Leverette v. Harmony

1. The provision of the contract pleaded by the defendant was that written notice must be given in order that the defendant might plead failure of consideration. The answer having failed to allege written notice, the court properly held that portion of the answer insufficient.

2. A plea of "novation" by substitution of a second debtor, for a first debtor must allege a mutual agreement among all the parties, whereby the first debtor and the original creditor agree that a new debtor be substituted and the original debt be discharged. Dykes v. McVay, 67 Ga. 502, 505.

3. "The mere assumption of a debt by a third party is not sufficient, but it is essential that an intention to release the first obligor and extinguish his liability should definitely appear, otherwise the assumption of debt by a third party will be presumed to be merely additional security." Fidelity-Philadelphia Trust Co. v. Hale Kilburn Cor., 24 F. Supp. 3, 9.

4. Where A filed a claim against C, a second debtor, in a bankruptcy proceeding of C, in order to protect himself and a first debtor, B, and because it was unrecorded the claim was not allowed as a secured claim, but was allowed as an unsecured claim, and he shared along with the general creditors, and credited the amount so received from the bankruptcy proceedings upon the debt of B, A did not waive his right to proceed in a court of competent jurisdiction to collect the balance due by B to him.

DECIDED MARCH 19, 1943 Harmony sued Leverette on a promissory note for $2441. The defendant pleaded that he was not indebted to the plaintiff, "because of the failure of consideration upon which the note was and is based, and because of the failure of the plaintiff to deliver to the defendant certain property described in the retention-of-title contract made between the parties simultaneously with and as a part of the note now sued upon." Defendant alleged as follows: He entered into a contract with the plaintiff on December 18, 1937, for the purchase of certain dairy products, ice cream, and candy manufacturing and distributing machinery and equipment, for the price of $5200, payable $800 cash, $1000 one year after date, $1000 two years after date, and $2400 three years after date. An itemized list of the machinery and equipment purchased under said contract, showing location, was attached to and made a part of the answer, as exhibit A. All of said purchase-price, except the $2400 sued on, has been paid in full, and defendant refuses to pay said $2400, because of the failure of the plaintiff to deliver certain of the property purchased. Under the terms of the contract it was agreed that no inventory had been made of said property, and that defendant should make in writing, within ten days from the date of said contract, any claim or demand he might have for any shortage or failure to deliver on the part of the seller, and that in no event would any such claim be made unless the replacement value of the undelivered items should aggregate more than $500. A copy of the stipulation as to warranty was attached to and made a part of the answer, as exhibit B.

The defendant further pleaded that it was unnecessary to attach a copy of the entire purchase contract, but he attached an itemized list of the machinery and equipment sold and described in the contract (well over a hundred articles), and the stipulations as to warranty which are the only portions of the said contract material to the issues in this case. The stipulations as to the warranty are as follows: "It is understood by the parties hereto that the property hereinabove described has not been inventoried by the party of the first part, and that the party of the second part has made such inspection as satisfies him that substantially all of said property is now located either in the premises known as No. 81 Park Street or Nos. 1534-36 Walnut Street; and it is therefore agreed that the liability of the party of the first part under this warranty is limited to such of the above-described property as is now located in either of the above-described premises. It is also agreed that any claims or demands of the party of the second part because of the failure, if any, of the party of the first part to deliver any part of the property hereinabove described shall be made in writing upon the party of the first part, within ten days after the date hereof; and in event any such claim is made, the party of the first part may, at his election, rescind this agreement or pay such damages as may be established by the party of the second part. It is also understood that there may be some small items of the above-described property which are not susceptible of being delivered, either through loss or misplacement, and that no claim will be made by the party of the second part for undelivered items, unless the replacement value of such items undelivered aggregates more than five hundred dollars ($500.00)."

