for which the receiver has bargained, but as a convenient method by which the money it represents may be transferred from one party to the other, there is a presumption that the payment is conditional on the paper being honored on due presentation; 10 and the rule supported by the great weight of authority is that, in the absence of a special agreement, the transfer by a debtor without indorsement of a third person's note to his creditor for an antecedent debt must be considered as a conditional payment, or as collateral security,11 and can result in an actual satisfaction only on the payment of the note by the maker.12 The debtor continues liable for his own debt in the event of a failure of payment of the note thus given or transferred,13 unless the creditor parts with the note 14 or is guilty of laches in not presenting it for payment in due time,15 and the maker fails.16 Notice of dishonor is not essential to the debtor's liability unless the neglect to give such notice has occasioned him loss; 17 and the liability of the debtor on the original obligation is not extinguished even though a judgment has been secured on the note.18 The general

10. Dille v. White, 132 Ia. 327, 109 N. W. 909, 10 L.R.A.(N.S.) 510.

11. Sheehy v. Mandeville, 6 Cranch 253, 3 U. S. (L. ed.) 215; Caldwell v. Hall. 49 Ark. 508, 1 S. W. 62, 4 A. S. R. 64; Mitchell v. Hockett, 25 Cal. 538, 85 Am. Dec. 151; Borland v. Nevada Bank, 99 Cal. 89, 33 Pac. 737, 37 A. S. R. 32; Corbit v. Smyrna Bank, 2 Har. (Del.) 235, 30 Am. Dec. 635; Lyons v. Planters' Loan, etc., Bank, 86 Ga. 485, 12 S. E. 882, 12 L.R.A. 155; Kinard v. Sylvester First Nat. Bank, 125 Ga. 228, 53 S. E. 1018, 114 A. S. R. 201 and note; Runyon V. Snell, 116 Ind. 164, 18 N. E. 522. 9 A. S. R. 839; Glen v. Smith, 2 Gill & J. (Md.) 493, 20 Am. Dec. 452; Patapsco Ins. Co. v. Smith, 6 Har. & J. (Md.) 166, 14 Am. Dec. 268; Taylor v. Conner, 41 Miss. 722, 97 Am. Dec. 419; Tobey v. Barber, 5 Johns. (N. Y.) 68, 4 Am. Dec. 326; Johnson v. Weed, 9 Johns. (N. Y.) 310, 6 Am. Dec. 279; Gibson v. Tobey, 46 N. Y. 637, 7 Am. Rep. 397; Smith v. Ryan, 66 N. Y. 352, 23 Am. Rep. 60; Hunter v. Moul, 98 Pa. St. 13, 42 Am. Rep. 610; Shepherd v. Busch, 154 Pa. St. 149, 26 Atl. 363, 35 A. S. R. 815; Barelli v. Brown, 1 McCord L. (S. C.) 449, 10 Am. Dec. 683 and note; Manitoba Mortg., etc., Co. v. Weiss, 18 S. D. 459, 101 N. W. 37, 112 A. S. R. 799, 4 Ann.

Cas. 868 and note; Mansfield v. Dameron, 42 W. Va. 794, 26 S. E. 527, 57 A. S. R. 884; Sullivan v. Saunders, 66 W. Va. 350, 66 S. E. 497, 19 Ann. Cas. 480 and note, 42 L.R.A. (N.S.) 1010.

Notes: 1 Am. Dec. 5; 6 Am. Dec. 386; 7 Am. Dec. 330; 58 Am. Dec. 610; 9 A. S. R. 842; 57 A., S. R. 887; 10 L.R.A. (N.S.) 511, 513; 35 L.R.A. (N.S.) 18.

12. Smith v. Ryan, 66 N. Y. 352, 23 Am. Rep. 60.

13. Hunter v. Moul, 98 Pa. St. 13, 42 Am. Rep. 610.

14. Mitchell v. Hockett, 25 Cal. 538, 85 Am. Dec. 151; Glenn v. Smith, 2 Gill & J. (Md.) 493, 20 Am. Dec. 452.

15. Mitchell v. Hockett, 25 Cal. 538, 85 Am. Dec. 151; Glenn v. Smith, 2 Gill & J. (Md.) 493, 20 Am. Dec. 452; Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68; Tobey v. Barber, 5 Johns. (N. Y.) 68, 4 Am. Dec. 326; Camidge v. Allenby, 6 B. & C. 373, 13 E. C. L. 201, 30 Rev. Rep. 358, 21 Eng. Rul. Cas. 47.

16. Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68.

17. Hunter v. Moul, 98 Pa. St. 13, 42 Am. Rep. 610.

18. Lyons v. Planters' Loan, etc.,

rule applies when the note is made payable to the creditor and is delivered without indorsement.19 There are a few cases going to the extent of holding that the taking of a note of a third person from a debtor is conclusive evidence of the payment of the debt when the debtor does not indorse the note, but the weight of authority is in favor of the proposition that the intent of the parties at the time of the transaction must govern, and if it appears that at the time such note was taken it was not the intent of the parties that it should be received as an absolute payment of the existing indebtedness, then in case of the nonpayment of such note the payment of the original indebtedness could be enforced. 20

88. Agreement to Take Note as Payment. The note of a third person given for a prior debt will be held a satisfaction, where it was agreed by the creditor to receive it absolutely as payment, and to run the risk of its being paid. The onus of establishing that it was so received is on the debtor. But there must be a clear and special agreement that the creditor shall take the paper absolutely as payment, or it will be no payment if it afterwards turns out to be of no value. Whether the taking of the notes of a third person by a creditor is intended as absolute payment of the debt or as collateral security merely is a question of fact dependent on whether an actual agreement to that effect is made by the parties. A receipt in full of an account does not establish an agreement on the part of the creditor to accept as absolute payment at his own risk the note of a third person for the debt. Where part of a debt is paid in cash and the remainder in the notes of third persons, a simple receipt given by

Bank, 86 Ga. 485, 12 S. E. 882, 12
L.R.A. 155.

19. Hunter v. Moul, 98 Pa. St. 13, 42 Am. Rep. 610.

20. Duggan v. Pacific Boom Co., 6 Wash. 593, 34 Pac. 157, 36 A. S. R. 182.

1. Costar v. Davies, 8 Ark. 213, 46 Am. Dec. 311; Borland v. Nevada Bank, 99 Cal. 89, 33 Pac.. 737, 37 A. S. R. 32; Ryan v. Dunlap, 17 Ill. 40, 63 Am. Dec. 334; Unterharnscheidt v. Missouri State L. Ins. Co., 160 Ia. 223, 138 N. W. 459, 45 L.R.A. (N.S.) 743; Glenn v. Smith, 2 Gill & J. (Md.) 493, 20 Am. Dec. 452; Hoopes v. Strasburger, 37 Md. 390, 11 Am. Rep. 538; Pasewalk v. Bollman, 29 Neb. 519, 45 N. W. 780, 26 A. S. R. 399; Le Page v. McCrea, 1 Wend. (N. Y.) 164, 19 Am. Dec. 469 and note; Stafford v. Bacon, 1 Hill (N. Y.) 532, 37 Am. Dec. 366; Grubbe v. Pierce, 156

Wis. 29, 145 N. W. 207, Ann. Cas. 1915C 1199 and note, 51 L.R.A. (N.S.) 358; Camidge v. Allenby, 6 B. & C. 373, 13 E. C. L. 201, 30 Rev. Rep. 358, 21 Eng. Rul. Cas. 47.

Note: 35 L.R.A. (N.S.) 24, 48.

2. Gibson v. Tobey, 46 N. Y. 637, 7 Am. Rep. 397; Shepherd v. Busch, 154 Pa. St. 149, 26 Atl. 363, 35 A. S. R. 815.

Notes: 6 Am. Dec. 386; 7 Am. Dec. 330; 57 A. S. R. 887.

3. Ryan v. Dunlap, 17 Ill. 40, 63 Am. Dec. 334; Glenn v. Smith, 2 Gill & J. (Md.) 493, 20 Am. Dec. 452; Johnson v. Weed, 9 Johns. (N. Y.) 310, 6 Am. Dec. 279.

