Opinion ID: 2570772
Heading Depth: 3
Heading Rank: 1

Heading: Appellants' Third Party Beneficiary Claim

Text: The Appellants' third party beneficiary claim alleged only that Joan Hughes sought Thayer's services for the preparation of applicable tax returns, not estate planning advice. In Jewish Hospital v. Boatmen's National Bank, 261 Ill.App.3d 750, 199 Ill.Dec. 276, 633 N.E.2d 1267 (1994), appeal denied, 157 Ill.2d 503, 205 Ill.Dec. 165, 642 N.E.2d 1282 (1994), the Appellate Court of Illinois addressed whether an accountant could be held liable to trust beneficiaries for adverse tax consequences under a third party beneficiary theory. The court allowed the trust beneficiaries to sue an accountant and attorney for negligently failing to give competent advice as to how to avoid unnecessary estate taxes when preparing the testamentary documents during the settlor's lifetime. Id. 199 Ill.Dec. 276, 633 N.E.2d at 1279. However, the court distinguished an accountant's post-mortem services for the administration of the trust and denied the beneficiaries' claim based upon such services. Id. 199 Ill.Dec. 276, 633 N.E.2d at 1279-80. The court explained the difference in the outcome as follows: [C]onstruing the evidence most favorably for plaintiffs, it is clear that [accountant] provided professional accounting services to the estate by way of assisting [executrix] in the preparation of the Federal estate tax return. Contrary to plaintiffs' assertions, [accountant] was not hired primarily to benefit plaintiffs or to give tax advice to the beneficiaries, but instead was hired to assist the Bank as coexecutor in the proper administration of the estate. Administration of this estate has so far required only that the trusts to the life beneficiaries be administered. Only after the death of the testator's sister will the residuary trust be paid to plaintiffs. We cannot say that the facts regarding the administration of the estate, even when construed most favorably for plaintiffs, show that the services of [accountant] were engaged to primarily benefit these plaintiffs. Id. Thus, because an accountant's post-mortem services for the preparation of federal estate tax returns were not to benefit the beneficiaries, the court affirmed the summary judgment in favor of the accountants. Id. 199 Ill.Dec. 276, 633 N.E.2d at 1282. Here, viewing the pleadings and the exhibits submitted by the parties, we must conclude that there is no genuine issue of material fact concerning the purpose for which Joan Hughes consulted Thayer. Thayer was retained to prepare the necessary estate tax returns following the death of Lloyd Hughes; there is no evidence that Thayer was consulted for estate planning advice. We are aware that, if Thayer had used the federal disclaimers and unified credit, as the Appellants claim he should have, the benefit to the Appellants would have been an increased inheritance. However, that benefit would have been merely incidental to Thayer's agreement to prepare the tax returns. Therefore, the Appellants are incidental, not intended, beneficiaries of the agreement between Thayer and Joan Hughes. The Appellants attempt to distinguish Jewish Hospital based upon the existence of an Illinois statute that precludes accountant liability to persons with whom they are not in privity of contract [hereinafter, Illinois' accountant privity statute]. See Ill.Ann.Stat. ch. 225, para. 450/30.1 (Smith-Hurd 1998). However, Illinois' accountant privity statute does not preclude third party beneficiary and negligent misrepresentation claims by non-clients; rather, it merely adds the statutory requirement of a written notice. See Ill.Ann. Stat. ch. 225, para. 450/30.1(2) (providing that the statute does not apply if (1) the accountant was aware that a primary intent of his/her client was to benefit a particular person; and (2) the benefitted person notifies the parties in writing of his/her reliance upon the accountant's services). Under this exception, Illinois' accountant privity statute would not affect the persuasive reasoning of Jewish Hospital as applied to the present case. Thus, the Appellants' attempt to distinguish Jewish Hospital on the basis of Illinois' accountant privity statute fails. The Appellants also cite Kinney v. Shinholser, 663 So.2d 643 (Fla.Dist.Ct.App.1995), review denied, Moncrief v. Kinney, 671 So.2d 788 (Fla.1996), in support of their third party beneficiary claim. In Kinney, summary judgment was awarded against a trust beneficiary who brought a third party beneficiary claim against an accountant for failing to advise his mother of the adverse tax consequences associated with failing to exercise her power of appointment. Id. at 645. The Florida Court of Appeals reversed, holding that the third party beneficiary claim precluded summary judgment where the beneficiary's inheritance, as the sole residuary beneficiary of the trust and personal representative of the mother's will, were diminished as a result of the increased tax liability. Id. at 646-47 (citing Machata v. Seidman & Seidman, 644 So.2d 114 (Fla.4th DCA 1994), review denied, 654 So.2d 919 (Fla.1995) (recognizing Florida's adoption of Restatement Second of Torts § 552 and holding that accountant liability for negligence is expanded beyond persons in privity to include persons the accountant knows intend to rely on the accountant's audit for a specific purpose)). The holding in Kinney appears to have relied upon the general principle that an accountant may be liable to a third party, as announced by Florida precedent involving negligent misrepresentation based upon financial statements. See id. However, as previously discussed, the Appellants's are not intended beneficiaries of Thayer's services for the purposes of accountant malpractice. See Jewish Hospital, 199 Ill.Dec. 276, 633 N.E.2d at 1267-80. Thus, because we are unaware of the allegations made by the plaintiff in Kinney, and to the extent that Kinney conflicts with the reasoning in Jewish Hospital that a will/trust beneficiary is an incidental beneficiary of an accountant's post mortem services, we decline to adopt Kinney's interpretation. Accordingly, we hold that, because there were no genuine issues of material fact, the circuit court correctly granted summary judgment as to the third party beneficiary claim against Thayer.