Bank of St. James v. Walker

• Decision Date: 04 June 1908
• Citation: 132 Mo. App. 117,111 S.W. 829
• Parties: BANK OF ST. JAMES v. WALKER.
• Court: Missouri Court of Appeals

111 S.W. 829

132 Mo. App. 117

BANK OF ST. JAMES v. WALKER.

St. Louis Court of Appeals. Missouri.

June 4, 1908.

1. NOVATION—WHAT CONSTITUTES.

A novation occurs when a debtor makes an arrangement with his debtor, for a valuable consideration, whereby the second debtor assumes and is to pay the first debtor's debt, and if, before passing of the consideration, or completion of the transaction, either of the debtors explains the proposed transaction to the first debtor's creditor, and the creditor consents to the substitution and agrees to accept the new debtor and release the old one, the novation is complete.

2. SAME—CONSIDERATION.

That defendant verbally agreed with the payee to pay others' notes, and the payee accepted the promise, and thereafter looked to defendant for payment, and the payee's cashier told a surety on the notes that defendant had agreed to pay them, and that the surety was released, is insufficient to show a novation binding defendant, for want of consideration, where it does not appear that defendant was indebted to the makers, or that they paid, or agreed to pay, him anything for assuming the debt, or that the payee formally released the makers or sureties or surrendered any security held under the old notes.

Appeal from Circuit Court, Greene County; Jas. T. Neville, Judge.

Action by the Bank of St. James against J. Ellis Walker. From a judgment for defendant, plaintiff appeals. Affirmed.

Watson & Holmes, for appellant. C. D. Jamison, for respondent.

BLAND, P. J.

By change of venue the case was sent from the Phelps circuit court, where it originated, to the Greene circuit court, and was tried at the May term, 1907, of the latter court. At the close of plaintiff's evidence, the court gave an instruction in the nature of a demurrer to the evidence, whereupon plaintiff took a nonsuit with leave to move to set the same aside. Its motion to set aside the nonsuit was denied, and the cause appealed here.

Briefly stated, the facts are: That J. L. Lovelace, Edna B. Lovelace, and Edgar Lovelace, bearing the relation of husband, wife and son, were engaged in a general mercantile business in the town of St. James, Phelps county, Mo., under the name of the "Lovelace Mercantile Company." In June, 1905, J. M. Gray and wife bought a half interest in the Lovelace Mercantile Company, and in payment of a part of the purchase price, on June 17, 1905, executed their negotiable promissory note to J. L. Lovelace for the sum of $1,600, due 12 months after date. A few days thereafter, the three Lovelaces indorsed the note and sold it to plaintiff bank, and at the same time executed two interest notes for $64 each, one due in 6 and the other in 12 months from date. The Grays soon became dissatisfied with the mercantile business, and on August 2, 1905, sold their interest back to the Lovelaces, and it was agreed between them that the Lovelaces would pay the $1,600 note to the plaintiff bank. To perfect this part of the agreement, J. M. Gray and J. L. Lovelace went to the bank for the purpose of taking up the note and substituting in lieu thereof the note of the Lovelaces. The note not being due, the cashier was unwilling to release the Grays and proposed to write a memorandum to have the effect of making the Lovelaces principals on the note and the Grays sureties. This proposition was assented to, and the following memorandum was written, signed by J. L. Lovelace, and attached to the note: "St. James, Mo., Aug. 2, 1905. It is understood between the parties hereto that J. M. Gray and M. J. Gray are securities, and J. L. Lovelace, Edgar Lovelace, and Edna B. Lovelace are principals, on a certain promissory note, dated June 17, 1905, due twelve months from date, 6 per cent. interest from date, signed on the face, J. M. Gray, M. J. Gray, and on the back thereof J. L. Lovelace, Edgar Lovelace and Edna B. Lovelace."

The plaintiff bank continued to extend credit to the Lovelace Mercantile Company until early in 1906, when the company's indebtedness to the bank exceeded $4,000. The company owned considerable property, and Mr. Holt, cashier of the bank, demanded security for the bank's debt as a condition precedent to the extension of further credit. J. L. Lovelace said he would see about it, and in a few days went to the bank with defendant, who is a brother of Mrs. Edna L. Lovelace, and who stated to Holt and the assistant cashier that he was there to take up the indebtedness of the Lovelace Mercantile Company; that he thought he was able to take care of it without executing any mortgages. All the company's...