Title: Porter Muirhead Cornia & Howard v. State By and Through Wyoming Bd. of Certified Public Accountants

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Porter Muirhead Cornia & Howard v. State By and Through Wyoming Bd. of Certified Public Accountants1992 WY 183844 P.2d 479Case Number: 92-73Decided: 12/23/1992Supreme Court of Wyoming
PORTER 
MUIRHEAD CORNIA & HOWARD, f/k/a Porter Muirhead & Co., a Wyoming 
corporation, James A. Porter; Robert D. Porter; T. Chris Muirhead; Joanne R. 
Kumor; James B. Dodson; Dennis R. Howard; Gerald D. Cornia; and Steven W. 
Hopkins, individually, Appellants (Plaintiffs),

 
 
v.

 
 
The STATE 
of Wyoming, By and Through the WYOMING BOARD OF 
CERTIFIED PUBLIC ACCOUNTANTS, Appellee (Defendant).

 
 
Appeal from 
District Court, LaramieCounty, Nicholas G. Kalokathis, 
J.

 
 
Joel M. 
Vincent of Vincent & Vincent, Riverton, for appellants.

 
 
Steven F. 
Freudenthal of Herschler, Freudenthal, Salzburg, 
Bonds & Rideout, P.C., Cheyenne, for appellee.

 
 
Before MACY, C.J., and THOMAS, CARDINE, URBIGKIT 
and GOLDEN, JJ.

 
 

URBIGKIT, 
Justice.

 
 

[¶1.]     This appeal tests the 
authority of the Wyoming Board of Certified Public Accountants to adopt 
regulations requiring that certified public accountants practicing within a 
corporate business entity "shall remain fully liable and responsible for [their] 
professional activities, and subject to all rules, regulations, standards and 
requirements pertaining thereto, as though practicing individually rather than 
in a corporation."

 
 
I. 
ISSUES

 
 

[¶2.]     The basic issue is the 
regulatory authority of the Wyoming Board of Certified Public Accountants (CPA 
Board) to require that the professional practitioner retain personal liability 
for his accounting services, even though acting as a shareholder in a general 
business corporation.

 
 

[¶3.]     The particular thrust 
of appellants' argument is that the authorization by the legislature for 
accounting firms to incorporate under the general business corporation statute 
is inconsistent with the rule adopted by the CPA Board that requires full 
professional liability for each licensed employee of an accounting corporation. 
Appellants seek the benefit of limited liability normally associated with a 
business corporation.

 
 

[¶4.]     We affirm the decision 
of the CPA Board, as tested and approved in the declaratory judgment decision of 
the district court, which justified a requirement that the individual CPA retain 
the same personal liability when using the corporate entity for the professional 
practice as is the case for the licensee practicing as an 
individual.

 
 
II. 
FACTS

 
 

[¶5.]     Appellant Porter 
Muirhead Cornia & Howard (Porter Muirhead) commenced practice as a 
professional corporation, Wyo. Stat. §§ 17-3-101 through 17-3-104 (1989), after 
passage of the enabling legislation by the Wyoming legislature in 1971. Under that 
statute, individual liability was maintained and the right for any person to be 
a shareholder was limited to members practicing in that particular 
profession.

 
 

[¶6.]     Changes were made to 
the CPA licensing statute with the enactment of 1975 Wyo. Sess. Laws ch. 179, 
Wyo. Stat. §§ 33-3-101 through 33-3-131 (1987). In 1982, based on statutory 
changes provided in the licensing statute and an Attorney General's opinion of 
July 5, 1979, Porter Muirhead amended their corporate structure to change from 
the professional corporate statute, Wyo. Stat. §§ 17-3-101 through 17-3-104, to 
create an entity organized under the general corporate business statute1 as permitted by Wyo. Stat. § 
33-3-117.2 For the period of 1982 to 1989, 
Porter Muirhead practiced under the general business corporation statute without 
any provision for personal liability of its CPA shareholders. In 1990, this 
deviation from regulations requiring retained personal liability was recognized 
by the CPA Board with the resulting disagreement producing the litigation now 
presented for review by this appeal. 

