
    George Webb, Respondent, v. Henry Goldsmith and Leon Goldsmith, Appellants.
    (Before Duer, Bosworth, and Emmet, J.J.,)
    October 27;
    November 19, 1853.
    One E. K, 0, held notes of the defendants, including the three notes in suit, which were payable to his order, amounting to nearly $3000, and they being unable to pay their creditors, he made a settlement with them, and accepted from them as a payment in full of all the notes so held hy him, the note of a third person for $500, which was paid at maturity. E, K. G. then for a valuable consideration endorsed the notes in suit without recourse to the plaintiff, who at the time of the endorsement had notice of the settlement with the defendants,
    
      Jffeld, that although the note of a third person so received by E, E. 0. was for a much less sum than was then owing to him from the defendants, yet its acceptance by him as a payment in full, rendered the transaction valid as an accord and satisfaction, and that the plaintiff having notice of the facts was hound by the settlement.
    Report of a referee in favor of the plaintiff set aside, and new trial ordered,
    This action was brought by the plaintiff, as endorsee, against the defendants, as makers of three promissory notes, each payable to the order of B. K. Olark, each dated Hay 1,1845, two of which were severally for the sum of $133, one at eight, and the other at ten months, and the third was for $135, and payable at twelve months.
    The answer denied indebtedness on the notes, and averred that the defendants never received any consideration for either of the notes, either from the plaintiff or the payee, and alleged on information and belief, that plaintiff knew when he received the notes, that the plaintiffs were not indebted to Clark, and that the plaintiff paid Clark no consideration for them.
    The reply put in issue the new matter contained in the answer, and also stated that the notes were received from Clark, in the course of business, for a valuable consideration, without notice of any equity or set-off against the same in favor of the makers.
    The cause was referred to a referee. On the trial, it appeared that the notes were transferred by the payee to the plaintiff, on the 30th of April, 1846, without recourse, in satis» faction of notes held by the plaintiff against the payee, and with full notice that there had been previously a settlement of the notes, between the payee and the makers, The settlement between the payee and the makers took place on the 21st of July, 1845.
    The payee then held the notes in suit, other notes made by the defendants, and also certain notes received from them, made by third persons. A receipt was given by Clark at the time of the settlement, the operative words of which are a@ follows;
    “ Beceived, Bew York, July gist, 1845, from Henry Gold» smith, James M. Smith, Esq.’s note at sixty days, for five hundred dollars, in full for the following notes, leaving it to their honor to pay the balance should they ever become able.” The receipt contained a description of the notes, and was signed CíB. B. Glabk,”
    The referee reported in favor of the plaintiff for the full amount of the notes. A motion was made for a new trial on the ground of newly discovered evidence. On the trial, it was doubtful whether any receipt or voucher was given at the time of the settlement. On affidavit of the discovery of it after the trial, a motion was made for a new trial, the motion was denied, with liberty to appeal from such order, and bring the appeal to argument, at the time of arguing an appeal from the judgment entered on the report of the referee. The appeals from the order and the judgment, were submitted on printed points,
    
      P. J. Joachimsen, for the defendants and appellants.
    The referee erred in his judgment,
    I. The settlement with Clark, by which he took from the defendants a new security (viz. Mr. Smith’s note), for the indebtedness of the defendants, including the notes in suit, was a complete satisfaction of all their indebtedness to him.
    H. The notes' in suit were extinguished, so that from the time of the settlement, Mr, Clark became a holder without consideration, and only a trustee for the defendants: he was bound, on demand, to surrender these notes to Messrs, Goldsmith.
    III. The plaintiff in this suit took these notes, with fell and complete knowledge of the compromise ; he is .not, therefore, an innocent, or bond fide holder. He took them “ without recourse,” exchanging Clark’s liability to him for Goldsmith’s liability, whatever it might be, to Clark 3 and the bar to Clark’s recovering against these defendants, is equally a bar to the plaintiff,
    IV. This is certainly so, to all intents and purposes, as to the two notes at eight and ten months’ date, which the plaintiff took after .maturity, He certainly is affected, as to those .two notes, by the equities subsisting between Clark and the defendants, The judgment, therefore, ought to be reversed. The motion for a new trial ought to have been granted. The receipt of Mr, Clark is conclusive evidence of the compromise made by the defendants. This evidence was supposed (on the trial) not to exist. Argument cannot be needed to show its materiality 3 its non-production at the trial is fully accounted for in the affidavits used on the motion, and which remain wholly uncontradicted; and the motion was made at the earliest practicable period, There is no conflict of testimony jn this case ; its equity as regards the defendants is too transparent to require any comment. Belying upon that equity, and feeling assured that the whole case upon its merits, irrespective of technicalities or objections (none having been made before the referee), is felly before this just and impartial tribunal, the defendants are warranted in asking, that this court will so mould the case to conform to the facts proven, that we may be relieved from what undoubtedly will be an unjust recovery,
    
