Folkens v. Hunt, 0782
| Decision Date | 24 June 1986 |
| Docket Number | No. 0782,0782 |
| Citation | 348 S.E.2d 839,290 S.C. 194 |
| Parties | Karl A. FOLKENS, Robert H. Moore, and Douglas D. Cooke, as Executors of the Estate of M. Murray McLendon, Jr., Appellants, v. J.W. HUNT, Jr., J.W. Hunt, R.L. Davis, W.R. Hunt, B.L. Davis, P.R. Johnson, Z.V. Smith and Michael S. Strange, individually and d/b/a J.W. Hunt & Co., a South Carolina General Partnership, Respondents. . Heard |
| Court | South Carolina Court of Appeals |
Ronald E. Boston, of Turner, Padget, Graham & Laney, Columbia, R. Wayne Byrd, of Scott & Byrd, and Karl A. Folkens, Florence, for appellants.
Kirkman Finlay, Jr., Manton M. Grier and Walter W. Theus, Jr., of Boyd, Knowlton, Tate & Finlay, Columbia, for respondents.
M. Murray McLendon, Jr., 1 individually and as a partner in Shodon Properties, brought this action alleging causes of action for accounting malpractice, fraud, intentional infliction of emotional distress, and a violation of the South Carolina Unfair Trade Practices Act. He brought this action against the partners of J.W. Hunt & Co., an accounting firm. The circuit court granted summary judgment to Hunt & Co. on all causes of action. McLendon appeals, contending that the grant of summary judgment on each cause of action was inappropriate and that the hearing judge abused his discretion in refusing to consider an affidavit submitted by him on the first day of a two-day hearing on Hunt & Co.'s summary judgment motion. We affirm in part and reverse in part.
Under South Carolina Circuit Court Rule 44(c), as under the new rule [see S.C.R.CIV.P. 56(c) ], summary judgment may be rendered only when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Spencer v. Miller, 259 S.C. 453, 192 S.E.2d 863 (1972). Additionally, it must be shown that further inquiry into the facts of the case is not desirable to clarify the application of the law. Abrams v. Wright, 262 S.C. 141, 202 S.E.2d 859 (1974). In ruling upon a motion for summary judgment, the hearing judge must construe all ambiguities, conclusions, and inferences arising in and from the evidence most strongly against the moving party. Tom Jenkins Realty, Inc. v. Hilton, 278 S.C. 624, 300 S.E.2d 594 (1983).
With these general principles in mind, we turn now to McLendon's contentions. As we do so, we view the evidence contained in the depositions, exhibits, and affidavits of record and all the reasonable inferences arising therefrom in the light most strongly against Hunt & Co.
In 1976, McLendon and Wellman formed a partnership called Shodon Properties. McLendon served as its managing partner.
The partnership agreement provided that "[a]ll capital contributions to the partnership have been and will hereafter be made by each partner in equal amounts." McLendon and Wellman both understood that Wellman's capital contribution would be cash in the amount of $310,000 and that McLendon's capital contribution would be a 391-acre tract of land known as Kelly Farms. Both parties considered these contributions to be of equal value.
In early 1979, Wellman told McLendon that he wanted Hunt & Co. to review the books of the partnership "due to the fact that [he] did not want to have any IRS problems ... and ... [he] wanted to make sure that everything was being handled in a businesslike fashion...." Hunt & Co. provided accounting services to Wellman personally and helped prepare Wellman's personal income tax returns for several years prior to 1979.
McLendon agreed, as a personal favor to Wellman, to have Hunt & Co. examine the partnership's books. McLendon made the arrangements to switch from the accounting firm that had previously handled the partnership's affairs.
On December 13, 1979, J.W. "Jim" Hunt, Jr., a staff accountant with Hunt & Co., went to the offices of Shodon Properties in Lake City to examine the partnership books. He remained there for two days.
On the first day Jim Hunt was in Lake City, he noticed a discrepancy between a listing of the partnership's property provided by McLendon and a listing of the property included on the partnership's general ledger land account. Kelly Farms appeared on the general ledger land account but not on the list furnished by McLendon.
Jim Hunt confronted McLendon about the discrepancy in the presence of McLendon's secretary, Brenda Matthews. Jim Hunt asserted that, while Wellman had contributed money to the partnership, McLendon had not made any capital contribution thereto. He pointed to McLendon's failure to deed Kelly Farms to Shodon Properties.
McLendon responded by saying that he and Wellman had agreed that Kelly Farms would represent his capital contribution.
