GITRE v. KESSLER PRODUCTS CO

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Docket Number

Docket No. 9073.

Attorney(S)

Jaffe, Snider, Raitt, Garratt Heuer (by Wallace H. Glendening), for plaintiffs. Long, Preston, Evans Kinnaird, for defendants.

Judges

V.J. BRENNAN, P.J.

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Smart Summary

Factual and Procedural Background

This appeal arises from a breach of contract lawsuit initiated by plaintiffs Jerry L. Gitre and Gitre Company, Inc., against defendants Kessler Products Co., Inc. ("Kessler") and The Dover Molded Products Company ("Dover"). In 1953, Jerry Gitre entered into a manufacturer's agent agreement with Kessler, appointing him as sole agent in Michigan and part of Ohio for aluminum window and door products, with a 5% commission and cancellable on 30 days' notice. In 1960, Gitre Co. entered into a similar exclusive sales agreement with Dover for Michigan and Lucas County, Ohio, also cancellable on 30 days' notice.

Over time, sales increased substantially, with defendants regularly paying commissions monthly. Problems began in 1967 when Kessler reclassified three of Gitre's largest customers as "house accounts," causing Gitre to lose commissions on those accounts without his consent. In early 1968, both defendants sent letters terminating the agency contracts effective February 15, 1968, and paid plaintiffs commissions due through that date. The checks bore restrictive legends stating that endorsement and payment constituted full release of all claims.

Plaintiffs endorsed and deposited the checks but later demanded retraction of contract cancellation, claiming the contracts had been modified orally and by course of dealing into "lifetime" agreements. Defendants moved for accelerated judgment based on release and accord and satisfaction. The trial court granted accelerated judgment for defendants, finding the checks discharged obligations under Michigan law and accord and satisfaction.

Legal Issues Presented

Whether the deposit of commission checks bearing restrictive legends constituted a valid accord and satisfaction discharging plaintiffs' claims for commissions due through February 15, 1968.
Whether the accord and satisfaction or release effected by the checks also discharged plaintiffs' separate claim for damages arising from an alleged breach of an oral "lifetime" agency contract for future commissions.
Whether there was a genuine dispute at the time the checks were deposited sufficient to support an accord and satisfaction.

Arguments of the Parties

Defendants' Arguments

The deposit of the checks with restrictive legends operated as an accord and satisfaction, fully discharging plaintiffs' claims.
Relying on People v. Louis J. Dettore Construction Company, the entire debt was unliquidated, and payment of the liquidated portion constituted sufficient consideration to discharge the whole debt.
The amount owed for commissions on reclassified house accounts and breach of contract was disputed, supporting accord and satisfaction.

Plaintiffs' Arguments

There was no real dispute regarding money owed at the time the checks were deposited, so no consideration supported an accord and satisfaction.
The checks were ambiguous and did not sufficiently notify them of conditions accompanying the tender.
Relying on Durkin v. Everhot Heater Co., the tender must be unequivocal to constitute accord and satisfaction, which was not met here.
The alleged oral lifetime contract created a separate cause of action for future commissions not extinguished by the checks and release.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
People v. Louis J. Dettore Construction Company, 17 Mich. App. 101 (1969)	Payment of a liquidated part of a debt can discharge the entire unliquidated debt by accord and satisfaction.	The court recognized defendants' reliance on this case to argue accord and satisfaction for disputed commissions.
Durkin v. Everhot Heater Co., 266 Mich. 508 (1934)	An accord and satisfaction requires an unequivocal tender of payment in full, so the creditor accepts the conditional payment knowingly.	The court noted plaintiffs' argument that the checks were ambiguous and no meeting of the minds existed, citing this case.
Puett v. Walker, 332 Mich. 117 (1952)	An accord and satisfaction, as a contract, must have all essential elements including consideration.	The court acknowledged this principle as foundational to evaluating the accord and satisfaction claim.
Obremski v. Dworzanin, 322 Mich. 285 (1948)	Accord and satisfaction requires a meeting of the minds between parties.	The court emphasized the importance of mutual understanding in forming an accord and satisfaction.

Court's Reasoning and Analysis

The court examined whether the deposit of commission checks with restrictive legends constituted a valid accord and satisfaction discharging plaintiffs' claims. It found that the checks and accompanying statements clearly represented commissions due up to February 15, 1968, excluding the reclassified "house accounts," and thus constituted accord and satisfaction for those amounts. The court recognized the necessity of consideration and a meeting of the minds for accord and satisfaction, noting the factual dispute whether a controversy existed at the time of tender, which affects these elements.

