The opinion of the Court of Civil Appeals, see 250 S.W.2d 652, contains a detailed statement of the factual background out of which arose all of the controversies involved in this case. Only such facts as are necessary to an understanding and decision of the law questions before this court will be stated in this opinion.
Two applications for writs of error were granted in this case. In the first, Whiteley-Phillips Drilling Company was petitioner and M. B. Chastain was respondent. In the second, M. B. Chastain was petitioner and Cooper and Reed and National Supply Company were respondents.
There is no serious disagreement between the parties as to the legal incidents of a novation. In the absence of such inconsistent provisions of two contracts that both cannot stand, thereby working an implied novation, it is held that a second contract will operate as a novation of a first contract only when the parties to both contracts intend and agree that the obligations of the second shall be substituted for and operate as a discharge of the obligations of the first. Money v. Dameron, Tex.Civ. App., 70 S.W.2d 291, writ refused; Cooper Grocery Co. v. Strange, Tex.Com.App., 18 S.W.2d 609; 31 Tex.Jur. pp. 394-397, Secs. 9 and 10. In keeping with this general rule it is held that to effect a novation by the substitution of one debtor for another thereby releasing the first, there must be agreement to that effect between all three parties, and a presumption of an intention to release the first debtor will not arise from the mere taking of the second. Scott, Adm'x, v. Atchison, 36 Tex. 76; Id., 38 Tex. 384, 385-390; Pierce Fordyce Oil Ass'n v. Woods, Tex.Civ.App., 180 S.W. 1181, 1183, writ refused; Money v. Dameron, Tex.Civ.App., 70 S.W.2d 291, 293. It is not necessary, of course, that a novation be in writing or that it be evidenced by express words; like any other ultimate fact it may be proved as an inference from the acts and conduct of the parties and other facts and circumstances. Commercial Nat. Bank of San Antonio v. Poulos, Tex.Civ.App., 8 S.W.2d 222, no writ history; Watts' Adm'r v. Smith, 250 Ky. 617, 63 S.W.2d 796, 91 A.L.R. 1206; 31 Tex.Jur., p. 400, § 13. Even so, whether the taking of a new debtor is intended to operate as a release of the liability of the old, in the absence of an express agreement to that effect, is usually a question of fact, and can only become a question of law when the state of the evidence is such that reasonable minds cannot differ as to its effect. McElwrath v. City of McGregor, Tex.Civ. App., 58 S.W.2d 851; Cooper Grocery Co. v. Strange, supra.
The question before us then is this: Does the evidence show a novation as a matter of law, or, on the other hand, is there evidence in the record that could reasonably form the basis of a conclusion that Whiteley-Phillips did not intend by entering into a written contract with Marshall to thereby release Chastain from his obligations under his oral contract?
From the record it appears that Whiteley-Phillips began drilling operations on September 22, 1948, under an oral contract with Chastain by the terms of which Whiteley-Phillips was to be paid at the rate of $6 per foot, plus extras. After the oral contract had been entered into, Chastain in a telephone conversation advised A. O. Phillips, president of Whiteley-Phillips, that he had made a deal with one Warren Wright to pay for drilling the well at the rate of $6.50 per foot and requested Phillips to prepare and enter into a contract with Wright on that basis, rebating 50 cents per foot to him, Chastain, and to confirm by letter. Accordingly, on September 21, 1948, Phillips prepared a contract and sent the same to Chastain for execution by Wright, and by letter confirmed the agreement for the rebate.
The record leaves no doubt that Chastain and Phillips intended that the contract with Wright should operate as a novation, Phillips himself testifying in that connection that he told Chastain that it "would be satisfactory to make the contract to Warren Wright" and that he "had an agreement to release Mr. Chastain." With contract conditions thus existing Whiteley-Phillips proceeded
The contract with Wright was never consummated and on October 28th Chastain wrote Whiteley-Phillips advising that Mr. Humphrey Marshall had decided to pay for drilling the well and advising: "Please write a new contract on same, leaving Mr. Warren Wright off and make for Mr. Marshall's signature." The letter further advised that Marshall would pay only $6 per foot, thereby rendering the rebate agreement ineffective, and that the contract should be handled through Marshall's attorney.
