Belated Complaint About Invoice Does Not Defeat Account Stated Claim

On November 1, 2018, Justice Hudson of the Suffolk County Commercial Division issued a decision in Walter Boss, Inc. v. Cleary, 2018 NY Slip Op. 33194(U), holding that a belated complaint about an invoice does not defeat an account stated claim, explaining:

An account stated is an agreement, express or implied, between the parties to an account based upon prior transactions between them with respect to the correctness of account items and a specific balance due on them which is independent of the original obligation.

Although it is a separate and distinct theory of recovery, it necessarily arises from the same circumstances which bestow the right to sue for breach of contract.

Mr. Boss' testimony and supporting documentation demonstrates that the following chronology of relevant events occurred: On 02/16/2007, Mr. Boss gave an estimate to Mr. Kohler. On 03/26/2007, a meeting with Mr. Kohler resulted in the preparation of a new invoice being presented to him on 04/07/2007. This invoice reflected an agreed upon price of $501,180.00 which was received without objection. Another invoice was prepared and given to Mr. Kohler on 04/29/2007, with a price of $507,995.00. Again, no objection was made to Mr. Boss' demands at that time. Ultimately, Mr. Boss prepared, and delivered, a final invoice which indicated adjustments on the as-built structure. This was in August of 2007. It was at this time that the Defendants bestirred themselves to object via an email Mr. Kohler sent to Mr. Boss on August 16, 2007. We note this objection was posed only after the conversation of Mr. Boss and Mr. Cleary at the Fire Island Pines ferry dock in August of 2007.

An essential element of an account stated is that the parties came to an agreement with respect to the amount due. Following the General Rule of Contracts, silence alone cannot be deemed as agreement. In some circumstances, however, in the absence of an objection made within a reasonable time, an implied account stated may be found. As stated in the case of Branch Servs., Inc. v. Cooper, 102 A.D.3d 645, 646, 961 N.Y.S.2d 170, 173 (2nd Dept. 2013):

An agreement may be implied where a defendant retains bills without objecting to them within a reasonable period of time or makes partial payment on the account.

In opposition to Plaintiff's claim, the Defendants rely on the holding in M & A Const. Corp. v. McTague, 21 A.D.3d 610, 611-12, 800 N.Y.S.2d 235 (3rd Dept. 2005). In that case, the Court reasoned:

Where either no account has been presented or there is any dispute regarding the correctness of the account, the cause of action fails. Here, the Supreme Court found that Defendants disputed aspects of the accounts and informed Plaintiff that payment was being withheld because certain work had not been completed. Moreover, Plaintiff admitted that at least one of the accounts was not correct.

We find the Defendants' reliance on M & A Const. (and its like) to be misplaced. Once again, this argument presumes the Court giving credence to the testimony of the Defendants. To the contrary. this Court gives full credit to Mr. Boss' sworn statements at trial.

The Defendants' partial payments tendered to Boss Inc. are also a factor which we must consider. The Court in Jaffe v. Brown-Jaffe, 98 A.D.3d 898, 951 N.Y.S.2d 142 (151 Dept. 2012) stated either retention of bills without objection or partial payment may give rise to an account stated.

Under these circumstances, the facts at trial, with one exception, are governed by the rule in Bay Ridge Lumber Co. v. Summit Renovation Corp., 271 A.D.2d 559, 706 N.Y.S.2d 155 (2nd Dept. 2000) where the Court stated that since the defendant did not object to the Invoices it received within a reasonable period of time, its retention of them without objection gave rise to an enforceable account stated.

The final, and determinative, question as to whether Plaintiff has proven an account stated concerns the timeliness of Mr. Kohler's objection. As noted by Mr. Snead: The retention of invoices for a period of several months without dispute has been found sufficient to substantiate an account stated.

The transaction in Jim-Mar was a single invoice submitted over five months prior to the objection. The Court in Marino addressed a scenario where the Defendant retained multiple bills for the unpaid services without objection for several months.

In addition to the above case law provided by Counsel, the Court is guided by the Decision in Herrick, Feinstein., LLP v. Stamm, 297 A.D.2d 477, 746 N.Y.S.2d 712 (1st Dept. 2002). The Appellate Court held that an objection sufficient to defeat a claim for an account stated had been made by the Defendant. The Court specified that the reason for the objection being timely was that the first objection had been made approximately two months after receipt of the first of the invoices.

Applying the rationale of Herrick to the instant case, Mr. Kohler's first objection, for the purposes of the case, is not measured against the last invoice. Instead it is set against the invoices of 02/16/2007 and 04/07/2007. In either event, his objection came too late to be considered timely.

(Internal quotations and citations omitted).

People sometimes are surprised to learn that if they do not complain about a bill they receive, they can be found to have agreed to it. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions about a claim based on un-objected-to invoices.