Allen v. R.G. Indus. Supply

• Decision Date: 19 May 1993
• Docket Number: No. 91-2411,91-2411
• Citation: 66 Ohio St.3d 229,611 N.E.2d 794
• Parties: ALLEN et al., Appellants, v. R.G. INDUSTRIAL SUPPLY; Rickenbacker et al., Appellees.
• Court: Ohio Supreme Court

Page 229

66 Ohio St.3d 229

611 N.E.2d 794

ALLEN et al., Appellants, v. R.G. INDUSTRIAL SUPPLY; Rickenbacker et al., Appellees.

No. 91-2411.

Supreme Court of Ohio.

Submitted Jan. 12, 1993.

Decided May 19, 1993.

SYLLABUS BY THE COURT

1. When an accord and satisfaction is pled by the defendant as an affirmative defense, the court's analysis must be divided into three distinct inquiries. First, the defendant must show that the parties went through a process of offer and acceptance--an accord. Second, the accord must have been carried out--a satisfaction. Third, if there was an accord and satisfaction, it must have been supported by consideration.

2. Two essential safeguards built into the doctrine of accord and satisfaction protect creditors or injured parties from overreaching debtors or tortfeasors: (1) there must be a good-faith dispute about the debt, and (2) the creditor must have reasonable notice that the check is intended to be in full satisfaction of the debt.

On March 26, 1990, appellants, Charles and Darlene Allen, filed a complaint in Summit County Common Pleas Court against appellee James J. Rickenbacker, appellee Robert J. Rickenbacker, and R.G. Industrial Supply. The complaint alleged that Robert Rickenbacker negligently caused a traffic accident in which Charles Allen was injured. The Rickenbackers answered and pled, inter alia, accord and satisfaction as an affirmative defense. This appeal concerns whether either of the Rickenbackers can succeed in this defense.

On March 28, 1988, the delivery truck driven by Charles Allen was rearended by a truck driven by Robert Rickenbacker. At the time of the accident Robert was an employee of R.G. Industrial Supply ("R.G. Industrial"). The truck he was driving belonged to his supervisor, James Rickenbacker, who was also an employee of R.G. Industrial. The parties agree that Robert was driving the truck as an agent of James or R.G. Industrial when the accident took place. In their answers both James and Robert admitted that Robert negligently caused the collision. As a result of the accident Charles suffered what appeared to be minor injuries; he was taken to a nearby hospital where he was treated and released.

Approximately two weeks after the accident, Charles was telephoned by an Allstate Insurance Company ("Allstate") agent representing James and his wife Jean. The agent told Charles that he would be sent a check for $200 for his hospital bill and lost wages. Charles had not, at the time of the call from Allstate, made any claim against Allstate or the Rickenbackers for compensation for any injuries arising out of the accident.

In late April, several days after the call from the agent, the Allens received from Allstate a check for $240, a release form, and a note. The front of the check bore the names "JEAN E & JAMES J RICKENBACKER" as "insured[s]." Next to the phrase "In payment of," the following statement was printed: "ANY AND ALL CLAIMS FOR BODILY INJURY BUT EXCLUDING ANY REASONABLE MEDICAL EXPENSES INCURRED WITHIN 6 MONTHS UP TO $500.00." The check was made out to Charles and Darlene Allen "individually and as husband and wife." The policy number, the claim number, and various other administrative information also appeared. The check did not make any reference to Robert Rickenbacker or to the date or circumstances of the accident itself. The back of the check was blank. Both Charles and Darlene Allen endorsed the check and it was cashed on June 2, 1988. (See Appendix.) Neither of the Allens signed the release form and it was not returned to Allstate. The note does not appear in the record.

In early July 1988 Charles began to experience back pain. Approximately four months later he sought medical attention for his back. The Allens allege damages as a direct result of the defendants' negligence.

The Rickenbackers filed a motion for summary judgment on their accord and satisfaction defense. Their motion was supported by the affidavit of the Allstate insurance agent who handled the Rickenbackers' claim. The court denied summary judgment; it found that the question of whether there had been a disputed claim had not been resolved.

The Rickenbackers deposed Charles on October 10, 1990. On January 8, 1991, they filed a second motion for summary judgment supported by Allen's deposition testimony. The trial court granted the Rickenbackers' motion and dismissed the case. The court held that Allen's testimony included an admission that he "understood the check was in consideration of full release against [the Rickenbackers]." The court of appeals affirmed.

The cause is now before the court pursuant to the allowance of a motion to certify the record.

Willis & Linnen Co., L.P.A., and Jerome T. Linnen, Jr., Akron, for appellants.