Following receipt of Chastain's letter Whiteley-Phillips prepared a contract, dated back to September 20th, to be signed by both Chastain and Marshall, and Ellison Miles, an officer of Whiteley-Phillips, carried the contract to Shreveport for Chastain's signature. Chastain declined to sign the contract saying, according to the testimony of Miles, that he had made a deal with Marshall to pay the drilling costs, that "he wasn't responsible, he didn't have anything to do" with drilling the well, and that "he would appreciate it if we would make this contract with Marshall and he would guarantee the contract." Miles further testified that Chastain asked "on what terms we would accept Mr. Marshall," and that he answered that "the only way we would take over this contract would be that he (Marshall) would put up the money in the bank in Dallas in escrow."
Money to cover drilling costs was never deposited by Marshall but Whiteley-Phillips investigated Marshall's ability to pay such costs and, being assured on this score by Marshall's banker at Atlanta, proceeded to strike Chastain's name from the contract wherever it appeared and to execute the same with Marshall alone. There is no record evidence that from that time forward Whiteley-Phillips ever communicated with Chastain again with reference to payment of drilling costs until the filing of this suit, although one witness testified that first cost invoices were mailed to him and returned by him. In the meantime, however, Whiteley-Phillips sent invoices covering drilling costs to Marshall on November 15th and on November 30th "as covered by" and "in accordance with" our contract. Copies of the invoices did not go to Chastain. On March 31, 1949, Whiteley-Phillips filed its affidavit of record in the Mechanic Lien Records of Henderson County in which it was stated that "the annexed is a true and correct account of the labor performed and materials furnished by Whiteley-Phillips Drilling Company to Humphrey Marshall of Dallas County" and "that said labor was performed and materials were furnished to said Humphrey Marshall * * * under and by virtue of a written contract between Whiteley-Phillips Drilling Company and Humphrey Marshall * * *." There was no statement in the affidavit that any of the labor or materials were furnished to M. B. Chastain. Attached to the affidavit was the contract with Marshall and an itemized statement of the entire drilling costs all of which were shown to be in account with Marshall and none of which were shown to be in account with Chastain. All charges on Whiteley-Phillips' books were made to Marshall, none to Chastain.
As security for its debt Whiteley-Phillips took a mortgage on two airplanes owned by Marshall, thereafter releasing one, and took from Marshall numerous assignments of oil and gas leases and interests in leases. It neither took nor sought any security from Chastain.
It cannot be doubted that the evidentiary excerpts here detailed offer on their face strong support for the conclusion reached by the Court of Civil Appeals. Viewing the evidence in its light most favorable to Whiteley-Phillips and disregarding that favorable to Chastain we nevertheless find that Whiteley-Phillips agreed to release Chastain in favor of a contract with Wright; that Chastain requested Whiteley-Phillips to substitute the name of Marshall for that of Wright; that Whiteley-Phillips at first declined to comply with this request, preparing the contract for both Chastain and Marshall to sign, but later complied by striking out Chastain's name when he refused to sign; that Whiteley-Phillips when asked on what terms they would accept Marshall on the contract agreed that it
