Winter Wolff & Co. v. Co-Op Lead & Chemical Co.

111 N.W.2d 461, 261 Minn. 199, 1961 Minn. LEXIS 630

Opinions

Knutson, Justice.

This is an appeal by plaintiff from a judgment entered pursuant to an order of the trial court granting summary judgment to defendant.

On or about October 3, 1958, plaintiff sold and agreed to deliver to defendant 135,000 feet of imported copper tubing under the terms of the following contract:

“State Metals Division Winter Wolff & Co.

“76 Beaver Street New York 5, N. Y.

“Co-op Lead & Chemical Co. 34 East Fillmore Street St. Paul 1, Minn.

“Gentlemen: Contract # 784/S

“We herewith confirm having sold to you the following:

“Material: Seamless drawn electrolytic copper water tubing, as per ASTM B-88. In coils, soft, 60 feet each.

“Quantity: (a) 75,000 feet — 3/4" K

(b) 50,000 feet — 1/2" L

(c) 10,000 feet— 1"K

“Price: (a) $ .2929 per foot

(b) $ .1344 per foot

(c) $ .3700 per foot

“Delivery: F. O. B. Piers New York

“Shipment: October/November — in 3 monthly shipments of about equal weights, from abroad.

“Payment: Net — Cash

“Packing: In wooden cases of 500 lbs. net.

“Markings'. CLC’ Made in England, size, weights, #1 and up. Coils must be embossed Type K or L — Not England ‘England’: Only a cellophane sticker or indelible ink.

“Remarks'. Please sign the attached green copy of this contract and return it to us.

Minimum Shipment: 30,000 pounds gross weight.

“Very truly yours,

“State Metals Division Winter, Wolff & Company Henry W. Fischer

“Accepted-:-

“This Contract Subject to Strikes, Accidents, Shut-downs, Delay of Carriers, Embargoes and Other Causes Beyond our Control

“Date 10/3/58”

After delivering 68,040 feet of tubing, plaintiff was unable to supply more that complied with the contract specifications. If the contract had been performed in full, defendant would have been indebted to plaintiff for the tubing delivered in the amount of $16,654.61. Because of plaintiff’s inability to complete the contract, defendant was compelled to procure tubing elsewhere at a price higher than that at which plaintiff had agreed to furnish it. Thereupon, a dispute arose as to the amount of defendant’s indebtedness to plaintiff under the contract for partial performance. In order to settle the dispute, defendant wrote plaintiff a letter on February 16, 1959, offering to settle the account for $14,234.81. Defendant enclosed a check in that amount in the letter. On both the front and the back of the check appeared the words: “Payment in full to date.” The letter of transmittal reads:

“Feb. 16,1959

“State Metals Div. Winter Wolff & Company 76 Beaver Street New York 5, N. Y.

“Attn: Mr. Henry W. Fischer

“Gentlemen:

“We received the following material on your Invoice B-26016:

23,700 ft. 1/2" L or 1,300 feet short

23,000 ft. 1/2" M or 2,000 feet short

460 ft. 1/2" L Copper was damaged

“We notified you of this on May 23, 1958 and also by phone.

“We also notified you in regard to Invoice B-27096 on Jan. 30, 1958. In regard to completion of contract 784/S, we wrote you on Jan. 9, 1959 and Jan. 19, 1959.

“We find, to date, it will involve an additional expense which we failed to understand in our rush to replace the material you so negligently did not supply in time and properly.

“However, since we want to forget the whole deal, we are mailing you a check for payment to date in full as follows:

Invoice B-26016...................................................$ 203.43

Invoice B-27096 ................................................. 16,351.18

Less 10% on 1" K .......................................... 199.80

Less per letter of 1/9/59 .............................. 2,120.00

$14,234.81

“Since you well know what we must do to replace the material you failed to ship to us, the above settlement should be satisfactory to you.

“Very truly yours,

“Co-op Lead & Chemical Co. H. Henderson

“Check# 5551-14234.81 Enclosed.”

