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National Bank of Alaska v. Warfle and First National Bank of Anch. (6/26/92), 835 P 2d 1167
Notice: This is subject to formal correction
before publication in the Pacific Reporter.
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THE SUPREME COURT OF THE STATE OF ALASKA
NATIONAL BANK OF ALASKA, )
) Supreme Court No. S-4324
Appellant, ) Superior Court No.
) 3KN-89-240 Civil
EDWIN S. WARFLE, JODINE C. ) O P I N I O N
WARFLE, and FIRST NATIONAL )
BANK OF ANCHORAGE, )
Appellees. ) [No. 3855 - June 26, 1992]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Charles K. Cranston, Judge.
Appearances: Charles G. Evans, Law
Offices of Charles G. Evans, Anchorage, for
Appellant. Allan Beiswenger, Robinson,
Beiswenger & Ehrhardt, Soldotna, for
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
National Bank of Alaska appeals the superior court's
grant of summary judgment in favor of Edwin Warfle and
Jodine Warfle, holding that they had fulfilled their
loan obligation to the bank. The bank also appeals the
denial of its own motion for summary judgment. We
I. FACTUAL AND PROCEDURAL BACKGROUND
In 1983 the National Bank of Alaska (NBA), with
participation by the Alaska Industrial Development
Authority (AIDA), loaned $275,000 to Edwin Warfle,
Robert Aikins and Pauline Aikins. The loan was to
finance the construction of a commercial project. The
project, Country Villa Mall, was a shopping center
located off the Sterling Highway near Soldotna. Once
the construction was finished the loan was converted to
permanent financing and a new promissory note was
executed. The debt was secured by the Country Villa
Mall property. In February 1988 Jodine Warfle assumed
the Aikins' obligation and NBA released the Aikins from
their obligation to pay the note. The Warfles also
gave NBA additional security for the note.
The Warfles encountered difficulties with the project,
foremost of which was the proposed condemnation of a
significant part of the property for expansion of the
Sterling Highway. The Deed of Trust provided that any
condemnation award would be assigned to NBA.1 Mr.
Warfle stopped making payments on the loan and
requested that NBA wait and restructure the arrangement
after the condemnation and appraisal was completed.
Warfle offered NBA all the proceeds of the condemnation
plus other compensation should the taking award be
insufficient. NBA reduced the monthly obligation to
In October 1988 the Warfles stopped making payments.
On December 6, NBA wrote to the Warfles informing them
of the default and accelerating the balance due on the
note. At that time, the Warfles owed $269,242.03. Mr.
Warfle's written response admitted his default and
announced his intention not to pay. NBA initiated
foreclosure proceedings on March 21, 1989. In March
1990 Mr. Warfle began negotiations with the state over
condemnation of the Country Villa Mall. Mr. Warfle
convinced the state that the taking amounted to at
least $225,000. In May the property was conveyed to
the state for $225,000.
On May 21, NBA signed a Request for Full Reconveyance.
NBA and the Warfles signed a Memorandum of Agreement.
Each document indicated that the condemnation
compensation fully discharged the Warfles' debt.2 NBA
now alleges that these form documents were executed by
mistake. In receiving the funds from the state, NBA
exchanged with the state an addendum to the Memorandum
of Agreement and a new draft of the Request for Full
Reconveyance, instead of the memorandum signed by the
Warfles and the original request form. The revised
documents expressly reserved NBA's rights to collect
from the Warfles the balance of their debt not covered
by the condemnation award.3
Before the corrected documents were exchanged with the
state, NBA moved for summary judgment. The Warfles
opposed the motion and filed their own cross-motion for
summary judgment based on the reconveyance documents
and allegations that the acceleration of the debt was
The trial court granted the Warfles' Motion for Summary
Judgment and denied NBA's motion. NBA appeals.
