State, Dept. of Fisheries v. J-Z Sales Corp., J-Z
| Decision Date | 31 March 1980 |
| Docket Number | J-Z,No. 3720-II,3720-II |
| Court | Washington Court of Appeals |
| Parties | , 28 UCC Rep.Serv. 1284 The STATE of Washington, DEPARTMENT OF FISHERIES, Appellants, v.SALES CORPORATION; Dahl Fish Company, Incorporated; Sea Pac Company, Incorporated; James Hill as President ofSales Corporation and Individually, and Jane Doe Hill, his wife; Kjell Dahl as President of Dahl Fish Company Incorporated, as President of Sea Pac Company, Incorporated, and Individually, and Jane Doe Dahl, his wife; Nick Salmella and Jane Doe Salmella, his wife; and the Safeco Insurance Company of America; andSales, Respondents. |
Rochelle E. Wienker, Asst. Atty. Gen., Olympia, for appellants.
Bruce T. Rinker, Seattle, Edward B. O'Connor, Bellingham, for respondents.
Washington's Department of Fisheries appeals from a summary judgment in favor of J-Z Sales, Inc., granted by the Thurston County Superior Court in a breach of contract action brought by the Department against J-Z Sales.
At issue is whether a check tendered by J-Z Sales "as payment in full" for surplus fish and fish eggs was accepted by the Department in such a manner as to establish an accord and satisfaction of the amount due the state for the fish products under the parties' contract. The pivotal issue is whether the amount of the contractual obligation was unliquidated or in dispute at the time payment was tendered. We affirm the judgment for the reasons set forth below.
The parties entered into a contract in 1974 whereby J-Z Sales agreed to buy surplus salmon carcasses and eggs from the Department. The Department had advertised for bids on the products and had estimated that the products available in the districts where J-Z Sales was the successful bidder would amount to 1,355,000 pounds of both edible and inedible fish and 39,000 pounds of eggs. The invitation to bid cautioned that
(t)he estimated pounds of fish in each district and category have been inserted in the bid form for the purpose of bidding on a per pound basis and are not to be regarded as being the actual pounds of fish to be taken under the contract.
The bid specifications went on to state that the "(s)uccessful bidder (or bidders) must take all fish or eggs offered in any category or district."
A problem arose, however. By letter of November 27, 1974, Mr. Kjell Dahl of J-Z Sales informed the Department that the amount of fish and eggs it was receiving under the contract had far exceeded the estimates provided on the bid sheet and that the market was flooded with cheaper fish caught by Indians. J Z Sales suggested that the Department consider reducing the contract price to $.50/lb. for salmon eggs and $.10/lb. for fish, in contrast to the contractual prices of $1.75/lb. and $.21/lb., respectively. Thor Tollefson, then Director of the Department of Fisheries, replied by letter of December 5, 1974. He acknowledged the poor market conditions and the fact that J-Z Sales would receive at least twice the quantity of fish estimated for bid purposes. The letter then stated:
Your request for reduction in prices from $.21/pound to $.10/pound, and from $1.75/pound to $.50/pound for salmon eggs will have to await my review of the statutes, the contract, and legal precedents with the State Auditor's Office and the Attorney General's Office. We assume you are referring to a price reduction for some reasonable portion of the surplus above the "Invitation to Bid Estimated Weight."
After all surplus fish and eggs had been accepted, J-Z Sales had received 843,630 pounds of fish above the bid sheet estimate and 94,4801/2 pounds of eggs above the estimate. Pursuant to the contract prices, J-Z Sales then owed $418,493.10 to the Department, excluding any interest or penalties.
By letter dated June 10, 1975, Craig Hayes of Bellingham, attorney for J-Z Sales, transmitted to the Department a check for $205,036.06 as "payment in full" of its contractual obligation. The letter explained that the unexpected surplus of fish and eggs had combined with the poor market to cause economic hardship to the buyer. J-Z Sales, the letter claimed, had agreed to continue to buy the excess "upon being told by Fisheries Department representatives that adjustments would be made to the original purchase contract." The letter quoted RCW 62A.2-306(1) 1 and contended that J-Z Sales was not, under that statute, obligated to accept the excess products. The amount of the check was calculated as representing payment for the poundage in excess of the Department's bid estimates, multiplied by J-Z Sales' earlier suggested revised prices of $.10/pound for salmon and $.50/pound for eggs.
