Laughlin, J.:
This is an action on a promissory note made by the defendant company, bearing date the 6th- day of March, 1903, whereby for value received it promised to pay to the order of the plaintiff on demand after date the sum of $10,452.32 with interest at .six per centum per annum. The noté was given for a-balance of account between the parties on business transactions during the year 1902. It was. indorsed by the defendant Grening, who was president of the defendant company, before delivery. The defendants answered separately, and each answer contains a simple plea of payment, together with a counterclaim. Upon the trial the counterclaims were waived. The making of the note and the indorsement and delivery were admitted. The. defendant Grening, at the opening of the trial, asked leave to amend his answer by setting up the additional defense of failure of consideration, which amendment was . allowed. The plaintiff offered the note in evidence and proved a [393]*393computation of interest and rested. The defendants then assumed the burden resting upon them of proving the defense of payment, and the defendant Grening his separate defense of want of consideration. The defendant Grening testified that he received nothing of value for his indorsement. He was then asked : “ Q. Were you under any liability, or had you sustained any loss, or had anything of that kind occurred during this year 1902 % ” to which he answered, “ I did not.” The president of the plaintiff testified, and his testimony in this regard was uncontradicted, that during the year 1902 Grening, while in the employ of the plaintiff under a. salary of $2,500 per annum and in charge of certain cement and other material which belonged to the plaintiff, was careless with respect to his custody and supervision thereof, whereby $4,500 worth of cement was stolen; that he admitted his carelessness in the premises, and on request that he indorse the "note as further security he consented to do so. At the close of the evidence no motion was made to dismiss the complaint as to the defendant Grening, and the sole question submitted to the jury was whether the note had been paid. Ho request to charge with respect to the evidence relating to the liability of the defendant Grening was made, and no exception was taken to the omission of the court to submit the question of failure of consideration to the jury. The defendant Grening is, therefore, in no position to sustain the judgment on the theory that there was no consideration for his indorsement, for by failing to request a ruling on that question or to have it submitted to the jury, he, in effect, waived the defense so far as this trial was concerned. It may be observed, however, that although he appears to have been an accommodation indorser, if, as is indicated by the testimony of the president of the plaintiff, the note would not have been accepted without his indorsement, that was a sufficient consideration therefor.
The single question, therefore, which requires serious consideration arises upon the evidence with respect to payment. On that question we are of opinion that the court erred in receiving evidence of a conversation between the president of the plaintiff and the defendant Grening at the time the note was made. The entire theory of the defense is based upon the testimony thus erroneously received. The defendant Grening was asked whether anything was said in his conversation with the'president of the plaintiff at the [394]*394time- the note was given with reference to the payment, of the note or how it was to be' paich He answered .this question in the affirmative, and was. then asked to state what was said on that subject. This was objected to by counsel for plaintiff on the ground that, the terms of the note with respect to payment could not be varied by pároli The objection Was overruled- and exception duly taken. The witnéss then answered : “ He said that he would make up that difference to me in the next year’s work; that, lie would give us credit sufficiently so that we would lose nothing on the next year’s work; that credit was to be given to us by making an allowance on asphalt work that they did-; that allowance was to be made at the rate of ten cents a yard.” The witness further testified that at the end of the year 1906 lie had a further conversation with the president of the plaintiff with reference to this allowance that was to.be made, according to the conversation had at the time that the note was given, in which the latter “ said lie wanted to square the books -of the company, and that he had ascertained about how we stood.. * * *’ And he said that they wanted to credit on the books of the company the differences between the concrete work and the asphalt Work and' whatever we owed in the shape of that note. -And he gave me a list and asked me to make out a bill on the- basis of thirty-eight cents a yard, and that would square the books.” The witness then testified that lie made out a bill pursuant to this suggestion under date of December 31, 1906, which was -received- in evidence, and contained a charge-against the plaintiff.for $43,695.44 for a loss on grading and concreting certain streets in the borough of Brooklyn, and perhaps partly in the county of Queens, inasmuch as their'contract relations embraced transactions in both, places. The amount was arrived at by charging thirty-eight cents per square yard for 114,988 square yards, and. was stated in the bill to be “as agreed between Mr. Kokeby [who was president'of the plaintiff] and Mr. Grening.” The bill was receipted by the defendant company,. It contained no reference to the note.' The defendant Grening was also permitted to testify, under objection and exception on the ground that- the evidence was irrelevant and immaterial, that he procured certain other contracts for the plaintiff pursuant to an arrangement by which- he Avas to receive ten cents a square yard for -wood block and slag block paving and sewer work, and that profits, were made' [395]*395on such contracts, but he gave no data upon which the amount of his commissions upon such contract work could be ascertained. The president of the plaintiff testified that his company continued relations with the defendant and with Grening until the year 1907, and continued Grening in its employ on a salary as aforesaid after its relations with his company terminated ; that there was an account between the companies with respect to their dealings after thfe execution of the note; that on that account the defendant company was given credit for the amount of the bill, to which reference has been made, but that it left a balance due and owing to the plaintiff from the defendant company of upwards of $80,000 exclusive of the note; that- in this account the defendant company was charged with the amounts advanced to it and was credited with all amounts with which it was entitled to credit; that' there was no agreement or understanding that either of the defendants was to be credited on the note on account of such dealings, or on account of any commissions or other credits to which they or either of them became entitled in the course of the further business relations between the parties, and that he had frequently discussed' the amount of this balance owing by the defendant company with Grening who never disputed its correctness.
