GREAT SOUTHERN EXCAVATORS, INC., GREAT SOUTHERN SHELL, INC., CHRISTOPHER E. LOVELACE AND EDWARD C. LOVELACE, JR. APPELLANTS
TEC PARTNERS, LLP AND JEFFREY A. TURNIPSEED APPELLEES
OF JUDGMENT: 09/17/2015
COUNTY CIRCUIT COURT, HON. WILLIAM E. CHAPMAN III.
ATTORNEY FOR APPELLANTS: CLARENCE MCDONALD LELAND.
ATTORNEY FOR APPELLEES: ALEXANDER FREDERICK GUIDRY.
LEE, C.J., BARNES AND FAIR, JJ.
This is an accounting malpractice case. In 2001, Great
Southern Excavators Inc. and Great Southern Shell Inc.
(collectively Great Southern) hired Jeffrey Turnipseed, a
member of accounting firm TEC Partners LLP (TEC), to provide
accounting and tax services. Both Great Southern corporations
were majority owned and operated by two brothers -
Christopher Lovelace and Edward Lovelace Jr.
The Lovelaces claimed Turnipseed was hired to oversee their
office manager (and aunt) Anita Musgrove in calculating and
depositing payroll taxes. In 2004, the IRS alerted Great
Southern that it owed back federal payroll taxes. The matter
was resolved, but another filing deficiency happened two
years later. Great Southern later discovered Musgrove had
been embezzling company funds. Great Southern sued TEC and
Turnipseed for failure to ensure the payroll tax deposits
were made timely and for failure to report Musgrove's
embezzlement of company funds.
After years of litigation, TEC moved for summary judgment,
which was granted by the circuit court. Great Southern
appeals, asserting the circuit judge erred in finding that:
(1) expert testimony was required to prove that TEC breached
the applicable standard of care; and (2) Great Southern's
expert failed to state how TEC breached that standard of
care. The case hinges on whether or not Turnipseed and TEC
agreed to weekly review by TEC of payroll taxes (Great
Southern's employees were paid weekly) - a responsibility
not set out in the original written contract. We find that
there remain questions of material fact between the parties,
and therefore the circuit court erred in granting TEC's
motion for summary judgment. We reverse and remand.
Great Southern originally hired TEC to prepare monthly
financial statements, prepare tax returns, perform a review
of financial statements, and prepare profit/loss reports on a
per-job basis. The 2001 engagement letter set out the nature
and limitations of TEC's services in which these monthly
services would be performed for a monthly fee of $775. Other
services, including review of the payroll account by request,
were performed and charged for as required.
In 2004, the IRS discovered that Great Southern had not paid
its federal payroll taxes. Funds owed to the IRS in Great
Southern's payroll account had not been electronically
transferred to the IRS account in the same bank. After a
meeting with the IRS, funds remaining in the account were
immediately deposited with the IRS, and the issue was
attributed to an error related to the company computer and
its operator, Musgrove.
In the summer of 2006, Great Southern realized there was
still a problem with the federal payroll taxes. The
corporation immediately alerted the IRS and paid the taxes a
few months later with proceeds from loans secured by
corporate property. During its review, the IRS notified Great
Southern that there was an embezzlement problem. An
investigation by Great Southern ensued, and the embezzler was
revealed - Musgrove. She had been getting the refund checks
and depositing them into her personal account. Musgrove was
arrested, pled guilty, and served a two year prison sentence.
Great Southern sued Turnipseed and TEC, submitting that they
violated their duty based on an agreement between Christopher
and Turnipseed - that Turnipseed would come to the office
weekly to ensure that the funds due to the IRS were actually
transferred from the payroll account to the IRS account. In
support of Great Southern's claim, Christopher stated
that, after the 2004 problem, Turnipseed came to Great
Southern's office weekly to make sure the payroll taxes
were paid. Musgrove testified to the same effect. TEC denied
that it "originally agreed" to monitor Great
Southern's federal payroll taxes, as the 2001 engagement