## Facts

- John Holley and Joan Holley divorced and agreed John would pay Joan $1,000 per month in alimony (with adjustments).
- John later declared bankruptcy, and the parties entered a settlement replacing the ongoing alimony with a lump-sum payout: John would pay Joan $10,000 plus interest, to be paid in full within five years.
- The settlement included a deadline and reversion term: if John did not pay in full by June 1993, the original divorce decree’s alimony obligations would control.
- John made monthly payments toward the settlement but did not pay the full amount by the June 1993 deadline (he did not remember the deadline).
- After the deadline passed, John contacted Joan to request the current payoff balance.
- Joan responded that she would send the balance but stated that the balance would be correct only if John had met the June 1993 deadline; she also included additional “late charges” for certain payments, which John disputed.
- Despite disputing the late charges and believing he was resolving the obligation, John sent Joan a check for $750 with the memorandum notation: “Paid in Full plus int. & late ch.”
- Joan crossed out the “paid in full” notation and deposited the check.
- Joan later demanded additional payment, asserting John’s missed deadline reinstated the original alimony obligation; John refused.
- Joan sued John seeking the much larger amount she claimed would be due under the original alimony terms; the magistrate and district court ruled in Joan’s favor.
- John appealed.

## Issues

1. Whether Joan’s negotiation of John’s check marked “Paid in Full plus int. & late ch.”, tendered to settle a bona fide dispute over the amount owed, constituted an accord and satisfaction that discharged further liability.
2. Whether Joan could avoid an accord and satisfaction by striking the “paid in full” language before depositing the check and then asserting the settlement’s missed deadline revived the original alimony obligation.

## Decision

- The appellate court reversed the rulings requiring John to pay additional alimony beyond the settlement payoff amount.
- The court held that Joan’s deposit of the check tendered as full settlement, in the context of a genuine dispute over the payoff (including interest and late charges), operated as an accord and satisfaction.
- The case was remanded with instructions consistent with treating John’s obligation as satisfied (including entry of satisfaction of judgment consistent with that ruling).

## Legal Principles

- An accord and satisfaction occurs when (1) a claim is unliquidated or subject to a bona fide dispute, (2) the debtor tenders payment in full settlement of the claim, and (3) the creditor accepts the tender (including by negotiating the check).
- A creditor cannot defeat a conditional tender by unilaterally altering, striking, or adding language to a “paid in full” notation and then cashing the instrument.
- When parties dispute the amount necessary to satisfy an obligation (including asserted interest or late charges) and the creditor accepts a check clearly offered as full payment, the creditor is bound by the accord and satisfaction and may not later pursue additional amounts on the same claim.

## Conclusion

Holley held that a genuine dispute existed over the payoff amount under the parties’ post-bankruptcy alimony settlement, and when Joan deposited John’s check expressly offered as payment in full, her acceptance created an accord and satisfaction that discharged further liability; she could not strike the “paid in full” notation and later seek additional alimony under the original decree.


Holley v. Holley, 915 P.2d 733 (1996)