Reclamation Co. v. Simmons

• Decision Date: 04 February 1927
• Docket Number: (No. 243.)
• Citation: 293 S.W. 194
• Court: Texas Court of Appeals
• Parties: RECLAMATION CO. v. SIMMONS et al.<SMALL><SUP>*</SUP></SMALL>

293 S.W. 194

RECLAMATION CO. v. SIMMONS et al.^*

(No. 243.)

Court of Civil Appeals of Texas. Eastland.

February 4, 1927.

Rehearing Denied March 25, 1927.

Appeal from District Court, Eastland County; George L. Davenport, Judge.

Suit by the Reclamation Company against A. C. Simmons, C. W. Hoffman, and K. F. Page, doing business under the trade-name of the Western Brokerage & Supply Company, in which John W. Turner, trustee, intervened. Judgment for plaintiff against only the defendant first named, and plaintiff appeals, and defendants Hoffman and Page file cross-assignments of error. Reversed and remanded.

Turner, Seaberry & Springer, of Eastland, for appellant.

Sayles & Sayles, of Eastland, for appellees.

LESLIE, J.

This is a suit in which the plaintiff, Reclamation Company, a corporation, sues the defendants, A. C. Simmons, C. W. Hoffman and K. F. Page, doing business in the trade-name of Western Brokerage & Supply Company, and under a declaration of trust, which undertook to fix their relations and liabilities among themselves, as well as toward creditors. As such they conducted a business from December 31, 1921, till the dissolution of their business relations about July 15 and 31, 1922, when Hoffman and Page withdrew, leaving to Simmons the settlement of the firm's liability from the assets of the company. A dispute arose between the defendants as to the understanding in that respect.

The original debt was contracted May 23, 1922, at a time when the defendants were doing business under the above trade-name, but after the dissolution of said business association, which occurred July, 1922. Simmons executed, in the name of the Western Brokerage & Supply Company, the notes sued on, as he says, to obtain extension of time on the past-due account, but which transaction Hoffman and Page claim constituted payment of, or novation of, the original account, to which they also interposed the plea of limitation on the ground that recovery on the account as such was not sought until the filing of the plaintiff's first supplemental petition, filed February 10, 1926, more than two years after the date of the account, which was May 23, 1922.

The parties will be designated here as in the lower court.

John W. Turner, trustee, intervened, and tendered into court certain funds in his hands, which he held for the Western Brokerage & Supply Company. Simmons had directed their application to the payment of the debt herein sued on as a part of the assets left in his hands for that purpose, and defendants Hoffman and Page denied this and claimed their half of such assets. Intervener prayed the court for order disposing of the funds according to their respective equities. The court entered a decree, awarding such funds to Hoffman and Page to the extent of their interest therein. Judgment went against Simmons, who has not appealed. Other facts material to the understanding of the case will more fully appear as the opinion develops.

This record contains numerous assignments assailing from different angles the sufficiency of the testimony to establish payment or novation of the original debt, or to constitute a basis for the submission to the jury of those issues. Such assignments will be grouped and considered together and disposed of under the holding to be made on the proposition as to whether the notes executed and delivered under the circumstances shown by this record, were intended by all the interested parties as either a payment or novation of the original debt.

To produce a novation there must be the substitution of a new obligation for an old one. Novation can only exist by the mutual agreement of all the interested parties, and is subject to the same rules of evidence as any other character of contract, and each element thereof must be established with the same certainty. Novation is never presumed, and the intention of the creditor to discharge the first debtor and accept a second in his stead must clearly appear. Crowdus Drug Co. et al. v. Wilson (Tex. Civ. App.) 190 S. W. 194; Scott v. Atchinson, 36 Tex. 76, 38 Tex. 385-391.

This case must therefore turn on the proposition of whether the original obligation on an open account was paid or novated by the execution and delivery of the notes under the circumstances shown. If the obligation was paid or novated, or the evidence in the record is sufficient to so establish the same, then Hoffman and Page would not be liable.

The testimony in this record has been carefully examined to ascertain if it establishes the contention of the defendants Hoffman and Page respecting payment and novation. The notes sued on were apparently executed and delivered by Simmons long after the dissolution of the partnership relations existing between himself, Hoffman, and Page. They seem to have been executed at Fort Worth, Tex., in the office of Thompson, an attorney. Who received the notes for the plaintiff is not made certain, nor is it shown that C. E. Ross, the alleged vice president and director of plaintiff, was present or handled the transaction. Simmons testified that they were executed, not in payment or novation of the original account, which was past due, but for the purpose of obtaining from the plaintiff an extension of time thereon. The plaintiff's dealings with the notes are significant, its auditor testifying that, at the time the notes were taken, the original account was not credited with the notes, and that he made no record of them on the corporation's books kept for that purpose; that the account remained as an open account on the books.

Neither Hoffman nor Page were present when the notes were given, and could therefore throw no light on the express understanding at the time of the negotiation, which resulted in the execution of the notes. The witness Page, speaking for himself and Hoffman, testified:

"We learned along in April, along in the early part of 1923, that the Western Brokerage & Supply Company, through Mr. A. C. Simmons, had given the Reclamation Company some notes on an account, and that was the first that we know of any notes having been given, when we were told by an outside party. I did not authorize Simmons to execute any notes for me or for the company. Prior to the time I learned that the notes had been executed, I didn't know that it was contemplated that notes would be executed."

Defendant Hoffman testified:

"I didn't authorize Mr. Simmons to execute the notes that are sued on in this case, * * * didn't know anything about them."

The above is, in substance, the testimony tending to throw light upon the purposes and intentions of the parties at the time of the execution of the notes, at least in so far as Simmons, Hoffman, and Page are concerned. The acceptance of the notes by the creditor, plaintiff herein, in full satisfaction of the account or as a novation thereof, is essential to the appellees' contention. No one appears to give the plaintiff's version of the negotiation, and no one testifies to any express understanding that it was the intention of the plaintiff to accept the notes in payment of the old debt or in the extinguishment of the old debt and the substitution of a new one therefor.

Measured by the legal standard applicable to either payment or novation, it appears from the undisputed facts in this case that neither proposition is established. True, this record presents testimony to the effect that, soon after the dissolution of the partnership relations existing between the defendants, Simmons, Hoffman, and Page, each notified one C. E. Ross, who was alleged to be the vice president and director of plaintiff company that they had withdrawn from the Western Brokerage & Supply Company and that at different times they urged Ross to take steps to collect the account, always speaking of it as such, and that at least on one occasion said Ross stated to them that he was not looking to them for the account, but that he expected to collect same from Simmons. The notes had evidently been executed for a considerable time before Hoffman and Page were aware of their existence. Giving this character of testimony its fullest significance, we fail to see how the defense of payment or novation, express or by implication, could be established in this case with that degree of clearness and certainty demanded by the law. However persuasive it might be on the issue of estoppel, which will later be considered, it is not believed that the testimony last referred to, combined with that first set out in substance, would establish the propositions contended for by defendants Hoffman and Page. So viewing the matter, the plaintiff's assignments are sustained in so far as they attack the sufficiency of the evidence in this record to establish...