DON’T FORGET YOUR AFFIDAVIT$! AN ACCOUNTS STATED PRIMER

Simon PLC Attorneys & Counselors – July 2021 Memorandum

DON’T FORGET YOUR AFFIDAVIT$!  AN ACCOUNTS STATED PRIMER.

Bloomfield Hills, Michigan – On April 28, 2021, the Michigan Court of Appeals issued a decision in the case of Network Designs, LLC v. Music Hall Center for the Performing Arts, No. 351434 No. 351434, LC No. 18-009505-CB (Wayne County Circuit Court).  The court provides a meaningful primer for creditors with accounts stated and breach of contract causes of action in situations where money is owed for services and/or goods provided on account.

“An account stated is a contract based on assent to an agreed balance, and it is an evidentiary admission by the parties of the facts asserted in the computation and of the promise by the debtor to pay the amount due.” Fisher Sand & Gravel Co v Neal A Sweebe, Inc, 494 Mich 543, 557; 837 NW2d 244 (2013).  An account stated is formed when either (1) the parties expressly agree upon the sum due or (2) the party receiving the account does not object within a reasonable time, in which case the receiving party’s assent is inferred.  Id.

Underlying facts.  In approximately 2008, defendant engaged plaintiff to provide information technology (IT) services for defendant’s business. For the next ten years, defendant would ask plaintiff to provide IT services for defendant, and, after doing the work, plaintiff would send defendant an invoice for the job reflecting the work performed and the hours spent performing it. In 2018, the parties’ relationship soured after defendant refused to pay plaintiff for certain outstanding invoices.

The Pleadings.  This refusal led plaintiff to file a two-count complaint against defendant alleging breach of contract and accounts stated. In support of its account stated claim, plaintiff attached to its complaint a copy of plaintiff and defendant’s account, as well as an affidavit of accounts stated that claimed that plaintiff had “delivered a copy of the account” to defendant and “[d]efendant has not objected to the bill.” Defendant filed an answer to the complaint denying that it owed plaintiff any money, but failed to submit a counter-affidavit of its own contesting the amount stated in the account attached to plaintiff’s complaint.  This failure was detrimental to the defendant.

Motion for Summary Disposition.  Plaintiff moved for summary disposition under MCR 2.116(C)(10) arguing it was entitled to summary disposition on its breach-of-contract and account-stated claims.  Plaintiff attached to its motion an affidavit that stated that plaintiff’s work was always performed to defendant’s satisfaction and, with the exception of one instance, defendant never objected to plaintiff’s invoices.

In response to plaintiff’s motion, defendant argued that plaintiff did not have the authority to enter into the contract with plaintiff and that the statute of frauds barred the contract’s enforcement. Defendant also argued that by denying the account-stated claim in its answer, it satisfied its obligations under the Michigan law to effectively create a question of fact on plaintiff’s account-stated claim.  The trial court granted summary disposition in favor of plaintiff on both claims.

The Appeal.  On appeal, defendant challenged the trial court’s decision on both the breach of contract and accounts stated claims.  The Court of Appeals affirmed the trial court’s decision.

Regarding breach of contract, defendant argued that summary disposition was improper because (1) there was a question of fact whether plaintiff satisfied the implied condition precedent of the contract to perform services in a skillful and workmanlike manner thereby triggering defendant’s duty to pay for those services and (2) there was a question of fact whether the hours expended and amount billed by plaintiff were reasonable.  The court held that neither argument warranted relief.

The court held that although services contracts in Michigan include an implied duty “to perform in a diligent and reasonably skillful workmanlike manner” Nash v Sears Roebuck & Co, 383 Mich 136, 142-143; 174 NW2d 818 (1970) the defendant was mistaken to assert that this duty was a condition precedent that plaintiff had to prove that created an issue of fact.  A duty and condition precedent are distinct, the court found, because the duty to perform the contract in a skillful and workmanlike manner was not a condition precedent of the contract, plaintiff was not required to prove that it performed its services in a skillful and workmanlike manner in order to recover on its breach-of-contract claim.

Regarding the reasonableness of the hours expended, defendant argued that the reasonableness of the hours spent was a question for the fact for the jury to decide.  The court held that whether the hours were excessive was irrelevant to plaintiff’s breach of contract claim because defendant contracted with plaintiff to pay plaintiff for the hours that plaintiff worked completing IT services for defendant.

Regarding accounts stated, the court recited the Michigan accounts stated statute, MCL 600.2145, in which the Legislature provided a burden shifting procedure for accounts stated claims:

In all actions brought in any of the courts of this state, to recover the amount due on an open account or upon an account stated, if the plaintiff or someone in his behalf makes an affidavit of the amount due, as near as he can estimate the same, over and above all legal counterclaims and annexes thereto a copy of said account, and cause a copy of said affidavit and account to be served upon the defendant, with a copy of the complaint filed in the cause or with the process by which such action is commenced, such affidavit shall be deemed prima facie evidence of such indebtedness, unless the defendant with his answer, by himself or agent, makes an affidavit and serves a copy thereof on the plaintiff or his attorney, denying the same.

Plaintiff attached to its complaint an affidavit of the amount owed plaintiff as well as a copy of the account. Defendant failed to attach to its answer an affidavit denying the account.  The court held that the unanswered plaintiff affidavit under MCL 600.2145 created a prima facie case that defendant owed plaintiff the amount stated.

This left the defendant with the burden of proving that the amount claimed was inaccurate or otherwise not owed.  In opposition, the defendant argued that plaintiff could not establish mutual assent because defendant objected to the excessive billing, it refused to pay and ultimately fired plaintiff.  Defendant attached affidavits of its president and new IT contractor and alleged that the plaintiff’s bills were excessive.  Even though the court was required to accept defendant’s evidence as true under MCR 2.116(C)(10), it held that defendant’s evidence did not rebut plaintiff’s prima facie case. The court further found that plaintiff established defendant’s indebtedness owed, and the fact that plaintiff’s bills were “excessive” did not rebut that indebtedness. Importantly, the court found that defendant failed to present any evidence tending to establish that it did not agree to pay plaintiff for the services plaintiff provided, or that the amount that plaintiff claimed was owed was incorrect.  Because defendant only asserted that plaintiff charged too much for its services, summary judgment in favor of plaintiff was appropriate and the Court of Appeals upheld the trial court’s decision.

The moral of the story is “do not forget your affidavits” both in support of and in defense against accounts stated claims.  Call us at Simon PLC Attorneys & Counselors if you have any questions regarding any possible accounts stated or breach of contract claims for amounts owed or if you are facing a claim against your business.  We will be happy to review the facts of your specific case so you can take the correct actions under the law.

N.B. Not Legal Advice: Please contact us if you would like to discuss the facts and circumstances of your specific matter. Simon PLC Attorneys & Counselors expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this memorandum. The information contained herein may not reflect current legal developments and is provided without any knowledge as to the recipient’s location, industry, identity or specific circumstances. No recipients of this content, clients or otherwise, should act, or refrain from acting, on the basis of any content included in this memorandum without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the jurisdiction for which the recipient’s legal issue(s) involve. The application and impact of relevant laws varies from jurisdiction to jurisdiction, and our attorneys do not seek to practice law in states, territories and foreign countries where they are not properly authorized to do so.

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