Opinion
Civil Action No. 99-0353-BH-M
October 4, 2000.
JUDGMENT
It is ORDERED, ADJUDGED and DECREED that, pursuant to the findings of fact, conclusions of law and order entered this day, JUDGMENT be and is hereby entered in favor of the defendants, Mark Walker and Overcash, Walker Company, P.C., and against the plaintiffs, Delmont O. Dapremont, Jr. and Joanie Dapremont, the plaintiffs to have and recover nothing of the defendants. Costs are to be taxed against the plaintiffs.
DONE this 4th day of October, 2000.
FINDINGS OF FACT; CONCLUSIONS OF LAW AND ORDER
This action is before the Court on defendants' motion for summary judgment (Doc. 28). Defendants contend that they are entitled to judgment as a matter of law on each of plaintiffs' claims for negligence (Count I), breach of contract (Count II), fraudulent suppression (Count III), negligent supervision (Count IV), and accounting malpractice (Count V).
In connection with this matter, the Court has also considered various motions to strike (Docs. 45, 47, 49, 51, 52 and 55) filed by the defendants in reply to plaintiffs' response in opposition (Docs. 42 and 43). These motion to strike essentially seek to negate much of the evidence presented by the plaintiffs in opposition to defendants' motion. It is indeed a novel approach. Upon consideration of these motions, the Court concludes and it is ORDERED that, to the extent the challenged evidence is contradicted by the prior testimony of Delmont O. Dapremont, Jr. as set forth in the defendants' motions and demonstrated by the evidence presented in support thereof, each motion is hereby GRANTED. To the extent, however, that the challenged evidence is irrelevant and immaterial to defendants' entitlement to judgment, the Court has not relied on same and the motions are therefore MOOT.
Upon consideration of the motion for summary judgment, plaintiffs' response in opposition thereto, the documentary and testimonial evidence submitted in support of and opposition to the motion and all other pertinent portions of the record, the Court makes the following findings and conclusions, ultimately concluding that defendants' motion is due to be granted.
FINDINGS OF FACT
1. In 1983, Delmont O. Dapremont, Jr. ("Dapremont") became the president and general manager of Coastal Ford, Inc. in Mobile, Alabama, and was required to obtain auditors to annually prepare the financial statements and tax returns of the dealership and to provide a written report of the audit to Coastal Ford, Inc. as well as Ford Motor Company, a co-owner of the dealership. Defendant Overcash, Walker Company, P.C. ("Overcash") was the firm selected by Dapremont and the Board of Directors of Coastal Ford to conduct the required audits and prepare the financial statements, tax returns and reports from 1985 through April 1997. The accountant who actually performed the accounting work was defendant Mark Walker ("Walker"), a certified public accountant employed by defendant Overcash. These accounting services were performed pursuant to a letter of engagement sent by Overcash each year to Coastal Ford which set forth the terms and conditions of their contractual relationship, including the fact that the defendants were to be paid $9,250.00 annually to perform the aforementioned accounting services for Coastal Ford.
2. Walker personally prepared the joint income tax returns for Dapremont. and his wife, plaintiff Joanie Dapremont ("Mrs. Dapremont"), through 1996. (Walker Deposition at 92-94). Although Dapremont "believe[d]" that Walker began preparing the joint income tax returns in 1984, Walker testified that he first met Dapremont in 1986. (Dapremont Deposition at 83; Walker Deposition at 14). Dapremont has proffered no evidentiary support for the proposition that Walker prepared any tax returns for the plaintiffs prior to preforming accounting services for Coastal Ford, Inc.
3. Walker prepared the Dapremonts' personal tax returns "as a courtesy" to Mr. Dapremont. It is undisputed that no payment was ever made by the Dapremonts to Walker or Overcash for the preparation of the plaintiffs' personal tax returns. Nor have the Dapremonts proffered any evidence of any consideration paid to Walker or Overcash for such services. There is also no evidence of any contract between plaintiffs and defendants with regard to the preparation of the plaintiffs' personal tax returns.
