Interiors v. Dicello - 46 Ohio St. 3d 1, 544 N.E.2d 869 (1989)

Rule:

Ohio Rev. Code Ann. § 1301.13, which embodies U.C.C. § 1-207, supersedes the common-law doctrine of accord and satisfaction in the "full payment" or "conditional check" situation."

Facts:

In June 1984, plaintiff-appellant, AFC Interiors ("AFC"), and defendant-appellee, Nicholas DiCello, d.b.a. Ohio State Home Services ("DiCello"), entered into an oral contract whereby AFC would perform certain interior decorating services for DiCello. These services were performed by AFC, and furnishings were thereafter purchased by AFC and delivered to DiCello. Invoices reflecting the amount due on the furnishings were sent to DiCello. However, payment from Dicello was not forthcoming. AFC filed this action against DiCello alleging breach of contract on the amount due for the furnishings. AFC thereafter filed a motion for summary judgment. Thereafter, the matter was referred to arbitration, and the arbitrators found in favor of AFC in the amount of $ 15,421, and further found that defendant was entitled to the return of the goods, except for a desk. DiCello sent a letter to AFC stating that he was returning the specific items that he no longer wanted pursuant to their oral contract, and enclosed a check containing a notation on the back, "[p]ayment in full for any and all claims against Nick DiCello." Kenneth Henderson, Vice-President of AFC, testified that he received the merchandise and the check, but that he crossed out the notation on the back of the check and inserted the words "Payment on Account." Henderson thereafter negotiated the check. DiCello filed a motion for summary judgment with the trial court on the ground that AFC's negotiation of the check amounted to an accord and satisfaction of the underlying debt. After due consideration, the trial court agreed, and granted DiCello's motion for summary judgment. Upon appeal, the court of appeals affirmed, finding that the trial court was correct in finding that an accord and satisfaction had taken place under Ohio law. In response to AFC's argument that R.C. 1301.13 permits a creditor to reserve its rights when cashing a payment-in-full check, the appellate court opined that "R.C. 1301.13 applies to the sale of goods and not payment in full checks."

Issue:

Did an accord and satisfaction take place with regard to the debt owed by DiCello to AFC?

Answer:

No.

Conclusion:

The court reversed the lower court's opinion since Ohio Rev. Code Ann. 1301.13, which embodies U.C.C. § 1-207, superseded the common-law doctrine of accord and satisfaction in the "full payment" situation. Where a debtor tenders a check to a creditor as payment in full for less than the amount alleged owed on the debt, the creditor may accept the check as partial payment on the debt so long as the creditor explicitly reserves all rights by endorsing the check "under protest."