Credit Card Account is an 'OPEN ACCOUNT' by law

[David A. Szwak]

Chaney Oil Co. of Vicksburg v. Beard
446 So.2d 849
La.App. 2 Cir.,1984.
February 21, 1984

Before HALL and MARVIN, JJ., and WILLIAM A. CULPEPPER, J. Pro Tem.


WILLIAM A. CULPEPPER, Judge Pro Tem.
In this suit filed by Chaney Oil Company of Vicksburg, Inc. for charges incurred for gasoline by the use of a Citgo credit card, defendant Gayle “Redâ€

[David A. Szwak]

First Nat. Bank of Commerce v. Band
727 So.2d 1171
La.App. 4 Cir.,1998.
November 18, 1998

Before BYRNES, ARMSTRONG and McKAY, JJ.


**1 McKAY, Judge.
First National Bank of Commerce d/b/a First Bankcard Center appeals the Civil District Court's granting the defendants' exception of prescription. We affirm.

The defendants, David Band and Ilonka Band were issued a credit card account by the plaintiff in September of 1988. The defendants made their last minimum payment on this account on May 7, 1993. In November of 1993 the full amount owed to the plaintiff was $ 6,209.43. The plaintiff filed the instant suit on July 3, 1997, to recover the balance due on the open account on the plaintiff's personal credit card. The plaintiff claims that subsequent events led to an interruption of prescription through acknowledgement and court order prohibition. We disagree.

The plaintiff alleges that the defendant David Band interrupted prescription when he unequivocally and expressly acknowledged liability*1172 for the debt in a deposition he gave on December 6, 1995, for a separate action involving himself and the plaintiff. Additionally, the plaintiff contends the letter dated April 26, 1996, sent to their attorney Mr. Hite by defendant's attorney Mr. Blair contains language confirming an acknowledgement of debt by the defendant. Further, the plaintiff offered the affidavit of their attorney Mr. Hite dated September 9, 1997, to advance this allegation of acknowledgement.

The plaintiff also maintains that Judge McGee in an unrelated case, **2 No. 93-12554 rendered a default judgment and order on November 23, 1993 that resulted in a prohibition against their filing of the instant suit. The plaintiff concludes that this order interrupted prescription.

The issues before this court are:

Whether the trial court erred in granting defendants' exception of prescription based on acknowledgement of debt.

Whether the trial court erred in holding that the judgment and order of default did not prohibit the plaintiff from filing suit against the defendants.

La. C.C. art. 3494(4) provides for a liberative prescription of three years on an action on open account. La. C.C. art. 3495 provides that prescription commences to run from the day payment is exigible. It accrues as to past due payments even if there is a continuation of labor, supplies, or other services. La. C.C. art. 3464 provides that prescription is interrupted when one acknowledges the right of the person against whom he had commenced to prescribe.

[1] [2] The Louisiana Supreme Court has held that the burden of proof is on the plaintiff to prove whether prescription is suspended, interrupted or renounced. Lima v. Schmidt, 595 So.2d 624, 628(La.1992). This circuit has consistently followed the pronouncements in Lima with a plethora of decisions on the issue of acknowledgement. A debtor makes tacit acknowledgement of responsibility, so as to interrupt prescription, where debtor performs acts of reparation or indemnity, makes an unconditional offer of payment, or lulls creditor into believing he will not contest liability; conversely, mere settlement offers or conditional payments ..., and acknowledgement of disputed claims will not constitute acknowledgements. **3 Sotomayor v. Lewis, 95-2520 (La.App. 4 Cir. 4/24/96); 673 So.2d 1201, Niklaus v. Bellina, 96-2411 (La.App. 4 Cir. 5/21/97), 696 So.2d 120, rehearing denied. A plaintiff pleading interruption of prescriptive period on basis of debtor's acknowledgement of responsibility must convince trier of fact that the cumulative effect of debtor's actions constitutes a recognition of creditor's rights against him. Sotomayor v. Lewis, at 1203.

