American Fuel Trading Co. v. Virginia Solid Fuels, Inc.

• Decision Date: 13 September 1989
• Docket Number: No. 88-1799,88-1799
• Citation: 892 F.2d 74
• Parties: NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. AMERICAN FUEL TRADING COMPANY, Plaintiff-Appellee, v. VIRGINIA SOLID FUELS, INCORPORATED, Defendant-Appellant. . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 74

892 F.2d 74

NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.

AMERICAN FUEL TRADING COMPANY, Plaintiff-Appellee, v. VIRGINIA SOLID FUELS, INCORPORATED, Defendant-Appellant.

No. 88-1799.

United States Court of Appeals, Fourth Circuit.

Argued: Sept. 13, 1989.

Decided: Dec. 1, 1989.

Gregory L. Murphy (David C. Schroeder, Murphy, McGettigan & West, P.C., on brief), for appellant.

Linda Lemmon Najjoum (Robert F. Brooks, John N. Richardson, Jr., Hunton & Williams, on brief), for appellee.

Before MURNAGHAN, SPROUSE and CHAPMAN, Circuit Judges.

PER CURIAM:

A dispute arose between American Fuel Trading Company (AFTC) and Virginia Solid Fuels, Inc. (VSF) over the correctness of an amount owed by VSF to AFTC. VSF sent AFTC three checks which, in total, amounted to $192,644.99 less than the amount claimed by AFTC. ¹ The checks bore the restrictive legend "pmt. in full."

There ensued negotiations between the parties in which AFTC sought unrestricted checks, and, when VSF, maintaining its position, refused to remove the restriction, AFTC's representative said "Well, okay." ²

Without notifying VSF that it was going to do so, thereafter AFTC unilaterally struck out the restrictive language and, substituting "partial payment only," presented the checks to a bank for payment. The bank complied by honoring the checks.

The present case arose when AFTC sued VSF claiming that, by contract, it was entitled to $192,644.99, for the difference between what it claimed and the amount of the three VSF checks in toto. VSF has asserted payment and accord and satisfaction. A jury returned a verdict in favor of AFTC for the amount claimed. VSF now appeals.

The parties do not dispute that, under Erie R.R. v. Tompkins, 304 U.S. 64 (1938), Virginia law decides the case. In many states other than Virginia, when a creditor receives, and then cashes, ³ a check with the legend "Payment in Full," the cashing of the check will amount to an agreement to take in satisfaction the lesser amount of the restricted check because the legend is deemed to have given notice of the debtor's intent to establish a precondition to cashing. E.g., Rhone v. State Auto Mut. Ins. Co., 664 F.Supp. 1431 (S.D.Ga.1987) (applying Georgia law), aff'd, 858 F.2d 1507 (11th Cir.1988); Air Van Lines, Inc. v. Buster, 673 P.2d 774 (Alaska 1983); County Fire Door Corp. v. C.F. Wooding Co., 202 Conn. 277, 520 A.2d 1028 (1987); DMI Design & Mfg. Inc. v. ADAC Plastics Inc., 165 Mich.App. 205, 418 N.W.2d 386 (1987); Inger Interiors v. Peralta, 30 Ohio App.3d 94, 506 N.E.2d 1199, 1201 (1986) ("The [creditor's] unauthorized unilateral modification of the [debtors'] express condition did not change the effect of his acceptance of their payment."); Pileco Inc. v. HCI, Inc., 735 S.W.2d 561 (Tex.Ct.App.1987). If the law of one of those states were to apply, there would be an accord and satisfaction under the facts of this case.

Virginia law, however, is to the contrary, following a more formal approach to contract law. Under Virginia law, "the burden of proof is on a debtor to show that the sum of money which he paid in part performance of his obligation was 'expressly accepted by the creditor in satisfaction and rendered in pursuance of an agreement for that purpose.' " Atkins v. Boatwright, 204 Va. 450, 454, 132 S.E.2d 450, 453-54 (1963) (citing Va.Code Ann. § 11-12 (1956)). In Atkins, in a manner similar to the case at bar, the creditors wrote "accepted in partial payment only" on a check upon which the debtor had written "Paid in full." The creditors then deposited the check. Because "by no word or act did [the creditors], at any time, indicate that the amount of the check would be accepted in settlement of their demand," the Virginia Supreme Court ruled there was not an accord and satisfaction. 204 Va. at 455, 132 S.E.2d at 454.

In this case, before cashing...