Sugarhouse Finance Co. v. Anderson
1980 Utah LEXIS 929, 610 P.2d 1369 (1980)
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Rule of Law:
An agreement to settle a liquidated debt for a lesser amount is supported by sufficient consideration if the debtor incurs a legal detriment they were not previously obligated to undertake, such as securing a loan from a third party to make immediate payment.
Facts:
- Sugarhouse Finance Company obtained a judgment against Eugene L. Anderson for $2,423.86 based on a promissory note.
- The judgment remained unsatisfied for over two years, prompting Sugarhouse to initiate supplemental proceedings.
- Anderson met with Sugarhouse's president, stated he was contemplating bankruptcy, and they negotiated a settlement to satisfy the judgment for $2,200.
- Anderson issued a check for $2,200, asking Sugarhouse to delay cashing it until funds were available, which would come from a third party.
- During the negotiation, Anderson did not disclose that he co-owned a parcel of real property.
- The day after the agreement, a title company called Sugarhouse regarding a pending sale of a portion of Anderson's property, informing Sugarhouse of the asset.
- When Anderson later called to authorize the cashing of the check, Sugarhouse refused to honor the settlement agreement.
Procedural Posture:
- Sugarhouse Finance Company (plaintiff) filed a complaint against Eugene L. Anderson (defendant) in a state trial court.
- The trial court rendered a judgment in favor of Sugarhouse for $2,423.86.
- Plaintiff docketed the judgment in Sevier County.
- Two years later, plaintiff served defendant with an Order in Supplemental Proceedings.
- Defendant filed a motion in the original action asking the trial court to enforce the settlement agreement.
- The trial court granted the defendant's motion and ordered the plaintiff to file a satisfaction of judgment upon receipt of $2,200.
- Sugarhouse Finance Company (appellant) appealed the trial court's order to the Supreme Court of Utah (the state's highest court).
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Issue:
Does an accord and satisfaction for a liquidated debt have sufficient consideration when the debtor agrees to pay a lesser sum immediately by incurring new indebtedness from a third party?
Opinions:
Majority - Hall, Justice
Yes, an accord and satisfaction for a liquidated debt has sufficient consideration under these circumstances. The court found that when Anderson agreed to settle the two-year-old judgment for an immediate payment of a lesser amount, he provided new consideration by agreeing to negotiate a loan with a third party. This action constituted a legal detriment, as Anderson had no prior legal obligation to incur additional debt to satisfy the judgment; Sugarhouse could only legally execute against his existing property. This new detriment conferred a benefit on Sugarhouse—immediate payment on a long-outstanding debt. The court also rejected Sugarhouse's claim of fraudulent inducement, holding that Anderson had no duty to disclose his ownership of the property. The property ownership was a matter of public record, and as the parties were dealing at arm's length, Sugarhouse, a professional financial institution, was obligated to take reasonable steps to inform itself and protect its own interests.
Analysis:
This case clarifies the 'new consideration' requirement for an accord and satisfaction involving a liquidated debt. It establishes that a debtor's act of incurring new, third-party debt to facilitate immediate payment constitutes a sufficient legal detriment to support a settlement for a lesser amount. The decision emphasizes that courts will look for even a slight new detriment or benefit to uphold such agreements. Furthermore, it reinforces the principle that in arm's-length transactions, a party cannot claim fraud based on an omission of publicly available information, placing a due diligence burden on sophisticated parties like financial institutions.
