Brown v. Coastal Truckways, Inc.

• Decision Date: 08 January 1980
• Docket Number: No. 7926DC254,7926DC254
• Citation: 28 U.C.C.Rep. 3,44 N.C.App. 454,261 S.E.2d 266
• Parties: , 28 UCC Rep.Serv. 3 Hugh R. BROWN v. COASTAL TRUCKWAYS, INC., a corporation.
• Court: North Carolina Court of Appeals

Page 266

261 S.E.2d 266

44 N.C.App. 454, 28 UCC Rep.Serv. 3

Hugh R. BROWN v. COASTAL TRUCKWAYS, INC., a corporation.

No. 7926DC254.

Court of Appeals of North Carolina.

Jan. 8, 1980.

Harkey, Faggart, Coira, Fletcher & Lambeth by Charles F. Coira, Jr., Charlotte, for plaintiff-appellant.

Joslin, Culbertson, Sedberry & Houck by William Joslin, Raleigh, for defendant-appellee.

WEBB, Judge.

There being no dispute as to the facts as stated in this opinion, the entry of summary judgment was proper if the defendant is entitled to judgment as a matter of law based on these facts. G.S. 1A-1, Rule 56. Atkinson v. Wilkerson, 10 N.C.App. 643, 179 S.E.2d 872 (1971). The case sub judice poses the following question. Is a disputed claim extinguished when the debtor tends to the creditor a check marked "account in full" and the creditor deposits the check after striking these words from the check and notifies the debtor he is reserving his right to contend for the balance of the claim? Prior to the adoption of the Uniform Commercial Code, this would be an accord and satisfaction and the claim would be extinguished. When the debtor tendered the check to the creditor, the creditor had to take the check on the terms offered by the creditor or not take it at all. The acceptance of the check constituted an accord and satisfaction in spite of any characterization of it by the creditor. See Rosser v. Bynum & Snipes, 168 N.C. 340, 84 S.E. 393 (1915); Phillips v. Construction Co., 261 N.C. 767, 136 S.E.2d 48 (1964), and Barger v. Krimminger, 262 N.C. 596, 138 S.E.2d 207 (1964). 1 Am.Jur.2d, Accord and Satisfaction, § 21, p. 319 (1962).

Plaintiff contends the rule in this state has been changed by G.S. 25-1-207 which provides:

A party who with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice," "under protest" or the like are sufficient.

This section is a part of the Uniform Commercial Code. It has been interpreted in several cases. See Baillie Lumber Co. v. Kincaid Carolina Corp., 4 N.C.App. 342, 167 S.E.2d 85 (1969); Scholl v. Tallman, S.D., 247 N.W.2d 490 (1976); Fritz v. Marantette, 404 Mich. 329, 273 N.W.2d 425 (1978), and Jahn v. Burns, Wyo., 593 P.2d 828 (1979). It has also been the subject of several articles. See Rosenthal, Discord and Dissatisfaction: Section 1-207 of the Uniform Commercial Code, 78 Colum.L.Rev. 48 (1978); Hawkland, The Effect of U.C.C § 1-207 on the Doctrine of Accord and Satisfaction by Conditional Check, 74 Com.L.J. 329 (1969), and McDonnell, Purposive Interpretation of the Uniform Commercial Code: Some Implications for Jurisprudence, 126 U.Pa.L.Rev. 795, 824 (1978).

The underlying obligation in this case for which the check was given involved an employment contract. Employment contracts are not ordinarily covered by the Uniform Commercial Code, and the first question we face is whether this case is brought within the coverage of the Code because a check was given in payment of a claim on an employment contract. G.S. 25-3-802 provides in part:

(1) Unless otherwise agreed where an instrument is taken for any underlying obligation

(b) in any other case the obligation is suspended pro tanto until the instrument is due or if it is payable on demand until its presentment. If the instrument is dishonored, action may be maintained on either the instrument or the obligation; discharge of the underlying obligor on the instrument also discharges him on the obligation to the extent of his discharge on the instrument.

The Official Comment indicates this section is intended to settle conflicts as to the effect of an instrument as payment of the obligation for which it is given. This section provides that if a check is given in payment of a claim, and the underlying obligor is discharged on the check, he is also discharged on the underlying claim. Since a check is governed by the Uniform Commercial Code, we hold that whether the defendant is discharged on the plaintiff's claim depends on the extent to which he is discharged on the check. The employment contract is subject to the Uniform Commercial Code to this extent.

We must next determine whether G.S. 25-1-207 applies to a full payment check given in satisfaction of a disputed account. If it does apply, it would be for the reason that plaintiff assented to "performance in a manner . . . offered by" the defendant while plaintiff reserved his rights. The defendant offered a check in full settlement of the plaintiff's claim. When the plaintiff struck from the check the words "for account in full" and notified defendant he would not accept the check in full payment, he did not assent to "performance in a manner . . . offered by" the defendant. This would make G.S. 25-1-207 inapplicable to the case sub judice.

Some help in interpreting the statute comes from the Official Comment which reads:

1. This section provides machinery for the continuation of performance along the lines contemplated by...