 |
 |
to fill out a simple form to connect to Personal Injury Lawyers in your area.
|
|
|
|
|
Ward v. Ernst & Young9/17/1993
OPINION BY SENIOR JUSTICE RICHARD H. POFF
We awarded an appeal to a plaintiff, the sole stockholder of a corporation, from an adverse judgment entered in an action for breach of contract and professional negligence brought against an accounting firm engaged by the corporation. The plaintiff claimed damages for the loss of a portion of the proceeds of the sale of his stock resulting from the defendant's error in calculating the corporation's "deferred revenue". The trial court granted the defendant's demurrer to the original motion for judgment. At the Conclusion of the plaintiff's evidence on an amended motion for judgment, the court granted the defendant's motion to strike and entered summary judgment for the defendant. Accordingly, we will review the facts of record and the inferences reasonably deducible therefrom in the light most favorable to the plaintiff.
In March 1987, HAZCO International, Inc. (HAZCO), a chemical waste disposal company, and its sole stockholder, William Ward (Ward), entered into an agreement with J.H. Whitney & Company and another investor (collectively, Whitney), to sell Whitney a portion of Ward's stock and certain HAZCO treasury stock. The agreement, under which Ward was to receive several hundred thousand dollars, was made subject to an audit of HAZCO's financial posture for the year ending December 31, 1986 conducted by a "Big Eight" accounting firm. HAZCO retained Arthur Young & Co. (hereinafter, its successor, Ernst & Young) in a contract evidenced by a letter
of intent dated April 24, 1987 addressed to Redmond Clark, HAZCO's president.
The letter provided that "we are pleased to be certified public accountants for HAZCO . . . and to examine and report on your annual financial statements." The letter fixed the fees to be charged "for the first year" and stated that "we also would like to be helpful on any problems that might arise, and hope that you will call at any time you think we can be of assistance." Clark testified that Ernst & Young "was aware from the very first . . . of the [Whitney] transaction that at that time was envisioned."
Ernst & Young conducted the audit and issued its report dated July 24, 1987. In the course of preparing the report, it became necessary to create and apply a formula to calculate "deferred revenues" because, as the report explained, HAZCO "often obtains significant deposits from customers at the time of contract execution for services to be rendered in the future."
In September 1987 following consummation of the Whitney sale, Ward and Clark began Discussions with Chemical Waste Management, Incorporated (Chem Waste), for sale of the remainder of Ward's stock holdings. In the ensuing months, HAZCO's employees contacted Ernst & Young for assistance in the preparation of HAZCO's balance sheets and income statements. Ernst & Young furnished them a worksheet employing the same deferred-revenue formula it had devised for the 1986 audit. Ernst & Young conducted a "review" of the financial statements prepared in reliance upon that worksheet with knowledge that those papers and the 1986 audit report were germane to the Chem Waste negotiations.
In December 1987, Ward signed a letter of intent to sell all of the HAZCO stock to Chem Waste, delivered copies of the 1986 audit report and financial papers reviewed by Ernst & Young to Chem Waste, and reacquired all the stock previously sold to Whitney. Ward and Chem Waste executed a formal stock purchase agreement on January 26, 1988.
In that agreement, Ward warranted that the paper
Page 1 2 3 4 5 6 7 8 Virginia Personal Injury Attorneys
Personal Injury Lawyers
|
| |
to fill out a simple form to connect to Personal Injury Lawyers in your area.
|
|