Levine v. Wiss & Co.

CourtUnited States State Supreme Court (New Jersey)
Writing for the CourtHANDLER; O'HERN; Burger
Citation97 N.J. 242,478 A.2d 397
Decision Date31 July 1984
PartiesBernard LEVINE, Plaintiff-Respondent, v. WISS & CO. and Herbert Rudnick, Defendants-Appellants.

Page 242

97 N.J. 242
478 A.2d 397
Bernard LEVINE, Plaintiff-Respondent,
v.
WISS & CO. and Herbert Rudnick, Defendants-Appellants.
Supreme Court of New Jersey.
Argued Jan. 23, 1984.
Decided July 31, 1984.

[478 A.2d 398]

Page 244

Todd M. Sahner, Newark, for defendants-appellants (Hannoch, Weisman, Stern, Besser, Berkowitz & Kinney, Newark, attorneys; Todd M. Sahner and Albert G. Besser, Newark, on the briefs).

Robert S. Field, Maplewood, for plaintiff-respondent (Fish, Field & Greenspoon, Maplewood, attorneys).

The opinion of the court was delivered by

HANDLER, J.

This case raises the question of whether an accountant, selected by the litigants in a contested matrimonial case and appointed by the court to act as an "impartial expert" in rendering a binding valuation of a business asset for purposes of equitable distribution, should be held liable for negligence in deviating from accepted standards applicable to the accounting profession.

I

The parties are in agreement as to the relevant facts. Grace Levine, upon filing for divorce from Bernard Levine, moved that an impartial expert be appointed by the court to evaluate her husband's interest in Unified Components Corporation/Unicorp (Unicorp), in anticipation of an equitable distribution. Both parties agreed to this procedure and consented to an order that provided in relevant part:

3. That the parties direct their respective attorney [sic ] to engage an impartial accountant, acceptable to both, to examine the books and records of defendant Unicorp, and value said corporation.

4. That the impartial expert so selected shall make a report of his findings which shall be binding and conclusive on both parties.

The parties engaged defendant Wiss & Company (Wiss), an accounting firm, to undertake the evaluation. In April 1977 Herbert Rudnick, one of the firm's partners and a named

Page 245

defendant, reviewed Unicorp's records and submitted a report to the court on behalf of Wiss, estimating the Levines' equity interest in Unicorp and reporting the company's cash-basis income for the four previous years.

Before trial, the Levines reached a settlement with respect to equitable distribution, alimony and child support. In February 1979, however, the parties moved jointly to vacate the settlement. The trial court denied this motion, and a judgment of divorce incorporating the property settlement was entered on April 9, 1979. Mr. Levine appealed the denial of the motion, requesting also that the consent order providing for defendants' appointment be vacated and that the matter be remanded for a plenary hearing on the issues of equitable distribution and support. In December 1980, in a per curiam opinion, the Appellate Division affirmed the judgment of the lower court, upholding the settlement agreement. 190 N.J.Super. 335, 463 A.2d 396 (1983).

In March 1982 Mr. Levine brought the instant action against Wiss and Rudnick, alleging negligence in their valuation of Unicorp, breach of agreement, and breach of fiduciary duty. The consequent damage asserted was part of the sum paid to Mrs. Levine pursuant to the terms of the settlement. Plaintiff claimed that he was forced to accept an unfavorable settlement because of the allegedly incorrect values furnished by defendants.

On defendants' motion, the trial court dismissed the complaint for failure to state a claim upon which relief could be granted. The court, relying substantially on English common-law precedent, held that an accountant appointed pursuant to court order enjoys "limited immunity" from suit and will be liable only if he or she acts in bad faith. The Appellate Division reversed, concluding that defendants' role was comparable to that of any expert hired by parties to a contract to resolve a dispute over a particular term's meaning, and therefore that defendants were not shielded from potential liability. 190 N.J.Super.