A. STANDARD OF REVIEW
On appeal from an award of summary judgment, "this
court must determine whether there is a genuine issue
of material fact and whether the moving party is
entitled to judgment on the law applicable to the
established facts. All reasonable inferences of fact
from proffered materials must be drawn against the
moving party . . . and in favor of the non-moving
party." Sea Lion Corp. v. Air Logistics of Alaska,
Inc., 787 P.2d 109, 116 (Alaska 1990) (citations
B. THE MOTION AND CROSS-MOTION
FOR SUMMARY JUDGMENT
NBA appeals the denial of its motion for summary
judgment on the judicial foreclosure of the remainder
of the Warfles' debt. NBA argues that "[o]ther than
the mistaken execution of the documents in connection
with receipt of the condemnation proceeds, no evidence
submitted by the Warfles warranted a denial of NBA's
motion for summary judgment."
The Warfles contend that summary judgment was properly
granted in their favor because the Memorandum of
Agreement constituted an accord and satisfaction. They
argue that their duty to pay the remainder of their
debt claimed by NBA was thus discharged. They contend
that under the accord and satisfaction they agreed to
accept a low valuation on their property during the
condemnation proceedings, and to forgo their improper
acceleration defense to the foreclosure, if NBA would
discharge the entire debt and not pursue the
foreclosure upon receipt of the condemnation proceeds.
They contend that the complete discharge of the
obligation on the note was the result of "protracted
negotiations." Therefore, the Memorandum of Agreement
is a binding settlement which must be enforced.4
1. Accord and Satisfaction.
"An accord is a contract between a creditor and a
debtor for a settlement of the creditor's claim by some
performance other than that which is due. Satisfaction
is the performance of such a contract." Air Van Lines,
Inc. v. Buster, 673 P.2d 774, 777 (Alaska 1983)
(citations omitted). Accord and satisfaction is "one
of the recognized methods of discharging and
terminating an existing right and constituting a
perfect defense in an action for the enforcement of a
previous claim." 6 Arthur L. Corbin, Corbin on
Contracts 1276, at 115 (1962).
The enforceability of an accord is governed by the
general rules of contracts. McKibben v. Mohawk Oil
Co., 667 P.2d 1223, 1227 (Alaska 1983). Thus, an
accord "[l]ike any contract . . . requires an offer,
acceptance, and consideration." Gudenau & Co. v.
Sweeney Insurance, Inc., 736 P.2d 763, 770 (Alaska
In order to find that there was a valid accord and
satisfaction it must first be determined that an offer
of accord was made. Moreover, we conclude that an
intent to offer an accord must exist. Accord Lundeen
v. Cozy Cab Mfg. Co., 179 N.W.2d 73, 76 (Minn. 1970).
Although the requirement of a "meeting of the minds"
generally is relaxed in analyzing accords,5 6 Arthur L.
Corbin, Corbin on Contracts 1279 at 130 (1962), the
accord and satisfaction should not be the result of
mere fortuity. Some "antecedent discussion" of the
accord is ordinarily required. 6 Arthur L. Corbin,
Corbin on Contracts 1277, at 123 (1962).
Summary judgment should not have been awarded to the
Warfles if NBA demonstrated that material issues of
fact exist concerning whether the Warfles intended the
Memorandum of Agreement to be an accord and the extent
to which the communications that preceded the
memorandum were "antecedent discussions."6
Furthermore, summary judgment should have been awarded
NBA on this issue if we are persuaded that one of the
elements of accord and satisfaction was absent as a
matter of law.
The Warfles contend that they offered to accept an
inadequately low valuation of their property by the
state and to not assert their improper acceleration
defense to the foreclosure action in exchange for NBA's
agreement to discharge the entire debt. That is, they
contend that they offered to settle the entire dispute.
The only evidence supporting the inference that the
Warfles intended to offer NBA an accord and
satisfaction by signing the Memorandum of Agreement is
that Mr. Warfle believed that NBA would be bound by the
same document that he was signing. There were no
antecedent discussions concerning a settlement of the
debt acceleration dispute. There were not the
"protracted negotiations" claimed by the Warfles.
