How Can I Accept a Check Marked Payment in Full Without Making an Accord and Satisfaction?
The CA statute says that crossing out the payment in full language will not avoid finding an accord and satisfaction if the check or draft is issued pursuant to or in conjunction with a release
of a claim. Therefore, it is possible the issuer may claim that you orally agreed to a release despite lack of signing and that an accord and satisfaction exists despite the stricken language.
The law is not settled in the area. The court in Directors Guild f America v. Harmony Pictures (C.D.Cal. 1998) 32 F.2d 1184 ruled that Commercial Code section 3311 impliedly repealed Civil Code section 1526 because the two were irreconcilable and Commercial Code section 3311 was enacted later. (Accord,
Woolridge v. J.F.L. Electric, Inc. (2002) 96 Cal.App.4th Supp. 52, 59 [117 Cal.Rptr.2d 771]; see Maurer & Dahle, New Law on "Payment-in-Full" Checks (May 1999) Cal. Lawyer, at p. 28.)
Please see the following CA statutes:
1526. (a) Where a claim is disputed or unliquidated and a check or
draft is tendered by the debtor in settlement thereof in full
discharge of the claim, and the words "payment in full" or other
words of similar meaning are notated on the check or draft, the
acceptance of the check or draft does not constitute an accord and
satisfaction if the creditor protests against accepting the tender in
full payment by striking out or otherwise deleting that notation or
if the acceptance of the check or draft was inadvertent or without
knowledge of the notation.
(b) Notwithstanding subdivision (a), the acceptance of a check or
draft constitutes an accord and satisfaction if a check or draft is
tendered pursuant to a composition or extension agreement between a
debtor and its creditors, and pursuant to that composition or
extension agreement, all creditors of the same class are accorded
similar treatment, and the creditor receives the check or draft with
knowledge of the restriction.
A creditor shall be conclusively presumed to have knowledge of the
restriction if a creditor either:
(1) Has, previous to the receipt of the check or draft, executed a
written consent to the composition or extension agreement.
(2) Has been given, not less than 15 days nor more than 90 days
prior to receipt of the check or draft, notice, in writing, that a
check or draft will be tendered with a restrictive endorsement and
that acceptance and cashing of the check or draft will constitute an
accord and satisfaction.
(c) Notwithstanding subdivision (a), the acceptance of a check or
draft by a creditor constitutes an accord and satisfaction when the
check or draft is issued pursuant to or in conjunction with a release
of a claim.
(d) For the purposes of paragraph (2) of subdivision (b), mailing
the notice by first-class mail, postage prepaid, addressed to the
address shown for the creditor on the debtor's books or such other
address as the creditor may designate in writing constitutes notice.
§ 3311 Com.
(a) If a person against whom a claim is asserted proves that (1) that
person in good faith tendered an instrument to the claimant as full
satisfaction of the claim, (2) the amount of the claim was unliquidated
or subject to a bona fide dispute, and (3) the claimant obtained payment
of the instrument, the following subdivisions apply.
(b) Unless subdivision (c) applies, the claim is discharged if the
person against whom the claim is asserted proves that the instrument
or an accompanying written communication contained a conspicuous
statement to the effect that the instrument was tendered as full
satisfaction of the claim.
(c) Subject to subdivision (d), a claim is not discharged under
subdivision (b) if either of the following applies:
(1) The claimant, if an organization, proves that (A) within a
reasonable time before the tender, the claimant sent a conspicuous
statement to the person against whom the claim is asserted that
communications concerning disputed debts, including an instrument
tendered as full satisfaction of a debt, are to be sent to a
designated person, office, or place, and (B) the instrument
or accompanying communication was not received by that designated
person, office, or place.
(2) The claimant, whether or not an organization, proves that
within 90 days after payment of the instrument, the claimant tendered
repayment of the amount of the instrument to the person against whom
the claim is asserted. This paragraph does not apply if the claimant
is an organization that sent a statement complying with
subparagraph (A) of paragraph (1).
(d) A claim is discharged if the person against whom the claim is
asserted proves that within a reasonable time before collection
of the instrument was initiated, the claimant, or an agent of the
claimant having direct responsibility with respect to the disputed
obligation, knew that the instrument was tendered in full
satisfaction of the claim.
Please see the following CA case law:WOOLRIDGE v. J.F.L. ELECTRIC, 96 Cal.App.4th Supp. 52 (2002)
117 Cal.Rptr.2d 771
JERRELL E. WOOLRIDGE Plaintiff/Appellant, v. J.F.L. ELECTRIC, INC., et
Court of Appeal of California, Appellate Department, Superior Court
San Bernardino County
Filed January 28, 2002
Appeal from judgment entered after court trial, SCI 54783, San
Bernardino County Superior Court, San Bernardino District Carl Davis,
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN
OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]
Jerrell E. Woolridge, plaintiff and appellant in pro per.
