
    VAN BRUNT v. DAY.
    
      N. Y. Court of Appeals;
    
    June, 1880.
    [Reversing 17 Sun, 166.]
    Evidence.—Pleading.
    Although a written guaranty of the payment of a mortgage, contained in an assignment thereof, cannot be shown by parol to have been conditioned on the assignee keeping the premises insured; yet a contemporaneous oral agreement, resting on a further consideration, to the effect that they should be kept insured for the guarantor’s benefit, may be proved; and a demand for the damages caused by its breach may be interposed as a counter-claim in an action on the guaranty.
    
    The statutory rule that pleadings should be liberally construed, applied.
    The omission to state in the answer that facts alleged will be relied on as a counter-claim, will not sustain the trial court in excluding competent evidence of those facts, if objected to solely on other grounds. 
    
    Appeal by the defendant, Edward P. Day, from a ■judgment of the general term of the supreme court in the second judicial department, affirming a judgment •of the county court of Kings county, rendered in an action brought by the plaintiff, Jane P„' Day, for the foreclosure of a mortgage.
    The mortgage was made to the defendant Day, and by him assigned to the plaintiff, and the judgment against him was based upon the following guaranty, contained in the assignment. “ I do hereby guarantee to the party of the second part the payment of the amount due and to grow due thereon, in case of the failure of the mortgagors to pay the same, according to the tenor thereof.”
    The defendant’s answer was as follows: It first alleged an assignment of the “mortgage to one John L. Spader, either on his own account or as agent of the plaintiff; that said assignment was made by this defendant on condition that the said property should be kept insured in an amount sufficient to secure the said bond and mortgage ; and that to provide for and pay such insurance this defendant allowed the said plaintiff and said Spader, to retain the sum of three hundred dollars from the amount for which said mortgage was assigned, as is hereinafter set forth; that on the conditions aforesaid on the part of the plaintiff and said JohnL. Spader, this defendant agreed to guarantee, and did guarantee, payment of said bond and mortgage.
    ' ‘ That the said plaintiff and said Spader neglected to keep the said premises insured as aforesaid.”
    It then alleged that the plaintiff falsely stated that he had insured the premises, and thus prevented the defendant from procuring insurance; that the mortgage was not foreclosed when due, although he requested that it should be; and that the plaintiff conspired with the mortgagor to let the insurance which secured the mortgage expire, and to take out other insurance in favor of a second mortgagee.
    The answer then proceeded to state, “that in selling and assigning said bond and mortgage to the plaintiff and said Spader, the defendant paid to and allowed said plaintiff and said Spader to retain the sum of three hundred dollars to pay for the expense of searching, and to pay premiums of insurance on said premises insured to secure payment of the mortgage in said complaint mentioned, in case of destruction of said building by fire ; and that the said plaintiff and said Spader promised to pay said premiums of insurance until the mortgage referred to in said complaint should become due, out of said moneys so paid by this defendant, and retained as aforesaid; and that in consideration of such promise to pay and to attend to the payment of said premiums of insurance, this defendant assigned to said plaintiff and said Spader the policy of insurance on said property, then valid and in force.”
    The demand for judgment was as follows :
    “Wherefore this defendant demands judgment against the plaintiff for the dismissal of said complaint, and for the costs of this action.”
    On the trial the defendant offered evidence of the oral agreement for insuring the premises, which was excluded, and judgment was rendered for the plaintiff.
    
      The Supreme Court at general term, affirmed the judgment, holding that the rule that parol evidence is incompetent to vary the meaning of a written instrument, applied. (Reported in 17 Hun, 166).
    
      S. C. Conable, for the defendant, appellant.
    I. The I. Theagreement to insure was sufficiently pleaded (Code Civ. Pro. § 519).
    II. The defendant’s damages, arising from the breach of the contract to keep the premises insured, constituted a counter-claim (Code Civ. Pro. § 501; Batterman v. Pierce, 3 Hill, 171; Springer v. Duyer, 50 N. Y. 19; Isham v. Davison, 52 Id. 237).
    III. And the failure to reply admitted it (Isham v. Davison, 52 N. Y. 237; Lawrence v. Bank of Republic, 3 Rob. 142; Clinton v. Eddy, 1 Lans. 61; Bridge v. Payson, 5 Sandf. 210; Tell v. Beyer, 38 N. Y. 161; Paige v. Willett, 38 Id. 28; Crosbie v. Leavy, 6 Bosw. 312; Thomas v. Austin, 4 Barb. 265; Robbins v. Codman, 4 E. D. Smith, 315).
    IY. The defendant did not waive his right to judgment on the pleadings and evidence by not specifically claiming it on the trial.
    Y. The agreement to keep up the insurance was a distinct collateral agreement on a subject not covered by the guaranty, and on an independent consideration. It was not therefore merged in the writing (Hope v. Balen, 58 N. Y. 380; Lewis v. Seabury, 74 Id. 409; Batterman v. Pierce, 3 Hill, 171; Hutchins v. Hebbard, 34 N. Y. 24; Greenl. Ev. § 284, a).
    VI. The agreement being part reduced to writing and part not, testimony may be given to show the wffiole contract (Potter v. Hopkins, 25 Wend. 417; Reab v. McAllister, 8 Id. 116; Sheperd v. Temple, 3 N. H. 455; McCullough v. Girard, 4 Wash. C. Ct. 289; Hall v. McCubin, 6 Gill & J. 107; McCreary v. McCreary, 5 Id. 147; Kelsey v. Dickson, 2 Black, 236).
    
