Smith v. Avco Mortgage & Acceptance, Inc. , 251 Va. 173 ( 1996 )

Present: Carrico, C.J., Compton, Stephenson, Lacy, Hassell, and
Keenan, JJ., and Whiting, Senior Justice
WILLIAM F. SMITH, et al.
OPINION BY
v. Record No 950649 SENIOR JUSTICE HENRY H. WHITING
January 12, 1996
AVCO MORTGAGE AND ACCEPTANCE, INC.
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
William F. Rutherford, Judge
In this appeal, we deal with issues arising out of a
creditor's refusal of the borrowers' tender of an uncertified
check in their attempted exercise of a right contained in the
following contractual provision:
The Borrowers shall have the right to pay off the
loan, in full, prior to the maturity date, so long as
they are current on their monthly payment obligations,
by payment of the sum of SIXTY THOUSAND AND NO/100
DOLLARS ($60,000.00) on or before March 15, 1993.
Since this issue was decided on the creditor's demurrers, we
will consider as true the borrowers' well-pleaded material facts
and all reasonable inferences fairly and justly drawn from the
facts alleged. Commercial Constr. Specialties, Inc. v. ACM
Constr. Management Corp., 242 Va. 102, 103, 405 S.E.2d 852, 853
(1991).
In 1988, William F. Smith and Janis K. Smith executed an
installment payment note, secured by a deed of trust on the
Smiths' real properties in Norfolk. Later, the Smiths entered
into a loan modification agreement containing the foregoing
provision with Avco Mortgage and Acceptance, Inc. (Avco), then
the holder of the Smiths' note.
The Smiths decided to prepay the note on March 15, 1993,
after their bank had closed for the day. William T. Webb, Avco's
agent, advised Scott Morgan, the Smiths' banker, that the Smiths
would have to pay $60,000 that day to obtain the benefit of this
provision. Therefore, the Smiths tendered their uncertified
check in that amount to Webb at 6:00 p.m. that day. Although
Morgan had assured Webb that the check would be honored
immediately upon its presentation when the bank opened the
following morning, Webb refused to accept the Smiths' tender
because it was not made with "certified funds or bank draft"
tendered by March 15.
Thereafter, the Smiths filed two actions against Avco. The
first action was an application under the provisions of Code
§ 55-66.5 for the release of the Smiths' deed of trust and their
reasonable attorney's fees incurred in that proceeding. 1 The
second was a motion for judgment for damages arising from Avco's
refusal to accept their check. In similar demurrers filed to the
Smiths' application and motion for judgment, Avco asserted that:
[T]he Plaintiffs are not entitled to the relief
requested or any damages as on the face of the [Smiths'
pleadings] it is apparent that the Plaintiffs did not
1
Code § 55-66.5(C) provides:
Upon a finding by the court that the holder of a
mortgage or deed of trust which has been fully paid or
discharged has unjustifiably and without good cause
failed or refused to release such mortgage or deed of
trust, the court, in its discretion, may order that
costs and reasonable attorneys fees be paid to the
petitioning party. This subsection shall not preclude
a separate suit by the petitioning party for actual
damages sustained by reason of such failure or refusal
to release the encumbrance.
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comply with the Modification of Deed of Trust by paying
$60,000 as required.
Following argument and the receipt of memoranda from counsel for
the parties, the court sustained the demurrers and entered final
judgments for Avco. The Smiths appeal. 2
The Smiths contend that since the prepayment provision does
not require payment by certified funds or bank draft, they had
the right to make the prepayment by their uncertified check.
Avco responds that since the Smiths' pleadings admit that Avco
could not present their check for payment until after March 15,
the Smiths could not make timely payment according to the
foregoing provision. We agree with the Smiths.
In the absence of an agreement specifying the medium of
payment, as in this case, uncertified checks are commonly used in
the ordinary course of business to pay money obligations. See
Staff Builders of Philadelphia, Inc. v. Koschitzki, 989 F.2d 692,
694 (3rd Cir. 1993); 6A Ronald A. Anderson, Uniform Commercial
Code § 3-802.5 (3rd ed. 1993 rev.). Thus, we conclude that the
Smiths made a timely tender of their payment obligation under the
loan modification agreement. We further conclude that Avco's
agent could not demand payment to be made by certified funds or
2
Although no orders have been entered consolidating these
actions either in the trial court or on appeal, the litigants and
the trial court have treated them as consolidated for purposes of
appeal, and we will do so as well.
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bank draft when the loan modification agreement did not so
specify. 3
Hence, we hold that the circuit court erred in sustaining
Avco's demurrers. Accordingly, we will reverse the judgment of
the circuit court and remand these actions for further
proceedings consistent with this opinion.
Reversed and remanded.
3
Avco did not demand payment in legal tender. See 31 U.S.C.
§ 5103 (defining legal tender). Hence, we do not consider the
implications of such a demand. See Vick v. Howard, 136 Va. 101,
116 S.E. 465 (1923); Restatement (Second) of Contracts § 239
(1979).
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