Account Stated

1 Elements and Case Citations

1. Previous transactions between the parties establishing the relationship

of debtor and creditor;
2. An agreement between the parties, express or implied, on the amount
due from the debtor to the creditor; and
3. The account is sent to the debtor who does not object to it within a
reasonable time.
4. Under such circumstances the law will find a promise by the debtor,
express or implied, to pay the amount due.”

For form pleading see California Judicial Council form No. PLD-C-001(2)
(“Common Counts”).

CALIFORNIA STATE COURTS

California Supreme Court: Trafton v. Youngblood, 69 Cal. 2d 17, 25 (1968).

California 1st Dist.: Crofts & Anderson v. Johnson, 101 Cal. App. 2d 418,
421 (1950).

California 2d Dist.: Truestone, Inc. v. Simi W. Indus. Park II, 163 Cal. App.
3d 715, 725 (1984).

California 3d Dist.: Mercantile Trust Co. v. Doe, 26 Cal. App. 246, 252
(1914).

California 4th Dist.: Maggio, Inc. v. Neal, 196 Cal. App. 3d 745, 752 (1987).

California 5th Dist.: H. Russell Taylor’s Fire Prevention Service, Inc. v. Coca
Cola Bottling Corp., 99 Cal. App. 3d 711, 726-27 (1979).

CALIFORNIA FEDERAL COURTS

United States Court of Appeal for the 9th Circuit: S.O.S., Inc. v. Payday,
Inc., 886 F.2d 1081, 1091 (9th Cir. 1989).

Central District: Xerox Corp. v. A & M Printing, No. CV 12-00043 MMM (Ex),
2013 U.S. Dist. LEXIS 74179, at *13 (C.D. Cal. May 20, 2013).
Eastern District: United States ex rel. Hajoca Corp. v. Aeroplate Corp., No.
1: 12-cv-1287-AWI-BAM, 2013 U.S. Dist. LEXIS 97753, at *11 (E.D. Cal. July
11, 2013).

Northern District: FDIC v. Hyun, No. 12-4749-PSG, 2013 U.S. Dist. LEXIS
90814, at *10 (N.D. Cal. June 26, 2013).

Southern District: Ambriz v. Patenaude & Felix, A.P.C., No. 12-CV-1309 W

(MDD), 2013 U.S. Dist. LEXIS 79188, at *5 (S.D. Cal. June 4, 2013).

2 Defenses to Claim for Account Stated

(1) Cal. Code Civ. Proc. § 431.30(b)(2) (pleading affirmative

defenses), and other standard defenses. See Chapter 1 for all defenses.

(2) Same Grounds for Demurrer as Related Specific Claims: “When a

common count is used as an alternative way of seeking the same recovery
demanded in a specific cause of action, and is based on the same facts, the
common count is demurrable if the cause of action is demurrable.” McBride v.
Boughton,

123 Cal. App. 4th 379, 394-95 (2004).

(3) Limitations on Need to Plead Affirmative Defenses to Common

Counts: Because “Account Stated” is one of the “common counts” there are
limitations on the requirements to plead affirmative defenses:

“The common count is a general pleading which seeks recovery of money

without specifying the nature of the claim . . .. Because of the uninformative
character of the complaint, it has been held that the typical answer, a general
denial, is sufficient to raise almost any kind of defense, including some which
ordinarily require special pleading.” . . . However, even where the plaintiff has
pleaded in the form of a common count, the defendant must raise in the
answer any new matter, that is, anything he or she relies on that is not put in
issue by the plaintiff.

Title Insurance Co. v. State Bd. of Equalization, 4 Cal. 4th 715, 731 (1992).

(4) Statute of Limitations: Cal. Code Civ. Proc. § 337(2) (four years if
written); Cal.. Code Civ.Proc. §339(1) (two years if oral); see Truestone,
Inc. v. Simi W. Indus. Park II, 163 Cal. App. 3d 715, 725 (1984)(an account
stated “need not be in writing.”).
(5) “[A]n account stated is formed when a statement of the amount owed
is sent to a debtor and the debtor fails to respond in a reasonable time
thereby implying agreement to the amount owed.” See Hadsell v. Mandarich
Law Group, LLP, 12-cv-235-L(RBB), 2013 U.S. Dist. LEXIS 49191, at *9-10
(S.D. Cal. Apr. 3, 2013).

