Abry Bros., Inc. v. Tillman
1964 La. LEXIS 3045, 162 So. 2d 346, 245 La. 1017 (1964)
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Rule of Law:
The delivery of a check, whether from the debtor or a third party, is presumed to be conditional payment, and the underlying debt is only discharged when the check is honored, unless the parties expressly or impliedly agree that the check itself constitutes absolute payment.
Facts:
- Abry Brothers, Inc. and Ruth Tillman entered into a written contract for Abry Brothers to perform construction work on Tillman's building.
- The contract stipulated a total price of $2,300.00, with a payment clause stating the 'balance with two post dated of $500.00 each of Mrs. Mary R. LeBlanc'.
- In accordance with the contract, Tillman endorsed in blank and delivered two post-dated checks drawn by a third party, Mrs. LeBlanc, to Abry Brothers.
- Abry Brothers completed the contracted work.
- When Abry Brothers presented the checks for payment, the bank dishonored them due to insufficient funds in Mrs. LeBlanc's account.
- Upon being notified of the dishonor, Tillman retrieved the checks from Abry Brothers and attempted to collect on them herself.
Procedural Posture:
- Abry Brothers, Inc. sued Ruth Tillman in the trial court for an unpaid balance on a contract and sought to enforce a recorded labor and material lien.
- The trial court rendered a personal judgment in favor of Abry Brothers and recognized the validity of the lien.
- Tillman, as appellant, appealed to the Court of Appeal of the Fourth Circuit.
- The Court of Appeal affirmed the trial court's judgment.
- Tillman's application for a rehearing before the Court of Appeal, in which she first raised a plea of prescription, was denied.
- The Supreme Court of Louisiana granted Tillman's petition for a writ of certiorari.
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Issue:
Does a debtor's delivery of a third-party's post-dated checks to a creditor constitute absolute payment of the underlying debt, thereby discharging the debtor's obligation, when the contract specifies payment 'with' those checks but the checks are subsequently dishonored?
Opinions:
Majority - Justice Hamiter
No. A debtor's delivery of a third-party's post-dated checks is not absolute payment of an underlying debt unless the parties explicitly agree to treat the checks as such; the presumption is that payment is conditional on the checks being honored. The court adopted the near-universal principle that a check is not absolute payment in the absence of an express or implied agreement to that effect. The underlying debt is discharged only when the check is paid. The court found that the contractual language specifying payment 'with' the third-party checks was insufficient, on its own, to overcome this strong presumption. The court also considered extrinsic evidence of the parties' intent, noting that Tillman endorsed the checks in blank rather than 'without recourse' and that her subsequent actions in attempting to collect on the dishonored checks herself indicated she felt a continuing obligation for the debt.
Analysis:
This decision solidifies Louisiana's alignment with the overwhelming majority rule in American jurisprudence that payment by check is conditional. It clarifies that merely identifying a specific check in a contract's payment clause does not, by itself, shift the risk of nonpayment from the debtor to the creditor. The ruling underscores the high evidentiary burden on a party claiming a check was accepted as absolute payment, requiring clear proof of an agreement to that effect. This precedent protects creditors by ensuring that their underlying right to payment is not extinguished by the receipt of a worthless negotiable instrument.