Plaintiff accepted and cashed this check and thereafter brought the present action to recover the sum of $2,419.80, representing the difference between what would have been due for the tubing delivered if the contract had been performed and the amount so paid by defendant. Defendant interposed an answer, alleging that because of plaintiffs breach of the contract it was entitled to an offset in the sum of $2,120¹ due to its damages resulting from a breach of the contract, and denying any liability. Upon these facts, which are undisputed except as to defendant’s right to an offset, the trial court granted defendant’s motion for summary judgment.

The trial court based its decision on its conclusion that the indebtedness, whatever it was, constituted an unliquidated account as to which there existed a bona fide dispute concerning the amount due. It is conceded by plaintiff that if the court was right in this respect, tender by the debtor of an amount less than the creditor claimed to be due and acceptance of that amount by the creditor would constitute an accord and satisfaction.² Plaintiff claims, however, that the court erred in holding that the indebtedness was an unliquidated debt. It contends that as to a liquidated account the above, rule has no application and that the creditor’s acceptance of a check, even though submitted as payment in full, does not constitute an accord and satisfaction if the account is a liquidated debt.

That a dispute existed between the parties as to the amount due on the part of the contract that was performed can hardly be open to question. The contract was an entire one for delivery of a specified amount of goods. Plaintiff performed only part of the contract. If it had fully performed, the amount would have been liquidated. Having breached the contract, the amount due for part performance was open to question. Plaintiff’s appeal here is based on the premise that there is a disputed question ot fact as to defendant’s right to an offset which should be tried and that consequently defendant was not entitled to summary judgment. It is not based on the premise that plaintiff is en titled to summary judgment because there are no disputed questions of fact. If a dispute exists now as to the amount due, it existed in the same manner when defendant made its tender. If no motion for summary judgment had been made, the issue before the trial court would have been how much defendant owed plaintiff. Involved in that decision would be a determination of whether defendant was entitled to damages for a breach of the contract and, if so, how much. How then can it now be said that no dispute existed at the time defendant made its tender and plaintiff accepted the same? It must be conceded that if a genuine dispute as to the amount due on the account existed the account is unliquidated by any test.

In Oien v. St. Paul City Ry. Co. 198 Minn. 363, 374, 270 N. W. 1, 6, we said:

“Where there is one entire claim as, for instance, the amount of wages earned for services for a specified time, and it is admitted by the creditor and debtor that one of two specific sums is the correct amount, but the parties are in dispute as to which amount is correct, the demand is to be regarded as disputed and unliquidated. The dispute is as to the whole amount. So where the parties disagree as to the amount due from one party to the other, under the contract, the claim is unliquidated and the rule of accord and satisfaction applies.”

In Addison Miller, Inc. v. American Central Ins. Co. 189 Minn. 336, 249 N. W. 795, many of the cases of similar import are discussed. We there quote with approval the following language from Nassoiy v. Tomlinson, 148 N. Y. 326, 330, 42 N. E. 715, 716, 51 A. S. R. 695, 697 (189 Minn. 341, 249 N. W. 797):

“A demand is not liquidated, even if it appears that something is due, unless it appears how much is due; and when it is admitted that one of two specific sums is due, but there is a genuine dispute as to which is the proper amount, the demand is regarded as unliquidated, within the meaning of that term as applied to the subject of accord and satisfaction.”

In the Addison Miller case we also said (189 Minn. 342, 249 N. W. 798):

“The case is the same as that we shall suppose of a matured promissory note, given by the maker to cover the purchase price of three large items of merchandise. When demand for payment is made, the maker admits liability for a substantial amount but says that as to items one and two he is not hable for the full price because of breach of warranty or some other honest claim. As to item three he says the goods were worthless, and he will not pay anything on account of them. He makes an offer of what he considers the fair value of items one and two, tells the payee that he will not pay more, and that if that offer is accepted the note must be surrendered and the whole thing settled. The payee accepts the offer, gets the money, and surrenders the note. Certainly, thereafter he cannot recover because the settlement intentionally allowed nothing for item three. That is precisely this case in principle.”

Applying the language of these cases to the facts of this case, the trial court correctly held the account was an unliquidated indebtedness and that acceptance of an offer to settle the account for the amount which defendant claimed it owed was an accord and satisfaction.

