We previously discussed some of the issues presented in Scheck Indus. Corp. v. Tarlton Corp. We will now turn to discussing the matter of an account stated, as presented in briefs. Scheck Indus. Corp. v. Tarlton Corp., 2014 WL 2116407 (Mo. Ct. App., E.D.). Although the initial discussion in the appellant’s brief concerning an account stated is quite lenghty, there seems to be some inadequacy in addressing the normal treatment that a failure to object to an accounting provided is not dispositive.
In brief, the case involves a subcontractor that took certain acts in remediation of construction problems. It appears that some time sheets for remediation work were signed on behalf of the prime. The additional remediation costs were not paid by the client. The sub claims there is an account stated that entitles it to the amounts referenced in the statements.
Judgment was entered against the sub following a bench trial. Sub appealed. Sub claims there is an account stated, and, as a result, sub is entitled to payment. It would seem that the succinct analysis would be something like the following:
An account stated arising from sending statements and acknowledging time sheets would not necessarily entitle an alleged obligee to payment. Even if the acts of the prime are taken as acknowledging the accuracy of the time sheet computations, it would be a question of fact as to whether obligation to pay the amounts was understood to be conditional–whether the sub actually under the contract was owed the amounts. “Because the debtor’s new promise is enforceable only to the extent it is co-extensive with its actual antecedent debt, it is necessary for the creditor to establish the existence and amount of this antecedent debt when the debtor denies the basis for an account stated.” Corbin on Contracts § 72.1 (Through December 2013; Release No. 13S2). So, to reverse the outcome, an appellant would have to meet the heavy burden to demonstrate the findings were reversible error.
We can see the initial brief’s discussion, and subsequent analysis and discussion, after the break:
More after the break ….
Sub’s Initial Brief
The initial brief of the sub states:
II. The trial court’s judgment in favor of Tarlton and against Scheck on Scheck’s claim for account stated is against the manifest weight of the evidence and an improper application of the law because Tarlton acknowledged the account in that Tarlton did not dispute Scheck’s invoices and made admissions over the course of two years that Scheck was owed for the work Scheck performed.
In a bench-tried case, the judgment of the trial court will be sustained unless there is no substantial evidence to support it, unless it is against the manifest weight of the evidence or unless it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc. 1976); Kirkpatrick v. Webb, 58 S.W.3d 903, 905 (Mo.App.S.D. 2001).
On August 15, 2013, the trial court entered amended judgment finding in favor of Tarlton and against Scheck on Scheck’s claim for account stated. (A000057.) The trial court held that Scheck failed to establish Tarlton agreed to the amount owed. (Id.) The trial court’s ruling, however, is against the manifest weight of the evidence and a misapplication of law as Scheck presented evidence that Tarlton never disputed Scheck’s invoices and, in fact, admitted Scheck was owed the amounts.
When an original debt or balance is acknowledged by a defendant, a new cause of action known as an account stated arises between the parties. Urban Painting & Dry Wall Co. v. Sander, 446 S.W.2d 500, 503 (Mo.App. 1969). An account stated is an agreement between the parties that a balance struck is correct and due between them and *37 an express or implied promise by the debtor to pay. Honigmann v. C& L Restaurant Corp., 962 S.W.2d 458, 459 (Mo.App.E.D. 1998). Even if a debtor makes no express promise to pay the balance, the retention of the account rendered for a reasonable time without objection acknowledges the account and implies a promise to pay. Id.; see also W.R. Chisler v. Staats, 502 S.W.2d 424, 427 (Mo. App. 1973).
This was demonstrated in Staats. There, the parties entered into an agreement under which the plaintiff would perform certain work to defendant’s home. Id. at 425. When defendant received the invoice for the work, defendant did not object and made several payments against the balance. Id. at 425-26. Defendant further provided two letters in which he reassured plaintiff the balance due would be paid. Id. at 426. Defendant failed to pay for six months and plaintiff filed suit to recover the amounts due. Id.
The trial court entered judgment in favor of defendant but the Missouri Court of Appeals reversed and held that plaintiff established an account stated. Id. at 427. The Court found that defendant’s letters to plaintiff constituted unconditional acknowledgements of the account but also found that, even without the letters, defendant retained the account without objection for more than a reasonable time:
[Defendant] testified that… he had decided, prior to making the [last] payment, not to pay the account as rendered. No expression of this intent appears in the correspondence… between the parties. Not until a meeting between the parties… did [defendant] express… dissatisfaction with the account rendered. Under the circumstances of this case, six months is a more than reasonable time for [defendant] to have objected to the account.
