Magleby v. Schnibbe

2023 UT App 54THE UTAH COURT OF APPEALS
MAGLEBY CATAXINOS & GREENWOOD PC, JAMES MAGLEBY,
MAGLEBY & GREENWOOD PC, AND PEGGY A. TOMSIC,
Appellees,
v.
ERIC K. SCHNIBBE,
Appellant.
Opinion
No. 20210591-CA
Filed May 18, 2023
Third District Court, Salt Lake Department
The Honorable Randall N. Skanchy
No. 200902977
Jefferson W. Gross, S. Ian Hiatt, and J. Adam
Sorenson, Attorneys for Appellant
James E. Magleby, Bryon J. Benevento, and Kimberly
Neville, Attorneys for Appellees
JUDGE RYAN M. HARRIS authored this Opinion, in which
JUDGES RYAN D. TENNEY and AMY J. OLIVER concurred.
HARRIS, Judge:
¶1 In 2016, the Magleby Cataxinos & Greenwood law firm
received a massive contingency fee related to the firm’s work in a
trade secrets case. A dispute arose between the firm and lawyer
Eric K. Schnibbe about what Schnibbe’s share of that fee ought to
be. The firm, via direct deposit, put $1 million (less withholdings)
into Schnibbe’s bank account, and asked Schnibbe to sign a release
of all claims against the firm and its principals. Schnibbe refused
to sign the release, but kept the money and continued to work at
the firm. After the dispute later came to a head, the firm (and its
principals) and Schnibbe sued each other, and the district court
later entered summary judgment in the firm’s favor, determining
Magleby Cataxinos & Greenwood v. Schnibbe
that there had been an accord and satisfaction, and that Schnibbe’s
claims failed for other reasons as well. Schnibbe now appeals, and
we affirm on the basis that, under Utah law as applied to the
circumstances presented here, the elements of accord and
satisfaction are met as a matter of law.
BACKGROUND
¶2 In the mid-2000s, attorney Peggy Tomsic began
representing USA Power LLC in a trade secret and legal
malpractice dispute against PacifiCorp and others (the USA
Power Case). Schnibbe joined Tomsic’s firm in 2006 and began to
assist Tomsic on the case. Tomsic’s firm was working on the case
under a contingency fee agreement entitling it to a percentage of
any recovery. In 2007, the trial court presiding over the case
dismissed it on summary judgment, and USA Power appealed.
¶3 In 2009, while this first appeal was pending, Tomsic joined
the Magleby law firm (the Firm),1 and she brought the USA Power
case with her. She recommended that the Firm hire Schnibbe too;
he joined the Firm in 2010 as an associate and was paid a monthly
salary as an at-will W-2 employee.
¶4 In 2010, the Utah Supreme Court ruled that the trial court
had erred by granting summary judgment against USA Power,
and therefore reinstated the case and remanded it for trial. See
USA Power, LLC v. PacifiCorp, 2010 UT 31, ¶ 71, 235 P.3d 749. At
that point, Tomsic and the Firm’s lead partner, James Magleby,
1. At the time Tomsic joined the Firm, it was known as “Magleby
& Greenwood, PC,” but in 2015 it changed its name to “Magleby
Cataxinos & Greenwood, PC.” For convenience, and because the
change in the Firm’s name is not material to the issues raised in
this appeal, we use the phrase “the Firm” to refer to the Magleby
law firm generally, in either iteration.
20210591-CA 2 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
agreed that any fee relating to the USA Power Case would be split
60/40, with Tomsic to get sixty percent and the Firm forty percent.
¶5 Soon thereafter, Magleby and Tomsic considered the
question of how much of the fee Schnibbe would be entitled to
receive. In March 2011, after some discussion, Magleby sent an
email to Tomsic stating that he “wanted to close the loop on our
discussion about [Schnibbe]” and “confirm that 10% is the right
number” for him. Attached to the email was a spreadsheet—
labeled “E. Schnibbe USA Power contingency”—that contained
what Magleby described as “hopefully . . . roughly accurate
numbers” that they “could work with” in figuring out Schnibbe’s
share of the fee. The spreadsheet estimated their client’s recovery
at $73 million, the total fee available to Tomsic and the Firm at just
over $20 million, and Schnibbe’s share at exactly ten percent of
that fee—just over $2 million—with no cap.
¶6 Some time later, in the spring of 2011, Magleby and Tomsic
met with Schnibbe (in a meeting we refer to as “the Spring 2011
Meeting”) to discuss the fee and other matters. As Schnibbe
remembers it, Magleby told him that, if there was a recovery in
the USA Power Case, Schnibbe would receive a maximum of 10%
of the fee, with no cap if the recovery were “larger than expected,”
but that Schnibbe’s share of the fee would be capped at $1 million
if the recovery were modest. Magleby—who apparently drove a
Bentley at the time—colorfully stated that, if the recovery were
large, the cap would not apply and that there would be enough
money for “Bentleys for everyone!” But the meeting included no
discussion of what the Firm’s expectations were regarding the fee,
and no discussion of any specific number above which the $1
million cap would be lifted. And there was never any further
discussion, after the Spring 2011 Meeting, regarding any specific
number above which the cap would be lifted.
¶7 Also in the spring of 2011, Magleby informed Schnibbe that
he would be allowed to use the designation “partner” for
marketing purposes, and that he would become a “Tier 2 partner”
under the Firm’s compensation policy. But this designation did
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not mean that Schnibbe became an owner in the Firm; he was still
to be paid a salary pursuant to the Firm’s compensation policy,
and he was still to remain a W-2 at-will employee of the Firm. At
all relevant times, Magleby was the Firm’s only equity
shareholder, and all other Firm lawyers—including Tomsic—
were W-2 employees paid according to the Firm’s policy or
separate contractual arrangements.
