Johnston v. First Union Nat. Bank, 271 Va. 239

Summary

The Supreme Court of Virginia held that a debtor's check marked "Acc't. Paid in full" discharged the disputed mortgage debt under Virginia Code § 8.3A-311 because the debtor acted in good faith, the amount claimed was subject to a bona fide dispute, and the bank accepted and retained the check beyond the statutory repayment period. The court reversed the relevant portion of the circuit court's decree and entered final judgment for the debtors. A dissent would have affirmed the trial court's finding that the tender was not made in good faith.

Holdings

1. Code § 8.3A-311 governs an accord and satisfaction arising from the tender and acceptance of an instrument marked as full satisfaction of a disputed debt, including where the creditor's acceptance may have been inadvertent.
2. Mrs. Johnston carried her initial burden of proving that she acted in good faith when she presented the check marked "paid in full" to the Bank's teller.
3. The mortgage claim was subject to a bona fide dispute and was not liquidated and undisputed for purposes of Code § 8.3A-311.
4. Because Mrs. Johnston proved a good-faith tender of an instrument containing a conspicuous full-satisfaction statement, the claim was subject to a bona fide dispute, and the Bank neither designated a recipient for disputed-debt communications nor refunded the check within 90 days, the mortgage debt was discharged under Code § 8.3A-311.

Questions Presented

1. Whether the Johnstons' mortgage debt was discharged under Code § 8.3A-311 when Mrs. Johnston tendered a check conspicuously marked "Acc't. Paid in full," the Bank accepted and retained the check, and the amount of the debt was subject to a bona fide dispute.
2. Whether Mrs. Johnston acted in good faith when she tendered the check to a bank teller rather than directly to the branch manager who had previously discussed the disputed balance.
3. Whether the Uniform Commercial Code provisions governing accord and satisfaction applied instead of Code § 11-12.

Disposition

reversed