Myron Soik & Sons, Inc. v. Stokely USA, Inc.

498 N.W.2d 897, 175 Wis. 2d 456, 1993 Wisc. App. LEXIS 374

• Court: Court of Appeals of Wisconsin
• Decided: March 25, 1993
• Docket: 92-0251
• Status: Published

Opinions

EICH, C.J.

This is a class action by farmers growing corn under contract with Stokely USA, Inc., a vegetable canning company. The growers sued Stokely, claiming the company had failed to pay the amounts due them under the contracts.

The growers' claims center on a section of the 1990 corn contract providing a method of payment for "passed acreage" — corn grown by them but not taken by the company. Under the contracts, passed acreage payments were to be made from a fund set up with equal contributions from the growers and the company based on total tons harvested from all growers. Believing that the payments made by Stokely under these provisions were inadequate, the growers sued.

The plaintiff class included several growers who had retained and cashed the checks Stokely had sent to them for the 1990 crop, and the company moved for summary judgment dismissing these plaintiffs from the action. Stokely claimed that the checks had been properly calculated under the terms of the contract and that their acceptance and negotiation by the growers constituted an accord and satisfaction of the company's obligations under the contracts.

The trial court denied the motion, concluding as a matter of law that the defense of accord and satisfaction was unavailable to Stokely, and we granted Stokely leave to appeal. We reverse the trial court's order and remand with directions to grant Stokely's motion and enter judgment dismissing the named plaintiffs from the action.

The material facts are not in dispute. In early 1990, Stokely contracted with various Wisconsin corn growers to purchase sweet com. The contracts were all identical and contained provisions for payment to the growers if some or all of their corn crop was "passed" — if it was fit for harvest but Stokely declined to take it. The passed acreage provisions of Stokely's 1990 Sweet Corn Contract provided as follows:

The [Growers'] compensation for the production of sweet corn suitable for processing and fit for harvesting but not harvested at the direction of the Company shall be computed as if it were harvested....

The [Growers] and the Company agree to share the cost of payments made for non-harvested crops ... as follows: Total payments made for non-harvested sweet corn acreage will be divided by total tons of sweet corn produced ... to establish a per ton allocation of said cost. The [Growers] will be responsible for this cost up to a maximum of $2.00 per ton. The Company will be responsible for this cost in excess of $2.00 a ton up to a maximum contribution of an additional $2.00 per ton. In the event that the combined contribution of $4.00 per ton ... is not sufficient to meet total calculated non-harvested crop compensation, payment will be prorated to the extent of funds collected from the Company and [the Growers]. (Emphasis added.)

During the 1990 harvest, Stokely "passed" some or all of the com it had agreed to purchase from the growers. Then, after the season, Stokely notified the growers by letter that the money that had been paid into the crop compensation fund under the provisions of the contract was insufficient to pay them in full for their passed acreage crops and that, as , a result, they would be receiving prorated payments:

This is to inform you that the non-harvested crop compensation fund is not sufficient this year to pay total calculated non-harvested crop compensation in full. This means your payment will be prorated to the extent the claims against the fund exceed its amount. The exact amount of the proration is now being calculated....

Details as to the proration will accompany your check.

A few days later, Stokely mailed checks in reduced amounts to the growers, along with a letter stating:

Enclosed is your Stokely USA, Inc., 1990 Sweet Com contract payment.

Your payment has been calculated according to the formula set forth in the contract for non-harvested crops....

Unfortunately, the total fund of $1,029,375.05 is insufficient to pay claims against it in full, and as a consequence, your payment has been prorated. The proration is 53.49%.

Please contact me if you have any questions.

As indicated, Stokely's defense and summary judgment motion were grounded on its claim that the growers who cashed the checks had accepted them in full satisfaction of the growing contracts. The trial court, recognizing that a dispute must exist between the parties in order for an accepted payment to constitute an accord and satisfaction of a debt, concluded that Stokely was not entitled to raise the defense because no such dispute existed at the time the checks were received and cashed.

