Lee Tire & Rubber Co. v. Frederick-Planche Motor Co.

The suit is on the last five of a series of six notes for the sum of $232.17 each, dated May 23, 1931, payable monthly in consecutive order from date, signed by the Frederick-Planche Motor Company, Inc., now in receivership, and indorsed by E.J. Frederick, Hebert Frederick, Lawrence C. Frederick, and M.P. Planche, which notes bear interest at the rate of 7 per cent. per annum from date, and provide for 10 per cent. attorney's fees.

The motor company filed an answer admitting the execution of the notes, but alleging payments thereon from time to time. The indorsers filed an exception of no cause or right of action based on the failure of the petition to allege notice of dishonor to them. Plaintiff then filed a supplemental petition alleging that timely notice of dishonor was given the indorsers, and the exception was thereafter overruled. Before the overruling of the exception, plaintiff filed a second supplemental petition in which it alleged that, on September 7, 1929, the indorsers had signed in its favor a guaranty wherein they had guaranteed the payment of any past or future indebtedness of the motor company that might be contracted with plaintiff up to the sum of $5,000; that the notes sued on were given after the execution of said guaranty agreement and while same was in full force and effect. The guaranty agreement was annexed to and made part of this second supplemental petition.

The motor company and the indorsers-guarantors filed a motion to strike out this supplemental petition on the ground that issue had been joined by the filing of an answer by the motor company, and on the ground that the substance of the demand was sought to be changed as the original suit was on notes signed by the motor company and indorsed by the other defendants, while the supplemental petition sought to hold the indorsers on the guaranty agreement as guarantors. This motion was overruled.

The indorsers-guarantors then answered, admitting that they signed the notes sued on, but denying that said notes had been protested and notice of dishonor given them, and they denied any liability on the notes. In answering the second supplemental petition, they admitted signing the guaranty agreement and that this agreement was in full force and effect when the notes herein sued on were given, but they averred that said guaranty agreement was novated, superseded, and canceled by the notes given by the motor company and indorsed by them.

On the trial of the case, there was judgment in favor of the plaintiff and against the defendant motor company for the sum of $598.33, with 7 per cent. per annum interest thereon from May 23, 1931, until paid, together with 10 per cent. additional on both principal and interest unpaid as attorney's fees. The claim against the indorsers-guarantors was rejected. Plaintiff has appealed from that part of the judgment which rejected its claim against the indorsers-guarantors.

At the outset, we do not believe it necessary to discuss the judgment or case in so far as the motor company is concerned in that the amount due on the notes is not in dispute, nor has the defendant motor company appealed from the judgment. We are also of the opinion that the question of whether or not the notes had been properly protested and timely notice of dishonor had been served on the indorsers has now passed out of the case. The tenor of plaintiff's brief clearly shows an abandonment of their case as against the indorsers as such, and such is clearly manifested by the prayer of their brief. They only pray for judgment in the sum of $618.19, without interest or attorney's fees, but with legal interest from judicial demand and costs. Then the only question presented in this appeal is the liability vel non of defendant guarantors under their agreement of guaranty.

Then, the objection of the defendants, as indorsers and as guarantors, to the second supplemental petition should first be considered in that after the judge had granted the filing of the same and had overruled the motion to strike out, he recalled his former ruling in his judgment and sustained the motion. Their motion was, at first, correctly denied. Their answer had not been filed; in so far as they were concerned, no issue had been joined, and the trial was not delayed. In so far as the motor company was concerned, it mattered not whether or not the defendants were bound with it as indorsers or as guarantors, and the issue had not been changed as to it, nor was the trial of the case retarded or delayed. The only objection which we can see that the defendants indorsers-guarantors could have offered to this second supplemental petition was a motion to elect if the two demands were separate and distinct demands. Article 148 of the Code of Practice provides for the cumulation of actions, and article 149 prohibits the cumulation of actions when one of them is contrary or precludes the other, but article 152 provides that "when two causes of actions, contrary to and exclusive of each other, have been cumulated in the same demand, the defendant may refuse to plead to the merit until the plaintiff have made his choice as to which of the two he means to proceed with." The Supreme Court has decided in the case of Thomas v. Lusk, 13 La.Ann. 277, that a supplemental petition, though inconsistent with, is not such a waiver of the original demand as to put plaintiff out of court. The plaintiff is not in a worse condition than if he had embraced both demands in his original petition; and in such a case he might elect his cause of action. The Supreme Court has, also, in the case of Maisonneuve v. Dalferes,133 La. 666, 63 So. 261, decided that the motion to compel the plaintiff to elect as between inconsistent causes of action is a dilatory exception and should be made before answer is filed in the cause. However, in the case of Carlile v. Kimbrough et al.,16 La.App. 490, 134 So. 773, the Second Circuit, Court of Appeal, has decided that "as against partner who guaranteed payment of partnership debts, creditor properly cumulated cause of action against partnership and individual members and cause of action against such guarantor." In the body of the decision,16 La.App. 490, 134 So. 773, at page 774, the court, through Judge Webb, said, "And it is, we think, apparent that neither of the alleged causes of action was contrary to or exclusive of the other, and, as to Huckaby [the partner and guarantor], the actions were not improperly cumulated." We are, in this case, of the opinion, in so far as the indorsers and guarantors are concerned, that neither of the alleged causes of action was contrary to or exclusive of the other and that the actions were not improperly cumulated; besides this the defendants indorsers-guarantors have failed to take advantage of a motion to elect. The ruling of the lower court allowing the second supplemental petition to be filed and considered was proper and correct and his later ruling recalling the same is erroneous. The agreement of continuing guaranty is therefore the sole issue in the case.