      Slosson & Hutchins, for plaintiff, respondent,
    I. The referee was correct in ruling that the answer did not deny the making of the notes upon which the action was brought. ' The answer simply denies that the defendants were indebted to the plaintiff, upon any promissory note or notes made by them.- This is pleading a conclusion of law, which is bad (McMurray v. Gifford, 5 Pr. R. 14). This was the only-exception ta]ien on the trial.
    II. It is not a case for a new trial, on the ground of newly discovered evidence, 1, The receipt, the discovery of which is made the ground of the application, was in the possession of the defendants at the time of the trial, and they knew it. The affidavit of Henry Goldsmith, one of the defendants, shows this. It is no excuse that Goldsmith did not succeed in his search for it, in time for the trial, for the defendants could have applied to postpone the trial on that account, and should have done so (Vandervoort v. Columb. Ins. Co. 2 Caine’s R. at p, 163). Emanuel L. Goldsmith testified, on the trial, that he was present at the alleged settlement; that he thought there was a release or receipt given, signed by Clark, at the time of the settlement, and he gives his reasons for thinking so ; and, from his affidavit, used on this motion, it appears that he was apprised by defendant’s counsel that the testimony was material, and that after searching he informed the defendant’s counsel, on the morning of the hearing, that he could not find it. R. K. Clark, who is alleged to have given the receipt, and who was examined as a witness for the defendant, was not asked a word in respect to such receipt, nor even whether a receipt was given, though the defendants were confident there was one, and had looked for it immediately before the trial. They might have proved by Clark, the contents of such receipt as a lost receipt, if they had deemed it material; but they made no effort to do so. Under these circumstances, this cannot be called newly discovered evidence, nor are the defendants in the position of those against whom laches cannot be imputed, 2. But it is a conclusive answer to this application for a new trial, that the evidence sought to be introduced is immaterial. The evidence must be material, as well as newly discovered. (See case of Vandervoort v. Columb. Ins. Co. above cited, 2 Caine’s R. p. 165,) The receipt, in itself, proves nothing more than the parol evidence already in—or, if it does, its meaning must be qualified by that evidence, and no objection can be taken to the character of such parol evidence, as varying a written contract (even if the receipt is to be taken as a contract, which we do not admit) in as much as the evidence was introduced by the defendants themselves. The evidence, then, as it stands, is, “ that on payment of the $500, the defendants were to be released from all indebtedness.” (See Smith’s testimony.) Now, even admitting that on the evidence, the $500 here spoken of was represented by Smith’s note, referred to in the receipt, though it is not so stated, it is, notwithstanding, manifest that the agreement, if any, was executory, and not to take effect until the note was paid ; this is further manifest from the fact, that the notes to be compromised by the payment, were all left in the possession of Clark. The transaction was not completed at the time—by the defendant’s permitting Clark to retain the notes, they negatived all idea of taking Smith’s note at their own risk—this, under any decided case, would be fatal. The rule of law, as laid down by Justice Sutherland (Mulden v. Whitlock, 1 Cowen, p. 306), is this: “ No principle of law is better settled than that taking a note, either from one of several joint debtors, or from a third person for a pre-existing debt, is no payment, unless it be expressly agreed to be taken as payment, and at the risk of the creditor—nor does the taking a note, and giving a receipt for so much cash, in full of the original debt, amount to evidence of such express agreement to take the note in payment. The agreement must be clearly and explicitly proved by the original debtor, or he will still be held liable.” "Under this evidence, as construed by this rule, the referee could not find otherwise than he did; and, were the receipt introduced, it could-not vary the case. It is perfectly reconcilable with the parol testimony, and proves no more.
    III. The defendants have no equity; by permitting Clark to retain the notes, they enabled him to pass them to innocent parties, and for value.
    IV. The notes were originally for value ; they were given for cigars, and they were passed to plaintiff for value; he gave up Clark’s notes to á considerable amount, and Clark assigned these notes to him, without recourse to him, Clark.
    V. One note, at all events, was passed to plaintiff before due, and, in respect to that, there should be a verdict for plaintiff in any event.
   By the Court. Bosworth, J.

No objection seems to have been taken before the referee, that the evidence given in the trial, was inadmissible under the pleadings. ■ Ho such position is taken in the points made by the respondent. The appeal should be determined, as it would be, if the pleadings were incontestably adapted to the facts as proved.

According to the facts proved, while the payee held these notes, and before the maturity of either of them, he accepted of the makers a note made by a third person, falling due before either of the notes in suit, in full payment and satisfaction of these notes. The note so received was paid.

The testimony given at the trial was explicit, that the note against Smith was accepted, in settlement and discharge of the notes in suit.”

The legal import of the receipt signed by Clark is, that he accepted the note against Smith, in satisfaction of the three notes in suit.

The receipt imports, that the defendants had become liable to pay these debts, and declares, that should they become able it was to be left to their honor to determine whether they would pay the same. It states, that the note against Smith is taken, in full, for notes of a larger amount, and it is so transferred and accepted, before either of the notes in question became due.

The acceptance, by the holder, from the maker of a note, of a note made by a third person, though for a less sum, in settlement of it, and in full for it, is a valid accord and satisfaction (Boyd v. Hitchcock, 20 J. R. 76; Le Page v. McCrea, 1 Wend. 164; Booth v. Smith, 3 Wend. 66; Frisbie v. Larned, 21 Wend. 450; Kellogg v. Richards, 14 Wend. 116).

The notes having been satisfied while in the hands of the payee, the plaintiff, who took them with full notice of all the facts and circumstances, has no equities superior to those of the payee.

On the merits, as the facts now appear, the report of the referee was erroneous.

But the pleadings do not allege a settlement and compromise of the notes. They aver nothing is due on them, but state no facts, from which such a conclusion can be drawn. They aver that the defendants received no consideration for them. This fact is disproved; for it is proved that they were given for cigars.

The pleadings should be amended. The issues now formed, do not raise the question, whether there was an accord and satisfaction of the notes. If an agreement to abstain from prosecuting a criminal complaint formed part of the consideration of the settlement and compromise, the whole transaction may prove to be void.

The judgment appealed from must be reversed, and the report of the referee set aside, with liberty to the defendants to serve an amended answer in twenty days; the date of the issue to be unchanged.  