amount.146

So, a note secured by mortgage is sufficient consideration for an accord and satisfaction.1 147 So, if a note is given with a waiver of the statutory exemption,148 or with new sureties, the original note will be paid thereby.149 So, a renewal with a new indorser will operate as a payment to discharge the original note with its indorsers and collateral." 150 So, where a renewal note with a new surety is discounted, and the proceeds used to take up the old note with a different surety, it will discharge the original note and its surety, although the original note was transferred to the new surety as collateral.151 So, if an action brought on a bond with a surety is dismissed and a new note taken with an indorser, the original surety will be discharged.152

Effect of Transfer.

§ 1523. In general, the debtor's own note is not an absolute payment, although it is negotiable and still outstanding, if it has not been transferred by the creditor.153 But if the creditor has transferred the bill or note, and it is in the hands of another holder, to whom the debtor thereby becomes liable, it will discharge the origi nal debt.1 154 And if the creditor has received the note as collateral,

146 Varney v. Conery, 77 Me. 527, 1 Atl. 683.

147 Pulliam v. Taylor, 50 Miss. 251. But see Whitley v. Lumber Co., 89 Ala. 493, 7 South. 810, where a third person's draft with collateral mortgage was held to be merely a means for obtaining payment.

148 Lee v. Green, 83 Ala. 491, 3 South. 785.

149 Barnett v. Reed, 51 Pa. St. 190.

150 Huse v. Alexander, 2 Metc. (Mass.) 157. So, Carter, Rice & Co. v. Howard, 17 Misc. Rep. 381, 39 N. Y. Supp. 1060.

151 Greening v. Patten, 51 Wis. 146, 8 N. W. 107.

152 Callaway v. Price, 32 Grat. (Va.) 1.

153 Buckingham v. Walker, 48 Miss. 609; Sutliff v. Atwood, 15 Ohio St. 186; unless the taker has transferred it or is guilty of laches, McCrary v. Carrington, 35 Ala. 698.

154 Donnelly v. District of Columbia, 119 U. S. 339, 7 Sup. Ct. 276; Woolfolk v. Degelos, 24 La. Ann. 199; especially if it has been paid to his transferee, Looney v. District of Columbia, 113 U. S. 258, 5 Sup. Ct. 463; but it must be shown to have been given in payment of the debt or it will not have this effect, Beecher v. Dacey, 45 Mich. 92, 7 N. W. 689. Its effect as a payment will date from the time of transfer. Groff v. Friedline, 17 Misc. Rep. 352, 39 N. Y. Supp. 1064.

and then transferred it, he will be considered as having thereby elected to take it in absolute payment.155 And this is true of the transfer by a pledgee, irrespective of the value of the note.156 So, if the note of a third person is indorsed by the debtor to his creditor as a conditional payment only, and is transferred by the creditor, no action can be brought on the original debt.157 And a note, taken from a new firm for the debt of the old firm, which is not of itself a payment of the original debt, will become such if it is put into judgment, and then transferred by the creditor, although it is afterwards settled for less than its face.158

And if a principal pays his factor in bills of exchange, which are sold by the factor with other bills for the purchaser's note, and no notice is given to the principal of the dishonor of the note, but a statement is rendered to him to the effect that the note is paid, it will be an absolute payment of the factor's account against him.159 So, if a renewal note is transferred by indorsement, and judgment rendered on it in favor of the indorsee, it will bar all action on the original debt, unless it is retransferred to the creditor, and can be surrendered by him.160 And if a note is received as collateral, and a judgment is recovered on it, and the judgment assigned, and property obtained by the assignee in satisfaction of the judgment, it will satisfy the original debt also.161 And it has been held that a note becomes absolute payment if transferred, although it was received with an agreement that it should not be so.162

§ 1524. It is sufficient for the defendant who has given a bill or note in payment to aver that it is outstanding in the hands of a third person.163 And even where a bill is given in renewal of a note, with the agreement that it is to be payment only if paid, if

155 Cocke v. Chaney, 14 Ala. 65.

156 Cocke v. Chaney, supra.

157 Harris v. Johnston, 3 Cranch, 311. So, if the note is put into judgment and the judgment transferred. Bradlee v. Manufactory, 16 Pick. (Mass.) 347. 158 Hill v. Marcy, 49 N. H. 265.

