WESTERN BANK V. BIAVA, 1990-NMSC-023,
109 N.M. 550, 787 P.2d 830 (S. Ct. 1990)
WESTERN BANK OF SANTA FE,
Plaintiff-Appellee,
vs.
WILLIAM E. BIAVA, Defendant-Appellant
SUPREME COURT OF NEW MEXICO
1990-NMSC-023, 109 N.M. 550, 787 P.2d 830
Appeal from the District Court of Santa
Fe County, Steve Herrera, District Judge.
Marchiondo, Vigil & Voegler, Douglas
G. Voegler, Albuquerque, New Mexico, for Appellant.
Sommer, Udall & Hardwick, Jack N.
Hardwick, Santa Fe, New Mexico, for Appellee.
{1} In
Clark Leasing Corp.
v. White Sands Forest Products, Inc., 87 N.M. 451,
535 P.2d 1077 (1975),
this Court held that the defense of accord and satisfaction could not be
asserted by a debtor, in a suit by the creditor to collect an undisputed and
liquidated amount, where the debtor claimed that the creditor/secured party had
agreed to accept possession of the collateral in full satisfaction of the
amount claimed. Raising a similar defense in the present case, the debtor
(Biava) resisted the secured party's (the bank's) suit on a promissory note
secured by the debtor's limited partnership interest, which the debtor alleged
the bank had agreed to accept in full satisfaction of the amount for which suit
was brought. Relying on
Clark, the bank successfully moved for summary
judgment. We hold that the trial court misapplied
Clark and reverse the
summary judgment.
{2} In January 1984 Biava
executed a promissory note to the bank in the principal sum of $66,005.24 and
secured it with an assignment of Biava's 6.7 percent interest in a limited
partnership known as the Santa Fe Court House and Spa. The assignment had as
its express purpose the granting to the bank of a security interest in the
limited partnership interest, and the parties executed and filed for record a
financing statement covering the collateral.
{3} Biava defaulted in
payment of the note and negotiated with Mr. Ortiz, a bank officer, concerning
Biava's payment of his indebtedness. According to Biava's affidavit,
on or about February 13, 1985, I entered into an agreement
whereby Western Bank agreed to accept my 6.7% ownership in the Santa Fe
Courthouse and Spa as full payment and satisfaction of the promissory note
which I had executed.
While he was "waiting for the paperwork" (again,
according to his affidavit), the instant litigation was commenced. Western Bank
sued for judgment on the note, for foreclosure of its security interest, and
for attorney's fees. Biava's answer admitted all material allegations of the
complaint (including execution of note, default and amount due) and set up the
affirmative defense of the alleged agreement "as full payment and
satisfaction" of the note.
{4} On this state of the
pleadings the bank moved for summary judgment, arguing that "for purposes
of this motion, the alleged agreement will be assumed to exist, because * * *
the alleged agreement (even if it existed) is not a fact which would suffice *
* * as a legal defense to" the bank's claim. The district court granted
the motion, and Biava appeals.
{5} In
Clark, the
Court recognized that an "accord" -- i.e., an executory agreement to
settle a claim (
Restatement (Second) of Contracts § 281 (1979)) --
operates as a defense to the claim even though there has not yet been
"satisfaction" -- i.e., the agreement has not yet been performed --
in two situations. The first of these is when the claim is unliquidated. The
second occurs when, if the claim is liquidated, there is "new and
independent consideration" to support the creditor's agreement that the
claim will be released.
See Clark, 87 N.M. at 453, 535 P.2d at 1079;
Yates
v. Ferguson, 81 N.M. 613, 615,
471 P.2d 183, 185 (1970) (receipt of
additional security operates as accord and satisfaction if parties intend
settlement agreement). The debt in this case was undisputed and liquidated;
hence the question is whether Biava's agreement to assign his 6.7 percent
partnership interest constituted "new and independent consideration."