[3] Excerpts from Mr. Band's deposition testimony taken on December 6, 1995, as gleaned from the portion provided to the trial court for review, place Mr. Band in a settlement posture which does not rise to the level of an unequivocal acknowledgment of liability. Mr. Blair's letter to Mr. Hite dated April 26, 1996, contemplated settlement negotiations; his only mention of the payment of the personal debt was that they would be willing “to include the payment of the other in such discussionsâ€

[David A. Szwak]

Carte Blanche Corp. v. Pappas
216 So.2d 917
La.App., 1968.
December 03, 1968

Action to recover amount allegedly due for purchases made by defendants. The First Judicial District Court, Parish of Caddo, James R. Alexander, J., upheld the prescriptive plea of three years and plaintiff appealed. The Court of Appeal, Bolin, J., held that where plaintiff issued credit cards to defendants and cards were honored by member companies or business establishments in charging sales made to persons possessing such cards and these accounts were assigned to plaintiff upon whom devolved right or responsibility of collecting from buyers, debt was ‘open account’, and plaintiff's suit as assignee was governed by three-year prescription and not by ten-year prescription.
Judgment affirmed and plaintiff's suit dismissed.

Before GLADNEY, BOLIN and DIXON, JJ.


BOLIN, Judge.
Carte Blanche Corporation filed suit February 16, 1968, seeking judgment in solido against Mr. and Mrs. Andrew C. Pappas for the sum of $843.85 allegedly due for purchases made by defendants from various business establishments between May 1961 and December 1961. Defendants answered the petition denying the obligation and filed pleas of prescription on the ground that more than three years had elapsed since the debt was incurred or since any payments had been made thereon. The lower court upheld the prescriptive plea of three years and plaintiff appealed.

Carte Blanche had issued credit cards to Mr. and Mrs. Pappas pursuant to an application blank signed by Mrs. Pappas, and these cards were honored by member companies or business establishments in charging sales made to persons possessing such cards. These accounts were then assigned to Carte Blanche upon whom devolved the right or responsibility of collecting from the purchasers.

[1] Appellant contends the ten-year prescription provided by Article 3544 of the Louisiana Civil Code is applicable to the facts of this case rather than the three-year prescription provided in Article 3538. The pertinent portion of the latter article is as follows:

'The following actions are prescribed by three years:



* * *


'That on the accounts of merchants, whether selling for wholesale or retail.

'That on the accounts of retailers of provisions, * * *

'That on all other accounts.

'This prescription only ceases from the time there has been an Account acknowledged in writing, a note or bond given, or an action commenced.'

(Emphasis added)

We consider the principal question to be resolved is the nature or character of the debt, i.e., whether it is an open account or whether it is a personal action prescriptible in ten years under Article 3544, which provides:

'In general, all personal actions, except those before enumerated, are prescribed by ten years.'

Basis for plaintiff's contention that the debt does not prescribe for ten years is two-fold: either that the signed application card formed a written contract to pay for merchandise or, alternatively, that the contents of a letter written by Mrs. Pappas, wherein she returned the credit cards to plaintiff, constituted a written acknowledgment of the debt thereby changing the prescriptive period from three to ten years. Support for both aspects of this position is said by plaintiff to be found in the following Louisiana cases: White Bros. Co. v. Shinn, 160 So. 823 (Orl.App.1935); Remington Rand v. Boliew, 131 So.2d 835 (La.App. 2 Cir. 1961); Louisiana Sportservice, Inc. v. Monsour, 59 So.2d 499 (La.App. 2 Cir. 1952).

While we agree with the rules enunciated in the cited cases, for reasons which we shall hereinafter set forth, we consider these decisions inapposite to the instant situation.