We now pass to the question as to whether or not this guaranty agreement was novated, superseded, and canceled by the notes given by the motor company and indorsed by the guarantors.

Article 2185 of the Civil Code provides that "novation is a contract, consisting of two stipulations; one to extinguish an existing obligation, the other to substitute a new one in its place." And under article 2189, a form of novation is where a debtor contracts a new debt to his creditor, which new debt is substituted to the old one, and the old debt is thereby extinguished. The question then arises as to whether or not the continuing agreement of guaranty was novated by the guarantors indorsing these notes? The determination of this question leads to the interpretation of the intention of the parties relative to the transaction. It must be borne in mind that novation is never presumed. C. C. art. 2190. It must be clear from the terms of the agreement, or by a full discharge of the original debt. We have only the testimony of Mr. F.A. Maddox, representative of the plaintiffs, which is to the effect that these notes, and the indorsements thereof by these defendants, were in no way to affect the continuing agreement of guaranty. He positively testified that these notes and indorsements were made and taken for the purpose of removing any question of liability and in no way to replace the guaranty agreement. This testimony was not denied by any of these defendants, guarantors, regardless of the fact that they were residents of the parish and presumed to be present and in court at the trial. His testimony is further to the effect that the notes were taken in order to fix a date of specific maturity of the account. It is to be noted that the notes represented no more value, as far as the indebtedness was concerned. There was no change in the debt, the only change being in the evidence of the debt. Furthermore, in the agreement of continuing guaranty, the guarantors waived any previous division or discussion of the property of the debtor, a condition not found in the notes, and it cannot be presumed that the plaintiff would have relinquished such a right. It has been definitely decided that the debtor's note for an open account does not novate the debt in the absence of an agreement; and that the obtaining of an extension of time and the giving of a new note is no novation. See Hughes v. Mattes, 104 La. 218, 28 So. 1006; Reconstruction Finance Corporation v. Thomson, 186 La. 1,171 So. 553; Interstate Trust Banking Co. v. Sabatier et al., La.Sup.,179 So. 80. In this case, the defendants, guarantors, never did request the return of their agreement of guaranty, a fact strongly against them.

Defendants-guarantors contend that "Why indorse notes when plaintiffs held an agreement of guaranty?" The answer is to be found in the testimony of Mr. Maddox, not contradicted, to the effect that it was to remove any question of liability and to have a definite maturity date. The plaintiffs having declared upon this agreement of guaranty, the defendants having admitted the execution of the same, pleading a discharge of the same by novation, the burden of proof then rested upon the defendants to establish this special defense and to show that the novation "clearly" resulted from the terms of the agreement, or that a full discharge of the guaranty was had. This, the defendants have failed to do. The plaintiffs are entitled to recover thereon.

It is contended by the defendants, guarantors, that the contract or agreement of guaranty did not guaranty notes to be given by the defendant motor corporation. We find no merit in this contention in that the agreement positively guarantees the payment "of all indebtedness," and the notes are merely evidences of indebtedness.

There is no dispute as to the amount due, that is, the sum of $598.33, being the amount for which judgment was rendered against the motor company. The plaintiffs pray in their brief that judgment be rendered, with legal interest from judicial demand until paid, and costs, to which they are entitled.

For these reasons, the judgment of the lower court in so far as being in favor of defendants, guarantors, and against plaintiffs is hereby annulled, set aside, and reversed, and it is now ordered, adjudged and decreed that there be judgment in favor of plaintiffs and against defendants E.J. Fredericks, Hebert Fredericks, Lawrence Fredericks, and M.P. Planche, in solido, in the full and just sum of $598.33, with legal interest thereon from judicial demand, until paid, and all costs, otherwise affirmed.