{6} The debtor in
Clark
asserted that the creditor had been allowed to repossess the collateral with
the understanding that this would be in full settlement of the outstanding
indebtedness. The debtor maintained that (1) its agreement to allow the repossession
constituted sufficient consideration for the alleged accord, and (2) its
relinquishment of the right to a surplus on resale of the collateral furnished
additional consideration. This Court responded that (1) allowing repossession
was simply an agreement by the debtor to do what it was already obligated to do
-- surrender possession on default, and (2) there was no evidence that the
agreement included the debtor's relinquishment of its right to any surplus. 87
N.M. at 453, 535 P.2d at 1079. As the Court said, an agreement to do what one
is already legally bound to do is not sufficient consideration for the promise
of another.
Id. (quoting
Barnes v. Reliable Tractor Co., 117 Ga.
App. 777, 778, 161 S.E.2d 918, 919 (1968)). On the evidentiary point, the Court
noted that "there was not a shred of evidence of an accord [i.e., the
agreement]," the issue having been raised for the first time on appeal. 87
N.M. at 452, 535 P.2d at 1078.
{7} The case at bar is quite
different. First, although Biava was similarly obligated to surrender
"possession" of the collateral (the partnership interest) on default,
this was not at all the same as a transfer of ownership. "Possession"
of the collateral would have entitled the bank to sell it and
{*552} otherwise proceed as provided in the
Uniform Commercial Code -- Secured Transactions, NMSA 1978, Subsections
55-9-504(1) and (3) (Repl. Pamp. 1987). Ownership of the collateral, on the
other hand, would entitle the bank to exercise all of the rights of a limited
partner under the partnership agreement and the Uniform Limited Partnership
Act, NMSA 1978, Sections
54-2-1 to -63 (Repl. Pamp. 1988). And, whereas there
was no evidence in
Clark of an agreement on the part of the debtor to
relinquish its right to a surplus, in this case Biava swore in his affidavit:
The value of my interest in the [partnership] could well have
exceeded my indebtedness to [the bank] which would have entitled me to payment
of the excess. However, I was willing to forego this, if [the bank] would accept
my interest as full payment of the note.
{8} The general rule on
consideration in this context is, of course, that
[a]ny new consideration, though insignificant or technical
merely, is generally regarded as sufficient consideration to support a contract
of accord and satisfaction. The courts do not inquire into and do not concern
themselves with the adequacy of the consideration; anything which may be deemed
in the judgment of the law a legal benefit to the creditor, or a legal
detriment to the debtor, however slight, is sufficient.
1 Am. Jur.2d Accord and Satisfaction § 13 (1962).
{9} As early as 1926 this
Court noted the trend in cases of liquidated, undisputed debts to seize upon
the "slightest" fresh consideration in order to uphold an accord and satisfaction.
Buel v. Kansas City Life Ins. Co., 32 N.M. 34, 41,
250 P. 635, 638
(1926) (citing 1 R.C.L.
Accord and Satisfaction, § 15 (1914)).
Clark
itself stands for the proposition that new consideration will support the
existence of an accord and satisfaction in the case of an undisputed,
liquidated debt when there is in fact such consideration.
{10} To sum up on this point,
the bank's position on this appeal is based on a misreading of
Clark, a
misreading which may have led the trial court into error. The bank states,
relying on
Clark: "If the existing claim is liquidated or
undisputed payment of less than the full amount of the claim will not be sent
consideration to support the accord." And: "Since Western Bank's
claim is liquidated and undisputed any agreement to pay less than the full
amount owed cannot be an accord because it is not supported by
consideration." As we have seen,
Clark does not stand for these
propositions -- propositions which, while they may be accurate in the abstract,
do not apply in this case because the agreement Biava asserted was not simply
to pay less than the full amount owed; it rather was to transfer his ownership
of a partnership interest and forego the rights he would otherwise have had
under the Uniform Commercial Code as a debtor in default.
