## Facts

- IFC Credit Corporation (IFC) leased gasoline tanks and related equipment to Bulk Petroleum Corporation (Bulk) for a 72-month term and obtained a personal guaranty from Bulk’s CEO, Darshan S. Dhaliwal.
- The lease included an end-of-term purchase option priced at the greater of fair market value or $31,419.40 plus applicable taxes, and it permitted lease extension at $2,820.52 per month.
- Shortly after execution, IFC assigned the lease to Finova Capital Corporation (Finova), transferring full rights in the lease; Bulk was instructed to make payments to Finova.
- Near the end of the lease term, IFC and Bulk negotiated about a buyout but could not agree on a purchase price.
- Finova later instructed Bulk that negotiations regarding the purchase option should be handled through IFC’s representative, while Finova faced bankruptcy-related developments.
- Three days before the lease term ended, Dhaliwal sent Finova a check for $31,419.40 with an accompanying letter and check notations stating the payment was “payment in full” of the lease and purchase option and that acceptance would fully satisfy Bulk’s obligation.
- Finova received the check and materials and forwarded them so that IFC ultimately received the proceeds; IFC cashed the check but claimed it was only partial payment and demanded additional sums, including alleged extension/holdover amounts.
- Bulk and Dhaliwal asserted that the full-payment tender and its acceptance constituted an accord and satisfaction that discharged any further obligation.

## Issues

1. Whether a bona fide dispute existed such that Bulk’s full-payment tender could support an accord and satisfaction under Wisconsin law.
2. Whether the “payment in full” check and letter, accepted and negotiated by the assignee (Finova) and benefiting IFC, created a binding accord and satisfaction discharging the lease-related obligations.
3. Whether IFC could avoid accord and satisfaction by arguing Bulk paid the “wrong” party or acted in bad faith, or by unilaterally treating the payment as partial.
4. Whether any genuine dispute of material fact precluded summary judgment for Bulk and Dhaliwal.

## Decision

- The Seventh Circuit affirmed summary judgment for Bulk and Dhaliwal.
- The court held that a genuine dispute over the amount due existed at the end of the lease term, satisfying a prerequisite for accord and satisfaction.
- Bulk’s check and accompanying letter clearly conditioned payment on full satisfaction of the lease and purchase option obligations.
- Finova’s acceptance and negotiation of the full-payment tender effected an accord and satisfaction under Wisconsin law, notwithstanding IFC’s later attempt to treat the payment as partial.
- Because Finova held the lease rights by assignment and had authority to compromise the claim, the accord and satisfaction bound IFC, which received the payment’s benefit.
- IFC’s bad-faith theory lacked evidentiary support and did not create a triable issue.

## Legal Principles

- Under Wisconsin law, accord and satisfaction occurs when (i) there is a bona fide dispute or unliquidated claim, (ii) the debtor tenders payment clearly conditioned as full satisfaction, and (iii) the creditor knowingly accepts and negotiates the payment.
- A creditor that cashes a check tendered on a full-satisfaction condition generally accepts the condition and cannot unilaterally recharacterize the payment as partial while retaining the proceeds.
- An assignee of contract rights may enforce and compromise those rights; a valid accord and satisfaction entered by the assignee with the obligor discharges the claim and binds the assignor to the extent it benefits from the settlement.

## Conclusion

The court held that Bulk’s explicit full-payment tender, accepted and negotiated by the lease’s assignee and ultimately benefiting IFC, constituted an accord and satisfaction under Wisconsin law that discharged Bulk and the guarantor from further liability, making summary judgment for defendants proper.


IFC Credit Corp. v. Bulk Petroleum Corp., 403 F.3d 869 (7th Cir. 2005)