Court Opinion

ID: 9567108
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:48:48.814353+00
Date Added: 2024-06-11T09:56:25.616839
License: Public Domain

Birdsong, Judge.
Summary Judgment. This mountainous case involves a most convoluted series of arguments. The facts giving rise to this controversy show that in 1966 Yaksh Builders, Inc., the parent company of Ranger Construction Company, entered into a contractual agreement with Travelers Indemnity Company, whereby Travelers would issue performance bonds in behalf of Ranger to secure the faithful performance of numerous large construction projects. In order to protect itself and to learn as much as feasible about the financial condition of Yaksh-Ranger, Travelers required Ranger to obtain a Financial Statement for each operating year as well as Supplementary Financial Information from an independent audit firm. Ranger obtained the services of A. M. Pullen & Company, a firm of certified public accountants. Pullen prepared financial reports on Ranger’s financial condition from 1966 through 1974, which were furnished to Travelers. Travelers issued performance bonds on behalf of Ranger (Yaksh) during the period from 1966 *785through 1973 amounting to a sum of approximately $200,000,000. During the years 1971, 1972 and 1973, Ranger became more and more pressed financially and ultimately defaulted on some of its contractual obligations to various owners and builders, requiring Travelers to make payments on some performance bonds commencing in November 1974. Travelers claims ultimately it had to pay an amount on the defaulted contracts amounting to $50,000,000. Travelers brought suit against Pullen in January 1977, asserting that Pullen had either negligently or fraudulently performed its auditing services, portraying Ranger (Yaksh) as a solvent, net revenue producing concern during the years 1971-1973 when in fact Ranger (Yaksh) was in an increasingly difficult situation and ultimately Yaksh (the parent company) was forced into bankruptcy. Ranger, rather than following its parent company into bankruptcy, merged with another solvent construction company (Ballenger) and continued to meet its contractual obligations. In order to protect itself, Travelers exchanged the debt obligation owed by Ranger for an equity position in the new corporation (Ranger-Ballenger), taking $2,000,000 in cash and $10,000,000 in shares in the new corporation and agreeing to advance additional capital as required. In exchange therefore, Travelers relinquished the indebtedness owed by Ranger. After extensive discovery (consisting of 40,000 pages of record), Pullen moved for summary judgment. The trial court in a very brief, non-illuminative order, granted summary judgment to Pullen. Travelers brings this appeal enumerating as error the grant of summary judgment. Held:
1. In presenting its motion for summary judgment, Pullen premised its motion on substantially eight separate bases. Inasmuch as the trial court did not indicate upon what ground it granted the motion (nor was the trial court required so to do), Travelers has presented its arguments and refutations in its briefs upon all eight potential grounds. This has resulted in multiple briefs and appendices being presented to this court with approximately 1,400 pages of facts, arguments, and discussion. Inasmuch as we too cannot determine with certainty upon which ground the trial court acted, we will consider each of the arguments made by the parties to the appeal.
2. In one of its primary contentions, Travelers contended in its pleadings that Pullen was grossly negligent in conducting its audits. Travelers presented evidence that Pullen’s audits showed Ranger earning net income each year of 1971,1972 and 1973 of approximately a quarter of a million dollars. Each year, its net worth increased by nearly an equivalent amount, as did asset inventory. Travelers offered evidence that upon súch glowing reports (which showed business performance opposite to most construction company trends *786in the same time frame) its continued issuance of performance bonds was consistent with good business practices. After Yaksh went into bankruptcy, Travelers retained its own audit expert who determined that each year during the period 1971-1973, Ranger’s records actually disclosed a net loss with a highly visible difference in income of well in excess of a million dollars less than portrayed in the financial statements prepared by Pullen. Travelers argues that had Pullen performed even routine examination of cash flow and expense documents dealing with Ranger’s operations, Pullen would not have furnished such glowing financial statements. In addition to Travelers allegations of negligence on the part of Pullen, Travelers contends that Pullen also was guilty of fraudulent misrepresentation by its certification that the examinations were made in accordance with generally accepted auditing standards and that such statements fairly represented the financial position of Yaksh, Inc. (Ranger), when Pullen knew such certification misrepresented the scope and thoroughness of Pullen’s audit. Thus, Travelers sought damages for the tortious injury resulting from Pullen’s submission of grossly inaccurarate financial statements.
