Opinion
5-1-1951
ALEXANDER et al. v. ANGEL. Civ. 14660.
Nathan Goldwater, John L. McVey, Oakland, for appellant. Donahue, Richards, Rowell & Gallagher, George W. Hauer, Oakland, for respondent.
ALEXANDER et al.
v.
ANGEL.
May 1, 1951.
Rehearing Denied May 31, 1951.
Hearing Granted June 28, 1951. *
Nathan Goldwater, John L. McVey, Oakland, for appellant.
Donahue, Richards, Rowell & Gallagher, George W. Hauer, Oakland, for respondent.
NOURSE, Presiding Justice.
This is an appeal in an action tried without a jury to foreclose a chattel mortgage given as security to the plaintiffs Alexander for the sum of $4,300, the amount of two promissory notes given by defendant. Defendant answered and cross-complained, alleging he had conveyed the property to Robert J. Haws and Zada M. Haws who had entered into a separate agreement with plaintiffs thereby, he contended, assuming his obligation and relieving him of any further obligation. Defendant and cross-complainant, John B. Angel, named as cross-defendants both plaintiffs Alexander and Robert J. and Zada M. Haws, his vendees, and in his cross-complaint sought to have the rights and duties of himself and cross-defendants established. Cross-defendants Haws failed to answer and let it go by default. There was some question as to their status in the action but Mr. Haws did participate as a witness.
The trial court held that the agreement between plaintiffs and the Haws was in effect a novation, releasing defendant and cross-complainant Angel from the obligations of the promissory notes and decreed: '1. That on their complaint, plaintiffs herein take nothing from the defendant John B. Angel. 2. That on the cross-complaint herein it is declared that the defendant and cross-complainant John B. Angel is not indebted to the complainants and cross-defendants, Charles N. Alexander and Katherine J. Alexander in the sum prayed for in the plaintiffs' complaint or in any sum whatsoever.'
Plaintiffs appeal from the judgment contending that neither the Alexander-Haws agreement, itself, nor the pleadings of defendant Angel, nor the testimony of any of the parties, support the court's finding that a novation had been effected.
The facts of the case are: The plaintiffs Charles N. Alexander and Katherine J. Alexander, appellants herein, sold a fountain lunch and restaurant to defendant, John B. Angel, respondent herein, on January 2, 1947. On that date in the City of Oakland two promissory notes were executed by respondent to appellants secured by a chattel mortgage on the business fixtures. One note was for $2,150 due January 2, 1948, the other for the same amount due January 2, 1949.
Prior to the maturity date of either of the notes respondent sold his business to the Haws. Just prior to this sale a new agreement was executed by appellants Alexander and Haws. It reads as follows:
'In consideration of the forbearance of Charles N. Alexander and Katherine J. Alexander in asserting their right to payment of the sum of $2150, due and payable January 2, 1948, pursuant to that certain promissory note, made and executed by John B. Angel on January 2, 1947, and payment of the sum of $2150, due and payable on January 1, 1949, * * * both of which notes are secured by a chattel mortgage on fixtures and equipment now located in that certain storeroom * * * we, the undersigned, purchasers and assignees of Angel's Fountain Lunch, formerly known as the Dimond Pastime, located at 3421 Fruitvale Avenue, Oakland, California, hereby agree to make monthly payments in the sum of $150.00 to include interest at the rate of six (6) percent per annum. We hereby agree to make said payments on the 28 day of each month, commencing on the 28 day of October, 1947, until the full amount of the principal of $4300 is paid.
'In the event, however, said payments as aforesaid, are not made in the manner as hereinbefore provided, then Charles N. Alexander * * * may, at their option, declare the full amount to be due and payable. In such event said payments are not made, we, the undersigned, hereby agree to pay all court costs made necessary in the collection of these notes and such attorney fees as the court may determine.' It was signed by Robert J. Haws, Zada M. Haws, Charles N. Alexander and Katherine J. Alexander.
Haws made 8 payments to appellants, amounting to $636.06, the first on October 28, 1947, the last on November 24, 1948. No demand was made on respondent for payment until January, 1949, at the time the second note became due when a formal demand was sent on both notes before appellants filed the suit.
