Accord and Satisfaction requires Good Faith Conduct
The party asserting accord and satisfaction must prove that “the amount of the claim was unliquidated or subject to a bona fide dispute.” [See Florida’s Uniform Commercial Code, § 673.3111(1).] The dispute cannot arise after the party seeking accord and satisfaction tenders the payment instrument intended to satisfy or discharge the debt.
The party seeking accord and satisfaction must also tender the instrument in good faith. Because Florida caselaw regarding good faith in an accord and satisfaction context is relatively undeveloped, court decisions in other states with similar accord and satisfaction statutes are instructive.
“Accord and satisfaction is something that must be intended by the parties; it cannot happen by accident[.]” “In other words, there must be a superseding agreement to accept reduced payment in complete settlement of a dispute — a dispute that already existed at the time of the tender.”
Smith v. Capital One Auto Finance, Inc., 48 Fla.L.Weekly D2118a (Fla. 4th DCA 2023).
In Smith a plaintiff tried to rely on accord and satisfaction to obtain title to a vehicle despite a balance due under her loan. The plaintiff procured a vehicle and financed the vehicle. The seller, per the retail installment contract, assigned its interest to the financier where the plaintiff was required to make 72 monthly payments to the financier. The plaintiff experienced problems with the vehicle and communicated these problems to the seller, not the financier. After a certain point, and when the plaintiff still owed $31,000 under the loan, the plaintiff sent a payment to the financier that stated “PAID In Full,” which the financier deposited. The plaintiff demanded that the title to the vehicle be furnished and the balance of the loan reduced the zero. The financier refused and the plaintiff sued the financier under an accord and satisfaction theory because the financier deposited the check that said “PAID In Full.” The financier moved for summary judgment and prevailed, which was affirmed on appeal. Why?
First, the plaintiff’s “accord and satisfaction claim fails because no dispute with Financier existed when she tendered the [Paid In Full] check.” Smith, supra. The plaintiff “did not contact Financier about the contract loan until after she tendered the check to receive title and zeroed-out loan balance.” Id. While the plaintiff contacted the seller about the problems she was having with the vehicle, she did NOT contact the financier.
Second, there was no good faith. The plaintiff “disguised the check as a monthly payment due per the contract in an effort to obtain title to the vehicle and a zeroed-out loan balance; however, when Buyer tendered the check, she still owed at least $31,000. She also tendered the check when no dispute with Financier existed and after she historically sent similar monthly payments.” Smith, supra. Notably, the appellate court mentioned that courts in other jurisdictions not only found such conduct to be without good faith, but to be frivolous, potentially sanctionable conduct.
Third, the financier did not intent for the plaintiff’s PAID In Full check to zero-out her loan balance. “Financier treated the check made out for the same amount as Buyer’s monthly installment payment in the same fashion as it did for all of Buyer’s previous payments. Thus, no superseding agreement or mutual intent existed.” Smith, supra.
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