SUMMARY: Plaintiff in contract dispute moved for summary judgment on defendants' affirmative defense of accord and satisfaction. HELD: denied because factual dispute on issue of mutual assent. Plaintiff moved for summary judgment on defendant's counterclaim. HELD: deferred until time of trial because issue of accord and satisfaction central to defendant's counterclaim.

Case Name: ProGold Limited v. Precision Stainless
Case Number: A3-98-102
Docket Number: 49
Date Filed: 2/3/00
Nature of Suit: 380

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
SOUTHEASTERN DIVISION

MEMORANDUM AND ORDER

This action commenced in federal court on September 18, 1999, at which time defendants filed a notice of removal. (Doc. # 1.) Before the court is the plaintiff's motion for partial summary judgment. (Doc. # 29.) After considering the parties' briefs and supporting evidence, the court denies plaintiff's motion for summary judgment on PSI's and SFI's affirmative defense of accord and satisfaction as well as on SFI's counterclaim. The summary judgment motion on PSI's counterclaim is deferred pending trial.

I. Background

Plaintiff, ProGold Limited Liability Company (ProGold), is the owner and operator of a wet corn milling plant and high fructose corn syrup processing and storage facility in Wahpeton, North Dakota. In 1996 ProGold entered into a contract with defendant Precision Stainless, Inc. (PSI) for the purchase of seven 500,000 gallon capacity stainless steel storage tanks for storage of high fructose corn syrup on ProGold's premises. In turn PSI contracted with defendant Stainless Fabrication, Inc. (SFI) for the erection of the tanks at ProGold's facility. SFI completed the erection of the tanks in October of 1996. After the tanks were erected, ProGold contracted with Harris Contracting Company (Harris) ⁽¹⁾ to install heating elements inside each of the seven tanks. Harris finished installation of the heating unit on Tank L in March of 1997. Around that same time Harris found cracks and pinholes in three of the seven tanks, including Tank L. Harris reported this to ProGold's project manager. There is a dispute in the facts over what happened next between Harris and ProGold. ProGold claims that it instructed Harris to fix the problem. Harris denies that it was directed to fix the cracks and pinholes and claims it did nothing to fix the welds.

On April 14, 1997, ProGold loaded liquid corn syrup into Tank L, one of the seven tanks purchased from PSI. On April 15, 1997, ProGold discovered a leak in Tank L and upon further inspection found that the weld on Tank L had failed to achieve full penetration. Subsequent testing of the other tanks revealed that a number of those welds also were not full penetration welds. ProGold brought the issue to the attention of PSI and SFI. PSI and SFI responded by agreeing to reweld the welds that had less than full penetration.

II. Summary Judgment Standard

Summary judgment is appropriate if there is not a genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. Pro. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is "material" if it might affect the outcome of a case, and a factual dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Rule 56 of the Federal Rules of Civil Procedure "mandates the entry of summary judgment . . . against a party failing to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex, 477 U.S. at 322. If the moving party has supported its motion for summary judgment, the nonmoving party has an affirmative burden placed on it to go beyond the pleadings and show a genuine triable issue of fact. Commercial Union Ins. Co. v. Schmidt, 967 F.2d 270, 271 (8th Cir. 1992). However, the court considering a motion for summary judgment must view the evidence in the light most favorable to the nonmoving party, who enjoys "the benefit of all reasonable inferences to be drawn from the facts." Vacca v. Viacom Broadcasting of Missouri, Inc. Et al., 875 F.2d 1337, 1339 (8th Cir. 1989)(citation omitted).

Summary judgment is improper if the court finds a genuine issue of material fact; however, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment . . ." Commercial Union Insurance Co. v. Schmidt, 967 F.2d 270, 271-72 (8th Cir. 1992)(citation omitted). The issue is whether "the evidence is sufficient to allow a reasonable jury to return a verdict for the nonmoving party." Landon v. Northwest Airlines, Inc., 72 F.3d 620, 624 (8th Cir. 1995).

III. Discussion

Plaintiff moves for partial summary judgment in two areas. First, plaintiff argues that it is entitled to summary judgment on PSI's and SFI's affirmative defense of accord and satisfaction. Second, plaintiff asserts that it is entitled to summary judgment on PSI's and SFI's counterclaims.

A. Accord and Satisfaction

Whether or not there has been accord and satisfaction is generally a question fact unless the evidence is such that a reasonable person can only draw one conclusion. Earthworks Inc. v. Sehn, 553 N.W. 2d 490, 495 (N.D. 1996). "Accord" and "satisfaction" are defined by statute. "An accord is an agreement to accept in extinction of an obligation something different from or less than that to which the person agreeing to accept is entitled." N.D.C.C. § 9-13-04 (1998). "Acceptance by the creditor of the consideration of an accord extinguishes the obligation and is called satisfaction." N.D.C.C. § 9-13-05 (1998).

Plaintiff argues that an essential element of accord and satisfaction is an agreement evidencing the parties' mutual assent. Plaintiff claims that though PSI and SFI agreed to repair and reweld the stainless steel tanks without any additional charge to plaintiff, there was no corresponding agreement from plaintiff to release its legal claims against PSI and SFI in exchange for the repairs.

