Burke Co. v. Hilton Development Co.

• Decision Date: 30 September 1992
• Docket Number: Civ.A. No. 90-50205/LAC.
• Citation: 802 F. Supp. 434
• Parties: The BURKE COMPANY, Plaintiff, v. HILTON DEVELOPMENT COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Florida

802 F. Supp. 434

The BURKE COMPANY, Plaintiff, v. HILTON DEVELOPMENT COMPANY, Defendant.

Civ.A. No. 90-50205/LAC.

United States District Court, N.D. Florida, Panama City Division.

September 30, 1992.

Alvin L. Peters, Panama City, Fla., for plaintiff.

L. Charles Hilton, Jr., Hilton, Kolk & Penson, Panama City, Fla., Charles V. Choyce, Jr., Rumberger, Kirk, Caldwell, Cabaniss, Burke & Wechsle, Orlando, Fla., for defendant.

ORDER

COLLIER, District Judge.

The defendant has moved for dismissal of the plaintiff's complaint for lack of subject matter jurisdiction over this diversity action, or alternatively, for summary judgment based on the common law doctrine of accord and satisfaction (docs. 7 & 8). The plaintiff argues in response that it has met the requisite amount in controversy, and, further, that under Florida law, there has been no accord and satisfaction (doc. 14). Although the Court finds that the plaintiff has satisfied the amount in controversy requirement of 28 U.S.C. § 1332, it, nonetheless, concludes that as a matter of law, there has been an accord and satisfaction, and therefore, summary judgment is appropriate.

FINDINGS OF FACT

The facts are not complicated. Pursuant to a rental agreement between the parties, the plaintiff supplied the defendant with certain construction equipment for use in the construction of a Holiday Inn Hotel by the defendant in Panama City Beach, Florida. Upon completion of the project, a dispute erupted between the parties based on the plaintiff's assertion that the defendant failed to pay the full rental amount due and that much of the equipment was either damaged or lost. In an apparent effort to resolve the dispute, the parties met to discuss a possible settlement of the claims.

At the time of the settlement discussions, the defendant tendered and the plaintiff accepted and cashed a check for $15,846.05 in satisfaction of all outstanding rental claims. The back of the check read as follows:

By acknowledgement and endorsement of this check the payee acknowledges receipt of the balance of all rent due on the Holiday Inn Job—Panama City Beach—Job 57.

THE BURKE COMPANY

Approximately thirty (30) days later, an additional check was tendered in the amount of $17,781.18. Similar to the first check, the reverse side of this check read as follows:

By acknowledgement and endorsement of this check the payee acknowledges full and final settlement of all sums owed to the payee by the payor on the Holiday Inn Job 57. THE BURKE COMPANY

The acknowledgement on the back of the second check, however, was crossed-out, with the words, "With Reservation Under Protest" written beneath the alteration.

On June 18, 1990, the plaintiff's representative contacted one of the defendant's representatives by letter and informed him of the plaintiff's intention to strike the restrictive endorsement before cashing the check. The plaintiff's representative then did so and cashed the check. The check cleared the defendant's bank on June 20. Upon learning of this, one of the defendant's representatives sent the plaintiff a letter requesting a return of the $17,781.18. This demand was ignored, and approximately four (4) months later, plaintiff filed suit for the outstanding balance due under the defendant's "Holiday Inn" account.

CONCLUSIONS OF LAW

A. Motion to Dismiss

A motion to dismiss for lack of subject matter jurisdiction based on a plaintiff's failure to satisfy the amount in controversy requirement of 28 U.S.C. § 1332 should not be granted unless the defendant shows "to a legal certainty that the claim is really for less than the jurisdictional amount." Adolph Coors Co. v. Movement Against Racism, 777 F.2d 1538, 1544 (11th Cir.1985) (quoting, St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938). The amount in controversy requirement is met if the plaintiff has made a "bona fide" allegation that his claim is in excess of $50,000.00. See St. Paul Mercury, 303 U.S. at 288-89, 58 S.Ct. at 590. Based on a careful review of the record in the present case, the Court finds that the plaintiff has made a "bona fide" allegation of its claim, and that the defendant has not met his burden under the "legal certainty" standard. The defendant's motion, therefore, is denied.

