Opinion
Civil No. JFM-99-2691
August 25, 2000
MEMORANDUM
Plaintiff Hopkins Construction Company, Inc. ("Hopkins") has brought suit against defendant American Buildings Company ("ABC") for breach of contract. ABC argues that the complaint is time-barred by the applicable statute of limitations, and that it is entitled to summary judgment based on the affirmative defense of accord and satisfaction. ABC's motion for summary judgment will be granted.
I.
ABC manufactures metal prefabricated building components. On October 24, 1994, Hopkins placed an order for components from ABC for the construction of facilities for the Shiloh Baptist Church of Baltimore County. Shortly after the initial shipment of ABC's components to the project site, Hopkins asserted that ABC breached the parties' contract, provided flawed erection drawings, and delivered materials that were incomplete and not in accordance with the specifications contained in the purchase order. In response, representatives of ABC and Hopkins met on at least two occasions in an effort to reach a settlement. As a result of those discussions, on October 1, 1996, ABC sent Hopkins a check in the amount of $25,000 with an accompanying cover letter. The letter stated, in pertinent part, that "American is issuing this check as settlement on all claims on this project" and that "[a]cceptance of this check indicates Hopkins' acknowledgment of this credit as settlement on all claims for this project." Pl.'s Opp'n Mem. Ex. H. Hopkins, without placing any restrictions on it, cashed the check on October 3, 1996. On that same day, Hopkins' president, Christopher Trionfo, wrote a letter to ABC that stated "[p]lease be advised that we must reserve the right to submit for all direct and indirect costs associated with the American Buildings delay." Pl.'s Opp'n Mem. Ex. J. Hopkins filed this lawsuit on August 3, 1999, against ABC, seeking damages in the amount of $79,633.
II.
Summary judgment may be granted only when it is shown "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Under this standard "the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted). However, "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).
ABC argues that it is entitled to summary judgment based on the doctrine of accord and satisfaction. In order to establish this affirmative defense, a defendant must show that: (1) a bona fide dispute has arisen between the parties regarding the existence or extent of liability; (2) subsequent to the dispute the parties entered an agreement in which one party pays a sum in excess of that which he admits he owes and the other party accepts an amount less than he claims is due him, all for the purpose of settling a dispute; and (3) performance by both parties of the agreement. See Parker v. Prudential Ins. Co. of Am., 900 F.2d 772, 776 (4th Cir. 1990). In this case, it is clear from the negotiations and prior correspondence between the parties that the amount of liability was disputed, and that the check and letter sent by ABC to Hopkins on October 1, 1996 was an offer to settle all claims relating to the construction project at Shiloh Baptist Church. The cover letter explicitly stated that "[a]cceptance of this check indicates Hopkins' acknowledgment of this credit as settlement on all claims for this project." Pl.'s Opp'n Mem. Ex. H (emphasis added). Hopkins accepted this offer by cashing the check. These actions, which are not disputed by Hopkins, constitute an accord and satisfaction.
Nevertheless, Hopkins argues that ABC has not demonstrated that there was an accord because there was no dispute regarding the existence or extent of ABC's liability, and that there was no satisfaction because ABC did not comply with the terms of the partial settlement agreement. Hopkins' president, Trionfo, maintains that during a September 30th meeting with ABC to discuss possible settlement for the difficulties encountered with ABC: "We agreed, [a representative of ABC] and I, verbally that I would accept the $25,000 for everything up to this point and that if I was impacted later, I would seek damages. That's all I agreed to." Trionfo Dep. at 53. Therefore, according to Hopkins, there was an agreement by which the $25,000 check would settle only past damages.
