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OCCIDENTAL CHEM. CORP. v. ENVIRONMENTAL LINERS

July 21, 1994

OCCIDENTAL CHEMICAL CORPORATION, a New York corporation, Plaintiff
v.
ENVIRONMENTAL LINERS, INC., a Colorado corporation, Defendant



The opinion of the court was delivered by: WILLIAM H. YOHN, JR.

 Yohn, J.

 Plaintiff, Occidental Chemical Corporation ("Oxychem"), is seeking $ 60,788.97 in damages for its claims of breach of contract and unjust enrichment. Defendant, Environmental Liners, Inc. ("Environmental"), has moved for summary judgment based on an affirmative defense of accord and satisfaction. Environmental contends that its debt to Oxychem was discharged when Oxychem negotiated a check from Environmental which had been marked "final payment." Oxychem argues, however, that its acceptance of the check did not constitute an accord and satisfaction as a matter of law and has cross-moved for partial summary judgment on the affirmative defense of accord and satisfaction. For the reasons discussed below, the court will grant defendant's motion for summary judgment and deny plaintiff's cross-motion for partial summary judgment.

 I. BACKGROUND

 From September, 1990 to September, 1991, Oxychem sold 2.77 million pounds of polyvinyl chloride ("PVC") sheeting to Environmental. During a portion of that time, Oxychem had in place a rebate program which entitled purchasers to a price reduction. Oxychem discontinued the rebate program in April, 1991. The parties dispute how much the rebate program reduced Environmental's bill. Environmental claims that its bill should have been reduced by $ 70,000 under the rebate program, whereas Oxychem argues that the reduction should only have been $ 4,940.

 On February 17, 1993, Environmental sent a check to Oxychem in the amount of $ 50,595.42. Environmental calculated this amount based on its entitlement to a $ 70,000 rebate. The check was clearly marked as "final payment." (Pl.'s Ex. H). Accompanying the check was a letter from Environmental informing Oxychem that "this payment is tendered as payment in full and represents all outstanding monies." (Pl.'s Ex. G). Upon receipt of the check and accompanying letter, Oxychem negotiated the check and sent a letter back to Environmental stating that Environmental still had a balance of $ 60,788.94 on its account. The letter did not state whether Oxychem had negotiated the check at the time the letter was written.

 II. LEGAL STANDARDS

 Under Federal Rule of Civil Procedure 56, the court will grant summary judgment "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56; see Celotex Corp. v. Catrett, 477 U.S. 317, 322-32, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). An issue of material fact is genuine if the evidence could cause a reasonable jury to decide in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). A factual dispute is "material" only if it might affect the outcome of the suit under governing law. Id. at 248. The court must take the evidence, and all reasonable inferences drawn therefrom, in the light most favorable to the nonmoving party. Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir. 1980).

 III. DISCUSSION

 An accord and satisfaction is a substitute contract between a debtor and creditor for the settlement of a debt by some alternative performance other than full payment of the debt. See Restatement (Second) of Contracts, § 281 (1981). Because an accord and satisfaction is a contract, it requires the elements of a contract: offer, acceptance and consideration. Brunswick Corp. v. Levin, 442 Pa. 488, 276 A.2d 532, 534 (Pa. 1971); Nowicki Constr. Co. v. Panar Corp., N.V., 342 Pa. Super. 8, 492 A.2d 36 (Pa. Super. 1985). The debtor's offer of a full payment check and the creditor's negotiation of that check usually constitute the offer and acceptance of an accord and satisfaction. The consideration is the resolution of an unliquidated or disputed claim. Nowicki, 492 A.2d at 40; Hayden v. Coddington, 169 Pa. Super. 174, 82 A.2d 285, 286 (Pa. Super. 1951).

 The Pennsylvania Supreme Court summarized the defense of accord and satisfaction under Pennsylvania law in Lucacher v. Kerson, 355 Pa. 79, 48 A.2d 857 (Pa. 1946), stating the following:

 
Where there is a dispute or disagreement between the debtor and creditor as to their respective rights, a payment tendered in full satisfaction of the other's claim operates as an accord and satisfaction if the payment is accepted and retained. [footnote omitted] On the other hand, in the absence of such a controversy, the payment of a part of the amount due under a contract, even though accepted by the creditor as in full satisfaction of the debt, does not work a discharge of the entire indebtedness, for the reason that there is no consideration for the creditor's agreement that it should so operate.

 Id. at 858.

 In the case at issue, all elements of a valid accord and satisfaction are present. Environmental made an offer by sending a check which was clearly marked "final payment" along with a letter which expressly stated that the check represented all outstanding monies owed to Oxychem. By negotiating the check Oxychem accepted Environmental's offer to settle the dispute. The consideration for the accord and satisfaction was the resolution of a bona fide dispute between the parties as to the amount of the debt owed to ...


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