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On December 10, 2015, the Indiana Court of Appeals decided the case of Auto Liquidation Center v. Chaca (pdf). The defendant, Auto Liquidation Center (“ALC”), sold a car on credit to the Plaintiff, Chaca. Mistakenly believing that Chaca was behind on payments, ALC ordered the vehicle repossessed. The mistake came from the fact that Chaca made a double payment one month and, the next month when no payment came in, ALS failed to note the double payment from the month before.

The vehicle was equipped with a GPS system that, among other things, enabled ALC to disable the vehicle pending repossession. Believing the vehicle was disabled due to a mechanical issue, Chaca took the vehicle to a mechanic. The mechanic said that the GPS was installed incorrectly, in such a way as to endanger the transmission if not removed. After the GPS was removed (without Chaca having actually consented to the removal) but before it could be re-installed, the vehicle was repossessed.

Chaca sued for conversion of his vehicle. Conversion is the exercise of unauthorized control over the property of another. The trial court determined (and the Court of Appeals affirmed) that, because Chaca was up to date on his payments, ALS had no cause to repossess the vehicle. When ALS tried to switch gears (so to speak) and claim that the repossession was due to Chaca having disabled the GPS in violation of the loan agreement, the court was not persuaded. ALS had the opportunity to return the vehicle once the misunderstandings were cleared up but declined to do so.

Further exacerbating the situation was the fact that Chaca had personal items in the vehicle that were never returned and, to clear the title, ALS had a power of attorney signed at the time of sale by Chaca falsely notarized to say that Chaca had signed it two days after Chaca had filed his complaint.

Indiana law allows a claim for triple damages when a civil claim is based on facts that satisfy the elements of criminal conversion (as opposed to a more routine and innocent breach of contract or failure to pay a debt.) Criminal conversion is the knowing or intentional exertion of unauthorized control over the property of another. When the defendant argued that the evidence supported only a breach of contract, not criminal conversion, the Court of Appeals disagreed, stating “even if the jury believed that [ALS] had initially acted on a mistaken belief that [Chaca] missed a payment, the evidence supports that the misunderstanding morphed into an intentional, unauthorized taking of [Chaca’s] property.”

The resulting verdict was significant. The original purchase price of the vehicle was $14,500. Chaca made a down payment of $4,000 and had made additional payments of $1,750. ALS repossessed the vehicle based on a belief that Chaca had missed a $250 payment. The evidence suggested the worth of the vehicle taken from Chaca was somewhere between $10,400 and $18,900. His personal property was worth around $600. The jury came back with a verdict of $45,883.86 and the trial court added interest and $66,000 in attorney’s fees, bringing the total judgment to $121,069.66. Additionally, because Chaca was successful on appeal, he was entitled to appellate attorney’s fees, so that $121,000 total will rise.

The Court of Appeals concluded:

As a final note: justice is better dispensed in a courtroom and not in one’s own hands. Self-help remedies are perilous and potentially expensive. When self-help is attempted, a jury or judge decides the appropriateness or inappropriateness of the actions regardless of how justified the actor may have thought his actions were. As we see here, the risks of paying damages, treble damages, pre-judgment interest, attorney’s fees, appellate attorney’s fees, and costs are not worth the possible benefits of sidestepping the court system.

Self-help may be less expensive in the short term, but in this case, the creditor ended up with a $121,000+ judgment because it jumped the gun chasing a $250 payment.

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On December 2, 2015, the Indiana Supreme Court issued an opinion in Schmidt v. Indiana Insurance Company (pdf) concerning insurance coverage for a fire loss. The case involved a denial of a claim after a fire loss where it was discovered that the house had been unoccupied for quite some time but that fact was not disclosed on the insurance application. The insured alleged that he gave the agent accurate information but the insurance agent filled out the application inaccurately, and the insured didn’t remember signing the application. The Court found that judgment in favor of Indiana Insurance was appropriate because, had accurate information been provided on the application, no insurer would have issued a Dwelling Fire Policy based on that information.

