46 N.E.2d 610 | Ohio | 1943
Lead Opinion
The first question is: Did the Court of Appeals commit prejudicial error in entering final judgment for the defendant, Amino Products Company?
The specific error which the Court of Appeals found was that the Court of Common Pleas should have sustained defendant's motion for a directed verdict made at the conclusion of all the evidence. The appellate court, relying upon Gholson v. Savin,
In that case, a lesser sum was paid in satisfaction of a judgment and the judgment was released of record by an order of the court which recited the agreement of *27 release and decreed satisfaction of the mortgage upon payment of costs by the judgment debtor. It was deemed that by the entry of satisfaction the judgment, except as to costs, was obliterated and could not be sued over or collected upon execution. This court held that what was done "was sufficient to constitute a complete release." If the sixth paragraph of the syllabus in the Gholson case at first blush seems rather far-reaching when applied to a different factual situation, it should be remembered that a syllabus must always be read in the light of the facts presented.
In the case of Seeds Grain Hay Co. v. Conger,
"Generally, however, the law is applied differently in cases of liquidated and undisputed claims, the reason being, as sometimes stated, that the payor pays no more than he is clearly bound in law to pay and there is therefore noconsideration for a release of the remainder of the obligation. But even in such a case, it has been held that when the parties have agreed in settlement of a bona fide dispute between them, that the lesser sum shall be received in satisfaction of the greater, it will be regarded as an accord and satisfaction." (Italics ours.)
The doctrine that the payment of a lesser sum in satisfaction of a liquidated and undisputed obligation for a greater amount presently or past due is not an accord and satisfaction is said to stem from Pinnel's Case, 3 Coke's Reports (Part V, page 117a), 238, 77 Eng. Rep. R., 237, decided in 1602. Upon an examination of the authorities it appears that that doctrine now prevails in most jurisdictions in this country. A good review of the adjudicated cases may be found in the case ofState v. Mass. Bonding Ins. Co., 40 Del. (1 *28
Terry), 274, 9 A.2d 77. See, also, Clay v. Rossi, 62 Idaho, ___,
Our attention has been called to Rye v. Phillips,
What is meant, then, when it is stated that an accord and satisfaction does not arise by the payment and acceptance of a lesser amount in full payment of a "liquidated and undisputed claim?" A liquidated claim is one that can be determined with exactness from the agreement between the parties or by arithmetical process or by the application of definite rules of law. State v. Mass. Bonding Ins. Co., supra; Wood Co. v.Sutton,
There is little difficulty in applying the established principles to the case at bar. In determining whether a motion for a directed verdict should be sustained the court considers only the evidence favorable to the party against whom the motion is directed. Hamden Lodge v. Ohio Fuel Gas Co.,
Looking to the evidence of the plaintiff herein we find that an agreement was made with the defendant for two and one-half per cent commission on all future sales to Chinese customers and that this contract though indefinite in duration was not terminated until after all orders on which the plaintiff bases his right of action were given by Woo to the defendant. Moreover, the amounts of the orders and shipments not being in controversy, the amount due and owing to plaintiff could readily and definitely be ascertained by arithmetical computation and so according to plaintiff's testimony would be liquidated for the full amount claimed by him.
The defendant's evidence, however, warranted the inference that the commission of two and one-half per cent applied only to the second order which amounted to 100,000 pounds of amino salts. In addition there was conversation between the plaintiff and Marshall, the vice president, in which they entered into a dispute as to the amount due and owing to the plaintiff. However, on the witness stand Marshall admitted that he had made a previous statement to the effect that the two and one-half per cent commission would apply to any future business. Thus the question of a bona fide dispute would become one for the jury alter it found that the claim was liquidated as contended by plaintiff.
Here, then, is a conflict in the evidence as to whether the plaintiff's claim was liquidated or unliquidated as to its amount. If the jury found that the claim was unliquidated plaintiff could not recover for in that event the acceptance of the check would constitute accord and satisfaction; but if the jury found that the claim was liquidated, it would be compelled to go further and determine whether there was a bona fide dispute as to the amount of plaintiff's claim at the time the check was given. The debtor's contention may turn out ultimately to be groundless in fact yet be so *31 far tenable as to be the foundation of a bona fide dispute. If the jury finds that such a dispute existed, then the defense of accord and satisfaction is made out.
