
    Downing W. Graves and Henry A. Merrill v. Herman Friend.
    Where a creditor took from a debtor owing him $392 31, a note for $322 83, made by a third person, payable to the order of, and indorsed by the maker, and by him only, and gave a writing, stating that' the note was received “ on account, without recourse,” and on the maker’s failing to pay the note, brought a suit against his debtor, on the original indebtedness:
    
      Held, that the writing imported an acceptance of the note as absolute payment, and that a contemporaneous verbal agreement to accept it as a conditional payment, could not be shown.
    The rule allowing parol evidence to vary or explain a receipt, is limited to a technical receipt, in the strict sense of that term, and not to a clause in the nature of the contract.
    The party may avoid such a writing, by showing mistake, fraud, or imposition in obtaining the execution and delivery of it.
    (Before Sakdfoed, Dvee, & Bosworth, J. J.)
    April 19 ;
    May 15, 1852.
    The plaintiffs, from time to time, sold merchandise to defendant. On the 11th of March, 1851, he was owing them, on account, $392 31, and passed to them a note made by one Isaac H. Clark, payable to the order of, and indorsed by the maker, for $322 83, payable at bank 6 months from its date, and at the time of transferring it, took a receipt reading thus, viz. :
    “ New York, March 11th, 1851.
    “ Received from Mr. H. Friend, Isaac Clark’s note, Feb. 6, 1851, at 6 months, for three hundred and twenty-two dollars and eighty-three cents, on account, without recourse.
    “ $322 83'. D. W. Graves & Co.
    “Per P. Bissell.”
    The defendant subsequently paid $69 50, the balance of the account, “ claiming it as in full for balance,” the plaintiffs “ refusing to receive it as a balance,” and insisted, when receiving it, that they took it “ on account.” This action is brought to recover an alleged balance due on the first of July, for merchanclise, being the portion of the account covered by the note described in plaintiffs’ receipt. The defendant pleads the delivery and acceptance of this note, in satisfaction, pro tanto, of the indebtedness of §392 31, on the 11th of March, and a subsequent payment of the balance in cash. The evidence shows that Bissell was a clerk of the plaintiffs, but had no authority to receive or receipt notes in satisfaction of accounts owing to them. That Graves was absent when this note was offered, that Bissell told the defendant he had no authority to take it, and Mr. Merrill, who was in the store, on being referred to, refused to take it without the assent of Graves. Defendant then said, if they would take the note, he would leave it for Graves’s decision, and that if it was not satisfactory to Graves,. he would take it back, and tear up the receipt. On these terns the note was taken. Merrill authorized Bissell to give the receipt under that agreement. The day after Graves returned, Bissell handed him the note, saying it was left for him to decide about. The next day defendant called on Bissell, to know what Graves said about it, and was told that he had not as yet said anything. Defendant spoke immediately of Clark’s having failed, and then Bissell told him, if that was the case, he might as well take the note back. A day or two after, when he came in the store, it was offered to him, and it was subsequently taken to his place of business and tendered to him, and he refused to take it back.
    The court ordered a verdict for the plaintiff for $336 22, subject to the opinion of the court at general term, on the question of law on a case to be made, with liberty to either party to turn the same into a bill of exceptions.
    
      E. W. Stoughton, for plaintiffs.
    
      F. Tillou, for defendant.
   By the Court.

Bosworth, J.

The first question properly arising on the case made, is this : Is the writing of March 11th a receipt, open as such to explanation and contradiction in all respects, or does it contain clauses of contract which cannot be varied by evidence of cotemporaneous verbal agreements, by which, in a certain event, the contract was to be inoperative and of no effect ? If the latter be its true character, a new-trial must be granted. It cannot be pretended that the want of authority in Bissell to sign the receipt, or that the transfer of the note, under a fraudulent concealment of the failure of the maker, is so incontestable as to justify the court in withdrawing either of these facts from the consideration of the jury, and determining them in favor of the plaintiff.

