McMahon Food Corp. v. Burger Dairy Co.

Burger Dairy Company (Burger) (defendant) regularly sold milk products to McMahon Food Corporation (MFC) (plaintiff). By February 1992, Burger’s records showed MFC was in arrears $58,518.41. On June 17, MFC’s vice president, Frank McMahon, met with Burger’s general manager, Larry Carter, who had replaced Burger’s previous general manager, Richard Bylsma, that May. McMahon told Carter he had already settled the February arrearage with Bylsma. McMahon then gave Carter a check for amounts accrued between February and June. McMahon attached a voucher to the check stating “payment in full through 6/6/92.” After the meeting, Carter learned from Bylsma that there was no prior settlement of the February arrearage and informed Carter that the arrearage remained outstanding. Burger’s accounting manager subsequently cashed the June 17 check, first crossing out the payment-in-full notation and substituting “without prejudice.” MFC sued Burger, seeking a declaratory judgment that there had been an accord and satisfaction, evinced by the June 17 check, and consequently the February arrearage had been settled. Burger countersued for the arrearage amount. While the dispute was ongoing, the parties continued doing business. In that process, MFC sent Burger a check on August 18. An attached voucher noted the three invoices the check was paying but then also contained a statement saying “PAID IN FULL THRU 8/8/92.” Burger’s accounting department cashed the check. In the suit, MFC then argued that this check, once cashed, was an accord and satisfaction of MFC’s entire outstanding balance, including any outstanding February arrearage. The district court held in Burger’s favor, finding neither check constituted an accord and satisfaction. MFC appealed.