Opinion
No. 99-CV-0036E(Sc)
December 29, 2000
Richard T. Sullivan, Esq., c/o Sullivan Oliverio, Buffalo, NY J.D. Humphries, lll, Esq. and John P. Gallagher, Esq., c/o Stites Harbison, Atlanta, GA, ATTORNEYS FOR THE PLAINTIFF.
Harold M. Halpern, Esq. and Michael Paskowitz, Esq., c/o Borins, Halpern Paskowitz, Buffalo, N Y Frank X. Moore, Esq. and John H. Patteson, Jr., Esq., c/o Byrne, Moore Davis, Atlanta, GA, ATTORNEYS FOR THE DEFENDANT.
MEMORANDUM and ORDER
By Notice of Removal filed January 19, 1999, this diversity action was brought before this Court. Therein plaintiffs, New York corporations with their principal places of business in this District, claim that defendant, a citizen of Georgia, breached an agreement to repay D.E.O., Inc. ("DEO") and Durham Companies, Inc. ("Durham") $190,036 of corporate funds which defendant allegedly used for his own private purposes. TNCS Holdings, Inc. ("TNCS") is the parent and successor in interest to all claims of the other two plaintiff corporations. Presently before this Court is plaintiffs' motion for summary judgment. Such motion will be denied.
The following facts are drawn from the parties' submissions and all justifiable inferences are drawn in defendant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Peter Durham ("Peter"), the brother of Brian Durham ("Brian") and of defendant E. Barry Durham, is the president, a member of the Board of Directors and a shareholder of TNCS, and is also the president of DEO and of Durham and a member of each company's board of directors. Plaintiffs' Statement 5. Brian is a shareholder, officer and member of the Board of Directors of TNCS. Id. 6. Prior to June 1997, defendant was an officer and director of TNCS and, at all times relevant to this action, was and is a shareholder of TNCS. Id. at 7. Relatedly and at all times relevant to this action, the three brothers acted as co-owners of the plaintiff companies in addition to being employees thereof. In their capacities as employees, each brother received a salary plus certain incidental benefits, including the use expense accounts, corporate credit cards and company vehicles. Id. at 8-9; Defendant's Response 9. With regard to these incidental benefits, Peter, Brian and defendant agreed to use, receive and share these benefits as equally among themselves as such could be maintained. Statement 11; Response 11.
Sometime in 1995 Peter and Brian confronted defendant and accused him of embezzling funds of the companies through the alleged misuse of incidental benefits. Statement 13. Such confrontation resulted in a number of meetings, principally to determine the use and the amount of incidental benefits received by each party and how such, if any, would be repaid. Statement 14-15, 19; Response 14-15, 19. During the last of these meetings in December 1995 and after defendant had delivered two checks reimbursing the plaintiff companies for previous expenses, the parties came to an "agreement" ("the December Agreement") as to the value of the benefits received by each party through mid December 1995 — such agreement based, in part, on an informal accounting in late 1989 or early 1990 — but subject to such balances being "brought forward after [the completion of a] final analysis." Statement 12, 21-25; Response 12, 21-25; Plaintiff's Ex. F. Although a "final analysis" was never completed, the December Agreement indicated that defendant had received $190,036 more in incidental benefits than had Brian, who, of the three brothers, had received the least amount in incidental benefits. Statement 27; Response 27. Brian's level of incidental benefits was the amount by which the remaining brothers' benefits was measured and by which parity among the parties was to be assessed. Statement 27; Response 27.
Rule 56 of the Federal Rules of Civil Procedure ("FRCvP") requires that summary judgment be rendered forthwith if "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter law." FRCvP 56(c). The "party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists" and that party's "burden will be satisfied if he can point to an absence of evidence to support an essential element of the nonmoving party's claim." Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995). Once this is accomplished, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "[T]he nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial."' Id. at 587 (citing FRCvP 56(e)).
