Estate Could Not Recover Alleged Debts Of Decedent’s Son Under “Open Account” Theory

Lesson. To collect a debt that is not otherwise documented in a promissory note or credit agreement, make sure there is evidence of a promise, either express or implied, for the debtor to pay the balance to the creditor.

Case cite. Meyer v. Meyer 205 N.E.3d 215 (Ind. Ct. App. 2023)

Legal issue. Whether a mother’s payment of various bills and debts for her son could later be recovered by her estate.

Vital facts. Estate sued Brian, one of the sons of the decedent (Laverne), to collect a debt. Estate asserted that Brian not only had a promissory note with Laverne but also an “open account” with an amount due of another $22K. Brian did not dispute that he owed about $5K on the promissory note, but he contested the other amounts, which appeared on a list of “bills paid” on behalf of Brian by Laverne.

Procedural history. Following an evidentiary hearing, the trial court entered judgment against Brian for about $27K. Brian appealed the amount of the judgment.

Key rules. Estate bore the burden of proving that Brian promised to repay the money that Laverne provided to him. At issue in Meyer was something called an “open account.” In Indiana:

For a mutual and open account to exist, there must be a mutual relationship, that is, there must be reciprocity of dealing. A mutual open account is an open account where there are items debited and credited on both sides of the account rather than simply a series of transactions always resulting in a debit to one party and a credit to the other party; each party to a mutual account occupies both a debtor and a creditor relation with regard to the other party. Thus, an account is generally not considered mutual if all the items are on one side.

The Court also examined a separate, albeit similar, principle under Indiana law called “account stated”:

An account stated is an agreement between the parties that all items of an account and balance are correct, together with a promise, express or implied, to pay the balance. An agreement that the balance is correct may be inferred from delivery of the statement together with the account debtor's failure to object to the amount of the statement within a reasonable time."

Holding. The Indiana Court of Appeals agreed with Brian and reversed the trial court with instructions to reduce the judgment to $5,292.12 based only on the note.

Policy/rationale. Brian argued that, although Laverne in fact paid certain bills of his, there was no evidence that he promised to repay her. There was also no evidence that the list of bills tendered to the trial court was ever delivered to Brian. With specific regard to Estate’s “open account” theory, the Court concluded that there “was no reciprocity of dealing between Laverne and Brian.” The Court recognized Brian’s assertion that all the subject transactions were “on one side of the ledger.”

Related posts.

• Claim “On An Account” Vs. Enforcement Of A Loan: Comments On Proposed Amendment to Indiana Trial Rule 9.2(A)
• Indiana’s Statute Of Limitations For “Open Account” Claims: Supplier’s Case Too Late

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I represent parties involved in disputes arising out of loans that are in default. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.