On February 22, 2022, the First Department issued a decision in Arici v. Poma, 2022 NY Slip Op. 01114, holding that a promissory note constituted a novation that replaced the defendant’s prior obligation under a stock purchase agreement, explaining:
Plaintiff Adem Arici commenced this action alleging that defendant Andrew Poma breached a stock purchase agreement (SPA), pursuant to which plaintiff sold his shares in Idaho Farmers Market, Inc. (Idaho) to defendant for $1,542,000. Plaintiff claims that defendant failed to make required payments under the SPA. At trial, defendant argued that a subsequently executed promissory note in which Idaho agreed to make the payments to plaintiff extinguished defendant’s payment obligation under the SPA. The jury found in favor of defendant, thereby crediting defendant’s claim that plaintiff accepted the note for the satisfaction of defendant’s obligation under the SPA.
. . . The elements of a novation are a previously valid obligation, agreement of the parties to the new obligation, extinguishment of the old [obligation], and a valid new contract. Here, defendant, as the party seeking to prove the novation, was required to demonstrate an unequivocal intention to extinguish his prior obligation and to replace it with the new obligation. Consent to the novation may be implied from the writings and the conduct of the parties. Clear and convincing evidence existed here for the jury to conclude that the parties to the stock purchase agreement entered into between plaintiff and defendant intended to replace defendant’s payment obligations under the agreement with a promissory note issued by the business entity defendant controlled. The weight to be accorded affidavits and affirmations of defendant and his prior counsel in prior litigations were issues of fact for the jury’s consideration.
(Internal quotations and citations omitted).