B. Motion for Summary Judgment

A motion for summary judgment should be granted when "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to summary judgment as a matter of law." FED.R.CIV.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Everett v. Napper, 833 F.2d 1507, 1510 (11th Cir.1987). An issue of fact is "genuine" if the record as a whole could lead a rational trier of fact to find for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). It is "material" if it might affect the outcome of the case under the governing law. Id.

When considering a motion for summary judgment, the court must view the record and all inferences that can be drawn from it in a light most favorable to the nonmoving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). Moreover, the court must consider the entire record in the case, not just those pieces of evidence which have been singled out for attention by the parties. See Clinkscales v. Chevron USA, Inc., 831 F.2d 1565, 1570 (11th Cir.1987).

In the present case, the defendant has raised the defense of accord and satisfaction, claiming that the plaintiff's acceptance and negotiation of its check designated as "full and final settlement of all sums owed to the payee by the payor on the Holiday Inn Job 57" constituted a release by the plaintiff of any rights it may have had under the parties' prior lease agreement. The plaintiff counters by arguing that FLA.STAT. § 671.207 abrogates the common law doctrine of accord and satisfaction and, instead, provides a mechanism whereby a creditor can negotiate a debtor's full payment check and, at the same time, preserve its right to payment under the former agreement.¹

The dispositive question for consideration by this Court is whether Section 671.207 supersedes the common law doctrine of accord and satisfaction. For the reasons that follow, the Court concludes that it does not, and that the parties' transaction is governed instead by Florida's law of contract which, although inconsistent on this issue, arguably supports a finding of an accord and satisfaction as a matter of law.

For the past several years, courts and commentators alike have struggled over the question of whether Section 1-207 of the Uniform Commercial Code (UCC), as embodied in a particular state's counterpart to the UCC, permits a creditor to accept and cash a check offered by a debtor as full payment of a disputed claim, while explicitly reserving the right to obtain payment of the remaining balance from the debtor at some later date.² This issue has been especially puzzling to Florida courts. See Eder, 407 So.2d at 313-14 does not; Miller v. Jung, 361 So.2d 788 (Fla. 2d DCA1978) does.³ Despite the current state of flux, the majority of courts considering the issue of the "full payment" or "conditioned" check have applied the common law doctrine of accord and satisfaction to defeat a creditor's argument under Section 1-207. Anderson, 737 P.2d at 419.

Many of the decisions noted above have been of great value to the Court in reaching a decision in this case, as most reflect well-researched and thoughtful analyses of the issue, including commentary and legislative history. However, in making its finding, the Court is most persuaded by an amendment to Article 3 of the UCC which effectively settles the long-standing debate.

In 1990, Article 3, governing negotiable instruments, was revised to include a section devoted entirely to the issue of accord and satisfaction. Entitled Accord and Satisfaction by Use of Instrument, the new section reads in part,

(a) If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply.

(b) Unless subsection (c) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

U.C.C. § 3-311 (1992).⁴

In conjunction with the revision of Article 3, Section 1-207 was amended to read as follows,

(1) 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.

(2) Subsection (1) does not apply to an accord and satisfaction.

U.C.C. § 1-207 (1992). The amendment is explained by language contained in the Official Comment:

3. Judicial authority was divided on the issue of whether former Section 1-207 (present subsection (1)) applied to an accord and satisfaction. Typically the cases involved attempts to reach an accord and satisfaction by use of a check tendered in full satisfaction of a claim. Subsection (2) of revised Section 1-207 resolves this conflict by stating that Section 1-207 does not apply to an accord and satisfaction. Section 3-11 of revised Article 3 governs if an accord and satisfaction is attempted by tender of a negotiable instrument as stated in that section. If Section 3-311 does not apply,

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