docket Number: No. A99A0115.,A99A0115.
• Citation: Crews v. Wahl, 238 Ga. App. 892, 520 S.E.2d 727 (Ga. App. 1999)
• Parties: CREWS et al. v. Roger WAHL, C.P.A., P.C.
• Court: Georgia Court of Appeals

520 S.E.2d 727

238 Ga. App. 892

CREWS et al. v. Roger WAHL, C.P.A., P.C.

No. A99A0115.

Court of Appeals of Georgia.

July 8, 1999.

Daniel & Lowe, Neal K. Daniel, Garrett & Gilliard, Michael C. Garrett, Augusta, Chamberlain, Hrdlicka, White, Williams & Martin, John W. Sognier, Savannah, for appellants.

Dunstan, Dunstan & Cleary, James R. Dunstan, Johnston, Wilkin & Williams, Wendell

E. Johnston, Jr., William J. Williams, Augusta, for appellee.

POPE, Presiding Judge.

Roger Wahl was the sole shareholder of Roger Wahl, C.P.A., P.C., and worked there from the time it opened until March 1993, when Wahl was being investigated for federal income tax evasion. Wahl subsequently pled guilty to the charges. On August 16, 1993, the Wahl firm sold its client files, client contracts, customer lists, computer software and computer records to Serotta, Maddocks & Devanny, a competing accounting firm.

On the afternoon of the sale, Earl J. Maddocks, one of the principals in the Serotta firm, went to the Wahl firm's offices to tell the remaining Wahl firm employees, who are the defendants in this action¹, about the sale and to pick up the Wahl firm's customer list. Although Maddocks told the defendants they could remain in their current employment, David Crews, the other CPA at the Wahl firm and one of the defendants, decided he would start his own accounting firm. He and some of the other defendants then drafted a letter announcing the formation of the new business, enclosing a release for customers to sign giving Crews access to their financial records. Crews and the others began preparing envelopes for the mailing, using the Wahl firm's customer lists.

Due to printing problems, the defendants were unable to provide Maddocks with a complete list of the Wahl firm's customers until the next day, August 17, 1993. Crews also told Maddocks that he had decided to start his own firm and that he was using the Wahl firm's customer lists to send out a mailing. Maddocks raised no objection. Within a week, the remaining defendants tendered their resignations and went to work with Crews.

The Wahl firm subsequently conducted an audit and determined that computer hardware and software containing customer records were missing from its office. On September 9, 1993, the firm filed a complaint asserting conversion and violations of the Georgia Trade Secrets Act and alleging the defendants had misappropriated trade secrets consisting of "financial data, financial plans, product plans, and a list of actual customers."

In addition to the customer list, which he used for his mailing, David Crews testified that when he left the Wahl firm on August 17, 1993, he took the contents of his desk, including computer backup tapes containing files with all of the firm's customer financial information. Crews also admitted taking postage, envelopes, a briefcase and several calculators, and admitted using the Wahl firm's copier and fax machine to send out his letters. His sister, Diane Crews, admitted taking a calculator. The other defendants who testified denied taking anything other than their own personal belongings. On September 30, 1993, Crews' attorney returned the materials Crews had taken, along with software and other items taken from the Wahl firm's office, which had come into his possession.²

On August 6, 1996, the Wahl firm was administratively dissolved by the Secretary of State. The case subsequently proceeded to trial and the Wahl firm was awarded a judgment in the amount of $265,000.

1. The defendants contend the trial judge erred in denying their motion for directed verdict on the ground the Wahl firm lacked capacity to pursue its claims. They assert that after the firm was dissolved, it was prohibited from continuing its lawsuit because there was no evidence that this proceeding was necessary to wind up the business and affairs of the firm.

An administratively-dissolved corporation retains its corporate existence, but is prohibited from carrying on any business "except that necessary to wind up and liquidate its business and affairs." OCGA § 14-2-1421(c). Those actions deemed necessary to wind up and liquidate a corporation's business and affairs include collecting assets, disposing of property, discharging liabilities, distributing remaining property among shareholders, and "[d]oing every other act necessary to wind up and liquidate its business and affairs." OCGA § 14-2-1405(5).