Even if the claim was liquidated, we have discarded the rule that a separate consideration is necessary in order legally to settle a liquidated debt where the debtor offers less than the full amount and such offer is accepted by the creditor with full knowledge of the terms under which the offer is made. In Rye v. Phillips, 203 Minn. 567, 569, 282 N. W. 459, 460, 119 A. L. R. 1120, 1121, 23 Minn. L. Rev. 223, we said:

“* * * plaintiff’s motion for directed verdict [was] granted upon the ground that ‘a mere promise of a creditor to receive, and of the debtor to pay, a sum less than the debt in full satisfaction of it, is without consideration, and binds neither party.’ * * *

“The doctrine thus invoked is one of the relics of antique law which should have been discarded long ago. It is evidence of the former capacity of lawyers and judges to make the requirement of consideration an overworked shibboleth rather than a logical and just standard of actionability.

“In Oien v. St. Paul City Ry. Co. 198 Minn. 363, 373, 270 N. W. 1, we made such observations concerning it that the bar should have been advised thereby that we were ready to label the proposition as a museum piece of the law and shelve it accordingly. As Mr. Dunnell suggests, Minn. Dig. (2 ed.) 1932 Supp. § 39, the doctrine may have sprouted from ‘a mistake in reporting,’ in Pinnel’s Case, 3 Co. Rep. Part V, 117a, in 1602. It is characterized as ‘an artificial and groundless rule which has been consistently condemned.’ * * *

“There is more than one ground of logic and good law upon which this old and indefensible rule may be discarded. There is no reason why a person should be prevented from making an executed gift of incorporeal as well as corporeal property. Why .should a receipt in full for the entire debt not be taken in a proper case as .sufficient evidence of an executed gift of the unpaid portion of the debt? Again, where there is proof, or on adequate evidence a finding, that a completed legal act, such as a waiver, has set a matter at rest, why is it necessary to search for any consideration?”

Prior to the Rye case, it is true, we followed the rule that payment of a part of a liquidated debt will not discharge the whole even though there is a release of the residue by the creditor. In other words, the mere retention by the creditor of money which he was entitled absolutely to receive was not considered an accord and satisfaction.³ We see no need of discussing these cases.

It may be true that what we said in Rye v. Phillips, supra, was dicta, but if it was, it was the considered opinion of the court that it should control decision in the future. The syllabus, which was written by the author of the opinion, stated (203 Minn. 567, 282 N. W. 459, 119 A. L. R. 1120):

“The rule discarded that a promise of the creditor to accept and of the debtor to pay something less than the sum due on a liquidated debt is not binding for want of consideration, even though the promise is performed and the debtor formally released.”

That the language used in the Rye case has been interpreted as an abandonment of our former rule by students and members of the bar alike is evident from what has been written by others.

In 1 Dunnell, Dig. (3 ed.) § 39, we find the following:

“An agreement by a creditor to accept less than the amount due on a liquidated past-due indebtedness in discharge of the whole is binding on the creditor though not .supported by any consideration. The former rule under which a consideration was necessary to support such an agreement has been discarded. Under such former rule the part payment of a liquidated claim past due was not a bar to a subsequent action for the balance, though the parties agreed that it should be deemed a full satisfaction. Such an agreement was held invalid because it was without consideration and hence nonenforceable.”

In a note covering the Rye case in 23 Minn. L. Rev. 223, 224, we find the following:

“* * * Thus it seems that Minnesota, by the practically-presented dictum in the instant case, is but one of a group of states seeking to do away with a rule founded upon an ancient judicial mistake and kept alive by courts blindly following a rule they have long conceded to be undesirable. Although the court here found it unnecessary to decide this specific issue, there is little doubt that it will follow the rule laid down.”

In Annotation, 119 A. L. R. 1123, 1129, the author says:

“The decision in Rye v. Phillips (Minn.) (reported herewith) ante, 1120, partakes both of the character of entire repudiation of the rule, and of the application of its various exceptions. Thus the court, after denouncing the rule as a relic of antiquity which should have been long discarded, held * * *.”

Our decisions following the Rye case are equally convincing. In Walgren v. Prudential Ins. Co. 205 Minn. 202, 203, 285 N. W. 525, we said:

“In view of the foregoing, we have no reason for consideration of Rye v. Phillips, 203 Minn. 567, 282 N. W. 459, 119 A. L. R. 1120. Anyway, the rule there discarded applied only to an undisputed and liquidated debt.” (Italics supplied.)

