
    PAYMENT AS AN AFFIRMATIVE DEFENSE.
    [Circuit Court of Hamilton County.]
    Susan J. Lord et al v. Isaac Graveson et al.
    Decided, May 16, 1904.
    
      Action on an Account — General Denial — Payment as an Affirmative Defense — Burden of Proof — Charge of the Court — Pleading.
    1. While it is necessary to aver non-payment of a debt in order to show a breach of the contract, proof of non-payment not being required, proof of payment is not permissible unless specially pleaded.
    2. Where the plaintiff and defendant have been in the habit of exchanging accommodation notes, and there have been other transactions between them in which the plaintiff paid to the defendant, on account or on notes given in settlement of an account, out of the proceeds of such accommodation notes, such payment constitutes a final credit although the accommodation note is not paid when due.
    Giffen, J.; Swing, J., and Jelke, J., concur.
   This was an action upon an account under Section 5086 of the Revised Statutes in which the plaintiffs in error filed a general denial. Two alleged errors may be considered together:

First. That the court erred in charging the jury that payment is an affirmative defense, and the burden of proof is on the defendants.

Second. That the court erred in refusing to allow the defendants to cross-examine the plaintiff upon the question of payment.

The argument is that the averment of a certain amount due upon an account, and that there are no credits thereon, includes the averment that the account is unpaid, and that, therefore, under a general denial, evidence of payment should be received.

In the case of Lent et al v. N. Y. & M. T. Company, 130 N. Y., the syllabus contains this proposition:

“In an action upon an alleged indebtedness an allegation in the complaint of non-payment is essential. This is not affected by the rule that payment must be pleaded as an affirmative defense, and can not be proved under the general issue, but the rule simply modifies the general rule of pleading so that the averment of payment is not put in issue by a general denial. ’ ’

In the case of Melone v. Ruffino, 62 Pacific, 93, the Supreme Court of California held:

“Where a plaintiff has proved the existence of the debt sued on the onus is on defendant to prove that it has been paid.”

Judge Swan, in his work on “Pleading and Precedents,” page 246, says:

“Under the general issue at common law, any facts tending to show that, when the action was brought, the plaintiff had no subsisting cause of action, might be introduced in evidence— such as payment, release, accord and satisfaction, etc.; whereas, under the code, the facts themselves, and all the facts alleged in the petition are controverted by the general denial; and if, notwithstanding the existence of those facts, something transpires afterwards which avoids or discharges the cause of action alleged in the petition, then a general denial is not only false, but such facts can not be given in evidence under it. ’ ’

On page 188 he says that an allegation that a specific sum on an account or note is due includes the allegation that the claim is a subsisting, existing debt, and is unpaid. It would seem, therefore, from these authorities that while it is necessary to aver non-payment of the debt in order to show a breach of the contract, yet proof of the same is not required, and that in order to prove payment it must be specially pleaded. At all events, the plaintiffs in error were not prejudiced for the reason that on January 23, 1901, they filed an additional answer in which they set up payment by their co-defendant John Car-lisle, and afterwards they had abundant opportunity and did cross-examine the plaintiff upon the subject of payment.

The giving of Charge No. 12, requested by the plaintiff and excepted to by the plaintiffs in error, is another ground of error, and is as follows:

“If the jury believe that some part of the plaintiff’s claim for work and labor was paid in cash by John Carlisle, but that at the time of such payments John Carlisle was indebted to the plaintiff for money or notes which said Carlisle had discounted in a sum as great or greater than the amount of such payments, and if the jury believe that said Carlisle received as much cash and notes from Graveson for the purpose of meeting his notes to Graveson given on account of the contract as he gave him cash and paid notes on account of the contract, or if the jury believe that Carlisle received from Graveson as much or more cash and notes between the date of his contract and the date of Carlisle’s agreement as. he gave Graveson during said time in cash or notes which were paid, and the jury is unable from the preponderance of the testimony to say how many and which of the notes and items of cash on either side are connected with the contract, then the defendants are not entitled to any credit on the account for work and labor sued for in this action.”

