
    William R. De Witt, Appellant, v. Louis Monjo, Respondent.
    
      Novation — sale of goods received by a corporation which has assumed the obligation of the vendee— effect of the giving of a note for the price thereof—referees report sustained by facts not found by him — review of discretion in opening a case to receive further evidence.
    
    Evidence that a vendee of goods, before their delivery, sold his business to a corporation which agreed to pay for the goods; that the goods were delivered to the corporation, and that the vendor, which knew of the agreement between the vendee and the corporation, accepted the note of the corporation for the purchase price which was afterward renewed, and that after the renewed note became due, the vendor drew a draft upon the corporation, which paid a portion thereof, is sufficient to warrant a finding that the vendor accepted the corporation as its debtor in the place of the original vendee.
    The assent of the creditor to the arrangement between the original vendee and the corporation may be proved by circumstantial evidence, and express knowledge of such arrangement need not be brought home to the creditor.
    Facts warranted by the evidence given on a reference, but not found by the referee, may be considered in order to sustain the judgment entered on his report.
    The exercise by a referee of his discretion, in reopening a case in order to permit the defendant to give further evidence, will not be disturbed unless it appears that such discretion has been abused.
    O’Brien, J., dissented.
    Appeal by the plaintiff, William R. De Witt, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the cleric of the county of Hew York on the 10th day of March, 1899, upon the report of a referee dismissing the plaintiff’s complaint.
    
      Albridge C. Smith, for the appellant.
    
      Thomas M. Rowlette, for the respondent.
   Rumsey, J.:

The action was brought to recover the balance due upon a sale of ■ goods by the Midland Steel Company, of which the plaintiff was assignee, to the defendant. From the judgment entered upon the report of the referee dismissing the complaint this appeal is taken.

It appears' that in the early part of the year 1896, the defendant, who was doing business under the name of Louis Mon jo, Jr., & Co., ordered from the Midland Steel Company a carload of steel, at the price of $759.32, upon a credit of sixty days. There was considerable delay in the shipment of the goods, and they were not finally received until about the 15th of May, 1896. Before that time the defehdant had sold to the National Wrought Steel Manufacturing Company, and that company had taken possession of all his property and business, and when this carload of steel reached the place to-which it was consigned, it was delivered to the National Wrought Steel Manufacturing Company.

On the twenty-ninth-of July that company delivered to the Midland Steel Company, the seller gf the goods, its promissory note for the amount due upon the carload of steel. The note was not paid when due but was renewed. When the renewed note became due, that was not paid, but after some negotiations the Midland Steel Company drew its draft for the amount of the note,, with interest, upon the Wrought Steel Company, which was accepted by it, and a payment of $425 was made by the acceptor upon the draft. The remainder was not paid* and it is to recover that remainder that this action is brought.

The foregoing facts are not disputed. It is conceded that the claim of the Midland Steel Company was assigned to the plaintiff before the bringing of this action. It is claimed by the defendant that upon his sale to the Wrought Steel Company of his property and business, that company agreed to pay for this carload of steel when it, was received; that the Midland Steel Company was advised of the purchase by the National Wrought Steel Manufacturing Company of the defendant’s plant and businéss and of the general relations between the Wrought Steel Company and the defendant, and- that, knowing these relations, it accepted the Wrought Steel Company as its debtor under such circumstances as to warrant the conclusion that it consented to the agreement between that company and the -defendant, by which the Wrought' Steel Company agreed to pay for this carload of steel, and that by reason of its assent to-that agreement, a novation took place, as a result of which the defendant was discharged and the. Wrought Steel Company became the debtor of the Midland Company.

There was evidence which warranted the finding that the Wrought Steel Company had agreed with Mon jo to pay the bill for this carload of steel, and there was also evidence that this agreement was ¡known to the Midland Steel Company although there is no direct •evidence that the precise terms of the agreement were made known to it. It is undisputed, however, that the Midland Steel Company was •advised of this agreement between Monjo and the Wrought Steel -Company, and the facts shown raise an inference that it .accepted the situation, and when the bill for the steel became due received the note of the Wrought Steel Company in place of the obligation of Montjo.

