Case Name: Thomas McLaughlin, Respondent, v. Peter Gillings, Appellant
Court: New York Supreme Court, Appellate Term
Jurisdiction: New York
Decision Date: 1896-09
Citations: 18 Misc. 56
Docket Number: 
Parties: Thomas McLaughlin, Respondent, v. Peter Gillings, Appellant.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 18
Pages: 56–60

Head Matter:
Thomas McLaughlin, Respondent, v. Peter Gillings, Appellant.
(Supreme Court, Appellate Term,
September, 1896.)
Money had and received — Promise to pay another — novation.
Plaintiff, a contractor, being indebted to defendant and one R., drew á draft for the aggregate amount due to them in favor of the defendant, who agreed that when the same was collected he would pay R. therefrom the amount due to him. This he subsequently refused to do; and R. collected his claim from the plaintiff. Held, that the transaction did not constitute a novation, and that plaintiff was entitled to maintain an action for money had and received to recover the surplus thus received by defendant.
Appeal by defendant from judgment of the Eleventh District Court.
Earley & Prendergast, for appellant.
Robert Lyon, for respondent.

Opinion:
McAdam, J.
According to the facts as found by the justice the plaintiff was- employed by General Earle to do certain work on the Washington House, between One Hundred and Fifty-ninth and One Hundred and Sixtieth streets, this city. The defendant did certain of the work for the plaintiff, and his bill amounted to $-290. He wanted his money, and the plaintiff promised to give him an order on General Earle for it, but added: " Mr. Robinson, my foreman, has $75 coming to him, and I would; like to make the .order $365, so.that when you collect the order, you may turn $75 over to Mr. Robinson, which will settle my account with him." The defendant agreed to this; the order was accordingly made out for $365, and the defendant obtained the money on it from the drawee, but refused to pay Robinson his $75.
The plaintiff, upon demand therefor, paid Robinson the $75 he owed him, and brought the present action to recover the amount from the defendant. The plaintiff declared for "money paid by mistake," but on the trial, without objection, amended his complaint by declaring for " money had and received."
Robinson was present when the- arrangement was made, and assented to it, and from this the defendant argues that there was a complete substitution of parties, that the plaintiff was discharged, and the defendant instead became the debtor of Robinson.
The legal results flowing from the acts of the parties will be separately considered.
First. General Earle, by accepting the plaintiff's draft, admitted that he .had funds of the drawer sufficient to meet it. Daniel on Heg. Inst., § 534. Though, as between himself and the drawer, it was only prima facie evidence of the fact (id.), yet as the presumption was neither successfully rebutted nor questioned in the court below, we must assume that the parties intended it should receive the credit which presumptions are accorded in courts of justice. Herman on Est., § 348.
Second. The transaction did not amount to a novation. The plaintiff owed Robinson $75. The defendant was not indebted to ' either, and did not agree to become Robinson's debtor in the place of the plaintiff. " The promise by a third person to apply the debt- or's own property to pay his debt is not a promise by the third person to pay it himself." Lippincott v. Ashfield, 4 Sandf. 615; DeColyar on Prin. and Surety (Am. Notes by Morgan), 84, 85. Ho new debt was substituted for the old one. The defendant simply agreed to collect $75 for the plaintiff, and pay it over to Robinson, who agreed to accept the money from the defendant as the plaintiff's agent; but until the actual payment of the money the plaintiff continued to be Robinson's debtor. Such is the construction of the transaction as the 'parties understood it, and effect should be given to their intention. Hovation is never presumed, and must be clearly established by a full discharge of the original debt, the express terms of the agreement, or the acts of the parties, whose intention must be clear. 16 Am. & Eng. Ency. of Law. 868; 5 Lawson's R. & R., § 2572.
To constitute a novation there must be a mutual agreement among three parties, the creditor, .his immediate debtor, and the intended new debtor, by which the liability, of the last named is accepted in the place of the original debtor in discharge of the original debt; for if the liability of the original debtor continues there is no consideration for the new contract, and no valid substitution takes place. Addison on Cont. (2d Am. ed.) 1004; Pothier on Oblig. (3d Am. ed.), marg. p. 546; Clarke on Cont. (Hornbook Series), 612; 1 Parsons on Cont. (6th ed.) 218; Jaudon v. Randall, 47 N. Y. Super. Ct. 374.
In Cuxon v. Chadley, 3 B. & C. 591, the court said: " Sweet is not proved, ever to have said, ' I will take you, Robert, as my debtor, and discharge James; ' he is not proved ever to have said or done that which would have the effect of discharging James." Hence, there was no novation.
Whether there has been a consent of all the parties sufficient to constitute a novation, is a question for the jury. Dean v. Bd. of Education, 73 Mich. 165; Lynch v. Austin, 51 Wis. 287. The court below found that there had been no novation; that the transaction was merely an attempt by the plaintiff to pay Robinson by means of the draft on Earle. If the defendant when he collected the draft had performed his promise and paid the $75 over to Robinson the debt against McLaughlin would have been extinguished and every possible controversy avoided.
Third. The fact that the transaction gave Robinson the right to sue Gillings on his promise to pay him the $7 5 owing by McLaughlin (Lawrence v. Fox, 20 N. Y. 268, and kindred cases), if he had elected that remedy, did not, in the absence of such election (Mills v. Parkhurst, 126 N. Y. 89), prevent Robinson from enforcing his demand against McLaughlin, his original debtor, whom he had not released.
