Background
Bourdeau Bros., an agricultural-supply company, delivered cattle feed to a dairy farm owned by Melissa and Jason St. Pierre. The couple had signed a 2010 credit application, and BBI invoiced them for feed deliveries. After the couple separated in 2018, they agreed between themselves that Melissa would no longer be responsible for future farm expenses. Jason continued to operate the farm and continued receiving feed from BBI.
In 2019, BBI and Jason agreed that he would continue making some payments and would pay the full balance after the divorce through refinancing, loans, or a property sale if necessary. Jason died before the divorce was finalized. BBI sued Melissa for breach of contract, unjust enrichment, and detrimental reliance. Following a bench trial, the civil division concluded that the 2019 agreement constituted a novation releasing Melissa and also ruled that BBI had waived its unjust-enrichment claim.
The Court’s Holding
The Vermont Supreme Court held that the evidence did not support a novation. A novation requires a mutual agreement, including the creditor’s clear agreement to discharge the original debtor. Although the record showed that BBI expected Jason to pay the farm debt, it contained no evidence that BBI agreed to release Melissa from any contractual obligation.
The Court also held that BBI failed to preserve its arguments concerning unjust enrichment. BBI did not oppose Melissa’s summary-judgment motion on that claim and did not challenge the trial court’s statement at trial that summary judgment had disposed of the equitable claims. The Court therefore reversed the novation ruling and remanded for adjudication of the breach-of-contract claim only.
Key Takeaways
- A creditor’s expectation that one debtor will pay does not, by itself, release another debtor.
- Novation cannot be presumed; it requires evidence of mutual assent to substitute and discharge obligations.
- A party must clearly raise an issue in the trial court to preserve it for appeal.
Why It Matters
The decision underscores the demanding proof required to establish novation in commercial-debt disputes. Arrangements with one obligor to manage or repay a debt do not eliminate another party’s potential liability absent evidence that the creditor agreed to that result.
On remand, the civil division must determine whether BBI has an enforceable contract claim against Melissa and whether she has defenses to that claim.