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 
 -2- 

 

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 

 1Code § 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. 
 -3- 

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 

 

 2Although 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. 
 -4- 

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. 

 

 3Avco 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).