[The parties designated evidence] showing that the plaintiff suffered no damage because, even if the insurance application had fully disclosed the accurate condition and usage of the property, no dwelling fire policy would have been issued providing fire coverage on property that was condemned, uninhabitable, without utilities, vacant for over a year, and undergoing renovation.

Similarly, the agent was not liable for the resulting non-payment on the dwelling policy because there is no way a dwelling policy could have been obtained on that particular property even if the agent hadn’t (allegedly) filled out the application with information other than what the insured provided.

However, judgment was not appropriate for the agent on the issue of negligent procurement of insurance. Based on the facts alleged by the plaintiff (which are the facts the court has to work with at the summary judgment stage), the agent could be liable for failing to assist the plaintiff in procuring some type of insurance against fire loss other than a dwelling policy (a Builder’s Risk policy, perhaps?) Accordingly, the case was remanded to the trial court for further consideration of that issue.

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On November 25, 2015, the Indiana Court of Appeals affirmed the sentencing decision of Tippecanoe County Superior Court 2 Judge, Steven P. Meyer. The appeal concerned a November 5, 2014, robbery of a Village Pantry in Lafayette, Indiana. The defendant was one of three people robbing the store. During the course of the robbery, the defendant stole money, alcohol, and food while one of her companions, armed with a knife and a shotgun, ordered two store employees to freeze and get on the floor. Judge Meyer found as an aggravating circumstance that the defendant placed some victims in fear by the use of the deadly weapon.

On appeal, the defendant claimed this was error since – she argued – placing someone in fear by use of the deadly weapon was a material element in the underlying crime. The notion is that the base sentence already assumes the presence of the elements in the underlying crime. An enhancement must, therefore, be something extra. The Court of Appeals noted that the statute for criminal confinement (IC 35-42-3-3) did not include an element of placing someone in fear. And the statute for robbery (IC 35-42-5-1) did not necessarily require placing someone in fear — rather, it is one alternative that can sustain a conviction for robbery:

A person who knowingly or intentionally takes property from another person or from the presence of another person: (1) by using or threatening the use of force on any person; or (2) by putting any person in fear

(Emphasis added by the Court of Appeals.) In this case, both factors were present. Therefore, it was not in error for the trial court to use the other one as a basis for enhancing the sentence.

There was also an argument that the defendant’s sentence was too severe in light of her character. The Court of Appeals did not agree, stating that her character “speaks very poorly for her.” She was 19 when committing this offense in 2014 but had first been in contact with the juvenile system in 2001 and in near constant contact with the juvenile justice system from 2009 onward. Accordingly, the Court of Appeals affirmed the sentence.

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As attorneys for Tippecanoe County and its Sheriff, our firm has more than our fair share of interaction with prisoners. So, even though it was a non-precedential memorandum decision, the Court of Appeal’s September 24, 2015, decision was of interest – in particular, where the Court reiterated that:

[A] prisoner who is a party to a civil action “has no right to a transport order,” Sabo v. Sabo, 812 N.E.2d 238, 242 (Ind. Ct. App. 2004), and does not, as a matter a federal due process, have an “absolute right” to be present. Niksich v. Cotton, 810 N.E.2d 1003, 1008 (Ind. 2004), cert. denied, 543 U.S. 1126 (2005).

At issue in this particular case was a foreclosure. The homeowner had been the subject of a foreclosure for some months. She entered an appearance but no answer. The bank filed a motion for summary judgment. The homeowner filed a response that asserted the bank was not entitled to enforce the note secured by the mortgage. However, she did not designate any evidence in opposition to the motion for summary judgment. Two days before the hearing on the motion for summary judgment, the homeowner was arrested. Someone purporting to be her mother asked the court for a continuance. The court denied the continuance and entered judgment in favor of the bank.