¶8 In 2012, the USA Power Case finally went to trial, and a
jury found in favor of USA Power and determined that it had
sustained more than $133 million in damages. Following post-
trial motions, the court reduced the verdict by some $21 million.
In the weeks after trial, Magleby and Tomsic exchanged emails
regarding Schnibbe’s share of the fee; to one email, Magleby
attached another spreadsheet showing a $1 million payment to
Schnibbe, but stated in the body of the email that “you and I know
that we may go above $1 million, depending upon what
happens.” And in post-trial filings about attorney fees, the Firm
described Schnibbe as a “partner” who had been an “essential
part of our trial team.” Following the post-trial rulings, both USA
Power and PacifiCorp appealed to the Utah Supreme Court.
¶9 In May 2016, the Utah Supreme Court affirmed the trial
court’s rulings and the award of damages, which (with accrued
interest) ended up being more than $122 million. See USA Power,
LLC v. PacifiCorp, 2016 UT 20, ¶¶ 83, 95–97, 109, 372 P.3d 629.
Shortly thereafter, PacifiCorp paid the judgment in full, resulting
in Tomsic and the Firm receiving a fee that Schnibbe estimates to
be about $55 million.
¶10 In late May 2016, Magleby emailed Firm employees to
explain that bonuses would be awarded to those who had been
working at the Firm while the USA Power Case was active and
that “everyone who is going to get a payment will need to sign a
release.” About a week later, Magleby emailed a handful of
attorneys, including Schnibbe, a “Generic Bonus Employer
Shortened General Release” (the Release) and asked the attorneys
to “please sign and return after you get the dough.” The Release
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recited that the Firm had recently settled the USA Power Case,
“resulting in the [F]irm’s recovery of a contingency fee payment,”
and that the Firm was “prepared to make a payment” to the
employees in question, including Schnibbe, “based upon the
recovery in this case.” The Release further stated that employees
who “sign (and do not revoke)” the Release will receive a
payment “on or before the next regular pay period.” By signing
the Release, employees would acknowledge that they have
accepted the payment provided and that they “have been fully
compensated . . . for the promises and releases made” in the
Release. Finally, employees who signed the Release would
“unconditionally release[]” the Firm and its principals “from any
and all claims . . . that arise out of or related to” their employment.
¶11 In early June 2016, without Schnibbe having signed the
Release, the Firm directly deposited, in two equal installments, an
amount totaling $1 million (less withholdings) into Schnibbe’s
bank account.2 Given Schnibbe’s belief that he was to receive 10%
of the fee, and his understanding that Tomsic and the Firm had
received a fee of some $55 million, Schnibbe believed that he was
entitled to a payment of $5.5 million. He therefore viewed the $1
million payment as falling well short of what the Firm owed him,
and on that basis refused to sign the Release.3 But Schnibbe did
not take any steps to return the money deposited in his account,
nor did he immediately express any dissatisfaction about the
2. The total amount actually deposited into Schnibbe’s account
was something less than $600,000.
3. Given the procedural posture of this case, we view this fact in
the light most favorable to Schnibbe. See Feasel v. Tracker Marine
LLC, 2021 UT 47, ¶ 17, 496 P.3d 95 (stating that appellate courts
“review the facts in a light most favorable to the party against
whom summary judgment was granted” (quotation simplified)).
We recognize that the Magleby Parties take the position that
Schnibbe might have signed the Release. The record submitted to
us, however, does not contain a signed Release, and we therefore
assume, for purposes of this appeal, that Schnibbe did not sign it.
20210591-CA 5 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
payment to Magleby or Tomsic.4 Instead, he kept the money and
remained employed at the Firm, apparently deciding to take a
“wait-and-see” approach; as he later put it in his counterclaim,
“he took the $1,000,000 knowing he had time to seek recovery of
the rest of his compensation later.”
¶12 About two years later, in March 2018, Magleby became
“frustrated” with Schnibbe for missing an internal deadline in
another case, and told him so in an email. In a response email,
Schnibbe raised the USA Power Case contingency fee issue for the
first time since the payment, accusing Magleby and Tomsic of
“reneg[ing] on the USA Power deal.” In a follow-up conversation
the next day, Schnibbe expressed to Magleby that he was
dissatisfied with the payment he had received in 2016, and that he
believed the $1 million cap should not have applied to that
payment. Magleby responded that he did not remember the
conversation from the Spring 2011 Meeting the same way.
Magleby and Schnibbe were not able to resolve the dispute during
that conversation, and neither side took any action around the
issue for another two years.
¶13 In the spring of 2020, Magleby informed Schnibbe that, due
to work performance concerns including a recent drop in
Schnibbe’s billable hours, the Firm would be reducing Schnibbe’s
salary by ten percent. Schnibbe responded by expressing his
displeasure in emails that Magleby considered “increasingly
hostile” and “combative.” In those emails, Schnibbe again
referred to his continuing disappointment about the USA Power
Case payment he received in 2016. After reviewing these emails,
Magleby concluded that he could no longer personally work with
Schnibbe and, because Magleby provided Schnibbe most of his
work, Schnibbe would have little work to do at the Firm if
4. Schnibbe did, however, complain to another lawyer at the Firm
around the time he received the money, but he did not ask that
lawyer to take any action with regard to the matter.
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Magleby did not work with him. For these reasons, in April 2020,
Magleby fired Schnibbe.
