Division I: Dewar's Money Whisk(ey)ed away in Tax Refund Scam; But SJ on Causation Inappropriate
For those of you hoping that this opinion is about a blended scotch, you are going to be sorely disappointed. Rather, this is about the exact opposite. Its an opinion abbot the duties of accountants. Here, Dewar was awarded a hefty sum by the trial court for negligent misrepresentation. How hefty? Over a $1,000,000 hefty. But this was a case decided on summary judgment. Summary judgment is one of those things that has a little bit different take depending on whether you’re moving to dismiss a claim or moving to win your claim. But it all comes down to the same thing, and any attorney involved in litigation pretty much has some version of this wording memorized:
“Summary judgment is appropriate when there are no material issues of fact and the claim may be resolved as a matter of law.”
In essence, there is nothing for the jury to decide because the evidence is so one sided that no reasonable juror could find for the other side.
Here, the Dewar sued Smith, and the trial court determined that there was no way a jury could determine that Smith did anything other than breach its duty to Dewar. But the Court also concluded the other elements (negligence has four: duty, breach, causation, and damages) were met. The court of appeals disagreed regarding whether Dewar had shown that the breach of the duty was, beyond any reasonable juror’s opinion to the contrary, the cause of his damages.
In this case, we’re dealing with a settlement agreement giving Dewar the exclusive interest in a tax refund of another guy, Bedall. As part of the settlement agreement, Bedall hired Traner Smith to file Bedall’s tax return, and the tax return was to go into Bedall’s name, then be transferred to Dewar. Befall signed an irrevocable power of attorney authorizing his attorney to receive the funds and deliver them to Dewar.
You can guess what happened next. Bedall revoked the consent and had the address on the check changed to Traner Smith. After that, Dewar asked Traner Smith to review the tax return, and he forwarded the old copy, knowing that the the new copy had an updated address noted to Traner Smith. Traner Smith gave the money to Bedall’s relative, and then Bedall put the money in Thailand, which, presumably, is a good place to hide money. The Court found that it was a breach by Traner Smith.
However, Dewar does not establish as a matter of law the sixth element, proximate causation between Smith's misrepresentation and his injury. "Proximate cause has two elements: cause in fact and legal causation.” "Cause in fact" is the actual, "but for," cause of the injury. "Legal causation” focuses on whether, as a matter of policy, the connection between the ultimate result and the tortfeasor's act is too remote or attenuated to impose liability. The court may determine proximate cause as a matter of law where the facts are undisputed and "reasonable minds could not differ." But proximate cause is usually the province of the jury because it involves determining what actually occurred.
Smith's undisputed misrepresentation kept Dewar from knowing that Beddall had changed the return address and, thus, the refund recipient. Dewar’s injury is not in dispute. But we cannot say as a matter of law that without Smith’s misrepresentation, Dewar would have avoided those damages.
Correct information from Smith—either a "noisy withdrawal" or notice to Dewar that Beddall had revoked his authority to disclose—should have alerted Dewar that he needed to act to protect his interests. He could have demanded information from Beddall or sought to enforce the settlement agreement in court. But, as the taxpayer, Beddall had the authority to amend his own tax return or revoke Hatch's power of attorney and direct the delivery of his refund. At the time of Smith's misrepresentation, Beddall lived in Thailand. In short, Dewar has not yet presented evidence, much less undisputed evidence, that Smith’s exercise of reasonable care would have allowed Dewar to prevent delivery of the refund to Beddall. The trial court erred when it resolved the issue of proximate cause in fact on summary judgment.
Basically, they’re saying that Bedall could have changed it without the misrepresentation by Bedall. But that’s not what actually happened. It seems to me that the Court is placing a burden on Dewar to discovery a misrepresentation through evidence not in the file. I dunno, just my take.
Definitely a necessary read for accountants and attorneys dealing in some form of third party receipt of settlement funds.
The attorneys at Issaquah Legal Services are skilled in complex settlement provisions and collection of judgments and will work to protect your interests. Please contact our Issaquah lawyers to find out more.