Whiteley-Phillips contends that its position that there was no intention to release Chastain and therefore no novation finds support in the following circumstances: (1) The testimony of its officials that they did not intend that the contract with Marshall should operate as a release of Chastain. But their testimony as to their mental state is overcome by their acts and conduct clearly showing the contrary. (2) The denial by Chastain of the existence of the oral contract, it being contended in this connection that Chastain could not have intended that the contract with Marshall should operate to release his obligations under the oral contract since he never recognized the existence of the oral contract. This is but another instance of alternative positions which one is permitted to take in a civil suit, and the claim by Chastain that the oral contract never existed, and a finding by the trial court that it did, did not prevent him from asserting and prevailing on the further claim in the alternative that if the oral contract did exist he was released by the novation thereof. (3) The statement of Chastain that if Whiteley-Phillips would make the contract with Marshall he "would guarantee the contract." As we view this statement it supports the position of a novation rather than the position of no novation in that it indicates an offer by Chastain to substitute an oral contract of guaranty of Marshall's liability in lieu of his own contract of primary liability and an acceptance of such offer by Whiteley-Phillips. (4) Testimony of Whiteley-Phillips' officials that the account was set up on their books in the name of Marshall because Chastain requested when the written contract was presented to him for his signature that all charges be made to Marshall. This testimony tends to support the view that Chastain was insisting on the substitution of Marshall's obligation for his own and does not support Whiteley-Phillips' position of no novation. (5) Testimony of Chastain that at the time the written contract was presented to him nothing was said about releasing him by any of the parties. The absence of such a statement can be of little comfort to Whiteley-Phillips. It indicates, at most, that there was no express release. If there had been, there would be no occasion for resting the result reached herein on circumstantial evidence. (6) Testimony of Miles and of Bill Campbell, attorney for Marshall, that at the time Marshall and Miles executed the written contract, Miles then stated, in substance, that by entering into the written contract Whiteley-Phillips did not intend to release Chastain. While it is held generally that hearsay and self-serving declarations of this character accompanying an act are admissible against or on behalf of the declarant to explain the act and to show the intent of the declarant, the rule appears to be applied only in cases where the declaration is consistent with and explanatory of the act. We doubt that declarations of intention accompanying an act but wholly inconsistent therewith should be admitted to prove intent. This court said in Ex parte Blumer, 27 Tex. 734, 744, that such declarations "are to be credited as the index of his intention, when not
From our examination and analysis of the record we must hold that there is in the record no evidence of probative force to support the finding of the trial court that Whiteley-Phillips did not intend by its written contract with Marshall to release Chastain from the obligations of his oral contract. On the contrary, the evidence that it did so intend is so conclusive that we hardly see how reasonable minds could differ with respect thereto.
The application of Chastain presents these questions: That there is in the record no evidence of probative force to support the trial court's judgment against him in favor of National Supply Company for the sum of $2,176.13 as the value of certain oil well equipment, and no evidence to support the judgment against him in favor of Cooper and Reed for the sum of $1,310 for services rendered in building roads, digging pits and preparing the location for the drilling of the well; and that the court was without authority to render judgment against him for attorneys' fees in favor of National Supply Company in the sum of $350 and in favor of Cooper and Reed in the sum of $250. Chastain's specific contention is that the equipment and services were contracted for by one Mitcham who, although an agent of Chastain in the Tri-Cities field in Henderson County in the operation of certain producing leases since 1946, was not the agent of Chastain but the agent of Humphrey Marshall in his activities in connection with the drilling of this particular well.
The claim of National Supply Company rests upon the apparent authority of Mitcham to bind Chastain for the purchase of oil well drilling equipment known as a "Christmas tree" at a cost of $2,048.15 and 450 feet of pipe at a cost of $127.98.
