Elmore-Schultz Grain Co. v. Stonebraker

• Decision Date: 01 July 1919
• Parties: ELMORE-SCHULTZ GRAIN COMPANY, Respondent, v. E. O. STONEBRAKER, Appellant
• Court: Missouri Court of Appeals

214 S.W. 216

202 Mo.App. 81

ELMORE-SCHULTZ GRAIN COMPANY, Respondent, v. E. O. STONEBRAKER, Appellant

Court of Appeals of Missouri, St. Louis

July 1, 1919

202 Mo.App. 81 at 97.

Original Opinion of July 1, 1919, Reported at: 202 Mo.App. 81.

Motion overruled.

OPINION

ON MOTION FOR REHEARING.

ALLEN J.

Respondent's learned counsel has filed a motion for a rehearing, which challenges our holding that if the account stated is based in part upon illegal transactions then the whole is tainted with illegality and no recovery may be had thereon. But after a careful consideration of the motion we are constrained to adhere to the conclusion reached in the opinion touching this matter.

It is argued for respondent that the rule is that where it is shown in defense to an action upon an account stated, that fraud accident or mistake entered into the settlement, the account may be corrected and a recovery had by the plaintiff upon the balance thus found due; and that this is likewise true as to illegality affecting only certain items going to make up the account stated, the burden being upon defendant to show the illegality of the particular transactions thus drawn in question.

It is well settled that an account stated, though presumptively a binding obligation on the part of the debtor, into which the prior transactions involved are merged, is not absolutely conclusive, but the settlement thereby evidenced may be impeached for fraud, accident or mistake inhering therein. [See Barr v. Lake, 147 Mo.App. 252, 126 S.W. 755 cases cited.] But such grounds for impeachment of an account stated must relate to the settlement itself, or the account stated, and not to matters of anterior liability, except in so far as evidence touching the latter may constitute a foundation for the introduction of evidence to substantiate such defense. [1 Corpus Juris., p. 711, sec. 337; 1 Cyc. 456; Koegel v. Gibbons, 79 Mo. 77.] As to correcting the account stated, under such circumstances, for errors or omissions in the settlement, and allowing a recovery upon the account as corrected, it is said that "in the absence of allegation and proof of fraud or mistake which taints the entire account, the court, will not open and unravel it as if no accounting had been made, but the settlement will be binding except for the errors shown. When, however, the fraud or mistake taints the entire transaction, the court will direct the whole account to be opened and taken de novo, and the relief will not be limited to the right to surcharge and falsify." [1 Corpus Juris., p. 721, sec. 373.]

But where the account stated is based in part upon transactions which are illegal and void, and this is shown in defense to the action thereon, we regard it as clear that the consideration for the debtor's express or implied promise to pay the balance appearing to be due is then tainted with illegality, preventing a recovery in such action. We do not think that under such circumstances the taint or illegality may be removed by correcting the account stated, reducing it by the amount shown to be based upon such illegal transaction. Where the action is upon an open account such course may be pursued, i. e., illegal items may be eliminated and recovery had upon the remainder of the account. But, as said, when the suit is upon an account stated, the right of action is predicated upon the new promise of the debtor to pay the balance alleged to have been agreed upon as being due upon a settlement between the parties (Barr v. Lake, supra), and if the consideration therefor is tainted with illegality the situation is the same, so far as concerns this question, as it is where a debtor gives his note for a prior indebtedness comprised in part of illegal items. [Bick v. Seal, 45 Mo.App. 475.]

In 1 Corpus Juris., p. 701, sec. 311, it is said:

"Since the statement of accounts must rest upon a subsisting indebtedness, it follows that a claim which is void by reason of illegality will not support an account stated, as where the account stated is with regard to claims founded on the illegal sale of liquors, or where it includes usurious interest; and the alleged debtor is not estopped from showing illegality in particular items of an account stated or by reason of his having retained the account rendered without objection. So an action upon a stated account will fall if one of several claims of indefinite amount included in it must be omitted for illegality."

And the rule is similarly stated in 1 Cyc., p. 458.

In Nash-Wright Company v. Wright, 156 Ill.App. 243, l. c. 265, 266, it is said:

"Appellee contends that as this case was tried solely on the count declaring on the account stated and the count on the note, there can be no recovery if any part of the transactions which make up the account and form the consideration for the note is illegal. We are of the opinion that there...