Travis v. Epstein

| Nev. | Jul 1, 1865

Opinion by

Beatty, J.,

full Bench concurring.

This was a suit brought on two promissory notes by .the plaintiff as assignee of one Dryden. The defense set up (so far as there is any question before the Court) was, that prior to the time the notes were executed there had been an informal settlement between the defendants and Dryden, and a balance found due to Dryden of $983, but this settlement was made in the absence of defendants’ books, and with an understanding that.' if any error was discovered when they had access to their books, it was to be rectified. On the 7th day of January, 1862, defendants executed four promissory notes of different sizes, amounting in the aggregate to $983, with, as the defense alleges, the “ express understanding, promise and stipulation, if any error or mistake should be discovered thereafter, that the same should be rectified, and that said promissory notes should be enlarged or diminished in amount according as the mistake, if any should be found, in favor of or against said Dryden.”

On the trial of the case, after the plaintiff rested, the defense offered the following testimony: “ That at the time said notes sued upon were given by said appellants, to the assignor of respondent, it was the express understanding and stipulation between the said assignor (Dryden) of the respondent [and these appellants], that, if at any future period, upon examination of their books, accounts, vouchers, etc., the appellants should discover any mistake or error -in the amount of their respective claims against each other, increasing or diminishing the amount informally settled upon, and for which the notes referred to herein were given, then the said error, upon its being discovered, should be rectified, and the amount of said notes should be increased or diminished in accordance therewith.” Also, appellants offered to prove that, after fire execution of said notes, they did make an examination of their books and Touch-ers, according to said stipulation, and found that the said Dryden, the payee of said notes, had claimed more than was due him, and that there was an error or mistake against the respondent of two hundred and twenty dollars existing at the time said notes were given, and which, should have been deducted from said notes according to agreement; and appellants further offered to prove that when they executed and delivered these notes to the said Dryden, payee, as aforesaid, that neither these appellants nor the said Dryden had present their respective books, accounts or vouchers, by which a correct settlement of their business affairs could be ascertained.

The admission of this testimony was objected to by plaintiff, the objection sustained, and the defendants excepted. The question presented to this Court is, did the Court below err in rejecting this testimony ? Respondents rely on the proposition that “parole evidence is not admissible to supply or contradict, to enlarge or vary the words of a contract in-writing.” No proposition can be better established than the one laid down. Yet the application of that rule in practice sometimes presents questions of great nicety. .It is not contended here that the contract set up in the defendants’ answer could he proved by way of explaining the meaning of the notes given; that is, “ to supply, contradict, enlarge or -vary the words” contained in these notes. Such proof can never he introduced except in a proper proceeding where there has been a mistake in drafting the instrument. But if we understand the position of the appellants,.they claim the right to prove a substantive and distinct contract. The language of the pleading is rather peculiar, “ that said promissory notes should be enlarged or diminished in amount according as the mistake, if any should be found,” etc. "We are hardly to suppose if the parties used this exact language, that it was their intention that if Dryden found a mistake in the accounts in his favor that' he was to alter or erase and rewrite the amounts in the notes he held against the defendants, to correspond with- the corrected accounts; or if the error was proved the other way, that he was to allow the defendants to alter the notes he held. But if we put a common sense interpretation on the agreement, it simply meant that this settlement was not to be considered final. If an error was found, it was to be corrected. If in favor of defendants, Dryden would surrender one or more of the notes, or enter a credit on them to the extent that would be necessary to correct the error. If against the defendants, they would execute an additional note for the amount due.

Putting this interpretation on the agreement, and it appears to us that it may be held to be not an agreement to vary the contract as expressed in the notes executed, but a separate and independent agreement that, upon the happening of a certain event (the finding an error or mistake in the settlement) they would correct it. We are not satisfied such an agreement would be invalid.

It would appear to be an agreement founded on a good consideration ; nor do we see that the fact that the agreement was entered into simultaneously with the execution of the notes, renders it null and void, or affects the character of evidence by which it is to be sustained.