The doctrine of apparent authority is based on estoppel, and one seeking to charge a principal through the apparent authority of an agent to bind the principal must prove such conduct on the part of the principal as would lead a reasonably prudent person, using diligence and discretion, to suppose that the agent has the authority he purports to exercise. Great American Casualty Co. v. Eichelberger, Tex.Civ.App., 37 S.W.2d 1050, writ refused. In this case National Supply Company rests its case upon the conduct of Chastain in permitting Mitcham to make purchases in his behalf from such company on prior occasions. The only testimony in the record with regard to such prior purchases comes from Chastain himself, as follows:
National Supply Company offered as witnesses on the trial of the case one N. S. Shipman who had been the company's salesman in the Tri-Cities field since 1945, and W. P. Smith, Division Credit Manager of the company in charge of credits in the area where the Tri-Cities field was located, but there is in the record not one word of testimony from either of such witnesses as to prior sales made to Chastain through Mitcham. There is no
With respect to the claim of Cooper and Reed, the evidence viewed in its most favorable light in support of the judgment, reflects that Cooper and Reed, who were in the bulldozer business, had been employed by Mitcham on prior occasions to do dirt work for Chastain in the Tri-Cities field on the Riddlesperger and Baker leases, and that invoices on such work were made out to Chastain and paid by Chastain; that Mitcham represented that the claimants were being employed to do the work in question for Chastain; that the first invoice was made out to and forwarded to Chastain for payment but was returned by Chastain's office manager to Mitcham on September 27, 1948, with a letter stating: "Please have them bill the $260.00 to Mr. Warren Wright, % M. B. Chastain, 725 Giddens Lane Bldg., Shreveport, La., as this is his bill, and we do not want to run the same through our books. Mr. Chastain will see that the bill is paid"; that claimant's first and second invoices were then billed to Warren Wright but they were returned unpaid; that at about the time claimants completed their work Mitcham asked them to bill all of their invoices to Humphrey Marshall which they did but the bills remained unpaid.
If the foregoing evidence is not such as to support the trial court's finding that Mitcham had express authority to represent Chastain in engaging the services of Cooper and Reed, which it is unnecessary to decide, it will at the very least support the trial court's finding that Mitcham had apparent authority to engage such services on behalf of Chastain.
Cooper and Reed's claim for services arose and their cause of action therefor accrued prior to the effective date of the amendment to Article 2226, Vernon's Annotated Statutes, whereby the amount of attorneys' fees recoverable in cases of this type was changed from an amount "not to exceed twenty dollars" to "a reasonable amount." The amendment of the statute was not retroactive. Government Personnel Mutual Life Ins. Co. v. Wear, Tex.Sup., 251 S.W.2d 525. The trial court was without authority to allow Cooper and Reed a recovery of attorneys' fees in excess of $20.
The judgments of the courts below in favor of National Supply Company against M. B. Chastain are reversed and judgment is here rendered that as against M. B. Chastain National Supply Company take nothing.
GRIFFIN, SMITH and WILSON, JJ., dissenting.
CULVER, J., not sitting.
SMITH, Justice (dissenting).
I respectfully file this dissent to that portion of the majority opinion relative to the controversy between Mr. Chastain and the Whiteley-Phillips Drilling Company. Mr. Chastain made the contention that he had not entered into an oral contract with Whiteley-Phillips, but that in the event the court should find that such an oral agreement existed, then there was a novation thereof when Whiteley-Phillips executed the written contract with Mr. Humphrey Marshall. The burden of proof rested with Mr. Chastain to prove that Whiteley-Phillips accepted Mr. Marshall as a new debtor with the intent to release Mr. Chastain. While it is true that assent to, and acceptance of, the terms of novation ordinarily need not be shown by express words to that effect, but the same may be implied from the facts and circumstances attending the transaction and the conduct of the parties thereafter; nevertheless, the facts and circumstances must be such that the intention to work a novation may be clearly implied. 66 C.J.S., Novation, § 4a, page 684. The trial court found as a fact that Mr. Chastain failed to discharge his burden, and, therefore, held that he was liable under the oral contract for all obligations which accrued up until October 28, 1948. The Court of Civil Appeals held, as a matter of law, that there was a novation and the majority opinion has affirmed such holding. In so holding, the majority has shifted the burden of proof. The question for us to determine is this: Has Mr. Chastain discharged his burden through competent evidence showing that it was the intention of Whiteley-Phillips to release him and accept Mr. Marshall's contract in lieu of the original debtor, Mr. Chastain? To uphold the holding of the Court of Civil Appeals in this case we would necessarily be compelled to hold that, as a matter of law, there was no evidence of probative force supporting the findings of fact and judgment of the trial court that Mr. Chastain had failed to discharge his burden of proving a novation. At this point, I wish to set out a summary of testimony of the witnesses, M. B. Chastain, respondent; Vernon Whiteley, an officer of Whiteley-Phillips; Ellison Miles, also an officer of Whiteley-Phillips; A. O. Phillips, an officer of Whiteley-Phillips; W. E. Rembert, office manager for Mr. Chastain, and Bill Campbell, attorney for Mr. Marshall. This testimony is on the question of novation.