{11} While placing primary
reliance on
Clark, the bank also seeks to uphold the summary judgment as
a matter of procedure. It argues that when it moved for summary judgment and
adduced Biava's answer admitting liability on the note, it made a
prima
facie showing of entitlement to summary judgment and shifted the burden to
Biava to establish at least a reasonable doubt as to the existence of a genuine
issue of material fact.
See Koenig v. Perez, 104 N.M. 664, 666,
726 P.2d
341, 343 (1986). The bank is correct as to the initial procedural posture
before the court once the motion was filed and the answer was considered. At
that point, since accord and satisfaction is an affirmative defense,
Transamerica
Ins. Co. v. Sydow, 107 N.M. 104, 105,
753 P.2d 350, 351 (1988), the burden
rested on Biava to come forward with sufficient evidentiary matters to
establish a genuine issue of fact as to his defense.
Fidelity Nat'l Bank v.
Goff, Inc., 92 N.M. 106, 108,
583 P.2d 470, 472 (1978).
{12} In ruling on the motion
the trial court had before it, in addition to the pleadings, Biava's affidavit
and a deposition he had given at the behest of the bank. The bank belittles the
recitations in the affidavit, to the effect that there was "an agreement"
{*553} for the transfer of the
partnership interest in exchange for a complete release, citing
Galvan v.
City of Albuquerque, 85 N.M. 42, 44-45,
508 P.2d 1339, 1341-42 (Ct. App.
1973) (conclusory opinion regarding speed of vehicle in accident not considered
because tests performed not identified and explained), and
Portales Nat'l
Bank v. Bellin 98 N.M. 113, 117,
645 P.2d 986, 990 (Ct. App. 1982)
(conclusions stated in affidavits against summary judgment, unsupported by
fact, are not sufficient to raise issue of material fact). We see no reason to
cast doubt on these rulings emanating from our court of appeals. The
justifiably cautious approach a court must bring to the treatment of
"conclusory" testimony of an expert witness should not be engrafted
onto an appraisal of an assertion by a lay person that he and another party
made "an agreement." We simply note that factual assertions which
could be characterized as conclusory can defeat a summary judgment motion if a
material issue of fact remains.
{13} We think that Biava's
recitation in his affidavit, coupled with his testimony on deposition, was
sufficient to raise a genuine issue of fact as to the existence of an agreement
whereunder Biava would transfer to the bank ownership of his partnership
interest in exchange for a complete release of his liability under the note.
The bank argues that there was no showing of an offer and acceptance leading to
formation of the agreement and that Biava did not identify the individual who
allegedly entered into the agreement on the bank's behalf. Legalistic
formulations of offer and acceptance are not necessary to establish an
agreement sufficient to defeat a motion for summary judgment; the sworn
statement of a layman that he "entered into an agreement" whereby the
bank would accept ownership of his partnership interest as full payment and
satisfaction of the promissory note should be -- and we hold is -- sufficient.
In ruling on motions for summary judgment, a trial court should apply a
common-sense interpretation of the language used by the affiant or deponent to
determine whether the requirements of SCRA 1986, 1-056(E) (party must adduce
"such facts as would be admissible in evidence" in moving for and
resisting summary judgment) have been satisfied.
{14} Moreover, the recitation
in the affidavit did not stand alone. In his deposition Biava testified that he
discussed another contemplated transaction with Mr. Ortiz and that
Mr. Ortiz told me that he couldn't handle anything like that
[the other transaction] until we got the other situation [the delinquent
promissory note] straightened out, that he would be glad to take it to his
board once the other thing was done, that if I would pass title to the units to
them that he would be happy to carry that to the board for me * * *. He said it
would save passing title on the units, the partnership units would save me and
my family embarrassment.
Q You're talking about passing title to the property. Did Mr.
Ortiz say if you pass title to this limited partnership interest, this amount
of debt that was then owing, which was about $75,000.00 --
Q $75,347.00 in December would be forgiven?
A Oh, that was the understanding, yes.
