Sec. 59.

"Payment in due course" means payment made at or Payment in after the maturity of the bill to the holder thereof in good faith and without notice that his title to the bill is defective: 2

due course

defined.

Effect of

payment by drawer.

Effect of payment by indorser.

Accomodation bill

2. Subject to the provisions hereinafter contained, when a bill is paid by the drawer or an indorser, it is not discharged; but

(a) Where a bill payable to, or to the order of, a third party is paid by the drawer, the drawer may enforce payment thereof against the acceptor, but may not re-issue the bill; 3

(b) Where a bill is paid by an indorser, or where a bill payable to drawer's order is paid by the drawer, the party paying it is remitted to his former rights as regards the acceptor or antecedent parties, and he may, if he thinks fit, strike out his own and subsequent indorsements, and again negotiate the bill: 4

3. Where an accommodation bill is paid in due course by discharged. the party accommodated, the bill is discharged. 5

1 Payment is not a technical word. It has been imported into law proceedings from the exchange, and not from law treatises. When you speak of paying in cash, that means in satisfaction; but when by bill, that does not import satisfaction, unless the bill is ultimately taken up. You may support a plea of payment by shewing that a person agreed to accept a horse, or goods, from another in satisfaction, provided that the agreement was to take the articles as money: Per Maule, J., in Mallard v. Duke of Argyle, 8 M. & Gr. 45. Nothing will discharge the acceptor or the drawer except payment according to the law-merchant; that is payment of the bill at maturity. If a party pays it before maturity, he does not extinguish the debt, he purchases it, and he is in the same position as if he had discounted the bill: Morley v. Culverwell, 7 M. & W. 182. The law as to accord and satisfaction (strictly so called) is wholly inapplicable to bills of exchange; because by the custom of merchants, to be found laid down, not only in the law of this country, but in the law of all commercial countries that deal with bills, a bill of exchange, even after breach, may be discharged without accord or satisfaction, by the assent of the holder. It is only necessary that he should assent to his having no longer any claim on the bill: Per Willes, J., in Cook v. Lester, 21 L.

J. C. P. 126. The Judicature Act, R. S. O. (1887) c. 44, s. 53, sub-s. Sec. 59. 74, alters the old doctrine of accord and satisfaction, by providing that part payment of an obligation, before or after breach, if accepted by the creditor, extinguishes the obligation. The section defines the effect of payment by the principal debtor on the bill, (drawee or acceptor) and by the sureties (drawer or indorsers.)

ILLUSTRATIONS.

The marriage of the maker of a note with the payee and holder, discharges the note, and all liability of the maker thereon: Curtis v. Brooks, 37 Barb. (N. Y.) 476.

"If the holder of a bill accepts but 2d. from the acceptor, he can never afterwards resort to the drawer:" Tassel v. Lewis, Ld. Raym. 744.

Payment by the maker of a note to one of two administrators, is a good discharge: Truman v. Dixon, 2 Pugs. & Bur. 33.

A. makes a note payable to B. or order; B. indorses to C., who indorses to D.; D., the holder, dies, leaving B. one of his executors; the executors of D. sue C. ;-Held, that D. having made B. his executor, B. was discharged, and that there was no remedy against C., the subsequent indorser: Jenkins v. McKenzie, 6 U. C. Q. B. 544; s. p., Feakley v. Fox, 9 B. & C. 130. See also note on p. 146.

Where notes were given for the purchase of certain property, which were not to be acted upon if the property were given up, and default having been made, the property was given up and sold for less than the original price ;-Held, that the notes were satisfied by the surrender of the property according to agreement: Smith v. Judson, 4 U. C. O. S.

134.

A promissory note for $6,200, made by the partners in a syndicate formed for completing a street railway, in favor of O. and S., and others who were also partners, was indorsed to a bank. On the day it fell due, O. paid part and S. paid part; S. at the time directing the bank to indorse it to the plaintiff, who gave no value for it. The plaintiff as holder sued the other co-indorsers ;-Held, that the plaintiff could not recover, for S., by his payment intended to satisfy the note, which was made for partnership purposes: Small v. Riddel, 31 U. C. C. P. 373.

Where the holder of a note accepts a draft or cheque in payment, he is not bound to give up the note before payment of the draft or cheque : Smith v. Harper, 5 Cal. 329.