There is virtually no evidence in the record that would
support a finding that the Warfles ever confronted NBA
with any offer regarding the acceleration dispute.
This evidence, viewed most favorably to the Warfles, is
insufficient as a matter of law to support a finding
that an offer of accord and satisfaction was made to
NBA. Furthermore, the Memorandum of Agreement was not
prepared by either party, but by the state.
Neither was there any discussion that the payment of
the condemnation award would trigger the discharge of
the entire debt. Indeed, the record is replete with
support for NBA's contention that there was no intent
to enter into an accord setting the dispute. In an
affidavit attached to the Warfles' opposition and cross-
motion, filed after the execution of the Memorandum of
Agreement, Mr. Warfle states: "The State has offered
to purchase the property for $225,000.00, and I have
accepted the offer. 8. The Bank has agreed to the
proposed purchase of the property by the State, and the
purchase money will be applied towards the balance of
the note owed by me to the Bank." (Emphasis added).
Mr. Warfle said the same in his deposition. Also, NBA
produced the state's record of the condemnation
meetings with Mr. Warfle. This evidence also reflects
that Mr. Warfle believed that he would have to "work
out the balance of what he owed to the bank."
We conclude that this evidence, viewed most favorably
to the Warfles, is insufficient as a matter of law to
support a finding that the Warfles intended to make an
offer of accord and satisfaction. As we have stated,
we will look to the presence of antecedent discussions
to evidence an intent to make an offer. See supra. In
this case there is a noticeable absence of any
discussion of a mutual withdrawal of the ongoing
litigation between the parties. Thus, we conclude that
an accord and satisfaction was not executed and is not
a viable defense to NBA's foreclosure action.
b. Acceptance and Consideration.
In view of our disposition of the issue of offer, we
need not address acceptance and consideration.
Regarding acceptance, however, we express our
disapproval of the trial court's implicit rejection of
our decision in First National Bank of Fairbanks v.
Taylor, 488 P.2d 1026 (Alaska 1971).
In Taylor, the borrower executed a note to the bank
secured by the assignment of a real estate contract
from which the borrower received profits. The
assignment provided for the bank to receive and apply
to the borrower's note all sums due to the borrower.
After the final payment on the contract was made a
balance of $4,795.13 remained due on the note. Because
the bank no longer had any interest in the real estate,
it executed a standard form Satisfaction and Discharge
of Real and Chattel Mortgage. The form document
indicated that the entire note was paid. Id. at 1027.
The bank initiated an action to collect on the balance
due on the note alleging that the form document was
filed in error. The trial court dismissed the
complaint. Id. at 1028.
The dismissal was reversed. We held that although the
document may have been some indication that a discharge
was executed, the document itself was not conclusive
evidence: "[T]he statement in the satisfaction and
discharge of the mortgage that the note had been paid
was not conclusive evidence of payment. The Bank
should have been allowed to attempt to show mistake in
the execution of that document." Id. at 1029-30.7
We supported our holding by analogizing to negotiable
instruments. We reasoned:
While stamping or endorsing a note as
paid may give rise to a presumption of
payment, the presumption may be rebutted and
recovery had upon a showing of mistake or
error. . . . When one considers that a
statement of payment on the face of a note is
not conclusive evidence, then it seems
obvious that a statement of payment in a
separate document, here the mortgage
discharge, should not be conclusive evidence
Id. at 1031. We concluded: "In our view, a simple statement
indicating payment, whether on the face of a note or in
a separate document, cannot support a dismissal where
mistake is claimed." Id.
