Douthwright v. Northeast Corridor Foundations
805 A.2d 157, 72 Conn. App. 319, 2002 Conn. App. LEXIS 478 (2002)
Rule of Law:
The common-law doctrine of accord and satisfaction, and its codification in UCC § 42a-3-311, requires a tender of payment to occur within the context of a good faith dispute about the amount of an unpaid debt, meaning the claim must be unliquidated or subject to a bona fide dispute, for it to discharge an obligation, including interest.
Facts:
- Vincent J. Douthwright suffered serious injuries when concrete pylons rolled off a truck and crushed his leg.
- Douthwright and the defendants (Northeast Corridor Foundations consortium and David Gilman) reached an oral settlement agreement for $3.2 million to resolve Douthwright's tort action, with $2.5 million allocated to be paid by the defendants.
- Douthwright fulfilled his responsibilities under the settlement by delivering releases and withdrawing his complaint on January 2, 2001.
- The oral settlement agreement entitled Douthwright to immediate payment of the allocated sums and was not conditioned on the execution of a separate arbitration agreement between the defendants and New England Pipe Corporation.
- The defendants' debt for the remaining $1.5 million of their $2.5 million share became due and payable on February 2, 2001.
- On April 25, 2001, the defendants sent Douthwright a check for $1.5 million, which represented the principal sum due, but did not include any payment for interest.
- The check was accompanied by a letter stating that it was tendered as "full and final settlement" and that the defendants disputed any interest was owing.
Procedural Posture:
- Vincent J. Douthwright initially filed a tort action to recover damages for serious injuries.
- The parties subsequently reached an oral settlement agreement in Douthwright's tort action.
- On February 13, 2001, Douthwright filed a motion for default judgment in the trial court (pursuant to General Statutes § 52-195c) against the defendants for their failure to pay their full share of the oral settlement agreement.
- On March 13, 2001, the defendants responded by denying any immediate payment obligation under the settlement agreement.
- On March 26, 2001, the parties appeared before the trial court for an initial hearing on Douthwright's motion for default judgment.
- On May 8, 2001, after an evidentiary hearing, the trial court rendered judgment in favor of Douthwright for $40,931.45, representing interest at 12% per year for the period between February 2, 2001 (when the debt became due) and April 25, 2001 (when the principal was paid).
- The defendants appealed the trial court's judgment to the Supreme Court of Connecticut.
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Issue:
Did the trial court err by refusing to apply the doctrine of accord and satisfaction, thereby requiring the defendants to pay statutory interest on a principal debt that was paid belatedly, when the defendants claimed their payment check was tendered as full settlement?
Opinions:
Majority - Peters, J.
No, the trial court did not err in refusing to apply the doctrine of accord and satisfaction because the defendants failed to prove that the amount of the claim, including interest, was subject to a good faith dispute. An enforceable accord and satisfaction requires the tender of payment to occur in the context of a good faith dispute about the amount of an unpaid debt, as established by common law and codified in General Statutes § 42a-3-311 (a). The trial court found that, after February 2, 2001, the defendants' debt for the $1.5 million principal was liquidated and unconditionally due. Furthermore, under General Statutes § 52-195c, the interest on this overdue principal was statutorily fixed at 12 percent per year from the date the payment became due. The court deferred to the trial court's factual findings regarding the terms of the oral settlement, specifically that payment was immediate and not conditional on arbitration, as these findings were supported by ample evidence and were not 'clearly erroneous.' Therefore, there was no basis for a good faith dispute about the defendants' indebtedness for either the principal or the statutorily mandated interest, and the defendants failed to satisfy the necessary precondition for accord and satisfaction.
Analysis:
This case reinforces the strict requirements for invoking the doctrine of accord and satisfaction, particularly emphasizing the 'good faith dispute' precondition regarding the amount of the debt. It clarifies that when a debt, including statutory interest, becomes liquidated and definitively due, a debtor cannot unilaterally create a 'dispute' to avoid payment by merely sending a check with a 'full satisfaction' statement. The ruling highlights the appellate court's deference to a trial court's factual findings, especially credibility determinations, underscoring the importance of establishing a genuine factual dispute at the trial level. Future cases will likely face a high bar to prove a good faith dispute for liquidated or statutorily determined debts.
