Acierno v. Worthy Bros. Pipeline Corp., 009

• Decision Date: 06 December 1994
• Docket Number: 1994,No. 009,009
• Citation: 656 A.2d 1085
• Parties: 27 UCC Rep.Serv.2d 759 Frank E. ACIERNO and F.A. Holdings, Inc., a Delaware corporation, Defendants and Counterclaimants Below-Appellants, v. WORTHY BROTHERS PIPELINE CORPORATION, a Delaware corporation, Plaintiff and Third Party Counterclaim Plaintiff Below-Appellee and Cross-Appellee, v. TRINITY PAVING COMPANY, a Pennsylvania corporation, Third Party Counterclaim Defendant Below and Cross-Appellant. . Submitted:
• Court: Supreme Court of Delaware

Page 1085

656 A.2d 1085

27 UCC Rep.Serv.2d 759

Frank E. ACIERNO and F.A. Holdings, Inc., a Delaware

corporation, Defendants and Counterclaimants Below-Appellants, v. WORTHY BROTHERS PIPELINE CORPORATION, a Delaware

corporation, Plaintiff and Third Party

Counterclaim Plaintiff Below-Appellee and Cross-Appellee, v. TRINITY PAVING COMPANY, a Pennsylvania corporation, Third

Party Counterclaim Defendant Below and Cross-Appellant.

No. 009, 1994.

Supreme Court of Delaware.

Submitted: Dec. 6, 1994.

Decided: March 8, 1995.

Revised: April 17, 1995.

Rehearing Denied April 17, 1995.

Upon appeal from the Superior Court: REVERSED AND REMANDED in part and AFFIRMED in part.

Gary A. Bryde, Bayard, Handelman & Murdoch, Hockessin, and Hugh J. Bracken (argued), and J. Yannacone, Media, PA, for appellants.

Joseph Grey (argued), and Norman L. Pernick, Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, for appellee.

Kevin Gross, Rosenthal, Monhait, Gross & Goddess, Wilmington, and Norman E. Greenspan (argued), and Francois A. Dutchie, Blank, Rome, Comisky & McCauley, Philadelphia, PA, for cross-appellant.

Before VEASEY, C.J., HARTNETT and BERGER, JJ.

HARTNETT, Justice.

In this appeal, we hold that the Delaware common law doctrine of accord and satisfaction has not been displaced by the adoption in Delaware of § 1-207 of the Uniform Commercial Code (UCC).

I.

We review the Superior Court's decision, after trial, that Appellee, Worthy Brothers Pipeline Corporation ("Worthy") was entitled to a judgment against Appellant F.A. Holdings, Inc. ("Holdings"), notwithstanding that Worthy negotiated a check from Holdings that purported to be payment in full for all claims of Worthy against Holdings.

We hold that the Superior Court erred in holding that the Delaware common law doctrine of accord and satisfaction has been abrogated by Delaware's adoption of § 1-207 of the Uniform Commercial Code that provides for continued performance of a disputed contractual agreement under reservation of rights. 6 Del.C. § 1-207 (UCC). We further find that it is unclear whether all of the elements of a common law accord and satisfaction were present when the check was tendered, and it is therefore unclear whether Worthy's claim against Holdings is barred. We also find that it is unclear whether Cross Appellant Trinity Paving Company ("Trinity"), a subcontractor of Worthy, is entitled to a judgment against Worthy that need not be paid until Worthy receives payment from Holdings. We further find that Trinity is entitled to interest at 12 percent per annum as to any amount it recovers. We therefore AFFIRM IN PART AND REVERSE AND REMAND IN PART for further proceedings.

II.

Our statement of facts is drawn, essentially, from the opinion of the Superior Court after a bench trial. Worthy Brothers Pipeline Corp. v. Frank Acierno v. Worthy Brothers Pipeline Corp. v. Trinity Paving Co., Del.Super., C.A. No. 90L-10-2, 1993 WL 485900 (Sept. 22, 1993).

On January 24, 1990, Worthy entered into a contract with Holdings whereby Worthy agreed to provide construction services at a site known as Concord Gallery, that was owned by Appellant Frank E. Acierno ("Acierno"), who is also President of Holdings. The contract provided that Worthy would demolish a school building on the site, strip the topsoil for on-site stockpiling, install a storm sewer, fine-grade the building area, install a drainage course in the area, pave and stripe the parking lot, and provide other services. Worthy subcontracted with Trinity for the paving work.

Worthy had to fine-grade the lot before Trinity could proceed with the application of 6 inches of stone, 2 inches of hot mix and then 2 inches of finish hot mix pavement. On August 31, 1990, Acierno arrived at the site while Trinity was applying the 2 inches of hot mix over the stone. Although concerned that the subsoil and water runoff were inadequate, Acierno allowed Trinity to continue placing some of the hot mix, but then prevented Trinity from completing the work.

