Hazelwood Lumber Co., Inc. v. Smallhoover

OPINION OF THE COURT

HUTCHINSON, Justice.

Appellants, Joseph T. and Dorothy K. Smallhoover, appeal by allowance from an order of the Superior Court affirming an order of the Court of Common Pleas of Allegheny County which struck from the record “satisfaction” of a judgment, against appellants, in favor of appellee, Hazelwood Lumber Company, Inc. The order appealed from was based upon the old common law rule that payment of a sum less than the face amount of a liquidated debt presently due lacks the consideration necessary to support a binding accord and satisfaction. We hold that rule inapplicable where a creditor “satisfies” a judgment on the record, and therefore, reverse. 296 Pa. Super. 614, 441 A.2d 440.

In 1969, appellee Hazelwood Lumber Company, Inc. (hereafter referred to as Hazelwood) obtained a judgment by confession against Joseph T. and Dorothy K. Smallhoover (hereafter referred to as Smallhoover) in the amount of $98,257.66. Thereafter, Smallhoover made payments on the judgment until 1974, when the judgment was revived in the amount of $72,372.65.

The debt and subsequent judgment arose from purchases, during the period 1954 to 1971, which Smallhoover had made for J. T. Smallhoover, Inc. from Hazelwood.¹ Hazelwood was then owned by Roger Cunningham and mémbers of his family. Cunningham advised Smallhoover, during this time, that Harry E. Walk, president of Hazelwood, had full authority to act for the corporation.² Consequently, from 1954 until 1971, Smallhoover dealt with Hazelwood through Walk.

In May, 1976 Walk contacted Smallhoover and stated the “Cunningham boys” were concerned about the judgment and willing to settle the debt for $15,000.³ Smallhoover, assuming Walk was still in the employ of Hazelwood, agreed to do so and, with borrowed money made three payments totalling $15,000, by checks on August 15, 1976, January 17, 1977, and April 11, 1977.⁴ At Walk’s direction, Smallhoover gave the last check to Lawrence May. May had been the attorney of record for Hazelwood in matters involving the Smallhoover judgment, including the 1974 revival, but had also served Walk as his attorney. Upon receipt of the check, May filed a praecipe to satisfy the judgment, whereupon it was satisfied by the Prothonotary.

Hazelwood never received the $15,000 collected by Walk and filed a “Petition for Rule to Show Cause Why Praecipe for Settlement Should Not Be Stricken and Docket Adjusted According” in 1979. Hazelwood alleged neither Walk nor May had authority to satisfy the debt. The question of authority was resolved against Hazelwood below and that determination is not at issue here.

The lower court, nevertheless, granted the petition by reinstating the judgment at its 1974 revived amount, less $15,000 representing the sum paid by Smallhoover to Walk. Because it found apparent authority in Walk to act as he did, the lower court determined the fact Hazelwood never received a cent of the $15,000 irrelevant as the corporation was bound by the action of its apparent agent.⁵

The lower court’s reliance, in reinstating the balance of the judgment on the rule that “payment of a lesser sum than is claimed is ordinarily insufficient consideration to support an accord and satisfaction” of a liquidated debt such as a judgment, Common Pleas Slip Op. at 5, is misplaced in the context of an otherwise proper satisfaction of the record.

We believe this old common law rule, said to originate in Pinnel’s Case, 5 Coke, 117a, 77 Eng. Reprint, 237, 1 Eng.Rul. Cas. 368 (1602), should have no application to the satisfaction of a judgment entered on judicial records under current conditions. Indeed, in its genesis it may have been merely a backward glance at even an older common law which refused to find a promise on a promise sufficient consideration to support an executory contract. While it may still have sound psychological roots in the context of executory promises, it is a hinderance to our present legal system if allowed to prevent an otherwise valid record satisfaction of a judgment.

As stated in Schwartz v. California Claim Service, 52 Cal.App.2d 47, 125 P.2d 883 (1942),

[t]he satisfaction of judgments for less than their face value is of everyday occurrence, and since every such settlement represents an agreement mutually satisfactory to the parties and fraught with some benefit to each, it should not be the policy of the law to discourage such sensible arrangements under which a creditor can satisfy a judgment for what he thinks it is worth and a debtor can settle it for what he can afford to pay.

Id. at 55, 125 P.2d at 888.

Had Walk, as apparent agent for Hazelwood, signed a written “release or promise” in which he, as agent, accepted $15,000 in satisfaction of a $72,000 debt and expressly stated the corporation “intends to be legally bound,” the agreement could not have been voided on the basis of “lack of consideration.” Act of May 13, 1927, P.L. 985, § 1, 33 P.S. § 6. A formal entry of satisfaction upon public court records should, likewise, be free of later questions concerning the lack or sufficiency of the consideration found in the agreement for entry of satisfaction. The respect and solemnity accorded official public records should not be less than that given promises between private parties pursuant to our version of the Uniform Written Obligations Act, supra, 33 P.S. § 6, as amended.

Therefore, because our law should neither invite litigation nor encourage its continuance, we hold a satisfaction entered on the record by or under the authority of a judgment creditor, shall not be open to question on the ground that the debtor paid, and creditor accepted, a sum less than the face amount of the judgment.⁶

The order of the Superior Court is reversed and the case remanded for further proceedings consistent with this opinion.

LARSEN, J., did not participate in the consideration or decision of this case. NIX, J., files a dissenting opinion in which McDERMOTT, J., joins. McDERMOTT, J., files a dissenting opinion in which NIX, J., joins.

1 . By 1974, the date of revival of the judgment, J.T. Smallhoover, Inc. had ceased doing business.

2 . In fact, in December, 1964 Hazelwood recorded a written power of attorney authorizing Walk to act on its behalf. Although this power was subsequently revoked on June 17, 1971, Walk continued in Hazelwood’s employ until his retirement in 1976.

3 . The Roger Cunningham, referred to previously, had died in the meantime. The term “Cunningham boys” was in reference to his sons.

4 . Although the money represented “borrowed” funds, the lower court did not find an understanding between Smallhoover and Walk that a third person(s) should pay the debt. Therefore, the statement in Fowler v. Smith, 153 Pa. 639, 645, 25 A. 744, 746-747 (1893), that payment from “a new party” was “not within the rule that receipt of a smaller sum is not a good accord and satisfaction of a larger one, .is inapplicable to the present case, and our holding here is not based on the source of the payment, but the formalities incident to satisfaction of a record.

5 . The question of an attorney’s authority to compromise the claim of his client, see Brockley v. Brockley, 122 Pa. 1, 15 A. 646 (1888), is not involved here since Smallhoover’s reliance upon May’s authority flowed from his reliance upon the authority of agent Walk, found reasonable by the lower court.

6 . Of course, our decision does not infringe upon the general equitable powers of a court to strike a satisfaction of judgment upon proof of “fraud or mistake.” Epstein v. Kramer, 365 Pa. 589, 591, 76 A.2d 212, 213 (1950) [citation omitted]. In the instant case, however, Hazelwood cannot avoid the striking of the judgment on this basis since any fraud or mistake was induced by Walk, Hazelwood’s apparent agent, and not by Smallhoover who simply carried out his part of what he reasonably believed was a binding agreement with Walk’s principal. DeTurck v. Matz, 180 Pa. 347, 36 A. 861 (1897); see also footnote 5, supra.