However, despite Hopkins' claims of a subjective understanding or agreement to the contrary, ABC's cover letter is clear that ABC's payment was intended to satisfy all claims. See Kimmel v. Safeco Ins. Co., 696 A.2d 482, 490 (Md.Ct.Spec.App. 1997) (holding that the party's subjective intent could not salvage the plaintiff's claims that there had been no accord and satisfaction). Although Hopkins was in a difficult position due to the delays caused by the faulty building components, it did have alternatives available other than accepting ABC's settlement check. For example, Hopkins could have renegotiated with ABC for either more money or to limit the settlement to only specific claims, or tried to complete the project and then sued ABC for all damages arising from the breach. Instead, Hopkins, despite some disagreement among its management, chose to accept ABC's certain and immediate, albeit low, settlement offer. As Trionfo candidly stated, even if a lawyer had advised him not to cash the check, he would have done so anyway because "I would have said, I'll take my lumps, and this is exactly what I have done on a couple of occasions." Trionfo Dep. at 45-46. In addition, the fact that Hopkins sent a letter dated October 3, 1996 to ABC purporting to reserve future claims does not negate the accord and satisfaction under Maryland law. See Kimmel, 696 A.2d at 490; Loh v. Safeway Stores, Inc., 422 A.2d 16, 20 (Md.Ct.Spec.App. 1980) ("[T]he party who accepts and uses the check, even though protesting against settlement, cannot make further claim against the tendering party.").
Trionfo himself apparently understood that the October 1st letter would settle all disputes. In response to a question about what the letter meant, he stated:
A. That they were trying to walk away from the project for $25,000. I know. I expected that if there was a problem, we would be here today. I mean, I'm not stupid.
Q. So you understood that sentence to mean that American was tendering this check as a full settlement of all claims relating to this project?
A. I understood that that was what they were attempting to say but was not taking it that way.
Trionfo Dep. 52-53.
At this time, of course, the potential future damages were unknown. Moreover, it also seems likely that Trionfo believed ABC would assist Hopkins in mitigating those future losses either through significant additional on-site help from ABC's troubleshooter, Tommy Collier, or by honoring the September 30th oral understanding. However, ABC apparently did not share Triofno's vision of fair play and Trionfo failed to insist on it before accepting the check.
Hopkins' argument that there was no satisfaction because ABC did not comply with the terms of the alleged partial settlement agreement is also unavailing. Hopkins argues that ABC did not comply with the second paragraph of the October 1, 1996 transmittal letter, which stated that ABC's representative, Collier, "will remain on site for the remainder of the week" to "audit the materials and provide erection counsel as needed." Pl.'s Opp'n Mem. Ex. H. Although it is disputed as to the extent of ABC's representative's work, Hopkins' officials have testified that the representative thereafter performed a visual audit and stayed on the site for a few days. Therefore, the resulting lapse, if any, is not significant enough to void the accord and satisfaction between the parties.
Chet Morris acknowledged that Collier walked the construction site and examined packing crates to determine whether the components had been delivered. See Morris Dep. at 118-19. Nicholas Trionfo also stated that Collier stayed on the site "a few days," which is consistent with his remaining there for the rest of the week. N. Trionfo Dep. at 70-71.
Turning to the statute of limitations argument, generally a cause of action for breach of contract accrues when there is a breach or at least an anticipatory breach. See Singer Co., Link Simulation Sys. Div. v. Baltimore Gas and Elec. Co., 558 A.2d 419, 424 (Md.Ct.Spec.App. 1988). However, successive breaches of a contract providing for continuous performance over a period of time tolls the statue of limitations. See id. at 425-26. Whether the parties' continuing relationship and subsequent contacts constitute an extension of the time under which the original contract was to be performed is arguable. Regardless, however, the presence of an accord and satisfaction moots the need for such a factual determination.
ABC has alternatively argued that the suit is precluded by the express limitation of liability contained in the purchase order between the parties. I need not reach this issue because of the presence of the accord and satisfaction.
For these reasons, defendant ABC's motion for summary judgment is granted. A separate order to that effect is being entered herewith.
ORDER
For the reasons stated in the memorandum entered herewith, it is, this 25th day of August, 2000
ORDERED that
1. Defendant ABC's motion for summary judgment is granted;
2. Judgment entered in favor of Defendant against the Plaintiff; and
3. The Clerk is directed to close this file.