Opinion
No. 11–P–985.
2012-08-7
Justin FERRY v. James M. CLARY, Third, & another.
By the Court (GRAHAM, VUONO & AGNES, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
At issue in this case is whether an employer can assert an accord and satisfaction as a defense to an employee's attempts to recover disputed commissions where the employer has only offered that employee the amount of commissions which the employer admits it owed to the employee. We conclude that such a defense is not a valid accord and satisfaction under the common law principle established in Whittaker Chain Tread Co. v. Standard Auto Supply Co., 216 Mass. 204 (1913) ( Whittaker ), which we conclude remains valid despite the adoption of G.L. c. 106, § 3–311. Accordingly, we reverse.
Background. This case involves a dispute between the plaintiff, Justin Ferry, and defendants Aircare Environmental Services, Inc. (Aircare) and James M. Clary, III, the president of Aircare. Ferry was hired by Aircare in 2006 under a written employment agreement under which Ferry was entitled to receive a salary and commissions based on the performance of certain accounts. When Ferry's employment with Aircare was terminated approximately one year later, Ferry, through counsel, wrote to the defendants claiming he had not been paid his commission on certain accounts and was owed additional compensation on other accounts. Clary, in his capacity as president of Aircare, subsequently wrote Ferry a letter indicating that, other than the “Perkins” account, which was currently involved in litigation, the defendants owed Ferry $1,325.64. Accompanying the letter was a check for $1,325.64. “Final Bonus Due/Less Perkins” was handwritten in the memo section of the check. Clary later stated in a deposition that this was “not in response” to Ferry's letter claiming additional money was owed and that he was “just delivering [Ferry] bonuses that he was entitled to.” Ferry later stated in an affidavit that he understood that the defendants viewed the check as his final commission payment, other than the Perkins matter. Ferry nonetheless deposited the check. Ferry expressed his disagreement with the final nature of the payment by crossing out the notation on the check, writing “Cold Sales” above it, and initialing the change. Ferry subsequently brought this action against the defendants for breach of his employment contract, failure to pay wages under the Wage Act, G.L. c. 149, § 148, in the form of commissions, and discharge in violation of the implied covenant of good faith and fair dealing. The defendants asserted that the check operated as an accord and satisfaction which precluded Ferry's claims. The trial judge agreed and allowed the defendants' motion for summary judgment.
Discussion. 1. Standard of Review. We review an appeal from a grant of summary judgment de novo. Bank of New York v. Bailey, 460 Mass. 327, 331 (2011). The standard of review is whether, “viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to judgment as a matter of law.” Massachusetts Insurers Insolvency Fund v. Smith, 458 Mass. 561, 564 (2010), quoting from Augut, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991).
At appellate oral argument, the defendants asserted that Ferry's claim was factually frivolous because Ferry had yet to identify particular accounts on which he has not been paid or an amount which the defendants owed him. To the degree the defendants intended this as an alternative reason for affirming the grant of summary judgment, the argument was not raised prior to appellate oral argument and is waived. See, e.g., Police Dept. of Salem v. Sullivan, 460 Mass. 637, 641 n. 7 (2011).
2. Validity of Accord and Satisfaction. a. Common Law Standard. Under the common law, it was “settled that acceptance of a check offered in full payment of a disputed claim constituted an accord and satisfaction and bar[red] an attempt to collect any balance outstanding under a contract.” Wong v. Paisner, 14 Mass.App.Ct. 923, 924 (1982), citing Worcester Color Co. v. Henry Wood's Sons, 209 Mass. 105, 109 (1911). The logic behind this doctrine was that a creditor “could only accept the money as it was offered, which was in satisfaction of his demand. He could not accept the benefit and reject the condition.” Whittaker, 216 Mass. at 206, quoting from Nassoiy v. Tomlinson, 148 N.Y. 326, 331 (1896).
However, in Whittaker, the Supreme Judicial Court also held that, in the absence of an express agreement to the contrary, the doctrine of accord and satisfaction “does not obtain where a debtor undertakes to make a payment of what he admits to be due conditioned on its being accepted in discharge of what is in dispute.” Whittaker, 216 Mass. at 208. Such a condition was considered to be void because it was “one which the debtor has no right to impose.” Ibid.
