Summary
holding the Court was bound by the record and the circuit court's certified written statement of fact, and "not upon counsel's recollection of what occurred" during proceedings in the circuit court
Summary of this case from LLOYD v. KIMEOpinion
44376 Record No. 801285.
October 15, 1982
Present: Carrico, C.J., Cochran, Poff, Thompson, Stephenson, and Russell, JJ.
Wife fails to carry burden to prove that husband, as new debtor, assented to three party novation; agency and various evidential issues presented.
(1) Creditors' Rights — Contracts — Novation — Defined.
(2) Creditors' Rights — Contracts — Novation — Evidence — Clear and Definite Intention on Part of All Concerned That Novation Purpose of Agreement Required.
(3) Creditors' Rights — Contracts — Novation — Evidence — Never Presumed — Clear and Convincing Evidence Required.
(4) Creditors' Rights — Contracts — Novation — Two Parties — When Effected By.
(5) Creditors' Rights — Contracts — Novation — Three Parties — When Effected By.
(6) Creditors' Rights — Contracts — Novation — Three Parties — Assent by Third Party Essential — Defendant's Agreement With Creditor Insufficient.
(7) Creditors' Rights — Contracts — Novation — Three Parties — Evidence — Burden of Proof — Party Claiming Novation Has Burden of Proving Every Essential Element of Claim — Defendant Fails to Prove Third Party Assent.
(8) Creditors' Rights — Contracts — Novation — Agency — Apparent Authority — Test to Determine Whether Act Within Apparent Authority.
(9) Creditors' Rights — Contracts — Novation — Agency — Apparent Authority — Evidence — Whether Ordinarily Prudent Person Would Believe Ostensible Agent Empowered to Perform Act is Question of Fact.
(10) Creditors' Rights — Contracts — Novation — Agency — Apparent Authority — Past Authority as Establishing Inference of.
(11) Creditors' Rights — Contracts — Novation — Agency — Apparent Authority — Notice of Rescission is Established — Inference of Lack of.
(12) Creditors' Rights — Contracts — Novation — Burden of Proof — Evidence — Spouse Fails to Carry Burden to Prove Assent of New Debtor.
Defendant purchased furniture from plaintiff furniture store in the amount of $1,347.71. She paid by check. The checking account was titled disjunctively in her name and that of her husband. At the time the check was drawn, the account contained sufficient funds to honor it. However, the husband withdrew all the funds before plaintiff presented the check for payment and the check was returned unpaid. When defendant was notified that the bank had dishonored her check, she arranged with one of plaintiff's employees to pay $47.71 in cash and to transfer the $1,300 balance of the debt to a store credit account in her husband's name. Defendant had charged purchases to that account on numerous occasions for several years.
Plaintiff later obtained a "warrant in debt" and served defendant with a summons, claiming nonpayment of the $1,300 debt due on the basis of the dishonored check. The General District Court ruled in defendant's favor. The Circuit Court reversed the judgment. Defendant appeals.
1. Novation is a mutual agreement among all parties concerned for discharge of a valid existing obligation by the substitution of a new valid obligation on the part of the debtor or another.
2. To effect a novation there must be a clear and definite intention on the part of all concerned that such is the purpose of the agreement.
3. A novation is never presumed, clear and convincing evidence to establish a novation being required.
4. A novation may be effected by two parties, as where a creditor and his debtor agree to substitute a new obligation running from the debtor to his creditor.
5. A novation may also be effected by three parties. An existing obligation is discharged when a creditor, his debtor and a third person agree to substitute a new obligation running from the third person to the creditor.
6. Assent by the third party is an essential element of a three party novation. Defendant's agreement with her creditor was insufficient to effect a three-party novation.
7. The party claiming a novation bears the burden of proving every essential element of the claim. Defendant failed to prove that the third party involved assented to the novation.
8. Whether an act is within the apparent scope of an agent's authority turns upon whether an ordinarily prudent person would be justified in believing that she is authorized to perform the act.
9. Whether an ordinarily prudent person would be justified in believing that a person is authorized to perform an act is a question of fact.
10. While the fact that the wife had apparent authority in the past to obligate the husband on his creditor account may raise an inference that she had continuing authority to obligate him on the furniture debt, that inference is not absolute or exclusive.
11. When the transfer voucher was prepared and signed, both the wife and plaintiff's employee were aware that the husband had closed the account, both thus being on notice that the husband had rescinded the wife's authority. These facts support an inference of lack of the wife's authority.
12. The Trial Judge could have rejected the inference the wife urges and based his decision on the contrary inference. The Court cannot say that he erred in doing so, the wife failing to carry her burden of proof.
Appeal from a judgment of the Circuit Court of Prince William County. Hon. Percy Thornton, Jr., judge presiding.
Affirmed.
James M. Rees (Michael L. O'Reilly, Rees, Broome, Birken Condo, P.C., on briefs), for appellant.
Richard A. Cooter [D.C.]; S. David Schiller (Cooter, Gell Cooter [D.C.], on brief), for appellee.
The issue framed by the parties in this appeal is novation vel non.