159 Hamilton v. Cunningham, 2 Brock, 350, Fed. Cas. No. 5,978.

160 Teaz v. Chrystie, 2 E. D. Smith (N. Y.) 621.

161 Holmes v. Lykins, 50 Mo. 399.

162 Morton v. Austin, 12 Cush. (Mass.) 389; Dewey v. Bell, 5 Allen (Mass.) 165.

163 Byles, Bills, 387; Price v. Price, 16 Mees. & W. 232. But see Mercer v. Cheese, 4 Man. & G. 804; Crisp v. Griffiths, 2 Cromp., M. & R. 159.

it is afterwards transferred by the creditor, there can be no recovery on the note until the bill is produced and surrendered. 164 So, where a note is given for goods purchased, with the agreement that the title is to pass when the note is paid, and the vendor transfers the note, he cannot afterwards bring trover for the goods on the nonpayment of the note.165 But, although a note given for the purchase of personal property is in the hands of a bona fide holder, it will be no bar to an action brought by the purchaser against his vendor for breach of contract.166

Even if a note has been received, however, in payment, and has been transferred by the creditor, it will not be an absolute payment, if it is produced at the trial and offered for surrender; 167 or if it is taken up by the creditor, after having been transferred in the usual course of business.1

168

Effect of Loss.

§ 1525. A bill or note will be a satisfaction of the original debt, if it is paid at maturity, or if it is lost by the negligence of the creditor.169 And the debt has been held to be satisfied absolutely by a note that is lost, although the creditor proves the destruction of the note, and offers indemnity to the maker. 170 The loss of a negotiable bill given for a debt is an answer to an action for the debt as well as to one on the bill.171 If goods purchased are paid for by the purchaser's bill, accepted by a third party, for a larger amount, and the vendor pays the balance in cash, and the bill is subsequently lost, and no further steps taken by the creditor, he can recover only upon clear proof of the loss of the bill.172 And, if a creditor takes a note as collateral, he will be liable to his debtor for its loss through

164 Miller v. Lumsden, 16 III. 161.

165 Esty v. Graham, 46 N. H. 169.

166 Creighton v. Comstock, 27 Ohio St. 548.

167 Burdick v. Green, 15 Johns. (N. Y.) 247; McConnell v. Stettinius, 7 Ill. 707. 168 Alcock v. Hopkins, 6 Cush. (Mass.) 484. So, where the payee procured the renewals to be discounted, and with the proceeds took up the prior note. Jagger Iron Co. v. Walker, 76 N. Y. 521.

169 Byles, Bills, 386; 3 & 4 Anne, c. 9, § 7; Sibree v. Tripp, 15 Mees. & W. 23. 170 Woodford v. Whiteley, Moody & M. 517.

171 Crowe v. Clay, 9 Exch. 604.

172 Champion v. Terry, 3 Brod. & B. 295.

his own negligence.173 But, if the buyer gives his own note for property purchased, there is no reason why it should be an absolute payment, although it is lost by the creditor, and an action still lies. on the original debt upon offer of proper indemnity. So, if a note given for the purchase of land is lost, and it does not appear that it was negotiated or negotiable, the seller may recover in an action for the price.175

174

Invalid Bills.