We note in the petition plaintiff is suing as Assignee of the accounts, particularly alleging: ‘that in accepting and using said credit identification cards, defendants agreed to pay the amount of the said Assigned accounts so arising on or before the 10th day following the date of the monthly statements rendered defendant by petitioner; * * * that all of the accounts against the defendants * * * have heretofore, for valuable consideration, been *919 Assigned, transferred and delivered to petitioner by the business establishments To whom said accounts were due; that petitioner is now owner and holder thereof; and that petitioner has rendered statements to the defendants covering such accounts.’ (Emphasis added)

[2] It is apparent from this language in the petition the debts originated as accounts for merchandise sold by the assignors to their customers; that at the time of origin they were open accounts for which purchasers customarily received monthly statements and as such constituted nothing more or less than a charge account or an account receivable belonging to assignor. An assignee ordinarily obtains only the rights possessed by the assignor at the time of the assignment and no more. Harris v. Westwood, 191 So.2d (La.App. 4 Cir. 1966); 6 C.J.S. Assignments s 99, n. 35 citing Louisiana cases. Since Carte Blanche is suing in its capacity as assignee of these accounts it is in no better position than the assignors who would have necessarily had to bring suit within three years under the clear language of Article 3538 and the jurisprudence thereunder. We conclude the account was and remained an open account and we therefore reject the primary contention of appellant.

[3] Turning next to the question of whether the account had been acknowledged, either in writing or orally, we first examine the letter, presumably written by Mrs. Pappas after the assignment, dated December 21, but without designation of the year, which reads:

'Thursday

Dec. 21

Dear Mr. Soshnick:

Enclosed are our cards. I am sure this problem of the $718.00 will be worked out very soon.

Thank you for your patience.

/s/ Mrs. Pappas.'

We find nothing in this letter which could be construed as an acknowledgment by Mr. and Mrs. Pappas that they owed the debt claimed nor of an intention on their part to be bound or to pay the sum stated. The cases interpreting La.C.C. Art. 3538 since its passage in 1888 are uniform in holding a written acknowledgment must acknowledge the correctness of the debt as charged as well as the creditor's right to recover before the three-year period of prescription will cease or change to ten years. We conclude the letter falls short of the requisites of a written acknowledgment necessary to change the character of the debt.

[4] As to the final contention that the debt was orally acknowledged we have only the testimony of Mr. Pickett, representing Carte Blanche, who testified that Carte Blanche had sent to him for collection the invoices which make up the alleged indebtedness and he went to the home of Mr. Pappas and talked with him about the account. He further testified Mr. Pappas promised to pay the account on two or three different occasions but it was never paid. Appellant claims this oral acknowledgment interrupted prescription.

Contrary to this testimony was that of defendants to the effect they did not owe the debt nor had they promised to pay it; that the credit cards were used by a person not a party to this suit who had promised to get the money to pay the debt but had not done so; that they had never made any of the purchases nor had they made any payments thereon. We find the evidence of an oral acknowledgment inadequate to interrupt the running of the three-year prescription.

For the reasons assigned the judgment of the lower court sustaining defendants' plea of prescription is affirmed and plaintiff's suit is dismissed at its cost.

[David A. Szwak]

1. In re Montgomery Ward, LLC,
348 B.R. 662, 47 Bankr.Ct.Dec. 40, Bkrtcy.D.Del., September 12, 2006 (Bankruptcy No. 00-4667 KG.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. Ordinary course of business defense applied to preclude avoidance of payments made by debtor-retailer to jewelry wholesaler during 90...


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2. U.S. v. Gallant,
Not Reported in F.Supp.2d, 2006 WL 278554, D.Colo., February 03, 2006 (No. CRIM.03-CR-00232-RPM.)

...delinquency status. Stated generally, the false reporting resulted in credits to the Century operating account at BestBank as payments by credit card customers for security deposits, initial payments to open accounts and charges for travel club memberships, annual fees, late fees and interest on accounts where no payments had been made...


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3. Parish Nat. Bank v. Wilks,
923 So.2d 8, 2004-1439 (La.App. 1 Cir. 8/3/05), La.App. 1 Cir., August 03, 2005 (No. 2004 CA 1439.)

