Carolina Equipment & Parts Co. v. Anders, 114

• Decision Date: 13 October 1965
• Docket Number: No. 114,114
• Citation: 144 S.E.2d 252,265 N.C. 393
• Parties: CAROLINA EQUIPMENT AND PARTS COMPANY, a corporation, v. Woodrow ANDERS.
• Court: North Carolina Supreme Court

Page 252

144 S.E.2d 252

265 N.C. 393

CAROLINA EQUIPMENT AND PARTS COMPANY, a corporation, v. Woodrow ANDERS.

No. 114.

Supreme Court of North Carolina.

Oct. 13, 1965.

Van Winkle, Walton, Buck & Wall, by Roy W. Davis, Jr., Asheville, for plaintiff appellant.

Harold K. Bennett, Asheville, and E. Glenn Kelly, Beaufort, for defendant appellee.

SHARP, Justice.

Plaintiff assigns as error the failure of the trial court to allow its motion to dismiss defendant's counterclaim. Defendant, having admitted the execution and delivery of the conditional sales contract in suit, must establish the novation he has alleged if plaintiff is not to recover the amount it claims.

To establish the terms of the novation he alleges, defendant relies upon his conversations with Manuel, plaintiff's sales agent for Western North Carolina. The evidence discloses, however, that Manuel himself had no authority to modify the contractual relations existing between plaintiff and defendant, and that defendant knew this. 2 C.J.S. Agency § 114, p. 1324. Manuel's declarations to defendant on September 19, 1963, which tended to show his authority to take back the Eimco and to modify the contract by a 'separation' were not, as the trial judge held, competent to establish the nature and extent of Manuel's agency. Commercial Solvents, Inc. v. Johnson, 235 N.C. 237, 69 S.E.2d 716. They were, however, competent to establish the terms of the alleged new contract which, defendant contends, Manuel purported to make on behalf of plaintiff, and which plaintiff thereafter ratified.

A novation is the substitution of a new contract for an old one which is thereby extinguished. Tomberlin v. Long, 250 N.C. 640, 109 S.E.2d 365. One of the several methods by which a contract may be discharged is the substitution of a new contract, the terms of which differ from the original. Bixler Co. v. Britton, 192 N.C. 199, 134 S.E. 488; Southern Public Utilities Co. v. Town of Bessemer City, 173 N.C. 482, 92 S.E. 331; Redding v. Vogt, 140 N.C. 562, 53 S.E. 337. 'In such cases the release of the obligation of the old and the substitution of new obligations constitute valuable considerations.' Lipschutz v. Weatherly, 140 N.C. 365, 369, 53 S.E. 132, 133; 66 C.J.S. Novation § 12. While a contract is wholly executory the mutual consent of the parties to discharge each other from its obligations is sufficient consideration for a rescission. When, however, as here, the contract has been executed by one of the parties, a valid novation requires a consideration. Palmer v. Lowder, 167 N.C. 331, 83 S.E. 464; McKinney v. Matthews, 166 N.C. 576, 82 S.E. 1036. The return of the Eimco to plaintiff would be sufficient consideration for the alleged novation, which released defendant from his obligation to pay for the Eimco and set up a new schedule of payments for the tractor-trailer only.

The determinative question here is whether plaintiff's acceptance of the check for $496.02 for 'payment on truck & trailer,' coupled with the other circumstances disclosed, was 'evidence of ratification fit to be considered by a jury.' Acme Mfg. Co. v. McPhail, 181 N.C. 205, 209, 106 S.E. 672, 674.

"If certain acts have been performed or contracts made on behalf of another without his authority, he has, when he obtains knowledge thereof, an election either to accept or repudiate such acts or contracts. If he accepts them, his acceptance is a ratification of the previously unauthorized acts or contracts, and makes them as binding upon him from the time they were performed as if they had been authorized in the first place.' Gallup v. Liberty County, 57 Tex.Civ.App. 175, 122 S.W. 291, 296.'

McNeely v. Walters, 211 N.C. 112, 113, 189 S.E. 114, 115.