¶14 Shortly thereafter, both sides sued each other. The Firm,
Magleby, and Tomsic (the Magleby Parties) filed a complaint
against Schnibbe, claiming that Schnibbe had breached an
agreement with the Firm and seeking (among other things) return
of the $1 million the Firm had paid Schnibbe. A few days later,
Schnibbe filed a separate lawsuit against the Magleby Parties,
asserting claims for breach of fiduciary duty, breach of contract,
promissory estoppel, unjust enrichment, and constructive trust.
Schnibbe’s suit was later consolidated into the Magleby Parties’
suit, with Schnibbe’s claims re-styled as counterclaims. The
Magleby Parties moved to dismiss Schnibbe’s counterclaims, but
the court denied the motion.
¶15 About a year later, after completion of discovery, the
Magleby Parties filed a motion for summary judgment on
Schnibbe’s counterclaims. Following briefing and oral argument,
the district court granted the motion, concluding that all of
Schnibbe’s counterclaims were barred by the doctrine of accord
and satisfaction. In addition, and alternatively, the court
concluded that each of Schnibbe’s counterclaims also failed for
other reasons: as the district court saw it, his fiduciary duty claim
failed because Schnibbe was an at-will employee who was owed
no fiduciary duty by the Firm; his contract claims failed for lack
of definiteness; and his remaining claims were duplicative or
failed for lack of a valid damages disclosure. After the court
announced its intention to dismiss Schnibbe’s counterclaims with
prejudice, the parties stipulated that the court should also dismiss
the Magleby Parties’ affirmative claims, but without prejudice to
reinstatement in the event Schnibbe mounted a successful appeal
regarding his counterclaims. The court then entered orders and a
judgment to that effect, dismissing the Magleby Parties’
affirmative claims without prejudice, and Schnibbe’s
counterclaims with prejudice.
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ISSUE AND STANDARD OF REVIEW
¶16 Schnibbe appeals the court’s dismissal of his counterclaims
on summary judgment. “We review a district court’s grant of
summary judgment for correctness and afford no deference to the
court’s legal conclusions.” Freight Tec Mgmt. Group Inc. v. Chemex
Inc., 2021 UT App 92, ¶ 19, 499 P.3d 894 (quotation simplified).
ANALYSIS
¶17 Schnibbe’s challenge to the district court’s summary
judgment order is multi-faceted—he challenges not only the
court’s conclusion that all his counterclaims were barred by the
doctrine of accord and satisfaction, but also the court’s alternative
conclusions that his counterclaims fail for independent reasons.
We need only discuss accord and satisfaction, however, because
the district court correctly determined that, under the
circumstances presented here, the elements of accord and
satisfaction are met as a matter of law.
¶18 “Accord and satisfaction is a common law concept” that
“denotes the intention of the contracting parties to agree that a
different performance, to be made in substitution of the
performance originally agreed upon, will discharge the obligation
created under the original agreement.” Bodell Constr. Co. v.
Robbins, 2009 UT 52, ¶ 23, 215 P.3d 933 (quotation simplified).
“When a claim is discharged through an accord and satisfaction,
the claim is considered fully satisfied. The claimant no longer has
the legal right to seek recovery from anyone on that claim.” Id.¶19 “To establish an accord and satisfaction, three elements
must be present: (1) an unliquidated claim or a bona fide dispute
over the amount due; (2) a payment offered as full settlement of
the entire dispute; and (3) an acceptance of the payment as full
settlement of the dispute.” Dishinger v. Potter, 2001 UT App 209,
¶ 19, 47 P.3d 76 (quotation simplified), cert. denied, 40 P.3d 1135(Utah 2001). Although “formation of a contract requires an offer,
20210591-CA 8 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
an acceptance, and consideration,” in cases of accord and
satisfaction “the consideration requirement is satisfied by the
settlement of a dispute between the parties,” at least “where there
is a bona fide dispute as to the amount due.” Wm. Douglas Horne
Family Revocable Trust v. Wardley/McLachlan Dev., LLC, 2013 UT
App 129, ¶ 17, 304 P.3d 99 (quotation simplified). Because “accord
and satisfaction is an affirmative defense,” “the party alleging it”
must “meet the burden of proof as to every necessary element.”
Messick v. PHD Trucking Service, Inc., 615 P.2d 1276, 1277 (Utah
1980) (quotation simplified).
¶20 In his challenge to the district court’s summary judgment
order, Schnibbe contends that none of the three elements of accord
and satisfaction are met here, at least not as a matter of law, and
that the court erred in concluding otherwise. For the reasons that
follow, we disagree.
¶21 The first two elements are, in our view, quite clearly
satisfied here: the undisputed facts demonstrate that there was a
bona fide dispute about the amount Schnibbe was owed, and that
the Magleby Parties tendered the $1 million payment in an effort
to fully settle the entire dispute. At the time the payment was
made, both sides understood that there was some uncertainty
regarding the exact amount Schnibbe was to receive. Schnibbe
apparently believed that he was entitled to a payment of $5.5
million, and viewed the $1 million payment as being well short of
what the Firm owed him. The Magleby Parties also understood
that the payment amount was not fixed; indeed, in a post-verdict
email, Magleby commented to Tomsic that Schnibbe would be
owed at least $1 million but stated that “you and I know that we
may go above $1 million, depending upon what happens.”
Schnibbe asserts that the amount owed was not in dispute but was
“liquidated and quantifiable,” but this would be true only if there
had been definite rules as to whether the cap applied. The parties
all understood that there were some circumstances under which
Schnibbe might receive more than $1 million, but those
circumstances were not well-defined, and the parties clearly had
(and have) differing views on that point. Schnibbe therefore
20210591-CA 9 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
overstates things more than a little bit when he asserts that the
amount owed was liquidated or not in dispute. In our view, the
first element of accord and satisfaction is met here.
