DD 4/18/06 Two in one: Accord and Satisfaction; Lis Pendens Issues



Daily Development for Tuesday, April 18, 2006
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

Note two discussions of the same case on different topics:

VENDOR/PURCHASER; SPECIFIC PERFORMANCE; ACCORD AND SATISFACTION: Accepting and cashing the return of a down payment check tendered by a seller who has refused to perform on a contract of sale does not constitute an accord and satisfaction, barring seller’s action for specific performance of the contract, when the seller does nothing to suggest that it in fact is agreeing to cancel the contract. 

Weston Builders & Developers, Inc. v. McBerry, L.L.C., 891 A.2d 430 (Md. App. 2006)

Seller agreed to release lots in a subdivision according to an identified schedule.  Seller was to prepare the site.  Buyer was to take the first five lots within thirty days of Seller’s recordation of the subdivision plat.  Long before Seller had completed site preparations, Seller recorded the plat, and didn’t even bother to inform Buyer.  About two months later, Buyer discovered that the plat had been recorded and inquired of Seller whether it was appropriate for Buyer to take title to the first five lots.  Seller said that Seller had barely started to clear the land, and if Buyer commenced construction, that Buyer would be in Seller’s way, so Seller would not carry out the initial transfer.

Later, Seller was substantially delayed by a wetlands problem, which also caused Seller considerably greater costs.  Still, no lots had been sold to Buyer.  When the wetlands problem was resolved, several years had passed since the original contract, and land prices in the area had gone, in the words of the parties, “through the roof.” Lots were selling at five times the earlier price. 

Seller refused to close on the grounds that Buyer had forfeited the contract by not taking the first five lots within thirty days of the original sale.  Buyer filed for specific performance, which resulted in a lis pendens filing.  At trial, Seller also argued that there had been an accord and satisfaction as a consequence of two checks from Seller to Buyer that Buyer had cashed during the course of the litigation.  

The first check was nothing more than a refund of monies that Buyer had advanced for certain public sewer and water fees as an accommodation to Seller.  The contract required Seller to pay these fees, and Buyer’s agreement with Seller was that Seller would repay them promptly.  This transaction, the appeals court ruled, was entirely outside the contract and did nothing to suggest any accord and satisfaction of the contract dispute, despite the fact that Seller’s cover letter indicated that the refund was being made in light of Seller’s position that the contract had been cancelled.

The second check was a refund of the security deposit.  Buyer’s attorney cashed the check and held it in a security account, but the court, for purposes of analysis, simply assumed that Buyer in fact had cashed it.  Although Seller again accompanied the check with a cover letter that stated that the money was being returned in light of Seller’s position that the contract had been forfeited. 

The appeals court, with exhaustive (and exhausting) review of authority, took the view that for there to be an accord there must be an unequivocal statement that monies are tendered in full satisfaction of any liabilities arising from a given dispute.  In this case, the attorney for Seller stated only that the Seller took the position that the contract was at an end, and that therefore it was tendering the check.

“. . . [Seller] hereby terminates the contract.  Accordingly, enclose herewith the check [from the law firm] . . . payable to [Buyer] representing the deposit paid on the Contract.  As provided in . . . [the forfeiture provision] of the Contract, [Seller] has no further rights or obligations under the Contract.”

Although the court admitted that a tender coupled with appropriate language can compel the recipient of the check to accept the accord if the recipient cashes the check, it concluded that the language in Seller’s counsel’s letter “didn’t come close” to offering an accord.  The check itself had no special legend on it that cashing the check would constitute the carrying out of an accord.  Consequently, it concluded it didn’t even have to consider the additional facts  that the Buyer’s counsel simply put the money in its trust account and immediately responded that it did not agree that the contract had been terminated.

Comment: Despite its extraordinary length, lawyers dealing in these kind of situations might profit from reviewing the case, as it includes decisions from a number of other jurisdictions detailing exactly what must be put into a tendered offer in order to establish an accord and satisfaction. 

               
LIS PENDENS; APPEAL: The fact that a plaintiff who has filed a lis pendens in a specific performance action  loses at the trial level and has not filed a supersedas, or otherwise attempted to stay the carrying out of the court’s decision does not render the lis pendens a nullity, and any party taking an interest in the property will still be bound by the outcome of the case on appeal.

Weston Builders & Developers, Inc. v. McBerry, L.L.C., 891 A.2d 430 (Md. App. 2006)

Although this is an analysis of Maryland statutes and common law on lis pendens, the editor believes the rule stated to be the general rule.

The erudite judge who authored the opinion, with feet rooted firmly in prose tradition of the Nineteenth Century, outdoes Dickens in describing, with far more words than one would expect possible, the issues and authorities bearing upon this problem. 

The principle substantive issue discussed was the distinction of several Maryland cases in which a lis pendens did not preserve the appealed case as against a purchaser at a judicial ordered sale carried out as a consequence of the original (unstayed) judgment.  The court here stated that the cases that recognized the validity of the sale did so as an exception to the usual rule that lis pendens continues to operate through appeal, as an application, according to the court of Newton’s First Law of Motion. 

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