(6) An account stated, being a contract (see Trafton v. Youngblood, 69 Cal.

2d 17, 25 (1968)) is subject to other contract action defenses, for example,
lack of consent (Cal. Civ. Code §§ 1565-1579), illegality (Cal. Civ. Code §§
1595-1599), and lack of capacity (Cal. Civ. Code § 1556). See also Cal. Fam.
Code §§ 6500 et seq. (minors) and Cal. Civ. Code §§ 38 et seq.
(incompetents).

(7) Because an account stated claim is premised on a preexisting relationship

with prior transactions, it is “‘intended to preserve and protect legitimate
demands but not to create obligations independent of prior indebtedness,’ the
rendering of an account, although not objected to, cannot create a liability
where no liability existed before.’” Trafton v. Youngblood, 69 Cal. 2d 17, 26
(1968).

(8) “An account stated need not be submitted by the creditor to the debtor. A
statement expressing the debtor's assent and acknowledging the agreed
amount of the debt to the creditor equally establishes an account stated.”
Truestone, Inc. v. Simi W. Indus. Park II, 163 Cal. App. 3d 715, 725 (1984).

(9) Parties cannot go behind an account stated and attack the original items
of the account except on a proper averment of fraud, duress, or mistake.
See Lund v. Utter-McKinley Mortuaries, 186 Cal. App. 2d 162, 168 (1960).

(10) Once the account has been stated, however, a subsequent breach of
the underlying contract does not provide a defense See S.O.S., Inc. v. Payday,
Inc., 886 F.2d 1081, 1091 (9th Cir. 1989) (relying on Gardner v. Watson, 170
Cal. 570, 577 (1915)).

(11) Production of “Account:” Pursuant to California Code of Civil Procedure

section 454, “[i]t is not necessary for a party to set forth in a pleading the
items of an account therein alleged, but he must deliver to the adverse
party, within ten days after a demand thereof in writing, a copy of the
account, or be precluded from giving evidence thereof. The court or
judge thereof may order a further account when the one delivered is too
general, or is defective in any particular.”

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attorney lisa j espada in san fran wrote:

The California Statute of Limitations for Collection of Debts.

The California Statute of Limitations for Collection of Debts

Posted on February 25, 2016 · Posted in Consumer Debt Issues, Credit Card
Debt, Debt Collection Defense

When a consumer has been sued for collection of a debt that he has heard
nothing about for several years, he may wonder whether the collection of that
debt is barred by the statute of limitations. If the lawsuit is filed after the
statutory period has run, the consumer has a solid defense in the lawsuit, and
will also have the option of a cross-complaint against the plaintiff that filed
the case. Filing a lawsuit to collect a “time-barred” debt is a violation of the
Fair Debt Collection Practices Act and the corresponding California statute.

The following general guidelines apply for credit card and most other debts
owed by California residents. (Note: although many credit card issuers send
customers credit card agreements that contain “choice of law” clauses, which
state that the law of another state, such as South Dakota or Delaware, will
apply to any dispute, in practice it is rare for the credit card issuer or debt
buyer to argue that the law of another state applies in a debt collection case.)

The Statute: California Code of Civil Procedure Section 337

Where the action is based on a written agreement, it must be filed within 4

years.

Code of Civil Procedure § 337:

(1) An action upon any contract, obligation or liability founded upon an

instrument in writing, except as provided in Section 336a of this code…

(2) An action to recover (1) upon a book account whether consisting of one or
more entries; (2) upon an account stated based upon an account in writing,
but the acknowledgment of the account stated need not be in writing; (3) a
balance due upon a mutual, open and current account, the items of which are
in writing; provided, however, that where an account stated is based upon an
account of one item, the time shall begin to run from the date of said item,
and where an account stated is based upon an account of more than one item,
the time shall begin to run from the date of the last item.

When does the time period begin to run?

