California Bus Lines v. State Investment House

Summary

California Bus Lines purchased buses from Delta Motors on installment via promissory notes. After payment defaults, a restructuring agreement modified terms. Delta later assigned 5 promissory notes to State Investment House as security for Delta's separate obligations. When SIHI sought collection, CBLI claimed the notes were novated by restructuring and discharged by a later compromise agreement with Delta. The Supreme Court ruled that restructuring agreements that merely modify payment terms without creating incompatibility do not constitute novation. The compromise agreement could not bind SIHI since it wasn't a party and Delta lacked authority to compromise assigned obligations. SIHI's right to collect remained valid and enforceable against CBLI.