It is claimed by counsel that this charge contains three distinct propositions, neither of which is sound. But we think that a fair construction limits it to two. The first five lines assume that payments were made by John Carlisle, but that if he was indebted to plaintiff for money and notes in a sum as great or greater than the amount of such payments, the defendants would not be entitled to any credit on the account. Standing alone, this would be clearly erroneous. Payment itself implies a discharge of the debt, and it is immaterial that the defendant at the same time was owing the plaintiff an equal or greater amount upon other obligations. But the next four lines of the charge were intended to qualify this statement, by showing that Carlisle received as much cash and notes from Graveson for the purpose of meeting his notes to Graveson given on account of the contract as he gave him cash and paid notes on account of the contract. The defect in this qualification consists in not limiting it to the time of any particular payment and embracing all the transactions pertaining to the account. If, when a note given in settlement of the account became due and was renewed for a sum less than the original amount and the difference was paid by Carlisle out of his own funds, it constituted a payment to that extent, notwithstanding a subsequent renewal note was given for the original amount. For example, when the note for $1,800 became due — September 19, 1891 — it was renewed by giving two notes of $875 each, the difference of $50 being paid by John Carlisle. This was a final payment of that sum, although in renewing either of the $875 notes it may have been increased by that amount or more. There are many such transactions shown in the record, as Carlisle and Graveson were exchanging accommodation notes, not only during the life of this contract but for some time prior thereto. It was, therefore, prejudicial error in giving the first proposition contained in this charge, although no objection can be found to the last one.

A like error occurred in the general, charge at page 812 of the bill of exceptions, to-wit:

“Nor is the mere passing of the actual money by John Car-lisle to Graveson, and it credited on the account, absolute payment, if John Carlisle by some note or other paper got some money or the same amount and subsequently never paid such note or obligation except by renewal. If, however, when John Carlisle gave Graveson money or a note, and Graveson accepted the money or note as payment or satisfaction, or Graveson then gave his note or obligation as a separate or independent loan, looking solely to the note or obligation for payment, the same would be a payment and extinguishment of the debt. ’ ’

If money was.given by Carlisle to Graveson and credited on the account, the fact alone that Carlisle owed Graveson upon some other obligation did not destroy the credit as a final payment.

The record discloses that when notes were renewed by Carlisle, there was an exchange of notes — Graveson giving to Carlisle notes for the same amount. It is claimed that when this was done, that Carlisle was entitled to use the note received by him as he might see fit, unless at the time some restriction was imposed. An exchange of notes without any limitation upon the use of the same, vests the title to the respective notes in the holder, one being the consideration for the other, and when ■discounted the proceeds can be applied as the holder may direct. If Carlisle paid any of such proceeds to Graveson upon the account, or upon the notes given in settlement of the account, it constituted a final payment on account, although. Carlisle failed to pay his note when due.

John C. Healy, for plaintiff in error.

Stephens, Lincoln & Stephens, contra.

Counsel for defendants in error direct our attention to entries in Carlisle’s books, showing that certain notes were given expressly to take up or renew other notes given in settlement of the account, but there are many other entries which fail to show for what purpose the exchange of notes was made except for mutual accommodation. No error of law is predicated on this view of the case, but that the verdict is against the weight of the evidence.

At page 636 of the bill of exceptions, the plaintiff was asked:

“What was said between you and John Carlisle at any time, when you received a note from him, any of these notes that you have testified to?
“A. There was not anything said at all. If they were paid the understanding was we would credit him with the amount. No agreement about it.”

If, therefore, nothing was said at the time, and no understanding was otherwise had as to the use of the notes, then Carlisle could use the- proceeds as he wished, even in payment of notes given to Graveson.

The trial court reduced the verdict of the jury by the sum of $805.59, which counsel for defendants in error claim embraces four items, making in all $809.59. Upon the same theory that justifies the allowance of these items, we think the verdict should have been reduced by the items of one hundred dollars, sixty-seven dollars, two of fifty dollars each, one hundred and seventy dollars, and one hundred and thirty-six dollars. To this extent, the verdict was manifestly against the weight of the evidence, and the court erred in giving Special Instruction No. 12.

The judgment will therefore be reversed and the cause remanded for a new trial.  