 
 

[¶7.]     The clarity of the 
requirement for retained personal liability found in the present CPA Board rules 
is not at issue.3 Appellants contend that the rules, 
as adopted in 1991, are inconsistent with the CPA licensing board statute, Wyo. 
Stat. §§ 33-3-101 through 33-3-131, and specifically, Wyo. Stat. § 33-3-117, 
which permits the utilization of the general business corporation structure. 
Consequently, they argue that the limited liability provisions are ineffective 
and contrary to the statutory authority. In effect, it is suggested that this 
licensing statute is different than the criteria provided for in the practice of 
medicine or in the practice of law with a corporate entity.4

 
 

[¶8.]     Broad issues of 
estoppel are advanced to support appellants' argument of legislative 
interpretation and administrative agency adaptation based on the Attorney 
General's opinion of July 5, 1979. The CPA Board responds that longstanding 
rules required retained personal liability with any corporate practice of this 
profession and that accountability should be continued as appropriately 
validated in the 1991 professional practice rules and regulations. 

 
 
III. 
DISCUSSION

 
 

[¶9.]     No one disputes that a 
career engagement for the certified public accountant is other than a 
specialized and very professional occupation. Christensen v. Wyoming Bd. of Certified Public Accountants, 838 P.2d 723 
(Wyo. 1992). 
The quality and capacity of the individual CPA practitioner is critical to that 
professional involvement in the broad and consuming business relationships and 
property and personal liberty interests of the user of accounting services. 
Christensen, 838 P.2d 723. False reports can cause danger to both the estate and 
personal liberty of the accountant's client.5

 
 

[¶10.]  This court will resolve the complex and 
well briefed contentions in dispute by two separate and simple conclusions. It 
is first discerned that the provisions included in the CPA statute, in its 1975 
recodification regarding business organizations, did not demonstrate in 
affirmative intent that obligations for individual liability for mistake or 
neglect in providing the service should be eliminated. Furthermore, in second 
concept, we find that the broad authority of the licensing statute, Christensen, 
838 P.2d 723, does continue a historical right for the CPA Board to require 
certificated practitioners to retain personal liability for the accounting 
services rendered.

 
 

[¶11.]  A consideration of the next section of 
the CPA licensing statute, additional to Wyo. Stat. § 33-3-117, relating 
specifically to corporate practice, is instructive:

 
 
     (b) A corporation organized for the 
practice of public accounting may register with the board as a corporation of 
certified public accountants if it meets all of the following 
requirements:

 
 
* * * * * 
*

 
 
     (ii) Each shareholder 
of the corporation is a certified public accountant of some state in good 
standing and is principally employed by the corporation or actively engaged in 
its business;

 
 
* * * * * 
*

 
 
     (viii) The corporation 
is in compliance with all board regulations pertaining to corporations 
practicing public accounting in Wyoming.

 
 
Wyo. Stat. 
§ 33-3-118(b)(ii) and (viii).

 
 

[¶12.]  Wyo. Stat. § 33-3-108(a) provides the 
authority to the CPA Board to adopt rules and grants discretional 
authority:

 
 
     (a) The board shall 
prescribe rules and regulations not inconsistent with the provisions of this act 
[§§ 33-3-101 through 33-3-131] as it deems consistent with, or required by, the 
public welfare. The rules and regulations shall include:

 
 
* * * * * 
*

 
 
(ii) Rules 
of professional conduct for establishing and maintaining high standards of 
competence and integrity for certified public accountants in the profession of 
public accountancy;

 
 
* * * * * 
*

 
 
     (iv) Regulations 
governing corporations practicing public accounting which use the title, 
"certified public accountant", including but not limited to rules concerning 
style, name, title and affiliation with any other 
organization.

 
 

[¶13.]  The present CPA Board regulations which 
are at issue provide a statement of the theory and the purpose for 
adoption:

 
 
The Board 
believes that the individual responsibility of a professional rendering services 
to the public may not, and should not, be diluted or altered by virtue of the 
legal structure under which the professional elects to render services. The 
proposed regulation preserves and promotes the public welfare and high standards 
of competence and integrity for certified public accountants by preserving 
individual accountability of each professional.