Dapremonts' contention that the consideration was "Walker's expectation of (1) continuing to perform accounting work for Coastal Ford and (2) the opportunity to receive additional work and referrals from Plaintiffs' (Plaintiffs' Opposition Brief at 10) is unsupported by any evidence of record. The contention regarding continued employment also ignores the role of other members of the Coastal Ford Board of Directors, including those members affiliated with Ford Motor Company, in this employment decision.
Although Dapremont asserted the existence of a verbal agreement in answer to defendants' interrogatory regarding any agreement for such accounting services, he testified that he "[did not] remember the conversation at all." Dapremont Deposition at 83.
4. Dapremont admitted he received a copy of the annual audit report prepared every year by Walker and Overcash. (Dapremont Deposition at 133; Plaintiffs' Exhibits 1, 19, 21, 22, 23). Each of these annual audit reports contains a section (section 7 on Plaintiffs' Exhibits 1, 19, 21, 22, 23 and Defendant's Exhibit 37), in which any "related party transactions" are documented. A related party transaction is a business or financial transaction between the company (here Coastal Ford, Inc.) and an employed individual or an entity in which an employed individual has an ownership interest. The annual audit reports prepared by the defendants (and reported to Ford Motor Company and to Coastal Ford, Inc.) documented the existence of certain related party transactions between Dapremont and the dealership (such as leases on certain property Dapremont owned and leased to the dealership) but never reported that Dapremont was doing business with the dealership through an entity known as DMT. (Walker Deposition at 80-86, 104-105, 107, Defendant's Exhibit "37"). The reason the defendants did not report DMT as a related party transaction in their audit reports was because they were unaware that Dapremont owned DMT until April or May of 1997. (Walker Deposition at 41-44, 50).
5. Each year Dapremont executed management representation letters wherein he represented, to these defendants, that all "related party transactions" had been properly recorded or disclosed in the financial statements of Coastal Ford, Inc. (Walker Deposition at Exhibits 21, 22, 23, 24, 26, 28, and 29; Dapremont Deposition at 167-172). These representations by Dapremont were false. Dapremont never disclosed that Coastal Ford's dealings with DMT were "related party transactions."
6. Dapremont knew that DMT was a "related party transaction" and that such related party transactions were supposed to be disclosed in the company's financial statements and included in the annual audit reports, and further that DMT was never disclosed or revealed as a related party transaction in any Coastal Ford, Inc. financial statements or in the audit reports while he was the manager of Coastal Ford. (Dapremont Deposition at 170-174).
7. DMT was the name on a checking account created by Dapremont at a local bank and the name he put on certain invoices he personally prepared and used to obtain payments from Coastal Ford, Inc. DMT was never incorporated. DMT never paid any business taxes. (Frances Lowe Affidavit). Dapremont admitted that DMT never had any employees other than himself, and Dapremont is the only person who was authorized to write checks on his DMT bank account.
8. Dapremont admitted that, beginning in 1991, he took invoices for advertising from an outside advertising agency and he personally added various amounts to those invoices and put the inflated amount on an invoice, with the name DMT thereon and the name and address of the legitimate local advertising agency. Dapremont then obtained payments from Coastal Ford, Inc., as alleged advertising expenses, of the inflated amounts on the DMT invoices that Dapremont prepared personally.
9. Dapremont admitted that no one at Coastal Ford, Inc. and no auditor could review his DMT invoices and tell or discover from the examination of the DMT invoices that Dapremont was personally obtaining any benefit or making any money for alleged personal appearance or talent fees. Dapremont specifically admitted that no auditor could examine the DMT invoices and tell from such documents that Dapremont was personally making money through DMT.
10. Although Dapremont claims he relied on the defendants to prepare his income tax returns and include any DMT income thereon, Dapremont in fact admitted that he never gave the defendants any documents or information with which to compute the amount of any income he derived from DMT or any expenses he allegedly incurred in connection with DMT that might be used to offset such income.
