Air Van Lines, Inc. v. Buster, 6563

Decision Date09 December 1983
Docket NumberNo. 6563,6563
Citation673 P.2d 774,42 A.L.R. 4 th 1
Parties, 37 UCC Rep.Serv. 1454 AIR VAN LINES, INC., Appellant, v. Jack BUSTER, and Bill Lawrence, individually and d/b/a Keystone Complex, Appellees.
CourtAlaska Supreme Court

David E. Grashin, Law Offices of Stephen F. Frost, Anchorage, for appellees.

Before BURKE, C.J., RABINOWITZ, MATTHEWS and COMPTON, JJ., and SINGLETON, Judge. *

OPINION

SINGLETON, Judge.

FACTS

Air Van Lines, Inc. [AVL] sued Keystone Complex [Keystone], a partnership, for a balance allegedly due on a contract whereby AVL agreed to perform services and Keystone agreed to pay for the services. Keystone answered raising "accord and satisfaction" as a defense, and moved for summary judgment. The trial court granted Keystone's motion and dismissed the case. AVL appeals. We affirm.

AVL, an Anchorage firm, performed a moving job in Valdez under an agreement with Keystone, a partnership of Jack Buster and Bill Lawrence. Under the original agreement between Keystone and AVL, Keystone was to supply local laborers and a single AVL employee was to supervise the loading.

Bill Reed, AVL's employee, arrived in Valdez Monday night, October 13, 1980. Reed considered the three local laborers provided by Keystone inexperienced. One of them quit after a day and a half. Reed called Bill Lawrence in Anchorage who authorized him to bring two AVL employees from Anchorage to finish the job. Lawrence told Reed to finish the job as soon as possible. The move was completed on Sunday, October 19.

AVL sent Keystone a bill for $11,317.98, itemized as follows:

                Van & labor, reg. rate  4,946.80
                Van & labor, overtime   2,278.19
                Packing materials       3,084.19
                Per diem & travel       1,008.80
                

Buster sent AVL a letter in February. Buster objected to the billing on the ground that he had not authorized AVL to use its own employees, nor had he authorized overtime. According to Buster, the total amount due on the basis of the original agreement was $4,355.56 for the van and labor, plus packing materials.

AVL contacted Bill Lawrence, who stated that Keystone would not pay the per diem and travel expenses of the two extra AVL employees, nor would it pay the overtime charges. AVL offered to reduce its bill by $1,000, the approximate amount of the travel and per diem costs of the two extra men.

Lawrence sent AVL a letter stating that Keystone still objected to paying overtime, and it wanted a further reduction of $2,278.19. The letter enclosed a check in the amount of $8,039.79, "as full and complete payment for all services, equipment and materials provided by your company." The check bore the notation "Endorsement of this check constitutes a complete settlement of your claim."

AVL endorsed the check without any reservation of rights, see AS 45.01.207. 1 However, AVL later sent Keystone a letter stating that the payment had been applied to the debt, and that AVL reserved its right to seek further sums.

ACCORD AND SATISFACTION

An accord is a contract between a creditor and debtor for a settlement of the creditor's claim by some performance other than that which is due. Stephenson v. Ketchikan Spruce Mills, Inc., 412 P.2d 496, 498 (Alaska 1966). Satisfaction is the performance of such a contract. See Restatement of Contracts § 417 comment a, at 785-86 (1932).

Like any contract, an accord requires an offer, an acceptance, and consideration to be enforceable. AVL seems to concede that the restrictive endorsement constituted an offer to compromise which it accepted by negotiating the check. But AVL contends that because Keystone paid only that portion of the debt that was undisputed, there was no consideration to support a contract of accord. AVL also contends that there was no consideration because Keystone acted in bad faith in disputing the overtime because Keystone knew that it had implicitly authorized overtime. Restatement (Second) of Contracts §§ 74, at 281 (1981). Therefore, AVL claims, no accord and satisfaction occurred.

Keystone argues that there was consideration because the total debt was unliquidated. Keystone also contends that there is no evidence from which a jury could find that it asserted the accord in bad faith.

In our view the requirement of adequate consideration is satisfied if Keystone disputed AVL's claim for overtime in good faith. There is no evidence that Keystone expressly authorized overtime payments, acknowledged the validity of AVL's claim for overtime, or conceded that its refusal to pay overtime was in bad faith. Nevertheless, AVL argues that there is sufficient evidence in the record to support an inference that Keystone impliedly authorized overtime. AVL points to evidence that Keystone explicitly authorized the hiring of Anchorage laborers and asked that the work be completed as soon as possible. Thus, AVL claims that it was placed in the position of determining whether it would be less expensive to pay overtime than to ferry the workers back and forth from Anchorage to Valdez during the progress of the job. AVL points out that in order to be finished as soon as possible the job had to continue into the weekend and that the workers could not work during a weekend without being paid overtime.

