Les Schwab Tire Centers of Oregon, Inc. v. Ivory Ranch, Inc., 8-81-CIV-89

• Decision Date: 25 May 1983
• Docket Number: No. 8-81-CIV-89,8-81-CIV-89
• Citation: 664 P.2d 419,63 Or.App. 364
• Parties: , 36 UCC Rep.Serv. 1100 LES SCHWAB TIRE CENTERS OF OREGON, INC., an Oregon corporation, Respondent, v. IVORY RANCH, INC., a Nevada corporation, Appellant. ; CA A25881.
• Court: Oregon Court of Appeals

Page 419

664 P.2d 419

63 Or.App. 364, 36 UCC Rep.Serv. 1100

LES SCHWAB TIRE CENTERS OF OREGON, INC., an Oregon

corporation, Respondent, v. IVORY RANCH, INC., a Nevada corporation, Appellant.

No. 8-81-CIV-89; CA A25881.

Court of Appeals of Oregon.

Argued and Submitted March 23, 1983.

Decided May 25, 1983.

Martin E. Hansen, Bend, argued the cause for appellant. With him on the briefs was Johnson, Marceau, Karnopp & Petersen, Bend.

Frank G. MacMurray, Redmond, argued the cause for respondent. On the brief was Paul R. Unger, Redmond.

Before GILLETTE, P.J., and WARDEN and YOUNG, JJ.

YOUNG, Judge.

This appeal presents the novel issue whether ORS 71.2070 (Uniform Commercial Code § 1-207) has altered the common law doctrine of accord and satisfaction as applied to checks tendered as full payment of a disputed sum. The issue was presented to the trial court on cross-motions for summary judgment. The trial court decided that the statute applied and granted plaintiff summary judgment. Defendant appeals from the final judgment, and we reverse.

Plaintiff claimed that defendant owed $1,210.03 on an account for tires, service and finance charges. Defendant claimed that plaintiff had waived the right to collect the finance charges and that the debt was $1,092.68. Plaintiff disagreed and filed an action to recover the larger sum. Defendant then sent plaintiff a check for $1,164.93, intending that it be accepted as full payment. On the face of the check there was the printed statement:

"By endorsement this check when paid is accepted in full payment of the following account."

Immediately below the statement defendant inserted its account number with plaintiff and added "PAID IN FULL." Upon receipt of the check, plaintiff crossed out the words "Paid in Full" and wrote "Accepted under protest and with reservation of rights." Plaintiff endorsed the check and negotiated it.

The trial court concluded that the parties had a bona fide dispute over the finance charges, that plaintiff understood the intent of defendant to offer the check in full satisfaction of the disputed debt ¹ and that by their actions the parties had affected an accord and satisfaction. The court ruled, however, that ORS 71.2070 altered the common law doctrine of accord and satisfaction and that plaintiff could accept the check and reserve the right to collect the balance. On appeal, the parties agree that their respective claims rest solely on the effect of ORS 71.2070 on the principles of accord and satisfaction.

Generally, an accord and satisfaction creates a new, substituted contract that discharges the debtor's liability and constitutes an affirmative defense to an action on the original debt. See Warrenton Lumber Co. v. Smith, 117 Or. 530, 539, 245 P. 313 (1926); Williams v. Leatham, 55 Or.App. 204, 207, 637 P.2d 1296, rev. den. 292 Or. 581, 644 P.2d 1130 (1981). It results where a debt is unliquidated or disputed in good faith, the debtor offers a sum on the condition that it be received as full payment and the creditor accepts it. Kilander v. Blickle Co., 280 Or. 425, 571 P.2d 503 (1977); Edgley v. Jackson, 276 Or. 213, 554 P.2d 476 (1976). The actual, subjective intent of the creditor does not matter; if the creditor cashes a "full payment check," the creditor is deemed to have accepted the debtor's condition of tender. Edgley v. Jackson, supra, 276 Or. at 218, 554 P.2d 476; Reppert v. Plaid Pantries, 42 Or.App. 313, 600 P.2d 494 (1979). At common law, crossing out the debtor's condition and adding words of protest is ineffectual, because the creditor's act of cashing the check is treated as speaking louder than words. 6 Corbin, Contracts, § 1279 at 130 (1962). When given a "full payment check," the creditor has the simple choice of accepting the tendered compromise on the debtor's terms or returning the check and bringing an action on the original debt.

Since Oregon's adoption of the Uniform Commercial Code, ² ORS 71.2070 has provided:

"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." ORS 71.2070.

The Oregon Supreme Court has gratuitously observed that the statute may have changed the common law. The court said in dictum:

" * * * In a transaction to which ORS 71.2070 applies, [the creditor] may well have the option under ORS 71.2070 to collect the tendered 'final' payment 'under protest,' or 'without prejudice,' or with some other explicit reservation of his rights to the remaining claim--at least unless the debtor has, in turn, expressly demanded a waiver of that option. * * * " Kilander v. Blickle Co., supra, 280 Or. at 429, 571 P.2d 503. (Footnote omitted.)