Mr. M. B. Chastain testified:
Vernon Whiteley testified as follows:
Ellison Miles testified:
The defense of novation is based on circumstantial evidence that Whiteley-Phillips impliedly intended to release Mr. Chastain. But, in my opinion, it only raises an inference, and does not meet the requirement that the intention to work a novation must be clearly implied. At most, the evidence presented an issue of fact, which the trier of the facts has determined against Mr. Chastain. Not only is it necessary to prove the creditor took a new debtor, but it must also be made to appear, in order to release the old debtor, that there was an agreement to look to the new debtor alone. The mere taking of a new debtor for the old debt would not, standing alone, be sufficient to show novation. Scott v. Atchison, 36 Tex. 76; Id., 38 Tex. 384, 385; M. Gimble & Sons v. King, 43 Tex.Civ. App. 188, 95 S.W. 7; Rushing v. Citizens' National Bank, Tex.Civ.App., 162 S.W. 460, writ refused; Pierce-Fordyce Oil Ass'n v. Woods, Tex.Civ.App., 180 S.W. 1181, 1183, writ refused. At this juncture it might be well to analyze the testimony and see if it isn't fair to say that reasonable minds can differ as to the effect of the evidence. Mr. Chastain admits that Whiteley-Phillips never, at any time, mentioned the matter of releasing him from his obligation under the contract. But he claims that the fact that Whiteley-Phillips was willing to accept Mr. Warren Wright is evidence that it intended to release Chastain when it entered into the contract with Mr. Marshall. The trial court said it was not. Mr. Wright entered into the picture at the instance of Mr. Chastain some time after the oral agreement and at a time when Whiteley-Phillips only knew of Mr. Chastain in the transaction. Whiteley-Phillips was willing to accept Mr. Wright because it knew that Mr. Wright was financially able to carry out the contract. Then, after Mr. Wright failed to enter into the contract, Mr. Chastain suggested Mr. Marshall. This was about October 28, 1948, and the witnesses testified that they had never heard of Mr. Marshall until this suggestion was made by Mr. Chastain. The trial court, no doubt, could understand why it was to the interest of Mr.
The trier of the facts is the judge of the credibility of the witnesses and the weight to be given their testimony. No doubt, the trial court considered the underlined testimony above to mean that Mr. Miles told Mr. Chastain that "we had agreed to drill the well with him and not Mr. Marshall." Of course, if one wants to view the matter from a technical standpoint and say that the first italicized sentence has no relation to the italicized sentence immediately following you could say that Mr. Miles didn't tell Mr. Chastain that he had agreed to drill the well for him and not Mr. Marshall. But, in view of the trial court's findings and judgment, we must say that the court concluded from this and other evidence that Whiteley-Phillips was still looking to Mr. Chastain to pay his obligations under the oral contract.
The respondent, Mr. Chastain, further contends that the fact that his name was stricken from the contract is conclusive evidence of a novation. He contends that this is true for the reason that the notation at the top of the contract "all strikeouts of the name of M. B. Chastain are approved." Now, are we going to follow this contention, or follow the evidence, which definitely and clearly explained this notation? Mr. Campbell testified "I am pretty positive I made a statement to them (Miles and Marshall at the time the contract was signed) about the possibility that all these strikeouts might be considered by some party as an alteration".
