On behalf of Gerald Jacobwitz

In Haselton Lumber Co., Inc. v. Bette & Cring, LLC, the Third Department of the New York Supreme Court, Appellate Division, reversed a trial court’s decision denying claims asserted by a seller against a building contractor. The appeals court determined that the seller’s proof was sufficient to support a claim for an “account stated.”

Where a debtor on an account has been billed on prior transactions and retains the invoices for an unreasonable period of time without raising any objection, a creditor’s claim for an “account stated” is implied under New York law. Courts deem the creditor’s silence as an implied agreement settling the balance due to the creditor on the account and the correctness of the account items.

Background and procedural history 

The seller, a family-owned business in Wilmington, New York, sells, distributes and manufactures building construction supplies. In 2010, the debtor, a building contractor, signed a business credit application and a personal guarantee requesting an extension of credit in order to purchase building materials for a construction project at a local housing development. During the next several months, the seller furnished the contractor with various building materials and sent out invoices and monthly billing statements that itemized the charges to the contractor’s account and recorded any payments submitted on the account.

In 2011, after the contractor allegedly failed to remit payment on certain invoices over a three-month period, the seller filed a lawsuit to recover the outstanding balance of $12,196.91, plus accumulated finance charges, attorney’s fees and other costs that were recoverable under the credit agreement and the personal guarantee. The seller’s suit asserted a claim for an account stated and a second claim based on the business credit application and personal guarantee.

After the trial court denied requests by both parties for a summary decision, the seller filed an appeal in the appellate division.

The appellate division’s decision

The appellate division reversed the trial court’s decision. The seller’s evidence was sufficient to establish a claim for an account stated. The seller submitted copies of the invoices and the itemized billing statements, thereby establishing the unpaid balance due on the contract. The seller’s president also submitted a sworn affidavit to the effect that the contractor never objected to the actual billing statements or contested the balance due until after the seller’s lawsuit was filed.

The appellate division also determined that the seller’s proof was adequate to support a claim against the guarantor. There was no dispute that the guarantor signed the agreements. No valid defenses were ever asserted to prevent enforcement of the personal guarantee. The agreements set forth the specific terms of sale, including the date when payments were due following the issuance of the billing statements, and further provided the seller’s rights, upon default of payment, to impose certain finance charges on the delinquent payments.

In addition, since the agreements expressly provided for an award of reasonable counsel fees and other litigation and collection costs, the appellate division sent back to the trial court to fix the amount of the award.

Contact an attorney

Individuals and owners and operators of businesses facing legal disputes involving business and commercial law matters are urged to consult the legal advice of an attorney experienced in these fields to ensure the protection of their legal rights.