...amount of $7,662.75, plus interest and attorney's fees. This judgment was obtained by PNB in a suit on an open account against James Wilks for a credit card account James Wilks had with PNB. The charges on this credit card were incurred prior to the execution of the act of donation. After James Wilks failed to make any payments in...


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4. In re Macias,
324 B.R. 181, Bkrtcy.E.D.N.Y., December 28, 2004 (Bankruptcy No. 04-11265-ESS.)

...C) Debts and Liabilities Discharged 51X(C)4 Fraud 51k 3372 37 Reasonableness 51k 3372 42 k. Particular Cases. (Formerly 51k3353(14.25) If, when credit card charges were incurred, debtor was in default on credit card account, or if creditor's initial investigation of debtor should have raised serious question about reasonableness of allowing debtor to open account, then those circumstances would amount to “red flagsâ€

[David A. Szwak]

21. In re Weilert R.V., Inc.,
245 B.R. 377, 4 Cal. Bankr. Ct. Rep. 77, Bkrtcy.C.D.Cal., February 25, 2000 (Bankruptcy No. RS97-16032 MG.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. To preserve their ordinary course of business defenses when debtor-recreational vehicle (RV) dealer was beginning its slide into bankruptcy...

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. Debtor-recreational vehicle (RV) dealer's repayment of creditor-lender's inadvertent overpayment fell within the ordinary course of business defense to...

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. Any payoff by debtor-recreational vehicle (RV) dealer to creditor-original financiers that held security interests in used RVs sold...


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22. In re Smith,
238 B.R. 879, Bkrtcy.M.D.Ga., July 16, 1999 (Bankruptcy No. 97-11019-JDW.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. Car loan payments that Chapter 7 debtor made, according to terms of retail installment contract, to bank that financed his...


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23. In re Brigance,
234 B.R. 401, 39 UCC Rep.Serv.2d 1037, W.D.Tenn., March 22, 1999 (No. 98-2477-TUA.)

...unsecured claim is somehow different from the unsecured claims of general creditors. EZ Cash states that unsecured creditors generally include credit card issuers or open account creditors, that unlike itself “do not hold any negotiable instrument given by contract that could even be considered colorable as...


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24. First Nat. Bank of Commerce v. Band,
727 So.2d 1171, 1998-0288 (La.App. 4 Cir. 11/18/98), La.App. 4 Cir., November 18, 1998 (No. 98-CA-0288.)

...David BAND and Ilonka Band. No. 98-CA-0288. Nov. 18, 1998. Bank filed action to recover balance due on open account on personal credit card. The Civil District Court, Parish of Orleans, No. 91-11815, Gerald P. Fedoroff , J., granted credit card holders' exception of...

...Part Payment 241k 140 Acknowledgment or New Promise 241k 149 Qualifications and Conditions 241k 149(4) k. Compromise or Settlement. Credit card holder's deposition testimony, which addressed his personal credit liability in context of settlement offer, did not rise to level of unequivocal acknowledgment of liability, so as to interrupt prescriptive period on bank's action to recover balance due on open account on credit card. LSA-C.C. art. 3494(4) [4] 241 Limitation of Actions 241II Computation of Period of Limitation 241II(G) Pendency of...

...Injunction, Stay, or War 241k 104 5 k. Suspension or Stay in General; Equitable Tolling. Default judgment in action involving corporate credit card did not preclude bank's action to recover balance due on open account on personal credit card, so as to interrupt prescriptive period on that claim. LSA-C.C. art. 3494(4) Sally A. Shushan John W. Hite...


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25. Grasso v. First USA Bank,
713 A.2d 304, Del.Super., April 16, 1998 (Civil Action No. 97C-10-144JOH.)

...permitted issuer to amend interest rate, rather than solicitation, which charged fixed rate after low introductory rate, constituted contract between credit card holder and issuer; solicitation was to open account which could be subject to agreement, which was an offer to extend credit, which card holder accepted by making payments on her transferred balance and by using credit card. Upon Motion of Defendant First USA Bank for Summary Judgment GRANTE D Kevin Gross , of Rosenthal, Monhait, Gross & Goddess, P.A. , and...


