FIRST COMM. BANK v. Kelley, Hardesty, Smith and Company, Inc.

State, motion to dismiss. See Johnston v. (Ind.1988).

Taylor next claims the trial court erroneously allowed the State to amend its information after the close of all the evi granted dence. The trial court the State delete, permission to "Lawful United States Currency in the form" from each of the seven counts, words, theft which left "of a 35-34-1-5(c): According check." to .C. Upon prosecuting motion of the attor- ney, before, may, any the court time trial,

during, permit or after the an amend- to the indictment or information in defect, respect imperfection, prejudice omission form which does not rights the substantial of the defendant. original Taylor information notified a check was involved with each theft count. The same is true of the amended informa- Taylor's argument tion. that the amendment deprived him persuasive. of a defense is not phrases The deleted amounted to mere sur- information, plusage in the and the amend- prejudice Taylor's ment did not substantial rights.

Judgment affirmed.

SHARPNACK,C.J., NAJAM,J., concur. FIRST COMMUNITY BANK AND TRUST, as successor in interest Bar

gersville Savings Bank, Federal Walter Umbarger, Wesemann, M. Merrill M. Eugene Morris, Appellants, W. Plaintiffs, KELLEY, HARDESTY, SMITH AND

COMPANY, INC., Larry Smith, D. Garry Autry, Appellees-Defendants.

No. 41A04-9507-CV-261. Court of Indiana. March

OPINION

CHEZEM, Judge. Summary

Case Community First Plaintiffs-Appellants, ("the Bank"), Um- Walter Trust Bank and ("Umbarger"), Merrill Wesemann barger ("Mor- Morris ("Wesemann"), Eugene and the tri- appeal tis"), collectively "Appellants", Defendants-Appel- grant of partial al court's Company, Hardesty, and leeg', Kelly, Smith ("Smith"), and ("KHS"), Larry Smith Inc. collectively,"Appel- ("Autry"), Autry Garry We summary judgment. lees", motion merits. on the for trial remand and reverse

Issue review, one issue present

Appellants whether as: we restate which by a assigned claim of the successor client. History and Procedural

Facts issues of material genuine are no There the Bank's dispute.1 KHS served fact partner and awas auditors. Smith external 1988, the In KHS. employee of Autry an base its traditional changed from Bank making con began lending and estate real was under- the Bank Because loans. sumer serutiny close came under capitalized, including the Office regulators, of federal ("OTS") Federal and the Supervision Thrift ("FDIC"). Corporation Deposit Insurance Super- into Bank entered Eventually, the to avoid the OTS Agreement visory addition, required the OTS liquidation. $94,649.00in defaulted off write Bank to characterized had been loans consumer time, the At Group "A" loans. as the owners substantial Directors were Umbarger, Wesemann They, Bank. II, MeCro- Wiles, Polis Patricia Donald A. non-performing Morris, those purchased Tresslar, & Mober- Harrison A. ry, “Douglas $84,649.00 pursuant the Bank from loans appellants. Indianapolis, ly, Agreement Purchase a Loan executed Agree- Purchase The Loan 1991. August Campbell, Mulvaney, David C. L. Karl Bank's interest expressly Welsh Bingham Crowley, Summers F. John loans related causes appellees. Indianapolisfor Spilman, court, trial brief, entered of law reply assert are conclusions in their Appellants, 1. findings of fact. findings of fact challenging court's these each of 11, 7, 8, nos. Hence, evidentiary Appellants liberally sold the Directors. matter must con brought suit nonmoving party. strued in favor of the performance of its audit of the Bank. Terre Haute Nat. Em First Bank Pacific (Ind. ployers Ins. The Bank claimed that the loans failed due Ct.App.1998). grant A trial court's of sum to acts or omissions of its loan consumer mary judgment presump is "clothed with a ("Davidson"). officer, Kerry Davidson The validity." tion of Rosi v. Business Furniture Bank discovered that Davidson committed (Ind.1993). 