Williams v. Reed

• Decision Date: 24 September 1952
• Court: California Court of Appeals Court of Appeals
• Parties: WILLIAMS v. REED et al. Civ. 15199.

Page 147

248 P.2d 147

113 Cal.App.2d 195

WILLIAMS v. REED et al.

Civ. 15199.

District Court of Appeal, First District, Division 1, California.

Sept. 24, 1952.

Hearing Denied Nov. 20, 1952.

Mancuso, Herron & Winn, San Francisco, for appellant.

Athearn, Chandler & Hoffman, San Francisco, for respondents.

FRED B. WOOD, Justice.

Plaintiff W. E. Williams has appealed from a judgment dismissing as to all the defendants but Reed this action to enforce payment of two promissory notes and to foreclose a chattel mortgage given to secure the notes. The judgment was rendered in response to a motion for summary judgment by defendant Cairns and a motion for dismissal by defendants Arvidson and Carroll. It followed an order which declared that it appeared from the affidavits of the parties that the 'debt sued upon has been satisfied by a judgment (§ 726, C.C.P.), and that there are no triable issues presented by the pleadings.'

The notes in suit bear date June 14, 1950, and were signed as makers by all the defendants (Glen E. Reed, Robert M. Cairns, Kenneth W. Arvidson, and Thomas F. J. Carroll) in favor of plaintiff as payee. Each note bears interest at 5%. One is in the principal sum of $30,000, due in sixty days; the other, in the sum of $10,000 due December 14, 1950.

The defendants failed to pay the $30,000 when it became due. Thereafter and on October 12, 1950, plaintiff entered into an agreement with defendant Reed and his wife concerning these notes and their payment. That agreement referred to the $30,000 and the $10,000 notes and the chattel mortgage given to secure them, and then provided as follows: (1) '* * * Williams does hereby agree to accept the sum of Thirty Five Thousand Dollars ($35,000.00) plus interest on Thirty Thousand Dollars ($30,000.00) at the rate of five percent (5%) per annum from the 14th day of June, 1950, until paid, in full settlement of both Promissory Notes hereinabove described, said sum to be paid to him in full on or before the 28th day of October, 1950.'

(2) Williams further agrees: '* * * to withhold any action to enforce the collection of said note and/or the foreclosure of said Chattel Mortgage to and including the 28th day of October, 1950.'

'3. Upon receipt of said payment in full, W. E. Williams will execute any and all documents required to evidence full satisfaction of said obligation. Glen E. Reed * * * does hereby agree and covenant * * * in full discharge of his obligation to pay to W. E. Williams in full on or before the 28th day of October, 1950, the sum of Thirty Five Thousand Dollars ($35,000.00) plus interest at the rate of five per cent (5%) per annum on Thirty Thousand Dollars ($30,000.00) commencing the 14th day of June, 1950, until paid.'

(4) Reed and wife each for himself or herself agree that if the entire sum of $35,000 plus interest is not paid to Williams on or before October 28, 1950:

'A. That W. E. Williams shall have judgment for Thirty Five Thousand Dollars ($35,000.00) plus interest as provided herein against Glen E. Reed, who shall be adjudged liable therefor together with any costs and disbursements incurred by the said W. E. Williams in effecting said Judgment and the collection of same, including reasonable attorneys fees;

'B. The said Glen E. Reed * * * does * * * hereby waive any and all legal and/or equitable defenses, of whatever kind or nature, to the claim of the sum of Thirty Five Thousand Dollars ($35,000.00) plus interest as herein provided, including, but not in limitation of the foregoing, any and all defenses, legal and/or equitable to either or both of the said Promissory Notes and/or to the said Chattel Mortgage;

'C. That W. E. Williams may obtain said Judgment without service of any papers upon Glen E. Reed and/or Alice Marie Reed and without prior notice to either of them; that in fact by this Agreement the said Glen E. Reed * * * does hereby confess Judgment under the conditions and in the amounts herein contained;

'D. That Glen E. Reed and Alice Marie Reed each for himself or herself jointly, do hereby waive now and forever any stay of execution upon such Judgment;

'E. That Glen E. Reed and Alice Marie Reed each for himself or herself and jointly do hereby waive any and all rights to set aside said Judgment to move for new trial or to appeal from said Judgment;

