The party asserting the existence of a novation has the burden of proving that the parties' later agreement was specifically intended as a complete substitute for any and all prior Agreements. First Pennsylvania Bank N.A. v. Triester, 251 Pa. Super. 372, 380 A.2d 826 (1977). In satisfying this burden, defendant must overcome the legal presumption that, "the substituted paper is not taken in discharge, but is received as collateral security for the payment originally undertaken." Citizens' Bank of Wind Gap v. Lipschitz, 296 Pa. 291, 145 A. 831 (1929); First Pennsylvania Bank N.A. v. Triester, 251 Pa. Super. at 382, 380 A.2d at 831.
Whether there is novation is ordinarily a question of fact. But where the party seeking to establish a novation does not and can not produce evidence of mutual assent to the purported novation, no question of fact exists. There is no language in the Louisiana Sale and Mortgage or any other document which supports the defendant's contention that the plaintiff and Luneau intended the Sale and Mortgage to discharge defendant from its guaranty obligation under the Agreement.
Defendant offers no other evidence sufficient to create an inference that plaintiff intended to accept the paper executed by Luneau as a substitute for the obligation of defendant. No question of fact existing, the Sale and Mortgage executed between plaintiff and Luneau did not constitute a novation as a matter of law.
Defendant argues that its obligation to plaintiff is limited to $500,000, the credit limit established by plaintiff in a letter dated August 3, 1985. Plaintiff has established that it subsequently agreed to defendant's request to raise the credit limit to $750,000. Defendant requested the increase in credit when it sold homes to Luneau and submitted invoices to plaintiff for credit in excess of $500,000. Defendant received the face amount of these invoices from plaintiff. Having benefited from its request that plaintiff waive the credit limit, defendant can not now assert the credit limit as a defense.
Under the terms of the Agreement, defendant must pay plaintiff the face amount of Luneau's indebtedness to plaintiff at the time of Luneau's default. Luneau defaulted in March, 1984, at which time Luneau's indebtedness to plaintiff was in the amount of $677,891.
Defendant also owes plaintiff interest since that time at a rate of 1.5% in accordance with the Rate Letter. Defendant is entitled to credit of payment in August of 1985 in the amount of $10,560 and the interest should be calculated accordingly. Judgment will be entered in favor of plaintiff for the total amount so calculated.
Plaintiff agreed to withdraw its motion for leave to file an amended complaint if its motion for summary judgment were granted. The court having granted plaintiff's motion for summary judgment, plaintiff's motion for leave to file an amended complaint is now moot.
AND NOW, this 21st day of November, 1985, upon consideration of plaintiff's motion for summary judgment, defendant's memorandum in opposition thereto, oral argument held thereon, and for the reasons set forth in the foregoing Memorandum, it is ORDERED that:
1. Plaintiff's motion for summary judgment is GRANTED.
2. Plaintiff shall submit to the court the interest calculation within ten (10) days of this Order.