Kibler v. Frank L. Garrett & Sons, Inc.
439 P.2d 416, 73 Wash. 2d 523 (1968)
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Rule of Law:
For an accord and satisfaction to be established on an unliquidated or disputed claim, the debtor must make it unequivocally clear to the creditor that a tendered payment is conditioned upon its acceptance as full and final satisfaction of the entire debt.
Facts:
- William F. Kibler was hired by Frank L. Garrett & Sons, Inc. to harvest a wheat crop, but the parties did not agree on a specific price.
- Kibler informed Garrett that if the crop yielded over 50 bushels per acre, the price would be at least 18 cents per bushel.
- The crop did exceed 50 bushels per acre, and Kibler encountered unanticipated harvesting difficulties.
- Kibler sent Garrett a corrected bill for $876.20, based on a rate of 20 cents per bushel.
- In response, Garrett sent a check for $444 along with a letter.
- Garrett's letter stated the check was for $12 per acre, which was more than they allegedly agreed upon, and called Kibler's bill 'ridiculous,' but did not state the check was offered as 'payment in full.'
- The check contained a line of fine print stating, 'By endorsement this check when paid is accepted in full payment of the following account,' which Kibler did not see.
- After consulting his attorney, who was also unaware of the fine print, Kibler deposited the check without further communication with Garrett.
Procedural Posture:
- William F. Kibler (plaintiff) brought an action on a contract against Frank L. Garrett & Sons, Inc. (defendant) in a state trial court.
- At the close of the plaintiff's case, the trial court dismissed the action.
- The trial court found that, as a matter of law, an accord and satisfaction had occurred, even though it was not pleaded as a defense.
- Kibler (appellant) appealed the dismissal to the state's highest court.
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Issue:
Does a creditor's act of cashing a check for a lesser amount than billed on a disputed claim constitute an accord and satisfaction when the debtor's accompanying letter does not explicitly state the payment is 'in full' and the creditor is unaware of fine print on the check with such a condition?
Opinions:
Majority - Rosellini, J.
No. The act of cashing the check did not create an accord and satisfaction because there was no meeting of the minds that the payment was intended as a full settlement of the disputed claim. For an accord to be formed, the debtor must clearly communicate to the creditor that the payment is offered on the condition that it is accepted as full payment. Here, Garrett's letter was equivocal; it disputed the amount but did not state 'I will pay no more than the amount enclosed,' leaving the matter open for negotiation. The inconspicuous fine print on a form check, which no one saw, is insufficient to establish the creditor's knowing acceptance of a settlement offer. The burden is on the debtor to prove a mutual agreement to compromise, and that burden was not met.
Dissenting - Hale, J.
Yes. The circumstances surrounding the transaction established an accord and satisfaction as a matter of fact. The claim was clearly unliquidated, as evidenced by the initial vague pricing discussion and Kibler's revised billing. Garrett's letter, which disputed the bill as 'ridiculous' and explained its calculation for the enclosed $444 check, unmistakably conveyed the notion that the check was tendered in full payment. A person of ordinary understanding would have realized that cashing the check under these hostile and disputed circumstances constituted an acceptance of Garrett's offer to settle the entire claim, regardless of the insignificant fine print on the check.
Analysis:
This decision reinforces the high bar for establishing an accord and satisfaction, emphasizing the requirement of a clear and unequivocal 'meeting of the minds.' It places the burden squarely on the debtor to ensure that any 'payment-in-full' condition is communicated so clearly that the creditor's acceptance is knowing and intentional. The ruling protects creditors from inadvertently forfeiting valid claims by cashing checks with ambiguous cover letters or boilerplate, inconspicuous notations. In future disputes, courts will likely require explicit and prominent language of settlement before finding that a creditor has waived rights to pursue the full, disputed amount.
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