However, the court rejected defendants' argument that the accord and satisfaction discharged plaintiffs' separate claim for damages arising from an alleged breach of an oral lifetime contract for future commissions. It reasoned that the parties did not contemplate the commission checks as satisfying such a breach claim, which involves a distinct and prospective indebtedness. The court interpreted the release language narrowly, limiting it to commissions owed through February 1968 and not extending to future claims.

Accordingly, the court affirmed the accelerated judgment as to commissions due and owing up to February 1968 but reversed and remanded for trial on the merits regarding the alleged breach of an oral lifetime contract and resulting damages.

Holding and Implications

Holding: The court affirmed the trial court's accelerated judgment dismissing plaintiffs' claims for commissions due through February 15, 1968, on the basis of accord and satisfaction, but reversed and remanded for trial on the separate claim of breach of an alleged oral lifetime contract for future commissions and associated damages.

Implications: This decision clarifies that an accord and satisfaction via conditional payment can discharge liquidated commission claims up to a certain date, but does not automatically extinguish distinct future claims arising from an alleged breach of contract. The ruling mandates further factual inquiry on the existence and breach of the oral lifetime contract, emphasizing the importance of clear mutual assent and scope of release in accord and satisfaction contexts. No new precedent was established beyond applying existing principles to the facts.

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GITRE v. KESSLER PRODUCTS CO., INC.

V.J. BRENNAN, P.J.

This appeal arises out of a civil action initiated by plaintiffs Jerry L. Gitre and Gitre Co., Inc., against Kessler Products Co., Inc., (hereinafter referred to as "Kessler") and The Dover Molded Products Co. (hereinafter referred to as "Dover"), for damages arising out of breach of contract. From a grant of defendants' motions for accelerated judgment, plaintiffs appeal.

In 1953, plaintiff Jerry Gitre entered into a manufacturer's agent agreement with Kessler which provided that he was to act as the company's sole agent in Michigan and part of Ohio for the sale of aluminum window and door products. Plaintiff was to receive a 5% commission and the agreement was cancellable by either party upon 30 days' notice to the other.

In 1960, Gitre Co., of which Jerry Gitre was president, entered into a similar agreement with Dover, an Ohio corporation with the same principals as Kessler. Plaintiff company was to be exclusive sale agent for Dover in Michigan and Lucas county, Ohio. Here, too, the contract was cancellable by either party on 30 days' notice.

Over the years the sale of Kessler's products in plaintiff's exclusive territory grew from nothing to approximately $500,000 annually in gross sales. Kessler regularly paid plaintiff commissions on each month's sales on the 15th day of the following month by transmitting checks with stubs identifying the preceding month and the total commissions payable. The checks were also accompanied by a commission statement showing sale invoice numbers and the gross sales price of products sold within plaintiff's exclusive territory.

Defendant Dover's sales also experienced an increase due to the plaintiff's efforts; the manner in which commissions were paid was similar to that employed by Kessler.

Problems began when, in 1967 Kessler reclassified as a "house account" one of Jerry Gitre's largest customers. Shortly thereafter, Kessler reclassified two other large accounts. The result was that Gitre lost all commissions on future sales to his three largest customers. According to plaintiff's complaint, this was done "without the consent, against the will, and over the objections of Gitre".

Then, on January 8, 1968, defendant Kessler sent plaintiff a letter stating that it elected to terminate and cancel the agency contract as of February 15, 1968. Similarly, defendant Dover informed plaintiff by letter dated February 1, 1968, that the contract between them would terminate on February 15, 1968. Pursuant to these letters, both defendants sent checks to the plaintiffs for the balance of commissions due for the period of January 1 to February 15. The reverse side of Kessler's check bore the following legend:

"Endorsement and payment of the within check constitutes a full release by the payee of all claims for commission or otherwise against the drawer and its affiliates"

The back of Dover's check provided:

"Endorsement and payment of the within check constitutes a full release by the payees of the drawer of the within check, of all claims and demands for commissions or other compensation."

These checks were indorsed with the indorsement stamp of Gitre Co., Inc., and deposited in its account in the National Bank of Southfield. In plaintiffs' answer to defendants' motion to dismiss, we are told the cancellation of the contract by the Kesslers (the principals of Kessler and Dover) was done "despite plaintiffs' objections".