Plaintiffs premise the instant motion on the fact that, by his Answer, defendant admits that "he entered into an agreement relating to repayments of his share of personal expenses that were paid the company finds subject to rights to challenge and confirm the calculations provided by the [plaintiffs]." Answer 10. To admit such, plaintiffs argue, "without any subsequent effort to "challenge and confirm' the amount" validates the existence of an account stated in an amount of $190,036 owed by defendant to plaintiffs. Plaintiff's Mem. of Law at 2. In response, defendant argues that the three "brothers agreed to use a preliminary accounting of owner benefits completed on December 15, 1995 as a "[b]alance to be to be brought forward after final analysis"' and that, because such "analysis was never performed, Plaintiffs cannot recover under the account stated theory because there was no final number for Barry to agree to." Defendant's Brief at 14.
According to New York law, an account stated "is an agreement, expressed or implied, that an examination of the account between the parties has occurred, a statement of that account has been asserted, and accepted as correct." Polygram, S.A. v. 32-03 Enterprises, 697 F. Supp. 132, 136 (E.D.N.Y. 1988). "An account stated may be implied when a creditor sends a statement of an account to a debtor and the debtor, who has a duty to examine the statement to ascertain whether it is correct or not, keeps it for a reasonable time without objecting to the correctness of the account. Ally Gargano, Inc. v. Comprehensive Accounting Corp., 615 F. Supp. 426, 429 (S.D.N.Y. 1985). An agreement may also be implied from the fact that the debtor makes a partial payment towards reducing the balance of the account." Ibid.
In this case and with regard to plaintiffs' effort to demonstrate the existence of an account stated, the very terms of the December agreement create a genuine issue of material fact as to whether the amount alleged to be owed to plaintiffs was accepted by all the parties. An essential element of an account stated is an agreement between the parties showing that some fixed amount is due. "[T]he very meaning of an account stated is that the parties have come together and agreed upon the balance of indebtedness, insimul computassent, so that an action to recover the balance as upon an implied promise of payment may thenceforth be maintained." Newburger-Morris Co. v. Talcott, 219 N.Y. 505, 512 (1912). The parties "must mutually concur upon the final adjustment, and nothing short of this in substance will fix and adjust their respective demands as an account stated." Lockwood v. Thorne, 18 N.Y. 285, 288 (1858). In short, "[t]here can be no account stated where no account was presented or where any dispute about the account is shown to have existed." Abbott, Duncan Wiener Ragusa, 625 N.Y.S.2d 178, 178 (1st Dep't App. Div. 1995); see also Volkening v. De Graaf, 81 N.Y. 268 (1880) (noting that an account stated is "essentially the same as f a promissory note had been given for the balance."). As is evidenced by the notation "[b]alances to be brought forward after final analysis," the December agreement contemplates that a further accounting would be needed before the balance of indebtedness among the parties could be finally ascertained. Indeed, if there had been an account stated, it follows that no final analysis would have been required because "[t]he minds of the parties [would have met] upon the allowance of each item or claim allowed, and upon the disallowance of each item or claim rejected.." Lockwood, at 288. By definition, an account stated cannot exist where there is no "manifestation of assent by debtor and creditor to a stated sum as an accurate computation of an amount due the creditor." Restatement (Second) of Contracts § 282(1) (emphasis added). Furthermore and insofar as it is not alleged that defendant made partial payments to plaintiffs after the consummation of such purported account stated, the fact that defendant may have made such payments prior to the December 15 agreement is immaterial. Relatedly, the language of such provision itself can also be read as indicative of a party's objection — i.e., if the balances set as forth in the December agreement were intended to be final, any further analysis would be unnecessary. There similarly exist genuine issues of fact as to whether defendant challenged the amounts tendered in the December agreement. By way of example, defendant asserts that, not only did he object to such numbers when they were first presented to him in December 1995, he reiterated to Peter and Brian in both 1996 and 1997 his belief that the numbers did not properly reflect their expenditures for personal benefit. Defendant Aff. 31.
Accordingly and because plaintiffs have failed to demonstrate the existence of an account stated, it is hereby ORDERED that the instant motion for summary judgment is denied.