Schillace v. Channell Shopping Partnership

Brief Fact Summary. Mrs. Shillace, (Plaintiff), filed suit against Channell Shopping Partnership (Defendants), seeking to dissolve the seizure of certificates of deposit on the ground that the funds seized were derivative proceeds of the life insurance policy on her late husband and therefore exempt from seizure. Defendants contends that the debt at issue arose after payment of the life insurance proceeds to Plaintiff and therefore such proceeds are not exempt from seizure.

Synopsis of Rule of Law. Whether a novation has been executed depends on the intent of the parties. The character of the transaction, the facts and circumstances surrounding it, as well as the terms of the agreement itself may demonstrate the intent of the parties.

Facts. Plaintiff’s late husband entered into a commercial lease agreement with Defendants for the lease of space located within a shopping center. Plaintiff continued to operate the business located within the shopping center after her husband died as administratix of his estate. Plaintiff failed to make rental payments and removed merchandise and other moveable from the leased premises to her son’s store. Defendants filed suit on the lease and obtained writ of sequestration ordering the seizure of all goods from Plaintiff’s son’s store.
To avoid the seizure, the parties executed an agreement whereby Plaintiff paid Defendants $15,000 and executed a promissory note in the amount of $27,150. Plaintiff defaulted on the note. Defendants filed and won a new suit against Plaintiff. Defendants then seized certificates of deposit belonging to Plaintiff pursuant to garnishment proceedings. Plaintiff then filed the instant suit seeking to dissolve the seizure of certificates as derivatives of a life insurance policy that was paid after the original debt arose. Defendants contend the execution of the promissory note amounted to a novation and therefore represents a new debt that arose after payment of the insurance proceeds.

Issue. Whether the promissory note between the parties amounted to a novation and therefore represents a new debt that arose after the insurance proceeds were paid to Plaintiff.

Held. Yes. The parties intended the note to be a novation.

Discussion. The debt under the lease was novated by the execution of the promissory note. The respective obligations were different in date, amount, method of payment, date of payment and signatories. Both parties clearly intended for a novation to take place when they swore under oath during Plaintiffs deposition that the cash payment and execution of the promissory note were in full settlement of Defendants’ suit and necessarily the underlying obligation under the le