11. In prior litigation in the United States District Court for the Southern District of Alabama Southern Division, involving Ford Motor Company and Coastal Ford, Inc. and Dapremont, inter alia, Dapremont testified as to various persons at Coastal Ford, Inc. or Ford Motor Company who allegedly knew or had reason to believe he owned DMT. However, Dapremont never testified or asserted in the Ford case that the accountant defendants in the case at bar knew about his ownership in DMT. In addition, after being terminated as the general manager of Coastal Ford, Inc., Dapremont wrote a letter to Ford and identified certain persons who could have told Ford that he owned DMT, but Dapremont did not claim in that letter that the accountant defendants in the case at bar knew he owned DMT.
This prior litigation was styled Coastal Ford Inc., et al., v. Lodd Enterprises, Inc., et al., Civil Action No. 97-00640-BH-C (S.D. Ma.).
12. In the prior Ford case, Ford Motor Company and Coastal Ford, Inc. obtained judgments against Dapremont in excess of $600,000.00, for breach of contract and breach of fiduciary duty, based upon Dapremonts obtaining funds from the dealership through the DMT device. The total amount of money that Mr. Dapremont made or gained through the DMT scheme is not known, but it is known, from the prior judgment in federal court, that Dapremont derived at least $600,000.00 through this scheme, above and beyond the actual amount of advertising provided for Coastal Ford, Inc.
13. Dapremont was indicted, tried and convicted on four counts of tax evasion. See, United States v. Delmont O. Dapremont, Jr., Criminal No. 00-00052-CB (S.D. Ala. June 22, 2000). In the case at bar, plaintiffs claim as damages any civil or criminal penalties they might incur for the failure to report income from DMT on their personal income tax returns, as well as unspecified attorney's fees for defending federal criminal actions.
14. Dapremont admitted that he never reported any income from DMT on his personal income tax returns. Dapremont admitted that he knew he had an obligation to report income he derived from DMT on his tax returns. Dapremont admitted that he signed and filed plaintiffs' joint income tax returns each year. However, Dapremont claimed that he did not read the returns and, for that reason, he did not realize that these defendants had not included his DMT income on plaintiffs' joint income tax returns. It is undisputed that the Dapremonts signed their joint income tax returns before they were filed. In each and every instance, the Dapremonts' signature on their tax returns represented a declaration that: "Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete." (Plaintiffs' Exhibits 15, 16, 17 and 18: Dapremonts' Personal Income Tax Returns).
CONCLUSIONS OF LAW
The Dapremonts' claim that the defendants breached an alleged verbal contract by failing to properly prepare plaintiffs' tax returns for the years 1993-1997. In deposition, Dapremont testified that the only income defendants allegedly failed to include on the Dapremonts' joint income tax returns is the income that Dapremont derived through DMT. It is, however, undisputed that Dapremont never provided defendants with any information concerning this income.
No contract can be formed under Alabama law without an offer, acceptance, mutual assent to the essential terms, and consideration. Ex Parte Grant, 711 So.2d 464, 465 (Ala. 1997); Steiger v. Huntsville City Board of Education, 653 So.2d 975, 977 (Ala. 1995); There is no contract under Alabama law where the defendant merely volunteers its services. Smoyer v. Birmingham Chamber of Commerce, 517 So.2d 585, 587 (Ala. 1987). Defendants are entitled to judgment as a matter of law on the Dapremonts' contract claim because there is no evidence of any contract between plaintiffs and these defendants with regard to the preparation of the plaintiffs' income tax returns. Walker alone prepared the returns as a favor because he liked Dapremont without receiving any consideration for his efforts. "[T]o constitute consideration for a promise, there must have been an act, a forbearance, a detriment, or a destruction of a legal right, or a return promise, bargained for and given in exchange for the promise." Grant, 711 So.2d at 465, quoting, Smoyer, 517 So.2d at 587.