The Court of Appeals said that it was not error for the trial court to conduct the hearing in the homeowner’s absence. The homeowner did not designate any evidence and, in the context of a summary judgment motion, she would not have been entitled to provide live testimony in any event. So, while she did not have an opportunity to argue her case at the hearing, because the bank had designated sufficient evidence to sustain its motion for summary judgment, it’s not clear what the homeowner could have done to prevent the judgment in any event.

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On August 26, 2015, the Indiana Court of Appeals issued a memorandum decision in the case of Running Man, LLC v. Nagy and Sak (pdf). (See also, this predecessor memorandum decision issued in 2010). Running Man, LLC is an Indiana limited liability corporation with a registered address in Muncie. The Nagsak Company of West Lafayette, Inc. was, I believe, an Indiana corporation based in Kalamazoo, Michigan but which owned a Pita Pit franchise store located in the Chauncey Hill Mall in West Lafayette, Indiana. Nagsak has since dissolved and its owners, Nagy and Sak, have become its successors in interest.

In 2008, Runningman signed a contract to purchase the Pita Pit. The contract included, significantly, a forum selection clause indicating that all contract-related litigation be conducted in Michigan. In 2009, Runningman attempted to sue Nagsak for breach of contract but that suit was thrown out due to the forum selection cause. Sometime after that, Nag and Sak, as successors in interest to Nagasak, filed suit in Michigan against Runningman for breach of contract. Runningman initially had an attorney appear and defend against the suit, but later the attorney withdrew, Runningman stopped defending in Michigan, and judgment was entered against Runningman for about $75,000.

After getting the Michigan judgment, Nag and Sak, filed an action in Indiana to domesticate the Michigan judgment. The point of domesticating a judgment in another state is to reach assets available in that state. The strategic advantage is that the judgment debtor’s ability to challenge the domestication is very limited. The primary challenges are that the court issuing the judgment did not, itself, have subject matter jurisdiction or it did not have personal jurisdiction over a judgment debtor. If the foreign court had jurisdiction, then, at the domestication stage, you do not have the opportunity to challenge whether the foreign court was correct that you did, in fact, owe the debt.

Lack of subject matter jurisdiction would be rare, particularly in a contract claim. Most state courts are going to have subject matter jurisdiction to hear a claim based in contract. Personal jurisdiction can be a lot trickier. I won’t go too deep into the rabbit hole at this point, but the judgment debtor generally has to have certain minimum contacts with the forum state where the underlying judgment was issued such that it’s reasonable to expect the defendant to be hauled into court in that state. Runningman protested the existence of personal jurisdiction, but it’s tough to say you did not expect to be hauled into court in a state when there is a contract where you specifically agree that litigation over a contract will take place in that state.

The upshot is that forum selection clauses can be leveraged to obtain judgments because it is easier for you to litigate in a particular forum and harder for the defendant to litigate. You can then domesticate the judgment when it is time to pursue assets to satisfy the judgment. On the flip side, when signing a contract, you should be very cautious about forum selection clauses that designate a location where it will be difficult for you to litigate. Some times, there is no helping it because the person demanding the other foreign has all of the leverage in the contract negotiation. But, if you can designate a forum close to home or elimination of the forum selection clause altogether, you should try to do so.

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On August 6, 2015, in the case of Smith v. M&M Pump and Supply (pdf), the Indiana Court of Appeals upheld the trial court’s summary judgment order in favor of a creditor against a guarantor. M&M was a supply company that provided materials to Lily Group. Smith was an employee of Lily Group who signed a personal guarantee in favor of M&M guaranteeing the performance of Lily Group under the contract. As one might guess from the fact that this matter made it to the Court of Appeals, Lily Group defaulted on the agreement and M&M sued Smith for the debts owed by Lily Group.

A personal guarantee is often used by creditors of small businesses to hedge their bets when they might be uncertain as to whether the small business will continue to be viable over the duration of the contract. The guarantee signed by Smith read as follows:

GUARANTEE
(Preferably owner of Business Organization with largest ownership
interest)
The individual who signs below personally guarantees to M & M Pump & Supply Company, Inc. that if the Business Organization identified above fails to pay any of the amounts owed either under an invoice or under this Agreement, the individual will pay to M & M Pump & Supply Company, Inc. that amount owed within 30 days after written demand is received from M & M Pump & Supply Company, Inc. The individual who signs below understands that credit would not be extended without this guarantee and waives any right to notice of default or presentment.