¶22 And so is the second. This element requires us to examine
things from the Magleby Parties’ point of view, and to inquire as
to whether those parties intended the $1 million payment to be a
complete satisfaction of any obligation owed to Schnibbe related
to the USA Power Case fee. And they quite clearly did. The
Release and accompanying emails leave no doubt about the
Magleby Parties’ view of the purpose of the payment. As noted
above, the Magleby Parties asked Schnibbe to sign the Release in
connection with the payment, and the Release stated plainly that
employees who signed it would acknowledge that they accept the
payment provided and that they “have been fully compensated
. . . for the promises and releases made” in the Release. And
employees who signed the Release would “unconditionally
release[]” the Firm and its principals “from any and all claims . . .
that arise out of or related to” their employment. These provisions
could hardly be more clear: the Magleby Parties were offering
Schnibbe a payment that would serve to fully and completely
discharge their obligations to Schnibbe with regard to the USA
Power Case. In our view, there is no question that the $1 million
payment was being offered as a “full settlement of the entire
dispute.” Stearns Lending Inc. v. Pyle, 2015 UT App 252, ¶ 28, 361
P.3d 672 (quotation simplified), cert. denied, 369 P.3d 451 (Utah
2016). Thus, we conclude that the second element of accord and
satisfaction is met here.
¶23 While the first two elements are clearly satisfied as a matter
of law, the third element presents a much closer question. That
element requires us to examine Schnibbe’s words and conduct,
and to inquire as to whether Schnibbe indicated—through actions
or otherwise—that he accepted the $1 million payment as full
settlement of the dispute. We begin our inquiry into this third
element with a discussion of how Utah’s case law interpreting it
has developed over time, and we explain that it has become firmly
established in our law that a creditor who negotiates a restricted
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check has accepted the offered accord. We then examine and reject
Schnibbe’s assertion that the situation presented here—in which
the funds were transmitted to Schnibbe via direct deposit rather
than by check—is materially different from the negotiated-check
cases. Ultimately, we conclude that Schnibbe’s decision to keep
and use the money deposited into his account satisfies the third
element of accord and satisfaction as a matter of law.
A. Utah Law Regarding Acceptance: Negotiation of a Check
Constitutes Acceptance as a Matter of Law
¶24 There are two basic ways to indicate acceptance of an
accord and satisfaction: through express indication of intent (e.g.,
a statement saying “I accept”), or through actions clear enough to
indicate acceptance. See Dishinger, 2001 UT App 209, ¶ 22 (stating
that “the third element of accord and satisfaction may be satisfied
by the creditor’s subjective intent to discharge an obligation by
assenting to the accord, or conduct which gives rise to a
reasonable inference that acceptance of payment discharged the
obligation”). The Magleby Parties do not contend that Schnibbe—
who did not sign the Release—ever manifested an express
indication that he was accepting the $1 million payment as a
complete satisfaction of the Magleby Parties’ obligation. Instead,
the Magleby Parties contend that Schnibbe took actions—most
significantly, retaining and using the money without complaint
for several years—that constitute acceptance as a matter of law. In
response, Schnibbe does not contest that he took those actions, but
contends that other reasonable inferences—besides acceptance—
can be drawn from the undisputed facts, and on that basis asserts
that summary judgment is inappropriate and that he is entitled to
a trial so that a jury can determine whether he intended to accept
the $1 million payment as an accord.
¶25 Had the Magleby Parties made this argument in the 1950s,
they likely would have been unsuccessful in winning this point
on summary judgment. In a case with some similarities to this
one, our supreme court held that “the facts of this particular case
entitled plaintiff to go to the jury on his theory of the case.” Scoville
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v. Kellogg Sales Co., 261 P.2d 933, 936 (Utah 1953). In Scoville, a
company had a policy that, for all sales of turkey feed
consummated in 1948, the salesman would get a “$2 per ton
bonus.” Id. at 935. The plaintiff—a salesman named Scoville—
began selling feed in late 1948, and told his superiors that he
anticipated that he would sell “500 cars of feed” in 1949, a scenario
that—under the 1948 bonus policy—would result in a $30,000
bonus payment. Id. His superiors seemed undaunted by that
figure and indicated that they “saw no reason why the bonus”
structure would “be changed” for 1949. Id. But in July 1949, after
Scoville had sold quite a bit of turkey feed, the company issued a
new bonus plan that, if applied to Scoville’s sales, would result in
“a bonus far below” the bonus he would receive under the 1948
plan. Id. Scoville “acknowledged receipt” of the new plan, but
“specifically did not accept or reject its terms.” Id. Instead, he
continued to work for the company for another few months
without much further discussion of the matter. Id. In early 1950,
the company sent Scoville two checks totaling about $4,000, along
with a letter stating that the checks were to cover “the balance due
on your bonus for 1949.” Id. Scoville negotiated both checks
without protest, and made no further complaint until “the end of
1950,” when he wrote a letter to the company and followed up
with a lawsuit seeking recovery of what he considered to be the
entire 1949 bonus payment. Id. Under these circumstances, a
three-justice majority of our supreme court held that “[t]he facts
most favorable to [Scoville] are not such as would require all
reasonable minds to conclude that there was such an acceptance,
hence whether Scoville’s actions were such as to constitute an
acceptance also was a jury question.” Id. at 936.
¶26 This decision drew a spirited dissent from two justices,
who pointed out that Scoville had “received and acknowledged
receipt of” the new bonus plan, “continued to work for” the
company without making any “serious protest” for the next “17
months,” and “received, endorsed, and cashed” the two checks.
