open account Archives - Florida Construction Legal Updates

In construction, one of the easiest claims to prove from a burden of proof standpoint is that of a supplier, particularly a rental equipment supplier. Oftentimes, these claims are more in the realm of a collection claim because a rental supplier will generally be able to establish that a party opened an account with them, signed a credit application and personal guaranty, and equipment was rented and even delivered to a specific jobsite during set dates. Defending these claims is not so easy. And even if there is a defense as it relates to some amounts, there needs to be an upside challenging those amounts when factoring in the attorney’s fees, costs, and interest on the other amounts and on continuing the dispute.

An example of the difficulty in defending these claims from rental suppliers can be found in the recent case of Custom Design Expo, Inc. v. Synergy Rents, Inc., 2021 WL 4125806 (Fla. 2d DCA 2021). Here, a contractor rented equipment (e.g, forklifts) from a supplier. The equipment was rented on an open account and the contractor signed a personal guaranty. The supplier sued the contractor for about $81,000 that remained unpaid. The supplier appeared to waste no time and moved for summary judgment with an affidavit from its credit manager. The credit manager affirmed that the contractor executed a credit application for purposes of renting equipment on an open account, the application contained a personal guaranty, and the credit application formed the basis of a contract. The credit manager authenticated the credit application and affirmed that the contractor owed it about $81,000 in unpaid amounts for rental equipment that was furnished under the credit application.

The contractor opposed the credit manager’s affidavit with an affidavit from the contractor’s customer, which was the owner. The dispute concerned three invoices (which were relatively small considering the balance) where overages were claimed. With the first two invoices, the argument was the invoices included a two-week rental period when the rental period should have been only one week. With the third invoice, the dispute concerned that the invoice included amounts which did not accurately reflect the amount of time the equipment was on the jobsite. Nevertheless, the trial court granted summary judgment in favor of the supplier.

On appeal, the contractor argued that its affidavit from the owner in response created a genuine issue of material fact. The appellate court disagreed.

The supplier’s affidavit included the credit application and invoices of rental equipment (forklifts) furnished on an open account and the $81,000 amount owed. The affidavit the contractor furnished was from its customer–the owner. However, the customer was NOT a party to the credit application and did not enter into any agreement with the supplier. The owner “did not have personal knowledge of any agreements between [the supplier] and the [contractor and its personal guarantor], and any information he could offer regarding those agreements—including how long the rental periods were ‘supposed to be’—would necessarily have to be inadmissible hearsay.” Custom Design Expo, supra, at *3 (explaining hearsay cannot create genuine issue of material fact to preclude the entry of summary judgment). Furthermore, the court noted that the owner’s affidavit really only created a question of fact as to whether the contractor used the equipment during the rental period, but it did NOT create a question of fact as to when the equipment was received and when it was returned to the supplier. In other words, the affidavit would have created a question of fact on a non-issue or a non-material fact! As the appellate court maintained:

To preclude summary judgment, “the ‘issue’ must be one of material fact. Issues of nonmaterial facts are irrelevant to the summary judgment determination.” “A material fact, for summary judgment purposes, is a fact that is essential to the resolution of the legal questions raised in the case.” Here, although the question of where the equipment was used may be a material fact as to the construction lien count against [the owner], it is not a material fact in the determination of whether [the contractor and personal guarantor] took possession of [the supplier’s] rental equipment pursuant to their contract with [the supplier] and failed to pay the cost of the rental in accordance with their contractual obligation.

Custom Design Expo, supra, at *4 (internal citations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

There are times where being too darn cute with your pleading allegations is unnecessary and does not work. But, the point is really that the cuteness is unnecessary.

In a Miller Act payment bond dispute in Boneso Brothers Construction, Inc. v. Sauer, Inc., 2018 WL 2387833 (N.D.Cal. 2018), a claimant asserted claims against a Miller Act payment bond surety for breach of the payment bond, breach of a subcontract, open account, and account stated. The question is why would the claimant sue the payment bond surety for breach of subcontract (when the subcontract was not with the surety), and open account and account stated. I have no clue, other than such claims appeared quite unnecessary when the claimant asserted an action on the Miller Act payment bond (which is what the surety is liable under — actions under the statutory payment bond). Such claims were dismissed. And, they should have been.

A claimant cannot navigate around an action under a Miller Act payment bond by suing the surety for breach of an underlying subcontract. Such a claim would obviate any preconditions to suing the surety under the bond and extend the surety’s exposure.

In Florida, and elsewhere, an account stated and open account are distinct causes of action.

An account stated is a claim when there is an “agreement between persons who have had previous transactions, fixing the amount due in respect of such transactions, and promising payment.” Farley v. Chase Bank, U.S.A., N.A., 37 So.3d 936, 937 (Fla. 4th DCA 2010) (quotation and citation omitted). An “account stated requires an express or implied agreement between the parties that a specified balance is correct and due and an express or implied promise to pay the balance.” Id.

An open account “is an unsettled debt arising from items of work and labor, with the expectation of further transactions subject to future settlements and adjustments.” Id. (quotation and citation omitted). In an action on an open account, the claimant must actually attach a copy of the itemized account, unlike an account stated action. Id.

The reality is none of these other claims would really apply to a Miller Act payment bond surety. Moreover, the surety naturally was being indemnified by its payment bond-principal, so it is not like the surety put itself in a position where it affirmatively acknowledged the so-called “debt” the subcontractor claimed was owed. The cuteness in trying to “throw the book” at the surety was not necessary, specifically when the subcontractor had an action on the Miller Act payment bond!

Tag Archives: open account

DIFFICULTY IN DEFENDING RENTAL SUPPLIER’S CLAIM UNDER CREDIT APPLICATION

SOMETIMES, BEING TOO CUTE WITH PLEADING ALLEGATIONS IS UNNECESSARY