Pullen resisted these counts and as the basis of its motion for summary judgment relating to the issues of negligence and fraud contended that there was a lack of privity between Pullen and Travelers. Pullen relies mainly on the cases of MacNerland v. Barnes, 129 Ga. App. 367 (199 SE2d 564); Howard v. Dun & Bradstreet, 136 Ga. App. 221 (220 SE2d 702); Dworman v. Lee, 441 N.Y.S.2d 90; and Ultramares v. Touche, 255 N.Y. 170 (174 NE 441), for the general principle that third parties may not recover from an accountant in the absence of privity. Quite aside from the fact that we distinctly held otherwise in Ga.-Car. Brick &c. Co. v. Brown, 153 Ga. App. 747, 748 (266 SE2d 531) and Sawyer v. Allison, 151 Ga. App. 334 (259 SE2d 721); (see also Hines v. Wilson, 164 Ga. 888, 889 (139 SE 802)); Young v. Hall, 4 Ga. 95 (4), 100, we do not read those cases cited by Pullen with such a limited rationale. As we view the reasoning of those decisions (MacNerland, supra; Howard, supra), a third party is entitled to recover from an accountant, despite the absence of privity, where the third party is in a limited class of persons known to be relying upon representations of accountants. What those cases do seem to hold is that if the third party is included only as a member of the general public who relies upon the representations of the accountant, there is too tenuous a relationship to warrant a legal liability being imposed upon an accountant whose negligence or fraud might have worked an injury. Travelers presented evidence, which if believed, would have warranted a conclusion that Pullen was informed by Yaksh that Travelers required financial statements and would rely *787upon those statements in deciding the propriety of issuing new performance bonds. Travelers presented a clear question of fact whether Pullen was aware of Travelers’ interest in the financial statements, and thus whether Travelers would rely upon or be directly injured by its representations. See Bodin v. Gill, 216 Ga. 467 (117 SE2d 325); and Ga.-Car. Brick, supra. Georgia courts have held that persons performing professional and skilled services are required to exercise ordinary care in the performance of those services and that duty may extend to persons with whom the professional is not in privity. These cases have allowed recovery by such third persons for damages attributable to the negligent performance of those professional services. Bodin v. Gill, supra; Chastain v. Atlanta Gas Light Co., 122 Ga. App. 90 (176 SE2d 487). At the very least, we conclude Travelers has created a question of fact as to the intent and purpose of Pullen and Ranger in the preparation of the financial statements in relation to Travelers. It follows that the trial court could not have based the grant of summary judgment upon the lack of privity.
3. Another basis for the motion for summary judgment was that the financial statements prepared by Pullen related to estimated income for each year and not to established income. Estimates made in good faith cannot form the basis of fraud and form a poor basis for an argument of negligence. On the other hand, Travelers presented expert evidence that Pullen’s annual reports related to year-end financial condition and while certain estimates may have been included, Pullen was certifying that the report reflected Ranger’s actual year-end financial position. We must concede that at least a question of fact remains as to what Pullen actually represented. Where a question of fact remains, the trial court may not rest a grant of summary judgment on such an unresolved issue. Lewis v. C & S Bank, 139 Ga. App. 855, 860 (229 SE2d 765). We conclude therefore that the trial court did not base its grant of summary judgment upon this ground.
4. Another ground for summary judgment advanced by Pullen was that there was no evidence showing the extent or amount of credit it (Pullen) certified to Travelers as being safely issuable on behalf of Ranger based on Pullen’s annual financial audits of Ranger. Pullen’s argument continues that because there could be no limitation of its liability resulting from its representations, then Travelers should not be allowed to proceed on a theory of fraud. This argument sounds in contract theory. Pullen in effect argues that if it is going to be liable for its acts, then it should have been able to have an understanding that either Travelers or Ranger would pay a higher fee for the risk to which Pullen might expose itself. We find this *788argument to be without merit. We have already held that there was a litigable issue of fraud between Travelers and Pullen. If that fraud is established by competent evidence, then the fees paid by Ranger for the professional service rendered to it by Pullen encompass not only the fee for the services rendered but for the risk incurred. A professional is liable to those in the limited class who the professional may reasonably expect to rely on his services. Bodin v. Gill, supra. See Mallis v. Bankers Trust Co., 615 F2d 68, 82-83 (2d Cir. 1980).
