Kroulee Corp. v. A. Klein & Co., Inc.
| Citation | 426 N.Y.S.2d 206,103 Misc.2d 441 |
| Court | United States State Supreme Court (New York) |
| Decision Date | 10 March 1980 |
| Parties | , 28 UCC Rep.Serv. 969 KROULEE CORPORATION v. A. KLEIN & COMPANY, INC. and Crown Paper Board Co., Inc. |
Finley, Kumble, Wagner, Heine & Underberg, New York City, for defendants.
This is a motion by plaintiff to dismiss defendants' affirmative defense of accord and satisfaction.
In January 1979 defendants ordered certain aluminum foil from plaintiff. The agreed price was $22,062.45. Delivery was made in June 1979, and defendants sent the sum of $5,000 to plaintiff on account. Thereafter, a dispute arose between the parties over the condition of the foil and the price. On October 24, 1979 defendants sent a check to plaintiff in the amount of $6,093.06 along with a letter stating that the check represented payment in full after provision for a set-off for the damaged condition of the merchandise. On the back of the check was typed:
"Endorsement of this check by payee shall constitute a full accord and satisfaction of payee's invoice no. 2767 to maker hereof."
Plaintiff responded with a letter dated November 1, 1979 advising defendants that it had not agreed to accept any amount less than the balance due, and that plaintiff was depositing the check as a partial payment of $6,093.06 under protest and specifically reserving any and all rights to collection of the balance due. After striking defendants' notation, plaintiff deposited the check with its own notation typewritten on the back stating:
"Accepted in partial payment of invoice no. 2767 under protest and without prejudice to any and all rights to collect the balance due of $10,969.39, plus interest."
Thereafter, plaintiff instituted suit for the balance. Defendants' answer contains an affirmative defense alleging the check dated October 24, 1979, in the amount of $6,093.06, constituted a full accord and satisfaction.
The transaction between plaintiff and defendant is covered by the Uniform Commercial Code. Section 1-207 states:
Under the New York Annotations (McKinney's Cons.Laws of N.Y., Book 621/2, Uniform Commercial Code, § 1-207, p. 65) it is stated:
"This section permits a party involved in a Code-covered transaction to accept whatever he can get by way of payment, performance, etc., without losing his rights to demand the remainder of the goods, to set-off a failure to quality, or to sue for the balance of the payment, so long as he explicitly reserves his rights."
A further explanation of section 1-207 is made in Anderson, Uniform Commercial Code ():
"The Code provides that a party may expressly preserve his rights and protect them against the danger of loss by waiver or estoppel if he makes an explicit reservation of such right.
Any form of expression indicating an intention to preserve rights is sufficient, such as 'without prejudice', 'under protest', 'under reservation' or 'with reservation of all our rights'.
The Code states an 'explicit' reservation must be made. 'Explicit' undoubtedly is used in place of 'express' to indicate that the reservation must not only be 'express' but it must also be 'clear' that such a reservation was intended.
The Code does not impose any requirement as to the form of the reservation, other than it be explicit."
In researching the reservations contemplated by section 1-207 of the Uniform Commercial Code, the court finds a paucity of New York cases on the subject. However, the Supreme Court of South Dakota (that State's highest court) has ruled on UCC 1-207 in a case very similar to the one before this court. (Scholl v. Tallman, 247 N.W.2d 490.) Defendant therein sent a check to plaintiff with the following statement typed on the back:
"Wesley Scholl Settlement in Full for all Labor and Materials to Date."
Plaintiff cashed the check, but not before he had scratched out the typing on the back and written:
"Restriction of payment in full refused. $1,826.65 remains due and payable."
South Dakota's statute SDCL 57-1-23 is an exact duplicate of UCC 1-207. The Court, in holding that there was no accord and satisfaction, stated at page 492 "We hold that plaintiff's conditional endorsement in this instance constitutes an explicit reservation of rights under SDCL 57-1-23 * * *."
Defendants herein contend that the common law rule of accord and...
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