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Laughlin, J.:
This is an action on a promissory note made by the defendant company, bearing date the 6th- day of March, 1903, whereby for value received it promised to pay to the order of the plaintiff on demand after date the sum of $10,452.32 with interest at .six per centum per annum. The noté was given for a-balance of account between the parties on business transactions during the year 1902. It was. indorsed by the defendant Grening, who was president of the defendant company, before delivery. The defendants answered separately, and each answer contains a simple plea of payment, together with a counterclaim. Upon the trial the counterclaims were waived. The making of the note and the indorsement and delivery were admitted. The. defendant Grening, at the opening of the trial, asked leave to amend his answer by setting up the additional defense of failure of consideration, which amendment was . allowed. The plaintiff offered the note in evidence and proved a [393]*393computation of interest and rested. The defendants then assumed the burden resting upon them of proving the defense of payment, and the defendant Grening his separate defense of want of consideration. The defendant Grening testified that he received nothing of value for his indorsement. He was then asked : “ Q. Were you under any liability, or had you sustained any loss, or had anything of that kind occurred during this year 1902 % ” to which he answered, “ I did not.” The president of the plaintiff testified, and his testimony in this regard was uncontradicted, that during the year 1902 Grening, while in the employ of the plaintiff under a. salary of $2,500 per annum and in charge of certain cement and other material which belonged to the plaintiff, was careless with respect to his custody and supervision thereof, whereby $4,500 worth of cement was stolen; that he admitted his carelessness in the premises, and on request that he indorse the "note as further security he consented to do so. At the close of the evidence no motion was made to dismiss the complaint as to the defendant Grening, and the sole question submitted to the jury was whether the note had been paid. Ho request to charge with respect to the evidence relating to the liability of the defendant Grening was made, and no exception was taken to the omission of the court to submit the question of failure of consideration to the jury. The defendant Grening is, therefore, in no position to sustain the judgment on the theory that there was no consideration for his indorsement, for by failing to request a ruling on that question or to have it submitted to the jury, he, in effect, waived the defense so far as this trial was concerned. It may be observed, however, that although he appears to have been an accommodation indorser, if, as is indicated by the testimony of the president of the plaintiff, the note would not have been accepted without his indorsement, that was a sufficient consideration therefor.
The single question, therefore, which requires serious consideration arises upon the evidence with respect to payment. On that question we are of opinion that the court erred in receiving evidence of a conversation between the president of the plaintiff and the defendant Grening at the time the note was made. The entire theory of the defense is based upon the testimony thus erroneously received. The defendant Grening was asked whether anything was said in his conversation with the'president of the plaintiff at the [394]*394time- the note was given with reference to the payment, of the note or how it was to be' paich He answered .this question in the affirmative, and was. then asked to state what was said on that subject. This was objected to by counsel for plaintiff on the ground that, the terms of the note with respect to payment could not be varied by pároli The objection Was overruled- and exception duly taken. The witnéss then answered : “ He said that he would make up that difference to me in the next year’s work; that, lie would give us credit sufficiently so that we would lose nothing on the next year’s work; that credit was to be given to us by making an allowance on asphalt work that they did-; that allowance was to be made at the rate of ten cents a yard.” The witness further testified that at the end of the year 1906 lie had a further conversation with the president of the plaintiff with reference to this allowance that was to.be made, according to the conversation had at the time that the note was given, in which the latter “ said lie wanted to square the books -of the company, and that he had ascertained about how we stood.. * * *’ And he said that they wanted to credit on the books of the company the differences between the concrete work and the asphalt Work and' whatever we owed in the shape of that note. -And he gave me a list and asked me to make out a bill on the- basis of thirty-eight cents a yard, and that would square the books.” The witness then testified that lie made out a bill pursuant to this suggestion under date of December 31, 1906, which was -received- in evidence, and contained a charge-against the plaintiff.for $43,695.44 for a loss on grading and concreting certain streets in the borough of Brooklyn, and perhaps partly in the county of Queens, inasmuch as their'contract relations embraced transactions in both, places. The amount was arrived at by charging thirty-eight cents per square yard for 114,988 square yards, and. was stated in the bill to be “as agreed between Mr. Kokeby [who was president'of the plaintiff] and Mr. Grening.” The bill was receipted by the defendant company,. It contained no reference to the note.' The defendant Grening was also permitted to testify, under objection and exception on the ground that- the evidence was irrelevant and immaterial, that he procured certain