Appellees, as complainants, brought suit against appellants, as defendants, to foreclose a junior mortgage. The joint and several answer of defendants admitted the execution of the notes and mortgage sued on but as a defense to the foreclosure interposed a parole agreement entered into by the parties in which the maturity of the notes and mortgage was extended and under which M. L. Woodward, the original mortgagee, took possession of the mortgaged premises with the right to collect the rents and profits therefrom and apply the same to the payment of the taxes and up-keep, the interest on the senior and junior mortgage, and when said amounts were paid the balance to be applied to the payment of the principal of the senior mortgage until paid and then to the payment of the principal of the junior mortgage until paid. It is also alleged that by said agreement the rents and profits so taken and applied were in lieu of all payments due and to become due on said mortgage, that the premises were delivered to the mortgagee pursuant thereto and that the mortgagee went into possession of said premises under said agreement and collected large sums thereunder which have not been accounted for.
By permission of the chancellor the complainants amended their bill of complaint to allege that if any such agreement as the foregoing was entered into by the parties it was *Page 361 breached and abandoned by the defendants who took charge of and are now in possession of the premises. A demurrer to the amended bill was overruled and defendants filed their answer denying the breach of the agreement. A final decree was entered for complainants and the present appeal is from that decree. This Court, two Justices dissenting, affirmed the decision below in the foregoing opinion written by Mr. Commissioner DAVIS, filed March 1, 1932. In view of the unsatisfactory condition of the evidence a re-hearing was granted to determine whether or not the complainants should be permitted to foreclose in view of the defense asserted by the defendants.
Appellants contend that the agreement entered into by the parties and asserted by them (appellants) as a defense to the foreclosure amounted to a novation of the mortgage indebtedness and that now the only relief open to complainants lies in the enforcement of said agreement.
A novation is the substitution of a new debt or obligation for an existing one. It consists of two stipulations, one to extinguish the old debt and the other to substitute the new one in its place. Novation has been held to arise in different ways. The debtor and the creditor may remain the same and a new debt take the place of the old one or the debt may remain the same and a new debtor substituted, or the debt and debtor may remain the same and a new creditor substituted. Whether or not a novation arose in this case is one for determination on proof of the essential elements of the alleged agreement, the intention of the parties thereto and whether or not it was in good faith lived up to by all the parties.
As against the contention of appellants, appellees contended that the agreement brought in question cannot have attributed to it the importance claimed because it was in *Page 362 parole and to do so would modify the mortgage, a written instrument. The rule is well settled that an executory or parole agreement will not be permitted to abrogate or modify a written or sealed instrument but this rule is not without its exceptions. A written contract or agreement may be altered or modified by an oral agreement if the latter has been accepted and acted upon by the parties in such manner as would work a fraud on either party to refuse to enforce it. 6 R. C. L., 917. Bishop v. Busse, 69 Ill. 403; Pratt v. Morrow, 45 Mo. 404; American Food Company v. Halstead, 165 Ind. 633, 76 N.E., 251; Monroe v. Perkins, 9 Pick (Mass.) 298; Beach v. Covellard,4 Cal. 316; Siebert v. Leonard, 17 Minn. 433; Bassini v. Brockner, 10 N.J.L. J., 1051.
It is alleged that the parole agreement involved here was so acted upon. The evidence tends to prove the agreement, that both parties accepted its terms, that the mortgagee went into possession of the mortgaged premises and that he collected rents alleged to have amounted to several hundred dollars, the record is not clear on the fact of just how much was collected.
The fact of the mortgagee getting in possession of the premises to work it out of debt in the manner alleged may have been sufficient consideration to support the agreement and if made it was a good defense to the foreclosure suit. Armton Corporation v. Brown, 101 Fla. 764, 135 So.2d 802. In the state of the pleadings, if the agreement was made the burden of showing its breach by the mortgagors and the resultant inability to claim the benefits of it was on the complainant.
Appellants were at any rate entitled to an accounting of the rents collected and to show what benefit they were entitled to under the agreement. The evidence is vague and *Page 363 uncertain as to these factors and as to other essential elements of the defense, the abandonment of the agreement, the amount collected under it and otherwise as to complainants' right to foreclose as against the defense interposed to it.
For these reasons we think the cause should be reversed on re-hearing.
Reversed.
DAVIS, C. J., and WHITFIELD, ELLIS and BUFORD, J. J., concur.
BROWN, J., disqualified.