There can be no question that by the law, as settled in this state, the taking of a note made by á third person, on account of a precedent debt, is no payment unless it be so agreed at the time, and that it is payment when transferred and accepted under this agreement. Does the payment of March 11th import that the plaintiffs, took the note described in it unconditionally, at their own risk ? Unless it means that, no force at all can be attached to the words “ without recourse.” The defendant’s name was not on the note, he could not be charged as a party to it, or made liable for the payment of it. These words, therefore, could not refer to any actual or apparent contingent liability of his as a party to the note. In no conceivable circumstances could there be any recourse to him as a party to the paper. The only thing to which they can apply is the “ amount ” of his account for which the note was received. The words, “ without recourse,” when added to the payee’s indorsement of a promissory note, have acquired a fixed legal meaning, and the effect is to exonerate him from all liability as a party to the note. (Chitty on Bills, 254-255.)

The fair and natural meaning of the words, “without recourse,” as here used, is,.that the note is taken at the risk of the plaintiffs, and, consequently, as payment. Having contracted to take it as payment, it is not competent to prove a cotemporaneous verbal agreement, that it was taken as a conditional payment, or, in other words, that they agreed to take it as payment, unless, on inquiry, they were dissatisfied with it, and that, in such an event, it was to be no payment, but they might return it. An instrument in the form of a receipt, may also contain clauses of contract. In such a case, so much of it as is in the nature of a contract, falls within the general rule that it cannot be varied by proof of verbal instructions- given, or of a verbal agreement made at the time, inconsistent with its terms (3 Sand. S. C. R. p. 7, Wolfe v. Myers) or with its legal effect. (Cherry v. Holly, 14 Wend. 26; Niles & Richmond v. Culver & Foote, 8 Barb. S. C. R. 205; 6 id. 458, Egleston v. Knickerbocker.)

If the construction here put upon the words, “ without recourse,” is correct, Kellogg v. Richards (14 Wend. 116), is an authority in point, that their legal effect cannot be obviated or varied by proof of a verbal agreement, made at the same time, inconsistent with it, or operating as a defeasance of it: where a written contract is made by the parties, the writing is the sole evidence of the contract, and in intendment of law, all cotemporaneous conversations and verbal agreements are merged in it, and cannot be proved to restrict, enlarge, or defeat it.

House v. Low, 2 J. R. 378, is not in conflict with Kellogg v. Richards. In the former, so far as appears from the report of the case, it was simply a receipt “ in full,” and an issue was joined and tried without objection, whether it was given on a condition which had never been performed : the court affirmed the judgment of the justice, on the ground that such an issue had been formed and tried without objection, and added “ and a receipt may be explained by parol.”

It has been held that a receipt, stating in terms, that the thing received is received “ in full,” is not in legal effect a declaration that the party expressly agreed to take it at his own risk, or absolutely as payment; and that such a receipt does not preclude the party giving it, from showing that the thing received was in part the note of a third person, who became insolvent before its maturity, and failed to pay it. In this case the precedent debt was larger in amount than the note received. If it was merely taken “ on account,” and to be a payment pro tanto if paid, the receipt would naturally have terminated with those words ; but in addition to that, the further words ‘‘ without recover,” were added. Suppose the added words had been at our own risk,” would the meaning or legal effect of the paper have differed in any respect from the present one? Would it not clearly have imported that the plaintiffs took it absolutely as payment ?

There was no pretence, or offer at the trial, to show that the words “ without recourse,” when thus used, have acquired and are treated among merchants, as having a specific meaning well understood, and incompatible with the idea, that the thing thus received, was taken unconditionally as payment, (4 Hill, 104, Goodyear v. Ogden; Ed. 107, Dawson v. Kittel.) On the case as presented, effect must be given to these words, according to their natural and obvious meaning.

We think the obvious meaning and legal effect of the writing in question, are as above stated, and that the verdict must be set aside, and a new trial ordered..

On a new trial it will probably be open to the plaintiffs, to show mistake, fraud, or imposition, in obtaining the execution and delivery of the receipt, (McKinstry v. Persall, 3 J. R. 318.)

The receipt or contract, when set up as an item of evidence, will undoubtedly be impeachable, upon any ground which would have been a good reply to it, had it been set up in the answer, as a bar to the action. A new trial must be granted, with costs, to abide the event.  