In summary judgment cases, we employ the same analysis as the trial court. State Bank of La Crosse v. Elsen, 128 Wis. 2d 508, 511, 383 N.W.2d 916, 917 (Ct. App. 1986). We look first to the pleadings to determine whether the complaint states a claim for relief and the responsive pleading joins the issues. If they do, we next look to the moving party's affidavits and other proofs to determine whether that party, if a plaintiff, has stated a prima facie case for relief — or, if a defendant, a prima facie defense. If they do, we then look to the opposing party's affidavits to determine whether a genuine issue exists as to any material fact — or whether reasonable conflicting inferences may be drawn from the undisputed facts. If any such disputed facts or inferences exist, a trial is necessary and summary judgment is inappropriate. If, however, the material facts are not in dispute, the legal issues presented by the motion are appropriate for determination. Id. at 511-12, 383 N.W.2d at 917-18.

The analysis may end at any point. If the complaint fails to state a claim upon which relief may be granted, we proceed no further and dismissal of the action is appropriate. If, at the next stage, it is determined that the moving party's affidavits and proofs fail to state a prima facie case for recovery — or, if a defendant, a prima facie defense — the analysis ends at that point and the motion is denied.¹ And if the final inquiry reveals a dispute as to material facts or inferences, the motion must also be denied. This is so because summary judgment is appropriate only where there are no issues of material fact and it appears that the moving party is entitled to judgment as a matter of law. See In re Cherokee Park Plat, 113 Wis. 2d 112, 116, 334 N.W.2d 580, 582-83 (Ct. App. 1983).

In this case, the moving party is the defendant, Stokely, who seeks a determination upholding its affirmative defense and dismissing various plaintiffs from the action. As a result, we need not consider the pleadings. Nor does either party assert that there is any material factual dispute. The issue in the case, then, is whether, on those undisputed facts, and as a matter of law, Stokely is entitled to the defense of accord and satisfaction as to the growers who retained and cashed the checks.

An accord and satisfaction is an agreement to discharge an existing disputed claim and constitutes a defense to an action to enforce the claim. Hoffman v. Ralston Purina Co., 86 Wis. 2d 445, 453, 273 N.W.2d 214, 217 (1979). It is a rule "resting not only on principles of contract law but on principles of sound public policy, that is, interests of resolving disputes informally without litigation and of fairness;" Flambeau Products Corp. v. Honeywell Info. Sys., Inc., 116 Wis. 2d 95, 110-11, 341 N.W.2d 655, 663 (1984). In Flambeau, the supreme court discussed the principles underlying the rule and the protections it affords to the debtor.

The interests of fairness dictate that a creditor who cashes a check offered in full payment should be bound by the terms of the offer. The debtor's intent is known, and allowing the creditor to keep the money disregarding the debtor's conditions seems unfair . . .. The doctrine of accord and satisfaction includes safeguards designed to protect a creditor from an overreaching debtor: there must be a good faith dispute about the debt [and] the creditor must have reasonable notice that the check is intended to be in full satisfaction of the debt. 116 Wis. 2d at 111, 341 N.W.2d at 663.

The Flambeau court also discussed the various rules that come into play when considering the defense of accord and satisfaction, two of which are relevant to our inquiry in this case:

First, the law in Wisconsin has long been that payment in full settlement of a claim which is disputed as to amount discharges the entire claim....

A second rule, also of long-standing, is that payment of part of a debt which is not disputed as to amount does not discharge the debt altogether . . .. The debtor's mere refusal to pay the full claim does not make it a disputed claim. 116 Wis. 2d at 113, 341 N.W.2d at 664.

We thus consider whether there was a dispute between Stokely and the growers at the time the checks were received and cashed, and whether the growers had reasonable notice that Stokely's checks were intended by the company in full satisfaction of its obligations under the "passed acreage" provisions of the contracts. We review both issues de novo. See Raby v. Moe, 153 Wis. 2d 101, 109, 450 N.W.2d 452, 455 (1990).