Id. at 940 (Wolfe, C.J., dissenting). The dissenting justices found
persuasive this passage from Corbin on Contracts:
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Where the amount due is in dispute, and the
debtor sends cash or a check for less than the
amount claimed, clearly expressing his intention
that it is sent as a settlement in full, and not on
account or in part payment, the retention and use of
the money or the cashing of the check is almost
always held to be an acceptance of the offer
operating as a full satisfaction, even though the
creditor may assert or send word to the debtor that
the sum is received only in part payment.
. . . . [I]t makes no difference that the creditor
did not know that the effect of his cashing the check
or keeping the money would be the discharge of his
entire claim.
Id. at 941 (quoting 6 A. Corbin, Corbin on Contracts § 1279 at 97
(1951)). Thus, the dissenters disagreed with the majority’s
conclusion, opining that “[w]hen the majority opinion states that
under these facts it was a jury question as to whether there was
an accord and satisfaction, it is allowing the jury to determine a
question of law.” Id.
¶27 While the position of the dissenting justices in Scoville
garnered only two votes in 1953, our supreme court—without
ever expressly overruling Scoville—eventually came to espouse
their position. In Marton Remodeling v. Jensen, 706 P.2d 607 (Utah
1985), a debtor sent a creditor a check marked “full and final
satisfaction of any and all claims.” Id. at 608. The creditor
attempted to conditionally accept the check by not only sending
the debtor a letter “demand[ing] the balance” and stating that he
was “refusing to accept the check in full payment,” but also by
writing “not full payment” on the check when he cashed it. Id.
This time, a four-justice majority held that the elements of accord
and satisfaction were present as a matter of law, despite the
creditor’s evident efforts to express his unwillingness to accept
the payment as an accord. Id. at 608–10. Without making any
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reference to Scoville, the majority relied on the exact same section
of the Corbin treatise relied on by the Scoville dissent—section
12795—and concluded that “[i]t is of no legal consequence that
[the creditor] told [the debtor] upon receipt of the . . . check that
he did not regard it as payment in full.” Id. at 609. In such a
situation, the court reasoned, “‘[t]he creditor’s action . . . is quite
inconsistent with his words.’” Id. (quoting 6 A. Corbin, Corbin on
Contracts § 1279 at 129–30 (1962)). Under the court’s view of the
law, the creditor had “the choice of accepting the check on [the
debtor’s] terms or of returning it,” and the court concluded that
this bright-line rule served to further the goals of “compromise,”
“limit[ing] litigation,” and streamlining business transactions.6 Id.
at 610 (quotation simplified). Indeed, the court further reasoned
that, “if we were to decide that a creditor can reserve his rights on
a ‘payment in full’ check, it would seriously circumvent what has
been universally accepted in the business community as a
convenient means for the resolution of disagreements.” Id.
(quotation simplified).
¶28 In the years following Marton Remodeling, this court—as it
is bound to do—followed the reasoning of our supreme court’s
most recent ruling on the issue. See Cove View Excavating & Constr.
5. Section 1279 of Corbin on Contracts had been edited in the years
between 1953 and 1985, but while the treatise used somewhat
different language in 1985 than it did in 1953, it still conveyed the
same idea: that a creditor who negotiates a restricted check has
accepted an offered accord. Compare Scoville v. Kellogg Sales Co.,
261 P.2d 933, 941 (Utah 1953) (Wolfe, C.J., dissenting) (quoting 6
A. Corbin, Corbin on Contracts § 1279 at 97 (1951)), with Marton
Remodeling v. Jensen, 706 P.2d 607, 609 (Utah 1985) (quoting 6 A.
Corbin, Corbin on Contracts § 1279 at 126–30 (1962)).
6. As concerns commercial transactions, Utah law provides that
negotiation of a check “tendered as full satisfaction of” a claim
constitutes discharge of the claim, unless the funds are returned
within ninety days. See Utah Code § 70A-3-311(2), (3)(b). No party
suggests that this statute applies here.
20210591-CA 14 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
Co. v. Flynn, 758 P.2d 474, 477–79 (Utah Ct. App. 1988) (relying on
Marton Remodeling and section 1279 of Corbin on Contracts, and
concluding that a creditor’s negotiation of a check marked
“payment in full” constituted acceptance of the accord because
“his retention of the money . . . operat[es] as an assent,”
notwithstanding the creditor’s action in crossing out the
“payment in full” notation on the check (quotation simplified));
Bench v. Bechtel Civil & Minerals, Inc., 758 P.2d 460, 461–62 (Utah
Ct. App. 1988) (relying on Marton Remodeling and concluding that
the creditor had accepted an accord by “continuing employment
. . . under the terms of the revised compensation plan” and
negotiating a check marked “settlement of net final wages”); cf.
Gary Porter Constr. v. Fox Constr., Inc., 2004 UT App 354, ¶ 15 n.2,
101 P.3d 371 (noting that this court is “bound by the Utah
Supreme Court’s most recent interpretation” of a rule), cert. denied,
123 P.3d 815 (Utah 2005).
¶29 A few years later, in 1992, our supreme court issued
perhaps its strongest statement on the subject, effectively
cementing into Utah law the notion that an accord and satisfaction
exists, as a matter of law, when a creditor keeps a payment
intended as payment in full of a disputed amount, even if that
creditor does so under protest. See Estate Landscape & Snow
Removal Specialists v. Mountain States Tel. & Tel. Co., 844 P.2d 322,
330 (Utah 1992). In Estate Landscape, the creditor—before
negotiating the check—had first made sure to file a lawsuit
against the debtor, specifically alleging that the payment was not
payment in full and seeking a judgment for the unpaid balance.
