Marton Remodeling v. Jensen
706 P.2d 607, 42 U.C.C. Rep. Serv. (West) 54 (1985)
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Rule of Law:
When a debtor tenders a check as payment in full for a single, unliquidated debt arising from a bona fide dispute, the creditor's act of cashing the check constitutes an accord and satisfaction that discharges the entire debt. The creditor cannot avoid this result by unilaterally adding words of protest or reservation of rights, such as 'not full payment,' before cashing the check.
Facts:
- Mark Jensen hired Marton Remodeling to remodel his house under a 'time and materials' contract.
- Upon completion, Marton presented Jensen with a final bill for $6,538.12.
- Jensen disputed the bill, contending the number of hours Marton claimed to have worked was excessive.
- Jensen offered to pay $5,000, which he considered the fair value of the services, but Marton refused this offer.
- Jensen then sent Marton a check for $5,000 with the written condition: 'Endorsement hereof constitutes full and final satisfaction of any and all claims payee may have against Mark S. Jensen...'
- Marton sent a letter to Jensen refusing to accept the check as full payment for the debt.
- Marton then wrote the words 'not full payment' below the condition on the check and cashed it.
Procedural Posture:
- Marton Remodeling filed an action in a Utah trial court against Mark Jensen to foreclose a mechanic's lien and recover the disputed balance of $1,538.12.
- A jury returned a verdict in favor of Marton for $1,538, plus punitive damages and attorney fees.
- The trial court judge remitted the punitive damages award and reduced the attorney fees.
- Jensen, as appellant, appealed the judgment against him to the Supreme Court of Utah.
- Marton, as appellant on a cross-appeal, sought to have the original jury awards for punitive damages and attorney fees reinstated.
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Issue:
Does a creditor's act of cashing a check, which was tendered by a debtor as full and final payment for a single, unliquidated claim, create an accord and satisfaction even if the creditor writes 'not full payment' on the check before cashing it?
Opinions:
Majority - Howe, J.
Yes. Cashing a check tendered as full payment for a disputed, unliquidated claim constitutes an accord and satisfaction that cannot be altered by the creditor adding words of protest. The court reasoned that a bona fide dispute over a single, unliquidated claim existed. It distinguished this from cases involving two separate claims, one disputed and one undisputed. When a single claim is disputed, any payment offered as 'payment in full' is an offer to settle the entire claim. The creditor's action of cashing the check operates as an acceptance of that settlement offer, regardless of any words of protest the creditor adds. The law provides the creditor with only two options: accept the payment on the debtor's terms by cashing the check, or reject it by returning the check. The court also explicitly held that U.C.C. § 1-207 (U.C.A. § 70A-1-207) does not alter this common law doctrine, siding with the majority of jurisdictions to promote the public policy of favoring informal dispute resolution.
Dissenting - Stewart, J.
Justice Stewart dissented without a written opinion.
Analysis:
This decision solidifies the common law doctrine of accord and satisfaction in Utah, particularly in the context of 'payment in full' checks. It provides a bright-line rule that a creditor cannot accept the benefit of a settlement check (the money) while simultaneously rejecting its condition (full satisfaction). The court's explicit rejection of the U.C.C. § 1-207 argument in this context is significant, aligning Utah with the majority view and providing certainty for debtors and creditors in commercial transactions. This ruling prioritizes the value of informal dispute resolution and confirms that actions (cashing the check) speak louder than words (protests written on the check).
