Williams v. Rowe Banking Company

Where a loan is made and a note and deed to secure debt with power of sale are executed, and the holder of the note and deed accepts a note from a third party in lieu of the note of the original maker and grantor, the execution of the note and deed being a single contract, the substitution of another payor in the note while the parties, terms. and conditions of the deed remain the same, amounted to a change in only one of the terms of the original contract and was not such an extinguishment thereof as would create a novation.

No. 16771. SEPTEMBER 15, 1949. On March 25, 1947, O. H. Thomas executed a deed with power of sale to the Bank of Toccoa to secure a loan of $4400. On October 24, 1947, Thomas conveyed the land in question to C. F. Williams for a consideration of $11,000 subject to the security deed held by the Bank of Toccoa which indebtedness Williams assumed.

On October 28, 1947, Williams executed his note to the Bank of Toccoa for $3485, the amount due them by Thomas, and pledged as collateral the deed previously executed by Thomas to the Bank of Toccoa. The record does not disclose that Williams executed a security deed to the bank. When Williams executed his note to the bank, the note that Thomas had given the bank was delivered to Williams with the following written across the face of the note: "Paid by new note by C. F. Williams, dated 10/28/47, . . and delivered the same to . . C. F. Williams."

On February 14, 1949, the Bank of Toccoa transferred, without recourse, to Rowe Banking Company the note and deed from Thomas to the Bank of Toccoa and the note from Williams to the Bank of Toccoa.

Rowe Banking Company advertised the property to be sold on the first Tuesday in April, 1949, as the property of Thomas. Williams filed a petition to enjoin the sale, and for the cancellation of the deed from Thomas to the Bank of Toccoa. A restraining order was granted, and upon the hearing the trial judge denied an interlocutory injunction. Williams insists that, when he executed his note to the bank and received in return therefor the note Thomas had given the bank with the notation "Paid by new note by C. F. Williams," this was a novation, and precluded the bank from exercising the power of sale contained in the security deed.

A novation is a complete contract within itself, and has four essential requisites: (1) a previous valid obligation, (2) the agreement of all the parties to the new contract, (3) the extinguishment of the old contract, (4) the validity of the new one. Savannah Bank Trust Co. v. Wolff, 191 Ga. 111 (4) (11 S.E.2d 766). Under the facts here, the original note and security deed executed by Thomas to the Bank of Toccoa constituted a single contract. Cocke v. Bank of Dawson,180 Ga. 714 (1) (180 S.E. 711). The acceptance of the note of Williams in lieu of the note by Thomas, leaving unchanged the security deed with power of sale, which had been executed by Thomas in favor of the bank, was only a change in one of the terms of the original contract. It changed the source of payment, but not the manner of sale as provided for in the deed in the event of default, as the terms of the deed still carried the right to sell the land as the property of Thomas in the event of a failure to pay in accordance with its terms. Accordingly, there was no extinguishment of all the terms of the original contract, and the new contract is lacking in that essential element to constitute a novation.

Judgment affirmed. All the Justices concur.