Ex parte Southern Cotton Oil Co.

• Decision Date: 30 June 1922
• Docket Number: 3 Div. 578.
• Citation: 207 Ala. 704,93 So. 662
• Parties: EX PARTE SOUTHERN COTTON OIL CO.
• Court: Alabama Supreme Court

93 So. 662

207 Ala. 704

EX PARTE SOUTHERN COTTON OIL CO.

3 Div. 578.

Supreme Court of Alabama

June 30, 1922

Certiorari to Court of Appeals.

Petition of Southern Cotton Oil Company for certiorari to the Court of Appeals to review and revise the judgment and decision of said court in the case of Southern Cotton Oil Co. v. H. W Currie. Writ denied.

Where an account was in dispute, a check with statement on its face "a/c in full to date, $81.84," made in connection with a dispute between debtor and creditor as to the amount justly due, meant that the payment was offered in full satisfaction of account and on that condition only.

Petitioner sued H. W. Currie for $260.57 on account, on account stated and for money had and received.

Defendant's plea 4 is as follows:

"4. That the demand of the plaintiff arises from an account between the plaintiff and the defendant covering a period of 8 or 9 months prior to June 6, 1921, during which time there were entered alternately a number of debits and credits; that on June 6, 1921, the amount then owing to the plaintiff by the defendant was in dispute between them; that on said date the defendant delivered to the plaintiff his check on the Bank of Atmore, Atmore, Ala., No. 814, payable to the plaintiff, in the sum of $81.84, upon the face of which check was written the following words and figures: ' a/c in full to date $81.84'; that the plaintiff received said check and collected the same from the said Bank of Atmore on July 2, 1921; wherefore the defendant says that the demand of the plaintiff has been satisfied."

Plaintiff demurred to this plea as follows:

"(1) Because it is not averred that there had arisen a bona fide dispute between the parties prior to the alleged accord and satisfaction. (2) Because it is not averred that plaintiff accepted the said sum of $81.84 in satisfaction of the account owing from defendant to plaintiff. (3) Because it does not appear that there was any consideration for the accord and satisfaction relied on. (4) Because, from aught appearing, the defendant recognized that there was a larger sum than $81.84 due to the plaintiff at the time the check set out in said plea was tendered to plaintiff. (5) Because said plea states the mere conclusions of the pleader. (6) Because it does not appear that the dispute was as to the amount or justness of plaintiff's demand, but that it was only in respect to a set-off claimed by the defendant."

The demurrer being overruled, plaintiff replied as follows:

"(2) For further and separate answers to plea 4, the plaintiff says, that the plaintiff did, at the time set forth in said plea, receive a check as described in said plea, and upon receiving said check, and before cashing or collecting same, plaintiff notified defendant that it would not accept said check in full settlement of said claim, but would accept it only to be applied in part payment of the amount due by defendant to plaintiff, and thereafter plaintiff collected said check and applied the proceeds as part of the indebtedness due by defendant to plaintiff.

"(3) For further replication to plea 4, the plaintiff says that between September 4th, and November 19th, 1920, the plaintiff advanced to defendant a large sum of money, to wit: $6,000.00, for the purpose of purchasing cotton seed to be sold by defendant to plaintiff as per contract between them as hereto attached, marked Exhibit A; that at the time defendant tendered its check in full settlement as set out in said plea, there was no dispute between the parties except as to the credits due by plaintiff to defendant on account of shipments of cotton seed made under said contract attached as Exhibit A, and that before accepting or collecting said check the plaintiff notified the defendant that same would not be accepted in full, but only in part payment of the account due by the defendant to the plaintiff."

Thereupon defendant demurred to said replications as follows:

"(2) Plaintiff had no right in law to accept said check upon any other conditions than that under which it was tendered to the plaintiff.

"(3) Plaintiff could not, by notifying defendant that it was accepting said check as part payment only of the account between them, avoid the legal effect of accepting and collecting said check according to its terms.

"(4) Plaintiff could not, as set forth in the replication, change the terms under which said check was tendered to it by the defendant."

This demurrer being sustained, plaintiff took a nonsuit and appealed.

Hamilton, Page & Caffey, of Brewton, and Steiner, Crum & Weil, of Montgomery, for appellant.

Leon G. Brooks, of Brewton, for appellee.

SOMERVILLE J.