It is clear, too, that from the time that note was received until there was a final failure of the Wrought Steel Company to pay the balance due upon the draft which had been substituted for the note, the Midland Steel Company dealt with the Wrought Steel Company precisely as though it were liable primarily for the steel, and without reference to Monjo.

From these facts it is fair to infer, as seems to have been inferred by the referee, that the Midland Steel Company assented to the agreement by which the Wrdught Steel Company assumed' to pay for this carload of steel, and accepted that company as its debtor in the place of Monjo, to whom the steel was originally sold. These facts are all that are necessary to establish a novation.

To prove the assent of the creditor it is not necessary that express "knowledge of the transaction be brought home to him, but that assent may be proved by circumstantial evidence precisely as other facts may be similarly proved. (16 Am. & Eng. Ency. of Law, 879, 880, 881; Hotchin v. Secor, 8 Mich. 494; Begester v. Dodge, 81 How. Pr. 107, 114.)

There was sufficient evidence, therefore, to warrant the conclusion reached by the referee. It is quite true that these facts were not found by him in his report, but as the evidence would have warranted the finding of them, the court will infer their existence, although not found in the report, to sustain the judgment. (RochChester Lantern Co. v. Stiles & Parker Press Co., 135 N. Y. 209, 213.)

It is claimed by the plaintiff that the referee erred in opening the case after the evidence was closed to permit the defendant to give material evidence bearing upon this question of novation. Whether it was proper or not to open the case was a matter within the discretion of the referee, and that discretion will not be reversed! unless from the facts it is made to appear that it has been abused. We cannot infer any abuse from what is shown in this case. Tim plaintiff made no. application for an adjournment after the new ■evidence was received to enable him to meet the facts which then appeared. It is to be' assumed, therefore, that he did not deem it necessary to make such proof, and he cannot now say that he had no opportunity to do so. The evidence admitted was clearly coim petent and relevant, and it was equally within the discretion of the referee to receive it if he saw fit.

We can find no error in the judgment, and for that reason it is.

affirmed, with costs to the respondent.

"Van Brunt, P. J., Ingraham and McLaughlin, JJ., concurred. O’Brien, J., dissented. '

O’Brien, J. (dissenting):

As the conclusion reached is based upon inferences from the testimony I deem it important, even at the risk of being tedious, to refer to the same .in detail.

On the trial before the referee, Boss- J. Beatty, president of the Midland Steel Company, testified that he received the order for the carload of steel from the defendant about March 18, 1896, and it was filled and shipped to the defendant May 15, 1896, and that after the shipment a statement was made out and sent to the defendant each, month. There are papers in evidence relating to the order from which it appears that the defendant had written, “ On arrival of the steel at the factory we will send cheque,” and that sixty days’” credit was given. And there is a'letter from the defendant dated. July 20, 1896, asking an extension of time for payment. (The carload of steel had then arrived at its destination and been delivered*, and the sixty days’ credit had expired.)

William Palmer, president of the National Wrought Steel- Company, testified that in June, 1896, there was a carload of steel on the tracks consigned to the defendant, and that the defendant told the company to put it in the factory, which was how they got possession of it; that a promissory nóte for $763.15, dated August 29* 1896, was sent by the National Wrought Steel ■ Company to the plaintiff’s assignor'—that being the amount of money due on the carload of steel; that when the note became due a time draft was given for the same sum plus interest, and after the time draft became overdue $425 was paid thereon ; that the National Wrought Steel Company is now insolvent.

The defendant testified that he had previous dealings with the Midland Steel Company, and ordered the carload of steel, saying it was to be sent to him; that he sold, his business to the National Wrought Steel Company, but does not remember notifying the Midland Company of that fact; that after the sale took place and. after the purchase * * * and before the delivery,” he believed

he notified them; that he had no written agreement with the National Company for payment of the indebtedness; that no demand ón him for payment was made after July 29, 1896, till January 26, 1898.