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26. In re Spitler,
213 B.R. 995, Bkrtcy.N.D.Ohio, August 07, 1997 (Bankruptcy No. 97-3068.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. Debtors' payment of $9,950.10 on credit card account, made by writing convenience check drawn on yet another credit card...


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27. In re Bushey,
210 B.R. 95, 38 Collier Bankr.Cas.2d 761, 6th Cir.BAP (Ohio), July 21, 1997 (BAP No. 97-8015.)

...Northern District of Ohio granted defendants' motion for summary judgment, and trustee appealed. The Bankruptcy Appellate Panel held that: (1) “open accountâ€

[David A. Szwak]

41. In re Industrial & Mun. Engineering, Inc.,
127 B.R. 848, Bkrtcy.C.D.Ill., November 20, 1990 (Bankruptcy No. 89-81834.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. Transfer made as part of installment payments on judgment for former employee against debtor for wages due was not excepted...


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42. In re Woker,
120 B.R. 454, Bkrtcy.S.D.Ill., October 22, 1990 (Bankruptcy No. BK 88-30886.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. Grain elevator failed to establish defense to trustee's preference action that elevator's application of soybean proceeds to pay debtors' account...


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43. In re Finn,
909 F.2d 903, 20 Bankr.Ct.Dec. 1319, Bankr. L. Rep. P 73,543, C.A.6 (Mich.), July 31, 1990 (No. 89-1827.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. The incurring of long-term consumer debt that is a “normal financial relationâ€

[David A. Szwak]

61. Cities Service Co. v. Pailet,
452 So.2d 319, La.App. 4 Cir., June 06, 1984 (No. CA-1507.)

...Fourth Circuit. CITIES SERVICE COMPANY v. Ellis Jay PAILET. No. CA-1507. June 6, 1984. Rehearing Denied July 24, 1984. Credit card issuer brought suit on open account against holder of the credit card for purchases made on his credit card. The First City Court of New Orleans, Parish of Orleans, Niles A. Hellmers, J., dismissed the suit, and issuer appealed...

...pro. per. Before GULOTTA, BARRY and WILLIAMS, JJ. GULOTTA, Judge. Cities Service Company appeals the dismissal of its suit on open account for $1,148.70, representing purchases made on defendant Ellis Jay Pailet's Citgo credit card. We reverse. The disputed invoices, except for one, were for charges made at a Pearl, Mississippi Citgo Service Station from...


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62. Yalanzon v. Citibank (South Dakota) N.A.,
169 Ga.App. 961, 315 S.E.2d 677, Ga.App., February 24, 1984 (No. 67802.)

...Court of Appeals of Georgia. YALANZON v. CITIBANK (SOUTH DAKOTA) N.A. No. 67802. Feb. 24, 1984. Bank brought action against credit card customer for $478.02 allegedly due on open account due to credit card charges. Customer counterclaimed for $5,000 arising out of bank's harassment and unlawful telephone calls to customer and to customer's employees...

...181 Grounds for Summary Judgment 228k 181(15) Particular Cases 228k 181(17) k. Banks, Cases Involving. In action on open account brought by bank against credit card customer to recover $478.02, substantial issue of material fact existed as to whether customer had been credited with various...

...Summary Judgment 228k 181(15) Particular Cases 228k 181(17) k. Banks, Cases Involving. In action brought by bank on open account against credit card customer, and in which customer counterclaimed for $5,000 arising out of bank's harassment and unlawful telephone calls to customer and...


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63. Chaney Oil Co. of Vicksburg v. Beard,
446 So.2d 849, La.App. 2 Cir., February 21, 1984 (No. 16019-CA.)

...Appeal, William A. Culpepper, J., held that: (1) evidence was sufficient to prove existence of debt incurred in connection with credit card purchases of gasoline by customer; (2) requirements of statute for award of attorney's fees for prosecution and collection of claim were satisfied; and (3) action was suit on open account within meaning of attorney's fees statute. Affirmed. West Headnotes [1] 10 Account, Action On 10k 1 Open Accounts in General...