      W. S. Cogswell, for the plaintiff, respondent.
    
      
       This case illustrates both sides of the important distinction— often overlooked—between admitting extrinsic evidence of an oral condition not in the writing, for the purpose of evading liability on the writing, and admitting evidence of a collateral oral stipulation or agreement for the purpose of establishing a counter liability. Modern decisions allow the latter to an extent beyond what the language of earlier cases would seem to have done. Compare Johnson v. Oppenheim, 55 N. Y. 280, affl’g 35 Super. Ct. (J. & S.) 440, and Remington v. Palmer, 62 N. Y. 31, rev’g 1 Hun, 619; S. C., 4 Sup’m. Ct. 696.
    
    
      
       For other cases see Abb. Trial Ev. 835.
    
   Andrews, J.

The defendant’s guaranty was in writing, contained in the same instrument by which he assigned the mortgage. The guaranty was an absolute undertaking to pay the mortgage in the event of the failure of payment by the mortgagors. This undertaking could not be varied by proof of an oral agreement, made contemporaneously with the guaranty, that the guarantor was only to be bound on condition that the plaintiff should keep the premises insured for his protection. The rule is elementary that such proof, in the absence of fraud or mistake, is inadmissible to change or qualify a written agreement.

But the answer of the defendant, although inartificially drawn, in substance alleges that at the time of the execution of the assignment and guaranty, the plaintiff, in consideration of being permitted to retain three hundred dollars out of the purchase-money of the mortgage, and of the assignment to him by the defendant of a policy of insurance upon the premises, agreed with the defendant to keep the premises insured until the mortgage should become due, which she neglected to do; that the building on the premises was destroyed by fire, and that by reason of such neglect the security of the defendant was lost.

The court on the trial rejected proof of this agreement, and of the consideration therefor, offered by the defendant.

The rejection of this evidence is sought to be sustained on the ground that the written agreement is conclusively presumed to contain the whole engagement of the parties, and that the offer was an attempt to engraft a new term upon the written contract, which was inadmissible within the rule disallowing parol evidence for that purpose.

But we are of opinion that the rule referred to does not apply to the case. The writing was executed by the defendant alone. It was given in execution of his contract to assign the mortgage and guarantee its payment. The agreement was an independent collateral engagement, upon a new condition, to keep the premises insured for the protection of the defendant. If established, it would not qualify or change the defendant’s absolute undertaking of guaranty. Its breach would only give a right of action, which would be available to the defendant as a counter-claim to the extent of the damages sustained, in reduction or extinguishment of his liability on the guaranty. The cases sustain the defendant’s claim, that the proof of the oral agreement to keep the premises insured was admissible, and would not violate the rule that when the agreement of parties has been reduced to writing, that alone is to determine their respective obligations (Batterman v. Pierce, 3 Hill, 171; Hope v. Baler, 58 N. Y. 380; Lewis v. Seabury, 74 Id. 409).

The objection that the breach of the plaintiff’s agreement was not in terms set up in the answer as a counterclaim is not available. The facts showing the agreement and its breach, and that loss resulted to the defendant therefrom, are substantially, although imperfectly, alleged.

No objection to the proof offered was made, so far as appears, upon the ground that the pleading was defective ; and under the statutory rule, that the allegations of a pleading must be liberally construed with a view to substantial justice (Code, § 519), the answer must be regarded as sufficient to raise the question whether the proof offered could be rejected as in violation of the rule governing the admissibility of oral evidence to-change the written agreement (Springer v. Dwyer, 50 N. Y 19; Isham v. Davidson, 52 Id. 237).

The judgment of the general term should be reversed and a new trial ordered.

All the judges concurred.  