4. Shepherd v. Busch, 154 Pa. St. 149, 26 Atl. 363, 35 A. S. R. 815.

5. Glenn v. Smith, 2 Gill & J. (Md.) 493, 20 Am. Dec. 452.

Note: 10 L.R.A. (N.S.) 539.

the creditor for the total amount represented by the cash and the notes is some evidence to be considered by the jury that the notes are taken as an absolute payment, but it is not convincing. A receipt in which the creditor expressly states that he receives the note as full payment and assumes the risk of its nonpayment is sufficient to show that the debt was paid by the note. But even though the receipt. tends to show that the note was received as security only, parol evidence is admissible to show that it was given and received in absolute payment. And where a note was taken as payment, and a receipt in full given by the vendor, it was held a question of fact for the jury whether there was a special agreement. There is no conclusive presumption of law that the note of a third person, given by a debtor to his creditor, was taken in absolute payment, from the fact that such creditor entered it on his books of account to the credit of the debtor, and, while it was maturing, rendered statements of accounts and made settlements on the basis of balances, after deducting the note.10 When a creditor has an option to receive either money or a note of a third person, and he accepts the note, it will be presumed that he received the note with the same effect as if he had received the money.11

89. View that Note Is Payment.-There are a few jurisdictions wherein the rule prevails that the taking of the negotiable note of a third person for an existing debt is prima facie payment, and the burden of proving an agreement to the contrary is on the creditor.12 Accordingly it has been held that a person taking a note of an agent in payment for work performed, with knowledge of the principal's liability therefor, thereby discharges such liability, and he cannot afterward rescind the contract and bind the principal, without his knowledge and assent.18

90. Contemporaneous Debt.-A distinction has frequently been drawn between notes received on a precedent indebtedness and those received in the transaction out of which the indebtedness arises; and the rule supported by the authorities is that if at the time of contract

6. Shepherd v. Busch, 154 Pa, St. 149, 26 Atl. 363, 35 A. S. R. 815.

7. Hoopes v. Strasburger, 37 Md. 390, 11 Am. Rep. 538.

8. Baker v. Briggs, 8 Pick. (Mass.) 122, 19 Am. Dec. 311.

9. Johnson v. Weed, 9 Johns. (N. Y.) 310, 6 Am. Dec. 279.

10. Note: 10 L.R.A. (N.S.) 540. 11. Gibson v. Tobey, 46 N. Y. 637, 7 Am. Rep. 397.

Notes: 10 L.R.A. (N.S.) 538; 35 L.R.A. (N.S.) 48.

12. Smith v. Bettger, 68 Ind. 254,

34 Am. Rep. 256; Union Ins. Co. v. Grant, 68 Me. 229, 28 Am. Rep. 42; Paige v. Stone, 10 Metc. (Mass.) 160, 43 Am. Dec. 420; Melledge v. Boston Iron Co., 5 Cush. (Mass.) 158, 51 Am. Dec. 59 and note; Quimbly v. Durgin, 148 Mass. 104, 19 N. E. 14, 1 L.R.A. 514; Wainwright v. Webster, 11 Vt. 576, 34 Am. Dec. 707. See contra, Tyner v. Stoops, 11 Ind. 22, 71 Am. Dec. 341.

13. Paige v. Stone, 10 Metc. (Mass.) 160, 43 Am. Dec. 420.

a negotiable bill or note, either of an individual or corporation, is transferred and received without indorsement or any agreement or understanding as to risk, it is a sale of such bill or note by the party delivering it, and a purchase of it with all risks by the party receiving it. It is considered in the same point of view as exchanging money for money, and the law implies, in the absence of proof to the contrary, that it was part of the original contract that such note or bill was taken in absolute payment; for if such had not been the understanding, the receiver would either have refused the note or taken some guaranty of its goodness.14 If there are circumstances showing a contrary intention it will not be considered as payment but only as collateral security, 15 and the burden is on the creditor to show such contrary intention.16 If the debtor guarantees payment this is strong evidence, and it may be sufficient, to show that the note was not an extinguishment of the debt.17 But the rule that a note of a third person given as payment for goods purchased is prima facie accepted as payment has been limited in its application to chattels, and it has been held that such a note given by a vendee to his vendor at the time of the purchase of land does not operate as a payment so as to extinguish the vendor's lien.18 In jurisdictions wherein the rule prevails that a note of a third person given in payment of a debt is prima facie payment it is held that if the debt existed at the time the paper is received in its discharge, it is not material whether it was created at the time or had existed before. 19

91. Worthless and Void Paper; Notes Affected with Fraud.-A note of a third person will not constitute payment notwithstanding an agreement to that effect where it turns out to be of no value, 20 unless the creditor specially agreed to take the risk in that particular; and even an agreement to take such risk is without effect if the debtor knew it to be of no value, and the creditor did not. The reason for

14. Corbit v. Smyrna Bank, 2 Har. (Del.) 235, 30 Am. Dec. 635, 30 Am. Dec. 635; Dille v. White, 132 Ia. 327, 109 N. W. 909, 10 L.R.A. (N.S.) 510 (stating rule); Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68; Whitbeck v. Van Ness, 11 Johns. (N. Y.) 409, 6 Am. Dec. 383.