1. It is a well-settled rule of the common law that "the payment of an amount less than that for which the debtor is liable does not constitute a valid accord and satisfaction, unless there is a bona fide dispute or controversy as to the debtor's liability, or as to the amount due from him, or unless the damages are unliquidated." 1 Corpus Juris, 554, § 74. This rule is of course qualified in this state by section 3973 of the Code, which provides that-

"all receipts, releases, and discharges in writing *** must have effect according to the intention of the parties thereto." Hodges v. Tenn. Implement Co., 123 Ala. 572, 26 So. 490.

"While it is not necessary that the dispute or controversy should be well founded, it is necessary that it should be in good faith. Without an honest dispute, an agreement to take a lesser amount in payment of a liquidated claim is without consideration and void. A dispute cannot be raised for the mere purpose of extorting money. And an arbitrary refusal to pay, based on the mere pretense of the debtor, made for the obvious purpose of exacting terms which are inequitable and oppressive, is not such a dispute as will satisfy the requirements of the rule."-1 Corp. Jur. 554, 555, § 75.

"The authorities bearing on this legal question express the principle in somewhat varying phraseology. The question in this class of cases is, whether there is a consideration to uphold the release, or agreed compromise. The surrender of a mere assertion, of claim, or the withdrawal of a threat to sue, when the claim is without legal merit, whether its legal invalidity is known or not, will not uphold a release, or agreement of compromise. 'When a claim is absolutely and clearly unsustainable at law or in equity, its compromise constituted no sufficient legal consideration.' Prince v. Prince, 67 Ala. 565; Prater v. Miller, 25 Ala. 320; s. c., 60 Amer. Dec. 521, and note; Hoge v. Hoge, 26 Id. 52; Cassell v. Ross, 85 Id. 270; Pitkin v. Noyes, 97 Id. 615.

"We must not be understood as affirming, that every compromise, or agreement of compromise, may be avoided by proof of the invalidity to the claim asserted. What we have said must be limited to cases of like kind. Whenever there is a bona fide claim, based on colorable right, such as conflicting or indeterminate testimony from which inferences are to be drawn, and many other supposable categories, it would seem compromises will not only be upheld, but the law encourages them. Knotts v. Preble, 99 Amer. Dec. 514; Farmers' & Mer. Ins. Co. v. Chesmitt, Id. 492, and note; Perryman v. Allen, 50 Ala. 573." Ernst Bros. v. Hollis, 86 Ala. 511, 513, 6 So. 85, 86.

The reason why there must be a bona fide dispute as to the amount due in such cases is that without some concession there would be no valid consideration for the agreement for satisfaction. 1 Corp. Jur. 527, § 12; Hand Lbr. Co. v. Hall, 147 Ala.. 561, 41 So. 78; W. Ry. of Ala. v. Foshee, 183 Ala. 182, 62 So. 500; Daniel v. Hughes, 196 Ala. 368, 72 So. 23; Ernst v. Hollis, 86 Ala. 511, 6 So. 85. As said by the Court of Appeals of New York:

"If a debt or claim be disputed *** at the time of payment, the payment, when accepted, of a part of the whole debt is a good satisfaction and it matters not that there was no solid foundation for the dispute. The test in such cases is: Was the dispute honest or fraudulent? If honest, it affords a basis for an accord between the parties, which the law favors, and the execution of which is the satisfaction." Simons v. Am. Leg. of Honor, 178 N.Y. 263, 70 N.E. 776; Fuller v. Kemp, 138 N.Y. 231, 33 N.E. 1034, 20 L. R. A. 785; Ness v. Minn., etc., Co., 87 Minn. 413, 92 N.W. 333.

Plaintiff's contention here is that, since a plea of accord and satisfaction must rest not merely on the fact of a dispute, but on the fact of a bona fide dispute, an honest claim, asserted without fraud, that there was a real ground for dispute, there is no good reason for not requiring a defendant to plead the existence of "a bona fide dispute," in accordance with the general principles that govern in the allegation of defensive matter.

According to the New Standard Dictionary, to dispute is "to question or deny the truth, genuineness or lawfulness of [anything]; to argue against, controvert or object to; to strive against, to resist."

As a matter of evidence, the dispute must appear to have been bona fide, that is, real, not simulated, and based upon a ground that is at least colorable, as all the authorities hold; but we think that, as a matter of pleading, it would be a finical and useless refinement to require an allegation of that evidential quality, and that the plaintiff will be fully apprized of the defensive issue relied on by the simple allegation that the amount due was in dispute.

The first ground of demurrer was therefore properly overruled. The third and fourth grounds of demurrer deny the sufficiency of the plea, because it does not show that defendant paid a larger sum in satisfaction of plaintiff's demand than defendant admitted was due.

The theory of the demurrer is that, in order...