 
 

[¶14.]  We find that the stated purpose follows 
statutory criteria and fits into grants of discretion to be exercised by the 
regulatory agency. Arnold v. Board of Accountancy, 49 Or. App. 
261, 619 P.2d 912 (1980); see also R.P. Davis, Annotation, Regulation of 
Accountants, 70 A.L.R.2d 433, §§ 2 and 3 (1960). The specific provision found in 
the present regulations adopted in 1991 is uncomplicated and 
exacting:

 
 
(1) 
professional services may be rendered only through licensed or permitted 
individuals; and

 
 
(2) that 
each such individual shall remain fully liable and responsible for his 
professional activities as though practicing individually rather than in a 
corporation.

 
 

[¶15.]  Within the progressive and developing 
nature of public agency regulation of licensed business activities, we do not 
find any office here of estoppel to deter changes (if any occurred) in 
regulatory regime. Sare v. SheridanCountyBd. of CountyCom'rs, 784 P.2d 593 (Wyo. 1989). Further, we 
cannot perceive any defined intent in the statutory language to eliminate the 
regulatory discretion to deny liability immunity for CPA's practicing within a 
general business corporation. WyomingState Dept. of Educ. v. Barber, 649 P.2d 681 (Wyo. 
1982).

 
 

[¶16.]  We additionally agree with the CPA Board 
that an appropriate public interest can be found in denying insulation from 
personal liability to licensed practitioners who do choose the corporate entity 
business practice. Clearly, in addition to regulation of competency and 
integrity, Wyo. Stat. § 33-3-108(a)(ii), we can find justification for inclusion 
of a regulatory assessment of individual accountability for quality of service 
provided. Cody Gas Co. v. Public Service Com'n of Wyoming, 748 P.2d 1144 (Wyo. 1988); State ex rel. Pape v. Hockett, 61 Wyo. 145, 156 P.2d 299 
(1945).

 
 

[¶17.]  We agree with the analysis stated by the 
appellee:

 
 
     The challenged rules 
fall within the standards of review set forth above, and are valid since they 
are:

 
 
1. Within 
statutory authority;

 
 
2. 
Reasonable;

 
 
3. Within 
the statutory purpose; and

 
 
4. A 
long-held administrative interpretation in which the legislature has 
acquiesced.

 
 
See also 
Meyer v. Norman, 780 P.2d 283 (Wyo. 1989) (practice of 
law). We also agree with the thoughtful analysis provided in the decision letter 
of the district court:

 
 
     Accountability to 
one's clients for possible malfeasance is one of the high points of any 
profession. This court concludes that accountability is consistent with the 
board's responsibility to insure competence and integrity. Having so concluded, 
the Court must then return to W.S. § 33-3-118(b). Pursuant to that section, 
particularly subparagraph (viii), the board may require the plaintiffs to 
structure their corporation to comply with its rules and 
regulations.

 
 
IV. 
CONCLUSION

 
 

[¶18.]  We conclude that nothing in the nature of 
the statutory changes in the CPA licensing statutes, Wyo. Stat. §§ 33-3-101 
through 33-3-131, can be found changing the historical right of the state 
licensing board to require personal liability of the practitioner for the 
quality of service in the interest of providing protection for the public. 
Maintaining the responsibility of personal liability for the practitioner, as 
delineated in the regulatory rules of the supervising state agency and adopted 
at the discretion of the agency, is a decision appropriately and justifiably 
invested with the public interest.

 
 

[¶19.]  Affirmed.

 
 
FOOTNOTES

 
 

1 Formerly Wyo. Stat. 
§§ 17-1-101 through 17-1-140, repealed by 1989 Wyo. Sess. Laws ch. 249 and 
renumbered as the present Wyoming Business Corporation Act, Wyo. Stat. §§ 
17-16-101 through 17-16-1803 (1989), generally effective on January 1, 
1990.