NBA contends that Taylor is directly on point. NBA
claims that the form documents discharging the Warfles
of all liability were executed mistakenly. The
assertion that this was a mistake was in the record
before the trial court. NBA also points to
corroborative evidence that neither Warfle nor NBA ever
intended the payment of the condemnation award to
discharge the Warfles from their obligation on the
The Warfles claim that Taylor does not apply when there
is an accord and satisfaction. They argue that against
the backdrop of the settlement, mistaken execution
cannot void the settlement as a matter of law.
However, mistake may be grounds for reforming or
setting aside an accord just like any other contract.
6 Arthur L. Corbin, Corbin on Contracts 1292, at 179
(1962).8 Taylor applies and the Memorandum of
Agreement is not conclusive evidence of acceptance.
2. Other Defenses.
NBA does not address the Warfles' alternate grounds for
summary judgment. In their cross-motion for summary
judgment, the Warfles' first argued that they were
entitled to summary judgment because NBA had not
properly accelerated the Warfles' debt.9 This argument
was entirely independent of its reliance on the
Memorandum of Agreement. The order granting summary
judgment did not specify on which contention it relied.
The order clarifying the judgment merely stated that
the first order "was based on a determination of the
merits of the case, and not on AS 09.45.220."10
Based on the record and the briefing before this court,
we conclude that the issue of whether the debt was
properly accelerated was not adjudicated.11 We remand
for a determination of the validity of the Warfles'
defense of improper acceleration.
The order of the superior court granting summary
judgment in favor of the Warfles is REVERSED. The
denial of NBA's motion for summary judgment is REVERSED
in part, and REMANDED for further proceedings
consistent with this opinion.
1. The deed of trust provided in part:
11. CONDEMNATION . . . . The proceeds
of any award, payment or claim for damages,
direct or consequential, in connection with
any condemnation or other taking, whether
direct or indirect, of the Property, or part
thereof, or for conveyances in lieu of
condemnation, are hereby assigned to and
shall be paid to Lender subject, if this
Instrument is on a Leasehold, to the rights
of lessor, under the ground lease.
Borrower authorizes Lender to apply
such awards, payments, proceeds or damages,
after the deduction of Lender's expenses
incurred in the collection of such amounts,
at Lender's option, to restoration or repair
of the Property or to payment of the sums
secured by this Instrument, whether or not
then due, in the order of the application set
forth in paragraph 3 hereof, with the
balance, if any, to Borrower.
2. Paragraph 3 of the Memorandum of Agreement stated:
The vendor or vendors hereby agree
that the compensation herein provided to be
paid, includes full compensation for their
interests, and the interests of their life
tenants, remaindermen, reversioners, lienors
and lessors, and any and all other legal and
equitable interests which are or may be
outstanding, and said vendor agrees to
discharge the same.
The memorandum was signed by the Warfles and NBA's
The Request for Full Reconveyance contained the
All sums secured thereby have been
fully paid. You are hereby requested and
directed to cancel all evidences of
indebtedness secured by said Deed of Trust
and to reconvey, without warranty, the estate
now held by you under the same.
This form was also signed by NBA's assistant cashier.
3. The ADENDUM [sic] TO MEMORANDUM OF AGREEMENT BETWEEN
EDWIN S. WARFLE AND JODINE WARFLE AND THE DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES reads in part:
The consent of NATIONAL BANK OF
ALASKA to that certain agreement [between the
Warfles and the state] . . . and the
acceptance of National Bank of Alaska of the
sum of $224,505.21 is expressly conditioned
upon National Bank of Alaska applying the sum
accepted as a credit to that certain
promissory note. . . . By accepting the sum
of $224,505.21, National Bank of Alaska
expressly reserves any and all of its rights
to collect all sums remaining owed pursuant
to the original note and the modification.
By accepting the sum of $224,505.21, it is
not the intention of National Bank of Alaska
to waive, release, modify or in any manner
alter any of its rights against [the Warfles]
other than to accept and to credit the
payment towards partial payment of the note
and to release the security interest of
National Bank of Alaska . . . .
