Jim Porter: The check’s in the mail
Special to the
TAHOE/TRUCKEE and#8212; Have you ever received a check marked and#8220;payment in fulland#8221; from someone who owed you money? Sending and#8220;payment in fulland#8221; checks is common practice among business people when there is a dispute over the balance owing on an account. The situation arises, for example, when the debtor refuses to pay interest or thinks he or she is being overcharged or received a defective product or service.
Payment in full
Can it be that simple, a debtor can write and#8220;payment in fulland#8221; on the front of a check, mail it off and if the check is cashed, the unpaid portion is extinguished?
On the flip side, if you cash a check marked and#8220;payment in full,and#8221; have you released the check-writer or can you pursue collection of more money you believe is owing? Iand#8217;m glad you asked.
Clearly, you may not simply endorse and deposit a partial payment check marked and#8220;paid in fulland#8221; and expect to recover more money and#8212; at least if there is an honest dispute over the amount owing. Do not cash that check if you want to recover more money.
The more difficult question is can you write on the check and#8220;without prejudiceand#8221; or and#8220;under protestand#8221; or cross off and#8220;payment in full,and#8221; cash the check and then go after the unpaid balance?
The answer depends on which California law you rely on. Donand#8217;t you love it when a lawyer answers your question with and#8220;it depends.and#8221; (As I wrote that, I flashed back to my daughters in diapers and their and#8220;Depends.and#8221;) Sorry.
Civil Code section 1526 recites that the creditor can simply strike the and#8220;payment in fulland#8221; language, cash the check and pursue additional recovery. So under the Civil Code if the payee/creditor crosses off the and#8220;payment in fulland#8221; language, he or she may go after more money.
Section 3311 of the Uniform Commercial Code states that the and#8220;payment in fulland#8221; condition is binding whether or not the creditor strikes the language. So under the Commercial Code if you deposit the check striking the and#8220;payment in fulland#8221; language you will be barred from further recovery at least if there is a bonafide dispute over the amount owing.
In one case, the court, relying on the Commercial Code, required the creditor to return the partial payment check to the debtor. In fact, section 3311 allows 90 days for the creditor to discover that a partial payment check has been cashed and to return the proceeds to the debtor, and at that point the debt is reinstated in full.
Whichever code you rely on, there must be an honest controversy over the amount of the obligation. A debtor who clearly owes the money but sends a smaller amount marked and#8220;payment in fulland#8221; (hum, why didnand#8217;t I think of that?) will not succeed even if the check is cashed without striking out and#8220;payment in full.and#8221;
If you wish to close out a disputed obligation by offering partial payment, and a person-to-person agreement fails, consider this.
If you want to be sneaky, mark and#8220;payment in fulland#8221; on the check, send it and cross your fingers hoping it is cashed. Then wait 90 days. I donand#8217;t advise that.
To do it correctly, hereand#8217;s a suggestion. Send the check marked and#8220;payment in fulland#8221; with an endorsement on the back like and#8220;Endorsement Is a Release of All Claims.and#8221; Mail with a cover letter (certified and first class would be best) informing the creditor/payee that the check is sent as payment in full satisfaction of the debt and must be returned if that is not acceptable, adding and#8220;if you cash the check it will be payment in full.and#8221;
With such a transmittal letter and endorsement, you stand a much better chance of fully discharging the disputed debt with a partial payment even if the check is cashed with and#8220;payment in fulland#8221; stricken. If you go to court cite Commercial Code section 3311 and claim you never heard of Civil Code section 1526.
The checkand#8217;s in the mail
Oh, and one more thing. Donand#8217;t tell someone and#8220;the check is in the mailand#8221; if it isnand#8217;t. That only works once.
Jim Porter is an attorney with Porter Simon, with offices in Truckee, South Lake Tahoe and Reno. He is a mediator and was the Governor’s appointee to the Fair Political Practices Commission and McPherson Commission, both involving election law and the Political Reform Act. He may be reached at firstname.lastname@example.org or at the firmand#8217;s website http://www.portersimon.com.
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