The defendant was alone originally liable for the cargo of steel* and the question for consideration is whether the learned referee was right in holding that the Midland Company, by implication* assented to the discharge of the defendant and accepted, with the defendant’s consent, the National Wrought Steel Manufacturing Company as a debtor in his place and stead.

It will be seen that the referee does not find that there was any express agreement, but only one arising by implication from the fact of the acceptance of the notes of the Wrought Steel Company and the payment of part of the claim by that company, and the evidence contained in the letters showing the transactions between the Midland Company and the Wrought Steel Company. All that cam be gathered from these letters and from the oral evidence is that after demand upon the defendant and a request by him for am extension of time subsequent to the delivery of the steel, the National Wrought Steel Manufacturing Company sent a note for the amount* which note was received and was subsequently renewed.

The defendant testified that he thought he sent a notice of the sale of his business to the Wrought Steel Company, but he does not claim that he notified the Midland Company that his successor im business had assumed his obligations by agreeing to pay his debts* including that to the Midland Company; and apart from the fact that the note was received and subsequently renewed as stated, there is nothing to show that the note was accepted in payment of the «defendant’s debt. On the contrary, the testimony of the president -of the Midland Company shows that after the delivery of the goods monthly statements were sent .to the defendant, although the ■defendant says he received no demand for payment after July 29, 1896 ; and not only is there absence of proof that the Wrought Steel Company assumed tlié obligations of the deféndant, but, even if there was, there is nothing to show that this fact was communicated to the Midland Company.

I think that the failure to bring home to the Midland Company notice of the fact, if it existed, that there was an agreement to assume and pay the obligations of the defendant, or a definite agreement on the part of the Midland Company to accept the note of the Wrought Steel Company in payment, at or before the time when it received such note, militates against the conclusion reached by the referee, that the mere receipt of the note, under the circumstances disclosed here, acted as a discharge' of the defendant’s liability. There was no agreement proven as to the assumption by the Wrought Steel Company of the defendant’s debts at the time 'the latter turned over his business, but whether there was or not, under the defendant’s testimony, such agreement would not be conclusive, for the reason that he testifies that, apart from the consideration for the transferring of the business, there was a separate and distinct agreement between him and the Wrought Steel Company in regard to this particular carload .of steel, by which he turned it over on the promise of the Wrought Steel Company to pay therefor.

The difference between my view and' that taken by Mr. Justice Humsey is as to the different presumptions that will be indulged in on the receipt by a creditor of the note of a third party in the absence of any express or definite agreement between the parties. I understand his view, based on the two cases' of Hotchin, v. Secor (8 Mich. 494) and Regester v. Dodge (61 How.. Pr. 107), to be that upon such slight evidence as here appears an agreement will be inferred or implied that the note was taken in payment; whereas I think in such cases the only presumption is that the note was received conditionally or as collateral, and not in payment, and the fourden of showing such an agreement as to payment is on the debtor, and it must be proved if not by direct at'least by clear and satisfactory evidence.

Neither of the cases referred to were New York cases, one being a- decision of the courts of Michigan and the other a case in partnership in the United States Circuit Court. In partnership cases it has been held in this State that where one partner retires, although the creditor has notice thereof, this does not discharge the retiring partner: unless-he-has. notice" in addition of an express agreement on the part of the continuing partners to assume and pay the liabilities of the old firm; and neither the acceptance of a note nor the obtaining of a judgment against the new firm "will discharge the retiring partner in the absence of such an agreement. (Palmer v. Purdy, 83 N. Y. 144; United States National Bank v. Underwood, 2 App. Div. 342; McLoughlin v. Bieber, 41 id. 561.)

