Chrysler Corp. v. Airtemp Corp.

• Decision Date: 20 November 1980
• Citation: 426 A.2d 845
• Parties: CHRYSLER CORPORATION, Plaintiff, v. AIRTEMP CORPORATION, Defendant.
• Court: Delaware Superior Court

Page 845

426 A.2d 845

CHRYSLER CORPORATION, Plaintiff, v. AIRTEMP CORPORATION, Defendant.

Superior Court of Delaware, New Castle County.

Submitted July 10, 1980.

Decided Nov. 20, 1980.

Michael D. Goldman and Sue L. Robinson, Potter, Anderson & Corroon, Wilmington, and William C. Heck (argued), Kelley, Drye & Warren, New York City, for plaintiff Chrysler Corp.

Paul P. Welsh, of Morris, Nichols, Arsht & Tunnell, Wilmington, for defendant Airtemp Corp.

TAYLOR, Judge.

I.

Plaintiff, Chrysler Corporation (Chrysler) seeks to recover $5,237,827.23 in one claim or $8,000,000 in another claim from defendant Airtemp Corporation (Airtemp) for services allegedly furnished by Chrysler to Airtemp.

Airtemp has moved to dismiss the complaint contending that it fails to state a claim upon which relief can be granted and fails to join Fedders Corporation (Fedders) as a defendant under the requirements of Civil Rule 19. Alternatively, Airtemp seeks a stay of this action pending the determination of a related action by Chrysler against Fedders in the United States District Court for the Southern District of New York.

Chrysler has moved for partial summary judgment against Airtemp. Since Airtemp has filed evidentiary material in connection with its motion to dismiss, that motion will also be treated as a motion for summary judgment. Superior Court Civil Rule 12(b)(6).

In an earlier Letter Opinion, this Court determined after assessing Rule 19 requirements that although Fedders is a party which should be a participant in this suit, dismissal for nonjoinder was not warranted but that alternatives be explored in lieu of Court imposed dismissal or stay. Specifically, the Court suggested either that this action be stayed until the right of Chrysler to pursue its claim against both Airtemp and Fedders in other pending litigation was resolved or that Fedders voluntarily intervene in this suit. Since neither of these alternatives has been accomplished within the time limit set by the Court, the Court herein will decide Airtemp's motion to dismiss, which will be treated as a motion for summary judgment, and, Chrysler's motion for summary judgment.

II.

In 1976 Chrysler and Fedders entered into a contract, hereinafter referred to as "Agreement", whereby Fedders agreed to purchase most of the assets of Chrysler's Airtemp Division. To effectuate the transfer of these assets, Fedders created Airtemp, its wholly-owned subsidiary. Pursuant to Fedders' instruction, Chrysler executed a "Bill of Sale and Assignment" transferring the assets to Airtemp. In order to provide continuity during the transfer period, the contract provided that Chrysler would for a period of up to nine months render the same services which it previously furnished to its Airtemp Division, for which services Fedders agreed to pay Chrysler or cause payment to be made. The complaint alleges that Chrysler rendered such services and seeks payment for those services from Airtemp, the recipient of the services. The complaint seeks payment from Airtemp for the services described above based on account annexed, account stated, book account and quantum meruit.

III.

Turning to the "account" theories which Chrysler asserts, "account" is defined as:

"an unsettled claim or demand by one person against another, based upon a transaction creating a debtor and creditor relation between the parties which is usually but not necessarily represented by an ex parte record kept by one or both of them." 1 Am.Jur.2d Accounts and Accounting § 1.

In the case of an unqualified allegation of account, the rights of the litigants turn upon the existence or non-existence of an underlying transaction whereby a defendant owes money to a plaintiff. 1 C.J.S. Accounts 15, p. 604; Star Steel Supply Company v. White, 4 Mich.App. 178, 144 N.W.2d 673 (1966); Telefunken Sales Corp. v. Kokal, 51 Wis.2d 132, 186 N.W.2d 233 (1971). "Account" is a common law form of action by which a claim may be pursued. 2 Woolley on Delaware Practice § 1460, p. 985, § 1466, p. 988, § 1523, p. 1032.

Although it had the benefit of a particular procedure by which the matter would be pursued in court, the rights of the litigants rest upon the existence or non-existence of a transaction whereby a defendant owes money to a plaintiff. Where the existence of the account was disputed, the traditional burden of proof rested upon plaintiff to prove the account, the underlying transaction and debt, and if plaintiff failed in its proof or defendant prevailed in its contrary proof thereof the suit, regardless of its nomenclature, must fall. Ibid.

