Opinion
01 Civ. 3241 (RWS)
March 19, 2002
JOSEPH H. NEIMAN, ESQ., Attorney for Plaintiff Flushing, N Y 11367
KIRKPATRICK LOCKHART Attorney for Defendants New York, N Y 10020 By: MICHAEL STERN, ESQ. Of Counsel
OPINION
Defendants Interactive Video Technologies, Inc., f/k/a Softcom, Inc. ("IVT") and Softcom, Inc. ("Softcom") have moved pursuant to Fed.R.Civ.P. 56 for summary judgment in this case regarding payment of disputed fees following the termination of its lease. Plaintiff, Corporate Plaza Associates, LLC ("Corporate Plaza"), cross-moved for summary judgment under Fed.R.Civ.P. 56.
For the reasons set forth below, the defendants' motion will be granted.
Parties
Corporate Plaza is a corporation with its place of business in New Jersey.
IVT is the successor in interest to Softcom and is a corporation with its principal place of business in New York.
Softcom Is a corporation with its principal place of business in New York.
Facts
On July 31, 1999, Corporate Plaza entered into a lease agreement with Softcom. In late 2000, Corporate Plaza and Softcom terminated the lease pursuant to the Termination Agreement. The Termination Agreement provided that Softcom would pay Corporate Plaza $91,448 over four months and assign it a security deposit in the amount of $83,496. At the time, the security deposit contained only $47,712-$35,784 less than the required amount.
Defendants defaulted on payment, and Corporate Plaza initiated this action on April 18, 2001. Pursuant to § 6 of the Termination Agreement, Corporate Plaza sought the amounts due under § 3 of the Agreement ($127,232) plus interest and legal fees. Plaintiff's counsel advised IVT that he sought legal fees of approximately $40,000 on the basis of a contingency fee arrangement with Corporate Plaza.
On May 22, 2001, Corporate Plaza sent an invoice to IVT stating that the balance due to Corporate Plaza from IVT was $128,232. That amount included $1,000 in cleaning fees, in addition to the amount owed under the Termination Agreement. The amount did not include attorney's fees or interest due pursuant to the Termination Agreement. The parties disagree as to whether Corporate Plaza sent this invoice in error or as a calculated effort to resolve the litigation.
As discussed below, this is not a material fact and does not bar summary judgment.
IVT tendered payment of $128,232 to Corporate Plaza on June 15, 2001. IVT followed the directions on the invoice to tender by remitting it to a lock box in which checks are automatically deposited by the Merchants Bank of New York. This lock box is how tenants typically deliver their rent checks to Corporate Plaza. The payment was accompanied by a letter from IVT's Comptroller dated June 15, 2001, that stated the payment was in "full and final satisfaction of IVT's debts to Corporate Plaza." That money was automatically deposited in Corporate Plaza's account. Corporate Plaza did not return or attempt to return the $128,232.
Defendants then moved for summary judgment asserting accord and satisfaction as an affirmative defense. Corporate Plaza cross-moved for summary judgment for a determination of the legal fees it claims it is owed.
Discussion 1. Summary Judgment Standards
Rule 56(e) of the Federal Rules of Civil Procedure provides that a court shall grant a motion for summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits . . . show that there is no genuine issue as to material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Silver v. City Univ., 947 F.2d 1021, 1022 (2d Cir. 1991). "The party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists and that the undisputed facts establish her right to judgment as a matter of law." Rodriguez v. City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995). In determining whether a genuine issue of material fact exists, a court must resolve all ambiguities and draw all reasonable inferences against the moving party.Matsushita Elec. Indus. Co. v. Zenith Radio Corp. 475 U.S. 574, 587 (1986); Gibbs-Alfano v. Burton, 281 F.3d 12, 18 (2d Cir. 2002)
2. Accord and Satisfaction
Defendants set up as an affirmative defense that their partial payment, and the plaintiff's retention of it, constitutes an accord and satisfaction under New Jersey law.
Although the defendants originally cited to New York case law in their motion for summary judgment, they agreed with the plaintiff in its reply brief that New Jersey law should apply and cited New Jersey law accordingly.
