Nello L. Teer Company v. Dickerson, Inc.

Annotate this Case

126 S.E.2d 500 (1962)

257 N.C. 522


No. 673.

Supreme Court of North Carolina.

July 10, 1962.

*505 McCleneghan, Miller & Creasy, Charlotte, and Bryant, Lipton, Bryant & Battle, Durham, for defendant-appellant.

Charles B. Nye and Watkins & Jarvis, Durham, for plaintiff-appellee.

SHARP, Justice.

Assignments of error 1 through 13 relate to the testimony of plaintiff's auditor who interpreted the ledgers of both plaintiff and defendant. The purport of his testimony was that the books of both corporations showed that the defendant owed the plaintiff the two invoices totaling $10,720.90.

Entries in the books of the defendant were clearly admissible against it as admissions. Stansbury on Evidence, Section 156. It was permissible for the auditor, an expert accountant, to interpret the books and testify what the books showed; he did not purport to say what amount was, in fact, due. Whether the books were correct or not, in the absence of a stipulation, was, of course, for the jury. In LaVecchia v. North Carolina Joint Stock Land Bank, 218 N.C. 35, 41, 9 S.E.2d 489, an expert accountant, after examining the books of a corporation, testified that they did not indicate that the corporation was indebted to its president in any amount. The court said: "The witness being an expert accountant, his testimony, based upon personal examination of the books and records of the corporation, is clearly competent." Assignments of error 1 through 13 are not sustained.

In the instant case, although the record contains no such stipulation, there seems to be no dispute between the parties that the two invoices in suit represent crushed stone in the amount of $10,720.90 delivered by plaintiff to the defendant and used by it. The defendant offered no evidence of any difference in the value of the aggregate delivered (which it claims did not meet specifications) and the aggregate specified in the contract. Its complaint is that because the aggregate did not meet specifications, more of it had to be used. Defendant contends that it is entitled to a setoff for the excess used.

*506 The plaintiff contends that all the aggregate it delivered to defendant did meet specifications but that, in any event, on September 21, 1957 it had compromised and settled the defendant's claim that it did not. On the trial the defendant's general manager conceded that all claims prior to September 21st had been compromised, but defendant offered evidence tending to show that thereafter the aggregate continued "out of specification"; that there was another conference early in October between plaintiff's sales manager and defendant's chairman at which it was agreed that defendant would continue to use aggregate from the Princeton quarry but, at the completion of the project, plaintiff would make "an equitable adjustment" if the aggregate failed to meet specifications. The essence of this controversy is whether the aggregate furnished after September 21st met specifications and, if it didn't, what amount would be an "equitable adjustment" for the excess required.

The plaintiff's theory of this case is, (1) that the two invoices in suit had become an account stated because defendant, which received periodic statements of its account with plaintiff, never protested to plaintiff's business office that those two items shown thereon were not due, and (2) that the account stated is not subject to a setoff or counterclaim. However, this conclusion does not necessarily follow. The defendant's theory of the case seems to be that although it did not dispute the amounts plaintiff had charged it for the aggregate represented by the two invoices, those charges did not represent an account stated in the sense of an agreement with respect to the totality of the transactions between plaintiff and defendant, i. e., a final settlement between them. Defendant denied that the parties had either expressly or impliedly struck a balance in their claims against each other and agreed upon $10,720.90 as the amount which defendant should pay to plaintiff in final settlement of all claims existing between them. It contended that defendant had repeatedly pressed its setoff upon plaintiff's sales manager who had promised an adjustment, and that this was a sufficient protest or denial of the account to prevent its becoming an account stated.

"An account stated may be defined, broadly, as an agreement between the parties to an account based upon prior transactions between them, with respect to the correctness of the separate items composing the account, and the balance, if any, in favor of the one or the other. The amount or balance so agreed upon constitutes a new and independent cause of action, superseding and merging the antecedent causes of action represented by the particular constituent items; it is a liquidated debt, as binding as if evidenced by a note, bill or bond." 1 Am.Jur. 272, Accounts and Accounting, Section 16. An account stated operates as a bar to any subsequent accounting except upon a specific allegation of facts constituting fraud or mistake. Costin v. Baxter, 41 N.C. 197; Morganton v. Millner, 181 N.C. 364, 107 S.E. 209.

