Consolidated Edison Co. of New York, Inc. v. Arroll
322 N.Y.S.2d 420, 1971 N.Y. Misc. LEXIS 1613, 66 Misc.2d 816 (1971)
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Rule of Law:
When an amount due is subject to a bona fide dispute, a debtor's tender of a check for a lesser amount marked 'payment in full' and the creditor's subsequent cashing of that check operates as an accord and satisfaction, discharging the entire debt.
Facts:
- Consolidated Edison Company of New York, Inc. ('Con Edison') sent Mark Arroll electric bills for the summers of 1968, 1969, and 1970 that Arroll considered excessively high compared to prior periods.
- Arroll disputed the amounts of the bills in correspondence with Con Edison, questioning the meter's accuracy and the amount of electricity consumed.
- On two separate occasions, Arroll sent letters to Con Edison's president stating his disagreement and advising that he was sending checks for what he considered the proper amount due ($35 for each bill).
- Arroll's letters specified that each check would contain a legend stating it was in 'full payment and satisfaction' and that its negotiation would constitute a release of all claims.
- Arroll sent five separate checks for $35 each to Con Edison's designated payment address.
- Each check had 'paid in full' written on its face and a detailed restrictive legend on the back stating it was in full satisfaction of the specific bill.
- Con Edison received, deposited, and retained the proceeds from all five checks.
- Con Edison's subsequent replies to Arroll only restated that the meter was accurate and ignored his statements about the checks constituting full payment.
Procedural Posture:
- Consolidated Edison Company of New York, Inc. filed a lawsuit against Mark Arroll in the Civil Court of the City of New York, a trial court.
- Con Edison sought to recover the unpaid balance on five disputed electric bills.
- In his defense, Arroll asserted the affirmative defense of accord and satisfaction.
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Issue:
Does a creditor's act of cashing a check, which is marked 'payment in full' for a bona fide disputed debt, constitute an accord and satisfaction, thereby discharging the remainder of the debt, even if the creditor is a large corporation that processes checks in bulk?
Opinions:
Majority - Milton Sanders, J.
Yes. The act of cashing a check offered in full payment of a genuinely disputed claim constitutes an accord and satisfaction. The court found that a bona fide dispute existed because Arroll honestly believed he owed less than Con Edison claimed, which is all the law requires. Arroll clearly expressed his intention for the checks to be payment in full through both his letters and the legends on the checks themselves. By accepting and depositing the checks, Con Edison accepted the condition of full satisfaction, regardless of its internal operational scale or its own subjective intent. The law imputes assent from the action of cashing the check, and a creditor cannot accept the benefit (the money) while rejecting the condition upon which it was offered.
Analysis:
This decision reaffirms the objective theory of contract formation in the context of accord and satisfaction, holding that a creditor's actions, not their uncommunicated intentions, are what determine legal acceptance. It establishes that large corporations are not exempt from well-settled commercial law principles simply due to the volume or nature of their business operations. The ruling serves as a strong precedent that a company cannot use its internal payment processing systems, such as having a bank directly handle deposits, as a shield to avoid the legal consequences of cashing a check tendered with a clear restrictive endorsement.
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