Page 246

[478 A.2d 399] 335, 463 A.2d 396. We granted defendants' petition for certification, 94 N.J. 613, 468 A.2d 242 (1983). For the reasons expressed in this opinion, we affirm the judgment of the Appellate Division.
II

One who undertakes to render services in the practice of a profession or trade is required to exercise the skill and knowledge normally possessed by members of that profession in good standing in similar communities. Restatement (Second) of Torts § 299A (1965). We have held that deviation from the accepted standards of care governing the professional conduct of, for example, doctors, Tramutola v. Bortone, 118 N.J.Super. 503, 288 A.2d 863 (App.Div.1972), modified on other grounds, 63 N.J. 9, 304 A.2d 197 (1973), dentists, Sanzari v. Rosenfeld, 34 N.J. 128, 167 A.2d 625 (1961), chiropractors, Klimko v. Rose, 84 N.J. 496, 422 A.2d 418 (1980), pharmacists, In re Suspension of Heller, 73 N.J. 292, 374 A.2d 1191 (1977), lawyers, St. Pius X House of Retreats v. Camden Diocese, 88 N.J. 571, 443 A.2d 1052 (1982), and insurance brokers, Milliken v. Woodward, 64 N.J.L. 444, 45 A. 796 (Sup.Ct.1900), will result in liability for negligence. Significantly, we have expressly recognized, and recently stressed, that an accountant may be held responsible to those to whom a duty is owed, for failure to adhere to the standards of the profession. See Rosenblum v. Adler, 93 N.J. 324, 461 A.2d 138 (1983).

"Accounting is the act of identifying, measuring, recording and communicating financial information about an economic unit." Id. at 342, 461 A.2d 138 (citing W. Pyle and J. White, Fundamental Accounting Principles 1 (1972)). An accountant must exercise reasonable care in preparing reports, verifying underlying data, and examining the methods employed in arriving at financial statements. An incorrect financial statement, negligently prepared by an accountant and justifiably relied upon, "may be the basis for recovery of damages for economic loss or injury sustained as a consequence of that reliance." Id. at 334, 461 A.2d 138. We have recognized that the public interest to be served by the rule holding accountants responsible for negligence is sufficiently

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compelling to warrant extension of the duty of care not only to those with whom the accountant is in privity, but also to those third persons known and intended to be the recipients of the representations, as well as those who foreseeably might rely on those representations. Id. at 352, 461 A.2d 138.

In the instant case, defendants were engaged as accountants to value plaintiff's business interest in accordance with the professional standards governing accountancy. This would call for application of general principles of accountancy in examination of the company's financial statements and records, critical review of supporting documents, and consideration of the underlying accounting methodology used in the business. Commission on Auditor's Responsibilities, American Institute of Certified Public Accountants, Report, Conclusions and Recommendations 1, 45 (1978). This standard of care, and the general rule of professional responsibility and liability for negligence, are implicated in plaintiff's complaint.

Defendants contend that they are not liable for any negligence in the performance of their professional duties on behalf of the parties. They stress that they were court-appointed, and that the litigants agreed that the valuation would be binding. These factors, defendants argue, elevated them beyond the status of accountants to the quasi-judicial role of "arbitrators," who would generally be shielded from private actions for damages brought by the parties to a given dispute.

Plaintiff maintains that defendants were engaged and appointed as accountants, and, consequently, they were expected to employ customary professional skill in the accomplishment of their designated task. As accountants, plaintiff asserts, defendants are more fittingly analogized to experts[478 A.2d 400] such as "appraisers" or "valuers," as opposed to arbitrators. The appraiser or valuer, unlike the arbitrator, is an expert or technician retained to apply professional or specialized knowledge and skill in the determination of "specific issues of actual cash value." 5 Am.Jur.2d "Arbitration & Award" § 3 (1962).

Page 248

In this case, defendants were expected to apply their professional accountancy skills to determine the valuation of Unicorp. See Bewick v. Mecham, 26 Cal.2d 92, 156 P.2d 757 (1945); Litman v. Holtzman, 219 Md. 353, 149 A.2d 385 (1959); In re Delmar Box Co., 309 N.Y. 60, 127 N.E.2d 808, 285 App.Div. 398, 137 N.Y.S.2d 491 (1955). They can appropriately be considered "appraisers," applying principles of accountancy in making their determination. Consequently, the standards of reasonable care applied to lawyers, doctors, engineers, and other professionals charged with furnishing skilled services for compensation attach with equal force and justification to defendants here. Gammel v. Ernst & Ernst, 245 Minn. 249, 72 N.W.2d 364 (1955). Under this standard of duty, defendants are required "to perform the services for which they were engaged in good faith and with reasonable care and competence, and [are] liable for damages occasioned by any failure to do so." Id. at 254, 72 N.W.2d at 367.