other contracts for the plaintiff pursuant to an arrangement by which- he Avas to receive ten cents a square yard for -wood block and slag block paving and sewer work, and that profits, were made' [395]*395on such contracts, but he gave no data upon which the amount of his commissions upon such contract work could be ascertained. The president of the plaintiff testified that his company continued relations with the defendant and with Grening until the year 1907, and continued Grening in its employ on a salary as aforesaid after its relations with his company terminated ; that there was an account between the companies with respect to their dealings after thfe execution of the note; that on that account the defendant company was given credit for the amount of the bill, to which reference has been made, but that it left a balance due and owing to the plaintiff from the defendant company of upwards of $80,000 exclusive of the note; that- in this account the defendant company was charged with the amounts advanced to it and was credited with all amounts with which it was entitled to credit; that' there was no agreement or understanding that either of the defendants was to be credited on the note on account of such dealings, or on account of any commissions or other credits to which they or either of them became entitled in the course of the further business relations between the parties, and that he had frequently discussed' the amount of this balance owing by the defendant company with Grening who never disputed its correctness. The plaintiff conceded the payment of §2,700 on the 7th day of May, 1.908, by the recovery and collection of a judgment against the firm of Sigretto & Mannino on a mechanic’s lien filed on account of part of the indebtedness included in the note for the sum of $4,500, out of which it paid by direction of the defendant company on an indebtedness owing by the latter the sum of $1,800, leaving a balance of $2,700 realized by the plaintiff and applicable to payment on the note. No evidence was given on the part of either defendant with respect to whether or not there was a general account between the plaintiff and defendants other than as already stated, before the president of the plaintiff testified with respect thereto, and after the testimony concerning the same, the defendant Grening was recalled and gave the following testimony only relative thereto “Neither the Uvalde Asphalt Paving Company nor Mr. Bokeby ever advanced to our company the sum of $100,000 or loaned it that sum, or any sum whatever.” On this evidence the court submitted the question to the jury as to whether the balance owing on the note had been paid by the credits [396]*396to which the defendants claimed to be entitled on account of the subsequent dealings between the ¡Dailies. The parol evidence tended to vary the terms of the note and since it was a conversation had at the time the note was given it was clearly'incompetent for it tended to impeach or contradict or vary the.unconditional promise to pay the money contained in the note. (Jamestown Business College Assn. v. Allen, 172 N. Y. 291.) It is clear¡ we think, that if the evidence of the conversations between the president of the plaintiff and the defendant Gfreningatthe time the note was given, which was incompetent, had not been received, there would have been no basis for the submission of this question to the jury.- It is to be.bornein mind that the defendants abandoned their counterclaims and stood upon their simple plea of payment only. . If the plaintiff subsequently became indebted to the defendants or either of them, such indebtedness would bé a good offset by way of counter claim -against their liability on the note, but it would not constitute a payment of the note. The rule formerly was that under a simple plea of payment, payment in money or its equivalent only could be shown, and that where a claim, of payment was based on a special agreement growing out of an independent contract, it was necessary to specially plead the facts (Morley v. Culverwell, 7 JVI. & W. 174, cited and followed in Jennings v. Osborne, 2 C. C. Rep. 195), but the rule now seems to be that under a general plea of payment, proof of any agreement between the parties for the payment and discharge of the obligation and of its performance, which according to the agreement of the parties, operated to discharge the debt, may be shown. (McLaughlin v. Webster, 141 N. Y. 76, 83; Farmers & Citizens’ Bank v. Sherman, 33 id. 69; Stirna v. Beebe, 11 App. Div. 206.) We are of opinion, however, that the evidence thus erroneously received and the other evidence relating to. it, to which reference' has been made,' did not, even if competent, establish an agreement by which any subsequent credit to which the defendants or either, of them would become entitled- should be apjDlied on the note. In view of the fact that the plaintiff' retained the possession of the .note, and its possession was never demanded by the defendants or either of them, and that the president of the plaintiff testified specifically to tlie existence'of a general"account■ between the parties involving business transactions covering a period of several year's, showing a [397]*397large balance still owing from the defendant company or both defendants to it, we think tlie mere denial of the defendant Grening that the plaintiff advanced or loaned the sum of $100,000 to the defendant company vías not sufficient to show that there was any balance owing from the plaintiff to the defendants or either of them on the account between them which would be applicable to the payment of this note, even if properly pleaded.
It follows, therefore, that the judgment should be reversed and a new trial granted, with costs to appellant to abide the event.
Ingraham and McLaughlin, JJ., concurred; Houghton and Scott, JJ., dissented.