Kilander did not decide the issue, because the creditor had made no attempt to reserve his rights. ³ This case presents the first opportunity to address the issue. ⁴

By reason of the terms of the statute itself, its history, purpose and policy, we hold that ORS 71.2070 does not alter the principles of accord and satisfaction.

By its terms, ORS 71.2070 does not fit the circumstances of accord and satisfaction. It requires that the creditor "assent to performance in a manner demanded or offered by the other party." Where a debtor offers to compromise through accord and satisfaction, the creditor, such as plaintiff here, literally does not "assent to performance in a manner * * * offered" by the debtor; rather, the creditor refuses to assent to the essential condition of the offer." Milgram Food Stores, Inc. v. Gelco Corp., 550 F.Supp. 992 (WD Mo.1982); Brown v. Coastal Truckways, Inc., 44 N.C.App. 454, 261 S.E.2d 266 (1980); Barber v. White, 46 N.C.App. 110, 264 S.E.2d 385 (1980); Jahn v. Burns, 593 P.2d 828 (Wyo.1979).

The official comments to ORS 71.2070 imply that the section is inappropriate to the circumstances of accord and satisfaction. Comment (1) explains:

"1. ORS 71.2070 provides machinery for the continuation of performance along the lines contemplated by the contract despite a pending dispute * * *." Legislative Counsel Committee, Oregon's Uniform Commercial Code 16 (1961) (hereinafter cited as Oregon Commentary ). (Emphasis supplied.)

Comment (2) adds:

"ORS 71.2070 does not add any new requirement of language of reservation where not already required by law, but merely provides a specific measure on which a party can rely as he makes or concurs in any interim adjustment in the course of performance. * * * " Oregon Commentary, supra, at 16. (Emphasis supplied.)

The statute appears to be inopposite, because

" * * * [A]n accord and satisfaction involves a new contract, not the contemplated performance of the original contract. By using the 'full payment check' the buyer is seeking to fulfill, not continue, its duty to pay." Chancellor Inc. v Hamilton Appliance Co., Inc., 175 N.J.Super. 345, 418 A.2d 1326, 1329 (1980).

See Jahn v. Burns, supra. ⁵

Another clue is what the statute and its comments do not say. The Uniform Commercial Code generally indicates where the common law is changed, see, e.g., ORS 72.2090(1); 72.2070. Nothing in ORS 71.2070, its comments or its cross reference indicate a change in the law of accord and satisfaction. See Oregon Commentary, supra, at 16. ⁶

The history of ORS 71.2070 intimates that its drafters did not intend or foresee that it would alter accord and satisfaction. Oregon's provision is as originally proposed by the American Law Institute and the National Conference of Commissioners on Uniform State Laws, Oregon Commentary, supra (Preface at v), and it is identical to Section 1-207 of the 1950 Proposed Final Draft of the U.C.C. At that time Section 1-207 coexisted with another provision of the code that codified and expanded the doctrine of accord and satisfaction. Section 3-802(3) provided:

"Where a check or similar payment instrument provides that it is in full satisfaction of an obligation the payee discharges the underlying obligation by obtaining payment of the instrument unless he establishes that the original obligor has taken unconscionable advantage in the circumstances." U.C.C. § 3-802(3) (1952 Official Draft).

Section 3-802(3) expanded the common law by permitting accord and satisfaction when the obligation is undisputed and liquidated. Because the section might have been "open to abuse," it was deleted in the 1957 Official Draft. American Law Institute, National Conference of Commissioners on Uniform State Laws, Supplement No. 1 to the 1952 Official Draft of Text and Comments of the Uniform Commercial Code 25 (1955); U.C.C. § 3-802 (1957). Accord and satisfaction was left entirely to common law.

The instructive value in Section 3-802(3) is that it existed entirely without reference to Section 1-207. The comments to neither section referenced the other. See U.C.C. §§ 1-207, 3-802(3) (1952 Official Draft). Similarly, the comment to Section 3-112(f), which speaks of the negotiability of checks tendered as payment in full, omits reference to Section 1-207 and instead cross-references only section 3-802(3). ⁷ This background indicates that the drafters of Sections 1-207 and 3-802(3) probably did not intend to write overlapping sections regarding accord and satisfaction but, rather, conceived of them as unrelated. See Rosenthal, Discord and Dissatisfaction: Section 1-207 of the Uniform Commercial Code, 78 Columbia L.Rev. 48, 58-63 (hereinafter cited as "Rosenthal"); Note, Accord and Satisfaction Under Uniform Commercial Code Section 1-207: Scholl v. Tallman, 38 Ohio S.L.J. 921, 926-29 (1977); see also Chancellor, Inc. v. Hamilton Appliance Co., Inc. supra; Brown v. Coastal Truckways, Inc., supra.

We believe that Section 1-207 was designed to serve a purpose unrelated to accord and satisfaction. Its purpose was to protect against waiver and estoppel. Cf. Anderson, The ...