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No. 86-103
IN THE SUPREME COURT OF THE STATE OF MONTANA

1986
ALLEN M. GEISSLER,
Plaintiff and Respondent,
-vs-
HOWARD NELSON,
Defendant and Appellant.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph B. Gary, Judge presiding.

COUNSEL OF RECORD:

For Appellant:
Berger Law Firm; Chris Nelson, Billings, Montana

For Respondent:

J. David Penwell, Bozeman, Montana

Submitted on Briefs: May 15, 1986 Decided: July 31, 1986
Filed: JUL 311986

Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

Appellant, Howard Nelson, appeals from the judgment of
the District Court, Eighteenth Judicial District, County of
Gallatin, awarding respondent $3,927.00, plus attorney fees.
We affirm.

On April 9, 1979, Nelson sold to Geissler, his business
known as Royal Honda Motors in Bozeman, Montana. The terms
of the sale provided for a total purchase price of
$130,000.00. Geissler made a downpayment of $65,000.00 and
agreed to pay the remaining $65,000.00 at the rate of
$1,309.05 per month over a five year period. Nelson was also
the owner of the premises that housed Royal Honda Motors.
Accordingly, the parties entered a lease whereby Geissler
leased the business premises from Nelson.

Among other requirements, the lease contained a
provision that Geisler deposit with Nelson a security deposit
in the amount of $9,034.00. The lease stated that the
security deposit was to be held:

[Flor the performance by tenant of the [terms] of
this lease. Said security deposit shall be
retained by landlord without interest until
termination of this lease and provided that tenant
has complied with all of the terms hereof and paid
all of the rental, such amount shall be returned
unto tenant.

The parties' lease also provided Geissler would pay
monthly rent of $4,517.05 per month. The parties, however,
apparently agreed that $3,208.00 of the payment was actually
rent and the remainder, $1,309.05, represented the money
being paid by Geissler to Nelson to be applied against the
$65,000.00 balance owed by Geissler on the purchase price of
Royal Honda Motors.

Prior to the initiation of this action, on June 7, 1983,
Nelson brought suit on the parties' lease in Cause No.
DV-83-537, in the same District Court. On October 1, 1983,
however, the lease was terminated by the parties when Nelson
entered a new lease covering the business premises with
Simpson Motor Cars Limited to whom Geissler had sold Royal
Honda Motors. Thereafter, Cause No. DV-83-537 was dismissed
by stipulation of the parties, signed October 31, 1983.
Accordingly, in the instant case, the District Court found
that the matters in the parties1 previous lawsuit involving
the lease agreement were "res judicata with the exception of
the question of the security deposit which was not
contemplated in the said action in Cause No. DV-83-537."

Subsequent to termination of the lease by the parties,
Geissler made demands for the payment and refund of the
security deposit of $9,034.00. Nelson failed to refund the
deposit until January 25, 1984 when he tendered a check to
Geissler written in the amount of $3,911.00. Nelson arrived
at a $3,911.00 refund by subtracting from the $9,034.00
deposit, set-off claims in the amount of $1,196.00 for
claimed damages to the leased premises and $3,927.00 for
nonpayment of the last three installments of $1,309.05 owing
on the balance of the purchase price of the business. In
other words, Nelson arrived at the set-off of $3,927.00 by
adding the portion of the lease payment attributable to

Nelson's payment  on  the purchase price of the business of  
$1,309.05  for  three  months.  On  the  back  of  the  check  
tendered  by  Nelson  the  following  restrictive  endorsement  
appeared:  

Endorsement by and payment of this check to the
named payee constitutes payment and return in full

Date
s/-//~co
EDITORIAL DEPARTMENT West Publishing Co., P.O.Box 3526, St. Paul, MN 55165
Please make the following correction in the opinion in the case of:
Vol. Rptr. Page2
f4(
~XAMW,line2 from G'InseseRd -.
-1
Signed 9-0-ass
-...
The expense of making changes is such that we cannot undertake it for changes. in typographical style or spacing.
West Publishing Co.
N182d
of all security deposits made said payee on a
certain commercial lease dated April 8th, 1979.

Gc lssL~e
-bKkem crossed out the above endorsement, wrote "Endorsement
Rejected" thereunder, endorsed the check and then negotiated

the same.

On February 3, 1984, Geissler commenced this action for

return of the remainder of his security deposit. In his

answer Nelson raised the affirmative defense of accord and

satisfaction. Trial was held without a jury on April 26,

1985. The District Court found that damages were done to the

business premises entitling Nelson to a set-off against the

security deposit in the sum of $1,196.00. The District

Court, however, also found that Nelson was not entitled to

his second claimed set-off in the sum of $3,927.00 because on

October 1, 1983, Nelson entered an agreement with Simpson

Motor Cars Limited for the lease of the same premises

previously leased to Geissler and received compensation in

the same amount being received from Geissler. In other

words, the District Court determined that no damages were

suffered by Nelson as a result of Geissler's alleged failure

to make payments upon the purchase price claimed as a

set-off.