5. Pullen also argued that Travelers has failed to show that any alleged acts of negligence or fraud by Pullen were the proximate cause of Travelers loss. Pullen maintains that so far as the evidence shows, Travelers by its own negligence continued to issue bonds long after it knew or should have known that serious questions existed as to Ranger’s financial condition. Thus, Pullen contends that Travelers would have suffered its losses whether or not any acts of negligence or fraud were committed by Pullen. On the other hand, Travelers offered much evidence to show that it exercised great care to protect its interest in view of the large value of the performance bonds issued on behalf of Ranger. Once again, we are confronted with a disputed question of fact. It is clear that questions of proximate cause are questions to be resolved by a jury. Ga. Power Co. v. Womble, 150 Ga. App. 28, 33 (256 SE2d 640). It follows that this could not be the ground upon which the trial court granted summary judgment.
6. Pullen argues that by accepting $2,000,000 in cash and $10,000,000 in stock in the new Ranger Construction Co. and substituting its debt position for an equity position, this constituted a release of Ranger from its debt to Travelers. Pullen then contends, assuming arguendo that there was gross negligence or fraud involved in the preparation of Ranger’s financial statements, the figures were furnished to it by Ranger and it was Ranger who actually submitted the financial report to Travelers. Thus, Pullen argues that Ranger was a joint tortfeasor with Pullen and the release of Ranger by Travelers released Pullen. Maxey v. Hospital Auth. of Gwinnett County, 245 Ga. 480 (265 SE2d 779).
Our problem with this argument is in finding that the documents passed between Travelers and Ranger constituted a release of a claim. Though Pullen makes persuasive arguments that the verbiage of the Stock Receipt and the Stock Subscription indicate that the indebtedness, as a claim, was released, Travelers makes equally cogent arguments that it never was the intent of either Ranger-Ballenger or Travelers to release any claim that Travelers might have against Ranger or any other tortfeasor. To the contrary, Travelers asserts this was nothing more than a receipt. Thus, the trial court was faced with an unresolved question of fact as to whether the *789document was a release or a receipt. In order for the trial court to conclude that Travelers and Ranger executed a “release,” the court would have to ignore the fact the document on its face is designated as a “receipt” for shares of stock, as well as the sworn testimony by way of affidavit and deposition of each of the parties to the execution of the receipt that they intended nothing more than a receipt and did not intend the transfer of stock to extinguish Ranger’s indebtedness to Travelers. Opposed to the maker’s uncontradicted assertion that it was a receipt, a third party to the agreement, Pullen, musters only an argument from the face of the document (and in disregard of the intent of its makers) that the document is a release. It has been the law of this state from its very early judicial history that parol evidence relating to the intent of the makers thereof is admissible to clarify an ambiguous document denominated a receipt but questioned to be in actuality a release. Bell v. Boyd & Brumby, 53 Ga. 643 (1). In that case Bell leased to Boyd and Brumby a storehouse and assigned the lease to Longley and Robinson but reserved the right to resume the collection of rents upon payment of all past rents to Longley and Robinson. Almost a year later, Bell paid past rents to Longley and Robinson, taking a receipt which in its body recited that Longley and Robinson released and discharged Brumby and Boyd from all further liability for future rents upon said property. Bell then sued for a rental payment. The court held this document to be ambiguous on its face and concluded that parol evidence as to the intent of the parties was admissible to explain the ambiguity in the lease, both latent and patent.
Ambiguity in a contract may be defined as duplicity, indistinctness, an uncertainty of meaning or expression. Novelty Hat Mfg. Co. v. Wiseberg, 126 Ga. 800 (55 SE 923). Parol evidence is admissible to explain all ambiguities, the question as to what was intended being an issue of fact for the jury. Tarbutton v. Duggan, 45 Ga. App. 31 (7) (163 SE 298). In this case, the uncertainty of meaning between a document denominating itself a receipt but containing language consistent with a release, triggered an issue of ambiguity, requiring a jury’s resolution of the ambiguity by consideration of parol evidence as to the intent of the parties. Taylor v. Estes, 85 Ga. App. 716, 718 (70 SE2d 82).