Smith advanced a shotgun array of defenses, and the Court of Appeals knocked them down in order.

1. Consideration as guarantor
Any contract has three elements – offer, acceptance, and consideration. Consideration is something of value received from each side. Courts will not typically spend time evaluating whether the consideration represents a good deal for any of the contracting parties, but there does have to be something of value that can be said to induce the contract. Smith argues that he did not get anything out of the deal and so his status as personal guarantor should fail for lack of consideration. The Court noted that Lily Group undoubtedly got value out of the contract and, under Indiana law, no further consideration is necessary to sustain the personal guarantee. “If a guarantee is made contemporaneously with the principal contract, then consideration sufficient to create the contract is also sufficient to support the guarantee. . . . It is not necessary for a guarantor to derive any benefit from the principal contract or the guarantee for consideration to exist.” I would argue, additionally, that the guarantor can be said to sign the guarantee to induce one party to enter into a contract with the other. The very fact that M & M entered into the contract with Lily Group can be seen as consideration with respect to the personal guarantee.

2. Smith’s lack of knowledge that he was signing a guarantee
Smith argued that it was a question of fact (and therefore not appropriate for summary judgment) as to whether he knew he was signing a guarantee. The Court of Appeals said that this cannot create a question of fact because, “under Indiana law, a person is presumed to understand the documents which he signs and cannot be released from the terms of a contract due to his failure to read it.” In other words, even if the judge or jury found that, in reality, Smith did not know what he was signing, it would still not be a legal defense and would not affect the outcome holding him responsible for the terms of the agreement.

3. Pending bankruptcy of Lily Group
Smith argued that, because Lily Group’s bankruptcy was pending, and it had not yet been determined that Lily Group would not pay the debt, it was improper to enter judgment against Smith holding him responsible. The Court of Appeals rejected this argument, holding that the guarantee was triggered when Lily Group defaulted and failed to pay the balance when due — it was not necessary to wait until a bankruptcy completely foreclosed M&M’s ability to collect.

4. Impairment of Collateral
A secured creditor who has a personal guarantee can compromise that guarantee when it fails to perfect its security interest in the collateral. Essentially, a guarantor can expect a creditor to act in a reasonable way to mitigate potential losses and, by extension, limit the guarantor’s risk. Smith alleged that M&M failed to properly perfect its security interest. However, the Court rejected this argument because M&M’s agreement with Lily Group did not provide for any security interest in the first place.

5. Attorney’s fees
Finally, Smith argued that, because the personal guarantee did not specifically mention attorney’s fees, his exposure under the personal guarantee should not be extended to cover those fees. The Court of Appeals rejected this argument. Where the agreement itself specifically references attorney’s fees, that is sufficient even if the guarantee clause does not specifically reference those fees.

The end result is that the judgment in favor of M&M and against Smith in the amount of $63,913.26 was affirmed. As a creditor, it is a good idea to get personal guarantees when extending credit to corporate entities that may go out of business. As an individual, it is a good idea to avoid signing such guarantees if your business has other ways of getting access to the credit or materials it needs or, alternatively, to revoke the guarantee before the business gets too deep in the hole.

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On, July 16, 2015, the Indiana Court of Appeals decided the case of City of Beech Grove v. Beloat. The plaintiff was a woman who stepped in a pothole and broke her leg. She sued the City, claiming it was negligent in its maintenance of the street.

