Reed Research v. Schumer Company

• Decision Date: 10 January 1957
• Docket Number: No. 13179.,13179.
• Citation: 243 F.2d 602,100 US App. DC 179
• Parties: REED RESEARCH, Inc., Appellant, v. SCHUMER COMPANY, Inc. (Schock, Gusmer & Co., Inc.), Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

100 US App. DC 179, 243 F.2d 602 (1957)

REED RESEARCH, Inc., Appellant, v. SCHUMER COMPANY, Inc. (Schock, Gusmer & Co., Inc.), Appellee.

No. 13179.

United States Court of Appeals District of Columbia Circuit.

Argued October 15, 1956.

Decided January 10, 1957.

As Modified February 1, 1957.

Mr. Dayton M. Harrington, Washington, D. C., for appellant.

Mr. George Morris Fay, Washington, D. C., for appellee.

Before PRETTYMAN, BAZELON and BURGER, Circuit Judges.

BURGER, Circuit Judge.

The district court granted appellee's motion for summary judgment in the amount of $4600.87 as an account stated between the parties and this appeal is from the order for such judgment.

The record on which the district court acted discloses various business engagements between the parties including a customer relationship and a debtor-creditor relationship. One agreement was to supply appellant with certain services at a charge fixed by the parties at $200 per month to continue while a bank loan under a collateral agreement was outstanding. Appellee had supplied to the bank collateral security for appellant's loan.

As of July 31, 1953 the account for the charges under the agreement amounted to $4500.87 but by an error a statement was sent to Reed for $2100.87, whereupon Reed returned it for correction. On August 31, 1953 a statement marked "Corrected Statement" was sent to Reed for $4500.87. This statement bears on its face in longhand the following notation:

"8/31/53 Balance of $4500.87 agrees with Books of Reed Research. Franklin J. Rixse Officer Manager Reed Research, Inc."

Subsequent to August 31, 1953, additional charges and credits were made to this account until January 30, 1954 with the result, not disputed, that the account rendered on May 31, 1954 was for $4600.87. The same statement, unchanged as to all but date, was sent June 30, July 31 and August 31, 1954 with no further debits or credits.

Appellee's action was brought for this balance of $4600.87. Appellant's answer, filed in 1955, asserted, inter alia, that the claim arose out of the loan agreement under which appellee had deposited collateral security with a bank to secure loans to appellant and that the charge of $200 per month was in fact for services which were not rendered. Alternatively, the answer pleaded that if the claim was for interest for guaranteeing the loan the rate was usurious. It also asserted a counterclaim for $4899.13.

Appellant's answer must for present purposes be read with other documents filed by the parties, including numerous statements and letters which passed between the parties. Thus we find that in addition to the admission that the account of August 31, 1953 for $4500.87 "agrees" with the appellant's books, the subsequent and final statement for $4600.87 (May 31, 1954) with the notation, "Will you please give this matter your earliest attention?" went unchallenged for about two months. In addition to three unchallenged statements of account in May, June and July 1954, for the $4600.87 sued on, we find appellee on May 25, 1954 wrote to appellant reminding that "you have not made any effort to reduce the amount of your indebtedness which totals $4,600.87; although they have written you several times. * * * Frankly, Stanley, we are quite disappointed. * * *"

Not until July 22, 1954, two months after the first of the final statements of account were sent, and nearly one year after the appellant's office manager had written his notation that the then balance of $4500.87 "agrees with the Books of Reed Research," did appellant challenge his liability as stated by the accounts. This challenge was by a letter dated July 22, 1954 in which appellant, for the first time, raised a question, saying "as of today's date Reed Research, Inc. has no financial obligation. * * *" Significantly, this letter, in its next paragraph, continues:

"c. Notwithstanding anything to the contrary above, Reed Research recognizes a deep moral obligation to Schock, Gusmer and the Sperti group for the financial aid given at the time of the Agreement and for their continuing understanding and sympathy with the financial problems we have faced.

"d. Therefore, upon execution of a general release of prior obligations by all parties, Reed Research offers to pay to Schock, Gusmer the sum of five-thousand dollars ($5,000) within one year of the date of this letter, in recognition of the moral obligation recited in paragraph c., above, unless Schock, Gusmer elects to cancel such obligation by virtue of joint benefit stemming from paragraph a., above. Emphasis added.

"We enclose two copies of General Release executed by Stanley F. Reed and Reed Research, Inc. Will you kindly execute and return one copy for our files."

It was against this factual background that the district court had to determine whether any genuine issues of material facts were raised by the appellant's answer. It should be noted that appellant in its letter of July 22, 1954 deals only in terms of a conclusion that it "has no financial obligation" to appellees. Whether appellant had a financial obligation is a legal conclusion which must rest on facts and it is not without significance that nowhere in this letter, or later, did appellant challenge the figures or calculations.¹ The essence of an account stated is a finding whether on the admitted and known facts the parties at some point agreed that a particular amount was due and owing.²

Long ago the Supreme Court held that the lapse of time which converts an account rendered into an account stated, i. e., what is a reasonable time, is a question of law for the court. In that particular case a silence between three and four months was found unreasonable. Standard Oil Co. v. Van Etten, 1882, 107 U.S. 325, 1 S.Ct. 178, 27 L.Ed. 319.

Taking into account the long course of dealing, the complete absence of challenge to the account as stated in numerous statements, the admission of appellant's office manager that the account as stated "agrees with the Books of Reed Research," the failure specifically to challenge the final statement of May 1954 for $4600.87 for two months when it appeared that the creditor was insisting on payment, we think the district court was warranted in concluding, as it did, (1) that an account stated existed³ and (2) the issues raised by the answer were not genuine issues.⁴ If any doubt existed the candid offer to settle this $4600.87 account for $5000 on a one year deferred note resolves that doubt. Paradoxically this offer is contained in the same letter in which, for the first time, appellant belatedly challenged his liability on the statement of this account between the parties.

It is correct, as Judge Prettyman points out, that appellant never agreed to the actual document of account prepared for trial, which showed a balance of $4600.87 as of January 30, 1954, but it did agree to $4500.87 categorically through its office manager and it failed to challenge, within a reasonable time under the circumstances shown, the final May 31 statement for $4600.87. The fact that the actual formal account attached to the complaint was "prepared solely for trial" goes to the form, not the substance of the issue. The formal account attached to the complaint was simply a detailed recapitulation of the May 31 statement; there were no transactions which altered the account between January 30, 1954 and May 31, 1954.

The order appealed from is

Affirmed.

PRETTYMAN, Circuit Judge (dissenting).

I disagree with my brethren on two grounds: (1) The issue of usury was fairly raised by defendant's Fourth Defense, and (2) the account sued on was not an account stated.

Schumer Company, Inc., entered into an agreement with Reed Research, Inc., in November of 1949, undertaking to lend, or to guarantee the loan of, $30,000 to Reed. The agreement provided that during the period of the loan Reed would hire a designee of Schumer whose services would "encompass supervision of" Reed's accounting department "at a salary commensurate with the services rendered." This salary was later set at $200 a month. Pursuant to the agreement Schumer pledged securities with a Washington bank to guarantee a loan to Reed. Schumer frequently rendered statements showing the state of the account. When the bank's loan was paid, Reed refused to pay the amount Schumer claimed, denying that it owed the money; Reed contended that Schumer's designee had not in fact performed the services for which $200 a month had been charged.

On September 30, 1955, Schumer filed a civil action "On an Account", attaching to the complaint a statement showing a balance due August 31, 1952, and twenty-nine...