SKC, Inc. v. EMAG Solutions, LLC

• Decision Date: 14 March 2014
• Docket Number: A13A2121
• Court: Georgia Court of Appeals
• Parties: SKC, INC. v. EMAG SOLUTIONS, LLC.

SKC, INC. v. EMAG SOLUTIONS, LLC.

A13A2121

Court of Appeals of Georgia

March 14, 2014

FIRST DIVISION

PHIPPS, C. J.,

ELLINGTON, P. J., and BRANCH, J.

NOTICE: Motions for reconsideration must be physically received in our clerk's office within ten days of the date of decision to be deemed timely filed.

Branch, Judge.

SKC, Inc. filed suit against eMag Solutions, LLC, in Fulton County State Court, seeking to recover amounts owed on eMag's account with SKC. The parties filed cross-motions for summary judgment, and the trial court granted summary judgment in favor of eMag, based on its conclusion that the applicable statute of limitations had expired. SKC now appeals from that order, asserting that the trial court erred in granting eMag's motion for summary judgment and in denying SKC's motion. We agree that the trial court erred in finding that SKC's claims are time-barred and therefore reverse the grant of summary judgment in favor of eMag. Additionally, because the undisputed evidence shows that eMag owes some amount of money on its account with SKC, we remand for entry of judgment in favor of SKC on the issue of eMag's liability on the account and for a determination of SKC's damages.

In an appeal from the grant or denial of a motion for summary judgment, we apply a de novo standard of review, viewing the evidence, including any reasonable conclusions and inferences that it supports, in the light most favorable to the nonmovant. Gayle v. Frank Callen Boys & Girls Club, 322 Ga. App. 412 (745 SE2d 695) (2013). Additionally, where the relevant facts are undisputed, we owe no deference to a trial court's ruling on whether an action is barred by the statute of limitations, as that question is one of law. See Lloyd v. Prudential Securities, 211 Ga. App. 247, 249 (2) (438 SE2d 703) (1993).

The record shows that SKC is a manufacturer of polyurethane film and that during the relevant time period it also sold what it describes as "digital media products." eMag describes itself as an electronic discovery company. In December 1999, eMag submitted a credit application to SKC, and SKC thereafter began selling products to eMag on account. Between May 17 and June 18, 2001, SKC made six product shipments to eMag, with the invoices for those shipments totaling $366,647.¹ eMag thereafter became severely delinquent on its account and on October 16, 2001, Ron Lanquist, eMag's CFO at the time, sent a letter to Byerson acknowledging that eMag owed SKC $331,104 and offering to return merchandise worth $121,319 and to settle the remaining debt for 20 cents on the dollar. Byerson responded on behalf of SKC on November 20, 2001. In its response, SKC rejected eMag's offer, requested full payment of the amount owed (which SKC contended was $366,246.69) by November 30, 2001, and stated that if payment was not made by that date, SKC would consider "other means of collection." When eMag failed to make any payments on the account, SKC's assistant general counsel sent eMag a demand letter on December 21, 2001, notifying the company that eMag's continued failure to pay an amount SKC now stated as "$366,647.04, exclusive of interest," would "result in further legal action by SKCA."

Although eMag did not immediately make any payments on the amount owed, Byerson testified that SKC did not sue on the account at that time because eMag was "an important customer," particularly with respect to SKC's digital media products. Byerson further explained that as a general rule, so long as a customer was making some effort to pay on its account, SKC would forego attempting to collect the debt "by means other than working with the customer." In this case, the parties continued negotiations regarding the outstanding balance on eMag's account, and on April 23, 2002, Steve Fiddler, who was then the CFO of eMag, sent an email to Byerson confirming their telephone conversation earlier that day regarding payment on the account. Fiddler wrote:

eMag . . . has proposed to issue wire payments of $6,000 per month through December 2002 against our outstanding payable to SKC. . . . In December 2002, we will re-evaluate our financial condition and attempt to increase the monthly payment amount for calendar 2003 and beyond. We greatly appreciate your patience as we attempt to resolve this payable balance. We have issued the first wire payment of $6,000 today.