Id. at 427.
*38 Here, just like the plaintiff in Staats, Scheck established an account stated with Tarlton. The evidence at trial showed that Scheck submitted invoices to Tarlton from February 2009 to December 2009 and three of those invoices were not paid. (Pl. Exs. 12, 17-18.) Tarlton, however, has never disputed the amounts contained in the three outstanding invoices until it filed its counterclaim – over two years later.
Instead, Tarlton (i) informed Scheck in January 2010 that Scheck had been paid through November 2009, which the exception of the August 18, 2009 invoice, which had “slipped through the cracks”; (ii) acknowledged in February 2010 that it had the three outstanding invoices and indicated they would be forwarded to Tarlton’s accounting department to be “processed for billing”; (iii) informed Scheck on March 16, 2010 that it had again submitted the August payment to its accounting department; and (iv) informed Scheck on March 16, 2010 that the August 2009 invoice was an unanticipated expense but “not because it was an unknown obligation.” (Vol. II, TR000268; Vol. VI TR001024-1029; Pl. Exs. 13-15.) Even if Tarlton did not agree with, or did not intend to pay Scheck the amounts due, Tarlton does not express that disagreement or intent in any of its correspondence with Scheck. (Id.) [FN7]
FN7. Similarly, although Tarlton now argues that it was not required to pay Scheck unless Ameren paid Tarlton, Tarlton never conditioned previous payments or the execution of Scheck’s time and material tickets on this premise.
Moreover, Tarlton has expressly acknowledged the amounts owed to Scheck. In May and August 2010, Tarlton, and Tarlton’s counsel, informed Ameren that Scheck was owed for the work Scheck performed at the Project. (Pl. Exs. 42, 43.)
*39 Indeed, even after this case was filed, Tarlton’s project manager admitted that Tarlton did not dispute Scheck’s invoices and that Scheck was in fact owed for the work performed:
Q. And as of March 16, 2010, you still were not disputing that Scheck was owed the amount that they were seeking, correct?
A. I was not disputing their invoices.
Q. In fact, as of the time that you gave your deposition in this case, which would have been December of 2011, you still were contending that Scheck was owed some money, correct?
A. They had completed work – or they had executed some work, they had generated invoices, and they had submitted those invoices that were unpaid. So yes, they were unpaid invoices.
Q. And you think that Scheck is owed something?
Q. At least you did at your deposition, correct?
(Vol. VI, TR001033-1034.)
Since Tarlton further testified at trial that it believed all of the foregoing statements to be true at the time they were made, these statements constituted party admissions which should have been considered by the trial court. Thoroughbred Ford Inc. v. Ford Motor Co., 908 S.W.2d 719, 737 (Mo.App.E.D. 1995) (an admission is a party’s conscious, voluntary acknowledgment of certain facts which are relevant to the litigation and inconsistent with its contentions in the action); Moore Automotive Group, Inc., v. Goffstein, 301 S.W.3d 49, 54 (Mo. 2009). The trial court, however, improperly *40 disregarded this evidence (and in fact never even addressed it) and found in favor of Tarlton and against Scheck on Scheck’s claim for account stated.[FN8]
FN8. The trial court similarly disregarded evidence that Tarlton had, in fact, already paid Scheck for some of the work related to the drain access ports but failed to pay Scheck for work other than the drain access ports, which was undisputed. (Vol. II, TR001034; Pl. Exs. 11, 12, 19.)
This Court should find the trial court’s judgment to be against the manifest weight of the evidence and an improper application of the law which should be reversed as to Point II.
Open Issues–Calamari and Perillo
What’s the problem with all this lengthy discussion. It discusses the existence of an account stated, but does not address the rest of the story. As Calamari & Perillo note:
[M]any of the cases involve the rendition of a statement of account by the creditor followed by a part payment by the debtor. On these facts, some courts find that an account stated is formed as a matter of law; others hold that part payment permits a jury to infer an account stated. More frequently the cases involve an implied agreement arising when the debtor or creditor sends an itemized account to the other who retains it without objection for more than a reasonable time. The debtor’s silence is equivocal, however, giving rise to a rebuttable inference of assent which, when controverted, as by a prior disagreement between the parties as to the amount of the debt, gives rise to a question of fact….
