Source: http://ucclitigation.blogspot.com/2010/09/
Timestamp: 2017-08-22 07:21:27
Document Index: 605850010

Matched Legal Cases: ['§ 1', '§ 1', '§11101', '§ 1', '§ 1', '§ 3', '§ 1']

Uniform Commercial Code Litigation: September 2010
Steinman v. Malamed, (June 28, 2010) 185 Cal.App.4th 1550, 111 Cal. Rptr. 3d 304.
This case suggests that UCC § 1-308 (allowing payment “under protest”) may not be interpreted broadly to allow a party to reserve rights when making a disputed payment.
The defendant tried to hedge against losing the early payment discount by paying the greater amount demanded plaintiff “under protest.” The plaintiff stated that it would not accept a payment made “under protest.” The defendant made the payment by wire transfer. The defendant subsequently sought to recover the overpayment.
The trial court found that the defendant was correct and that there was in fact an overpayment and ordered the return of the money. But the appellate court reversed. It did not overturn the finding of an overpayment. Rather, it concluded that because the defendant’s overpayment was voluntary, it could not be recovered. The appellate court found that the defendant had not properly protected itself because the plaintiff had announced it would not accept a payment under protest and the defendant had paid anyway.
• This is a questionable reason to refuse application of UCC § 1-308. California has enacted UCC Article 4A, which is designed to deal with commercial wire transfers. (California Commercial Code §11101 et seq.) UCC § 1-102 (California Commercial Code 1102) states that this division (Division 1, “General Provisions,” which includes § 1-308) applies to a transaction governed by another division, such as Division 11, “Funds Transfers” (UCC Article 4A.) So the method of payment (wire transfer not check) should not disqualify application of the UCC.
The appellant attempted to come under the UCC by arguing that the payment was made under a “negotiable instrument,” (the promissory note being paid as part of the settlement agreement).
• UCC § 3-104 does cover negotiable instruments. Without any description of the factual record, the court of appeal merely noted that the lower court “did not make” a determination that the promissory note was negotiable. The court of appeal did not make an independent analysis of whether the settlement note was a negotiable instrument.
• The court cited Connecticut Printers, Inc. v. Gus Kroesen, Inc. (1982) 134 Cal. App. 3d 54. Connecticut Printers held that UCC § 1-308 (then known as 1-207) did not displace common law principles which allowed a party to offer an “accord and satisfaction” on a disputed account by tendering a check “in full payment” of the account. This is a different situation than the one facing the Steinman court. The Steinman court did not discuss the factual differing fact patterns. The court of appeal was unwilling to find that the UCC “explicitly displaced” common law principles of “economic duress” and “involuntary payment” in a transaction involving wire payment of an obligation arising under a settlement agreement. (185 Cal. App. 4th at 1562.)
The case, which sits at the intersection of common law and the UCC, could probably spawn some law review articles. In the meantime, for day-to-day lawyers, one must proceed carefully in order to protect a performing party’s rights in an ongoing contract.
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