Wirtz v. Switzer

• Decision Date: 04 September 1991
• Docket Number: No. 07-CA-59508,07-CA-59508
• Parties: Charlena WIRTZ, as Executrix of the Estate of Lena Watson Whitley, Charlena Wirtz, Lynn Wirtz, Elizabeth Wirtz, Andrew Wirtz and Clay Wirtz v. Dennis R. SWITZER and Dennis R. Switzer, CPA, Ltd.
• Court: Mississippi Supreme Court

Page 775

586 So.2d 775

Charlena WIRTZ, as Executrix of the Estate of Lena Watson Whitley, Charlena Wirtz, Lynn Wirtz, Elizabeth Wirtz, Andrew Wirtz and Clay Wirtz v. Dennis R. SWITZER and Dennis R. Switzer, CPA, Ltd.

No. 07-CA-59508.

Supreme Court of Mississippi.

Sept. 4, 1991.

Rehearing Denied Oct. 23, 1991.

Edwin E. Kerstine, Pitts & Kerstine, for appellant.

Richard D. Gamblin, Edward C. Cohen, Wise Carter Child & Caraway, Jackson, for appellee.

Before ROY NOBLE LEE, C.J., and PRATHER and SULLIVAN, JJ.

SULLIVAN, Justice, for the Court:

On June 18, 1985, Charlena Wirtz, as Executrix of the Estate of Lena Watson Whitley, and Charlena Wirtz, Lynn Wirtz, Elizabeth Wirtz, Andrew Wirtz, and Clay Wirtz, as residuary beneficiaries under the will of Lena Whitley, filed a Complaint in the Adams County Circuit Court against Dennis Switzer and Dennis Switzer, CPA, Ltd. The plaintiffs alleged that Switzer, in performing professional accounting services for the Estate, failed to exercise that degree of care, skill, and diligence required of other certified public accountants. Specifically, the plaintiffs alleged that the defendants were negligent in failing to timely file a fiduciary return for the Estate and in omitting the 1982 windfall profit taxes on a schedule prepared for use by the Estate. As a direct and proximate result of the defendants' negligence, the plaintiffs suffered damages. The plaintiffs asked for punitive as well as compensatory damages.

The trial in the matter was conducted on November 4 and 5, 1987. At the close of the plaintiff's case, the defendant moved for a directed verdict on the issue of punitive damages and on all claims dealing with the alleged negligent preparation of the schedule. The court granted the directed verdict as to both issues. The trial proceeded on the claim of negligence in filing the fiduciary return.

When the defendant rested, the plaintiffs moved for a directed verdict on the issue of Switzer's liability for allegedly failing to file the fiduciary return in a timely manner. The court granted the directed verdict in the amount of $4,173.40. The court denied the plaintiffs' request for prejudgment interest. These rulings were incorporated into the court's final judgment of November 13, 1987. The plaintiffs have appealed.

FACTS

Lena Watson Whitley died on November 28, 1981. She left a Last Will and Testament in which, among other bequests, she left all rights, titles and interests in certain oil and gas-producing property in Louisiana to Sarah Arnold Campbell, Robin Ward, Nannette Cape, and Elaine Grow (referred to as 'the heirs'), and named Lynn Wirtz, Charlena Wirtz and their three children as residuary beneficiaries after all debts and bequests had been paid. Charlena Wirtz was named as the Executrix.

The Executrix filed a Petition to Probate in the Adams County Chancery Court on January 4, 1982. In September of 1983, the heirs began petitioning the court to order that distribution be made of the income from the oil-producing property in Louisiana which had been left to them by Lena Whitley. The Executrix's response to the heirs' Petitions was that a final accounting could not be made until the tax returns for the Estate were filed and the IRS formally closed the Estate. The dispute culminated in the Executrix threatening to ask the court to interpret the provision of the will bequeathing the Louisiana property to the heirs and the heirs threatening to contest the will because of the circumstances under which it was executed.

As a result of the dispute, the parties entered into an Act of Compromise, Settlement, Conveyance, and Release. By the terms of the Act, all of the Louisiana property, with the exception of thirty-five acres which had been bequeathed to someone else, would be placed in the possession of the heirs. The heirs agreed to release any claims against the Estate, the Executrix, and the residuary beneficiaries. The Executrix agreed to pay to the heirs all sums received which were attributable to the property.

Incorporated into the Act was a schedule prepared by Dennis Switzer who had been engaged by the Executrix as the accountant for the Estate. The schedule was an accounting of the net oil income, along with the taxes due on the income. The tax liability reflected on the schedule, which included an estimate for windfall profit taxes, was to be withheld by the Executrix when she made the distribution. The schedule reflected the oil income through October 31, 1983. The interest earned by the oil income was not reflected on the schedule and the parties agreed that each side would receive one-half of the interest, or $4,500.00. After deductions for the various taxes, the net oil income reflected by the schedule to be distributed to the heirs was $96,456.00 (although the heirs would actually receive $100,956.00 with the inclusion of the $4,500.00 in interest).

