Mullan Contracting Co. v. International Business MacHines Corp.

Horney, J., delivered the opinion of the Court. International Business Machines Corporation (I.B.M. or the supplier) and the Board of Education of Baltimore County (Board of Education) for the use of I.B.M., the plaintiffs below, filed a suit in the Superior Court of Baltimore City against Charles A. Russell, a partnership (Russell or sub-contractor), The Mullan Contracting Company (Mullan or general contractor) and National Surety Company and Maryland Casualty Company (National and Maryland or sureties), the defendants below, for the balance due on the electrical time and fire alarm equipment (usually hereinafter referred to as “equipment”) supplied by I.B.M. and installed in the Kenwood Senior High School (Kenwood project or project). When I.B.M. moved for summary judgment, the lower court granted the motion against all of the defendants (except James A. Russell who was not a copartner). From the judgment for $2420.50 ($1937.50 plus interest), Mullan and the sureties appealed.

Mullan, who had sub-contracted with Russell to furnish and install all of the electrical facilities in the project, paid the subcontractor from time to time while the work was in progress ²⁵² and eventually paid them in full. However, the sub-contractor, who purchased the time and fire alarm equipment from I.B.M., made several payments on account thereof, but failed or refused to pay the balance due of $1937.50. 1 I.B.M., joining five causes of action in one amended declaration, sued Russell on the simple contract and Mullan, as principal, and National and Maryland, as sureties, on payment and performance bonds. Among other things, it was alleged that the sub-contractor ordered the equipment from I.B.M., promised to pay therefor, received delivery thereof and installed it in the Kenwood project, but failed or refused to fully pay therefor. It was further alleged that the principal as well as the sureties on the bonds, although notified of non-payment, also refused to pay the balance due of $1937.50.

In his deposition, L. Thomas Russell (one of the copartners) testified that the partnership had purchased the equipment from I.B.M. at a total cost of $4367, that the prices charged were fair and reasonable and reflected the then current market prices, and that all of the equipment purchased for the project had been installed therein. He further testified that the “summary invoice” attached to the amended declaration was, to the ²⁵³ best of his knowledge, correct, and, although he was not absolutely sure that the “payment schedule,” showing total credits of $2429.50, was correct, he thought it was because he recognized the check numbers. He was also of the opinion that at that time [May 31-October 31, 1955] his firm did not have any other accounts with I.B.M. He also recalled that I.B.M. had made a mistake by crediting $500 on May 31, 1955, when the credit should have been only $419, and that the last statement received showed a balance due of $1948, which, when credited with $10.50 for a returned outlet box, would reduce the unpaid balance to $1937.50. On cross-examination, the deponent reiterated that while his firm had purchased other materials from I.B.M. for other projects from time to time, the firm, as of May 31, 1955, was not indebted to I.B.M. for anything other than equipment purchased for use in the Ken-wood project.

In connection with a request for admission of facts and genuineness of documents pursuant to Rule 421, other pertinent facts were established by attaching a true and correct copy of the contract between Mullan and the Board of Education. The basic contract incorporated by reference true and correct extracts of several documents contained in two bound volumes. These, together with forms of the payment and performance bonds, were also attached to the request for admission. The truth and correctness of an omitted rider to one of the bonds was subsequently supplied by stipulation.

The request for admission further established that the general contractor and the sureties had been notified of the failure and refusal of the subcontractor to pay I.B.M. After the amended declaration had been filed on February 4, 1957, many other pleadings were filed during the ensuing period of nineteen months. But when I.B.M., on September 24, 1958, moved for summary judgment as a matter of law pursuant to Rule 610, the case moved more rapidly to a conclusion. Claiming there was no genuine dispute as to any material facts, the motion was based on the pertinent pleadings, the admissions and the only deposition then on file. Two days later, Mullan and the sureties filed what they termed was an ²⁵⁴ “answer”—for which the rule does not provide 2 —stating that there was a genuine dispute between the parties as to “many” material facts and that the “defendants” — but meaning the plaintiffs—were not entitled to judgment as a matter of law, but such facts as were claimed to be in dispute were not specified.

On October 20, 1958, an affidavit made by Charles H. Feihe (secretary-treasurer of Mullan) was filed in opposition to the motion. Therein the affiant made oath that he had personal knowledge that I.B.M. generally charged all purchases made by the sub-contractor to a running account without designating in which of several projects a particular purchase was to be used, that other projects were in progress subsequent to October 1, 1954, and that the sub-contractor had paid I.B.M. $8360 between October 1, 1954, when the Kenwood materials were shipped, and October 31, 1955, when the last payment was made on account of them, although during that time I.B.M. had charged the sub-contractor with purchases aggregating only $4367. At the summary judgment hearing on October 23, 1958, I.B.M. called the affiant, who was allowed to testify without objection. 3 He admitted that he had never been employed by I.B.M. nor the sub-contractor, and that the only knowledge he had had been gathered from an analysis of a ledger card furnished him by the attorneys and other evidence in the case. His testimony on the point was stricken as speculative. 4 On October 22, 1958—one day before the summary judgment hearing had been set and more than twenty months after ²⁵⁵ the amended declaration had been filed—Mullan and the sureties moved for discovery of I.B.M.’s billings to and receipts from the sub-contractor, its accounting card system and all writings between the supplier and the sub-contractor.