The addendum was signed only by NBA's assistant
The revised REQUEST FOR FULL RECONVEYANCE substituted
the following language for the paragraph quoted in the
$224,505.21 of the sums secured
thereby have been paid. You are hereby
requested and directed to credit the
indebtedness secured by said Deed of Trust
with the payment of the sum of $224,505.21
and to reconvey, without warranty, the estate
now held by You under the same.
4. At his deposition, Mr. Warfle stated that when he
signed the Memorandum of Agreement he had no previous
agreement that NBA would also sign the memorandum.
Thus the Memorandum of Agreement is the only contract,
written or oral, which could be the accord.
5. This court has before held that for executory accords a
meeting of the minds is required. See Alaska Creamery
Products, Inc. v. Wells, 373 P.2d 505, 511 (Alaska
1962). An executory accord is an agreement whereby the
parties exchange promises to settle a dispute. See id.
at 511. It is an accord before satisfaction has been
performed and the duties have thus not yet been
discharged. Id. In this case, the Memorandum of
Agreement purportedly formed a completed accord and
satisfaction because the performance of settling the
dispute and assigning the condemnation award were both
accomplished by the memorandum.
6. This burden is not demanding. We have held before that
summary judgment was inappropriate where the party
resisting the summary judgment on accord and
satisfaction could support its allegations by concrete
facts. Gudenau & Co. v. Sweeney Ins., Inc., 736 P.2d
763, 770 (Alaska 1987). In Sweeney Insurance, this
support consisted of one statement by the opposing
party. Id. Moreover, summary judgment should be used
sparingly where intent is the main issue. Harris v.
Alaska Title Guaranty Co., 510 P.2d 501, 503 (Alaska
1973). Thus, issues of material fact are easily raised
in scrutinizing an alleged accord and satisfaction.
7. The holding in Taylor arose from a discussion of
section 122 of the Alaska Negotiable Instruments Law,
which addressed gratuitous and voluntary renunciation,
not discharge by payment. Taylor, 488 P.2d at 1029.
Although we found that that section did not apply to
the facts in Taylor, we held that even if the section
were applicable, the document would not be conclusive
evidence. Id. at 1029-30.
8. This is especially true in cases of mistaken execution.
The defense of mistake is more limited in cases of
mistake in scope of settlement. "[W]here parties are
consciously disputing an issue and agree upon a
compromise in order to settle it, they are making no
mistake as to the matter in issue and thus settled.
There must be a mistake as to matters that were not in
issue and were not compromised in order that the
settlement may be voidable on the ground of mistake."
6 Arthur L. Corbin, Corbin on Contracts 1292, at 179-
9. Failure to accelerate the debt properly would not
justify a judgment discharging the Warfles from the
entire obligation but would affect what portion of the
debt was presently and past due.
The Warfles also argued that "equitable concerns"
prohibited a judgment against them.
10. AS 09.45.220 reads:
Effect of payment before judgment
or sale. If, before a judgment is given, the
amount then due, with the costs of action, is
brought into court and paid to the clerk, the
action shall be dismissed, and, if the same
be done after judgment and before sale, the
effect of the judgment as to the amount due
and paid shall be terminated and the
execution, if any have issued, be recalled by
the clerk. When an installment not due is
adjudged to be paid, the court shall
determine and specify in the judgment what
sum shall be received in satisfaction
thereof, which sum may be equal to the
installment or otherwise, according to the
present value thereof.
11. In their Reply Memorandum to NBA's Motion for
Reconsideration, the Warfles stated that "It is clear
from the circumstances that the Court's grant of
summary judgment in this case in favor of Defendant
Warfles was based upon the Defendants' argument that
Plaintiff NBA had waived any deficiency claim against
Defendant Warfles, or that such claim was barred by the
Doctrine of Accord and Satisfaction." This statement
explained why summary judgment was not based on
AS 09.45.220. It does not explain why the summary
judgment was not based on the allegedly improper