The following day, Byerson responded via email acknowledging receipt of "the initial payment of $6,000" and informed Fiddler that she was "sending today via Fed-X [sic] copies of invoices and statement of account."

A current statement of eMag's account produced by SKC reflects that eMag made monthly wire transfer payments of $6,000 on its account for the months of April 2002 through October 2003, inclusive; made no payments for the months of November and December 2003 and January 2004; made a payment of $3,000 in February 2004; made monthly payments of $1,500 for the months of March 2004 through May 2008, inclusive;² and made a payment of $3,000 on July 29, 2008. SKC also obtained printouts from its bank evidencing the wire transfer payments it received from eMag for the months of January through May 2006, inclusive; October 2006; January through December 2007, inclusive; January through May 2008, inclusive; and July 2008. Each of these printouts contains a line for "originator [eMag] to beneficiary [SKC] info"; on each of these lines one of the following notations appears: "payment on account," "on account," "eMag on account," or "payment on past due account." These payments totaled $196,500 which, when subtracted from the invoice totals of $366,647, leaves a balance on those invoices of $170,147.

Fiddler, in his capacity as CFO of eMag, sent a letter to SKC on January 16, 2006, stating that eMag was undergoing an annual audit and that the auditors "desire that [SKC] furnish directly to them . . . the amount of [eMag's] liability to [SKC] (if any) as of December 31, 2005 and a statement of our account as of that date." SKC responded on January 26, 2006, reporting to the auditors that eMag owed SKC $214,746.69 as of December 31, 2005. On February 7, 2007, Fiddler sent SKC another audit letter asking for SKC to provide eMag's auditors with the amount of eMag's liability to SKC as of December 31, 2006. SKC responded on February 27, 2007, stating that eMag owed it $151,906 as of December 31, 2006.³

eMag designated as its 30 (b) (6) representative its current CFO, James Mauck. Mauck, who was first employed by eMag in May 2011, testified that eMag disputed the invoices relied on by SKC as evidence of the debt because "there's nobody [currently employed] at eMag that has knowledge of whether these invoices are accurate, whether they are real." Mauck admitted, however, that eMag's records from 2006 and 2007 "show that eMag owed some amount of money to SKC." He also acknowledged that eMag's "hard copy records" from early 2007 showed an account payable balance to SKC. Mauck further explained that two events occurred in 2008 that may have affected eMag's records with respect to any outstanding debt to SKC. First, in 2008 eMag obtained new auditors and following their initial audit, no debt to SKC was reflected on eMag's balance sheets. Additionally, in 2008 eMag converted to a new data system, and some of the information shown on eMag's balance sheets starting in 2009, following this conversion, could not be reconciled with information from the company's 2008 balance sheet.

When questioned, Mauck, who had previously worked as a financial auditor, acknowledged that it would be "fair to say" that a creditor would not receive an audit letter like those received by SKC unless the company being audited had acknowledged that the creditor was owed a debt. Mauck also admitted that although eMag could not locate all of its bank statements for the relevant time period, those that it could locate showed that between February 2004 and December 2007 eMag made twenty payments totaling $31,500 to SKC. He further acknowledged that eMag made a payment of $3,000 to SKC on July 29, 2008.

1. SKC contends that the trial court erred in finding that its claim is time-barred. We agree.

Under Georgia law, the statute of limitations for an action on an open account is four years. OCGA § 9-3-25. Normally, the limitations period begins to run either on the date payment becomes due or on the date the creditor demands repayment. See Avery Enterprises v. Lyndhurst Builders, 304 Ga. App. 353, 355 (696 SE2d 389) (2010); Murphy v. Varner, 292 Ga. App. 747, 748 (1) (666 SE2d 53) (2008). Georgia law further provides, however, that "[a] payment entered upon a written evidence of debt by the debtor or upon any other written acknowledgment of the existing liability shall be equivalent to a new promise to pay." OCGA § 9-3-112. And each new promise to pay constitutes a new point from which the statute of limitations begins to run, provided two conditions are met. See OCGA § 9-3-110. Specifically, the acknowledgment of the debt must be communicated to the creditor and it "must sufficiently identify the debt or afford the means by which [the debt] might be identified with reasonable...