…The account is supported by the survival in this area of the common law rule that a pre-existing debt is consideration for a promise to pay the debt. Such a promise, however, can be avoided for fraud, mistake or other grounds on which a contract may be avoided. Indeed it may be shown that the account contradicts the contractually agreed upon method of computation. If the computation is incorrect, the primary effect of an account stated is merely to shift the burden of going forward with the evidence to the party who claims the account is incorrect….
Joseph M. Perillo, Calamari and Perillo on Contracts § 21.9 (5th ed. 2003). So, the discussion in the initial brief proceeds as if the sending of an account that has not been the subject of an objection within a reasonable period of time disposes of the matter. As Calamari and Perillo note, it does not.
Sub’s Reply Brief
Let us turn to the sub’s reply brief:
Tarlton next argues that even if Scheck had pled an action for account stated, it still supposedly failed to establish Tarlton agreed to or acknowledged the amount due. (Response, p. 27.) Tarlton’s argument is both contrary to the law and the evidence.
It is well-established that a party need not expressly agree or acknowledge an account if the account is retained for a reasonable time without objection. Honigmann v. C&L Restaurant Corp., 962 S.W.2d 458, 460 (Mo. App. 1998). Here, Scheck established that certain invoices from 2009 were not paid and that Tarlton did not dispute them until two years later. (Vol. II, TR000268; Vol. Ill, TR001027-1030.) Moreover, Tarlton *5 admitted to having signed each and every one of Scheck’s time and material tickets (even after the cracking) thus acknowledging Tarlton’s obligation to pay for such work. (Vol. I, TR000088, TR000134; Vol. V, TR000884; Vol VI, TR001035-1038; Vol. VII, TR001317, TR001333; Pl. Exs. 9, 13.) Tarlton therefore expressly agreed to and expressly acknowledged the account no less than 302 times. (Pl. Ex. 9.)
Nor does the case cited by Tarlton – Spartan Carpet Distributors, Inc. v. Bailey, 728 S.W.2d 236 (Mo. App. E.D. 1987) – change this result. There, the Court found plaintiff had not established an account because defendant’s promise to pay was conditioned upon plaintiff responding to complaints about defects in the product plaintiff had supplied. Id. at 237. Unlike Spartan, Tarlton failed to prove that its promise to pay Scheck was ever disputed or conditioned on anything.
Instead, the evidence established that Tarlton made previous payments to Scheck without first being paid from Ameren, actually paid Scheck for some of the work it later ended up disputing, and never informed Scheck that it would not be paid if Ameren rejected Tarlton’s claim. In fact, the only representations Tarlton made were that one invoice had “slipped through cracks” and the outstanding invoices were being “processed.” Even after Ameren rejected Tarlton’s claim, Tarlton continued to admit that Scheck’s invoices were not disputed and that Scheck was owed for the work it performed. As such, Tarlton expressly and impliedly consented to and acknowledged the account with Scheck.
In passing I note the brief states time and material sheets were signed by the debtor/obligor. Were I to find a signature to acknowledge one’s obligation to pay for the work, because a signature can merely acknowledge receipt of a document, and not give rise to an unconditional obligation to pay, not subject to any defense, I would have here referenced the language that accompanied the signatures here.
In any case, finally, in the last two paragraphs, we get to the heart of the matter. As to whether the parties’ acts have unconditionally obligated the prime to pay the sub for this work, there is a factual question someone has to resolve. The formation of an account stated does not dispose of that question. Why cannot prime acknowledge that a sub has worked a particular number of hours, or performed certain tasks, that, if compensable, without binding itself to releasing some defense?
The trial court evidently assessed the evidence, who said what to whom, etc. It is not clear from these last two paragraphs why that determination is so unsupported by the record that there is reversible error.
General Principles Beyond This Particular Case
As a general rule, courts should be very reluctant to find that inaction or ambiguous action is intended to alter pre-existing contractual rights during the course of performance following one party’s failure to perform. It is not as if it is generally the case that it is difficult to document agreement expressly if–and this is the important point–if there is, in fact, an agreement. Rather, what we often have is one seeking to alter contractual rights but not willing to step up and address it expressly.
As a general matter of contract doctrine–i.e., putting aside this particular case–what one can expect to result from contract doctrine that aids those who are in breach of contractual obligations is that there will be more breaches. Does one suppose that the markeplaces for goods and services in this country are characterized by too much contractual performance? Is that, seriously, a problem–that contracts are not often enough breached?