On the same day notice was served of the desire to take the depositions of two I.B.M. managers on October 30, 1958. At the conclusion of the summary judgment hearing the court made an order postponing the taking of the depositions and staying the production of the records pending further order of the court. On appeal, Mullan and the sureties raise only one question —that the trial court erred in entering summary judgment— but they assigned a number of reasons to support the contention which appear to fall into four principal categories: (i) those which assert there is a genuine dispute as to material facts; (ii) those which assert the data offered in support of summary judgment was defective and insufficient; (iii) those which assert that I.B.M. was not entitled to judgment as a matter of law; and (iv) that which asserts the allowance of interest on the claim was improper. 0) The pleadings, admissions, deposition, opposing affidavit, and the oral testimony of the affiant—taken in open court—show that there was no genuine dispute as to any material fact. There were claims that there was no showing of the installation of any I.B.M. materials in the Kenwood project, and that the balance due by the sub-contractor to the supplier was for such materials.

The only evidence on this point came from one of the Russell partners, but it was contrary to these claims. Even though the testimony of the deponent was expressed in general terms, it was ample to demonstrate his familiarity with the transactions between his firm and I.B.M. Moreover it was uncontradicted and shows conclusively that the materials in question were used in that project and that a balance of $1937.-50 was due and owing for them. The deponent was certain of this fact because at the time the first payment of $419 was made on May 31, 1955, on account of the Kenwood materials, his firm had simultaneously paid I.B.M. in full for all materials used in other projects. In any event, the summary invoice ²⁵⁶ shows that all subsequent payments made were credited against the single charge for the Kenwood materials.

But—because the total cost of these materials came to only $4367, while the total payments made to I.B.M., on what was termed its “running account” with the sub-contractor, during a part of the same period the Kenwood project was in progress, totaled $8360—Mullan and the sureties contend that I.B.M. should-show why the total payments of $8360 had not fully paid for the item of $4367. As to this they are wrong. Generally, if neither party to a running account makes an appropriation the law appropriates the payment according to the justice of the case and usually to the payment of the earliest debt. T. Dan Kolker, Inc. v. Shure, 209 Md. 290 , 121 A. 2d 223 (1956) ; Carozza v. Brannan, 186 Md. 123 , 46 A. 2d 198 (1946).

See however, Restatement, Contracts, § 394, Illustration 3. But, be that as it may, there is no basis for the claim that the supplier kept a running account with the sub-contractor other than that shown by the answer to the interrogatories—one of the many pleadings—which consisted only of a list of the numbers and dates of checks totaling $8360. Certainly, a statement or other accounting showing only payments made by a debtor is not a running account. Ordinarily, a running account is one which is kept to show all transactions between a debtor and creditor, i.e., a continuous record of the entry of charges as well as payments on account.

See Carozza v. Bran-nan, supra. It may be that the sub-contractor kept a running account on their books of their dealings with the supplier, but there is no evidence that the supplier kept a running account on its books of transactions with the sub-contractor. The only evidence on this point shows the exact opposite. The summary invoice attached to and made a part of the amended declaration without objection, shows that I.B.M.’s account with the subcontracting firm [C. A. Russell] was based on the partnership’s Order No. 2990 for Job No. 953 (Kenwood High School).

We think it is clear that this summary invoice is not a running account. Moreover, it clearly indicates by dates and check numbers and amounts that the payments of $2419, plus a credit of $10.50, made on and after May 31, 1955, were applied to I.B.M.’s Order No. E 18084 for the materials cost ²⁵⁷ ing $4367, which left a balance due of $1937.50, the amount claimed by I.B.M. The further claim that the opposing affidavit of the secretary-treasurer shows a genuine dispute is clearly without merit. For the most part his testimony, allegedly on personal knowledge, was so fully discredited by his own admissions in open court that the affidavit had no evidentiary value to create an issue of fact. There was also a claim that the facts alleged in the pleas— particularly the special pleas—on which issue had been joined in writing, established a genuine dispute as to material facts.

By the first of such of those pleas as are still at issue on this appeal, it was alleged that the sub-contractor had fully paid I.B.M., that such payment had been made from moneys paid by Mullan to the sub-contractor, and that the general contractor had provided and paid for all necessary materials to complete the electrical work. Obviously these pleas do no more than state general allegations that the necessary materials had been provided and paid for. They fail to state specifically how the materials were provided and when and how payment therefor was made. Actually, the basis for two of these allegations is the same as the claim already discussed to the effect that during the period the Kenwood project was in progress the subcontractor had paid I.B.M., $8360 out of moneys paid to them by Mullan which should have paid in full the $4367 the equipment cost.

The short answer to this claim is that these pleas, in order to raise a triable issue of a