It was further pleaded, that Harmony failed to deliver to defendant certain property described in said contract, aggregating more than $500, notice of which shortage and failure to deliver was given to Harmony within ten days from the date of said contract. The undelivered property, and the approximate replacement value of the same, are itemized as follows: The total amount of such itemized list, consisting of eleven items, is $2441. Defendant alleged, that after the execution of the purchase contract, and with the knowledge and consent of Harmony, defendant assigned all of his interest in said purchase contract and the property therein described to Leverette's Incorporated, a corporation of Jacksonville, Florida; and Leverette's Incorporated assumed the balance due under said contract, on or about August 23, 1940; that Harmony consented to said assignment, and ratified the same by accepting from said corporation payments on said contract in the sum of $1000 on or about January 1, 1941, as well as at least one interest payment on the note sued on of $72 about the same time. We will hereinafter refer to the plaintiff Harmony as A, the defendant Leverette as B, and Leverette's Incorporated as C.

1. The defendant B, having solemnly and deliberately agreed in writing not to make this particular defense of failure of consideration unless written notice thereof was given within ten days from the date of the conditional bill of sale, and having given no good reason in his plea why the notice he had stipulated to give was not given within the time stated, it follows that the defense as set out in his plea was not good. Pritchard v.Johnson, 60 Ga. 288, 291.

2. In considering B's answer, if it could be said that C assumed the balance of the debt due under the contract, it does not definitely and directly say that A released B and substituted C. Thus, there being in the answer no simple direct statement that A agreed to release B; the original debtor, and substitute C, a new debtor, the mere allegation of such evidentiary facts as that B assigned all his interest in "said purchase contract and the property described therein," that C assumed the balance due under the contract, and that A allowed C to pay him $1000 on January 1, 1941, and at least one interest payment of $72 about the same time, and by accepting these payments consented to said assignment and ratified same, would not demand an inference that A ever agreed to release B and substitute C. "The mere assumption of a debt by a third party is not sufficient [to establish novation], but it is essential that an intention to release the first obligor and extinguish his liability should definitely appear; otherwise the assumption of debt by a third party will be presumed to be merely additional security. These principles are elementary." Fidelity-Philadelphia Co. v. Hale Kilburn Cor., 24 F. Supp. 3, 9. Under the rules of pleading as stated in Bivins v. Tucker, 41 Ga. App. 771,774 (154 S.E. 820), and Lewis v. Amorous, 3 Ga. App. 50,53 (59 S.E. 338), when the pleading, as here, is questioned by demurrer, the evidentiary facts pleaded must demand an inference of the ultimate fact that there was a novation by substitution of debtors, and that there was a mutual agreement among all the parties whereby the debtor and original creditor agreed that a new debtor be substituted and the old debtor be discharged. Wallace v. Axtell, 5 Colo. App. 432 (39 P. 594); Redewillv. Matzenauer, 32 Ariz. 13 (255 P. 486); Palmetto Mfg. Co. v. Parker, 123 Ga. 798 (51 S.E. 714). The plea does not meet these requirements.

3. B's contention, as pleaded, that A had released B and substituted C in his place, because A had filed his claim under the conditional-sale contract in the bankruptcy proceeding of C, was without merit, for A had a right to file his conditional-sale contract in the bankruptcy court, to recover the property or its equivalent for his protection, as well as for the protection of B. When A filed a claim against C, a second debtor, in a bankruptcy proceeding of C, in order to protect himself and a first debtor, B, and the claim was not allowed as a secured claim, because it was unrecorded as required by the Code, §§ 67-108, 67-1403, but was allowed as an unsecured claim, and he shared along with the other general creditors, and credited the amount so received from the bankruptcy proceedings on the debt of B, A did not waive his right to proceed in a court of competent jurisdiction to collect the balance due him by B. Hines v.Rutherford, 67 Ga. 606; In re Loden, 184 Fed. 965; In re Braselton, 169 Fed. 960; Elston v. Rusch, 250 Mich. 221 (229 N.W.. 503); In re Rosenthal, 238 Fed. 597; Georgia Railroad Bankv. Kopel, 246 Fed. 390.

The judge did not err in sustaining the motion to strike the plea and answer when such motion was in the nature of a general demurrer, and subsequently in entering judgment against the defendant.

Judgment affirmed. Broyles, C. J., and Gardner, J., concur.