One ground upon which Chrysler seeks recovery is "account annexed". From an examination of the landmark treatise on the subject of Delaware practice by Judge Woolley it appears that this term did not have a special significance in Delaware. Apparently it has been given special treatment by statute in some states. 1 C.J.S. Account, Action On § 8, pp. 588-596. Since this is not true in Delaware, Chrysler's case must turn on the existence of an agreement or debt on which the account is founded and the propriety of the charges shown in the account. 1 C.J.S. Account, Action On § 15, p. 604.

Chrysler also bases its claim upon "book account". A "book account" has been defined as "a detailed statement, kept in a book, in the nature of a debit and credit, arising out of contract or some fiduciary relation ...". 1 C.J.S. Account at 574 (1936). See also 1 Am.Jur.2d, supra § 3. A claim based on book account entitles a claimant to a certain procedural advantage, 10 Del.C. § 3901, which is not of concern here. But the mere fact that a plaintiff carries a claim on its books does not alone establish liability on the part of defendant. If Airtemp properly opposes it, the claim must be established according to the same standards applicable to other suits, namely, by a showing that the transaction between the parties entitles plaintiff to recover. 2 Woolley on Delaware Practice § 1468, p. 990; Bloom v. Handloff, Del.Super., 97 A. 586 (1916); A. H. Davenport Co. v. Addicks, Del.Super., 57 A. 532 (1904); Steel v. Yeatman, Del.Super., 5 Harr. 267 (1850). All of the elements essential to a contract must exist in order to permit recovery. Ibid.

Chrysler also asserts its claim as an "account stated". 2 Woolley on Delaware Practice § 1460, p. 985 states:

"(a)n account stated is an agreement by both parties that all the items (stated in the account) are true ... No recovery can be had under an account stated, unless there was an account agreed upon between the parties, by which the person said to be charged, stated, or admitted a certain sum to be due and owing from him to the other. In the absence of such proof no recovery can be had under the count of account stated, and the plaintiff is put to the proof of the items of his account."

An agreement constituting an account stated must be subsequent to the creation of the debt. It must be an agreement by the debtor that the debtor owes a certain sum and there must be a valid underlying indebtedness upon which the account stated rests. 1 Am.Jur.2d Accounts and Accounting § 21, pp. 395-7; Restatement of Contracts § 422(1).

The sufficiency of consideration to support an account stated "rests solely upon the pre-existing debt, commonly called a 'past consideration'." 6 Corbin on Contracts § 1304, pp. 237-8; 15 Williston, Contracts (3d ed.) § 1864, pp. 578-9. Since the function of an account stated is to resolve or consolidate prior transactions, the parties to the account stated must be the same as the parties to the underlying transactions. 1 Am.Jur.2d Accounts and Accounting § 22, p. 397; Shea v. Kerr, Del.Super., 1 Penne. 198 (1898); See Annotation 6 A.L.R.2d 118-120.

The amended complaint asserts with respect to the account stated claim that:

"Chrysler at the request of C-A-T Airtemp, performed certain services for C-A-T Airtemp," and

"C-A-T Airtemp received invoices from Chrysler for such services, periodically reviewed the charges and credits for an (sic) in connection with such services and agreed and acknowledged that C-A-T Airtemp owed Chrysler a balance of at least $5,237,827.23 by reason of Chrysler's performance of such services." ¹

Based upon the authorities cited above, the validity of the alleged account stated agreement between Chrysler and Airtemp must turn on whether Airtemp had an underlying liability to support the account stated.

In summary, all of the "account" claims turn upon whether Airtemp had a contractual obligation to pay Chrysler for these services.

IV.

I pass to the question of whether under the amended complaint and the evidentiary material which has been supplied in connection with the motions of Chrysler a valid contractual obligation exists on the part of Airtemp to pay Chrysler for this claim.

Airtemp contends that the services for which Chrysler seeks compensation in this suit were simply the services which Chrysler was obligated to perform under the Agreement between Chrysler and Fedders referred to above and that the liability for those services rests with Fedders and not with Airtemp. Airtemp was not a party to that Agreement. Airtemp's reasoning is that if Airtemp was entitled to receive these services from Chrysler by virtue of the Chrysler-Fedders Agreement, any subsequent promise by Airtemp to pay Chrysler could not constitute consideration for a direct contractual relationship between Chrysler and Airtemp which would support an undertaking by Airtemp to Chrysler to pay for those services, and hence even if Airtemp made a promise to Chrysler to pay for the services, such promise is not binding because it lacked consideration.

Two provisions of the Chrysler-Fedders Agreement bear consideration. ²

Section 1.5.1 excludes third-party benefits generally, but removes from that exclusion "subsidiaries of Fedders or Chrysler, as the case may be, as expressly provided in this Agreement". The inference from this language is...