New Jersey law recognizes three elements of accord and satisfaction: "(1) a dispute as to amount of money owed; (2) a clear manifestation of intent by the debtor to the creditor that payment is in satisfaction of the disputed amount; [and] (3) acceptance of satisfaction by the creditor." A.G. King Tree Surgeons v. Deeb, 140 N.J. Super. 346, 348-49, 356 A.2d 87, 88 (1976) (citing U.S. for Use of Glickfeld v. Krendel, 136 F. Supp. 276, 282 (D.C.N.J. 1955); See also Loizeaux Builders Supply Co. v. Donald B. Ludwig Co., 144 N.J. Super. 556, 565, 366 A.2d 721, 726 (1976). Courts have also described the third prong as requiring "the creditor's retention and use of the check." Chancellor v. Hamilton Appliance Co., 175 N.J. Super. 345, 347, 418 A.2d 1326, 1327 (1980) (citing Decker v. Smith Co., 88 N.J.L. 630, 96 A. 915 (E. A. 1916);Rose v. American Paper Co., 83 N.J.L. 707, 85 A. 354 (E. A. 1912)). This three-part inquiry focuses on whether there is a "knowing and deliberate" decision to act in the described manner. Connell v. American Funding Ltd., 231 N.J. Super. 409, 416, 555 A.2d 745, 748 (1987)
The parties agree that a dispute existed with regards to the legal fees and that IVT manifested an intent that its check be considered in full payment of the amount owed. The dispute revolves solely around the third factor, whether Corporate Plaza evidenced acceptance. As such, this case presents a novel situation in New Jersey case law. While it is arguable that Corporate Plaza did not deliberately accept the payment of the check — due to its being sent to an automatic deposit system — it did deliberately retain the funds despite a letter clearly stating that the receipt thereof would be considered in full satisfaction of the larger debt. At the time of writing, Corporate Plaza meanwhile has had the use and benefit of $128,232 for approximately nine months. This Court is persuaded that Corporate Plaza evidenced sufficient intent to accept the satisfaction by this retention and use.
As the defendants point out, it is also arguable that the plaintiff did intend to accept the payment. This turns on the disputed fact of whether Corporate Plaza intentionally sent the invoice to resolve the litigation. If so, they intended that any offer of accord and satisfaction be sent to the lock-box. For the purposes of deciding this motion, however, all inferences and ambiguities must be drawn against the defendants.
As discussed above, some New Jersey case law refers to the "retention and use" of funds, rather than merely knowingly cashing a check. Indeed, in cases where parties attempted to alter the face of checks stating that they were in full satisfaction, New Jersey courts have firmly held that "plaintiff's remedy was to return the check to defendant and sue for the full amount claimed due." Chancellor v. Hamilton Applicance Inc., 175 N.J. Super. 345, 418 A.2d 1326 (1980) (quoting A.G. King Tree Surgeons v. Deeb, 140 N.J. Super. 346, 349, 356 A.2d 87, 88 (Cty. D. Ct. 1976)). These rulings suggest that as soon as a plaintiff decides to reject satisfaction, any failure to return the money amounts to acceptance.
____________ The Ninth Circuit dealt with an analogous situation inTeledyne Mid-America Corp. v. HOH Corp., 486 F.2d 987 (9th Cir. 1973) (applying California law). There, Teledyne's accounting department routinely deposited a check from HOE containing accord and satisfaction language. Id. at 991. When counsel for HOH brought this language to Teledyne's attention a month later, Teledyne protested the attempt. Id. at 991-92. Teledyne argued, in part, that the routine cashing of a check by its accounting department did not constitute acceptance. Id. at 993. The court looked to the fact that, when Teledyne received notice of the attempted accord and satisfaction, it did not return the check, but kept it as a partial payment. Id. at 993-94. Teledyne's only options, upon discovering the mistake, were to return the check or to accept the check as full satisfaction. Id. "The court is in these cases faced with the alternative between holding that the creditor is a wrongdoer in cashing the check or using the money, and holding that his conduct is operative as an acceptance and is therefore not wrongful. The latter holding is a short cut to complete justice, protects the debtor against injury, and prevents unnecessary litigation." Id. at 994-95 (quoting 6 Corbin Contracts § 1279 (1962)). See also Didriksen v. Sewerage and Water Board of New Orleans, 527 So.2d 319, 322 (4th Cir. 1988) (finding accord and satisfaction where party "made use of the funds and renounced the condition upon which the funds were tendered" because "we cannot allow [the party] `to have its cake and eat it too'"); Valley Asphalt Inc v. Stimpel Wiebelhaus Assocs., 2 Fed. Appx. 838, 840 (10th Cir. 2001) ("Utah precedent, federal precedent, and commentators have all made clear retention of a check offered as payment in full constitutes assent to the accord and satisfaction even if the recipient of the check notifies the sender it is accepted only as a partial payment."); Thomas Creek Lumber and Log Co. v. United States, 36 Fed. Cl. 220, 244 (1996) ("use of money can be taken as acceptance")
Corporate Plaza argues that defendants should have sent the check to Corporate Plaza directly, or to its counsel, rather than to the lock box. While this suggestion may have merit, it overlooks Corporate Plaza's more pressing responsibility to reject defendants' offer as soon as it was aware that the check had made its way from the lock box and into Corporate Plaza's coffers. Plaintiffs cannot play the accord and satisfaction game both ways, knowingly retaining the money offered in satisfaction of a disputed amount and still suing for the difference. Therefore, this Court finds that Corporate Plaza's retention and use of the defendants' $128,232 constitutes accord and satisfaction of the debt at issue in this case.
Corporate Plaza's Cross Motion
Because of the findings above, the Court need not reach the merits of the plaintiff's cross motion.
Conclusion
For the reasons stated, the defendant's summary judgment motion is granted and the plaintiff's summary judgment motion is denied.
It is so ordered.