Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. NC051560 Patrick T. Madden, Judge.
Snipper, Wainer & Markoff and Maurice Wainer for Defendants and Appellants.
Law Offices of Michael Weisberg and Michael Weisberg for Plaintiff and Respondent.
MANELLA, J.
The trial court granted judgment in favor of National Continental Insurance Company (NCI) on a book account. After review, we conclude that because NCI failed to establish the existence of a book account, the judgment must be reversed.
FACTUAL AND PROCEDURAL BACKGROUND
1. Complaint
NCI sued Louis K. Stanley individually, and doing business as J&L Contractor (collectively Stanley), for breach of contract and for the common count of open book account for money due. NCI alleged that “Plaintiff agreed to and did provide liability insurance to defendant for defendant’s business, at plaintiff’s regular rates and on plaintiff’s usual terms and conditions, and defendant agreed to pay plaintiff accordingly.”
NCI also alleged a cause of action for account stated, but no evidence was presented on that cause of action.
2. Trial
The case was tried to the court. NCI’s regional industry manager, Susan Petrillo, was the sole witness. According to Petrillo, NCI provided commercial auto liability insurance to Stanley from November 23, 2005 until June 5, 2006. Petrillo testified that NCI increased the premium when it learned that information contained in Stanley’s application regarding the location of the insured vehicles was inaccurate. Petrillo also testified that Stanley had not paid the difference between the increased premium and the original premium.
No written contract was offered in evidence.
Exhibit 2 was admitted into evidence. It is a one-page document, purporting to describe Stanley’s policy by identifying the “[a]ctivity” taken by NCI, the “[e]ffective date” of such activity, the premium charged, and the payments made. Exhibit 2 showed that NCI had increased the premium once to add pollution liability coverage and four amendments to reflect the “garaging” location of the insured vehicles. It also showed payments made by Stanley. Finally, exhibit 2 reflected Stanley’s outstanding balance to be $103,992.
Petrillo explained that documents in the format of exhibit 2 “are requested at final conclusion of the policy as we prepare to send a matter to a collection agency... to outline the course of the history of the policy.” Exhibit 2 “outline[d] each transaction of the policy for easy reference” and was prepared when the policy was terminated. Petrillo testified that Teresa Stodolak prepared exhibit 2 in response to Petrillo’s request that she prepare a “premium breakdown” for Stanley’s file.
3. Statement of Decision
With respect to the cause of action for breach of contract, the court found: “As to this cause of action, Ms. Petrillo is not able to give testimony that establishes the amount of any debt owed by defendant to plaintiff.” On the cause of action for open book account, the court found that “[e]xhibit 2 establishes that there is an open book between the parties... and the balance owed to plaintiff by defendant is a total of $103,992.” The court concluded that “[b]ased on this open book account, defendant owes plaintiff $103,992, plus costs of suit.” The court awarded judgment in the amount of $103,992 in favor of NCI.
DISCUSSION
The parties dispute whether exhibit 2 constitutes an open book account. Stanley argues that exhibit 2 was not a running history of transactions. NCI argues that it was not required to show the company’s records were maintained in a bound book in order to demonstrate an open book account.
Stanley also argues that exhibit 2 was improperly admitted. For purposes of this appeal, we assume that the document was properly admitted.
Code of Civil Procedure section 337a provides: “The term ‘book account’ means a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation, and shows the debits and credits in connection therewith, and against whom and in favor of whom entries are made, is entered in the regular course of business as conducted by such creditor or fiduciary, and is kept in a reasonably permanent form and manner and is (1) in a bound book, or (2) on a sheet or sheets fastened in a book or to backing but detachable therefrom, or (3) on a card or cards of a permanent character, or is kept in any other reasonably permanent form and manner.”