431, Corp., 615 N.E.2d 434 How certain "defaleations" such as destruction of ever, carefully this court must serutinize the bankruptey post-dating notices and of loan losing trial court's decision to ensure that the non-performing due dates so that loans improperly day is not denied his up moving" would not show on the "slow loan Rao, 189, Oelling court. v. 593 N.E.2d 190 alleged list. The Bank that because this (Ind.1992). Davidson, by information was hidden it was appropriate steps not able to take to collect II Further, alleged those loans. Bank we consider here is by failing prevent KHS breached its duties whether claim can through or discover its audit what Davidson assigned by be a client of an accountant to a that, doing. argued pur- was The Directors by of accounts audited the accoun assignment, they suant stood in the yes. tant. We answer When an accountant respect shoes of the Bank with to those serving who is as an external auditor issues consumer loan losses. opinion statements, regarding financial granted part The trial court KHS's mo- produce and accounts are audited to the fi summary judgment. Relying tion on our statement, any nancial malpractice claim as supreme Picadilly, court's decision in Inc. v. production sociated of the financial Raikos, (Ind.1991), 582 N.E.2d 338 opinion statement and of the accountant that, law, court found as a matter of assigned purchase be of the busi malpractice against Bank's claim for KHS ness or the assets included the audit. assigned could not be to successive owners of question. loans Relationship Accountont-Client successfully argued to the trial court Discussion and Decision claims for accountant I and, legal malpractice similar to claims for Summary judgment appropriate henee, supreme holding our court's in Pica- designated evidentiary if the matter dilly applies. The Court in that case based genuine shows there is no issues of material legal its decision claims moving party fact exist and the is entitled to should not be on its concern about judgment as a matter of law. "Ind.Trial Rule two preserve issues: "the need to the sancti- 56(C). reviewing a motion for ty client-lawyer relationship, and the judgment, we must determine whether there disreputable public role reversal that would genuine is a issue of material fact and wheth during result assigned malprac- the trial of correctly applied by er the law has been tice claims like this one." 582 Apartments, trial court. Inc. v. Cloverleaf N.E.2d at 342. (Ind.Ct. Eaton, Town 641 N.E.2d 667 App.1994). apply We the same standard as Duty Loyalty A. Moore, City the trial court. Evansville v. Court held that (Ind.1990). 563 N.E.2d malpractice claims would weaken two stan- party seeking summary judg lawyer's duty dards that define the establishing loyally bears the burden of client: to act and the propriety of the motion. confidentiality. Specifi- Miller Monsanto maintain client Id. (Ind.Ct.App.1998). cally, attorney's duty loyalty would be designated All facts and inferences from the knowledge undermined that a client Even if the the case. indicate such adver- to an malpractice claim his sell could malpractice before of KHS's to Directors knew attorneys' desires might chill sary. This notes, has not dem- clients, they purchased the some- for their advocates be zealous to do. duty-bound malprac- why compensating for otherwise thing onstrated bar- agreement would could become Additionally, assignments purchase claim a tice The existence negotiations of settlements: deleterious. chips in gaining any asset. make a favorable claim could adversary might well value of affect "An reject argument Accordingly, or fi- judgment-proof offer settlement should not claims exchange for nancially strapped client duty of bring a of an right assignable client's assignment of that attorney." Id. his client. loyalty to against his malpractice claim Hence, lawyer the interest at 348. of the client. the interest Confidentiality to Duty