Although the question here is not quite the same as m partnership cases, I think the principle and reasoning involved are analogous, and that, on the mere receipt of a note of a third party after a debt is due, it will not be presumed-to have been received in payment. If with knowledge of a definite agreement that a third party is to pay the debt, it is received, then there would be a novation. So, also, if simultaneously with the contracting of the debt, the note of a third party were given, there would again be a novation. As stated, generally, in 16 American and English Encyclopaedia of Law, 880 : “ When a creditor accepts the note of a third person in payment of his debt, a novation takes place. * * * The mere acceptance of such a note, however, does, not constitute a novation without some evidence that it is taken in satisfaction of the. debt. * * * ” In the foot note cases are. cited that there is no presumption that the note is taken in payment.

Apart from my view, that in the absence of definite proof that there was such an agreement there arises a presumption that the note of a third person was received as collateral rather than in payment, there is another consideration which, upon the facts here, seems to me controlling. The carload of steel had been received by the defendant and turned over by him to the National Wrought Steel Company. Thereafter the term of credit, which was sixty days, expired, and the debt was due and payable when the defendant asked for an extension of time, and it was subsequent - to that event that the note of the National Wrought Steel Company was sent and received. In Gibson v. Toby (53 Barb. 191), where earlier cases are summarized, the court says, “ when the sale and delivery of the property and the transfer of the note are at the samé time, a presumption arises that the parties agreed to an exchange of property, that is, that the vendor should sell and deliver his property for the note to be transferred by the other party called the vendee, and the agreement being executed, the note is taken at the risk of the party taking it for his property. The fact of a simultaneous, exchange is the evidence from which the agreement is presumed?'. ■ Among other cases the court refers to that of Ward v. Evans (2 Ld. Raym. 928), where Lord Holt said •“ taking a note - for goods sold is a payment, because it was part, of the original contract; but paper is no payment when, there. is a precedent debt. For when such a note is given in payment, it is always intended to be taken under his condition to- be payment if the money be- paid thereon in convenient time.” Reference was also made to the.long-established authority -of Noel v. Murray (13 N. Y. 167), that the-acceptance by a creditor from his debtor of a bill or note made by a third person on account of the debt does not satisfy it unless. the parties agreed that it should be received as payment, and the presumption is that it ■ was not taken as payment, and the onus of establishing that it was agreed- to be so taken is upon the debtor.

All the authorities in this State hold that in the Case of a precedent debt the note .of a third person is not to be deemed to be taken in payment unless there is positive proof to that effect. (See. Whitaker v. Whitaker, 4 Hun, 810 ; Raynor v. Laux, 28 id. 35 ; Smith v. Applegate, 1 Daly, 91; Darnall v. Morehouse, 36 How. 511.) In the last-mentioned case, as well stated in the head note:. “ The extinguishment of one cause of action by the substitution of another of the same degree can only be by way of accord.cmd satisfaction which cannot be implied by law, but is the effect of agreement between the parties. The check or note of a third person is not a satisfaction of the engagement unless it be so agreed.”

The law outlined has been followed and more clearly formulated in the recent cases. • Thus, in the case of Kirkham v. Bank of America (26 App. Div. 110), Justice Ingbaham, in writing the opinion of the court, says: The question as to the effect of a receipt by a creditor of a check or draft' of a debtor in payment of a debt has been much discussed, but it seems to be now settled that the receipt of such a check or draft is not a payment of the debt unless there is an express agreement to that •effect, the burden being upon the debtor to prove that agreement. * * * ” And in Hall v. Stevens (116 N. Y. 209) it is '.said: The answer * * * depends upon whether the draft was taken for a present or a precedent debt. If it was for the former, the presumption is that it was agreed to 'be taken in payment, and the burden of proving the contrary rested upon the plaintiff ; while if it was for the latter, the presumption is that it was not taken as payment, and the onus of establishing' that it was so taken rested upon the defendants.”

In the case at bar the note of the National Wrought Steel Company was not given at the time when the debt for the carload of steel accrued, but was subsequently sent to the Midland Steel Company, and as there is no clear or positive evidence of any agreement that the note should be received in payment, I must, for the reasons stated, dissent from the opinion of the majority of the court. I think the judgment should be reversed and a new trial ordered, with costs to the appellant to abide the event.

Judgment affirmed, with costs.  