The growers maintain that the trial court's conclusion was correct: that "no dispute or controversy between plaintiffs and Stokely [existed] since the amount to be paid ... on the passed acres was not even known to the plaintiffs prior to the time they received the check[s]." They point out that, prior to that time, ”[t]here were no negotiations and no compromises" between themselves and Stokely, and thus there could be no dispute. As we perceive it, the argument is that a dispute must have existed — evidenced by announced disagreements, or prior negotiations or compromises— prior to the date on which the checks were received in order for their acceptance to constitute an accord and satisfaction. They also contend that they had no notice that the checks were tendered by Stokely in full payment under the 1990 growing contracts.

We think Flambeau is particularly instructive on the points raised. In that case, the debtor, Flambeau, contracted to purchase computer equipment from Honeywell. As part of the package, Flambeau was to receive $14,000 worth of programming services. These services, however, turned out to be of no use to Flambeau; and when advised by Honeywell of the full amount due on the equipment purchase contract, Flambeau deducted $14,000 from that amount and sent Honeywell a check in the reduced amount. A notation on the check indicated that it was in "full payment" of the amount due, and an accompanying letter contained a similar statement. Honeywell cashed the check but continued to seek the additional $14,000 from Flambeau, who raised the defense of accord and satisfaction.

The supreme court had no difficulty concluding that Flambeau's defense defeated Honeywell's claim — despite the fact — as the trial court found — that "there was no dispute about the account known to Honeywell until the check . . . was tendered by Flambeau." Flambeau, 116 Wis. 2d at 115, 341 N.W.2d at 665. The court rejected Honeywell's argument that "a dispute must have been manifest before the settlement offer is made" in order for there to be an accord and satisfaction. Id. at 115 n.15, 341 N.W.2d at 665. And it refused to set aside the trial court's determination that "when Honeywell received the check it was faced with an offer by Flambeau to satisfy a disputed claim." Id. at 115, 341 N.W.2d at 665.

We conclude that a "dispute" sufficient to support application of the rule of accord and satisfaction existed between Stokely and the plaintiff growers. We are also satisfied that the growers had adequate notice that the checks were tendered in full payment under the 1990 growing contracts.

Prior to receiving any communication from Stokely, the growers knew from the terms of their contracts that they were to be paid for "passed" acreage in an amount calculated "as if [that acreage] had been harvested," and that these payments would come from a fund comprised of equal contributions from Stokely and themselves. They also knew that in the event these contributions were insufficient to allow Stokely to pay at the "harvested crop" rate, they would receive only a prorata share of the amount of money actually in the fund.

Then, after the harvest, the growers were informed by Stokely's first letter that their payment "this year" would have to be prorated under the contract. And in a second letter — the one enclosing the lower-than-expected checks — they were plainly advised that the amount being paid constituted "your Stokely . . . 1990 Sweet Corn crop payment," and the details of the prorata calculation were explained to them.

The growers, obviously, had expected to receive a larger amount. But, armed with the above information, they nevertheless decided to cash the checks. Admittedly, the checks did not contain the words "full payment," as in Flambeau; but we do not believe such "magic language" is essential to the debtor's ability to raise the defense of accord and satisfaction. The test, after all, is one of reason: "[T]he creditor must have reasonable notice that the check is intended to be in full satisfaction of the debt." Flambeau, 116 Wis. 2d at 111, 431 N.W.2d at 663.

We conclude on this record that: (1) at the time the checks were received and cashed a "dispute" within the meaning of the rule of accord and satisfaction existed between Stokely and the plaintiff growers, all of whom, obviously, disagreed with the company's application of the prorata clause; and (2) the correspondence preceding and accompanying the reduced payment gave the growers reasonable notice that the checks were intended as full payment under the contract. As a result, the growers' acts of accepting and cashing the checks must be considered acceptance of the tendered amount in full settlement of Stokely's obligations under the 1990 corn contracts.

By the Court — Order reversed and cause remanded for further proceedings consistent with this opinion.

1 It was at this point that the trial court ended its analysis in this case, concluding that Stokely's proofs had failed to establish, prima facie, that it was entitled to the defense of accord and satisfaction.