Whittaker's limitation on the doctrine of accord and satisfaction has been reaffirmed many times since it was initially announced. See, e.g., Moss v. Goldstein, 254 Mass. 334, 337 (1926); Puritan Wool Co. v. Winsted Hosiery Co., 263 Mass. 467, 471 (1928); Dedham Lumber Co. v. Hartung, 278 Mass. 488, 490–491 (1932); Champlin v. Jackson, 313 Mass. 487, 490 (1943); Wong v.. Paisner, 14 Mass.App.Ct. at 924;Cuddy v. A & E Mechanical, Inc., 53 Mass.App.Ct. 901, 902 (2001). The decision in Cuddy postdates the enactment of G.L. c. 106, § 3–311, but does not mention that statute. Ibid.
b. Effect of the Adoption of G.L. c. 106, § 3–311. The legislature enacted G.L. c. 106, § 3–311 in 1998. See St.1998, c. 25, § 8. General Laws c. 106, § 3–311, “follows the common law rule with some minor variations to reflect modern business conditions.” Official Comment 3 to Uniform Commercial Code (U.C.C.) § 3–311. However, § 3–311 does not expressly provide that an accord and satisfaction is not valid where a debtor pays only that portion of a debt which is undisputed.
We do not interpret a statute to have materially altered or repealed the common law “unless by direct enactment or necessary implication.” Riley v. Davison Constr. Co., 381 Mass. 432, 438 (1980). Cavadi v. DeYeso, 458 Mass. 615, 628–629 (2011). As G.L. c. 106, § 3–311 contains no express language addressing an accord and satisfaction in the context presented by Whittaker, we are left with the question of whether the comprehensive nature of G.L. c. 106 operates as an implied repeal of that doctrine. The answer is supplied by a consideration of other sections of the Code. G.L. c. 106, § 1–103 states that “[u]nless displaced by particular provisions of this chapter, the principles of law and equity, including ... estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause, shall supplement its provisions.” Thus, while the U.C.C. was intended as a “unified coverage of its subject matter,” G.L. c. 106, § 1–104, it is nonetheless supplemented by preexisting law that affects subjects it covers but does not conflict with its terms .
Whittaker is an “invalidating cause” as to accord and satisfactions, just as “estoppel, fraud, misrepresentation, duress, coercion, mistake, [and] bankruptcy” are to ordinary contracts. See, e.g., DeMatteo v. DeMatteo, 436 Mass. 18, 26 n. 16 (2002) (noting that all contracts require consideration and the absence of fraud, misrepresentation, and duress). Since nothing in § 3–311 directly addresses the validity of an accord and satisfaction in which the creditor has only proffered the undisputed portion of a debt, it cannot reasonably be said that § 3–311 “displaces” the common law on the issue.
See, e.g., Raymer v. Bay State Natl. Bank, 384 Mass. 310, 314 (1981) (enactment of the U.C.C. does not change “traditional rules” regarding assignability of claim for wrongful dishonor of checks); Terry v. Kemper, Ins. Co., 390 Mass. 450, 454 (1983) (enactment of U.C.C. does not require court to ignore common law agency principles in the absence of specific command that it do so).
The Official Comment to U.C.C. § 3–311 provides additional support for the proposition that Whittaker survives the adoption of G.L. c. 106, § 3–311. See, e.g., Wells Fargo Business Credit v.. Environamics Corp., 77 Mass.App.Ct. 812, 819–820 (2010). According to the Official Comment, “Section 3–311 follows the common law rule with some minor variations to reflect modern business conditions.” Official Comment 3 to U.C.C. § 3–311. The defendants cite to no modern business condition which would warrant overruling Whittaker, and none is apparent. Moreover, courts in other jurisdictions that have addressed the issue resolved by Whittaker after the enactment of § 3–311 have followed their preenactment common law, whatever that may be. Compare Brucato v. Ezenia! Inc., 351 F.Supp.2d 464, 470 (E.D.Va.2004), with Hoertsman Gen. Contr., Inc. v. Hahn, 474 Mich. 66, 77 (2006).
c. Application to the present case. Having determined that Whittaker remains valid, its application to this case is straightforward. The defendants readily admitted that the check which they sent Ferry only covered that which they did not dispute that they owed him. As a result, under Whittaker, they merely paid the undisputed portion of a disputed claim and cannot use such a payment as a release from the disputed portion of that claim, even if all the other requirements of G.L. c. 106, § 3–311, are met.
In view of this result, it is not necessary for us to determine whether the defendants' acts violate the “special contracts” provision of the Wage Act, G.L. c. 149, § 148. See Electronic Data Sys. Corp. v. Attorney Gen., 454 Mass. 63, 70 (2009). Ferry raises several other arguments concerning the application of the standard contained in G.L. c. 106, § 3–311, to this case. In light of our conclusion that Whittaker survives that section's enactment, we need not address these arguments.
Conclusion. The defendants have offered Ferry nothing more than the ink required to write the words “Final Bonus Due” in exchange for a waiver of his contractual and statutory claims. The defense of accord and satisfaction is not available to them and summary judgment should not have been granted.
The parties seek costs of the appeal. In light of the result we deny the requests.
Judgment reversed.