Cuff, Robinson & Jones, Kenneth L. Qualls, Esq., for defendant and
On February 8, 1999, appellant, Jerrell E. Woolridge, sued
respondents, J.F.L. Electric and its Chief Executive Officer[fn1], for
injuries suffered in an automobile accident. On October 7, 1999, J.F.L.
moved for summary judgment on the ground that all claims had been
resolved through an accord and satisfaction. After a hearing held
December 27, 1999. the court granted summary adjudication on the bodily
injury claim but denied it on property damage. In making his ruling, the
motion judge said "the defendant's notation on the one check, that it was
partial payment, is sufficient to signify that he did not agree to
accord and satisfaction on that check, [and] while an accord and
satisfaction has been reached to the [bodily] injury claim and storage
fees, the lawsuit should go forward to the proper amount the plaintiff
is allowed for loss of the vehicle."
The case was tried to the court on December 7, 2000. The court took
the matter under submission and on December 8, 2000. awarded judgment to
J.F.L., finding the parties had reached an accord and satisfaction as to
the remaining claims.
Timely notice of appeal was filed.
Mr. Woolridge's 1986 BMW was damaged in October of 1998. when a J.F.L.
employee rear-ended it. J.F.L.'s insurance carrier, Fireman's Fund,
tried to settle the claim by issuing three checks; The first, in the
amount of $780.00, was payable to Savage BMW and bore the notation
"[f]or storage on vehicle for JFL re; Woolridge Invoice #10018." Two
more checks were issued, payable to Woolridge. A $3,000 check bore the
notation "[f]or full and final settlement for your injury." A $6,545
check bore the notation "[f]or the total loss of your vehicle and
advance car rental for 27[fn2] per day for 44 days."
Accompanying the checks was a release form which Woolridge was
instructed to sign and return. He did not sign the release, but he
checks. The $3000 check was cashed without reservation.
Before cashing the $6,545 check, he wrote "partial payment" next
to his endorsement, but he did not cross out the "full and final
settlement" language on the face of the check.
After cashing the checks, Woolridge sued J.F.L. for additional sums he
alleged J.F.L. still owed him. As noted above, J.F.L. succeeded in
obtaining summary adjudication as to Woolridge's claim for bodily injury
damages, based upon evidence that he had cashed the $3000.00 check
without reservation. Because summary judgment was denied on the property
damage and loss of use claims, these claims went to trial.
At the outset, the trial court told the parties that it planned to
accept evidence not only on the amount of damages but also on the
asserted defense that an accord and satisfaction had been reached on the
remaining claims, stating "[the law and motion judge] did not grant
summary judgment only as to the issue of property damage . . . [a]nd
that's the only issue that we have before us. I'm not sure that that
gets us by the question of the [accord] and satisfaction. That also is a
live issue In this trial." Mr. Woolridge responded, "I can understand
that. Thank you."
Mr. Woodridge testified that, in his opinion, his car was worth
$15,000 before the accident and the cost to repair would be $11,840.72.
He alluded to an estimate from Arrow Glenn Appraisal, but a hearsay
objection to that evidence was sustained. He also contended he was
entitled to loss of use damages of $27.00 per day for 487 days.
Mr. Clark, the Fireman's Fund adjuster, disagreed with Mr. Woolridge's
evaluation. He testified he had obtained a professional appraisal
showing that the cost to repair exceeded the car's market value and
therefore the company considered the car a "total loss." He then
explained how he had computed salvage value and arrived at
the $6,545 settlement amount that Woolridge had received.
On the accord and satisfaction issue, while Mr. Woolridge admitted
he cashed the check sent to him for property damage and loss of use,
he contended he had rejected it as an accord and satisfaction. He
attempted to place into evidence a letter to Mr. Clark in which he
said he was not accepting the check as a full payment. Clark
testified he never received the letter, possibly because it was
addressed to a nonexistent post office box. The court sustained
J.F.L.'s hearsay objection and excluded the letter from evidence.
Mr. Clark testified he had discussed settlement with Mr. Woolridge.
Although at certain times during their discussions, Mr. Woolridge had
disagreed with the value Clark was placing on his car, Clark said the
check ultimately issued by the insurance company represented his
understanding of the amounts for which Woolridge had agreed to
settle. Mr. Woolridge denied having agreed to accept these amounts.
At the conclusion of testimony, the court took the matter under
submission. Thereafter, the court gave judgment to defendant on
the ground that the parties had reached accord and satisfaction on
remaining claims. This appeal followed.