Consequently the trial court properly overruled the motion for a directed verdict and the Court of Appeals erred in entering final judgment for the defendant.
Nevertheless, counsel for the defendant Amino Products Company maintain that the trial court did commit reversible error in giving certain requests before argument and in charging the jury. A careful examination of the requests given and of the charge discloses that certain statements of law made by the trial judge, taken separately and alone, do not fully cover the issues in the case but we are of the opinion that the instructions as to the law when read together and considered as a whole are not prejudicially erroneous. It is our judgment that substantial justice has been done and that there is no reversible error apparent on the face of the record of proceedings in the trial court.
For the reasons given the judgment of the Court of Appeals is reversed and that of the Court of Common Pleas affirmed.
Judgment reversed.
WEYGANDT, C.J., ZIMMERMAN and TURNER, JJ., concur.
HART, J., concurs in paragraphs two and three of the syllabus but dissents from paragraph one and from the judgment.
MATTHIAS and BELL, JJ., not participating.
Dissenting Opinion
Unquestionably the acceptance of a check for a lesser sum on condition that it shall constitute a satisfaction of an unliquidated or disputed claim of greater amount, presently or past *32 due, constitutes an accord and satisfaction. Here there is said to be a consideration for the release of the debt because of the uncertainty of its amount or because of uncertainty as to its validity. In this I fully agree with the majority opinion of this court.
But what must be the rule where the debtor tenders a check to his creditor conditioned that it shall be in full satisfaction of the latter's liquidated or undisputed claim of a larger amount and the check is retained and cashed by the creditor with a full and complete understanding of all the facts concerning the nature and character of the debt and the situation of the parties? Many courts have held, and quite unanimously so until recent years, that an accord and satisfaction may never take place under such circumstances because there is a lack of consideration to support the settlement.
My apology for the length of this dissenting opinion lies in the fact of the great importance of the question involved, of the frequency of its recurrence as an issue to be determined by the courts, of the confusion which I fear may result from the decision of the court in this case in connection with the case of Gholson v. Savin,
The doctrine that a liquidated or undisputed debt cannot be compromised by the payment of a lesser sum unless there is some collateral consideration for the settlement is perhaps mistakenly said to rest on Lord Coke's dictum in Pinnel's Case, 3 Coke's Reports (Part V, page 117a), 238, 77 Eng. Rep. R., 237 (1602), which was as follows:
"Resolved by the whole court, that payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole, because it appears *33 to the judges that by no possibility, a lesser sum can be a satisfaction to the plaintiff for a greater sum; but the gift of a horse, hawk, or robe, etc., in satisfaction is good. For it shall be intended that a horse, hawk, or robe, etc., might be more beneficial to the plaintiff than the money, in respect of some circumstance, or otherwise the plaintiff would not have accepted of it in satisfaction. But when the whole sum is due, by no intendment the acceptance of parcel can be a satisfaction to the plaintiff."
Under the modern law of contracts, as I view it, the rule inPinnel's Case, above quoted, has no application to an executed agreement of settlement and release. Some authorities take the position that such an agreement of settlement constitutes a secondary contract having sufficient consideration to support it, while others hold that the executed agreement resulting in mutual release cannot be attacked for want of consideration.
It will be noted that in Lord Coke's dictum there is no indication that the resolution of the court was based upon the doctrine of consideration. As a matter of fact, the doctrine of consideration had not, at that date, been adopted as an essential element of contracts. Besides, Coke's position on that subject is not a matter of mere inference. We have his own explicit statement discriminating in the sharpest way between the operation of part payment as a satisfaction, and as a consideration. In the later case of Bagge v. Slade, 3 Bulst., 162, 1 Rolle, 354, 81 Eng. Rep. R., 137, 530, he said:
"If a man be bound to another by a bill in £1000 and he pays unto him £500 in discharge of this bill, the which he accepts of accordingly, and doth upon this, assume, and promise to deliver up unto him his said bill of £1000, this £500 is no satisfaction of the £1000, but yet this is good, and sufficient to make a good *34 promise, and upon a good consideration, because he hath paid money five hundred pound, and he hath no remedy for this again."