Notes: 10 L.R.A. (N.S.) 522; 35 L.R.A. (N.S.) 45, 46.

15. Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68; Whitbeck v. Van Ness, 11 Johns. (N. Y.) 409, 6 Am. Dec. 383; Gibson v. Tobey, 46 N. Y. 637, 7 Am. Rep. 397.

16. Gibson v. Tobey, 46 N. Y. 637,

7 Am. Rep. 397.

Note: 6 Am. Dec. 386.

17. Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68.

Note: 35 L.R.A. (N.S.) 45, 46. 18. Mansfield v. Dameron, 42 W. Va. 794, 26 S. E. 527, 57 A. S. R. 884.

19. Smith v. Bettger, 68 Ind. 254, 34 Am. Rep. 256.

20. Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68; Roberts v. Fisher, 43 N. Y. 159, 3 Am. Rep. 680.

Note: 35 L.R.A. (N.S.) 49.

1. Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68.

this is that the agreement to take the note is necessarily based on the assumption that the note received is a valid obligation. A note agreed to be taken in payment will not cancel the debt, where the debtor was guilty of fraud or misrepresentation, and the creditor relied on such representations. Nor does it affect the rights of the creditor in such a case that he retained the note until the commencement of the action without taking measures to enforce its collection, or giving notice of its nonpayment, or offering to return it.*

92. Forged Notes.-The acceptance of paper in payment with forged signatures is held not to extinguish the debt, but leaves it in full force and effect, for the reason that it is of no value, and not what it was affirmed to be by the person delivering it as payment, or believed to be by him who accepted it as such. On this point the law is well established. Thus the surrender by an indorsee to an indorser of a genuine note in exchange for a note forged by such indorser does not amount to a payment of the genuine note, nor extinguish the indorsee's right to recover against the maker thereof. But it has been held that where the note of a third person, received by the creditor in payment of his claim, proves to be forged, he cannot maintain an action on the original consideration, unless, as soon as the forgery is discovered, he offers to return the note, or unless he has exhausted his remedies on it with due diligence.8 There is one important exception to the general rule above stated, i. e., where the forged instrument bears, or purports to bear, the signature of the person accepting the same, or of his correspondents, and he is guilty of negligence in accepting a forged paper when he had superior means at hand to determine its genuineness, which were not in the power of the other party.9

2. Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68.

Note: 35 L.R.A.(N.S.) 72.

3. Hoopes v. Strasburger, 37 Md. 390, 11 Am. Rep. 538; Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68; Willson v. Foree, 6 Johns. (N. Y.) 110, 5 Am. Dec. 195; Hatch v. Barnum, 23 Vt. 133, 56 Am. Dec. 59.

Note: 35 L.R.A. (N.S.) 74.

4. Hatch v. Barnum, 23 Vt. 133, 56 Am. Dec. 59.

5. Pope v. Nance, Minor (Ala.) 299, 12 Am. Dec. 51; Pope v. Nance, 1 Stew. (Ala.) 354, 18 Am. Dec. 60; Eagle Bank v. Smith, 5 Conn. 71, 13 Am. Dec. 37; Melledge v. Boston Iron Co., 5 Cush. (Mass.) 158, 51 Am. Dec.

59; Wright v. First Crockery Ware Co., 1 N. H. 281, 8 Am. Dec. 68; Markle v. Hatfield, 2 Johns. (N. Y.) 455, 3 Am. Dec. 446; Athens First Nat. Bank v. Buchanan, 87 Tenn. 32, 9 S. W. 202, 10 A. S. R. 617 and note, 1 L.R.A. 199 and note.

Notes: 24 A. S. R. 566; 35 L.R.A. (N.S.) 72.

6. Eagle Bank v. Smith, 5 Conn. 71, 13 Am. Dec. 37.

7. West Philadelphia Nat. Bank v. Field, 143 Pa. St. 473, 22 Atl. 829, 24 A. S. R. 562.

Note: 35 L.R.A. (N.S.) 72. 8. Pope v. Nance, Minor (Ala.) 299, 12 Am. Dec. 51.

9. Gilman v. Peck, 11 Vt. 516, 34 Am. Dec. 702.