In order to establish the act of a principal as a ratification of the unauthorized transactions of an agent, the party claiming ratification must prove (1) that at the time of the act relied upon, the principal had full knowledge of all material facts relative to the unauthorized transaction, Wilkins-Ricks Co. v. Welch, 179 N.C. 266, 102 S.E. 316; Wise & Bro. v. Texas Co., 166 N.C. 610, 82 S.E. 974, and (2) that the principal had signified his assent or his intent to ratify by word or by conduct which was inconsistent with an intent not to ratify. The jury may find ratification from any course of conduct on the part of the principal which reasonably tends to show an intention on his part to ratify the agent's unauthorized acts. 3 Am.Jur.2d, Agency § 162. 'It is what a party does, and not what he may actually intend, that fixes or ascertains his rights under the law. He cannot do one thing and intend another, and very different and inconsistent, thing. The law will presume that he intended the legal consequences of what he does, or, in other words, that his intention accords in all respects with the nature of his act.' Norwood v. Lassiter, 132 N.C. 52, 56-57, 43 S.E. 509, 510.

A principal who acted without actual knowledge of the material facts will not be held to have retified an unauthorized act of his agent even though he failed to exercise due diligence which would have revealed the truth. 'This general rule pertains whether the want of knowledge arises from the intentional or the unintentional concealment or misrepresentation of the agent, or from his mere innocent inadvertence; and, of course, if the material facts are suppressed or unknown, the ratification is invalid, because founded on mistake or fraud.' 3 Am.Jur.2d, Agency § 173. However, as stated by the American Law Institute, 'knowledge by the purported principal can be inferred as in other cases; when he has such information that a person of ordinary intelligence would infer the existence of the facts in question, the triers of fact ordinarily would find that he had knowledge of such fact.' Restatement (Second), Agency § 91; 1 Mechem, Law of Agency § 406 (2d ed. 1914). See Fisher v. John L. Roper Lumber Co., 183 N.C. 485, 111 S.E. 857, 35 A.L.R. 1417 and Hall v. Giessell & Richardson, 179 N.C. 657, 103 S.E. 392, cases in which the court, in sustaining judgments based on the juries' findings of ratification, commented that the facts were sufficient to show that the principals knew or should have known the terms of their agents' contracts and that the juries had the right to consider this and other evidence as bearing upon the question of ratification. See also Breckenridge, Ratification in North Carolina, 18 N.C.Law Rev. 308, 327-334 (1940).

A principal is not permitted to repudiate the act of its agent as being beyond the scope of his authority while accepting the benefits of what he has done. Jones v. Bank of Chapel Hill 214 N.C. 794, 1 S.E.2d 135. 'It is also a settled principle of ratification that the principal must ratify the whole of his agent's unauthorized act or not at all. He cannot accept its benefits and repudiate its burdens.' Parks v. Security Life & Trust Co., 195 N.C. 453, 456, 142 S.E. 473, 474. Accord, Maxwell v. Procter & Gamble Distributing Co., 204 N.C. 309, 168 S.e. 403.

Clearly, if plaintiff's president, Stephenson, knew that defendant had attached conditions to the acceptance of his check he could not endorse it, collect the proceeds for plaintiff, and then repudiate the conditions attached to it notwithstanding he may have intended to do so. DeLoache v. DeLoache, 189 N.C. 394, 127 S.E. 419; Acme Mfg. Co. v. McPhail, supra; Wilkins-Ricks Co. v. Welch, supra; Moore v. General Accident, Fire & Life Assurance Corp., 173 N.C. 532, 92 S.E. 362; Southwest Nat. Bank v. Justice, 157 N.C. 373, 72 S.E. 1016; Norwood v. Lassiter, supra. Such knowledge and conduct would have made Stephenson's position equivalent to that of the man who cashes a check which purports to be in full payment of a disputed account. Speaking to this situation in Petit v. Woodlief, 115 N.C. 120, 20 S.E. 208, the Court said, 'When the plaintiff indorsed this draft and collected the money, with the proposal staring him in the face that it should, if received, operate to discharge the whole debt, instead of returning it to the drawer and declining the offer, we think that his conduct amounted to an acceptance of it * * *.' 115 N.C. at 125, 20 S.E. at 209. Accord, Sylva Supply Co. v. Watt, 181 N.C. 432, 107 S.E. 451; Aydlett v. Brown, 153 N.C. 334, 69 S.E. 243; Armstrong, Cator & Co. v. Lonon, 149 N.C. 434, 63 S.E. 101; Kerr v. Sanders, 122 N.C....