JP MORGAN CHASE BANK v. RABEL (2010)

Plaintiff, JP Morgan Chase Bank, N.A. (“Chase”), commenced this action seeking to recover the sum of $8,501.91, alleging causes of action sounding in breach of contract and account stated.   A bench trial took place before the undersigned on January 14, 2010.   After considering and weighing the trial evidence, and having had the opportunity to observe and assess the credibility of the witnesses, the Court makes the following findings of fact and conclusions of law:

FACTS:

Plaintiff called one witness, Paul Taylor, a “relationship manager” employed by JP Morgan Chase.   As a relationship manager, Mr. Taylor is responsible for managing a network of attorneys and collection agencies throughout the United States.   According to Mr. Taylor, defendant purchased a motor vehicle (a Toyota 4 Runner) and financed the vehicle by entering into a retail installment contract with Chase Bank.   He testified that the total amount financed was approximately $28,000.00.   The contract was neither offered nor received in evidence.

Mr. Taylor was shown a one page document (plaintiff's exhibit 1) which he maintained was a record of all the payments made by the defendant on the loan.   Based upon his review of this document, he maintained that the defendant had defaulted in her obligations under the loan agreement after making only six out of the required seventy-two payments.   He testified that at the time of her default, the outstanding balance was approximately $25,000.00.

According to Mr. Taylor, this document further reflected that after defendant defaulted under the loan, Chase repossessed the vehicle and sold it at auction for approximately $18,000.00.   According to Mr. Taylor, after the proceeds of the sale were applied to the account, defendant still owed Chase $12,000.00.

Plaintiff offered plaintiff's exhibit 1 in evidence.   Although defendant did not raise an objection, the Court reserved decision as to its admissibility.

Plaintiff then offered a letter addressed to defendant dated February 16, 2009, advising her that notwithstanding the fact that the proceeds of the auction were applied to her account, a deficiency balance in the amount of $12,498.05 remained.   Inasmuch as the plaintiff failed to offer any competent evidence that this letter was mailed to the defendant or that it constituted a business record within the meaning of CPLR 4518, the Court, on its own motion, excluded it from evidence.

Defendant, the only other witness to testify at the trial, admitted entering into the retail installment contract with Chase.   She admitted that she was not able to keep up with the loan payments due to financial problems and that for this reason, she allowed Chase to repossess the vehicle.

ANALYSIS:

 Plaintiff did not make out a prima facie case of breach of contract.   It is well settled that the essential elements of a cause of action to recover damages for breach of contract are:  the existence of a contract, the plaintiff's performance under the contract, the defendant's breach of that contract, and resulting damages (see JP Morgan Chase v. J.H. Elec. of New York, Inc., 69 A.D.3d 802, 893 N.Y.S.2d 237 [2d Dept. 2010];  Agway, Inc. v. Curtin, 161 A.D.2d 1040, 1041, 557 N.Y.S.2d 605 [3d Dept. 1990];  Furia v. Furia, 116 A.D.2d 694, 695, 498 N.Y.S.2d 12 [2d Dept. 1986] ).   Here, although the defendant acknowledged the existence of a contract, since the contract was not received in evidence, its terms were never established in admissible form.

 Turning to plaintiff's cause of action for account stated, it failed to establish its case by a preponderance of the credible evidence.  “An account stated is an agreement, independent of the underlying agreement, regarding the amount due on past transactions” (G.W. White & Son, Inc. v. Gosier, 219 A.D.2d 866, 632 N.Y.S.2d 910 [4th Dept. 1995] [citations omitted];  see also W.R. Haughton Training Stables, Inc. v. Miriam Farms, Inc., 118 A.D.2d 639, 499 N.Y.S.2d 792 [2d Dept. 1986];  see also Discover Bank v. Anderson, 20 Misc.3d 136(A), 2008 N.Y. Slip Op. 51526(U), 2008 WL 2814812 [App. Term, 2d & 11th Jud. Dists.] ).   It is well settled law that “[a]n account stated assumes the existence of some indebtedness between the parties, or an express agreement to treat the statement as an account stated.   It cannot be used to create liability where none otherwise exists” (M. Paladino, Inc. v. J. Lucchese & Son Contracting Corp., 247 A.D.2d 515, 516, 669 N.Y.S.2d 318 [2d Dept. 1998] [emphasis added] ).   Thus, the plaintiff must establish the “existence of some indebtedness between the parties or an express agreement to treat the statement in question as an account stated” (Enviroclean Services, LLC v. Cem, Inc., 12 A.D.3d 1042, 1043, 785 N.Y.S.2d 641 [4th Dept. 2004] [citations omitted] ).   Account stated has two essential elements.   The first being the existence of an account, and the second being whether the account became “stated” (see e.g. Gurney, Becker & Bourne, Inc. v. Benderson Dev. Co., 47 N.Y.2d 995, 996, 420 N.Y.S.2d 212, 394 N.E.2d 282 [1979] [citations omitted] ).