would be adverse B. rela- argues that an accountant-client KHS Picadilly noted in Secondly,the Court assign- to allow and that tionship is similar confidentialityof lawyer's duty to maintain a create malpractice claims would ment of such by assign- compromised the client would accountant's self-inter- an conflict between a malpractice claims. When legal ment of loyalty to his client. duty of his ests and client, may lawyer the lawyer a is sued An However, one crucial difference. there is within reason information confidential reveal duty of accountant, imposed with a though may drop The client a defense. to establish clients, not an "advocate" is loyalty to claim, the confidential thereby preserving the The facts system. adversarial in an clients Picadilly noted in The Court information. an adver- purely because Picadilly arose in the claim longer controls if a client no a assignment of gain to sary able was attorney still assignment, the due oppo- previous against a claim malpractice but in his defense information reveal client malpractice attorneys. The claim nent's the power to discontinue has no the client original claim adversary's the from arose not be Thus, assignments should claim. such the case is not opponent. Such against his allowed. and KHS. Directors the between sanctity of Likewise, argues that the KHS Di- assignee in Unlike relationship should the accountant-client to the never adverse were interests rectors' fiduciary relation a it is preserved because as- Bank's, they received their from In the in nature. ship it is gained Picadilly assignee in signment. vein, the accountant-client KHS notes same adverse previously from his duty main accountant's and an privilege moreover, and, never a successor In con confidentiality of a client. tain mal- except anything in in interest privilege, attorney-client trast succes- Directors were practice claim. for com recognized privilege law common the notes that the Bank on interest in sors and their between munications the Bank. When from they purchased Ernst v. Underwriters Ernst clients. position notes, they stood bought Ind.App. Nat'l Assurance acquired the interest the Bank. accountant, (1978). Instead, N.E.2d 897 mal- the claim included the notes with creation purely the privilege is notes. to the audit regard practice with 25-2-1-28. in 1969. LC. passed statute potential argues that KHS January as LC. (Recodified, effective might business client's accountant's 2). 25-2.1-14-1 exchange in the business his offer crease privilege law any common lack of right of that client's statutory privi application limits the against the accoun- claim malpractice bring a Ernst, evidentiary in explained lege. As Directors were This assumes tants. on with disfa are looked generally privileges they pur- malpractice when of KHS's aware as privileges such vor, specific "certain has been No evidence notes. chased privilege, which accountant-client which would arguments made nor presented law, malpractice merely incidental particularly at common claim for unknown disfavored, strictly con- and are therefore essence, being the central asset sold. application." any in strued order to limit their when a seller asset is not a sells Ernst, (as 381 N.E.2d at 901. malpractice claim for was not the case Picadilly, where the claim was correctly states the asset), automatically he waives his itself confidentiality. of client unlike the regard privilege accountant-client attorney, the accountant's of confiden- affecting matters the value of that asset. tiality is not rooted other duties of the This means that when there is a claim for words, privilege accountant. In other malpractice relating to the asset the client's and the client waive the sold, being then the asset and the elaim for privilege bringing an action of malpractice may buy also be assigning the accountant or er. to another. To the con- trary, attorney-client privilege is rooted Commercialization C. confidentiality of a client but attorney's duty also to be a zealous argues that to allow that client, indepen- advocate for which is of accountant claims would lead duty imposed equally important dent and to commercialization of such attorneys. attorney An cannot be a zealous claims, Picadilly. disapproved Com- advocate for his client if he reveals confiden- product mercialization of such a is disastrous only tial the client. It is information about legal setting in a where adversaries could attorney adversary when a becomes an underlying litigation control the outcome of malpractice via a claim that the attor- by purchasing malpractice against claims ney may duty suspend his of zealous advoca- essence, opponents. their In it could render cy may duty confidentiality, avoid his of opponents puppets string, their on a which necessary to the extent to reason- every attorney duty flies in the face of almost ably in defend himself the action. demonstrate, to a client. KHS does not claim, the case of an accountant accountant, hand, on the other how harm would occur. The Directors re- confidentiality has no of rooted in a ceived the duty to be a zealous advocate. The accoun they purchased claim when the notes. There confidentiality solely tant's of is based is no threat of commercialization when confidentiality on the intrinsic value of of an accountant client, selling A client. a business or asset purchase claim is incidental of assets business, have should disclosed the claim, give which rise to the such as the regarding confidential information that asset purchased today do not us facts before today. The for matter of law judgment as a entitled to pure a privity. There was of an issue contain we stand Because reason. another stood The Directors rights. of reviewing grant the trial court shoes of they completed Bank after the shoes summary judgment a motion or denial of assign- an was not assignment. There on court reversed and because Toro, or Essex. Ultramares rights in ment of regard to the of law with conclusions its attempted to answer Rather, those cases must examine privilege, we accountant-client a may sue party a third of when privity. no KHS's assign- no has been there professional when asserts, of the law Contrary what KHS to by purchase. regard accountant privity with standard, before the Ultramares Like Under in Indiana. not well-settled claims is negligence held liable be claims, malprac- accountants accountant rely their parties who non-contractual arising out a claim both claims resemble tice report, financial inaccurate on an gen- detriment services-which personal contract for of satisfied. must be prerequisites certain based a claim assignable-and erally not been aware must have First, the accountant property- injury tortious on to be used reports were financial that There have assignable. generally is Appeals concerned Court of question for the requirement privity applicability of the The ac- required for care of appropriate standard by the considered accounting professionals was law. under Indiana countants the Seventh Court of States United utilized three standards isolated Toro court The Inc., Co., Krouse, Kern Co. v. in Toro Circuit case, These stan- Cir.1987). throughout nation. (7th by $27 In that courts F.2d 155 (1) the Ultramares as: brought classified be firm dards standard; a client of of creditor standard; (3) (2) Restatement accoun- individual against the firm and The Toro "reasonably standard. foreseeable" tants, au- upon erroneous alleging it relied that relied court the Essex that Dis- court noted extending the client. credit to dits be should judgment in favor ap- that standard Ultramares, then Court entered trict Toro. facts in plied to the appealed. the creditor defendant of 224 Second, find that or business. We purpose purposes. or particular party reason- permissible when a claims is rely intended to party parties or