An account can only become an account stated by an admission of its correctness by the party charged, or by its receipt and failure to deny liability within a reasonable time. Brooks v. White, 187 N.C. 656, 122 S.E. 561; Savage v. Currin, 207 N.C. 222, 176 S.E. 569.

The following succinct statement of the law with reference to account stated appears in Little v. Shores, 220 N.C. 429, 17 S.E.2d 503: "To constitute a stated account there must be a balance struck and agreed upon as correct after examination and adjustment of the account. However, express examination or assent need not be shownit may be implied from the circumstances. * * * An account becomes stated and binding on both parties if after examination the party sought to be charged unqualifiedly approves of it and expresses his intention to pay it. * * * The same result obtains where one of the parties calculates the balance due and submits his statement of account to the other who expressly *507 admits its correctness or acknowledges its receipt and promises to pay the balance shown to be due, * * * or makes a part payment and promises to pay the balance. * * * `It is accepted law in this jurisdiction that when an account is rendered and accepted, or, when so rendered, there is no protest or objection to its correctness within a reasonable time, such acceptance or failure to so object creates a new contract to pay the amount due.'"

Where parties, who have had business dealings resulting in claims against each other, consider the claims in their entirety and have a complete accounting of all transactions between them, agreeing upon a final balance in favor of one or the other, such an agreement is certainly an account stated. It has also been called "a burnt-book settlement of all matters and things in controversy." However, an account stated need not cover all the dealings or all the claims between the parties; it may include certain items and leave others open for future adjustment. In that event it becomes an account stated only as to the items admitted to be correct. Anno. 175 A.L.R. 248.

An account stated extends only to those transactions contemplated by the parties. "In the last analysis, an account stated is nothing more than an agreement between the parties as to the items considered." 1 Am.Jur.2d 397. In an action on an account stated, the party against whom the balance is claimed may set off against it any balance which he claims from items not included in the settlement. 1 Am.Jur. 2d 415.

"Where there is no attempt to dispute or question the items of an account, there is very little difference between an account and an account stated. Neither is it inconsistent to sustain a claim upon cross-petition as a counterclaim where its items are independent of the adjustment contained in the account stated." Reed v. Thomas, 134 Kan. 849, 8 P.2d 379, 84 A.L.R. 110.

In this case the trial judge instructed the jury to answer the first issue YES if it found that the defendant was indebted to the plaintiff "in the sum of $10,720.80, either from account stated or the balance due upon open account." In explaining what constituted an account stated the judge told the jury that when an account is rendered "and there is no protest or objection to its correctness within a reasonable time, such failure to object creates a new contract or obligation to pay the amount due." He then gave the jury the following instruction:

"Now, with respect, gentlemen, to the obligation upon the debtor to reject or deny an account stated, it must be done within a reasonable time. (And I instruct you that under the evidence in this case there was no evidence of a rejection of the account within a reasonable time, referring solely to the time limit.)"

That portion of the charge in parenthesis constitutes defendant's assignment of error No. 93, and it is the only portion of the charge on the first issue to which it excepts. The exception must be sustained. Nowhere in his charge on the first issue did the judge instruct the jury as to the defendant's theory of the case. The vice in the challenged instruction is that it accepted plaintiff's theory that its monthly statement had become an account stated with respect to the totality of all transactions between the parties, and it completely ignored the negotiations which defendant's evidence tended to show were going on at the quarry in October between plaintiff's sales manager and defendant's engineer with reference to the defendant's protest that the aggregate being furnished did not meet specifications. Throughout this transaction, both the plaintiff and the defendant seem to have operated on two separate levels. According to the defendant's evidence, while the plaintiff's accounting department was sending out invoices and bills to the defendant and the defendant's bookkeepers were entering the charges and carrying them forward on its ledgers, the defendant's engineer and superintendent *508 on the job were complaining to the plaintiff's sales manager and quarry superintendent that the aggregate was upsetting the formula and increasing costs, and the sales manager was promising "an adjustment" when the job was complete. Plaintiff's evidence is silent about this; the sales manager did not testify.