Defendant Marlene R. Dere paid for certain furniture she bought from plaintiff Montgomery Ward and Company, Inc., by a check in the sum of $1,347.71. The checking account was titled disjunctively in her name and that of her husband, Donald P. Dere. The account contained sufficient funds to honor the check at the time it was drawn. Before plaintiff presented the check for payment, however, Donald withdrew all the funds, and the bank returned the check stamped "Account Closed". When plaintiff notified defendant that the bank had dishonored her check, she contacted one of plaintiff's employees. The employee agreed to allow defendant to pay $47.71 in cash and to transfer the $1,300.00 balance of the debt to a store credit account in Donald's name. Defendant had charged purchases to that account on numerous occasions for several years. Plaintiff's employee prepared a "voucher/receipt" for the cash payment and one for the transfer, defendant signed the transfer voucher, and the employee stamped both "paid".
Sometime later, plaintiff obtained a "warrant in debt" and served defendant with a summons "upon a claim of nonpayment of a debt in the sum of $1,300.00 . . . said to be due on the basis of . . . a dishonored check". The general district court entered judgment for defendant, and plaintiff appealed to the circuit court. Upon a trial de novo, the circuit court, sitting without a jury, found that "Defendant continues to possess and use the furniture" and ruled that defendant "is in fact indebted to the Plaintiff". Rejecting defendant's plea of novation, the court entered final judgment against her.
Under a single assignment of error, defendant contends that "the agreement . . . to extinguish the obligation on the check and to substitute a new obligation on a credit card account, constituted a novation which is a bar to the bringing of any action on the dishonored check."
We will not consider the accord-and-satisfaction issue defendant raised for the first time in her reply brief. Rule 5:21.
[1-3] Defendant relies upon Honeywell v. Elliott, 213 Va. 86, 89, 189 S.E.2d 331, 334 (1972), where we said:
[N]ovation is defined as a mutual agreement among all parties concerned for discharge of a valid existing obligation by the substitution of a new valid obligation on the part of the debtor or another. To effect a novation there must be a clear and definite intention on the part of all concerned that such is the purpose of the agreement, for it is a well settled principle that novation is never to be presumed. To establish novation the proof must be clear and satisfactory.
[4-5] This definition addresses two of the several species of novation recognized by the courts. A novation may be effected by two parties; an existing obligation is discharged when a creditor and his debtor agree to substitute a new obligation running from the debtor to his creditor. And a novation may be effected by three parties; an existing obligation is discharged when a creditor, his debtor, and a third person agree to substitute a new obligation running from the third person to the creditor.
Defendant advances alternative theories in support of her claim of novation. On brief, she claims that the agreement into which she and plaintiff's employee entered constituted a two-party novation. We disagree. The obligation she sought to substitute was not an obligation running from her to her creditor; the sole obligor on the credit account was her husband, a third party.
In argument at bar, defendant contended that her agreement with her creditor effected a three-party novation. But the agreement of two parties is insufficient to effect a three-party novation. Honeywell requires "clear and satisfactory" proof of "a clear and definite intention on the part of all concerned". Id. Indeed, the legal authorities agree that assent by the third party is an essential element of a three-party novation. S. Williston, Contracts Sec. 1870 (3d ed. 1972); 6 A. Corbin, Contracts Sec. 1299 (rev. ed. 1962); see also Restatement of Contracts Sec. 424 comment c (1932).
[7-12] The party claiming a novation bears the burden of proving every essential element of the claim. Johnston v. Lamson Company, 159 Va. 666, 679, 167 S.E. 417, 421 (1933). Defendant offered no evidence to show that Donald gave personal assent to the novation she claims. Yet she argues that, since Donald had clothed her with "apparent authority" to charge his credit account on previous occasions, she was acting as his "agent" when she signed the transfer voucher, and hence, that her signature constituted assent on the part of her "principal".
On appeal, plaintiff's counsel asserts that "[i]n fact, both the defendant and the plaintiff's employee were prohibited from transferring the balance due on the furniture purchased by the defendant to the charge account in the name of Donald P. Dere." The Statement of Facts submitted as part of the record pursuant to Rule 5:9(c) makes no reference to evidence to that effect. "[W]e must pass upon the record duly authenticated by the trial judge, and not upon counsel's recollection of what occurred." Bryant v. Commonwealth, 189 Va. 310, 320, 53 S.E.2d 54. 59 (1949).
As we understand this argument, defendant asks us to apply the doctrine of apparent authority as a shield against her creditor and as a sword against her "principal", a total stranger to the case before us. The trial court did not, and we will not. The facts of record tend to contradict defendant's basic premise. While, as defendant says, the fact that she had apparent authority in the past to obligate Donald on his credit account may raise an inference that she had continuing authority to obligate him on the furniture debt, that inference is not absolute or exclusive. Other facts of record support a contrary inference. At the time the transfer voucher was prepared and signed, both defendant and plaintiff's employee were aware that Donald had closed the joint checking account. Thus, both were put on notice that Donald may also have rescinded defendant's authority to obligate him on his credit account. If Donald's action cast doubt upon defendant's continuing authority to bind him, the doctrine of apparent authority is inapposite. Whether an act is within the apparent scope of an agent's authority turns upon the question whether "an ordinarily prudent person . . . would be justified in believing that he is authorized to perform the act". Wright v. Shortridge, 194 Va. 346, 353, 73 S.E.2d 360,365 (1952). That question is a question of fact. Id. As fact finder, the trial judge could have rejected the inference defendant urges and based his decision upon the contrary inference, and we cannot say that he erred in doing so.
Applying the rule that assent of the new debtor was an essential element of the novation defendant asserted, we hold that defendant failed to carry her burden of proof, and we will affirm the judgment.
Affirmed.