Conversely, PSI and SFI argue that there is clear evidence of mutual assent. PSI and SFI allege that plaintiff's administrative manager, David Hanback, testified in his deposition that he had sent a letter to PSI which in essence stated that unless corrective measures were taken plaintiff would sue. PSI and SFI claim they understood Mr. Hanback's statement to constitute an agreement between the parties in which PSI and SFI would undertake the repairs at their own expense and in return plaintiff would release the two companies from any legal claim. SFI alleges that it never would have agreed to reweld the tanks had it known that it would still be faced with the costly prospect of defending itself in a lawsuit. PSI and SFI argue that based on Mr. Hanback's admission, a jury could reasonably find that plaintiff agreed to forego a lawsuit if it could get the tanks rewelded. PSI and SFI further allege that the arguments made by plaintiff are arguments for the jury rather than arguments in support of summary judgment. The court agrees.

Plaintiff claims that neither PSI nor SFI can point to any written documentation of an accord. However, as defendants properly point out, an accord may be oral. (Doc. # 37, pg. 17.) An oral accord may be found if it is supported by testimony or other evidence. See Herb Hill Ins., Inc. v. Radtke, 380 N.W. 2d 651, 651-652 (N.D. 1986). It is the role of the fact finder to determine the credibility and weight of the evidence. Id. at 653. When more than one conclusion can be drawn from the testimony, the court must accept that conclusion drawn by the fact finder. Id. The facts before the court are primarily testimonial in nature and do not support a determination as a matter of law for the plaintiff. Accordingly, summary judgment on the issue of accord and satisfaction is denied and the issue is properly left to be decided by the fact finder.

B. Counterclaims

Plaintiff argues that had PSI and SFI not agreed to repair the tanks at their own cost, then plaintiff would have sought recovery of these additional items of expense in this lawsuit. Plaintiff claims that the repairs to the tanks were simply an effort to mitigate the damages of plaintiff and to minimize PSI's and SFI's liability to plaintiff. Plaintiff alleges that there was never an agreement that plaintiff would release PSI and SFI from any legal claims in exchange for repairs. Plaintiff further argues that PSI and SFI can not come back, after being sued, and seek reimbursement from plaintiff when PSI and SFI had already agreed to repair the tanks at no charge to plaintiff.

PSI and SFI argue that if there is no accord and satisfaction, then PSI and SFI are entitled to compensation for the costs they incurred as a result of rewelding the tanks. PSI and SFI claim they only repaired the tanks because they were under the impression that they were going to be released from any legal claim in exchange for the repairs. Alternatively, PSI and SFI argue that if there is accord and satisfaction, then plaintiff breached the accord by suing PSI and SFI. PSI and SFI claim they must seek reimbursement from plaintiff because plaintiff reneged on its promise to release these two defendants from any legal claims.

Plaintiff specifically argues that its basis for summary judgment on SFI's counterclaim is the fact that SFI agreed to repair the tanks at no cost to plaintiff. In response SFI argues that it only did so under the belief that if it repaired the tanks, then plaintiff would release SFI from any legal claim. SFI further argues that plaintiff misconstrued the deposition testimony of SFI's President, Claude Mizell, in which Mr. Mizell stated that SFI would "bite the bullet" and reweld the tanks. Plaintiff claims that Mr. Mizell's statement is an admission that SFI would repair the tanks at no cost to plaintiff. SFI claims that Mr. Mizell was simply explaining that although SFI believed that others had caused the problem with the tanks, SFI would reweld them in order to avoid a lawsuit by plaintiff.

The issue of accord and satisfaction is central to the question of whether or not summary judgment would be proper on SFI's counterclaim. The court has determined that the question of accord and satisfaction must be left to the fact finder. Until that question is resolved SFI's counterclaim can not be properly evaluated. SFI's counterclaim involves a question of fact properly left for determination by the fact finder. The court denies plaintiff's motion for summary judgement on SFI's counterclaim.

Plaintiff argues that it has an independent basis for summary judgment against PSI. Plaintiff claims that PSI did not incur any damages, costs, or expenses as a result of the rewelding work; rather, SFI completed and absorbed all the costs of the repairs. Because of this plaintiff claims that PSI has no damage claim and, thus, plaintiff is entitled to summary judgment on PSI's counterclaim.

PSI concedes that SFI did the repairs and absorbed the repair costs but maintains that SFI did so at the instruction of PSI because SFI is a subcontractor and agent of PSI. PSI argues that it "retains both a legal and moral obligation to attempt to secure compensation for such losses and expenses incurred by SFI, its subcontractor and agent, from ProGold by all means necessary." (PSI's Response to Plaintiff's Motion for Summary Judgment, Doc. #39, pg. 7.)

The court finds that the facts surrounding the question of PSI's damages are tenuous and inconclusive; therefore, the court defers making a determination on plaintiff's motion for summary judgment against PSI's counterclaim until the time of trial.

IV. Conclusion

In sum, the court finds that plaintiff has failed to demonstrate that no genuine issues of material fact exist in the case. Thus, the court denies plaintiff's motion for partial summary judgment (doc. #29) on the defense of accord and satisfaction and on SFI's counterclaim. The court defers making a decision on plaintiff's motion for summary judgment against PSI's counterclaim pending trial.

IT IS SO ORDERED.

Dated: January _____, 2000.

Karen K. Klein
United States Magistrate Judge

1. Harris is the third defendant involved in this action; however, it is not named as a party against whom the motion for partial summary judgment is directed. Harris declines to take a position with respect to plaintiff's motion for partial summary judgment. (Doc. # 34.)