known purchase the ably relies on statements Third, must upon report. the financial included in the asset business or business part of the some conduct on the have been audit. party or linking them to that un parties, which evidences the accountant's assignment of claims of derstanding party parties' reliance. prohibited in not be should Corp. Arthur Andersen & reasonably Alliance v. foreseen Credit there is stances where 493 N.Y.S.2d 65 N.Y.2d opinion by reliance on the (1985). N.E.2d 110 assignee. on the mer- and remand for trial might accept- Reverse standard The Ultramares noneontractual, par- non-assignee its. able when important it is

ties seek redress. DARDEN, J., concurs. that, have never Indiana courts to note standard for accoun- adopted the Ultramares BAKER, J., separate opinion. concurs with standard adapted the Ultramares tants. We BAKER, concurring. Judge, liability of a case when the the Essex agree result reached I While party at issue. We surveyor to a third my majority, clear that I want to make holding in that case to specifically limited our upon unique facts of is based concurrence Essex, of that case. the facts case, Di namely party the third party's that a third 373. We held Essex in fact substantial owners rectors were survey is not a on erroneous results reliance Bank, accountant. who was the client of the surveyor physical therefore the injury and permitting Although I am not favor survey- Additionally, because the not liable. assignability malpractice claims to third knowledge party the third no or had Raikos, parties, see Inc. results, privi- rely on the there was (Ind.1991), light of these N.E.2d ty surveyor and the third party. between the facts, majority's agree I specific Id. at 874. ultimate conclusion dispositive of the although somewhat . malpractice claim should the accountant party who lacks of whether a third issue reasonably fore prohibited here as was malprac- privity may an accountant sue that the third Directors would seeable tice, Therefore, has not addressed the case law to date rely opinion. on the accountant's an accountant mal- of whether I concur in result. assigned. practice claim rep- provide

External auditors are hired fully client and are resentations for the opinions that they produce their aware when buyers rely on the audit re- potential will reasonably fore- imperative It is sults. MERIDIAN INSURANCE MUTUAL rely parties who on an accountant's seeable COMPANY, Appellant- opinion of an confidence in the opinion have Defendant, indepen- accountant. The rules external auditors, surveyors to which dence Henry Harter, Karen K. HARTER and goal subject, rooted in the of enhance- Jr., Appellees-Plaintiffs. credibility opinion that those ac- ing No. 68A04-9510-CV-385. Otherwise, produce. countants Accoun- for external auditors. be little use Indiana. Court accurately responsibility to re- tants have a March An they audit. accoun- flect the business the financial representations about tant's company may relied on

statements purchase of an asset buyer complete notes here. Moreover, purchaser.2 or business to the it that a seller should be the case when sells D. Role Reversal buyer, buyer asset or business supreme Piccadilly Our court in also exam- every opportunity should have to receive the purchase. legal malpractice full value a seller for his ined how goes any disreputable should be aware that with the asset claims can have a effect of role asset, during information related to that reversal trial. confidential For instance, plaintiff Picadilly to the extent such information will enable the trial buyer pur prove maximum value for his had to that obtain defendant caused his injuries. plaintiff, if The same allowed the great chase. There is a difference when the may prevent pur- 2. be a in which the seller is not in an effort control even There case or buyer. completely forthright exam- For It the ac- seller, chase. would be not ple, proceed want but countant, the seller the sale maybe parties both who would be seller, Or, and not the seller's terms buyer. defending buyers. liable to the buyer seller is hostile to the and does not want fraud, against buyer, may etc. action of such the sale to such as when there is a proceed, liability, thereby assert volun- cases, In both hostile takeover corporation. tarily suspending privilege. the seller's the seller withhold confidential information privity that cases hold no Indiana legal been original defendant's assignment of accountant action for bring an required claim, prove that have to not the attorneys, and malpractice. the defendant's er- for the defendant, responsible were who (Ind.Ct. Ryan, 446 N.E.2d In Essex plaintiff, judgment. The outcome roncous filed of real estate App.1983), a position of precarious in a assignee, allegedly con surveyor who against a suit the same conflicting positions arguing prior survey for the an inaccurate ducted plaintiff that mention Not to time. no there was that because held owner. We two-fold, re- recovery its chances creased consumers, should injury to original tort asserting the gardless, either requirement. privity exception to the asserting the or, subsequently, action holding, reaching we at 372-78. Id. Potentially, such malpractice. concerning opinion Judge Cardozo's relied on relat- judgments two plaintiff could recover Touche, Corp. v. in Ultramares Fortunately, we case. the same ing to (1931). Judge 174 N.E. 255 N.Y. unique cireamstance presented with not the absence reasoned Cardozo malpractice is a claim for when expose accoun requirement would privity assigned. amount indeterminate liability in an tants an indetermi time to for an indeterminate Privity Contract de reasons we those same For nate class. requires law Indiana argues privity exception to the extend clined to successfully maintain an privity of contract Essex surveyors requirement Although malpractice. case.3 of law to presented this to follow Ultramares decline judg- motion for in its trial court those cases facts of and Essex because ques- ment, not reach court did before us the facts comparable to not Directors it held the tion

Case Details

Case Name: FIRST COMM. BANK v. Kelley, Hardesty, Smith and Company, Inc.

Court Name: Indiana Court of Appeals

Date Published: Mar 25, 1996

Citation: 663 N.E.2d 218

Docket Number: 41A04-9507-CV-261

Court Abbreviation: Ind. Ct. App.