...10k 1 1 k. In General. (Formerly 10k1 Oil company's suit against customer for charges incurred for gasoline by use of credit card issued by supplier was “suit on open accountâ€

[David A. Szwak]

81. In re Bowen,
3 B.R. 617, 1 Collier Bankr.Cas.2d 1090, 6 Bankr.Ct.Dec. 254, Bankr. L. Rep. P 67,434, Bkrtcy.E.D.Tenn., April 24, 1980 (Bankruptcy No. 1-79-01434.)

...51k 2606 Elements and Exceptions 51k 2616 Transfers in Ordinary Course of Business 51k 2616(6) k. Installment Loans; Running, Credit Card, or Open Accounts. (Formerly 51k165(3.1) Regularly scheduled installment payments on loan which were made within 45 days of date on which payments were...


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82. Singer v. C.I.R.,
T.C. Memo. 1979-383, 1979 WL 3435, 39 T.C.M. (CCH) 181, T.C.M. (P-H) P 79,383, 1979 PH TC Memo 79,383, U.S.Tax Ct., September 19, 1979 (Docket No. 6358-76.)

...which also handled petitioner's and CCS's accounts. Pending Pollock's and OGC's loan application with the Bank, Singer advanced money on open account to Pollock and authorized Pollock to use his credit cards to cover expenses expected to be incurred in negotiating the contract with the Panamanian government. In those ways Pollock borrowed...

...testified that, in order to help Pollock cover his expenses during the start-up period, he loaned Pollock money on open account and let Pollock use his credit cards and in these ways advanced approximately $13,000 to Pollock. In repayment of those advances petitioners maintain that OGC or Oceantech...


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83. Novack v. Cities Service Oil Co.,
149 N.J.Super. 542, 374 A.2d 89, N.J.Super.L., April 07, 1977

...termination of a credit card account. Responding to plaintiff's breach of contract claim, the court held; The issuance of a credit card is but an offer to extend a line of open account credit. It is unilateral and supported by no consideration. The offer may be withdrawn at any time, without prior notice...


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84. General Aviation Corp. v. First Management Corp.,
333 So.2d 682, La.App. 4 Cir., June 09, 1976 (No. 7494.)

...v. FIRST MANAGEMENT CORPORATION et al. No. 7494. June 9, 1976. Rehearing Denied June 30, 1976. Suit was brought on open account for gasoline charged to defendant on a credit card. The Civil District Court for the Parish of Orleans, Division ‘E’, No. 576-167, Gerald P. Federoff, J., rendered judgment...

...STOULIG, Judge. Plaintiff, General Aviation Corporation, obtained a $1,465.44 judgmentFN[FN1] against defendant Hilbert Loeb in a suit on open account for gasoline charged to H. S. Loeb on Exxon Credit Card No. 375 616 976. Defendant has appealed urging reversal on the ground that plaintiff failed to prove the gasoline was...


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85. Southern Equipment & Tractor Co. of Shreveport, Inc. v. McCullen,
319 So.2d 511, La.App. 2 Cir., September 03, 1975 (Nos. 12667, 12668.)

...Exchanges of Property 398k 31 k. In General. Formerly effective 1970 Act relating to finance charges was not limited to credit card transactions and was applicable to sales on open account. Act No. 313 of 1970. [3] 398 Usury 398I Usurious Contracts and Transactions 398I(A) Nature and Validity 398k 30...


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86. Maes v. Motivation for Tomorrow, Inc.,
356 F.Supp. 47, N.D.Cal., March 07, 1973 (No. 72968.)

...to make purchases or obtain loans, from time to time, directly from the creditor or indirectly by use of a credit card, check, or other device, as the plan may provide; (2) the customer has the privilege of paying the balance in...

...Products or Services may be purchased by the buyer from time to time and added to the balance of this Open Account within credit limits established by the creditor;â€

[Guest-1658]

Is there a specific case that states this in Georgia?