It is interesting to note the interpretation which James Barr Ames, former Dean of Harvard Law School and a learned legal historian, has given to the pronouncements in the two cases above referred to, when he said:
"The frank way of dealing with these cases [in which two or more creditors compromise with their debtor upon payment of a percentage of their claims] is to say that they can be supported only upon Coke's view, that the payment of part of a debt is a good consideration for the creditor's promise to relinquish all claim to the rest. In his day, it is true, the only way in which the debtor could make use of such a promise was by a cross action. But in recent times such a promise would serve as a bar to an action upon the partially paid debt, on the ground of avoiding circuity of action, since what the creditor recovered in his action against the debtor, he would have to repay as damages in the cross action." 12 Harvard Law Review, 526.
The rule or doctrine of "no consideration," attributed to Lord Coke in Pinnel's Case, was, it is said on good authority, first announced by Lord Ellenborough in the case of Fitch v.Sutton, 5 East, 230, 102 Eng. Rep. R., 1058 (1804), wherein he assumed to interpret but, according to Dean Ames, misinterpreted the holding in Pinnel's Case, because he was unaware of, or failed to give consideration to the case ofBagge v. Slade, supra.
Be that as it may, it is now well settled that a creditor may enter into a valid contract with his debtor, in consideration of part payment of the debt, not to prosecute an action to recover the balance of the claim, which such contract has been referred to by the courts *35
and law writers as a "covenant not to sue." Many courts, in order to carry out the intent of the debtor and creditor who have consummated an agreement whereby the debtor has paid and the creditor received a sum on condition that it shall be in full satisfaction of a larger debt, have held that such an agreement is equivalent to a covenant on the part of the creditor not to sue, and thus in effect discharge the original obligation. Such courts hold that the sum paid is sufficient consideration for the secondary contract not to sue on the original obligation, and in case the creditor breaches his covenant by bringing suit on the original obligation, the debtor is entitled to recover as damages for breach of the latter contract an amount equivalent to that remaining unpaid on the original contract. Restatement of Contracts, 763, Section 405 (1), and comment on subsection (1);Reynolds v. Pinhowe, 1 Roll Ab. 28, 78 Eng. Rep. R., 669;Johnson v. Astell, 1 Lev., 198, 1 Keb.,
I concede that executory agreements to accept less than the full amount of a fixed and certain indebtedness without some collateral consideration to supply the quid pro quo for the difference, are voidable and unenforcible before final consummation, but not so when fully executed. "An agreement by one person to discharge another from the obligations of a written contract *36
as a matter purely ex gratia and in the nature of a donation would be of no binding validity as a mere executory agreement and to be effectual must be fully executed by an actual release or surrender of the contract in writing." 12 American Jurisprudence, 986, Section 407, citing Thurston v. Ludwig,
Many courts, especially in recent years, unwilling to be bound by the absurdities and injustice of the rule said to be announced in Pinnel's Case, have ceased merely to criticize the rule and are now holding that where an agreement has been voluntarily made between debtor and creditor, whereby the latter agrees to receive a less sum than his liquidated or undisputed debt in full satisfaction of his debtor's obligation, and the debtor has actually made payment accordingly, so that the new agreement has been consummated and executed, such settlement will constitute an accord and satisfaction, which cannot later be impeached by the creditor.
"A contract once fully performed will never be disturbed for want of consideration. [12 American Jurisprudence, 987, Section 408, citing Lamb v. Morrow, Treas.,
After a contract has been fully executed on both sides, the element of consideration has no function. "If one makes an executory contract which lacks consideration, he may avoid it when called on for performance, but if he executes the contract by performance *37
he cannot undo his voluntary act." 17 Corpus Juris Secundum, 422, Section 71. See, also, In re Estate of Alms,
Even "a sealed contract may be modified by a subsequent parol agreement if the latter has been executed or has been so acted upon that the enforcing of the original contract would be inequitable." 12 American Jurisprudence, 1008, Section 429, citing Very v. Levy, 54 U.S. (13 How.), 345,
Professor Williston in 1 Williston on Contracts, 417, Section 120, after stating the common-law rule, says:
"It has been held in several cases that payment of *38
a reduced rent in accordance with a parol agreement satisfies the tenant's obligation under the lease to pay a larger sum." Citing Julian v. Gold,
Also in a note to the same section appears the following:
"In Barnett v. Rosen,
The rule as applied to executed contracts has been directly repudiated by judicial decision in the following cases:Rye v. Phillips,
"An agreement hereafter made to change or modify, of to discharge in whole or in part, any contract, obligation, or lease, or any mortgage or other security interest in personal or real property, shall not be invalid because of the absence of consideration, provided that the agreement changing, modifying or discharging such contract, obligation, lease, mortgage or security interest, shall be in writing and signed by the party against whom it is sought to enforce the change, modification or discharge." Vol. 1, Laws of N.Y. (1936), 614, Chapter 281, Section 279.