Consumers are often confused about the statute of limitations because they
do not know when the time period began to run. Follow these guidelines to
determine the date when the statute of limitations period begins to run in
various situations.

Breach of Contract Actions

Credit card debts are based on written agreements provided to the consumer
either before or after the account is opened. For purposes of the statute of
limitations, a contract is “in writing” under California law if the party accepts
the offer subject to a written contract. Amen v. Merced County Title Co. (1962)
58 Cal. 2d 528, 532. In Amen, the California Supreme Court held that a
contract may be “in writing” for purposes of the statute of limitations even
though it was accepted orally or by an act other than signing if the party
accepted the offer and agreed to the terms of a written contract.

In contract actions, the statute runs from the occurrence of the last element
essential to the cause of action, when the plaintiff discovers or should discover
all facts essential to his cause of action. C.C.P. § 312; April Enterprises, Inc.
v. KTTV (1983) 147 Cal. App. 3d 805, 826-827; Fox v. Ethicon Endo Surgery
(2005) 35 Cal. 4th 797, 806.

Although consumer loans and credit card agreements differ, they generally
require the consumer to make a minimum payment by a specified due date,
and provide that the entire balance may become due in the event of default.
Failure to make the minimum payment when it is due is a default or breach of
the agreement. If the consumer does not cure the default by paying the past-
due amount, the cause of action has accrued. In that case, the statute of
limitations for an action to recover the unpaid installment runs from the date
the installment payment was due. White v. Moriarty (1993) 15 Cal. App. 4th
1290,1299.

A creditor cannot arbitrarily decide when the account is in default and when
the statute begins to run. “Where a right has fully accrued, except for some
demand to be made as a condition precedent to legal relief… the cause of
action has accrued for the purpose of setting the statute of limitations running.
(Citations) Otherwise… he might indefinitely prolong his right to enforce the
claim or right by neglecting to make the demand until it suited his convenience
to do so.” Taketa v. State Board of Equalization (1951) 104 Cal. App. 2d 455,
460.

Waiver (Extension) of the Statutory Period Based on Partial Payment

Although a contract cause of action accrues when a debtor misses a payment

or pays less than the minimum due, the statute of limitations can be re-
started by a single payment on the debt. This is based on an old common
law principle that partial payment is an acknowledgement of the debt and a
waiver of the period that the statute of limitations has run. Generally, the
partial payment causes the statute of limitations to begin to run again from
the time that the payment is made. This rule has been codified in C.C.P. §
360.

“As a general rule, part payment of a debt or obligation is sufficient to extend

the bar of the statute. The theory on which this is based is that the payment
is an acknowledgement of the existence of the indebtedness which raises an
implied promise to continue the obligation and to pay the balance.” Martindell
v. Bodrero (1967) 256 Cal. App. 2d 56, 59-60.

The circumstances of the partial payment may be such that it does not reflect
the debtor’s unequivocal agreement that the debt is owed and unconditional
intention to pay the debt. In that case, it can be argued that the statute of
limitations was not waived and continued to run.

Credits applied without the debtor’s knowledge or consent do not constitute

acknowledgement of the debt and do not toll or extend the statute. Martindell
at 59-60, citing Bullock v. Simon (1955) 132 Cal. App. 2d Supp. 881.

Acknowledgement of the debt must be “a direct, unqualified and unconditional

admission of a debt which a party is liable and is willing to pay. The most
positive acknowledgment of a preexisting debt is insufficient if accompanied
by a declaration which is inconsistent with an intention to pay.” Heiser v.
McAlpine (1937) 20 Cal. App. 2d 467, 471.

Common Counts Actions: “Book Account” and “Account Stated”

“Common counts” are causes of action (legal claims) that are used to collect
a debt. Debt buyers frequently use these causes of action. However, the law
that applies to common counts is different than the law that applies to breach
of contract cases. The differences may be helpful to consumers who have been
sued for defaulted credit card debt.
Book Account

Collection complaints often contain allegations that money is owed on a book

account. The four-year period for actions on a book account begins to run
from the date of the last entry in the account. C.C.P. § 337(2); Egan v. Bishop
(1935) 8 Cal. App. 2d 119, 123; Bloom v Bender (1957) 48 Cal. 2d 793, 799.