We have recognized the distinction between a person engaged because of special knowledge, technical skill, or expertise to act as an "appraiser" in a dispute, as opposed to one appointed to serve in a quasi-judicial capacity as an "arbitrator," in whose hands "the dispute resolution process is entrusted." Barcon Assocs. v. Tri-County Asphalt Corp., 86 N.J. 179, 188, 430 A.2d 214 (1981). The appraiser is expected to perform a discrete function involving only the ascertainment of particular facts. This function, which entails neither a hearing nor the exercise of judicial discretion, is not to be confused with the duty of the arbitrator. Elberon Bathing Co. v. Ambassador Ins. Co., 77 N.J. 1, 16-17, 389 A.2d 439 (1978) (agreement for arbitration...

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35 practice notes
  • Perini Corp. v. Greate Bay Hotel & Casino, Inc.
    • United States
    • United States State Supreme Court (New Jersey)
    • August 6, 1992
    ...to (2) an arbitrator or arbitrators chosen by the parties who (3) agree the decision will be final and binding.' " Levine v. Wiss & Co., 97 N.J. 242, 257, 478 A.2d 397 (1984) (O'Hern, J., dissenting) (quoting Arthur J. Simpson, Jr., Whither Judicial Arbitration in New Jersey 12 (Mar. 9, 198......
  • Lambert v. Carneghi, No. A113388.
    • United States
    • California Court of Appeals
    • January 11, 2008
    ...to "litigation support services"; court declines to reach applicability to actual testimony of expert]; Levine v. Wiss & Co. (1984) 97 N.J. 242, 478 A.2d 397 [court-appointed accountants not immune from suit]; Marrogi v. Howard (La.2002) 805 So.2d 1118 [expert who provided pretrial analysis......
  • Bruce v. Byrne-Stevens & Associates Engineers, Inc., BYRNE-STEVENS
    • United States
    • United States State Supreme Court of Washington
    • July 20, 1989
    ...is precluded by immunity, the rule does not sweep so broadly as to extinguish all causes of action. Finally, in Levine v. Wiss & Co., 97 N.J. 242, 478 A.2d 397 (1984), the court held immunity was not available to shield an accountant's malpractice, even though the professional was hired to ......
  • Ronson v. Talesnick, No. CIV.A. 97-1024(JAG).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • January 19, 1999
    ...the skill and knowledge normally possessed by members of that profession in good standing in similar communities." Levine v. Wiss & Co., 97 N.J. 242, 246, 478 A.2d 397 (1984) (citing Restatement (Second) of Torts § 299A (1965)). "[A]n accountant may be held responsible to those to whom a du......
  • Request a trial to view additional results
35 cases
  • Perini Corp. v. Greate Bay Hotel & Casino, Inc.
    • United States
    • United States State Supreme Court (New Jersey)
    • August 6, 1992
    ...to (2) an arbitrator or arbitrators chosen by the parties who (3) agree the decision will be final and binding.' " Levine v. Wiss & Co., 97 N.J. 242, 257, 478 A.2d 397 (1984) (O'Hern, J., dissenting) (quoting Arthur J. Simpson, Jr., Whither Judicial Arbitration in New Jersey 12 (Mar. 9, 198......
  • Lambert v. Carneghi, No. A113388.
    • United States
    • California Court of Appeals
    • January 11, 2008
    ...to "litigation support services"; court declines to reach applicability to actual testimony of expert]; Levine v. Wiss & Co. (1984) 97 N.J. 242, 478 A.2d 397 [court-appointed accountants not immune from suit]; Marrogi v. Howard (La.2002) 805 So.2d 1118 [expert who provided pretrial analysis......
  • Bruce v. Byrne-Stevens & Associates Engineers, Inc., BYRNE-STEVENS
    • United States
    • United States State Supreme Court of Washington
    • July 20, 1989
    ...is precluded by immunity, the rule does not sweep so broadly as to extinguish all causes of action. Finally, in Levine v. Wiss & Co., 97 N.J. 242, 478 A.2d 397 (1984), the court held immunity was not available to shield an accountant's malpractice, even though the professional was hired to ......
  • Ronson v. Talesnick, No. CIV.A. 97-1024(JAG).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • January 19, 1999
    ...the skill and knowledge normally possessed by members of that profession in good standing in similar communities." Levine v. Wiss & Co., 97 N.J. 242, 246, 478 A.2d 397 (1984) (citing Restatement (Second) of Torts § 299A (1965)). "[A]n accountant may be held responsible to those to whom a du......
  • Request a trial to view additional results

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