But admitting our views on this point are erroneous, still it appears to us that the rights of the parties in this instance would be about the same without oral agreement. If, in the absence of their books, the parties had made a settlement, and' the defendants paid an apparent balance against themselves, each of the parties acting in good faith, but laboring under a mutual mistake of fact, there can be no doubt the defendants would, on discovering a mistake against themselves, have been entitled to recover back the amount paid beyond the real balance against them.

If they possessed this right without agreement, the contract which was attempted to be made could not destroy that right.

The defendants not only offered to prove the verbal contract, but the existence of the mistake. If the notes were given for $983, and there was only due from defendants $163, there was a partial failure of consideration, and if a pwrtial failure of consideration can be set up as defense to a note, that part of the evidence relating to the mistake in the accounts was admissible, for the purpose of showing that failure.

It has not been many years since it was almost invariably held by the Courts of England and the various States of this Union, that partial failure of the consideration could not be pleaded at law as a defense pro tcmto to a note.

Of late years, however, to avoid circuity of action, many common law Courts have held that partial failure of consideration of a note may be pleaded at law. That we think the better rule, and especially must it be so under our system, where the common law and equity systems are so intimately connected. The notes in this instance were assigned after maturity, and it is a well settled principle, that under such circumstances, whatever would have been, a defense to the notes in the hands of the original payee, is also a defense against the assignee.

The answer of defendants in this ease, seems to rely principally on that oral contract as a defense. Nevertheless it states substantially the facts that would have to be stated to sustain the plea of partial failure of consideration.

Under our very liberal system in regard to pleadings, we think it may be held as a good answer to support that defense.

The authorities as to the introduction of evidence to prove oral agreements made when the notes were executed, as to the manner of paying notes, the giving of credits, etc., are, it appears to us, somewhat conflicting and not easily reconciled.

We think these propositions have been settled. If A and B settle accomits, A gives his note to B, and B agrees if A, on examination of his accounts, is dissatisfied, he will give up the note or enter a credit on it, this is not a valid agreement. It is a verbal agreement to make that dependent on the will of A, which by the writing is absolute. So if B says to A, when the note is executed, if you will procure bank notes of a certain character, I will take them in discharge of this note, and A executes the note with this understanding; it has been held he cannot discharge the note with such bank notes, or plead the tender of them in defense, because this would be varying a written contract by parole.

Yet when B, by the terms of a contract, was bound to pay A a sum of money at a future day, and A obtained from B a smaller stun, and executed his note to B for such smaller sum, with the oral agreement made when the note was executed, that the note was not to be paid, but the note and accumulated interest was to be credited on the larger sum when it became due on B’s contract, tbis agreement was held to be a defense against the note. A case which seems irreconcilable, with the preceding cases.

The ease of Batterman v. Pierce et al., 3 Hill, 171, is, it appears to us, precisely like the one under consideration, so far as it relates to the admissibility of oral testimony.

In next to last paragraph of opinion, page 418, the .Court holds the oral testimony does not tend to vary the written contract, but proves a distinct verbal contract entered into simultaneously with the written contract.

Several other eases we have examined, seem to agree in principle with these latter ones. Erom the want of access to a good library, we have not been able to give this part of the subject such an-examination as we, could have desired. But from the best light we have on the subject, we are satisfied the whole of the evidence offered by the defendants should have been admitted. The settlement having been made, the burthen of proof falls on defendants to prove a mistake. And that proof must be reasonably clear and satisfactory.

The fact that the parties, when they made the settlement, anticipated- that probably there might be a mistake, may be legitimately introduced with other testimony to explain any mistake and partial failure of consideration. The proof of the agreement, and the fact that defendants thought there was a mistake, would not be a defense to this action. But proof that there was a mistake is a defense pro tcmto.

The order of the Cotmt below, refusing to grant a new trial, must be set aside, the judgment reversed, and a new trial granted.