176

§ 1526. Where a note or bill is given in payment, and is insufficient in law for any reason, it will not be a payment of the debt.1 Thus, if a note is given for a consideration which is partly illegal, it will not be a payment of the legal debt, and that part of the consid eration may still be recovered in an action of assumpsit.177 And, even in states where a note is presumptive payment, a valid debt. will not be merged in, or paid by, a subsequent invalid note.178 And a void note of a third party, although given at the time of a purchase and with a guaranty, will not bar an action for the price of the goods.179 Thus, the note of A., given in payment of a note of B., will not be a payment, although B.'s note is surrendered, where A.'s note was made payable "in whatever currency may be legal tender in the Confederate States twenty-four months after peace declared." 1 180

173 Roberts v. Thompson, 14 Ohio St. 1.

174 Keller v. Singleton, 69 Ga. 703; Lazell v. Lazell, 12 Vt. 443. And such note is no defense, if its destruction is proved. Tompkins v. Tompkins, 89 Hun, 608, 34 N. Y. Supp. 1032.

175 Lazell v. Lazell, 12 Vt. 443.

176 So, where the maker was without legal capacity, Godfrey v. Crisler, 121 Ind. 203, 22 N. E. 999; or had no corporate existence, as represented, Montgomery v. Forbes, 148 Mass. 249, 19 N. E. 342; or where the payee (a public officer) had no right to accept the check or note, Inhabitants of Embden v. Bunker, 86 Me. 313, 29 Atl. 1085; Houghton v. City of Boston, 159 Mass. 138, 34 N. E. 93; Doran v. Phillips, 47 Mich. 228, 10 N. W. 350; Turnbull v. Alpena Tp., 74 Mich. 621, 42 N. W. 114; or where the consideration was illegal, as in the case of a peddler selling goods without license, Rash v. Farley, 91 Ky. 344, 15 S. W. 862.

177 Coburn v. Odell, 30 N. H. 540.

And see section 537, supra.

178 Pecker v. Kennison, 46 N. H. 488.

179 Monroe v. Hoff, 5 Denio (N. Y.) 360. 180 Scott v. Atchison, 36 Tex. 76.

RAND.C.P.-138

(2193)

So, if the creditor accepts an agent's note executed without authority, it will not discharge the principal debtor.181 And if an agent, who is authorized to take a new note with the old sureties, surrenders the old note for a new one with only one of the sureties, the new note (being without consideration) will not be a payment of the old note, or discharge the other sureties.182 So, if a joint and several note of A. and B. is renewed by a similar note, which is void as to B., because executed for him by A. without his authority, recovery may still be had on the original note, although it was surrendered on taking the renewal.183 So, if the debt of a municipal corporation is paid by a draft of the town executed without legal authority, it will not be discharged.184 In like manner, an unauthorized county warrant will not discharge the county from its liability for the original consideration, 185

Payment by Unstamped Bill.

§ 1527. If a debt is paid by a bill which is not valid for want of a stamp, it will be no satisfaction, unless it is afterwards stamped in accordance with the provisions of the statute.186 So, the acceptance of a third person without a sufficient stamp will not be a payment, although it would have been paid, if duly presented.187 So, the debtor's indorsement of the bill of a third person, if not duly stamped, will not pay the debt, although the holder has neglected to give the indorser notice of dishonor.1 And, where a note is

188

181 Emerson v. Manufacturing Co., 12 Mass. 237; Ruffin v. Mebane, 41 N. C. 507. And action lies on the original debt. Slocomb v. Lurty, 1 Hempst. 431, Fed. Cas. No. 12,949.

182 Williams v. Martin, 2 Duv. (Ky.) 491.

183 Leonard v. Society, 2 Cush. (Mass.) 462. So, First Nat. Bank of Covington v. Gaines, 87 Ky. 597, 9 S. W. 396.

184 Hussey V. Sibley, 66 Me. 192.

285 Polk V. Board, 52 Miss. 422. But the creditor cannot disavow the warrant as illegal without offering to return it. City of Tacoma v. Bank, 15 Wash. 294, 46 Pac. 256.

186 Byles, Bills, 392; Gunn v. Bolekow, 10 Ch. App. 491.

187 Wilson v. Vysar, 4 Taunt. 288.

188 Cundy v. Marriott, 1 Barn. & Adol. 696.