Plaintiff's invoices were prepared in Durham from daily reports which the quarry manager mailed in. The mail clerk turned the reports over to the price clerk who turned them over to the billing clerk who made out the invoices and sent them to the statistical clerk who mailed them to the defendant. Plaintiff's auditor never saw them unless some discrepancy developed or a customer protested. He knew nothing of the complaint which resulted in the sales manager, Mr. Champion, giving defendant an adjustment of $838.18 on September 21, 1957. This matter first came to his attention when the credit was entered on the plaintiff's books. Under these circumstances, the fact that defendant's treasurer made no protest to plaintiff's auditor did not justify a charge that there was no evidence of a rejection of the account within a reasonable time.

Furthermore, "What is a reasonable time within which objection must be made to an account rendered in order to preclude a presumption of acquiescence therein will depend upon the circumstances, among which may be enumerated the nature of the transaction, the relation of the parties, their distance from each other and the means of communication between them, their business capacity, their intelligence or want of intelligence and the usual course of their business." 1 Am.Jur., Accounts and Accounting, Section 28. Ordinarily what is a reasonable time is a question for the jury. Certainly if there is any conflict in the evidence, or if adverse inferences may be reasonably drawn from it, it is for the jury. Anno. 27 L.R.A. 825; 29 L.R.A.,N.S., 341.

On this record it is doubtful that the challenged instruction affected the jury's answer to the first issue, and ordinarily an error in the charge on one issue is not presumed to have influenced the jury's answer to another issue. Fleming v. Drye, 253 N.C. 545, 117 S.E.2d 416. However, error relating to one issue may not be disregarded when it is probable that it affected the answer to another. N.C.Index, Appeal and Error, Section 45. In this case, when the judge told the jury in his charge on the first issue that an account rendered would become an account stated if it were not rejected within a reasonable time and then stated that there was no evidence of a rejection within a reasonable time, it is apparent that this erroneous statement could have influenced the jury's consideration of the third issue. The third issue posed the question whether the aggregate failed to meet the required specifications. When it came to consider this issue, having been previously told by the judge that there was no evidence of any rejection of the account within a reasonable time, the jury may have concluded that there had been no breach of specifications because there had been no protest. In any event, the challenged portion of the charge amounted to an instruction to the jury to disregard the evidence of the protests by defendant's chairman and general manager and their negotiations with plaintiff's sales manager with reference to the aggregate being "out of specification." This was prejudicial error. G.S. ยง 1-180.

Although the judge told the jury to answer the first issue YES if it found that defendant owed plaintiff $10,720.80, either upon open account or an account stated, when he came to the fourth issue, "Is the defendant estopped from making any claim by reason of an `account stated'?", he charged the jury that if it had answered the first issue YES it would answer the fourth issue YES. This amounted to an instruction that a finding that defendant owed plaintiff the account eliminated any setoff. *509 The jury did not answer the fourth issue, but this interrelation points up the fact that the effect of this erroneous charge could not be confined to the first issue.

Since there must be a new trial, a detailed consideration of the other assignments of error is not required as they may not arise again.

However, we deem it appropriate to point out that this record presents a somewhat anomalous situation. Plaintiff alleged in its reply that the written contract had been altered by a subsequent parol agreement, but offered no evidence to prove the allegation. Defendant alleged no change in the written contract but offered evidence tending to show modification of it. If so advised, defendant may consider the desirability of moving in the Superior Court for permission to amend its pleadings to conform to its evidence. What issues will arise upon the evidence in the next trial cannot now be predicted. However, upon this record, no question of damages arises for plaintiff's alleged delay in delivering aggregate. The contract provided that if plaintiff was not able to furnish the aggregate the defendant would secure it elsewhere and plaintiff would be liable for any difference in defendant's costs. The Chairman of the Board of Dickerson, Inc. so testified. Thus, it is clear that damages for delay were not within the contemplation of the parties when the contract was made. Troitino v. Goodman, 225 N.C. 406, 35 S.E.2d 277. There was no evidence that this provision of the written contract was ever altered, and the plaintiff, in fact, did furnish all the aggregate required for the project.

For the reasons stated herein there must be a new trial.

New trial.