February 19, 2007
Washington Supreme Court Splits on "Accounts Receivable"
Wow, what an interesting case. In Tingey v. Haisch, 2007 WL 474084, __ P.3d __ (Wash. 2007), a majority of the Washington Supreme Court reversed an appellate court's decision interpreting an amendment to Washington's statutes of limitation. It's a fascinating read, particularly in light of the strong dissent, and it raises a variety of issues.
Boiled down, prior to 1989 Washington had a 3 year statute of limitations for oral contracts and a 6 year statute for written ones. In 1989, however, the legislature carved out from the 3 year statute oral contracts based on "an action upon an account receivable incurred in the ordinary course of business...." In Tingey, a lawyer filed suit based on an oral contract for legal services more than 3 years, but less than 6 years, after breach. The question was: is the payment for legal services an "account receivable" and so not subject to the 3 year statute for oral contracts?
The majority, reversing the appellate court, reasoned that because the legislature had used the clause 'in the ordinary course of business' it intended a technical, accounting meaning to be applied to the term. Relying on an accounting dictionary from the year 2000, it concluded that the legislature intended the phrase to cover "amounts due [a business] on an account from customers who have bought merchandise or services." Thus, all oral contracts for services or merchandise are now subject to a 6 year statute!
The majority did not seemed troubled by the fact that this enormous change to long-standing Washington law governing oral contracts was adopted with nary a whimper as to that scope, but instead relied on what it deemed to be the "plain meaning" of the word from that technical dictionary.
The dissent, though, relied on a normal dictionary, Websters from 2002(!), which defined it as "a balance due from a debtor on a current account" and relied on "current account's definition" as "an account betwen two parties having a series of transactions not covered by evidences of indebtedness (as notes or certificates) and usu. subject to settlements at stated intervals (as monthly or quarterly)."
In other words, the dissent relied on plain meaning from a nontechnical dictionary to argue narrow scope for the exception, while the majority relied on a technical dictionary to give it expansive, and likely unintended meaning (you would think someone would have said, "my gosh, aren't we creating a 6 year window for all oral contracts by a business?" if this is what the legislature intended.)
Great case. The majority dispenses with the dissent's read of the legislative history, even though one senator read the bill as *not* creating a 6 year statute for all oral contracts, and thought the legislature ought to do that to avoid disputes over what an account receivable with a business was.
Remarkable. I think the majority blew it, but I'm always for the underdog.
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