Nukes, Perantinides & Nolan Co., L.P.A., and James J. Gutbrod, Akron, for appellees.

WRIGHT, Justice.

The question presented is whether summary judgment in favor of James and Robert Rickenbacker was proper on the ground that the Allens' negotiation of the check sent to them by Allstate constituted an accord and satisfaction of all of their claims against the Rickenbackers. For the following reasons we hold that summary judgment was not proper and, accordingly, reverse and remand for further proceedings.

I

Accord and satisfaction is an affirmative defense to a claim for money damages. If a party against whom a claim for damages is made can prove accord and satisfaction, that party's debt is discharged by operation of law.

An accord is a contract between a debtor and a creditor in which the creditor's claim is settled in exchange for a sum of money other than that which is allegedly due. Satisfaction is the performance of that contract. Air Van Lines, Inc. v. Buster (Alaska 1983), 673 P.2d 774, 777, 42 A.L.R. 4th 1, 5; see Calamari & Perillo, Contracts (3 Ed.1987) 214-215, Section 4-11. In Ohio, the situation in which an accord and satisfaction can arise is well settled:

"Where there is a bona fide dispute over an unliquidated demand and the debtor tenders an amount less than the amount in dispute, upon the express condition that it shall be in full [satisfaction] of the disputed claim, the creditor has but one alternative; he must accept the amount tendered upon the terms of the condition, unless the condition be waived, or he must reject it entirely, or if he has received the amount by check in a letter, he must return it." Seeds Grain & Hay Co. v. Conger (1910), 83 Ohio St. 169, 93 N.E. 892, paragraph one of the syllabus.

When an accord and satisfaction is pled by the defendant, the court's analysis must be divided into three distinct inquiries. First, the defendant must show that the parties went through a process of offer and acceptance--an accord. Second, the accord must have been carried out--a satisfaction. Third, if there was an accord and satisfaction, it must have been supported by consideration. Calamari & Perillo, supra, at 215, Section 4-11. The first and second inquiries merge when the creditor manifests acceptance of the offer by negotiating a check sent by the debtor with the offer. "At common law, an accord and satisfaction is accomplished when a creditor accepts and deposits a check which the debtor offers as full payment for an unliquidated or disputed debt. * * * By cashing the check, the creditor manifests assent to the terms of a new contract which extinguishes the debtor's prior contractual obligation." AFC Interiors v. DiCello (1989), 46 Ohio St.3d 1, 6, 544 N.E.2d 869, 873 (H. Brown, J., dissenting on other grounds); see Platt v. Penetryn System, Inc. (1949), 151 Ohio St. 451, 39 O.O. 273, 86 N.E.2d 600, syllabus; 15 Williston on Contracts (3 Ed.1972) 542, Section 1854.

Two essential safeguards built into the doctrine of accord and satisfaction protect creditors from overreaching debtors: " there must be a good-faith dispute about the debt and the creditor must have reasonable notice that the check is intended to be in full satisfaction of the debt." AFC Interiors, supra, 46 Ohio St.3d at 12, 544 N.E.2d at 878 (H. Brown, J., dissenting on other grounds). See, also, Seeds Grain, supra, paragraph one of the syllabus ("Where there is a bona fide dispute over an unliquidated demand and the debtor tenders an amount less than the amount in dispute, upon the express condition that it shall be in full [satisfaction] of the disputed claim * * *." [Emphasis added.] ).

If there is not an actual dispute between the parties, there cannot be an accord and satisfaction. See West Penn Power Co. v. Nationwide Mut. Ins. Co. (1967), 209 Pa.Super. 509, 512, 228 A.2d 218, 220 (a dispute is "an essential element of accord and satisfaction"). There are two reasons for this requirement. First, if there is no dispute, the accord would not be supported by consideration because the creditor would not be giving anything up in exchange for the payment from the debtor; if there is an actual dispute, the creditor is sacrificing a real claim against the debtor for further damages. Second, requiring a bona fide dispute protects unsophisticated creditors because it ensures that they are aware that they are giving something up in return for the debtor's offer. In light of the importance of this safeguard, there is a bona fide dispute, in a tort case, only if the injured party has expressly asked the alleged tortfeasor for compensation of some sort for his or her injury.

The second safeguard requires the creditor to be given reasonable notice that the check sent by the debtor is intended as full satisfaction of the alleged debt. "The rule relating to an offer of accord is that the offer must make clear that the offeror seeks a total discharge. If this is not done any payment made and accepted will be treated as part payment." Calamari & Perillo, supra, at 215, Section 4-11. To achieve an accord and satisfaction the debtor must make it clear, in the eyes of a reasonable person, that the check is being tendered only on...