Don Kral Inc. v. Lindstrom
| Citation | 286 Minn. 37,173 N.W.2d 921 |
| Decision Date | 16 January 1970 |
| Docket Number | No. 41881,41881 |
| Parties | DON KRAL INCORPORATED, Respondent, v. Carl E. LINDSTROM, et al., Defendants, Carl E. Lindstrom, Appellant. |
| Court | Supreme Court of Minnesota (US) |
Syllabus by the Court
1. An enforceable accord and satisfaction may arise when a creditor accepts part payment of an unliquidated debt which the debtor tenders in full satisfaction of the debt, or when the debtor offers to pay a definite amount or provide a different performance in settlement of a liquidated or undisputed debt and the creditor accepts that offer.
2. Where the accord is not fully performed, the original claim is not satisfied and the accord does not constitute a defense to an action based on the original claim.
3. The giving by a debtor of his note or the note of a third person constitutes satisfaction only if the creditor agrees to receive the note as absolute payment and run the risk of its being paid. The burden of establishing that it was so received is on the debtor, who must prove there was an express agreement that the note was taken absolutely as payment.
4. There is no evidence of an agreement on the part of plaintiff in the instant case to accept the assignment of the note and mortgage as satisfaction of its prior claim. The lien waiver was not an acknowledgment by plaintiff that it had received payment in full for supplies and work done.
5. The assignment in the instant case should be viewed as an instrument in the nature of a security agreement rather than as an accord and satisfaction.
6. The function of a court of review is not to weigh the evidence as if trying the matter de novo, but to determine from an examination of the record if the evidence as a whole sustains the trial court's findings, and if it does so, it is immaterial that the record might also provide a reasonable basis for inferences and findings to the contrary.
Edward M. Cohen, Minneapolis, for appellant.
R. P. Harriman, Hopkins, for respondent.
Heard before KNUTSON, C.J., and NELSON, MURPHY, PETERSON, and GRAFF, JJ.
This is an appeal from a municipal court judgment for $1,250 in favor of plaintiff, Don Kral Incorporated. Plaintiff brought the action to recover the amount still due it for work on the residence of defendant Carl E. Lindstrom. Defendants Richard and Joan Burton filed no answer. Defendant Lindstrom asserted as a defense an accord and satisfaction. The trial court found, however, that plaintiff was entitled to judgment against all of the defendants for $1,250.
The parties stipulated as to the facts. Plaintiff is a masonry contractor who did work on the home of defendant Lindstrom in October 1960 and in the spring of 1961. Defendants Burton were the general contractors doing the work on defendant Lindstrom's residence. Kral, a subcontractor during 1960 and 1961 did work on the Lindstrom residence worth $2,400. Lindstrom paid that amount to the Burtons, but they paid Kral only $1,200. When Kral did not receive payment of the balance due, it filed a mechanics lien against defendant Lindstrom's property in the spring of 1961. In addition to the Burtons' asking Kral to do masonry work on the Lindstrom home, defendant Lindstrom also requested Kral to do some work.
In May 1962, when the mechanics lien came up for foreclosure, Lindstrom assigned to Kral a mortgage and note for $1,250 in return for a lien waiver in the amount of $1,200. The mortgage and note had been executed by the Burtons, who since have filed bankruptcy.
On this appeal, as in the trial court, the only issue is whether an accord and satisfaction was reached between plaintiff and defendant Lindstrom, thereby discharging Lindstrom from all liability for labor and material furnished by plaintiff.
1. An 'accord and satisfaction' is a method of discharging a contract, the accord being a contract between the creditor and the debtor for settlement of the claim by some performance other than that which is due, and the satisfaction being the execution or performance of the accord. See, 1 Am.Jur. (2d), Accord and Satisfaction, § 1. An enforceable accord and satisfaction may arise when a creditor accepts part payment of an unliquidated debt which the debtor tenders in full satisfaction of the debt, or when the debtor offers to pay a definite amount or provide a different performance in settlement of a liquidated or undisputed debt and the creditor accepts that offer. Butch Levy Plumbing & Heating, Inc. v. Sallblad, 267 Minn. 283, 126 N.W.2d 380. An executory accord is an agreement for the future discharge of an existing claim by a substituted performance. Daly v. Chicago & N.W. Ry. Co., 262 Minn. 351, 114 N.W.2d 682, 94 A.L.R.2d 499; 1 C.J.S. Accord and Satisfaction, § 37.
2. If the accord constitutes a binding contract and it is fully performed, the original liability is discharged. Burleson v. Langdon, 174 Minn. 264, 219 N.W. 155; Restatement, Contracts, § 417. On the other hand, where the accord is not fully performed, the original claim is not satisfied and the accord does not constitute a defense to an action based on the original claim. Restatement, Contracts, § 417; 1 Am.Jur.(2d) Accord and Satisfaction, § 47.
3. The rule that an accord in the form of a new promise, if unexecuted, does not operate as a satisfaction, is subject to an important qualification. When the parties agree that the promise itself will constitute satisfaction of the prior debt, and the new agreement is based on sufficient consideration and is accepted in satisfaction, then it discharges the original claim and is a defense to an action based upon such claim. Ward v. Allen, 138 Minn. 1, 163 N.W. 749; Burleson v. Langdon, Supra; 1A Dunnell, Dig. (3 ed.) § 34.
The instant controversy centers around the issue of whether the agreement to assign the note and mortgage in return for the mechanics lien waiver was intended by the parties to constitute satisfaction of the accord, or whether they intended satisfaction of the debt only upon payment of the note. If the parties intended the former, then a valid accord and satisfaction was consummated, and plaintiff would be left to pursue its remedy on the mortgage note and not on the original obligation. Restatement, Contracts, § 417. If, however, the parties intended satisfaction to occur only when the obligation under the note was performed, then, since payment on...
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