Weickert v. Alliant Health Systems, Inc.

• Decision Date: 30 October 1997
• Docket Number: No. 96-SC-693-DG,96-SC-693-DG
• Citation: 954 S.W.2d 314
• Parties: James WEICKERT, Movant, v. ALLIANT HEALTH SYSTEMS, INC., Respondent.
• Court: United States State Supreme Court — District of Kentucky

Page 314

954 S.W.2d 314

James WEICKERT, Movant, v. ALLIANT HEALTH SYSTEMS, INC., Respondent.

No. 96-SC-693-DG.

Supreme Court of Kentucky.

Oct. 30, 1997.

Robert M. Klein, Louisville, for Movant.

John V. Hanley, B. Frank Radmacher, III, Hanley & Radmacher, Louisville, for Respondent.

KYLE T. HUBBARD, Special Justice.

This appeal is from a decision of the Court of Appeals which reversed the judgment of the circuit court and remanded the case to the circuit court for a determination of the authority of a bank, an undisclosed agent, to bind its principal to an accord and satisfaction.

The issues are whether a depositary bank, in accepting, endorsing and depositing a check containing a restrictive endorsement that stated it was a full and final settlement of a disputed claim, effected a valid accord and satisfaction that is binding upon its principal, Alliant Health Systems, Inc. ("Alliant"), and whether Alliant properly reserved its right to sue for the balance owed when the check was accepted by its agent.

Appellant, James Weickert, was admitted to a hospital of Appellee, Alliant, where he received medical treatment. After he was released from the hospital, Alliant sent Weickert a bill for $30,082.25 for hospital care and treatment. The hospital's bill gave the following directions, "SEND PAYMENTS TO: Alliant Health System, Dept. 94088, Louisville, Kentucky 40294."

Weickert was insured through the Indiana State Council of Plasterers/Cement Masons. The insurer employed Medical Review Systems to review the medical bill and determine whether the charges were reasonable, appropriate, and within the usual and customary limits. Medical Review Systems concluded that a portion of the bill was unreasonable and advised the insurer to only pay the amount of $25,242.83.

On September 24, 1993, Medical Review Systems sent a letter itemizing the disputed charges to Alliant at the address listed on the bill. The letter notified Alliant that acceptance of the payment amounted to settlement in full of the account. Enclosed with the letter was a check from the insurer payable to Alliant in the amount of $25,242.83. The check had a restrictive endorsement that stated, "FULL AND FINAL SETTLEMENT."

The check was received by Alliant's depositary bank, endorsed, and deposited into Alliant's account. Alliant later sent Weickert a bill for $4,839.42, the difference between the original charge and the amount paid by the insurer. On April 5, 1994, Alliant brought this action against Weickert for the outstanding amount owed on the account.

Alliant contends its agent, the depositary bank, had authority to merely collect deposits and did not have authority to bind it to an accord and satisfaction when it accepted a partial payment. Alliant further contends it reserved its right to sue for the balance of the payment when Alliant later billed Weickert for the amount owed and then initiated this action to collect on the debt some months later.

The Court of Appeals relied on Elbert v. Louisville Trust Co., 265 Ky. 522, 97 S.W.2d 26 (1936), and reversed the judgment granted by the circuit court. The facts in Elbert are distinguishable from the facts in the case under consideration. In Elbert, the debtor knew payments in cash were to be made to the principal's bank but, after refinancing of the debt, the debtor then tendered discounted notes, bonds and a set-off to the bank as payment on the debt. The court properly determined that an agent merely to collect is authorized to accept nothing but cash, and any other species of settlement, or payment, is beyond the agent's authority and not binding upon its principal. In the case now under consideration, Weickert's insurer mailed a negotiable...