Nelson raises four issues for our review:

1.
Whether the District Court erred in not finding that
the previous action between the parties was a bar, either by
res judicata or estoppel, or both, to the subsequent claim
herein for return of the security deposit;


2.
Whether the District Court erred in not finding that
the restrictive endorsement on the check that was sent by
Nelson to Geissler constituted an accord and satisfaction
when Geissler endorsed and cashed the check;


3.
Whether the District Court erred in failing to make
a finding as to whether or not $1,309.00 per month was for
the purchase of the business or was for other consideration;
and,


4.
Whether the District Court erred in finding that any
of the security deposit monies were due and owing from Nelson
to Geissler.



Nelson first contends that Geissler's present action for the return of his security deposit given to secure performance under the parties lease is barred by res judicata. The record in Cause No. DV-83-537 indicates that although the previous action did indeed refer to the existence of the lease between the parties, the only claims for relief in that action by Nelson were: 1) the payment of back rent; 2) a demand for the retaking of possession of certain personal property pledged as security for the payment of said rent; and, 3) a claim for general damages and punitive damages. In the previous action Geissler counterclaimed for specific performance of the terms of an option he had under the lease which Nelson had refused to honor. No other issues were raised by either party in Cause
This Court has stated the criteria to be used in
determining whether an action is barred by res judicata as
follows:

1.
The parties or their privies must be the same;


2.
The subject matter of the action must be the
same;


3.
The issues must be the same and must relate to
the same subject matter; and


4.
The capacities of the persons must be the same
in reference to that subject matter and to the
issues between them. Fox v. 7L Bar Ranch Co.



(1982), 198 Mont. 201, 206, 645 P.2d 929, 931, S-W
Co. v. John Wright, Inc. (1978), 179 Mont. 392,
405, 587 P.2d 348, 355.

In the present case Nelson's res judicata claim fails as
it relates to criteria 2 and 3. Clearly, neither the subject
matter nor the issues raised were the same in both cases.
The subject of the unpaid security deposit and the issue of
its payment were never before the District Court in Cause No.
DV-83-537 since refund of the entire deposit was not refused
until January 25, 1984 when Nelson tendered a partial refund
and the prior case was terminated by stipulation of the
parties on October 31, 1983. We, therefore, affirm the
District Court's finding that all matters involving the lease
agreement were res judicata with the exception of the
security deposit which was not contemplated in the previous
action.

Nelson next contends that the District Court erred in
not finding that the restrictive endorsement on the check
sent by Nelson to Geissler constituted an accord and
satisfaction. Geissler, in the converse, contends that the

District Court  correctly  ruled  that  there  was  no  accord  
entered into by the parties.  
The  phrase  "accord  and  satisfaction"  means  the  

substitution of a "new agreement" in satisfaction of an
obligation, different from the original rights existing under
an antecedent liability. From that premise it follows that
when an accord has been executed it operates as a complete
bar to an action on the original claim. See Sawyer v. Somers
Lumber Co. (1929), 86 Mont. 169, 171, 282 P. 852, 854.

In Montana both accord and satisfaction are defined by
statute. Section 28-1-1401, MCA, provides:

An accord is an agreement to accept in extinction
of an obligation something different from or less
than that to which the person agreeing to accept is
entitled. Though the parties to an accord are
bound to execute it, yet it does not extinguish the
obligation until it is fully executed.

Section 28-1-1402, MCA, defines satisfaction as follows:
Acceptance by the creditor of the consideration of

an accord extinguishes the obligation and is called
satisfaction.
There is no doubt in the instant case but that Geissler

accepted the consideration tendered by Nelson which would
constitute a satisfaction if in fact the parties entered into
an accord. Section 28-1-1401, MCA, clearly defines an accord
as an "agreement" to extinguish the original obligation for
something different or less than the creditor is entitled.
There, however, is the additional requirement that an offer
to enter an accord be accepted in writing. Section
28-1-1403, MCA, provides:

Part performance of an obligation, either before or after a breach thereof, when expressly accepted & the creditor in writing in satisfaction or rendered in pursuance of an agreement in writ%- for that
7-

. .
purpose, though without any new consideration, extinguishes the obligation. (Emphasis added. ) In Sawyer, we held that the endorsement of a check by a creditor for the purpose of cashing it is not such a writing as is contemplated by 5 28-1-1403, MCA. Sawyer, 86 Mont. at 177, 282 P. at 854. In the instant case there was also no agreement in writing to enter an accord other than Geissler's endorsement of the check. To hold on the facts of this case that the parties did enter an accord simply by Geissler endorsing Nelson's check would be akin to condoning a form of commercial blackmail. We, therefore, hold that the District Court properly found that there was no accord entered by the parties because there was no such "agreement" and even if there was it was not in writing.
The final two issues raised by Nelson are simply
repetitious. We, therefore, decline to discuss them further.
We affirm the District Court.,,--

I
,
Justice

We Concur:

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