“A book account is a detailed statement of debit/credit transactions kept by a creditor in the regular course of business, and in a reasonably permanent manner. ([Code Civ. Proc., ] § 337a.) In one sense, an open book account is an account with one or more items unsettled. However, even if an account is technically settled, the parties may still have an open book account, if they anticipate possible future transactions between them.” (Reigelsperger v. Siller (2007) 40 Cal.4th 574, 579, fn. 5, italics omitted.) To constitute a book account there must be a system of bookkeeping as distinguished from a private memoranda. (Egan v. Bishop (1935) 8 Cal.App.2d 119, 122.)
Applying these principles, courts have held that a law firm’s billing statements reflecting work performed on an hourly basis constituted an open book account. (In re Roberts Farms, Inc. (1992) 980 F.2d 1248, 1252.) Where each transaction concerning the delivery of hay was kept on a ledger sheet with supporting data and collected in a manila folder, sufficient evidence established a book account. (Costerisan v. DeLong (1967) 251 Cal.App.2d 768, 769-771.) In contrast, a four-page exhibit prepared for use in opposing a motion for summary judgment was not an open book account. (Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1343.) Similarly, working papers of an auditor did not constitute a book account. (Robin v. Smith (1955) 132 Cal.App.2d 288, 292.)
Where there is an express contract setting the time and amount of payment, the creditor and debtor must expressly agree to be bound by an open book account. (In re Roberts Farms, Inc., supra, 980 F.2d at p. 1252, fn. 3.) “When such an express contract exists, courts require that the parties expressly intend to be bound because accruing debts under an express contract are not normally considered the subject of an open book account.” (Ibid.) The “incidental keeping of accounts under an express contract does not of itself create a book account.” (Warda v. Schmidt (1956) 146 Cal.App.2d 234, 237.) For example, a loan was not a book account where there was no agreement between the parties to carry it as a book account, and the conduct of the parties did not express such intention. (Maggio, Inc. v. Neal (1987) 196 Cal.App.3d 745, 752.)
Parker v. Shell Oil Co. (1946) 29 Cal.2d 503 (Parker), is instructive. In that case, plaintiff leased a gasoline service station. (Id. at p. 505.) Under the terms of the lease, “defendant agreed to pay as rent a sum equal to one cent for each gallon of gasoline delivered by defendant to, and sold from, the premises; the rent was ‘payable in cash or by credit....’” (Id. at p. 507.) The high court reviewed the general principle that “[s]ums which become due under an express contract (such as rent under a lease) are not ordinarily treated by the parties as items of an open account.” (Ibid.) However, it distinguished the lease before it from the typical case because rent “was not in a stated amount payable at stated intervals, ” but instead “was entirely dependent upon the amount of gasoline delivered by defendant to the premises.” (Id. at p. 508.) The court further explained that the “ascertainment of the amount of rent accruing to plaintiffs from defendant during any accounting period... required the keeping of a record showing the amount of gasoline delivered.” (Ibid.) The fact that any rental payment was dependant on the amount of gasoline sold was sufficient to raise a question as to whether the parties intended an open book account. (Id. at pp. 512-515.)
In contrast to Parker, here there was no evidence that the parties intended to create an open book account. Although the trial court relied on exhibit 2 as evidence of an open book account, that document was not a detailed statement of debit and credit transactions for the policy, but instead was prepared at the conclusion of the policy in anticipation of sending it to a collection agency. NCI’s sole witness, Petrillo, testified that exhibit 2 was “requested at final conclusion of the policy as we prepare to send a matter to a collection agency....” Petrillo’s testimony establishes that exhibit 2 was akin to the working papers of an auditor or a document prepared in opposition to a motion for summary judgment, and was insufficient to create a book account.
Respondent’s sole basis for concluding that exhibit 2 reflected an open book account is its statement that “the law no longer requires a bound book....” That statement is accurate. (Costerisan v. DeLong, supra, 251 Cal.App.2d at p. 770 [ledger sheets kept in a folder satisfy the permanency element of a book account].) However, it concerns only one element of an open book account. Because NCI did not establish the remaining elements, it did not establish an open book account.
DISPOSITION
The judgment is reversed. Appellants to have their costs on appeal.
We concur: EPSTEIN, P. J., SUZUKAWA, J.