The Dapremonts also claim in Counts I, III and V of their complaint that the defendants were negligent in the preparation of their tax returns. Under Alabama law a plaintiff cannot recover when the plaintiff is guilty of negligence that contributed to plaintiffs' damages. Brown v. Piggly-Wiggly Stores, 454 So.2d 1370, 1372 (Ala. 1984). Contributory negligence may be found to exist as a matter of law when the evidence is such that all reasonable people must conclude that the plaintiffs were negligent and that negligence was a proximate cause of plaintiffs' injury. Buchanan v. Mitchell, 741 So.2d 1055, 1057 (Ala. 1999). Such is clearly the case here because Dapremont admits that he failed to provide the information and documentation concerning the income he derived from DMT and because the Dapremonts signed and filed income tax returns which they contend they did not read. Dapremont admitted he knew he had to report on his tax returns income he received from DMT, but claimed he didn't realize it was not included on his tax returns, even though, in one year, the income from DMT was four times that which he earned as president of the dealership. Even assuming Dapremont's claim that he did not read his income tax return before filing it was true, a reasonable person would conclude that plaintiffs were contributorily negligent and were in fact the cause of their own alleged injuries resulting from the failure to report DMT income on their returns.
The Dapremonts were also contributorily negligent as a matter of law and/or assumed the risk by not providing the defendant accountants with any documents or information with which to compute any income plaintiffs had derived from DMT or any alleged expenses of DMT which might be used to offset that income. Such is undisputed in this case. No reasonable person would believe that they were not obligated to provide the person preparing their tax return with information or records concerning all income they received during the year in question, regardless of its source. And no reasonable person would believe that they could withhold from the preparer any information or records regarding income which the preparer did not specifically request. Under the circumstances, any reasonable person would conclude that it was unreasonable for the Dapremonts' to allegedly rely on the defendants to include the DMT income on their tax returns when plaintiffs provided no documents or other information to defendants with which to compute such income and report it on their income tax returns and that the Dapremonts therefore assumed the risk that the income would not be reported in the tax returns.
Summary judgment is also due on the negligence claims in this case because The Dapremonts have failed to present any evidence, expert or otherwise, that the defendants, certified public accountants, deviated from the applicable standard of care in the preparation of plaintiffs' tax returns. Expert testimony is required in negligence claims against professionals. See e.g., Donnell and Froom v. Baldwin County Board of Education, 599 So.2d 1158 (Ala. 1992); Alabama Phillips v. Olonzo, 435 So.2d 1266, 1267 (Ala. 1983).
The Court would also agree that the plaintiffs are estopped from asserting either that they received income from DMT or that Dapremont owned DMT inasmuch as Dapremont made written representations each year to the defendants that all "related party transactions" between himself and Coastal Ford, Inc. were disclosed in the dealership's financial statements and records. Dapremont also expressly admitted that, in fact, the existence of DMT as a related party transaction was not disclosed in the company's financial statements or records. Dapremont has presented no evidence to refute defendants' obvious reliance upon the representations contained in Dapremont's written management representation letters to the defendants each year. Cf. Affidavit of Mark Walker. In contrast, the evidence of record establishes that it was Dapremont's intent that his ownership of DMT and the additional income he derived from Coastal Ford through the DMT scheme would never be disclosed either in the Coastal Ford financial statements or any of his personal tax returns.
Under Alabama law estoppel can be applied to every enterprise in which men may be engaged and is applied in individual cases to promote equity and justice by preventing a party from asserting a right under a general technical rule of law when that party's conduct renders the assertion of rights contrary to such equity and good conscience. Haginas v. Haginas, 598 So.2d 1334, 1337-38 (Ala. 1982); Mazer v. Jackson Insurance Agency, 340 So.2d 770, 772 (Ala. 1976).
In addition to Dapremont's written false representations to the defendants, Dapremont admitted that no auditor could look at the DMT invoices he prepared and tell that Dapremont was personally charging the dealership for alleged appearance fees or talent fees or that he was making any money from the DMT transactions. Dapremont admitted that he used Jeff White's name and the address of the Kreger, White advertising agency on the DMT invoices that Dapremont personally manufactured.