Since reasonable people could differ in deciding whether AVL's evidence established implied authority to pay overtime, Keystone would not have been entitled to summary judgment in the absence of an accord and satisfaction. We hold, however, that when AVL negotiated Keystone's full payment check it implicitly agreed to an accord and satisfaction. For AVL to avoid summary judgment on the issue of whether the accord was supported by adequate consideration, it would have to establish either bad faith or the absence of a bona fide dispute. AVL could not establish Keystone's bad faith simply by showing that a jury might have found in its favor on the overtime claim. In the absence of some direct evidence of bad faith, AVL must establish that at the time it ignored the restrictive endorsement and cashed the check no bona fide dispute existed as a matter of law. Because reasonable people could differ on the issue of whether Keystone's conduct constituted implied authorization to pay overtime, there was a bona fide dispute on this issue as a matter of law. We therefore hold that AVL negotiated the full payment check at its peril. 2

Although the record would permit an inference supporting the AVL claim that Keystone paid only that part of the debt which was undisputed, a majority of the cases considering this issue hold that a valid accord and satisfaction nevertheless exists. See generally Annot., 112 A.L.R. 1219, 1225-36 (1938). The authorities conclude that the entire claim, including both the disputed and undisputed elements, is unitary and not subject to division so long as the whole claim is unliquidated. 3 See also 1 S. Williston, A Treatise on the Law of Contracts § 129, at 528 (3d ed. 1957); 6 A. Corbin, Corbin on Contracts §§ 1281, 1289 (1962); Restatement of Contracts § 417 comment c (1932). AVL's entire claim was unliquidated. Keystone's obligation to pay a part of AVL's invoice, even if conceded, did not serve to render the conceded amount liquidated. Restatement (Second) of Contracts § 74 comment c (1981).

We are persuaded to adopt the majority rule and hold that Keystone's conditional offer to pay only the undisputed part of the unliquidated debt in full satisfaction of that debt was supported by consideration. AVL had the option either to tear up the check and sue for what it felt was due or to cash the check and consider the contract dispute resolved. When it cashed the check it effectively accepted Keystone's offer to compromise and satisfy the debt. Alternatively, we hold that the contract of accord and satisfaction was fully executed and therefore not dependent on separate consideration for its validity. 6 A. Corbin, Corbin on Contracts § 1289, at 163-66 (1962).

AVL next contends that there is a jury issue as to whether it intended to relinquish its rights by accepting the check. However, regardless of AVL's intentions, a purported reservation of rights is ineffective when a clearly conditional tender is accepted. See 15 S. Williston, A Treatise on the Law of Contracts §§ 1854-56 (3d ed. 1957); 6 A. Corbin, Corbin on Contracts § 1279 (1962); Restatement of Contracts § 420 (1932). AVL's actions speak louder than words. See Hudson v. Yonkers Fruit Co., 258 N.Y. 168, 179 N.E. 373, 375 (1932).

UCC SECTION 1-207

Finally, AVL urges this court to apply UCC § 1-207, AS 45.01.207, to this transaction. It is argued that under section 1-207, tender of part payment in satisfaction of a debt does not bind the acceptor who expressly reserves his rights. The cases and commentators disagree as to whether section 1-207 changes the common law of accord and satisfaction. The authorities are collected in Kelly v. Kowalsky, 186 Conn. 618, 442 A.2d 1355, 1357 n. 3 (1982). We hold that AS 45.01.207 does not preclude summary judgment in Keystone's favor for two reasons. 4 First, we are persuaded by those cases representing the majority of jurisdictions that have considered the issue, which hold that section 1-207 does not alter the common law rules regarding accord and satisfaction by tender of a full payment check, and which limit section 1-207 to continuing disputes on executory contracts. See, e.g., Milgram Food Stores, Inc. v. Gelco Corp., 550 F.Supp. 992, 996-97 (W.D.Mo.1982); Chancellor Inc. v. Hamilton Appliance Co., Inc., 175 N.J.Super. 345, 418 A.2d 1326, 1330 (1980); Brown v. Coastal Truckways, Inc., 44 N.C.App. 454, 261 S.E.2d 266, 269 (1980); State Department of Fisheries v. J-Z Sales Corp., 25 Wash.App. 671, 610 P.2d 390, 395-96 (1980); Jahn v. Burns, 593 P.2d 828, 830 (Wyo.1979). See also Corbin on Contracts § 1279(C) at 395-98 (Kaufmann Supp.1982); Rosenthal, Discord and...

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