(1) Appellant first contends the trial judge erred in considering
respondent's accord and satisfaction defense because the judge was
bound by the law and motion judge's finding that there was no accord
and satisfaction on the property damage and loss of use claims. We
The purpose of summary judgment is to determine whether triable
issues of fact exist, not to resolve any issues that remain. "[T]he
fact that a motion for summary adjudication is granted as to one
or more causes of action, affirmative defenses, claims for damages,
or issues of duty within the action shall not operate to bar any
cause of action, affirmative defense, claim for damages, or issue
of duty as to which summary adjudication was either not sought
or denied." (Code Civ. Proc., § 437c, subd. (m)(2).) Whether an
accord and satisfaction has been reached is a question of fact.
(In re Marriage of Thompson (1996) 41 Cal. App. 4th 1049, 1059
[48 Cal. Rptr. 2d 882].) In denying J.F.L.'s motion for summary
judgment, the law and motion judge could do no more than find the
company had failed to meet its burden of showing as a matter of
law that an accord and satisfaction had been reached. Therefore,
that factual question was still unresolved when the case went
Having concluded that the trial court properly considered whether the
parties had reached an accord and satisfaction, we move to the question
of whether the trial court was correct in concluding that they had done
so. The court's judgment is contained in a December 8, 2000, minute
order that reads in pertinent part:" Judgment will be for the defendant.
It is found that acceptance of the check with the notation `for the
total loss of your vehicle and advance car rental for 27 per day for
44 days' constitutes an accord and satisfaction." Two California
statutes relate to a debtor's attempt to reach an accord
and satisfaction on a disputed claim by tendering the creditor
a check. The first, Civil Code section 1526, was enacted
in 1987. It reads in pertinent part: (a) "Where a claim is
disputed or unliquidated and a check or draft is
tendered by the debtor in settlement thereof in full discharge of
the claim, and the words `payment in full' or other words of
similar meaning are notated on the check or draft, the acceptance of
the check or draft does not constitute an accord and satisfaction
if the creditor protests against accepting the tender in full
payment by striking out or otherwise deleting that notation
or if the acceptance of the check or draft was inadvertent
or without knowledge of the notation" (emphasis supplied). (Civ. Code
§ 1526, subd.(a).)
Under this statute, a creditor may accept a check that the debtor sends
as a full settlement offer without agreeing that the check represents a
full payment. To do so, the creditor need only strike out or otherwise
delete the "payment in full" language on the check. This statute changed
the common law rule that required the creditor to "take it or leave it"
when offered a check bearing conspicuous "payment in full" language.
(Cf. Potter v. Pacific Coast Lumber Co. (1951) 37 Cal.2d 592, 597 with
In re Van Buren Plaza (C.D. Cal. 1996) 200 B.R. 384, 386.)
In 1992, however, the Legislature enacted Commercial Code section
3311, which provides in pertinent part:
"(a) If a person against whom a claim is
asserted proves that (1) that person in good
faith tendered an instrument to the claimant as
full satisfaction of the claim, (2) the amount of
the claim was unliquidated or subject to a bona
fide dispute, and (3) the claimant obtained
payment of the instrument, the following
(b) Unless subdivision (c) applies, the claim
is discharged if the person against whom the
claim is asserted proves that the instrument or
an accompanying written communication contained a
conspicuous statement to the effect that the
instrument was tendered as full satisfaction of
In comment 3 to this section, the drafters
acknowledge that the statute purposely codifies the
common law rule "based on a belief that the common
law rule produces a fair result and that informal
dispute resolution by full satisfaction
checks should be encouraged." (U. Com. Code § 3311, (West Supp. 2001),
UCC Comments ¶ 3. at p. 59.)
Appellant's opening brief referred to neither of the above statutes,
arguing instead that reversal is compelled by Commercial Code section
1207. This argument is meritless because section 1207, by its terms,
"does not apply to an accord and satisfaction."[fn3]
Respondent's brief does not mention Commercial Code section 3311, but
does cite to Civil Code section 1526. Respondent then argues appellant
cannot take advantage of section 1526's election to treat a "full
payment check" as partial payment only, because appellant's "partial
payment" notation on the reverse of the check does not constitute
"otherwise deleting" the "full and final payment" language on the front
of that check as required by the statute.
Independently, this court identified the potential applicability of
Commercial Code section 3311 to this case. Therefore, we offered the
parties an opportunity to provide supplemental briefing on the question
of which statute governs. (Gov't Code § 68081.) In particular, we
invited comment on the reasoning of Directors Build of America v.
Harmony Pictures. Inc. (C.D. Cal. 1998) 32 F. Supp. 2d 1184, which held
Commercial Code section 3311 superseded Civil Code section 1526 because
the two were irreconcilable and the Commercial Code section was
enacted later. (Id., at p. 1192, citing LA. Police Protective
League v. City of Los Angeles (1994) 27 Cal.App.4th 168, 179
[32 Cal.Rptr.2d 574].)
Both parties accepted our invitation to submit supplemental briefs.