Estoppel is also applied in this case because Dapremont affirmatively represented to Walker that he did not have any ownership or insolvent in DMT. Concealment of a material fact which induces another person to act on reliance on the fact that he mistakenly thought them to be is a proper basis under Alabama law for application of estoppel. Talladega City Board of Education v. Yancy, 682 So.2d 33, 36 (Ala. 1996). While Dapremont now claims, in this case, that he did tell Walker something about his involvement in DMT, Dapremont admitted that he never made such an allegation in the prior Ford case — when he had every opportunity and reason to advance such an assertion when trying to prove that Ford had knowledge of his ownership of DMT.
Plaintiffs also are barred by the doctrine of collateral estoppel from now asserting, in this case, that the defendants knew about Dapremont's ownership of DMT. Collateral estoppel applies where an issue was actually litigated in a prior action. Wheeler v. First Alabama Bank of Birmingham, 364 So.2d 1190, 1199-2000 (Ala. 1978). Dapremont testified at great length in the prior Ford case about persons who allegedly knew or had knowledge of his ownership of DMT, but never once claimed these defendants knew about his ownership in DMT. The accountant defendants in the case at bar had an affirmative duty to report all "related party transactions" to Ford Motor Company and to Coastal Ford, Inc. It is undisputed that they made no such reports until after they learned of Mr. Dapremont's involvement in DMT in April or May of 1997. Since the issue of. Dapremont's failure to inform Ford Motor Company or Coastal Ford, Inc.'s Board of Directors of Dapremont's ownership or involvement in DMT as a related party transaction was determined against Dapremont in the prior Ford litigation, plaintiffs are now precluding from attempting to relitigate this issue.
Plaintiffs also claim that the defendants fraudulently suppressed "material information regarding their preparation of Mr. and Mrs. Dapremont's personal tax returns" from the plaintiffs. (Count III). Assuming plaintiffs have stated a claim under Alabama law with sufficient particularity, judgment as a matter of law in favor of the defendants is due to be granted because, under Alabama law, defendants owed no duty to orally report to plaintiffs that which was plain from the face of plaintiffs' income tax returns (i.e., that DMT income was not reported thereon) and because plaintiffs neither relied nor reasonably relied to their detriment on any alleged fraudulent suppression by the defendants. The Dapremonts admitted that they signed and filed their personal tax returns each year, but claim they didn't read them. Since the fact allegedly suppressed (i.e. failure to report DMT income) was apparent from the face of the tax returns signed by the Dapremonts each year, judgment as a matter of law is due to be granted in favor of the defendants on any fraudulent suppression claims.
Finally, under Alabama law a person cannot maintain a cause of action if; in order to establish the cause of action, plaintiffs must rely in whole or in part on an illegal or immoral transaction to which plaintiff is a party. Hinkle v. Railway Express Agency, 242 Ala. 374 (1942). In Lemond Construction Company v. Richard C. Wheeler, 669 So.2d 855, 861 (Ala. 1995), the Alabama Supreme Court more recently addressed Hinkle as follows:
[I]n Oden v. Pepsi Cola Bottling Co. of Decatur, Inc., 621 So.2d 953 (Ala. 1993), . . . this Court held: "We interpret the rule in Hinkle to bar any action seeking damages based on injuries that were a direct result of the injured party's knowing and intentional participation in a crime involving moral turpitude." 621 So.2d at 955 (emphasis added). A crime involving moral turpitude is one involving conduct with an inherent quality of baseness, vileness, or depravity in regard to the duties one owes to society. Meriwether v. Crown Investment Corp., 289 Ala. 504, 268 So.2d 780 (1972)
Dapremont's derivation of very substantial income through DMT constitutes income derived from illegal or immoral acts or transactions to which Dapremont was a party, including his concealment of that income. Plaintiffs cannot therefore recover under any cause of action against these defendants.
CONCLUSION AND ORDER
For the reasons stated above, the Court concludes that there exists no genuine issue of material fact and that the defendants are entitled to judgment as a matter of law as to each of the plaintiffs' claims. The Court therefore concludes and it is thus ORDERED that defendants' motion for summary judgment is due to be and is hereby GRANTED and judgment shall be entered in favor of the defendants, Mark Walker and Overcash, Walker Company, P.C., and against the plaintiffs, Delmont O. Dapremont, Jr. and Joanie Dapremont, the plaintiffs to have and recover nothing of the defendants.
