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Michigan Supreme Court Lansing, Michigan

Opinion
HOERSTMAN GENERAL CONTRACTING, INC., Plaintiff-Appellee, v JUANITA REMS HAHN and C. RONALD HAHN, Defendants-Appellants, and TEACHERS CREDIT UNION, Defendant. _______________________________ BEFORE THE ENTIRE BENCH KELLY, J.

Chief Justice:

Justices:

Clifford W. Taylor

Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly Maura D. Corrigan Robert P. Young, Jr. Stephen J. Markman

FILED MARCH 23, 2006

No. 126958

This case calls on us to decide whether an accord and satisfaction existed between the parties. The Court of Appeals found that it did not. We disagree and rule that the parties reached an accord and satisfaction. Therefore, we reverse the decision of the Court of Appeals and remand the case to the trial court for entry of judgment in favor of defendants.

SUBSTANTIVE FACTS AND PROCEDURAL HISTORY This case centers on a contract to remodel and reconstruct a lakeside residence in Edwardsburg, Michigan,1 made between plaintiff, Hoerstman General Contracting, Inc., and defendants Juanita and Ronald Hahn, the owners. Unfortunately, several unforeseen events during construction caused significant delay and cost overruns. When plaintiff did not meet the expected deadline to complete the work, Ronald Hahn informed plaintiff's owner that he wanted the job finished no matter the expense. Plaintiff agreed to work under these conditions if Ronald agreed to pay the extra costs. Ronald made it clear that he was not concerned with the price. Plaintiff followed Ronald's oral instructions on changes to the project. These were not minor modifications. They included moving walls and tearing up concrete floors. According to plaintiff, a later-compiled written list of the oral changes to the contract covered over ten pages. Despite these significant

alterations, Ronald refused to agree in writing to any changes to the existing contract. Defendants acknowledged that they owed more than the original bid price and paid plaintiff $125,000. But plaintiff claimed defendants owed an additional $32,750. In an apparent attempt to settle the dispute, plaintiff sent a letter to

Originally, the residence belonged solely to Juanita Rems. Juanita married during the course of construction and added her husband, C. Ronald Hahn, to the title.

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defendants asking for $16,910.79. Plaintiff indicated that it would provide the lien waiver and close the account in exchange for payment of the amount requested. Defendants did not pay the $16,910.79. Instead, they replied with a letter in which they calculated the balance due at $5,144.79. They included with the letter their check for that amount. They wrote "final payment" on the check. In the letter, they indicated that they believed that their payment of $5,144.79 closed the account. The letter provided: If we send you a check for $5144.79 we will consider this account closed and will not expect discussion of the other * items.[2] We will then expect the lein [sic] waiver to be sent. If this is not acceptable, we will have to resort to arbitration per attorney [sic]. Plaintiff sought legal advice. Its attorney crossed out the words "final payment" on the check and advised plaintiff to deposit it. Plaintiff followed this advice, credited defendants' account in the amount of $5,144.79, and did not close the account. When defendants made no additional payments, plaintiff brought suit seeking damages and foreclosure of its construction lien. Defendants

counterclaimed for amounts they believed they had overpaid. In their answer to plaintiff's complaint, defendants asserted the affirmative defense of accord and satisfaction. After a bench trial, the court awarded plaintiff approximately

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The "* items" refers to a list of disputed charges for changes made in the

project.

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$26,000 after setting off $5,800 on defendants' counterclaim. The court did not explicitly rule on the issue of accord and satisfaction. Both parties appealed to the Court of Appeals. The Court of Appeals ruled that the words "final payment" on the check were not sufficient to inform plaintiff that acceptance of the check discharged the entire claim. Hoerstman Gen

Contracting, Inc v Hahn, unpublished opinion per curiam of the Court of Appeals, issued June 15, 2004 (Docket No. 244507). This Court granted leave to appeal limited to whether an accord and satisfaction occurred in this case. 472 Mich 898 (2005). STANDARD OF REVIEW The existence of an accord and satisfaction may be decided as a question of law if the facts of the case are undisputed and not open to opposing inferences. Urben v Pub Bank, 365 Mich 279, 286; 112 NW2d 444 (1961). During oral argument, the parties conceded that the relevant facts here are not in dispute. Therefore, the case presents a question of law which we review de novo. Anzaldua v Band, 457 Mich 530, 533; 578 NW2d 306 (1998). ACCORD AND SATISFACTIONS An accord and satisfaction is an affirmative defense3 grounded in contract principles. An accord is a contract and requires a meeting of the minds of those

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MCR 2.111(F)(3) provides: (continued...) 4


who enter into it. Fritz v Marantette, 404 Mich 329, 334; 273 NW2d 425 (1978), quoting Gitre v Kessler Products Co, 387 Mich 619, 624; 198 NW2d 405 (1972). A satisfaction is the discharge of the debt occurring after acceptance of the accord.4 Cases in which an accord and satisfaction defense is relevant involve a good-faith dispute about an unliquidated amount owing under a contract. One

(...continued) Affirmative Defenses. Affirmative defenses must be stated in a party's responsive pleading, either as originally filed or as amended in accordance with MCR 2.118. Under a separate and distinct heading, a party must state the facts constituting: (a) an affirmative defense, such as contributory negligence; the existence of an agreement to arbitrate; assumption of risk; payment; release; satisfaction; discharge; license; fraud; duress; estoppel; statute of frauds; statute of limitations; immunity granted by law; want or failure of consideration; or that an instrument or transaction is void, voidable, or cannot be recovered on by reason of statute or nondelivery; (b) a defense that by reason of other affirmative matter seeks to avoid the legal effect of or defeat the claim of the opposing party, in whole or in part; (c) a ground of defense that, if not raised in the pleading, would be likely to take the adverse party by surprise. Black's Law Dictionary (7th ed) provides a useful definition of "accord and satisfaction": An agreement to substitute for an existing debt some alternative form of discharging that debt, coupled with the actual discharge of the debt by the substituted performance.

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