Appellant argued we should reject Director's Guild because it is not
binding precedent, and the Commercial Code should not be applied because
this is a non-commercial transaction. Respondent offered no analysis of
either statute, contending that the judgment must be affirmed regardless
of which statute applies.
Contrary to appellant's assertion, we find Commercial Code section
3311 is applicable here, because article 3 of the Commercial Code
"applies to negotiable instruments." (U. Com. Code § 3102, subd. (a).)
Checks are negotiable instruments (U. Com. Code § 3104), and respondent
paid with a check. Civil Code section 1526 is also applicable here,
because it governs transactions, such as the transaction here, in which
a debtor tenders a check in full payment of a disputed claim. The
statutes conflict, however, because under Civil Code section 1526 the
creditor can "opt out" of an accord and satisfaction while still
accepting the check as partial payment but Commercial Code section 3311
offers no such choice.
This statutory conflict has been noted by a number of commentators.
(See 3 Witkin, Summary of Cal. Law (Supp. 2001) Negotiable Instruments,
p. 231: Hull & Sharma, Satisfaction not Guaranteed: California's
Conflicting Law on the Use of Accord and Satisfaction Checks (1999) 33
Loy. L.A.L. Rev. 1; Casey, Full Payment Condition Checks: California
Statutory Conflict (1998) 20 T. Jefferson L. Rev. 97.) The weight
of the commentary reaches the same conclusion as the court
in Director's Guild, namely, that the two statutes
cannot be harmonized, and therefore Commercial Code section
3311, having been enacted most recently, controls.
We agree, and therefore we apply section 3311 to evaluate whether the
court correctly gave judgment to respondent. In undertaking this
analysis, we read the record in the light most favorable to the judgment
below. (County of Sacramento v. Lackner (1979) 97 Cal.App.3d 576, 591.)
That is, we "must view the evidence in a light most favorable to
respondent and presume in support of the judgment the existence of every
fact the trier could reasonably deduce from the evidence." (People v.
Rayford (1994) 9 Cal.4th 1. 23.)
Viewed in this light, the record contains substantial evidence of an
accord and satisfaction under Commercial Code section 3311.[fn4] It was
undisputed that a bona fide dispute existed as to the amount respondent
owed appellant for property damage and loss of use ( § 3311,
subd.(a)(2)). Respondent's witness, insurance adjuster Clark, testified
that during telephone discussions with appellant, he obtained
appellant's agreement to a settlement figure and, in
reliance upon that agreement, mailed him the check for the settlement
amount. Thus, the check was tendered in good faith. ( § 3311,
subd.(a)(1).) Appellant cashed the check. ( § 3311. subd.(a)(3).) The
check bore conspicuous statements indicating it was tendered in full and
final satisfaction of the
claim ( § 3311, subd. (b)). The statute was
therefore satisfied and the court correctly found an accord
and satisfaction had been reached.[fn5]
The judgment is affirmed.
[fn*] Before Fuller, P. J., Davis, J., and Wade, J.
[fn1] During trial, counsel for defendants moved for dismissal. The
court granted the dismissal as to the C.E.O. Appellant did not challenge
that dismissal in his opening brief and therefore, the propriety of the
ruling is not before us on this appeal.
[fn2] The record shows that the `27' refers to twenty-seven
[fn3] California Uniform Commercial Code section 1207, which
deals with performance or acceptance under reservation of
rights, reads in full:
"(a) A party who, with explicit reservation of rights, performs or
promises performance or assents to performance in a manner demanded or
offered by the other party does not thereby prejudice the rights
reserved. Such words as `without prejudice, `under protest' or the like
(b) Subdivision (a) does not apply to an accord and satisfaction."
[fn4] Although the record does not indicate that the court considered
section 3311 in making its finding that the parties had reached an
accord and satisfaction, we review results, not reasoning. "[A] ruling
or decision, itself correct in law, will not be disturbed on appeal
merely because given for a wrong reason, if right upon any theory of the
law applicable to the case, it must be sustained regardless of the
considerations which may have moved the trial court to its conclusion."
[citation omitted.] (D'Amico v. Board of Medical Examiners 1974)
11 Cal. 3d 1, 19.) Moreover, even if section 1526 had not been superseded, so
that it controlled here, we would affirm the trial court's judgment.
When statutory language is clear and unambiguous there is no need for
construction and courts should not indulge in it. (In re Waters of Long
Valley Creek Stream System (1979) 25 Cal.3d 339, 348.) The plain
statutory language of section 1526 requires "striking out" or "otherwise
deleting" the full and final payment language in order to opt out of an
accord and satisfaction. Appellant did neither. Rather, he added
language. Therefore, he did not satisfy the statute's requirements.
[fn5] Subdivision (c) of section 3311 provides exceptions to an accord
and satisfaction being created by mere acceptance of a check (e.g., if a
check is cashed inadvertently) but nothing in the record suggests that
the exceptions apply.