For several weeks prior to August 31, 1990, Holdings had failed to pay the monthly bills that were submitted by Worthy and in September 1990, letters were exchanged between Worthy and Holdings. Holdings stated that the work was not progressing sufficiently and that it would terminate the contract unless work resumed within seven days. No complaint was expressed as to the work being done improperly. Worthy, on the other hand, cited Holdings' failure to pay its bills and stated that if payment was not received within seven days Worthy would stop work until payment was received. When Holdings continued to withhold payment, Worthy stopped work on the job and asked its subcontractor Trinity to do the same. Trinity thereupon refused to return to the site, despite Acierno's request to Trinity that it do the finish paving work.

Acierno and Holdings then hired R.A. Boyer ("Boyer"), a paving contractor, to complete the paving and to cure what Boyer considered to be a drainage problem. Holdings paid Boyer $161,353.58 for its work including covering two existing catch basins and installing five catch basins at locations different from what was originally contemplated, regrading part of the lot, and digging up and repairing areas which demonstrated a water removal pumping problem. More than $91,000 of Boyer's bill was attributed to the delivery and installation of hot mix. Although Holdings characterizes the entire sum paid to Boyer as being remedial, the Superior Court held that the $91,000 charged by Boyer for hot mix work could not have been remedial because it was for the top finish layer of the paving process that had never been commenced by Trinity. Further, the Superior Court specifically found that Worthy and Trinity had performed according to the plans provided to them and, therefore, they were entitled to be paid in full. The Superior Court also found that any problem with drainage was due to a change in the plans, for which Holdings was responsible.

Worthy filed a mechanics' lien suit against Holdings and Acierno in October 1990 and a meeting between Worthy, Holdings, Acierno and Boyer was held on November 6, 1990 in an attempt to resolve the dispute. About $300,000 owed for work performed by Worthy was not controverted. Worthy, however, sought payment for the additional sums it claimed were due to it. Holdings contested some of these claims and sought credit for the $161,000 it had paid to Boyer. After discussion, the settlement sum of $327,703.55 was agreed upon and Acierno, on behalf of himself and Holdings, wrote a check on the Holdings' account payable to Worthy for that sum. This sum did not include any payment by Holdings to Worthy for the $91,000 that Trinity had billed Worthy.

On the front of the check Acierno wrote, "All bills paid to date for Concord Gallery Project by this check." On the back of the check above the space for the endorsement was written, "Paid and accepted in full satisfaction of all claims." Acierno tendered the check to James Worthy, President of Worthy. It is unclear from the record whether Mr. Worthy knew at that time that the restrictive language appeared on the check. They shook hands and Mr. Worthy took the check and left. Several weeks later, after seeking legal advice, Worthy endorsed the check after adding on the back of the check the words: "Accepted under reservations of rights pursuant to 6 Del.C. sec. 1-207."

Relying on language in its contract with Trinity that provided for draws as Worthy was paid, Worthy withheld payment from Trinity claiming that Trinity was not entitled to be paid until Worthy received payment from Holdings for that portion of the work that it claimed it had not been paid and for which it sued. After Worthy cashed Holdings' check, Worthy amended its complaint to seek payment from Holdings for only the $91,000 value of the Trinity work. Trinity filed a cross-claim against Worthy for immediate payment of the $91,000 it had billed it, less payments received, plus interest at the rate of 18 percent per annum.

III.

After trial, the Superior Court ruled that the Delaware common law doctrine of accord and satisfaction was abrogated by the enactment of 6 Del.C. § 1-207 (UCC). It therefore held that because Worthy negotiated the check under protest it retained the right to sue for the remainder of its claim. The Superior Court further found that there was no basis for Holdings not to pay Worthy and, accordingly, awarded judgment to Worthy against Holdings for the balance it found was due on the unpaid Trinity bill: $80,662.86, plus 10 percent profit, for a total of $88,729.15 plus interest at the rate of 18 percent per annum. It also entered judgment in favor of Trinity against Worthy for $80,662.86 plus interest at the statutory rate of 12 percent per annum "payable at such time that F.A. Holdings, Inc. satisfies the judgment rendered in ... this Order.". The Superior Court also dismissed a counterclaim asserted by Acierno and Holdings.

IV.

Holdings and Acierno appealed and assert that the Holdings tender to Worthy of the settlement check, and Worthy's acceptance of it, constituted an offer of an accord and satisfaction, and that Worthy could not unilaterally change the terms of that accord and satisfaction by writing new terms on the check. Holdings, therefore, argues that the Superior Court erred when it held Holdings to be liable to Worthy. Worthy responds that the Delaware common law doctrine of accord and satisfaction has been changed by 6 Del.C. § 1-207 (UCC) and its cashing of the check with a reservation of rights, therefore, did not constitute an accord and satisfaction.

Trinity, in its cross-appeal, asserts that the judgment entered in its favor against Worthy should not be limited by the requirement that it be paid only upon Worthy being paid by Holdings and that the interest awarded to it should have been 15 percent, not 12 percent per annum.

V.

Under the common law doctrine of accord and...