Mr. Fox, real estate agent for respondent, negotiated the sale between respondent and the Haws, and was instrumental in obtaining the agreement between the Haws and the Alexanders. At no time did the three parties meet to discuss the agreement which respondent alleges relieved him of his obligation to appellants. Angel testified he first learned of the agreement between Haws and Alexander about the time the sale was made but that he did not remember actually seeing it until about the time of the institution of the action. Mr. Alexander testified that in negotiating the agreement he dealt only with Mr. Fox; he never discussed it with respondent nor with the Haws; that he was told by Fox that Haws wanted the agreement to protect him, for if Alexander foreclosed on the chattel mortgage three or four months after Haws had bought the business Haws would lose everything. Alexander testified, after being asked if any demand had ever been made upon him for the notes, that he told Fox the notes would be held and not released under any circumstances. He also testified that when he received the payments from Haws he understood them to be payments on the notes on respondent's account. Respondent paid nothing on the notes, assuming that Haws was making the payments.
Appellants contend that there was no novation and the trial court erred in so holding. They base their contention on the following arguments: That the Alexander-Haws agreement provided for the collection of the notes in case payments were not made and that if a novation had been effected there would be no notes to collect, that any action would necessarily be upon the later agreement. Respondent answers that a provision had already been made for the collection of attorney's fees and payments of costs in the original chattel mortgage and if the new agreement had not been intended to supplant that, the provision for costs and attorney's fees on the collection of the notes would have been mere surplusage. Therefore the new agreement must have been intended as a novation.
Appellants also argue that the finding of a novation is contrary to the pleadings of respondent in certain particulars, that in the second defense to the complaint respondent affirmatively alleges with reference to the payments made by Haws 'that said plaintiffs accepted said payments in performance of defendant's obligation.' In the cross-complaint it was alleged 'that the cross-defendants Charles N. Alexander and Katherine J. Alexander agreed to the assumption by the cross-defendants Robert J. Haws and Zada M. Haws of all of the obligations of the cross-complainant under said mortgage and notes.' They claim if there had been a novation effected there would be no notes or mortgages any longer in effect, that the allegations completely negative any idea of a novation.
Appellants argue that nowhere in the testimony of Alexander, Angel or Haws is there any claim that it was ever agreed or understood that the original obligation of Angel on his notes and chattel mortgage was to be released. A reading of the reporter's transcript reveals no clear cut intent on the part of the interested parties to effect a novation by the new agreement, relieving respondent of his obligation.
In conclusion appellants state that in order to effect a novation 'a. The original debtor would have to be released; b. The original debtor would have to be a party to the novation agreement; c. It is the intent of the obligee that is controlling in determining whether there has been a novation.'
Respondent answers that the pleadings expressly raise the issue of novation; that the evidence is sufficient to support the trial court's findings and verdict; that appellant's attorney was the one who prepared the agreement and if he hadn't intended it as a release of respondent's obligation he could and should have so stated in the agreement; that inasmuch as the new agreement was so entirely different in its terms from those under the notes that it must have been intended as a completely new agreement replacing the other. Respondent contends that the action of the parties clearly indicate a novation, stating that appellants' failure to contact respondent at the time the new agreement was made and their delay in making demand on the notes after Haws failed to meet his obligation indicate they considered respondent out of the picture, released from his obligations. But the problem is not that simple. It is the intention of the obligee which is the controlling factor.
The Alexander-Haws agreement is expressly tied to a consideration for 'the forbearance' of appellants to press payment of the two promissory notes. In the negotiations with respondent's agent, Alexander refused his request to deliver the notes and informed the agent that he would not release respondent under any circumstance. This evidence completely negates any intention on the part of appellants to create a novation.
It is elementary that intention to release the primary debtor is the first principle of a novation. 'Without release of the original debtor--there being no other consideration for the agreement--there is no consideration and consequently no contract.' 20 Cal.Jur. p. 251.
'Novation is a bilateral (or multilateral) contract requiring the mutual assent of all the parties, Civ.Code, sec. 1530; 20 Cal.Jur., p. 249, § 4; and obviously, as between obligor and obligee, it is the intent of the latter that is controlling on the question of waiver or release of the obligation under the original agreement.' Ayoob v. Ayoob, 74 Cal.App.2d 236, 251, 168 P.2d 462, 472. 'In the determination of this question, cognizance must be taken of the well established rule that the burden of proving a novation is on the party asserting its existence (Colley v. Chowchilla Nat. Bank, 200 Cal. 760, 770, 255 P. 188, 52 A.L.R. 569; 46 Corpus Juris, pp. 625, 626, § 72), and that the proof in support thereof must be clear and convincing. Columbia Casualty Co. v. Lewis, 14 Cal.App.2d 64, 72, 57 P.2d 1010.' Ayoob v. Ayoob, supra, 74 Cal.App.2d at page 250, 168 P.2d at page 471.
The judgment is reversed.
GOODELL and DOOLING, JJ., concur. --------------- * Subsequent opinion 236 P.2d 561.