Id. at 325. But the court nevertheless held that accord and
satisfaction was present as a matter of law, the creditor’s lawsuit
notwithstanding. Id. at 329–30 (stating that “mere negotiation” of
a restricted check “constitutes the accord, regardless of the
payee’s efforts or intent to negate” the restriction). The court
determined that, regardless of the clarity of any expressed
“subjective intent not to accept the lower payment as full
discharge of their claims,” a creditor’s decision to negotiate a
restricted check and retain the funds constitutes acceptance,
because those actions are clear enough to render the creditor’s
20210591-CA 15 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
“subjective objections . . . irrelevant.” Id. at 330 (also stating that
“what is said is overridden by what is done, and assent is imputed
as an inference of law” (quotation simplified)).
¶30 Since Estate Landscape, we have continued to follow the
same principles. See Dishinger, 2001 UT App 209, ¶ 26 (discussing
Estate Landscape and stating that “where, as here, the check is
tendered under the condition that negotiation will constitute full
settlement, mere negotiation of the check constitutes the accord,
regardless of the payee’s efforts or intent to negate the condition”
(quotation simplified)). We have even held that the opposite
position—the one once espoused by a majority of our supreme
court in Scoville, namely, that a creditor who negotiates a
restricted check is entitled to a jury trial for resolution of
competing inferences regarding acceptance—is now considered
“frivolous.” See ECO Mktg., Inc. v. Hardesty, 2003 UT App 148U,
paras. 4–5 (citing Estate Landscape and Marton Remodeling, stating
that “[t]he law in regard to what constitutes an accord and
satisfaction, in this context, has been clear for many years,” and
awarding attorney fees pursuant to rule 33 of the Utah Rules of
Appellate Procedure).
¶31 Thus, even though Scoville has not been expressly
overruled, in our view that case has been implicitly superseded
by subsequent cases. It is now clearly established in Utah law that
a creditor who cashes or negotiates a check intended as payment
in full of a disputed amount is deemed—as a matter of law—to
have taken action clear enough to indicate acceptance of an
accord, even if the creditor contemporaneously makes clear its
subjective intent not to accept the accord.7
7. The only check-negotiation cases decided to the contrary in
recent years—that is, cases in which the court did not rule in favor
of the debtor on “acceptance” as a matter of law—are
distinguishable. See, e.g., Neiderhauser Builders & Dev. Corp. v.
Campbell, 824 P.2d 1193, 1197–98 (Utah Ct. App. 1992) (holding
(continued…)
20210591-CA 16 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
B. Direct Deposit
¶32 Schnibbe does not quibble with this case law, as far as it
goes; he recognizes, as he must, that under Utah law he would
have been deemed to have accepted the accord if the Firm had
paid him by check and he had negotiated that check. But he
asserts that those cases are distinguishable, because in each of
them the creditor had taken “an affirmative act” indicative of
acceptance: negotiating the check. He emphasizes that, in his case,
the money simply appeared in his bank account, without him
having taken any action to put it there, and he argues that this
situation is therefore materially different from situations in which
a creditor actively endorses and negotiates a restricted check. As
he sees it, his “passive retention of funds, paid unilaterally by the
debtor through direct deposit,” is not the sort of affirmative act
that constitutes acceptance of the accord as a matter of law.
¶33 We take Schnibbe’s point that a creditor who negotiates a
check has taken an additional affirmative act that a person who
has been paid via direct deposit—or other similar method (e.g.,
Venmo or Zelle)—does not need to take in order to claim the
money. And we acknowledge that no Utah appellate court has yet
that a debtor was entitled to a trial on accord and satisfaction
where the debtor had raised a question about whether it had
made a unilateral mistake in computing the amount owed); Vali
Convalescent & Care Insts. v. Division of Health Care Fin., 797 P.2d
438, 450–52 (Utah Ct. App. 1990) (holding that no accord and
satisfaction existed where it was unclear whether the offer had
been intended to include interest); Spor v. Crested Butte Silver
Mining, Inc., 740 P.2d 1304, 1308–09 (Utah 1987) (holding that a
debtor was entitled to a trial on accord and satisfaction where it
was unclear “whether the prepayment of the loan was intended
to satisfy all obligations of both parties under the” contract); Tates,
Inc. v. Little Am. Refin. Co., 535 P.2d 1228, 1231–32 (Utah 1975)
(concluding that no accord and satisfaction was present where the
check in question was not marked “payment in full” or with any
“words of that import”).
20210591-CA 17 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
wrestled with the question of whether this distinction matters.
The Magleby Parties, naturally, assert that it doesn’t, especially
where—as here—Schnibbe not only retained and apparently used
the money,8 but also continued working at the Firm for several
more years without direct complaint.
¶34 As we see it, there are two important variables that interact
with each other in these cases. The first is how the money is
transmitted to the creditor: by regular check, cashier’s check, or
direct deposit. With a regular check, creditors are required to take
an affirmative act—endorsing and negotiating the check—in
order to take the money from the debtor’s account and move it to
their own. With a cashier’s check, the money has already been
removed from the debtor’s account at the time the check was
created, but creditors still need to negotiate the check in order to
place the money in their own account. But with direct deposit,
creditors need not take any action in order to move the money
into their account; instead, the money simply appears there
passively, without requiring the creditor to do anything. In
Schnibbe’s view, this variable matters a great deal; indeed, he
asserts that acceptance of an accord does not exist—at least not as
a matter of law—in cases where money simply appears in a
creditor’s account via direct deposit.