However, whether a book account existed is a fact to be established. “The

mere recording in a book of transactions or the incidental keeping of accounts
under an express contract does not of itself create a book account… Such
memoranda cannot be utilized under the guise of a book account as a device
to extend the statute of limitations beyond the time it would run on the
contractual obligation.” Warda v. Schmidt (1956) 146 Cal. App. 2d 234, 237;
Tsmetzin v. Coast Federal Savings & Loan Association (1997) 57 Cal. App 4th
1334, 1343. See also: Lee v. DeForest (1937) 22 Cal. App. 2d 351.

C.C.P. § 337a defines a book account and states that such an account can
arise from a contract. If there is a contract, the language of the contract and
contract principles should determine when the cause of action has accrued.

If a book account is established, the next question is whether the account was
open or closed when the action was filed. If the creditor sues after the account
was closed, then the point when the account was closed determines the date
of the last relevant entry and when the statute begins to run.

Action to collect balance on open account

If the action seeks to collect an amount due on an open account, the last
relevant entry is the last payment. Gardner v. Rutherford (1943) 57 Cal. App.
2d 874, 883; County of Santa Clara v. Vargas (1977) 71 Cal. App. 3d 510,
517.

Action to collection balance on closed account

Where the parties have ended their business relationship and no further
charges can be made on the account, the date on which the account is closed
determines the running of the statute.

“While an ‘open’ book account has been defined as ‘an account with one or
more items unsettled,’ it also includes ‘an account with dealings still
continuing.’ (Citations) By contrast, a ‘closed’ account is… one to which no
further additions can be made on either side… Thus, it is clear that the ‘open’
or ‘closed’ nature of a book account turns not on the account balance per se,
but on the parties’ expectations of possible future transactions between them
[on that account].” R.N.C., Inc. v. Tsegeletos (1991) 221 Cal. App. 3d 967.

In R.N.C., the closure of the account and defendant’s failure to pay the amount
demanded started the running of the statute; a partial payment made after
that point was not a “pertinent entry” for purposes of calculating the expiration
of the statutory period. Id. This rule differs from the rule regarding debts
based on a promissory note (C.C.P. § 360), where a payment made towards
principal or interest may waive the period that has already run in favor of the
debtor.

Account Stated

Account stated claims in debt collection cases often allege that a “final
statement” was sent to the consumer, showing the balance due and
demanding payment in full. However, the mailing of the “final statement” may
have no bearing on the statute of limitations. By the time of that statement is
sent, most likely the account is already delinquent and the statutory period
has already started running.

C.C.P. § 337(2) states: “Where an account stated is based upon an account

of one item, the time shall begin to run from the date of said item, and where
an account stated is based upon an account of more than one item, the time
shall begin to run from the date of the last item.”

California law does not define “item” as used in this section. As applied to
credit cards, the most logical interpretation of this section is that the statutory
period begins to run from the date of the last purchase/charge or the last
payment on the account, whichever is later. After four years, the debt is time-
barred (uncollectible).

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THIS IS FROM JEFF:

THEIR TAKING THE MONEY OUT OF THE ACCOUNT AND USING IT IS ACKNOWLEDGEMENT OF A DEBT TO
ME

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Cal code of civil procedure ;

360.5.
No waiver shall bar a defense to any action that the action was not commenced within the time
limited by this title unless the waiver is in writing and signed by the person obligated. No waiver
executed prior to the expiration of the time limited for the commencement of the action by this
title shall be effective for a period exceeding four years from the date of expiration of the time
limited for commencement of the action by this title and no waiver executed after the expiration
of such time shall be effective for a period exceeding four years from the date thereof, but any
such waiver may be renewed for a further period of not exceeding four years from the expiration
of the immediately preceding waiver. Such waivers may be made successively. The provisions of
this section shall not be applicable to any acknowledgment, promise or any form of waiver which
is in writing and signed by the person obligated and given to any county to secure repayment of
indigent aid or the repayment of moneys fraudulently or illegally obtained from the county.
(Amended by Stats. 1953, Ch. 655.)