The same effect is given without the aid of statute to a receipt in full in a few states, most of which have modified by statute the common-law rules as to sealed instruments. SeeDreyfus v. Roberts, supra; Aborn v. Rathbone,
In this connection the editors of American Law Reports, in an annotation appearing in 119 A. L. R., 1123, call attention to a large number of cases wherein the rule in question has been severely criticized and its application generally denied through some fantastic device of the courts to escape an unjust or improper result. In connection with this annotation the editors, in commenting upon the rule, say:
"In the course of its history there have been so many additional exceptions engrafted upon it by the courts in this country, that even in jurisdictions where it is not entirely repudiated by statute or judicial decisions, the rule, while still theoretically obtaining at the present time, largely serves as the background for the application of some exception to it which in the *40
great majority of the cases precludes or forecloses its applicability." See also Cantrall v. Waterman,
In line with what I believe is a modern trend represented by these authorities, this court two years ago in the case ofGholson v. Savin, supra, held that:
"While an executory agreement on the part of a creditor to accept in payment and full satisfaction of a liquidated claim a sum less than the amount of such claim, without any additional consideration to support such agreement, is ordinarily not enforcible at law, yet if such agreement has been executed and settlement made accordingly, or has been made with some benefit or advantage to the creditor, however slight, it will operate as a full discharge of the debt in accordance with the intention of the parties."
That case, since its decision, has been cited and commented upon by commentators and the law magazines of this country with general approval and commendation. See 15 University of Cincinnati Law Review, 319; 40 Michigan Law Review, 317; 50 Yale Law Journal, 1485; 7 Ohio State Law Journal, 463.
The majority opinion in discussing the case ofGholson v. Savin, supra, seeks to justify the holding in that case and differentiate it from the case at bar because the settlement there related to a judgment which was cancelled of record by means of a court entry. The form or character of proof in that case, in my judgment, was not controlling in its decision. They only emphasized the solemnity with which the parties entered in the contract of settlement. The fact that the cancellation of the judgment was evidenced by a journal *41 entry approved by the court, in my judgment, did not give it any greater efficacy than would a receipt in full signed by the judgment creditor who received the settlement money. The court, after the rendition of the judgment, lost all jurisdiction in the case except to issue process to enforce and satisfy the judgment according to statutory procedure. The controlling principle in the Gholson v. Savin case was based upon the fact that the parties had deliberately entered into a contract of settlement which had been fully executed and carried out according to the intentions of the parties. The character of the evidence of such settlement was unimportant.
While it is elementary that consideration is necessary in the creation of a contract, the act of an obligee in surrendering a part of his claim to his debtor does not create a new contract. A creditor may discharge his debtor without any consideration. Sheehy v. Mandeville, 10 U.S. (6 Cranch), 253,
Mr. Williston in note 9 to Section 120, 1 Williston on Contracts (Rev. Ed.), 419, says:
"In New York part payment will discharge the obligation where there is evidence of delivery of receipt in full with intention of making a gift of the balance to the debtor." CitingGray v. Barton,
"The payment of a part of a debt or demand will not discharge the whole thereof without an acceptance of such partial payment as satisfaction. Such acceptance may be actual, by an express and affirmative agreement or consent to receive a partial payment in settlement of the whole debt or demand, or it may be constructive, or implied in law, by the acceptance of a partial payment tendered on the condition that it be accepted in full settlement. In the latter case, actual or express assent or acceptance in satisfaction, apart from acceptance and retention of the payment, is not required, nor is the execution of a receipt necessary, and even an affirmative refusal to consent to the satisfaction and discharge of the demand is unavailing. [Hudson, v. Yonkers Fruit Co., Inc.,
All courts recognize that a debtor has the right of disposition of his own money in the payment of his obligations and no creditor can lawfully appropriate the money of his debtor to account or debt against the will of the latter without due process of law, unless the debtor owes the money in the capacity of agent or fiduciary, in which event, it is not his own money but that of his principal or beneficiary. The debtor therefore has the right to attach such conditions to his payment *44