A few days later, the Estate's attorney told the Executrix that she needed to retain an additional $30,000.00 from the money to be paid to the heirs because Switzer had called and said that the 1982 windfall profit taxes had not been included on the schedule. Switzer told the attorney that he did not know the exact figure of those taxes, but he estimated that the amount would be approximately $30,000.00. The Executrix wrote a check in the amount of $70,000.00 and sent it to the attorney of the heirs with an explanation of why the extra $30,000.00 had been withheld.

The heirs filed a Complaint disputing the amount. The court found that the Act entered into by the parties was a binding contract and that the schedule incorporated therein required the Executrix to pay $96,456.00 to the heirs.

The parties continued to negotiate because the heirs wanted the Executrix to pay an additional $30,000.00 for the 1982 windfall profit taxes which had been omitted. Eventually, the parties agreed and the court entered orders to reflect the agreement. In the first, the court found that the rights to the property vested in the heirs as of the date of Lena Whitley's death and that the Executrix and the Estate were not entitled to receive any part of or any control over the interest or income from the property. The Executrix was ordered to pay to the heirs the sums she had interpled for the 1982 windfall tax liability. In the second order, the court required the Executrix to place the sum of $15,000.00 in an interest-bearing account. That money was to remain in escrow until a determination could be made as to whether or not any 1982 windfall profit taxes were owed. If any of the money remained after paying taxes, it and the interest earned on the money was to be paid to the heirs. The Executrix was awarded a lien on any future production in the event she was required to pay any additional windfall profit taxes. For any future taxes, the heirs were responsible.

On April 7, 1987, the heirs asked that the $15,000.00 which had been placed in escrow be paid to them. The Executrix asked that the funds remain in escrow since there had as yet been no determination of tax liability. The court ordered that the $15,000.00 plus interest be paid to the heirs.

LAW

I. DID THE TRIAL COURT ERR IN GRANTING APPELLEES' MOTION FOR A DIRECTED VERDICT ON APPELLANTS' CLAIM THAT DAMAGES WERE SUFFERED DUE TO PAYMENT OF A CERTAIN $15,000 TO THE HEIRS BY THE ESTATE?

At the close of the plaintiff's case, the defendant moved for and the court granted a directed verdict on the claim of the negligent preparation of the schedule. Where a motion for a directed verdict is made and granted at the close of the plaintiff's case-in-chief, the trial court should look "solely to the testimony on behalf of the opposing party; if such testimony, along with all reasonable inferences which can be drawn therefrom, could support a verdict for that party, the case should not be taken from the jury." Biloxi Regional Medical Center v. David, 555 So.2d 53, 57 (Miss.1989) [quoting Hall v. Mississippi Chemical Express, Inc., 528 So.2d 796, 798 (Miss.1988) ]. The motion should be denied unless the plaintiff's evidence is so lacking that reasonable jurors would be unable to reach a verdict in favor of that party. Wilner v. Mississippi Export Railroad Co., 546 So.2d 678, 681 (Miss.1989). On review, we must consider the evidence in that same light. Guerdon Industries, Inc. v. Gentry, 531 So.2d 1202, 1205 (Miss.1988).

An accountant may be liable for negligence.

It is implied in all contracts for the employment of public accountants that their services are to be furnished with reasonable care and in good faith without fraud or collusion, and that standard accounting practices will be followed, and that, where different theories as to proper practices are involved they will follow the one they deem fairly applicable to the situation presented. While not an insurer against damage to his client, in the exercise of his professional capacity, it is generally recognized that a public accountant may be held liable on principles of negligence, to one with whom he is in privity or with whom he had a direct contractual relation, for damages which naturally and proximately result from his failure to employ the degree of knowledge, skill, and judgment usually possessed by members of that profession in the particular locality.

1 Am.Jur.2d Accountants Sec. 15 (1962).

In an attorney malpractice case, the existence of certain factors must be proven by a preponderance of the evidence. Those are equally applicable to an accountant malpractice case. The factors are:

1. Existence of a lawyer-client relationship[;]

2. Negligence on the part of the lawyer in handling his client's affairs entrusted to him; and

3. Proximate cause of injury.

Hickox by and through Hickox v. Holleman, 502 So.2d 626, 633 (Miss.1987). Expert testimony is required "to support an action for malpractice of a professional man in those situations where special skills, knowledge, experience, learning or...