Jewel Co. of America, Inc. v. George

• Decision Date: 09 June 1977
• Docket Number: No. 75-242-A,75-242-A
• Citation: 373 A.2d 1200,118 R.I. 372
• Parties: JEWEL COMPANY OF AMERICA, INC. v. Guy GEORGE. ppeal.
• Court: Rhode Island Supreme Court

Page 1200

373 A.2d 1200

118 R.I. 372

JEWEL COMPANY OF AMERICA, INC. v. Guy GEORGE.

No. 75-242-Appeal.

Supreme Court of Rhode Island.

June 9, 1977.

[118 R.I. 378] Levy, Goodman, Semonoff & Gorin, Edward F. Burke, Robert A. Pitassi, Providence, for plaintiff.

Jackvony & De Conti, Daniel J. Donovan, Providence, for defendant.

OPINION

PAOLINO, Justice.

This is an action for goods sold and delivered and on account annexed brought by the seller, Jewel Company of America, Inc., against the buyer, Guy George. The case was tried on an agreed statement of facts by a justice of the Superior Court sitting without a jury. The defendant now appeals from the judgment entered pursuant to the trial justice's decision.

The agreed statement sets out the following facts. The defendant had known plaintiff corporation and had done business with it for some years before May 1971. In that month, defendant, representing to plaintiff that he was doing business individually under the name Carol-Lynn Creations, applied to open a new account under that name. The account was opened and orders and billings were sent to Carol-Lynn Creations at a Johnston, Rhode Island Address. By the end of December the outstanding balance on defendant's account was $6,082.48. Carol-Lynn Creations was incorporated as Carol-Lynn, Inc., on November 27, 1971, and came into legal existence on December 15, 1971.

On or about January 10, 1972, plaintiff, at defendant's oral request, began sending the billings to Jewels by Carol-Lynn at a new address. The plaintiff thereafter sent seven small shipments to the new address and received a partial payment on the account, so that by February 18, the outstanding obligation was $5,635.45.

On or about February 18, 1972, plaintiff was informed of the existence of the corporation Carol-Lynn, Inc., and of the subsequent change of its name to Jewels by Carol-Lynn, Inc., and plaintiff learned that defendant was one of the stockholders of this corporation. The plaintiff continued to maintain one open account for Carol-Lynn Creations and its successor corporation and noted on its ledger the change of name and address.

Beginning about this same time, plaintiff did business with the corporation on a c.o.d basis only, but accepted a $500 payment on the outstanding balance, reducing it to $5,135.45. In May, the corporation executed a promissory note in favor of plaintiff for that amount. The note was signed by the president of the corporation. There was no agreement orally or in writing absolving defendant from liability. The plaintiff proceeded to file a financing statement for a security interest in the corporation's accounts receivable, inventory, machinery, equipment, office furniture and fixtures.

On June 6, 1972, the corporation again changed its name to Jewels by Lynn, Inc. The corporation made two $500 payments on the promissory note and plaintiff credited them against the outstanding balance on the account, reducing the debt to $4,135.45.

On March 29, 1973, plaintiff filed an action against Jewels by Lynn, Inc., for $4,135.45. The plaintiff obtained a default judgment against the corporation but it was without assets.

The plaintiff then brought this present action against defendant for the same amount. After the District Court rendered a decision for plaintiff, defendant appealed to the Superior Court, arguing there, as he does here, that although there was no express contract of novation between plaintiff and the corporation, the facts indicate that the parties had implicitly agreed that the corporation alone would be liable for the balance on the account.

The trial justice found that the 'facts * * * (did) not establish unequivocally that the plaintiff by its conduct impliedly agreed to accept the corporation as a substitute debtor to the exclusion of the defendant.' He thus entered judgment for plaintiff for the balance of the account plus interest and defendant filed the present appeal.

A novation agreement need not be expressly stated but can be shown by inference from the facts and from the conduct of the parties. Clark v. General Cleaning Co., 345 Mass. 62, 64, 185 N.E.2d 749, 750 (1962); Emerson New York-New Jersey, Inc. v. Brookwood Television, Inc., 122 N.J.Super. 288, 294, 300 A.2d 187, 190 (1973); 15 Williston, Contracts § 1869 at 615-16 (3d ed. 1972). The mere fact that plaintiff took a second debtor, however, does not raise a presumption that plaintiff intended to free defendant, the original debtor, from his obligation. 15 Williston, supra § 1869 at 615, § 1873B at 632-33; see also 6 Corbin, Contracts § 1298 at 224 (1962). As the party bound to pay the debt and wishing to be discharged by novation, defendant was obliged to make sure that there was a clear proposal for the successor corporation to become the sole debtor and that there was assent to the proposal by his creditor, the plaintiff. 6 Corbin, supra § 1301 at 231. In order to sustain his defense of novation, then, defendant must prove that plaintiff, in accepting the promise of the corporation to pay the debt, unequivocally agreed to release and discharge defendant from...