Gurney, Becker & Bourne, Inc. v. Benderson Development Co., Inc., 47 N.Y.2d 995 (1979)

An account stated cannot create liability where none exists; it requires either an existing indebtedness between the parties or an express agreement to treat a statement as an account stated, even if the amount is not yet due.

Summary

Gurney, Becker & Bourne, Inc., a real estate broker, sued Benderson Development Co., Inc. for commissions allegedly due when a tenant exercised a renewal option. The trial court submitted the case to the jury on both implied contract and account stated theories, and the jury returned a general verdict for the plaintiff. The Court of Appeals reversed, holding that it was error to submit the case on an account stated theory because no commission was due at the time the statement was sent, as the renewal option had not yet been exercised, and the defendant had not expressly agreed to treat the statement as an account stated. A new trial was ordered because the basis of the jury’s verdict was unclear.

Facts

Gurney, Becker & Bourne, Inc. (plaintiff), a licensed real estate broker, claimed commissions were due from Benderson Development Co., Inc. (defendant) when a tenant exercised its renewal option.
A letter containing a typewritten notation stated that there was an “additional commission due and payable if tenant remains for another five years after 9/30/72.” At the time the letter was received, the tenant had not yet exercised the renewal option.

Procedural History

The trial court submitted the case to the jury as an action based on both implied contract and account stated theories.
The jury returned a general verdict in favor of the plaintiff.
The Appellate Division’s order was reversed by the Court of Appeals, and a new trial was granted.

Issue(s)

Whether the trial court erred in submitting the case to the jury as an action based on an account stated when no commission was due at the time the statement was sent and the defendant had not expressly agreed to treat the statement as an account stated.

Holding

No, because an account stated cannot create liability where none exists; it requires either an existing indebtedness between the parties or an express agreement to treat a statement as an account stated, even if the amount is not yet due.

Court’s Reasoning

The Court of Appeals reasoned that the rule regarding an account stated assumes that there is some existing debt between the parties or an express agreement to treat the statement as an account stated. The court cited American Lithographic Co. v Dorrance-Sullivan & Co., 241 NY 306; Jugla v Trouttet, 120 NY 21; and Bauer v Ambs, 144 App Div 274 in support of this principle.

The court emphasized that at the time the letter was received, no commission was due on the renewal option because the option had not yet been exercised. Since an account stated cannot be used to create liability where none exists, and the defendant had not expressly agreed to treat the letter as an account stated concerning the contingent commission, the trial court erred in submitting the case to the jury on an account stated theory.

The court acknowledged that the jury could have found that the defendant was required to pay a commission on the renewal term based on an implied contract theory. However, since the case was submitted on both theories, and a general verdict was returned, it was impossible to determine whether the erroneous charge predicated on the account stated theory was the basis of the verdict. Therefore, a new trial was necessary.

The court stated: “The rule that an account which has been rendered and to which no objection has been made within a reasonable time should be regarded as admitted by the party charged as prima facie correct assumes that there exists some indebtedness owing between the parties or an express agreement between the parties to treat the statement as an account stated although such statement may encompass amounts not yet due if there remain no further obligations to be performed by the party claiming payment.”