Indiana Collections: Collecting on an Account
The Indiana Court of Appeals issued a Memorandum Decision in the case of Meisberger v. H&B Enterprises (pdf) Because it’s a Memorandum Decision, it is not binding precedent. However, it still provides some insight into some of the issues involved with collecting on an account as a contractor. The practice point for businesses in this case seems to be a recommendation (but not a legal requirement) that businesses include a running total of amounts due on their invoices.
Meisberger was a contractor that provided building and excavation services, in particular landscaping and irrigation services. From 1997 – 2007, Meisberger sent invoices to H&B which were paid without incident. In 2008 and 2009, H&B (according to Meisberger) did not pay some of the invoices in full. In 2010 – 2012, H&B paid the invoices in full but never made up the shortfalls from 2008 and 2009. With respect to 2008-2009, the Court of Appeals says:
At some point beginning at the end of 2007, Meisberger contends that H&B stopped paying in full on the invoices it received. While Meisberger kept track in his own internal records of the full amount owed, the invoices did not state a total balance due. Instead, each invoice reflected the amount owed for the previous month.
Meisberger filed suit against H&B “for account stated.” After a trial, the trial court found that Meisberger failed to prove its case by a preponderance of the evidence. The Court of Appeals explained the “account stated”:
An account stated “‘is an agreement between the parties that all items of an account and balance are correct, together with a promise, expressed or implied, to pay the balance.’” . . . An agreement that the balance is correct “may be inferred from delivery of the statement and the account debtor’s failure to object to the amount of the statement within a reasonable amount of time.” The amount indicated on a statement or invoice is not conclusive, “but it is prima facie evidence of the amount owed on the account. ‘Once a prima facie case is made on an account stated, the burden of proof shifts to the account debtor to prove that the amount claimed is incorrect.’”
The Court of Appeals noted that the amounts claimed by Meisberger for services provided were never disputed. H&B just claimed that it had paid for those services. However, going through the amounts H&B specifically claimed to have paid and adding to that the additional amounts that Meisberger acknowledged having received, there was still a shortfall. The Court of Appeals did not regard defendants’ testimony that they were certain they had paid all of the invoices as probative. Based on that, the Court of Appeals determined that Meisberger had made its prima facie case and that H&B had not carried its burden to rebut Meisberger’s claim.
The Court questioned (but did not decide) whether the evidence provided by Meisberger was enough to invoke the account stated cause of action. Instead, it reasoned that Meisberger had prevailed under good old fashioned contract law or promissory estoppel.
As a final aside, we observe that the invoices supplied to H&B did not contain a running balance owed. Instead, they merely stated the amount that was owed for the previous month of Meisberger’s work. We question whether an arrangement such at this would constitute an account stated. ([In a footnote]:”We also question the wisdom of this system as an accounting practice.”) We need not resolve that issue, however, given that there is plainly a debt that is owed by H&B to Meisberger. The basis of the debt may sound in contract or the equitable doctrine of promissory estoppel; either of these doctrines would support Meisberger’s right to a recovery.
In a previous post, about “accounts stated,” I noted: “The lesson is that a creditor’s ability to prove and collect on an account becomes easier if it sends statements of accounts and keeps records of those statements and any subsequent responses (or lack of responses).” If you have a contracting business, supplement that advice by adding a running total to statements of accounts payable you send to your clients.
Need help collecting on an account in the Tippecanoe County area? Contact us.