'F. That Glen E. Reed and Alice Marie Reed does hereby each for himself or herself and jointly declare that W. E. Williams, his agents, employees, servants and assigns may use any and all force reasonably necessary to execute upon any of the personal or real property of said debtors wherever located at any time of the day or night and the said debtors do hereby waive any and all rights or claims that they might have for wrongful taking or unlawful taking of said real and/or personal property by reason thereof and any and all claims and all defenses that they might assert by reason of the reasonable force used in taking of the real and/or personal property;

'G. That Glen E. Reed and Alice Marie Reed each for himself or herself and for themselves jointly, do hereby agree that W. E. Williams, his agents, employees, servants or assigns may execute said Judgment upon all of the property, not in limitation of the last preceding paragraph, particularly described in that said Chattel Mortgage heretofore made and executed by Glen E. Reed to W. E. Williams as aforesaid.'

Mrs. Reed expressly waived any objections to the chattel mortgage theretofore executed by her husband and waived any defenses she might have to the mortgage and agreed that the mortgage be deemed to have been executed by her as well as by her husband.

Defendant Reed covenanted and agreed that the interest of 'Williams in and to the personal property described in the said Chattel Mortgage is the paramount lien interest in and to each and every item of property therein described and * * * covenants and agrees to hold the said W. E. Williams, his agents, employees, servants and assigns free and harmless upon any claim successfully made by any person or persons that such person or persons interest on all or any of said personal property is paramount and superior to that of W. E. Williams therein. In the event of any costs, including attorneys fees are incurred by the said W. E. Williams in defending his interests in the said property against the claim of any person or persons, such cost and reasonable attorneys fees shall be paid and it is hereby agreed that they shall be paid by the said Glen E. Reed * * *.'

Soon after maturity of the October 12, 1950, obligation, plaintiff brought suit upon it against Reed, and on November 2, 1950, obtained judgment against him for $35,571.24, costs, and attorneys fees. No part of that judgment has been paid. Nor does it appear that plaintiff has taken any steps, by levy of execution or otherwise, to enforce that judgment.

April 3, 1951, the present action was filed against the four makers of the original $30,000 and $10,000 notes.

These are the significant facts concerning which the parties are in agreement. ¹ Do these facts demonstrate that plaintiff is without right to maintain the present action? ²

Defendants Cairns, Arvidson, and Carroll say this question should be answered in the affirmative. They claim that (1) the October 12, 1950, agreement between plaintiff and the Reeds was a novation and released the cosigners of the notes, (2) the reduction of the October, 1950, obligation of Reed to judgment was an election which estops plaintiff from proceeding herein, and (3) plaintiff has waived the security of the chattel mortgage to the prejudice of the rights of Reed's cosigners and thereby lost his right to proceed against them.

(1) Did the October, 1950, agreement between the plaintiff and the Reeds operate as a novation and thereby release Reed's comakers from their obligation on the original notes? 'Novation is the substitution of a new obligation for an existing one.' Civ.Code, § 1530. 'Novation is made: 1. By the substitution of a new obligation between the same parties, with intent to extinguish the old obligation; 2. By the substitution of a new debtor in place of the old one, with intent to release the latter; or, 3. By the substitution of a new creditor in place of the old one, with intent to transfer the rights of the latter to the former.' Civ.Code, § 1531, emphasis added. Novation is a question of fact, and the burden of proving it is upon the party asserting it. Alexander v. Angel, 37 Cal.2d 856, 860-861, 236 P.2d 561, and cases cited.

If the mere execution of the October 12, 1950, agreement is to meet the requirements of subdivision 1 of section 1531, we must find expressed in the agreement an 'intent to extinguish the old obligation'. If it is to meet the requirements of subdivision 2, we must find an 'intent to release' the old debtors. Where is any such intent manifest in this agreement? We find none.

Plaintiff agreed to accept, in settlement of the old notes, a certain sum of money, with interest, that sum to be paid in full by October 28, 1950. That does not indicate an intent to substitute the new obligation for the old, unless and until the new obligation has been performed. Of like import was plaintiff's promise 'upon receipt of payment in full' to execute documents evidencing satisfaction of the old obligation. His agreement that he would withhold until October 28, 1950, 'any action to enforce the collection of said note' (the old obligation) or 'the foreclosure of said chattel mortgage' indicates an intent to keep the old obligation alive, not to extinguish it nor to release Reed or any of his cosigners, nor to release the mortgage security. Of similar import are Reed's agreement that plaintiff's interest in the personal property described in the chattel mortgage is the paramount lien interest in and to every item of that property, and Mrs. Reed's waiver of any objections or defenses she might otherwise have to the chattel...