as he sees fit, independently of whether the debt is liquidated or undisputed, and such condition cannot be disregarded by the creditor without legal consequences hereafter discussed.Stewart v. Hopkins,
On this subject, Judge Cardozo, speaking for the court in the last case cited, said:
"The question then is whether the acceptance of the check without approval of the deduction is to be viewed as the breach of a condition lawfully imposed. A debtor paying his own money may couple the payment with such conditions as he pleases (Nassoiy v. Tomlinson,
The rationale of this rule, as applied to the acceptance of checks conditioned that acceptance shall constitute full payment of an obligation, is that the debtor is disposing of his own money, and may, therefore, attach whatever condition he may choose to the disposition. *45 To take the money and at the same time ignore the condition on which it was offered would amount to a conversion on the part of the creditor. Under such circumstances the law will deem the money to have been taken by the creditor lawfully and not tortiously, and will declare that its retention when tendered in full satisfaction of an obligation gives rise to an irrebuttable presumption that the condition has been accepted. "* * * the creditor is not allowed to assert his tortious conversion, though the effect of such a ruling is to fix upon him a bargain which he never made." 3 Williston on Contracts (1920 Ed.), 3178, Section 1855.
"It is a general principle that where an act may rightfully be done with certain consequence or effect, the actor cannot assert for his own advantage to avoid that effect, that the act was done wrongfully. * * * The imposition of an accord and satisfaction on the creditor against his will can be justified only where his taking the check would be tortious except on the assumption of a taking in full satisfaction." 3 Williston on Contracts (1920 Ed.), 3179, Section 1856; 1 Restatement of Contracts, 77, Section 72 (2); Hudson v. Yonkers Fruit Co.,Inc., supra.
The rules of offer and acceptance apply. Where a tender of payment is made upon certain conditions, the creditor has no right to accept the tendered payment and disregard the conditions attached. If he exercises dominion over the thing offered or tendered, he will be bound by the conditions.Grouf v. State Natl. Bank of St. Louis,
I concede that to constitute an accord and satisfaction by the acceptance of a check conditioned that such *46 acceptance shall constitute a full satisfaction of an unliquidated or disputed debt, or of a liquidated debt for a larger amount, there must be a full understanding of the facts involved; there must be absence of fraud, imposition or mistake; and the circumstances must be such that the law will imply an acceptance by the creditor of the tender and condition attached by the debtor. In some instances, these cases may involve questions of fact to be submitted to a jury; but where the facts are not in dispute, there is only a question of law to be determined by the courts.
In the instant case I agree with the majority opinion that there is a dispute in the evidence as to the amount, if any, due to the plaintiff from the defendant. There is a dispute as to the amount of commissions to be paid and as to how long the contract for commission was to continue in force. But these are disputes as to the interpretation of the facts rather than as to the facts themselves and at most were merged in the settlement if there was one. Consequently, in my judgment, there was an accord and satisfaction and the judgment of the Court of Appeals should be affirmed. On the other hand, if the Court of Appeals cannot be sustained in entering final judgment, the case should be remanded for a new trial, because, in charging the jury before argument, the court failed to submit the issue of accord and satisfaction as requested.
The old rule which has become obnoxious to the law, if applicable to executed agreements of settlement, breeds dishonesty and unnecessary litigation. It encourages duplicity on the part of the creditor to pretend to make a settlement with his debtor and get as much cash as possible from him and then disregard the ethics of fair dealing and sue the creditor for the remainder. The courts also experience difficulty in the application of this rule, in determining whether a claim is liquidated *47 or unliquidated, disputed or undisputed, and if disputed whether the dispute is bona fide or otherwise. This difficulty and expense of litigation is well illustrated in the instant case which has already been twice tried in the Common Pleas Court, twice reversed by the Court of Appeals and is now disposed of by this court, as I see it, without a proper consideration of the issue of accord and satisfaction asserted by the defendant, because of error in its submission to the jury which rendered the verdict upon which the judgment is based.
I concur in paragraphs two and three of the syllabus but dissent from the first paragraph thereof and from the judgment.