The question of whether an administratively-dissolved corporation lacks capacity to pursue a particular course of action must be decided on a case-by-case basis. Gas Pump v. General Cinema Beverages &c. Co., 263 Ga. 583, 584(2), 436 S.E.2d 207 (1993). And contrary to the defendants' argument, we find our decision in Exclusive Prop. v. Jones, 218 Ga.App. 229, 460 S.E.2d 562 (1995) is not controlling of the facts in this case. In that case, we affirmed the grant of summary judgment to the defendant in a legal malpractice case after the corporate plaintiff was administratively dissolved while the action was pending. Id. at 230(1), 460 S.E.2d 562. We expressly limited our decision to the facts in that case, where there was no evidence the corporate plaintiff had taken any action to wind up its affairs and the corporation never contended that the lawsuit was a necessary part of liquidating its business. Id.

In contrast, the Wahl firm was clearly in the process of concluding its business. It had sold its primary corporate assets to the Serotta firm, and there was evidence at trial that a short time earlier, Wahl had been declared mentally incompetent and his wife had been appointed his guardian. Some months later he pled guilty to tax fraud. Thus, there was virtually no possibility that Wahl would ever operate his accounting business again.

This lawsuit, filed within a few weeks after the sale contract was signed, sought to reclaim possession of certain corporate assets the Wahl firm alleged defendants had misappropriated. The collection of corporate assets is one of the enumerated activities a dissolved corporation is entitled to pursue. OCGA § 14-2-1405. Moreover, many of the assets at issue were the subject of the sale contract with the Serotta firm, and thus any misappropriation of those assets clearly had the potential to affect the sale. Under these circumstances, we find the lawsuit was necessary to wind up and liquidate the business and affairs of the Wahl firm, and there was no error in denying the defendants' motion for directed verdict on this ground.

2. The defendants also contend the trial court erred in denying their motion for directed verdict on the ground that the Wahl firm had sold its trade secrets to the Serotta firm prior to their alleged misappropriation by defendants.³

The sale between the two firms closed on the morning of August 16, 1993, with the signing of the sale contract. Under the contract, the Serotta firm was buying

[a]ll client files and contracts, both open and closed, all client lists, both open and closed, including all computer records (both hard copies and floppy disks) and computer software relating thereto and all information on the computer hardware relating thereto.

The contract provided that the Serotta firm took possession of these assets at closing.

Under the plain terms of the sale contract, therefore, the Serotta firm owned the customer lists, computer software and customer files at the time they were removed from the Wahl firm's offices. However, in Georgia, the ownership of an accountant's working papers is controlled by statute. Under OCGA § 43-3-32(a):

All statements, records, schedules, working papers, computer printouts, computer tapes, and memoranda made by a certified public accountant or public accountant incident to, or in the course of, professional service to clients ..., except reports submitted ... to a client, shall be and remain the property of such certified public accountant or public accountant and his or her partners, fellow shareholders, or fellow members of the firm, in the absence of an express agreement between such certified public accountant or public accountant and the client to the contrary. No such statement, record, schedule, working paper, or memorandum shall be sold, transferred, or bequeathed, without the consent of the client or his personal representative or his assignee, to anyone other than one or more surviving partners, fellow shareholders, or fellow members of the firm of such certified public accountant or public accountant.

(Emphasis supplied.) Under this provision, absent an agreement with the client to the contrary, an accountant retains ownership of all of his working papers, but may not transfer ownership in any statement, record, schedule, working paper or memorandum without the client's consent.

The Wahl firm contends that this statute makes its sale contract with the Serotta firm an executory agreement only. Although the contract states the Serotta firm took possession of its customer lists and other documents, the Wahl firm argues the contract did not become binding until the clients consented to the transfer of their records to the Serotta firm. And because no clients had consented at the time the defendants used the mailing list and took other information, the Wahl firm asserts it still owned that information.

While we agree that the sale from one accounting firm to another of any information covered by OCGA § 43-3-32(a) is subject to a condition that the client consent to the transfer, we do not agree that the statute applies to all client information in the possession of an accountant. We find that the transfer of the Wahl firm's customer list to the Serotta firm is not governed by OCGA § 43-3-32(a) because there is no indication that the statute was intended to apply to such lists.

The interpretation of statutes is a question of law for the court. Monticello, Ltd. v. City of Atlanta, 231 Ga.App. 382, 383(1), 499...