In addition to the above, the Court has considered defendants' motion for attorney's fees and costs as sanctions for bad faith in connection with the filing and prosecution of this lawsuit (Doc. 53), as supplemented (Doc. 60) with evidence that Dapremont attempted to suborn perjury on the critical issue of whether Walker was told by the witness before Dapremont's departure from Coastal Ford that Dapremont owned DMT Upon consideration of this motion, as supplemented, and all the evidence of record, the Court agrees with the defendants and specifically finds that each of the claims in this civil action was "without substantial justification"; was filed in bad faith; and prosecuted for the sole purpose of attempting to manufacture a defense for the plaintiffs in connection with the then anticipated and now prosecuted criminal charges against Delmont O. Dapremont, Jr., for tax evasion. The Court further agrees and finds that plaintiffs' opposition to defendants' motion for summary judgment consisted of numerous representations which were either false or not reasonably based on the evidence of record. The defendants were required to expend considerable time and expense in reviewing voluminous materials in both the case at bar and the prior Ford litigation which demonstrated unequivocally the inconsistencies in Dapremont's contentions concerning his ownership of DMT and Walker's knowledge about same. The defendants are therefore entitled to an award of attorney's fees and costs pursuant to the Alabama Litigation Accountability Act, Ala. Code §§ 12-19-272 and 273. See also, Meek v. Diversified Products Corp., 575 So.2d 1100, 1103 (Ala. 1991) ("the trial court set forth substantial reasons for this award, as required by § 12-19-273".); Hall v. American Indemnity Group, 681 So.2d 220, 223 (Ala.Civ.App. 1996) ("In view of the misrepresentations Hall made to American regarding the water damage to his home and his meritless cross-claims alleging bad faith, fraud and outrage, we conclude that, pursuant to the [Alabama Litigation Accountability Act], the trial court was well within its discretion in awarding attorneys fees to American."). An award of attorney's fees as cost are also appropriate in this case pursuant to the inherent authority of this Court to impose sanctions when it has made a finding such as in this case of bad faith. See e.g., Barnes v. Dalton, 158 F.3d 1212, 1214 (11th Cir. 1998) ("The key to unlocking a court's inherent power is a finding of bad faith."). The Court therefore concludes and it is thus also ORDERED that defendants' motion for attorney's fees and costs is due to be and is hereby GRANTED. Costs, including attorney's fees, are to be TAXED against the plaintiffs.
In connection with the taxation of costs, it is first ORDERED that, inasmuch as the costs which defendants are herein authorized to seek will be beyond the purview of the Clerk of this Court, the procedures set forth in Local Rule 54.1 which are applicable to the taxation of costs by the Clerk are hereby SUSPENDED. Instead, it is ORDERED that the defendants submit a Bill of Costs on the appropriate official form together with a motion to tax such costs on or before 5:00 p.m. on October 25, 2000.
It is FURTHER ORDERED that, unless otherwise compromised by the parties, the plaintiffs may RESPOND in writing with any objections to plaintiffs bill of costs, including attorney's fees, and motion to tax such costs by no later than 5:00 p.m. on November 6, 2000, at which time the Court will take the matter of costs under submission.
FINALLY, TILE COURT IS WILLING TO RECONSIDER THAT PORTION OF THIS ORDER GRANTING DEFENDANTS' MOTION FOR ATTORNEY'S FEES AND COSTS AS SANCTIONS PROVIDED THAT PLAINTIFFS, ON OR BEFORE OCTOBER 16, 2000, FILE A MOTION FOR RECONSIDERATION AND THEREIN SHOW CAUSE WHY SUCH AN AWARD OF ATTORNEY'S FEES AND COSTS OUGHT NOT TO BE MADE.
DONE this 4th day of October, 2000.