 An account is “nothing more or less than a contract express or implied between the parties” (Rodkinson v. Haecker, 248 N.Y. 480, 484-85, 162 N.E. 493 [1928];  see also Toland v. Sprague, 37 U.S. (12 Pet.) 300, 9 L.Ed. 1093 [1838] ).   Here, it was uncontroverted that an account existed between the parties.   Thus, the only relevant issue at trial was whether the account was stated, as “the mere rendering an account does not make it a stated one” (Lockwood v. Thorne, 11 N.Y. 170, 175 [1854] [citations and quotations omitted] ).

 The Court of Appeals has explained that an account may become stated in two instances, as “a general rule, where an account is made up and rendered, he who receives it is bound to examine the same, or to procure some one to examine it for him” (Rodkinson v. Haecker, 248 N.Y. at 485, 162 N.E. 493).   The first instance is where the debtor expressly “admits it to be correct” which makes the account a stated one that “is binding on both parties” (Id.).  “If, instead of an express admission of the correctness of the account, the party receiving it keeps the same by him and makes no objection within a reasonable time, his silence will be construed into an acquiescence in its justness, and he will be bound by it as if it were a stated account” (Id.).   After an account becomes stated, it “is conclusive upon the parties, unless fraud, mistake, or other equitable considerations are shown, which make it improper to be enforced” (Id. [citations omitted] ).   Moreover, “[n]o practice could be more dangerous than that of opening accounts which the parties themselves have adjusted” (Chappedelaine v. Dechenaux, 8 U.S. (4 Cranch) 306, 2 L.Ed. 629 [1808] ).  “While the doctrine of account stated had its origin in the transactions of merchants (Freeland v. Heron, 7 Cranch [U.S.] 147, 3 L.Ed. 297), it has since been extended to embrace transactions between other persons” (Rodkinson v. Haecker, 248 N.Y. at 485, 162 N.E. 493 [citations omitted];  see also Stenton v. Jerome, 54 N.Y. 480 [1873] ).

 In any event, regarding both causes of action, plaintiff did not establish by admissible proof its entitlement to damages (Kenford Co., Inc. v. Erie County, 67 N.Y.2d 257, 261, 502 N.Y.S.2d 131, 493 N.E.2d 234 [1986] [citations omitted] ).   The only evidence offered concerning damages was plaintiff's exhibit 1 and 2. Plaintiff failed to lay a proper evidentiary foundation for the admission of either of these documents as business records pursuant to CPLR 4518.   Further, Mr. Taylor's testimony concerning the terms of the contract and defendant breach of the contracted constituted inadmissible hearsay and a violation of the best evidence rule (CPLR 4539;  see also Platovsky v. City of New York, 275 A.D.2d 699, 700, 713 N.Y.S.2d 358 [2d Dept. 2000] [citations omitted] ).   Because Mr. Taylor lacked personal knowledge, his testimony was speculative, and given his demeanor, this Court gives it no weight (see e.g. Greenstein v. R & R of G.C., Inc., 50 A.D.3d 637, 854 N.Y.S.2d 754 [2d Dept. 2008];  see also People v. Rieck, 70 A.D.2d 724, 416 N.Y.S.2d 866 [3d Dept. 1979];  see also Lucks v. Lakeside Mfg., Inc., 37 A.D.3d 666, 668, 830 N.Y.S.2d 747 [2d Dept. 2007];  see also People v. Barrett, 14 A.D.3d 369, 787 N.Y.S.2d 321 [1st Dept. 2005] ).

 A business record is admissible if “it was made in the regular course of any business and ․it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter” (CPLR 4518[a];  see also People v. Kennedy, 68 N.Y.2d 569, 579-580, 510 N.Y.S.2d 853, 503 N.E.2d 501 [1986] ).  “A proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker's business practices and procedures” (West Val. Fire Dist. No. 1 v. Village of Springville, 294 A.D.2d 949, 950, 743 N.Y.S.2d 215 [4th Dept. 2002] ).   Although Mr. Taylor testified that both documents were made in the regular course of plaintiff's business, he did not establish that he was familiar with plaintiff's business practices or procedures, and he further failed to establish when, how, or by whom they were made (Palisades Collection, LLC v. Kedik, 67 A.D.3d 1329, 890 N.Y.S.2d 230 [4th Dept. 2009];  CPLR 4518[a];  West Val. Fire Dist. No. 1, 294 A.D.2d at 950, 743 N.Y.S.2d 215).