¶35 The second variable is what the creditor does with the
money after receiving it: returning it to the debtor, setting it aside,
8. Schnibbe did not return the money to the Firm, and there is no
indication in the record that he made any effort to set aside (e.g.,
escrow) the money rather than simply use it. At any rate, Schnibbe
makes no such argument. We therefore assume, for purposes of
our analysis, that once the money was deposited into Schnibbe’s
account, it became commingled with his other personal funds,
earned interest, and was available for his personal use over the
next few years. In the end, however, whether Schnibbe actually
spent those particular dollars is of relatively little consequence
because the salient fact is that Schnibbe retained the funds and has
made no effort since 2016 to return them to the Firm.
20210591-CA 18 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
or keeping and using it. Returning the money—whether
transmitted by check or direct deposit—to the debtor is a strong
signal that the creditor does not accept the money as an accord.
Setting the money aside—whether by placing an uncashed check
in a drawer, or placing money in a separate escrow account—may
or may not carry the same connotation. But keeping (and
presumably using) the money, even where passively placed in the
creditor’s account, may fairly be viewed as an indication that the
creditor intends to accept the accord offered by the debtor. The
Magleby Parties emphasize this second variable, and assert that,
because Schnibbe retained the funds in his own account and
presumably spent them, he should be deemed to have accepted
the accord, regardless of the passive way in which the money
found its way into his account. We agree with the Magleby Parties
that this second variable is the more important one in this case,
and conclude that creditors who receive money by direct deposit
that is intended as payment in full of a disputed amount, and who
keep the money in their account—instead of either returning the
money within a reasonable time or, at a minimum, separating it
or setting it aside and registering protest—will be deemed to have
accepted the money as an accord and satisfaction.
¶36 While no Utah appellate court has grappled directly with
the direct deposit situation in this context, several Utah cases have
mentioned “retention of the money” as a critical factor indicating
acceptance. See Marton Remodeling, 706 P.2d at 609 (quoting
section 1279 of Corbin, and stating that “[t]he fact that the creditor
scratches out the words ‘in full payment’ or other similar words
indicating that the payment is tendered in full satisfaction, does
not prevent his retention of the money from operating as an assent
to the discharge” (emphasis added)); Cove View, 758 P.2d at 478
(same quote); Scoville, 261 P.2d at 941 (Wolfe, C.J., dissenting) (also
quoting section 1279 of Corbin, and stating that “the retention and
use of the money or the cashing of the check is almost always held
to be an acceptance” (emphasis added)). And this position seems
to be in line with most of the cases from other jurisdictions that
have taken up the issue.
20210591-CA 19 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
¶37 For instance, one court has held that a creditor who merely
retained—but did not deposit or use—a cashier’s check received
from the debtor and intended as payment in full had accepted the
check as an accord. See Day-Luellwitz Lumber Co. v. Serrell, 177 Ill.
App. 30, 39 (1913). The court emphasized that a cashier’s check
was “something for which the debtor has paid consideration and
which has tied up out of his use and control the amount which he
paid or was charged for it unless and until it is returned to him,”
id. at 37, and was “supposed to be negotiated promptly or
presented promptly,” id. at 39. The court stated that, “although
there was no intention on the part of the creditor at any time to
receive the [cashier’s check] as full payment, the law would hold
that he had so taken it if he had retained it an unreasonable time
without repudiation.” Id. at 37. The court held that retention of the
check for more than three months was unreasonable, and that the
creditor’s actions in “neglect[ing]” to “return or act in any way on
the [cashier’s check] was equivalent in its effect on the [debtor] to
cashing it.” Id. at 39.
¶38 Much more recently, other courts have similarly concluded
that a creditor’s retention of money received through a direct or
automatic deposit constitutes acceptance of an accord and
satisfaction. In one case, a debtor tendered payment to a creditor
by sending a restricted check “to a lock box in which checks are
automatically deposited” into the creditor’s bank account.
Corporate Plaza Assocs., LLC v. Interactive Video Techs., Inc., No. 01
CIV 3241 (RWS), 2002 WL 424308, at *1 (S.D.N.Y. Mar. 19, 2002).
The creditor kept, and did not return, the money, even after
discovering that it had been automatically deposited into its
account. Id. The court acknowledged that it was at least “arguable
that [the creditor] did not deliberately accept the payment of the
check . . . due to its being sent to an automatic deposit system.” Id.
at *2. But the court held that, even if the creditor had not
deliberately accepted the payment, “it did deliberately retain the
funds despite a letter [from the debtor] clearly stating that the
receipt thereof would be considered in full satisfaction of the
larger debt.” Id. And the creditor “has had the use and benefit [of
the money] for approximately nine months.” Id. Under those
20210591-CA 20 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
circumstances, the court held that the creditor “evidenced
sufficient intent to accept the satisfaction by this retention and
use,” and that “any failure to return the money amounts to
acceptance.” Id. at *2–3.
¶39 And in another case, the “accounting department” of a
corporate creditor “routinely endorsed and deposited” a
restricted check sent by a debtor and marked as “full payment” of
a disputed amount. Teledyne Mid-Am. Corp. v. HOH Corp., 486 F.2d
987, 991 (9th Cir. 1973). Following the routine deposit of the check,
the company made no effort to return the money to the debtor,
even though it “protested the offset” and informed the debtor that
“it was treating the disputed tender as a partial payment” of the
amount owed. Id. at 994. The court acknowledged that “the
cashing of the check” did not, under those circumstances, “per se
constitute an accord and satisfaction,” but it nevertheless held that
the creditor’s “retention and use” of the funds did constitute
acceptance as a matter of law, and it affirmed the lower court’s
entry of summary judgment in the debtor’s favor. Id. at 994–95.