Though it is the duty of the court to construe contracts, the trial court may not construe an inherently ambiguous contract. Guest v. Mitchell, 156 Ga. App. 815 (275 SE2d 799). Such a document requires the admission of parol evidence to ascertain the intention of the parties. Code Ann. § 20-704; Taylor Freezer Sales Co. v. Hydrick, 138 Ga. App. 738, 739 (227 SE2d 494). Inasmuch as courts are not at liberty to revise or remake contracts while professing to construe *790them (Smith v. Standard Oil Co., 227 Ga. 268 (1) (180 SE2d 691); Stuckey v. Kahn, 140 Ga. App. 602, 606 (231 SE2d 565)), we must conclude that the trial court did not resolve this ambiguous contract by concluding it to be a release nor predicate its grant of summary judgment thereon.
7. Pullen advanced as a ground for its motion for summary judgment the argument that Travelers’ complaint was barred by the running of the statute of limitations. We can reject this ground on the face of the argument. Pullen and Travelers both agree that any losses incurred by Travelers that predate four years from the filing of the complaint in January 1977 are barred by the statute of limitations. Their only disagreement relates to the point at which the four years begins to run. One party in effect argues that no cause of action arose until Travelers actually made payment of bonds. The other counters by arguing that a cause of action arose when a bond actually was issued. These arguments miss the point. Both parties agree that at least some of the monetary losses are cognizable, assuming a cause of action otherwise exists. Thus what each party admits is that the trial court should have granted a partial summary judgment as to those claims advanced by Travelers which fall without the four-year period. Yet the trial court did not grant a partial summary judgment, but extended the summary judgment to the entire cause of action. Manifestly then, the trial court did not rely on a theory of limitations to issue its order. Until the trial court determines at what point the four-year period commences, there is nothing for us to review in relation to a statute of limitation issue.
8. Travelers argued that even though the auditing services emanated from a contract between Ranger and Pullen, Travelers was a third party beneficiary inasmuch as the intended benefits of the financial information furnished was for Travelers. Pullen argues equally forcefully that there was no competent evidence showing that Pullen and Ranger intended to benefit Travelers. Once again, we are confronted with a question of fact as to what intent, if any, may be found within the agreement between the accounting firm and the principal concerning the principal’s surety. There can be no question that Travelers may, under proper circumstances, be a third party beneficiary. M. R. Thomason & Assoc. v. Wilson, 125 Ga. App. 658 (188 SE2d 805). This likewise was a matter for a jury and could not furnish a viable ground for grant of summary judgment.
9. Related to the arguments discussed in division 2 of this opinion dealing with negligence and fraud, Pullen also advanced the argument that Travelers did not exercise due diligence in protecting its own interests but continued to issue bonds long after it was aware of Ranger’s difficulties. For the same reasons discussed in division 5 *791of this opinion, we conclude that there was a substantial question of fact presented as to whether Travelers exercised reasonable care to protect its interests. Issues of due diligence are for a jury’s consideration. Cato v. English, 228 Ga. 120, 122 (184 SE2d 161). Thus, this argument presented no ground for grant of summary judgment.
Decided March 17, 1982
Rehearing denied March 25, 1982
G. William Speer, Frank M. Hull, Michael L. Chapman, for appellant.
Richard R. Cheatham, J. Eric Dahlgren, George B. Haley, for appellees.
10. Based on the foregoing and after a thorough review of each and every ground for the grant of summary judgment as well as the authority cited in support of those arguments, we can find no justification for the grant of summary judgment to the appellee Pullen. Accordingly, it is our conclusion that the trial court erred in granting summary judgment to Pullen.

Judgment reversed.

Quillian, C. J., McMurray, P. J., Shulman, P. J., and Banke, J., concur. Deen, P. J., Carley, Sognier and Pope, JJ., dissent.