The trial court denied the City’s motion for summary judgment which claimed, among other things, that the City was immune from suit under the Indiana Tort Claims Act, specifically discretionary function immunity under IC 34-13-3-3(7) which says that a governmental entity is not liable if a loss results from performance of a discretionary function. The courts have struggled to separate discretionary functions from ministerial functions in this context. The general idea is to immunize governments from liability for making policy decisions that a jury or plaintiff might find disagreeable but subject them to traditional rules of liability where there is no political judgment being exercised, only decisions about how to execute a particular duty imposed on the entity or public employee.

The problem is that one has a way of bleeding into the other. Prior to 1988, the approach was to define a ministerial act as being “one which a person performs in a given state of facts in a
prescribed manner, in obedience to the mandate of legal authority without regard to, or the exercise of, his own judgment upon the propriety of the act being done.” Anything that did not fit within that definition was, by default, discretionary and entitled to immunity. In 1988, the Indiana Supreme Court decided that immunized the government too much and took a different approach, offering a narrower definition for discretionary functions and requiring that the activity in question fit within that narrower definition to qualify for immunity. In Peavler v. Commissioners of Monroe County, the Indiana Supreme Court set out a “planning/operational” test where “planning” functions were entitled to the discretionary immunity protection but operational functions were not. Planning activities were defined as:

[T]hose that “include acts or omissions in the exercise of a legislative, judicial, executive or planning function which involves formulation of basic policy decisions characterized by official judgment or discretion in weighing alternatives and choosing public policy” as well as “[g]overnment decisions about policy formation which involve assessment of competing priorities and a weighing of budgetary considerations or the allocation of scarce resources are also planning activities.”

With that in mind, the majority of the Court of Appeals panel regarded evidence that the City had plans to reconstruct the intersection in question and, as a result, was avoiding piecemeal repairs as conclusive. Such decisions were planning and, therefore, immune under the discretionary function approach. You can see how slippery the concepts are, however, when you compare the majority decision to the dissent. The dissent would have found that there was insufficient evidence for judgment based on discretionary function immunity because, in the dissenting judge’s view, despite the general sense of the city that it wanted to avoid piecemeal repairs in favor of a more comprehensive street improvements, there was not enough evidence that the city’s plans were sufficiently focused on the issue of whether or not to repair the potholes.

Because the concept is so elusive, most government defense cases relying on discretionary function immunity are likely to be hard fought affairs and close calls when the courts issue their opinions.

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The world of small claims hearings can be a little rough and tumble. Our founding partner, Fred Hoffman, was known to refer to the decisions rendered in those hearings as “JP Justice” — referring to the old Justice of the Peace system. In those cases, it was not unusual for the small claims judges to “split the baby,” give each side a little of what they want, and move on to the next case. This is not to cast aspersions on the small claims judges. The process is designed to be faster and less expensive, but unfortunately, that sometimes means that the facts and law are not developed as clearly by the litigants and so the judge often does not have the greatest material to work with and might find him or herself relying on gut feelings a little more than in a more formal proceeding.

The Court of Appeals, in the case of Griffin v. Martin (pdf), decided that the small claims court had gotten it wrong. The plaintiffs bought a used car from defendant pursuant to a sales agreement that said that the agreement was an “as is” sale in a couple of places and was generally pretty clear about the fact that the dealer was not taking any responsibility for the quality of the vehicle. On the drive home, the plaintiffs discovered the car did not even have brakes – they were forced to rely on the brakes for the trailer they were pulling with the car. So, they immediately had to pay about $1,200 for brakes. The car buyers sued the dealership.

The dealership defended by saying that the contract clearly waived any warranties and that this was an “as is” sale. Plaintiffs responded in a more or less clever fashion, saying (in effect) that they were not suing for breach of contract but, rather, suing under “civil tort law.” Tort law is the body of law that allows you to sue someone who has wronged you, not as a matter of contract, but as a matter of duties of reasonable care imposed by the law. (For example, you have a duty to exercise reasonable care when you drive your car so you don’t hit other people who are also expected to exercise reasonable care when driving their cars.) The trial court’s ultimate finding was that, notwithstanding the as-is sales agreement:

Griffin “committed a tort against the [Martins] by selling a vehicle that was not road worthy and placed them in danger, as well as any other individuals on the road” and that, “because of [Griffin’s] tort, [he] is liable to the [Martins] for their reasonable expenses in repairing the vehicle as well as their reasonable attorney fees.”

