Legal Question in Credit and Debt Law in California

Re: Car Loan w/Capital One Auto Finance vs. ''Paid in Full'' on a cashed check

Of course not. Having a check sent to a company that size that probably processes the incoming checks through a mechanized process does not constitute an acceptance of a payment in full.

That would be like them sending a statement with an insert that says "If you make this payment, you acknowledge that your balance is $3,000 higher."

If you had a legitimate dispute with the company, and you offerd this payment as a settlement for the dispute, sent it directly to an individual with the company and enclosed a letter stating that this is an offer in settlment of the dispute, you might have a basis for claiming it as such.

Quit listening to people who think they can get something for nothing.

Re: Car Loan w/Capital One Auto Finance vs. ''Paid in Full'' on a cashed check

In 1951, the California Supreme Court stated that the recipient of a check marked "payment in full" had two choices: the recipient of the check could either cash the check and consider the debt paid in full, or not accept the check, return it to its sender and continue to claim the full amount it contends it was owed.

In 1987, the Legislature enacted Civil Code Section 1526. The passage of Section 1526 added a third choice when a check was received marked "payment in full." Under Civil Code Section 1526, in certain circumstances, the creditor can cross out those words and cash the check. Under Section 1526, if a check is mailed with the words, "payment in full" and it is deposited, that will not constitute an accord in satisfaction if: (1) the person depositing the check has struck out or deleted the "payment in full" notation, or (2) if the check was deposited without knowledge of the notation.

Section 1526 also has some exceptions. One of the exceptions that seems to assure that a check cannot be cashed for anything other than an accord and satisfaction is if the sender writes a letter, not less than 15 days nor more than 90 days before sending the check, stating that a check will be tendered with a restrictive endorsement (such as "payment in full") and that acceptance and cashing the check will constitute an accord in satisfaction. If that letter is written prior to sending the check, then once the check is cashed, it will be considered settlement in full.

There is now a new twist. In 1992, when California adopted a new revision to the Uniform Commercial Code through its enactment of Commercial Code Section 3311, it did not reconcile the difference between Commercial Code Section 3311 and Section 1526. Commercial Code Section 3311 follows the older law as noted by the Supreme Court, that the recipient has only two choices: a person can reject the check or accept it as full payment, but cannot cross off the words "payment in full."

Recently, two different courts, a United States District Court, and an appellate panel of the San Bernardino Superior Court, had to grapple with this issue and the conflict between the two statutes. Each of these courts, and a few legal commentators, have determined that the later enacted statute, Commercial Code Section 3311, takes precedence over the Civil Code section which was enacted earlier. Accordingly, it appears to be the law that a recipient of a check cannot merely cross off the "payment in full" notation and cash the check.