Griffith Motors, Inc. v. Parker

• Decision Date: 12 January 1982
• Citation: 633 S.W.2d 319
• Parties: GRIFFITH MOTORS, INC., Plaintiff-Appellant, v. C. E. PARKER, Billy J. Stewart, James S. Shorter and James Carden, Jr., individually and d/b/a Parker, Stewart & Shorter, a partnership, Defendants-Appellees.
• Court: Tennessee Court of Appeals

Page 319

633 S.W.2d 319

GRIFFITH MOTORS, INC., Plaintiff-Appellant, v. C. E. PARKER, Billy J. Stewart, James S. Shorter and James Carden, Jr., individually and d/b/a Parker Stewart & Shorter, a partnership Defendants-Appellees.

Court of Appeals of Tennessee, Eastern Section.

Jan. 12, 1982.

Application for Permission to Appeal Denied by Supreme Court

April 12, 1982.

John W. Emerson, Richard W. Pectol, Johnson City, for plaintiff-appellant.

Joel M. Leeman, Nashville, Thomas C. McKee, Johnson City, for defendants-appellees.

OPINION

GODDARD, Judge.

The complaint of Griffith Motors, Inc., Plaintiff-Appellant, against C. E. Parker and others individually and as an accounting partnership, Defendants-Appellees, was dismissed by summary judgment. Griffith insists there are material disputed facts as to its theory of breach of contract as well as tort, and consequently the Trial Court's dismissal was erroneous.

The complaint, which is couched in language partaking of both breach of contract and tort, contends that representatives of the Defendant partnership failed to advise the proper officials of Griffith Motors that one of its employees was guilty of a number of acts of malfeasance, including false and fictitious bookkeeping entries to cover up sales of automobiles out of trust, and ultimately in a check kiting scheme. Griffith contends that these facts were known, or by the exercise of reasonable care should have been known, by the Defendants, and that their failure to impart the information to James M. Allen, president and sole stockholder of Griffith, resulted in damage to Griffith.

The Trial Court sustained the motion for summary judgment on two grounds: First, he concluded that because the Plaintiff did not contend the Defendants were guilty of any fraudulent acts the cause of action must stand, if at all, upon the contract theory. He thereupon found there was no genuine issue of fact as to the scope of the Defendants' engagement which did not embrace responsibility for the learning of the employee's misfeasance. As a second ground for dismissal he found that the errant employee's knowledge of his own transgressions was imputable to Griffith and, consequently, Griffith was not in a position to cast liability upon the Defendants for failing to learn and advise it of matters which in law it was deemed to know.

Griffiths' appeal contends there is a genuine issue of fact as to the first issue, and that the Court misapplied the rule of law as to the second.

Before discussing the proof, it is well to remember the guidelines given by the Supreme Court when dealing with summary judgments. Two Supreme Court cases are instructive. In the first, Evco Corporation v. Ross, 528 S.W.2d 20, 24 (1975), Mr. Justice Harbison states:

Summary judgment proceedings in this state were authorized for the first time by Rule 56 of the Tennessee Rules of Civil Procedure. This new procedure was designed to fill a vacancy or void which had existed in prior practice and to provide a procedural step which had heretofore not existed. Under previous practice, in both the circuit and chancery courts, there had been no satisfactory intermediate step between the demurrer, which dealt only with the contents of pleadings, and a full-scale trial of a case upon the merits. The summary judgment procedure was designed to provide a quick, inexpensive means of concluding cases, in whole or in part, upon issues as to which there is no dispute regarding the material facts. Where there does exist a dispute as to facts which are deemed material by the trial court, however, or where there is uncertainty as to whether there may be such a dispute, the duty of the trial court is clear. He is to overrule any motion for summary judgment in such cases, because summary judgment proceedings are not in any sense to be viewed as a substitute for a trial of disputed factual issues.

In a later case, Bowman v. Henard, 547 S.W.2d 527, 530 (1977), Mr. Justice Henry makes the following observation:

As a general rule summary judgments are not appropriate in negligence cases. See Wright & Miller, Federal Practice and Procedure: Civil Sec. 2729. We particularly consider them inappropriate, as a general rule, in malpractice actions against professionals, recognizing, as we must, the natural tendency of their colleagues to be good Samaritans and come to their rescue in a time of distress. We, of course, do not restrict this view to men of medicine. (Emphasis in original.)

There is proof that Jerry D. Jones, who was the business or office manager and secretary and member of the Board of Directors of Griffith from January 1, 1973 through November of 1978, perpetrated a check kiting scheme with company funds and falsified its books and records from which it may be inferred that he misappropriated its funds. The Defendant, C. E. Parker, who was the personal accountant for Mr. Allen before acquisition of the motor company, handled practically all of the accounting for Mr. Allen personally, as well as for any firm in which he had an interest. ¹ There was never any formal or written contract for the accounting services. There is proof that the Defendant accounting firm was employed to do what has been described as a "straight audit" for the motor company. Straight audit was defined by Mr. Allen as when the accounting firm comes in and "generally takes a look at the important functions of the dealer," looking at the cash and at postings, and generally "taking a look at the books." This testimony, coupled with past practices where Mr. Parker had "critiqued the quality and performance of ... accounting personnel and accounting procedures" and Mr. Allen's answer to an interrogatory wherein he states that the Defendant was employed "to perform accounting or public accounting procedures for the company, to assist and evaluate the bookkeeping personnel in the office and to accurately report to the President and sole Stockholder of the company the company's true financial condition" are sufficient in our view to raise a question of fact regarding the terms of the Defendants' engagement, notwithstanding the considerable mass of evidence that the contract contemplated only preparation of income tax returns which, according to experts on behalf of the Defendants, entitled the accountant to rely exclusively upon the information furnished by the client.

But even should we accept the Defendants' contention that the contract was merely for preparation of income tax returns, there is disputed proof as to whether the accountant should have sought additional information upon Mr. Jones' insistence that a year-end adjustment in 1977 of.$326,000 was proper, especially when this sum is compared to none or relatively modest ones in most all of the prior years. As to this point, Frank A. Borschke, a certified public accountant of Troy, Michigan, testified by affidavit as follows:

If I, or any member of my firm, acting under our standard tax procedures, had obtained a trial balance from the source accounting records of Griffith Motors, Inc. in connection with preparing...