¶40 Many leading commentators agree that mere retention of
funds is sufficient to constitute acceptance of an accord. As noted
in one frequently cited treatise, for example, a “creditor’s use of a
check or draft . . . sent to the creditor as full satisfaction of a larger
claim, as by cashing, depositing, or collecting it, or otherwise
availing herself of it, constitutes an acceptance.” 1 C.J.S. Accord and
Satisfaction § 57 (2023) (emphasis added); see also 29 Williston on
Contracts § 73:46 (4th ed. 2023) (stating that “most courts to have
considered the question” of whether “retention of a check offered
as payment in full of an obligation necessarily involves an
acceptance of the condition upon which it was tendered” agree
that it does “because the creditor has no more right to retain the
check for an unreasonable time than it has to cash it, unless the
creditor accepts it as full satisfaction”).
¶41 After examining Utah law and relevant out-of-state
authorities, we agree with this assessment of the law provided by
the United States Court of Appeals for the Tenth Circuit: “Utah
20210591-CA 21 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
precedent, federal precedent, and commentators have all made
clear [that] retention of a check offered as payment in full
constitutes assent to the accord and satisfaction even if the
recipient of the check notifies the sender it is accepted only as a
partial payment.” Valley Asphalt Inc. v. Stimpel Wiebelhaus Assocs.,
3 F. App’x 838, 840 (10th Cir. 2001) (emphasis added).
¶42 Schnibbe resists these authorities by citation to the general
contract principle that “[o]rdinarily an offeror does not have
power to cause the silence of the offeree to operate as acceptance.”
See Restatement (Second) of Contracts § 69 cmt. a (Am. L. Inst.
1981); see also Somervell v. Baxter Healthcare Corp., 1998 WL 203145,
at *2 (D.C. Cir. Mar. 13, 1998) (per curiam) (stating that one party
“could not, merely by depositing the money into [the other
party’s] account, create the presumption that [the other party]
accepted the terms of the agreement if she did not subsequently
return the funds”). But these authorities do not purport to be
discussing the doctrine of accord and satisfaction; instead, they
are concerned with whether an original contract can be formed by
the unilateral payment of money.
¶43 In the specific accord and satisfaction context, by contrast,
a creditor’s retention of funds is an action—whether characterized
as affirmative or passive—that indicates a willingness to accept an
accord and satisfaction. We therefore perceive no dispositive
distinction between a creditor who negotiates a restricted check
and thereby facilitates the placement of funds in its account, and
a creditor who elects to retain funds placed into its account by
direct deposit.9 Accordingly, we conclude that, under Utah law, a
9. We acknowledge Schnibbe’s point that, as a practical matter,
returning funds that appear in one’s account by direct deposit
may be more difficult than returning an uncashed check. But we
do not view any such difficulties as dispositive; there are certainly
readily available ways to retrieve money out of one’s bank
account and send it to someone else. And we are unpersuaded by
Schnibbe’s argument that, because some of the $1 million was
(continued…)
20210591-CA 22 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
creditor who retains money—whether transmitted by direct
deposit or by check—that the debtor intends as payment in full of
a disputed amount will be deemed to have accepted that payment
as an accord and satisfaction, regardless of the creditor’s potential
subjective intent to the contrary.
¶44 Thus, creditors who receive money by direct deposit, and
who do not intend to accept that money as an accord and
satisfaction of a disputed amount, are well advised to return the
money to the debtor within a reasonable time; if they do so, they
will almost certainly not be deemed to have accepted the accord,
regardless of the method by which they received the money. See
Estate Landscape, 844 P.2d at 330 (stating that creditors’ “options
[are] to accept the checks on their debtors’ terms or to refrain from
negotiating the checks and seek the entire sums through the
judicial process”); see also, e.g., Karvalsky v. Becker, 29 N.E.2d 560,
563 (Ind. 1940) (holding that there was no accord and satisfaction
because the creditor promptly returned the check); Bill Munday
Pontiac, Inc. v. Satterwhite, 586 S.W.2d 946, 948 (Tex. Civ. App.
1979) (holding that there was no accord and satisfaction because
the creditor returned the check after two months). But creditors
who elect not to return, within a reasonable time, money received
by direct deposit run a high risk—even if they register sharp
protest—of being deemed to have accepted the accord, just like
creditors who negotiate a check under similar circumstances.
¶45 Under the circumstances here, we have no trouble
concluding that Schnibbe failed to return the deposited funds
within a reasonable time. After all, he kept the money for four
years before filing suit, and has made no effort to return the funds
even after filing suit. By itself, this is a strong indication, under
paid to taxing authorities through withholdings, the full $1
million was not returnable; this issue arises regardless of method
of payment—an employee paid by check may have the same
withholdings issue—and, obviously, creditors seeking to indicate
non-acceptance of a potential accord are only responsible for
returning that portion of a payment that is actually given to them.
20210591-CA 23 2023 UT App 54Magleby Cataxinos & Greenwood v. Schnibbe
applicable law, that Schnibbe intended to accept the money as an
accord and satisfaction. In addition, although Schnibbe did not
sign the Release, he remained employed at the Firm for another
four years, and registered no protest to either Magleby or Tomsic
about the payment for some two years after receiving it. On these
facts, we perceive no error in the district court’s conclusion that
Schnibbe’s actions constitute acceptance of the accord and
satisfaction as a matter of law.
CONCLUSION
¶46 All three elements of accord and satisfaction are met here
as a matter of law. The district court therefore correctly entered
summary judgment in favor of the Magleby Parties on that basis.
¶47 Affirmed.
20210591-CA 24 2023 UT App 54