Strunk Chain Saws, Inc. v. Williams
1959 La. App. LEXIS 896, 111 So. 2d 195 (1959)
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Rule of Law:
A novation that discharges an original debtor occurs when a creditor's intent to substitute a new debtor is clearly indicated by their actions, even if the creditor does not expressly declare the original debtor's release.
Facts:
- In June 1956, C. W. Williams, a dealer, was indebted to Strunk Chain Saws, Inc. for $2,430.72 worth of merchandise.
- A new partnership, S & F Repair Service, was formed to take over Williams's assets and liabilities.
- S & F Repair Service proposed to Strunk that it would take over Williams's indebtedness and pay it off in installments.
- Williams agreed in writing to turn over Strunk merchandise valued at $2,427.22 to S & F Repair Service.
- A Strunk agent met with S & F Repair Service and arranged for S & F to receive the merchandise from Williams.
- S & F Repair Service paid $500 on the account and executed new promissory notes in its own name for the balance; Williams's name did not appear on these notes.
- Strunk subsequently dealt exclusively with S & F Repair Service regarding the debt, sending collection and warning letters directly to S & F.
- S & F Repair Service made payments on the account before becoming insolvent.
Procedural Posture:
- Strunk Chain Saws, Inc. filed suit against C. W. Williams in a trial court to collect a $500 balance on an account.
- Williams asserted the defense of novation, arguing his obligation was extinguished.
- The trial court sustained the plea of novation and entered judgment in favor of Williams, rejecting the plaintiff's demands.
- Strunk Chain Saws, Inc. (as appellant) appealed the trial court's judgment to the Court of Appeal of Louisiana.
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Issue:
Does a novation occur, discharging an original debtor from his obligation, when a creditor enters into a new agreement with a new debtor, accepts payment and promissory notes from the new debtor, and exclusively pursues the new debtor for collection, without expressly stating that the original debtor is discharged?
Opinions:
Majority - Gladney, J.
Yes, a novation occurs and the original debtor is discharged when the creditor's actions clearly indicate an intent to substitute a new debtor and a new obligation, even without an express declaration. While Louisiana Civil Code Article 2192 suggests an 'express declaration' is required to discharge a debtor, jurisprudence has interpreted this more liberally. The creditor's intent to novate can be 'clearly indicated' by their conduct. Here, Strunk's actions—accepting a new debtor, taking new notes from S & F Repair Service that did not include Williams, and dealing exclusively with S & F for collection—clearly disclosed an intent to no longer look to Williams for payment. Following precedents like Bates-Crumley Chevrolet Company, these acts are tantamount to an express declaration and are sufficient to establish a novation that discharged Williams's original debt.
Analysis:
This decision solidifies a more liberal, fact-based interpretation of the novation requirements under the Louisiana Civil Code. It confirms that courts can look beyond the strict requirement of an 'express declaration' and infer a creditor's intent to release an original debtor from the totality of their actions. This creates a more equitable standard, preventing a creditor from accepting the benefits of a new arrangement with a new debtor and then reverting to the original debtor if the new arrangement fails. For future cases, it emphasizes that a creditor's course of conduct can be as legally binding as a formal written release in establishing a novation.