A- cannot discharge his debt to B. by arranging with 0., even upon a good consideration, that the latter will pay the debt to B. ; nor can he compel B. to sue C., on his promise to pay. Even if B. should at first assent to the suggestion he could not he held hound, in the -absence of proof of novation, by his actual acceptance, or some new consideration to him whereby he had concluded himself upon the subject. The direction to 0. until payment by him or such conclusive acceptance -would be revocable by A. as a mere naked authority.
Judge Comstock, in his dissenting opinion in Lawrence v. Fox, supra, made this pertinent statement (which is not at variance with the decision there rendered): " It is plain that Holly, who loaned the money to the defendant and to whom the promise in question was made, could at any time have claimed that it should he performed to himself personally. He had lent the money to the defendant, and at the same time directed the latter to pay the sum to the plaintiff. This direction he could countermand, and if he had done so, manifestly the defendant's promise to pay according to the direction would have ceased to exist."
In Kelly v. Roberts, 40 N. Y. 439, the court,- in reiterating the same principle, illustrates it by holding that if. A. hand money to Ms own servant or agent, with instructions to carry and deliver to B., wMch the servant or agent agrees to do, such instructions are revocable; for " Until such instructions have been acted upon in some manner, the servant continues servant of A., and only his servant. So, where one hands-money to Ms servant, agent or friend, with a request that he visit the city and therewith pay a note due or about to become due, can it be seriously questioned that if, before anything further is done, such one conclues to use the money for some other purpose, or to pay some other debt, he may do so? I think not. And the cases cited (Lawrence v. Fox, 20 N. Y. 268; Berly v. Taylor, 5 Hill, 533; Williams v. Fitch, 18 N. Y. 546; Gridley v. Gridley, 24 id. 130, and Lowry v. Stewart, 25 id. 239) do not hold the contrary nor anything like it" The simple inquiry, • whether if a creditor directs his debtor to pay Ms note to a third person, and he assents, such creditor can revoke the direction, has never been decided in the negative, and, I think, it cannot be. so decided on principle. Suppose, for - example, the debtor having received such a direction and agreed thereto, nevertheless neglects to pay to any one. Can it be doubted that the original creditor could maintain an action for the original debt? It would be a good defense that he had paid it to a third person pursuant to such an agreement;' but the mere agreement unperformed and not acted upon at all, would be no defense." See also Aetna Nat. Bank v. Fourth Nat. Bank, 46 N. Y. 82.
Instead of availing himself of the promise made by the defendant for his benefit, Robinson elected to pursue McLaughlin, his original debtor, from whom he obtained satisfaction of Ms demand, thereby effectually releasing Gillings, the defendant herein, from all obligation to him resulting from Ms promise to pay, leaving McLaughlin, the plaintiff, to the remedy suggested by the court in Kelly v. Roberts, supra, against Gillings, the defendant, viz., recover back the $75 on the unperformed contract; for until appropriation according to the directions given that sum remained the money of McLaughlin.
Fourth. The promise to pay Robinson was conditioned upon the collection of the money, for until then there would be nothing in the defendant's hands to pay with. When he received the money and failed upon demand to pay the plaintiff's debt to Robinson, he was guilty of a breach Of his contract with the plaintiff, who was still interested in having his debt extinguished, and this interest was sufficient to enable the plaintiff to maintain the action for the breach.
Bobinson testified that he owed nothing to the defendant, a circumstance which, if true, proves that the defendant's refusal to pay over the $75 was capricious and in bad-faith, the risk of which Bobinson never agreed to assume.
Robinson did riot regard the order as effecting a novation, for he demanded payment of the $75 from the plaintiff, and the latter, apparently of the same mind,. handed over that amount to Bobinson, and then resorted to this action for the breach in the form of money had and received to and for his use. Such an action is maintainable where a party receives money belonging to another' which in equity and upon principles of natural justice he should pay over to him. Cow. Tr., § 305; Roberts v. Ely, 113 N. Y. 128; Roberts v. Ellwood, 116 id. 652; 4 Wait's Act. & Def. 469; Kingston Bank v. Eltinge, 66 N. Y. 625; Chapman v. Forbes, 123 id. 532. No fault is found with the form of remedy, the main objection being thatBobinson, and not the plaintiff, had whatever right of action existed against the defendant.
Bobinson never obligated himself to enter into any legal controversy with the defendant. He assented only to the proposition that the defendant, as the plaintiff's agent, might pay him the $75 in discharge of the plaintiff's obligation; but the defendant did not and would not pay it over, and Bobinson accordingly pursued his remedy against the person to whom he had given a credit. This he had a right to do. , '
The defendant undertook to excuse the nonpayment of the money to Bobinson by- the plea that there was an understanding that it should be credited on an account which Bobinson owed him. But the evidence so completely disproved any such contention that the appellant, in his points, states that no argument is advanced on the appeal to sustain this.defense, and it may, therefore, be regarded as no part of the case presented for review.
This judgment must be affirmed, with costs.
Daly, P. J., and Bischoff, J., concur.
Judgment affirmed, with costs.