{15} We think these sworn
statements were sufficient to satisfy Biava's burden to come forward with
evidentiary facts sufficient to defeat the motion for summary judgment on the
accord-and-satisfaction defense. We have no doubt that almost all trial courts
would receive in evidence the testimony of the debtor that he and the bank had
made an agreement along the lines testified to by Biava and leave for
cross-examination questions of who on behalf of the bank made this agreement,
when and where it was made, exactly who said what, and the other circumstances
surrounding the making of the alleged agreement. It would then be for the trier
of facts to evaluate the testimony and decide whether or not the agreement
really was made. It is for this reason that trial is the preferred method for
resolving this kind of dispute,
Pharmaseal Laboratories, Inc. v. Goffe,
90 N.M. 753, 759,
{*554} 568 P.2d 589
(1977), although the utility of the summary-judgment procedure in weeding out
those cases in which a genuine fact issue is not present cannot be denied.
Goodman
v. Brock, 83 N.M. 789, 793,
498 P.2d 676, 680 (1972).
{16} The summary judgment is
reversed, and the cause is remanded for further proceedings consistent with
this opinion.
RANSOM, J., specially concurs.
RANSOM, Justice (specially concurring).
{18} I specially concur to
address whether the claimed accord was supported by consideration in the form
of a promise by the debtor to relinquish contract and in UCC (Article 9) rights
to any surplus value in the security. On the issue addressed by the majority,
distinguishing the surrender of possession (e.g.,
Clark) from surrender
of title as in the accord claimed here, I find the distinction illusory without
addressing whether, in either event, there was a promise to relinquish rights
to any surplus value or to forego claim to other rights under the contract or
Article 9.
{19} I recognize that the
majority addresses the issue of surplus value in its discussion of Biava's
affidavit. However, the majority analysis also contains the suggestion that
transfer of "ownership" in itself necessarily entails waiver of all
legal and equitable rights in the collateral. I am not convinced that, unless
so contemplated by the parties, transfer of title alone operates to do anything
more than transfer of possession, i.e., to facilitate exercise of the
creditor's pre-existing right to obtain payment of the debt from the collateral
upon default by the debtor.
Cf. NMSA 1978, §
55-9-202 (Repl. Pamp. 1987)
(provisions of Article 9 with regard to rights, obligations, and remedies apply
whether title is in the secured party or the debtor).
{20} In
Clark, when
the debtor relinquished possession of the equipment, there was held to be no
new consideration to support an accord absent evidence that the debtor agreed
to relinquish contract and Article 9 rights to any surplus after resale.
Although Biava claims such a relinquishment, the crux of the bank's argument on
appeal is that Biava's response to the motion for summary judgment failed to
set forth facts showing that the value of the collateral was greater than or
equal to the indebtedness. That is, the bank argues Biava has not shown that
relinquishment of rights to any surplus had a peppercorn of value. It does not
appear, however, that the bank raised this issue below, and it is not incumbent
on the respondent to show facts in support of any material element of his case
not relied upon by movant as warranting summary disposition.
See Fidelity
National Bank v. Tommy L. Goff, Inc., 92 N.M. 106,
583 P.2d 470 (1978)
(moving party carries the burden to show no genuine issue of material fact as
to affirmative defenses in the pleadings of party responding to motion for
summary judgment).
{21} To shift to Biava the
burden to demonstrate the existence of surplus value, it was incumbent upon the
bank to make a
prima facie showing that there existed no genuine issue
of material fact as to whether the promise of relinquishment was contemplated
by the parties to constitute consideration of value at the time the accord was struck.
Proof of value in that which is agreed to be forfeit is not necessary to
establish a promise to forbear as consideration for an accord. In general, all
that is required is a promise to forbear, made by one party and accepted by the
other.
Gonzales v. Gauna, 28 N.M. 55,
206 P. 511 (1922).
See also Mel
Dar Corp. v. Commissioner of Internal Revenue, 309 F.2d 525 (9th Cir. 1962)
(forbearance based on belief in existence of value is consideration even though
value ultimately might not be upheld). Only if the parties contemplated the
promise to be valueless would it fail to constitute consideration upon
acceptance.