The majority refers to certain evidentiary excerpts and says they offer, on their face, strong support for the conclusion reached by the Court of Civil Appeals. What the Court of Civil Appeals concludes in regard to the facts is not the test. The trial court had the sole right to weigh the evidence. It had the right to say, and reasonably so, that from all the facts and circumstances in this case, the taking of additional security from Mr. Marshall did not show a novation as a matter of law. The taking of collateral security or promise from a debtor or a stranger does not effect a novation, inasmuch as one may accept money or performance of a contract from
Reverting now to the contention of respondent, Mr. Chastain, with reference to the effect of the notation "all strikeouts of the name of M. B. Chastain approved", Mr. Campbell testified that this notation was put at the top of the instrument to avoid the possibility that some party would think the contract had been altered. He also testified that at the time this notation was being made, he heard Mr. Miles tell Mr. Marshall that "we are still looking to Mr. Chastain on this." At the time this last-quoted testimony was offered, the respondent, Mr. Chastain, objected to the introduction thereof "for the reason that it was not made in the presence of M. B. Chastain and would not be binding on him in any manner". The objection was overruled, and thereupon, Mr. Winn, an attorney for Mason Bland, further objected to the question and answer and asked that the answer be stricken "because any statement made by Ellison Miles would be a self-serving declaration * * *". This objection was overruled. I think there was sufficient evidence in the record, aside from this testimony, to support the findings of the trial court. However, in my opinion, this testimony was admissible on the vital issue of the intention of Mr. Miles at the time the name of Mr. Chastain was stricken from the contract and the notation made. When question of intent is an issue, declarations may be relevant evidence, and when acts are admitted in evidence, declarations accompanying such acts and explanatory of them are always admissible. Southland Life Ins. Co. v. Greenwade, Tex.Civ.App., 143 S.W.2d 648, writ granted; affirmed, 138 Tex. 450, 159 S.W.2d 854; O'Fiel v. Janes, Tex.Civ.App., 269 S.W. 1074; affirmed, Tex.Com.App., 280 S.W. 163; Prater v. Traders & General Ins. Co., Tex.Civ. App., 83 S.W.2d 1038; Whitlow v. Durst, 20 Cal.2d 523, 127 P.2d 530; Ayoob v. Ayoob, 74 Cal.App.2d 236, 168 P.2d 462; Commonwealth v. Trefethen, 157 Mass. 180, 31 N.E. 961, 24 L.R.A. 235; Mutual Life Ins. Co. v. Hillmon, 145 U.S. 285, 12 S.Ct. 909, 36 L.Ed. 706; 31 C.J.S., Evidence, § 256, pages 1007, 1008.
In this case, Whiteley-Phillips has made the contention throughout that it never, at any time, had any intention of releasing Mr. Chastain. Ellison Miles had so told Mr. Chastain just prior to meeting with Mr. Marshall and his attorney, Mr. Campbell. The evidence that he made the same statement to Mr. Marshall was admissible. As stated by the court in the case of Mutual Life Ins. Co. v. Hillmon, supra [145 U.S. 285, 12 S.Ct. 912]: "The existence of a particular intention in a certain person at a certain time being a material fact to be proved, evidence that he expressed that intention at that time is as direct evidence of the fact as his own testimony that he then had that intention would be." In this same case, the court, in discussing the admissibility of letters written by a party expressing his intention to make a journey, said: "A man's state of mind or feeling can only be manifested to others by countenance, attitude, or gesture, or by sounds or words, spoken or written. The nature of the fact to be proved is the same, and evidence of its proper tokens is equally competent to prove it, whether expressed by aspect or conduct, by voice or pen. When the intention to be proved is important only as qualifying an act, its connection with that act must be shown, in order to warrant the admission of declarations of the intention. But whenever the intention is of itself a distinct and material fact in a chain of circumstances, it may be proved by contemporaneous oral or written declarations of the party." This case, as well as the case of Commonwealth v.
For the reasons stated, the judgment of the Court of Civil Appeals that Whiteley-Phillips Drilling Company take nothing as against M. B. Chastain should be reversed, and the judgment of the trial court affirmed.
I agree with the opinion of the majority as to the claims of respondents, Cooper and Reed and National Supply Company against the petitioner, M. B. Chastain.
GRIFFIN and WILSON, JJ., join in this dissent.