91-055 | Mont. | Jul 2, 1991
No. 91-055
IN THE SUPREME COURT OF THE STATE OF MONTANA
GARDNER C. WAITE,
Plaintiff and Respondent,
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DAVID ANDREASSI and
JEFFERSON Z. AMACKER, J ' J, t,!
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Defendants and Appellants. .I.
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APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Larry W. Moran, Judge presiding.
COUNSEL OF RECORD:
For Appellant Jefferson Z. Amacker:
Stephen M. Barrett, Kirwan & Barrett,
Bozeman, Montana
For Respondent:
H. A. Bolinger, Bolinger & Quist,
Bozeman, Montana
Submitted on Briefs: May 10, 1991
Decided: july 2, 1991
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
Jefferson Amacker appeals from the order of the District Court
of the Eighteenth Judicial District in Gallatin County, granting
summary judgment to the plaintiff. We affirm the District Court.
The sole issue is whether the District Court erred when it
concluded, as a matter of law, that the parties' subordination
agreement did not constitute a novation which extinguished the
original agreement between the parties.
In October 1984, David Andreassi and Jefferson Amacker
purchased property in Manhattan, Montana from Gardner C. Waite.
Andreassi and Amacker paid $5000 down and secured payment of the
balance of $50,000 by executing and delivering a trust indenture
note. The borrowers desired to remodel the property and sought a
loan of $105,000 from American Federal Savings & Loan Association
of Bozeman. American Federal informed the borrowers that it would
not make the loan unless it had a first mortgage on the property.
The borrowers persuaded Waite to subordinate his claims to that of
American Federal, and a subordination agreement was executed by the
parties.
The borrowers subsequently defaulted in their payments, and
American Federal enforced the default provision of their note and
sold the property. Waite then sued on the original promissory
note. Default judgment was entered against Andreassi for failure
to appear. Amacker answered, asserting affirmative defenses of
accord and satisfaction and election of remedies. Motion for
summary judgement was made by Waite. In his brief in opposition
to summary judgment, Amacker abandoned his accord and satisfaction
defense in favor of a novation defense. He did not amend his
answer to reflect that change.
The District Court ruled that Amackerls novation defense
failed to meet both the statutory and common law criteria for
novation, and that he had not amended his answer to plead novation
as an affirmative defense. In addition, the court found that there
was no new consideration for a novation, or an extinguishment of
Waitets right to sue on the note. The court granted Waitels motion
for summary judgment, and found Amacker and Andreassi jointly and
severally liable for principal, interest, costs, and attorney fees.
Amacker appeals from that judgment.
Amacker contends that the subordination agreement executed by
the parties constituted a novation ofthe original promissory note.
He states that the language contained within the subordination
agreement clearly sets out the options available to Waite, and that
Waite did not pursue them. The provision of the subordination
agreement relied upon by the defendant reads in pertinent part:
4. COLLECTION OF THE CREDITOR'S CLAIMS. Borrowers
shall have the right, at any time, to pay all or part of
the debt owed by them to Creditor provided that American
Federal Savings and Loan consents, in writing, to such
payment. On or after April 1, 1988, Creditor shall have
the right, upon ninety (90) days notice to Borrowers, to
demand payment in full of Borrowers1 debt to Creditor
and, in the event such payment is not made, to (1) assume
Borrowers' existing indebtedness to American Federal
savings and Loan or, in the alternative, to (2) pay the
debt owed by Borrowers to American Federal Savings and
Loan; provided that, in either event, Borrowers shall
have no further interest in the above-described real
property and Borrowers' interest shall vest in Creditor.
A novation is the substitution of a new obligation between
the same parties with intent to extinguish the old obligation.
Section 28-1-1502(1), MCA. The subordination agreement executed
by the parties does not disclose any intent by the parties to
extinguish the old obligation. In fact, other terms in the
contract make it clear that the parties' intent was to the
contrary. Paragraph 13 provided as follows:
13.PAYMENT OF DEBT OWED CREDITOR. Creditor and
Borrowers agree that the debt owed Creditor by Borrowers
shall be due and payable on April 1, 1988, or any time
thereafter, as provided in paragraph 4, but, in no event,
shall payment in full be made later than one year after
all claims of American Federal Savings & Loan are paid
in full.
Paragraph 13 preserves defendants' obligation to pay the
balance due under the original note, even after American Federal
was paid in full
As we stated in Harrison et al. v. Fregger et al., 88 Mont.
In order to effect a novation there must be a clear and
definite intention on the part of all concerned that such
is the purpose of the agreement, for it is a well-
settled principle that novation is never to be presumed
* * * ; the point in every case, then, is, did the
parties intend by their arrangement to extinguish the old
debt or obligation and rely entirely on the new, or did
they intend to keep the old alive and merely accept the
new as further security, and this question of intention
must be decided from all of the circumstances.
The defendant contends that since the parties submitted
conflicting affidavits regarding what they intended by the
subordination agreement, there was an issue of fact which should
have been decided by a jury. However, 5 28-3-303, MCA, provides
in relevant part that tf[w]hena contract is reduced to writing, the
intention of the parties is to be ascertained from the writing
alone if possible .. . . II
In this case, it was possible for the District Court to
determine the intention of the parties from the terms of the
subordination agreement itself. A review of that agreement reveals
no genuine issue of material fact, and accordingly, Waite was
entitled to a judgment a s a m a t t e r of law.
We affirm the judgment of the District Court.
We Concur:
July 2, 1991
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Stephen M. Barrett
Kirwan & Barrett
P.O. Box 1348
Bozeman. MT 59771-1348
H. A. Bolinger
Bolinger & Quist
P.O. Box 1047
Bozeman, MT 59715
ED SMITH
CLERK O F THE SUPREME COURT
STATE OF MONTANN