The Department replied on June 18, 1975, through an assistant attorney general. He stated that the check would be accepted as partial payment and deposited on June 30, and that he assumed J-Z Sales intended to arrange payment of the balance of the contract amount. Counsel for J-Z Sales replied on June 20 that the check was intended as payment in full and no arrangements were being made for further payments. The assistant attorney general on July 24, 1975 returned the check. The cover letter stated that the check would not be accepted as full payment and that legal action was contemplated in view of J-Z Sales' refusal to pay the full amount.
Mr. Hayes on behalf of J-Z Sales refused to take the check back. On July 29, 1975 he returned it to the Department, writing as follows:
Due to your retention of the remittance for such a long period of time, we must decline your return of the check. So far as we are concerned your lengthy retention constituted an acceptance of the terms and conditions of our proposed settlement. There can be no claim of confusion on the State's part since we made our position clear. The retention of the draft was for an unreasonable time, as a matter of law, and the State accepted it in full accord and satisfaction. This is true regardless of whether the check was negotiated or not.
With the lines thus drawn, the Department sued for breach of contract in August, 1975. In an affidavit dated August 28, 1975, another assistant attorney general stated:
In order to assist the Court in a determination of all claims of the parties, in order to prevent the loss and destruction of said check in further transmittals between Olympia and Bellingham, Washington, and in order to preclude any claim or argument by the defendants concerning the status of said non-negotiated check, the plaintiff State of Washington Department of Fisheries hereby tenders said check to the custody of the Clerk of the Court of the Superior Court for Thurston County, Washington, pending resolution of the parties' contentions.
The check was endorsed as follows: The funds have remained in the control of the clerk since then.
Defendants' motion for summary judgment was based upon the contention that an accord and satisfaction of the debt had been established by the conduct of the parties. The trial court granted the motion and the Department's appeal followed. The familiar rule is that the trial court can grant a motion for summary judgment when, construing the evidence in the record in favor of the nonmoving party, no genuine issue of fact exists and the moving party is entitled to judgment as a matter of law. E. g., Adamski v. Tacoma General Hosp., 20 Wash.App. 98, 103, 579 P.2d 970 (1978).
An accord is a contract between debtor and creditor to settle a claim by some performance other than that which is due. Satisfaction occurs when the accord is performed. Plywood Marketing Assoc. v. Astoria Plywood Corp., 16 Wash.App. 566, 574, 558 P.2d 283 (1976). Any claim, whether disputed, unliquidated, or undisputed and liquidated, may be discharged by an accord and satisfaction. Harding v. Will, 81 Wash.2d 132, 138, 500 P.2d 91 (1972). The parties agree, moreover, that in the factual context of this case the following statement of law applies:
(9) Where the amount of a debt or obligation is unliquidated or in dispute, then the tender by the debtor of a certain sum in full payment of the debt, followed by acceptance and retention of the amount tendered, establishes an accord and satisfaction;
Graham v. New York Life Ins. Co., 182 Wash. 612, 621, 47 P.2d 1029 (1935). Accord, Kibler v. Frank L. Garrett & Sons, Inc., 73 Wash.2d 523, 439 P.2d 416 (1968).
For purposes of accord and satisfaction, the underlying dispute over the debt must be in good faith, i. e., the parties must have a bona fide belief in the validity of their positions with respect to the claim. Harding v. Will, supra; Opitz v. Hayden, 17 Wash.2d 347, 369-71, 135 P.2d 819 (1943). See also 1 C.J.S. Accord and Satisfaction § 32 at 515-16 (1936).
The Department's first challenge is to the trial court's reliance on RCW 62A.2-306(1), which we have quoted previously in footnote 1. The trial court ruled that the quantity of fish and eggs acquired by J-Z Sales was, as a matter of law, "unreasonably disproportionate" under that statute, and that, even though J-Z Sales continued to accept the products, a "dispute" arose as to the fair price for the excess products.
The Department argues that the court had an obligation to assess the commercial background and intent of the parties and the industry practice as a whole before it could declare that the actual output of fish in this case was unreasonable to J-Z Sales, and that the record was completely devoid of any evidence on this point. Furthermore, the Department argues that as J-Z Sales did not rely on RCW 62A.2-306(1) to reject the tender of excess fish products, but took them anyway, it has effectively waived the argument that the excess products were unreasonably disproportionate.
We think that there was a dispute for purposes of accord and satisfaction, for the following reasons. We agree with the trial...
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