Thereafter, plaintiffs' attorneys formally demanded that Kessler retract its election to cancel the contract. The basis for the demand was that their written contract was subsequently modified both orally and by a course of dealing so that it was in effect a "lifetime" agreement. When defendants refused to proceed with the contract, plaintiff sued for breach thereof.

Both defendants filed motions for accelerated judgment pursuant to GCR 1963, 116.1(5), on the basis of release and accord and satisfaction. In a written opinion granting defendants' motions the court said that the checks were sufficient to discharge the obligations under MCLA § 566.1 (Stat Ann 1970 Rev § 26.978[1]), and that "in any event there also was a discharge of the obligations through an `accord and satisfaction'".

"Section 1. An agreement hereafter made to change or modify, or to discharge in whole or in part, any contract, obligation, or lease, or any mortgage or other security interest in personal or real property, shall not be invalid because of the absence of consideration: Provided, That the agreement changing, modifying, or discharging such contract, obligation, lease, mortgage or security interest shall not be valid or binding unless it shall be in writing and signed by the party against whom it is sought to enforce the change, modification, or discharge."

Defendants, relying on People v. Louis J. Dettore Construction Company (1969), 17 Mich. App. 101, claim that the deposit of the checks with their restrictive legends was sufficient to constitute an accord and satisfaction, since the amount owed to plaintiffs for commissions on the reclassification of certain customers as house accounts and for breach of contract, if any, was disputed. Plaintiffs, relying on Durkin v. Everhot Heater Co. (1934), 266 Mich. 508, claim that no real dispute concerning money owed to them arose until after the checks were deposited and thus there was no consideration to support an accord and satisfaction. They further contend that the checks were so ambiguous that they were not sufficiently apprised of the conditions accompanying the tender.

An accord and satisfaction, being a contract, must possess all the essential elements of a contract, including consideration, Puett v. Walker (1952), 332 Mich. 117, and a meeting of the minds, Obremski v. Dworzanin (1948), 322 Mich. 285. The case relied on by defendants, Dettore, supra, is concerned mainly with the element of consideration. It held that where part of a debt is liquidated and part is unliquidated, the entire debt is held to be unliquidated and payment of only the liquidated part is sufficient consideration to discharge the whole debt. On the other hand, the case relied upon by plaintiffs, Durkin, supra, p 513, deals with the requirement that there be a meeting of the minds:

"To work an accord and satisfaction the tender of payment as being in full should be made in unequivocal terms, so that the creditor in accepting the conditional payment will surely do so understandingly."

The fact question of whether or not a dispute existed at the time the checks were deposited is important because it is relevant both to the issue of consideration and to that of a meeting of the minds.

It is clear by virtue of the amounts on the checks and from the accompanying invoices that they represented commissions due on sales which did not include the house accounts; as to that debt the trial court was correct; there was an accord and satisfaction.

However, if plaintiffs' contentions are correct there arose another cause of action over and above the one for commissions due and owing up to February of 1968. This new cause would embrace damages arising after February 1968 for an alleged breach of written and oral contracts for future commissions.

We cannot accept defendants' contention that the accord and satisfaction of the past due debt for commissions would cancel a debt for the alleged breach. In the breach action there is a possibility, depending on plaintiffs' proofs, for a separate and distinct indebtedness to plaintiffs. It is clear that it was not within the contemplation of either party that the commission checks of February 1968 were in satisfaction of a possible breach indebtedness for future commissions.

Obviously, the defendants did not wish to bring about an unjust result by virtue of these writings. They undoubtedly intended nothing more than to pay plaintiffs' commissions they honestly believed they owed up to February 1968 as the amounts of $57.92 and $2,844.46 clearly indicate; and, therefore, we read this so-called release as not applying to an action for future commissions.

In other words, if there was in fact a valid oral lifetime contract and there was in fact a breach, the damages would be calculated from February 1968 to a future point in time depending on the measure used.

In order to determine this factual issue, the trial court would have to conduct a hearing on the merits; therefore, we affirm the trial court's decision as to any dispute over monies due and owing up to February 1968. However, we reverse and remand for the purpose of a trial on the merits to determine if there was a breach of an oral lifetime contract and, if so, what damages resulted therefrom.

Affirmed in part, reversed and remanded in part.

All concurred.