Brack v. Brack, 218 Minn. 503, 16 N. W. (2d) 557, involved a claim that an agreement that upon payment of semiannual interest the principal amount of a debt should be canceled under certain conditions lacked consideration. We held that the validity of the agreement could be upheld on three theories, one of which was (218 Minn. 508, 16 N.W. [2d] 560):

“* * * no consideration is necessary to support an agreement by a creditor to accept less than the amount due on a liquidated past-due indebtedness in discharge of the whole, Rye v. Phillips, 203 Minn. 567, 282 N. W. 459, 119 A. L. R. 1120.”

We then said:

“We decide the instant case upon the last-mentioned ground upon the authority of our decision in Rye v. Phillips, supra. In that case we held that the rule requiring a consideration in .such cases, which we had prior thereto applied in numerous cases relied on here, is indefensible either on the grounds of logic or good law.”

In Mattfeld v. Nester, 226 Minn. 106, 135, 32 N. W. (2d) 291, 310, 3 A. L. R. (2d) 909, 931, we said:

“* * * In Rye v. Phillips, 203 Minn. 567, 569, 282 N. W. 459, 119 A. L. R. 1120, we overruled and rejected as a ‘museum piece of the law’ the common-law rule that a new consideration is necessary to sustain a debtor’s promise to accept something less than is due upon a liquidated debt in satisfaction thereof, which we already had adopted and followed, for the sole reason that the old rule was not sustained by sound reason.”

It may now be argued that we have not applied the rule which we have discussed in these cases in any situation involving a liquidated account. If that is true, the reason in all probability is that we have in each case sought and been able to find some dispute which would justify calling the account an unliquidated one, making it unnecessary for us to apply the untenable rule which we had followed in cases involving liquidated accounts. However, in considering the many statements we have made in which we approve of what was said in the Rye case, there can be no doubt as to what we intended to hold in that case and to follow in the future. To now revert to the rule which we had followed prior to the Rye case would be a step backward. Where two parties in the position of debtor and creditor, having full knowledge of the facts and dealing fairly with each other, settle an account, even though it may be called a liquidated one, by the offer of one party to pay a definite amount and the acceptance of that offer by the other party, there is no logical or legal reason why they should not be permitted to do so.

A creditor’s retention of a check offered in full settlement of a liquidated debt by a debtor constitutes an acceptance of an offer to settle the indebtedness.⁴

There is some claim that the case of Cut Price Super Markets v. Kingpin Foods, Inc. 256 Minn. 339, 98 N. W. (2d) 257, is opposed to what we said in Rye v. Phillips, supra, and the other cases mentioned above. In the Cut Price Super Markets case other things were involved than the settlement of a liquidated debt. We did recognize the rule of the Rye case even there and said (256 Minn. 357, 98 N. W. [2d] 270):

“* * * a close reading of the Rye case indicates that that case is no more than authority for the principle that an agreement by a creditor to accept less than the amount due on a liquidated, past-due indebtedness in discharge of the whole is binding on the creditor although not supported by any consideration.”

If the account in this case were held to be liquidated, the same would be true here. Defendant submitted a check with the full explanation to plaintiff that it was intended as a settlement of the whole account. With full knowledge of the facts, plaintiff accepted this check and should now be precluded from seeking recovery of more. It follows that the trial court was right on either theory.

Affirmed.

Footnotes

1

The discrepancy between the amount representing the difference between the contract price for the tubing furnished and the tender made by defendant and the amount claimed by defendant as an offset is not explained in the record or briefs.

2

See, Ball v. Thornton, 193 Minn. 469, 258 N. W. 831; 1 Dunnell, Dig. (3 ed.) § 40.

3

Duluth Chamber of Commerce v. Knowlton, 42 Minn. 229, 44 N. W. 2; Marion v. Heimbach, 62 Minn. 214, 64 N. W. 386.

4

Such is the rule as to an unliquidated indebtedness. See, 6 Williston, Contracts (Rev. ed.) § 1854.