 
 

2 One (1) or more 
persons may organize a corporation for the practice of public accounting as 
certified public accountants under the general corporation law. The corporation 
is not required to have more directors than shareholders, but at least one (1) 
director shall be a shareholder.

 
 

Wyo. Stat. § 
33-3-117.

 
 

3 Rules adopted in 
compliance with the Wyoming Administrative Procedure Act, Wyo. Stat. §§ 16-3-101 
through 16-3-115 (1990), on February 4, 1991 and duly filed with the Secretary 
of State, are not subjected in this proceeding to any contention of impropriety 
in adoption. The CPA Board rules and regulations, in pertinent part, 
state:

 
 
CHAPTER 
IV

 
 
FIRMS, OFFICES, 
PARTNERSHIPS, CORPORATIONS

 
 
Section 1. Partnerships and 
Corporations.

 
 
(a) Partnerships and 
corporations of CPAs must register with the Board in order to furnish 
professional accounting services to corporations, partnerships, individuals, 
etc., which are domiciled in or are residents of the state of Wyoming when all 
or part of the services are performed within the state.

 
 
(b) Partnerships and 
corporations of CPAs furnishing professional accounting services to entities 
within the state of Wyoming, shall meet registration requirements 
as follows:

 
 
(i) The practice of 
public accounting in Wyoming is permitted in the partnership form 
in compliance with W.S. 33-3-118(a)(i-iii).

 
 
(ii) The practice of 
public accounting in Wyoming is permitted in the corporation form 
in compliance with W.S. 33-3-117 and W.S. 33-3-118(b)(i-viii). Any corporation 
making application for registration to carry on the practice of public 
accounting within the state of Wyoming must file a certified copy of the 
articles of incorporation at the time such application is filed and subsequent 
amendments thereto within one (1) month after the effective date of the 
amendment in compliance with the following requirements:

 
 
(A) The articles of 
incorporation shall contain the following language: "No professional services 
may be provided except by and through licensed or permitted stockholder or 
stockholders, or licensed or permitted employees, each of whom shall retain his 
professional license or permit in good standing, and shall remain fully liable 
and responsible for his professional activities, and subject to all rules, 
regulations, standards and requirements pertaining thereto, as though practicing 
individually rather than in a corporation"; and

 
 
(B) The articles of 
incorporation shall contain the following language "All shareholders of the 
corporation are, and will continually be, licensed or permitted in the 
profession for which the corporation is formed, and no professional service will 
be offered by the corporation except by or under the supervision of licensed or 
permitted stockholders or licensed or permitted 
employees."

 
 
(C) The practice of 
public accounting in Wyoming is also permitted in the professional corporation 
form in compliance with paragraph (ii) and subparagraph (B) above and with the 
additional requirements of W.S. 17-3-101 through 104 specifically but not 
limited to the requirement of W.S. 17-3-101 that all owners of capital stock be 
licensed or permitted under Wyoming law and the requirements of W.S. 17-3-103 
with respect to corporate name.

 
 

4 See Wyo. Stat. §§ 
17-3-101 and 17-3-103, which state:

 
 
     A corporation 
organized under the Wyoming Business Corporation Act or the Wyoming Statutory 
Close Corporation Supplement [chapter 17 of this title], whose capital stock is 
owned exclusively by a person or persons licensed to practice a profession by 
the state of Wyoming or by an agency, office or instrumentality authorized by 
the laws of Wyoming to license individuals for the practice of such profession, 
may, by and through the person or persons of such licensed stockholder or 
stockholders, or licensed employees, practice and offer professional services in 
such profession.

 
 

Wyo. Stat. § 
17-3-101.

 
 
     The corporate name of 
every professional corporation shall contain either the words "A Professional 
Corporation" or the capital initials "P.C.". These words or initials shall be 
the last word of the name of the professional corporation.

 
 

Wyo. Stat. § 
17-3-103.

 
 

5 Tests and scholarly 
writings dating back to antiquity describe the learned professions as, 
initially, law and then medicine. In the more complicated present societal 
structure in which we live, it is clear that a learned profession should also 
include the way we design and build, architects and engineers, and the way we 
exist, operate and do business, accountancy.