The Court of Appeals disagreed and reversed. There was no civil tort because of something known as the “economic loss rule” which precludes tort liability for purely economic loss.

Economic losses are disappointed contractual or commercial expectations. Damage to the product itself, including costs of repair or reconstruction, is an ‘economic loss’ even though it may have a component of physical destruction. If the plaintiff’s injury results from a defective product or service, the defendant is liable under a tort theory only if the defect causes personal injury or damage to property other than the product or service the plaintiff purchased. A defendant is not liable under a tort theory for a pure economic loss caused by its negligence, including damage to the product or service itself.

(internal citations omitted).

One of the main purposes of the economic loss rule is to prevent a disappointed party from doing an end-run around the contract. Contracts are supposed to be the means by which parties to economic transactions lay out their expectations and negotiate a price accordingly. Presumably the price at which the dealer was willing to sell the car reflected the fact that the dealer was not providing a warranty that the car was any good. The facts of the case say that the dealer had purchased the car from another dealer and did not have much knowledge about the car. Because of the economic loss rule, the Court of Appeals said that the contract was binding.

Furthermore, the Court of Appeals cited the statutory basis for the “as is” language in the contract and its effect:

Ind. Code § 26-1-2-316 provides in part that, “unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like ‘as is’, ‘with all faults’, or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty.” It is well-settled that automobile dealers may use this law to exclude express warranties and make it plain that there are no implied warranties.

The purchaser of the automobile was, therefore, bound by the terms of the contract and was not entitled to recover the cost of repairs from the dealer.

Need help with a small claims or contract matter? Contact us.

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As attorneys for Tippecanoe County, we have had a considerable amount of experience with the Indiana Tort Claims Act (found at IC 34-13-3.) Court of Appeals decisions concerning ITCA are, therefore, always of some interest. On July 9, 2015, the Indiana Court of Appeals issued the memorandum decision of Stierwalt v. Barton (pdf). Because it’s a memorandum decision, it cannot be cited as precedent. However, it does offer insight into how similar cases are likely to turn out.

ITCA contains notice provisions that must be observed if an individual plans to sue a political subdivision such as a city or county. Within 180 days after the loss occurs, notice has to be filed with the governing body of the political subdivision. The notice given to the governing body must include “the circumstances which brought about the loss, the extent of the loss, the time and place the loss occurred, the names of all persons involved if known, the amount of the damages sought, and the residence of the person making the claim at the time of the loss and at the time of filing the notice.”

In this case, an employee of the City of Linton was in a car accident that caused injury to Stierwalt. The city’s insurer contacted Stierwalt and requested information about his injury. Stierwalt obtained a lawyer who began communicating regularly with the insurer. Stierwalt’s lawyer also sent the city police department a letter indicating that he represented Stierwalt with respect to an accident that took place on July 29, 2013, enclosing $5, and requesting a copy of the police report. After completing treatment by February 2014, Stierwalt cited expenses of approximately $6,000 and demanded $75,000 from the city’s insurer. The insurer asked for a copy of the tort claim notice filed with the city and, when one was not forthcoming, denied the claim.

The trial court and, subsequently, the Court of Appeals held that these communications did not satisfy the statutory notice requirements. Actual knowledge of the accident and injury does not satisfy ITCA. While the courts will give plaintiffs some leeway within the confines of the statutory requirements, there must be some formal notice to the governing body and it must, in some fashion, represent an effort to satisfy the notice requirements as to the circumstances, the extent, the time and place of the loss, the names of people involved, the amount of damages, and the residence of the claimant. Communications with an insurer and a request for a police report did not meet the threshold.

The upshot is that there are special requirements for litigation involving local government. Experience in this area is helpful. Have a question concerning local government? Contact us.

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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.

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