Further, Mr. Taylor failed to demonstrate that the preparer of Plaintiff's exhibits 1 and 2 had actual knowledge of the events recorded therein or that they obtained knowledge of those events from someone with actual knowledge of them and who had a business duty to relay information regarding the events to the preparer (see Capasso v. Kleen All of America, Inc., 43 A.D.3d 1346, 842 N.Y.S.2d 798 [4th Dept. 2007], citing Alexander, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 7B, CPLR C4518:1;  Matter of Leon RR, 48 N.Y.2d 117, 122-123, 421 N.Y.S.2d 863, 397 N.E.2d 374 [1979];  see also Johnson v. Lutz 253 N.Y. 124, 128, 170 N.E. 517 [1930];  Toll v. State, 32 A.D.2d 47, 49, 299 N.Y.S.2d 589 [3rd Dept. 1969] ).

 While the defendant did not raise an objection to plaintiff's exhibit 1 or 2, the Court on its own motion excludes them from evidence (see e.g. People v. Smith, 172 N.Y. (10 Bedell) 210, 64 N.E. 814 [1902];  see also People v. Robinson, 36 N.Y.2d 224, 367 N.Y.S.2d 208, 326 N.E.2d 784 [1975];  see also People v. Siegel, 4 A.D.2d 680, 163 N.Y.S.2d 721 [2d Dept. 1957];  see also People v. Jenkins, 24 A.D.2d 716, 263 N.Y.S.2d 438 [1st Dept. 1965];  see also HDM Flugservice GmbH v. Parker Hannifin Corp., 332 F.3d 1025, 1034 [6th Cir.2003] [citations omitted];  Maddox v. Patterson, 905 F.2d 1178, 1180 [8th Cir.1990] ).¹

As plaintiff failed to prove its action based on breach of contract, the only relevance left for plaintiff's exhibit 2 was to prove whether the account between the parties was a stated one by defendant's failure to timely object (see e.g. William Gardam & Son v. Batterson, 198 N.Y. 175, 177-178, 91 N.E. 371 [1910];  see also Prince, Richardson on Evidence § 8-225 [Farrell 11th Ed] ).   Here, the defendant credibly denied receipt of the bill, and plaintiff's witness admitted that he did not mail the document and stated that he had no knowledge of office practices and procedures that would ensure mailing (see Watt v. New York City Transit Authority, 97 A.D.2d 466, 467 N.Y.S.2d 655 [2d Dept. 1983] ).   Therefore, the condition of the document's relevance, i.e. that it was mailed or otherwise delivered to the defendant, was never established and this Court properly excluded plaintiff's exhibit 2 (see e.g. Fischl v. Carbone, 155 A.D.2d 516, 547 N.Y.S.2d 376 [2d Dept. 1989] ).   In other words, there was nothing for defendant to dispute.

For these reasons, plaintiff's cause of action for account stated fails (see generally Citibank (South Dakota) N.A. v. Jones, 272 A.D.2d 815, 708 N.Y.S.2d 517 [3d Dept. 2000];  see also Rhulen Agency, Inc. v. Gramercy Brokerage, Inc., 106 A.D.2d 725, 726-727, 484 N.Y.S.2d 156 [3d Dept. 1984];  see also DeToia v. Yellow Transp., Inc., 68 A.D.3d 804, 889 N.Y.S.2d 475 [2d Dept. 2009] ).   Based on the above, it is hereby

ORDERED that judgment be entered in favor of defendant MARIEALTA RABEL and against plaintiff JP MORGAN CHASE BANK, N.A.;   and it is further

ORDERED that plaintiff's complaint is hereby DISMISSED with prejudice on the merits.

The foregoing constitutes the decision and order of the court.

FOOTNOTES

1.   Additionally, a document admitted pursuant to CPLR 4518 can be treated like any other piece of evidence, which means that if the document is not trustworthy, then the trier of fact can give it no weight (see e.g. People v. Fisher, 201 A.D.2d 193, 199, 615 N.Y.S.2d 374 [1st Dept. 1994] ).   Therefore, assuming this Court did not exclude the evidence, the Court would have given the documents no weight because of the absence of meaningful foundation testimony.

NOACH DEAR, J.