Gillett v. Ivory

Brooke, J.

(after stating the facts). The court in directing a verdict in favor of defendants held, as a matter of law, that plaintiff had elected his remedy in proceeding against Hagle and Yarran, instead of against defendants. To define plaintiff’s acts as an election of remedies may not be strictly accurate. When plaintiff first learned of the sale of the bank to Hagle and Yarran, he had two courses open to him. It is immaterial whether these courses be denominated as remedies or not. He could refuse to accept Hagle and Yarran as his debtors in the place of defendants, or he could affirm the arrange- *449 merit which he knew had been made between defendants and Hagle and Varran, and look to them to pay his deposit, instead of to defendants. It is clear that he knew at that time that Hagle and Varran had undertaken to pay the depositors in the bank, for he testifies:

“I knew that he [defendant Ivory] had sold out, and that I could go and get my money if I wanted to. I didn’t go and get it.”

Of course, he could not get his money from Hagle and Varran (with whom prior to that time he had had no contract relations) upon any other theory than that they had, as between themselves and defendants, agreed to assume and pay the indebtedness of the old partnership. The fact, therefore (emphasized by plaintiff), that he was never told that Hagle and Varran had assumed the old indebtedness, becomes unimportant. Having knowledge of the sale and of the fact that as between themselves there had been a substitution of debtors, it would seem clear that plaintiff elected to accept Hagle and Varran as his debtors in the place and stead of the defendants, who were then bounden to him. This election is evidenced by the fact that he permitted his deposit to remain in the hands of Hagle and Varran for some months after he had knowledge of the sale, by the fact that he knew he could get his money from them if he wanted to, and by the further fact that during those months he made no demand upon defendants for his money, though he knew that they had sold the bank and had retired from the business.

This, however, is not all. After the bank had failed and Hagle had absconded, and a receiver had been appointed, he filed his claim with the receiver. This claim is verified by his oath, and recites that Hagle and Varran are indebted to him in the amount of the certificate of deposit. Obviously this debt was not due to plaintiff from both Hagle and Varran and defendants. If defendants were his debtors at that time, plaintiff had no right to participate in a fund to which the creditors of Hagle and *450 Varran alone were entitled. Three months after the receiver was appointed he accepted from him a dividend and another a year later.

These facts, concerning which there is no dispute, indicate in our opinion a novation rather than a technical election of remedy. Counsel for defendants seem to concede that, if his clients are entitled to a verdict upon the ground of novation, that question was one of fact upon this record, and should have been submitted to the jury. While it may be urged that plaintiff’s conversation as detailed by him with defendant Ivory at the time of the sale and his subsequent conduct up to the time of the failure do not conclusively establish a novation, they very persuasively lead to that conclusion, and plaintiff’s conduct after the failure can be accounted for upon no other theory than that he had accepted a substitution of debtors at the time he learned of the sale. This conduct, we think, conclusively establishes tho fact that he had accepted such substitution. It is urged by plaintiff that the court of chancery was without jurisdiction in the receivership matter, and therefore plaintiff is not bound by his acts in connection therewith. We need not determine whether the equitable proceeding is defective or not. Plaintiff is in no position to raise the question. He recognized the propriety of the proceeding and participated in the benefits arising therefrom. We give consideration to his acts in relation to the receivership only for the purpose of determining how far they give character to his prior acts and conduct as bearing upon the question of novation.

The necessary legal elements to establish a novation are (1) parties capable of contracting; (2) a valid prior obligation to be displaced; (3) the consent of all the parties to the substitution; and (4), lastly, the extinction of the old obligation and the creation of a valid new one. The first and second of these elements are conceded to exist. As to the third, it appears conclusively that the defendants and Hagle and Varran agreed to the substitution, and we think it is demonstrated that plaintiff like *451 wise so agreed. If he did so, the fourth element follows as a matter of law. Ample consideration for the novation is found in the transfer of the fund to Hagle and Varran, their undertaking to pay plaintiff, and his assent thereto. Plaintiff cites and relies upon the recent case of Harrington-Wiard Co. v. Manufacturing Co., 166 Mich. 276 ( 131 N. W. 559 ). We have carefully examined that case, and can find nothing therein inconsistent with our conclusions herein. The only equivocal act (tending to prove novation) in that case was the sending of a statement of account to the Lion Motor Car Company, and under the testimony that fact was held to be insufficient to carry the case to the jury. In the course of his opinion Mr. Justice Stone, says:

“ To constitute novation the creditor must have consented to the discharge of the original debtor, and must have accepted the promise of the new debtor.

“ It is true that it has been held that it is not essential that the assent to, and the acceptance of, the terms of novation be shown by express words to that effect, but that the same may be implied from the facts and circumstances attending the transaction, and the conduct of the parties thereafter.”

Plaintiff’s conduct after he learned of the sale and after the insolvency of the bank should be held to estop him from now claiming that he did not assent to the novation.

Relying upon such assent, defendants took no steps to protect themselves under their contract with Hagle and Varran. Indeed, while plaintiff was asserting that Hagle and Varran were his debtors, they were unable to do so. Now that he finds that Hagle and Varran are financially unable to pay his claim in full it is too late for him to change his position, and compel defendants to respond at a time when they cannot protect themselves.

Judgment is affirmed.

Moore, C. J., and Steers, McAlvay, Kuhn, Stone, Ostrander, and Bird, JJ., concurred.