Baker v. Emmerson, 2

• Decision Date: 09 October 1986
• Docket Number: CA-CIV,No. 2,2
• Parties: Marvin BAKER, Plaintiff/Appellant/Cross-Appellee, v. David EMMERSON and Deborah Emmerson, husband and wife, Defendants/Appellees/Cross-Appellants. 5644.
• Court: Arizona Court of Appeals

Page 101

734 P.2d 101

153 Ariz. 4

Marvin BAKER, Plaintiff/Appellant/Cross-Appellee, v. David EMMERSON and Deborah Emmerson, husband and wife, Defendants/Appellees/Cross-Appellants.

No. 2 CA-CIV 5644.

Court of Appeals of Arizona,

Division 2, Department A.

Oct. 9, 1986.

Reconsideration Denied Nov. 18, 1986.

Review Denied March 3, 1987.

[153 Ariz. 5] Molloy, Jones, Donahue, Trachta, Childers & Mallamo, P.C. by Michael J. Meehan and David A. McEvoy, Tucson, for plaintiff/appellant/cross-appellee.

Mesch, Clark & Rothschild, P.C. by J. Emery Barker, Tucson, for defendants/appellees/cross-appellants.

OPINION

HOWARD, Presiding Judge.

Dr. Marvin Baker and Dr. David Emmerson, both radiologists, formed a professional corporation, Radiology, Nuclear Medicine and Ultrasound, Associates, P.C. (the "P.C.") and a partnership known as Radiology Leasing (the "Partnership"). Subsequently another doctor became a shareholder in the P.C. A dispute between Baker and the other two doctors led to Emmerson's agreement to buy out Baker's interest in the P.C. and Partnership for $45,000. ¹

Emmerson executed a promissory note dated June 17, 1981, in Baker's favor in the sum of $45,000, without interest, payable in monthly installments of $7,500 on the eighth day of each month, first payment due August 8, 1981. The note also provided, upon default, for acceleration of the entire debt at the option of the holder, with interest at the rate of 20 percent on the balance, and for the payment of attorney's fees by Emmerson if suit was brought to recover on the note. The parties also made other agreements and assignments which gave Emmerson ownership of all accounts receivable not converted to cash prior to and including June 19, 1981, as offsets against all liabilities and expenses of the P.C. and the Partnership for which bills might have been sent after June 19, 1981. All expenses attributable to the operations of the Partnership and P.C. up to and through June 19, 1981, were to be paid, on a pro rata basis, from these accounts receivable. It was further agreed by the corporation that Baker would be reimbursed, pursuant to a previously executed employment agreement, for Baker's business and related expenses.

The P.C. had a deferred contribution Pension Plan and Trust Agreement (the "Plan") under which Emmerson was the sole trustee. The Plan required the P.C. to pay into the Plan trust account 10 percent of Baker's total compensation each fiscal year. The P.C. did not make the contribution for the fiscal year beginning July 1, 1980, and ending June 30, 1981, which would have been in the sum of $11,900.

Emmerson made the payments due on the note for the months of August and September 1981, but failed to make the October 1981 payment. Baker made demand on Emmerson to cure his default and resume payments, but Emmerson failed to do so. In November, however, Emmerson tendered to Baker a check in the amount of $2,000 in an attempt to satisfy the Partnership portion of the buy-out agreement. Baker refused to cash the $2,000 check sent by Emmerson because he was afraid that it might represent an attempt to extinguish the balance that was due and owing. In March 1982, Emmerson sent Baker a check in the amount of $18,770.86. The check was dated March 23, 1982, and was accompanied by an "accounting" wherein Emmerson sets forth how he arrived at the "net amount due" of $18,770.86. Accompanying this accounting and check was a letter to Baker's attorney. The letter stated:

"Enclosed please find a check from Radiology, Nuclear Medicine and Ultrasound Associates, P.C. payable to Marvin Bcker, (sic) M.D., in the amount of $18,770.86. Please see enclosed schedule.

I have talked to Dr. Baker several times by telephone to Edenton regarding this matter, most recently in late December or early January. He desired your legal opinion, and we had left it that he would have you contact me. As you know, I have tried to contact you by phone. As has my attorney. I understand that you have been very busy with an upcoming trial. Regardless, if you have any questions, please feel free to contact me. On alternate days I am in Tucson at 297-2566, and the other alternating days in Nogales at 1-287-2771 (ask for x-ray).

Kindly request that your client forward claimed expenses to me. I have requested this, but that has not been forthcoming.

I would also request the return of my personal check in the amount of $2000.00, which Dr. Baker has refused to cash, which was for payment of the same amount for Radiology Leasing, the partnership. This has subsequently been replaced with a cashier's check in the amount of $2000.00, given to the escrow agent per the escrow instructions." (Emphasis added)

The check sent by Dr. Emmerson had no conditions on it, such as "payment in full" or any other such conditions. In fact, the letter and the accounting show that there was still more money that might be due. On March 24, 1982, Baker's attorney sent Dr. Emmerson a letter acknowledging the receipt of partial payment and demanding the remainder of the payment by March 29, 1982. Baker's attorney spoke with Dr. Baker by telephone and on April 15 sent the following letter to Dr. Emmerson:

"This letter is in response to yours of March 23, 1982, and confirms the position described to you by me in our telephone conversation of April 2nd.

We have forwarded to Marvin Baker your check in the amount of $18,770.86 as partial payment of the $45,000.00 promissory note. On Dr. Baker's behalf we hereby request payment of the remaining amount of principal, together with interest to and including 9 April 1982, in the total amount of $14,610.93, by April 9, 1982.

As I said on the telephone, in the event that you wish to tender that amount and receive credit for the $2,000 previously tendered directly or through the escrow, I am willing to make demand upon Mr. Nuckolls for the full $2,000 payment, before resorting to the personal check in the amount of $2,000 which you had previously sent.

In the meantime, Dr. Baker is gathering the matters of expenses referred to in your letter of March 23, 1982 and in my previous letter.

I have advised Dr. Baker that I think the entire promissory note is payable by you, notwithstanding the matters which you contend are credits, as scheduled in your letter of March 23rd.

We would very much like to receive payment on this without the need for the filing of suit, and therefore would ask that you promptly send forward payment or communicate immediately with me what you are in a position to do."

Dr. Baker cashed the $18,770.86 check. His attorney received no response to the letter sent to Dr. Emmerson in April and on July 19, 1982, filed this lawsuit.

The case was tried to the court, which concluded as a matter of law, that Dr. Baker's cashing of the $18,770.86 check constituted an accord and satisfaction. As will be seen, this conclusion was entirely incorrect. Other facts will be set forth as they are necessary to discuss the various questions for review.

Generally, the elements essential for any valid contract must be present in a contract of accord and satisfaction. Those elements are as follows: (1) a proper subject matter, (2) competent parties, (3) an assent or meeting of the minds of the parties and (4) a consideration. Vance v. Hammer, 105 Ariz. 317, 464 P.2d 340 (1970). The general rule is that acceptance and use of a remittance by check which purports to be payment "in full," or which implies words of similar meaning, or is accompanied by a letter to that effect, constitutes an accord and satisfaction of the larger claim of the creditor, assuming the claim is unliquidated or disputed. Mobilife Corporation v. Delta Inv. Corp., 121 Ariz. 586, 592...