Jim Hunt became verbally abusive and accused McLendon of owing hundreds of thousands of dollars in taxes and of filing fraudulent tax returns. He told McLendon that McLendon "could be looking at ... jail."
Jim Hunt's accusations upset and shocked McLendon. He immediately offered to deed Kelly Farms to the partnership. Jim Hunt, however, said it was too late.
In response to a telephone call from Wellman on the morning of December 15 1979, McLendon met later that day with Wellman, Bruce Hunt of Hunt & Co., and Jim Hunt in Columbia at Hunt & Co.'s office.
At the meeting, Hunt explained what he perceived to be the problem. Wellman expressed concern about McLendon's failure to make a capital contribution. The parties discussed the alternatives available to Wellman and McLendon and finally decided that Wellman should withdraw his capital contribution and that McLendon should pay Wellman interest thereon. Jim Hunt led the discussions and advised Wellman and McLendon regarding what they should do.
A letter agreement was later prepared on Jim Hunt's stationery. The agreement, dated February 1, 1980, was signed by both partners. It provided that the partnership would pay Wellman the sum of $440,149.32 on February 11, 1980. The amount included "the interest due to ... Wellman on the principal amounts of funds for which he had capital funds in excess of [McLendon's] capital accounts."
Shodon Properties thereafter distributed the money to Wellman pursuant to the letter agreement.
McLendon continued to work with Wellman; however, their relationship became increasingly strained. They later ended their partnership.
Before December, 1979, McLendon enjoyed good health. In 1981, however, he began to see a psychiatrist. He "started going to pieces." In fact, he withdrew from all activities and "just sat home." McLendon attributed this withdrawal and mental deterioration to the interruption of his relationship with Wellman and to the fact that he "[had] never, ever, been accused of being crooked or dishonest."
McLendon contends that the hearing judge erred in granting summary judgment to Hunt & Co. on his cause of action for accounting malpractice. He argues there are genuine issues of material fact regarding whether Hunt & Co. rendered negligent accounting advice to him as a partner in Shodon Properties and whether this advice proximately caused disbursements to be made to Wellman from the partnership account.
In granting Hunt & Co. summary judgment on the cause of action alleging accounting malpractice, the hearing judge ruled that Hunt & Co. was obligated to raise the issue of whether Kelly Farms was contributed as an asset to the partnership, that it had raised the issue in a reasonable manner, and that, while an issue of fact existed concerning whether McLendon had contributed Kelly Farms to the partnership as a capital asset, the question of whether he made the contribution was immaterial.
As a further ground for granting summary judgment to Hunt & Co. on McLendon's accounting malpractice claim, the hearing judge found that there was no genuine issue of material fact as to the fact that, when the status of Kelly Farms was raised, Wellman was a fifty percent partner in Shodon Properties and, as a matter of partnership law, had the right to require that the equities of each partner reflect his fifty percent interest. He apparently held that Hunt & Co.'s advice concerning the status of Kelly Farms was not the proximate cause of the issuance of $440,149.32 to Wellman from the partnership account.
Generally, negligence claims are not susceptible of summary adjudication because of the many questions normally present in such cases concerning the reasonableness of a party's conduct, foreseeability, and proximate cause. 6-Pt. 2 Moore's Federal Practice p 56.17 at 56-946 (1985); see 65A C.J.S. Negligence § 251(1) at 778 (1966). Actionable negligence consists of a duty on the part of the defendant, a breach of that duty, and an injury to the plaintiff resulting from the defendant's breach. Winburn v. INA, 287 S.C. 435, 339 S.E.2d 142 (Ct.App.1985).
A public accountant who fails to perform in accordance with accepted professional standards may be liable in tort to his client for his negligence. 65 C.J.S. Negligence 94 at 1052 (1966). The standard of care and the public accountant's departure therefrom must ordinarily be established by expert testimony. Kemmerlin v. Wingate, 274 S.C. 62, 261 S.E.2d 50 (1979).
The same standard of care applicable to other professionals who furnish skilled services for compensation is applicable to public accountants and that standard is reasonable care and competence. Id. In this context, reasonable care and competence means that public accountants "will render their services with that degree of skill, care, knowledge, and judgment usually possessed and exercised by members of that profession ... in accordance with accepted professional standards and in good faith without fraud or collusion." Annot., 92 A.L.R.3d 396, 400 (1979); cf. King v. Williams, 276 S.C. 478, 279 S.E.2d 618 (1981) (...
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