A banker in London receiving bills to present for payment, is not guilty of negligence in giving up such bills to the acceptor upon receiving a cheque on a banker for the amount, although it turns out that such cheque is dishonored: Russell v. Hankey, 6 T. R. 12.

Where a note overdue has been settled by a renewal note, it is cancelled, and cannot be put in circulation again, even by the payee who has taken up the renewal note out of his own funds: Cuviller v. Fraser, 5 U. C. Q. B. 152.

A. held B.'s note (not negotiable), for £500. In a transaction with one R., (a partner of B.), A. transfered it to R. for his note for £1000, for that and other transactions. In dissolving partnership, it was arranged that R.'s note for £1000 should be paid by B. R. being subsequently

Sec. 59. called upon for payment, obtained B.'s cheque for £500, and returned B.'s original note for £500 to A. in payment of the note for £1000 ;— Held, that the facts did not amount to a payment, and that B. was liable for the £500 note: Booth v. Ridley, 8 U. C. C. P. 464.

A. sold to B. certain goods, and a claim on one C. of £25, taking a horse in payment for the goods, and B.'s note for the claim. B. took from A. an order for the goods, but on presenting the order he was unable to obtain them;-Held, in an action by A. against B. on the note, that B. might set off the value of the horse: Wright v. Cook, 9 U. C. Q. B. 605.

In an action against the maker and indorser, the separate debt of the plaintiff to the maker or indorser cannot be set off: Paterson v. Howison, 2 U. C. Q. B. 139.

By consent of the payee of a note, the amount of it was paid to a ereditor of the payee in extinguishment of his debt;-Held, that the note was discharged, although not delivered to or indorsed by such creditor: Groves v. Brown, 11 Mass. 334.

2 Payment means payment in due course, and not by anticipation. If, therefore, the acceptor should pay a bill of exchange before it is due, to the holder, who should afterwards, and before its maturity, indorse, or pass the same to any subsequent bona fide indorsee, or other holder, the latter would still be entitled to full payment thereof from the acceptor at its maturity; for payment of the bill before it is due, is no extinguishment of the debt as to such person: Story on Bills, s. 417. This clause gives the party, whether debtor or surety, paying the amount of the bill to the holder, the same protection that is extended to persons paying money to trustees under an express or implied trust; such payment discharges them from seeing to the application of the money; and the only liability on the party paying the bill is to ascertain that the money is properly payable to the party demanding it. But this rule may not apply where, on the face of the note, the money is stated to be for the use of another. See Munro v. Cox, 38 U. C. Q. B. 363. The possession of the bill would, under the Act, be a sufficient identification of the holder. Such possession is prima facie, or presumptive, evidence, that he is the proper owner or lawful possessor of the bill. And indeed if this doctrine did not prevail, the acceptor would in many cases pay at his peril, where the true owner or holder is unknown to him; and endless embarrassment would grow out of the negotiations of bills, which, in a vast variety of cases, pass by mere delivery from hand to hand, where there is a blank indorsement by the lawful owner or holder thereof. It is therefore for the security of all persons that the rule is adopted to prevent innocent holders from being compelled to establish their titles, before the acceptor will be bound to pay the bill: Story on Bills, s. 415. See ss. 2 and 20 as to the terms "holder" and "possession."

ILLUSTRATIONS.

H. & Co. holding several notes of F., all overdue except one, take a mortgage for the total amount thereof;-Held, that the remedy on the notes was extinguished: Fraser v. Armstrong, 10 U. C. C. P. 506.

Held, that in taking a mortgage for $1,300, and subsequently a note Sec. 59. for $1,353.75, there could be no merger: Bank of Upper Canada v. Bartlett, 12 U. C. C. P. 238.

A note of a local judge (who was paid by fees) was placed in the hands of an attorney for collection, and he agreed to give the judge credit on the note for fees payable by him for business done in the Court, and did indorse part on the note as payment, and subsequently the whole amount was paid by such fees, but the attorney refused to credit more than the sum first indorsed, and he afterwards absconded ;- Held, that as against the holder of the note, the judge could not claim the payment by fees as a discharge of the note: Ketchum v. Powell, 3 U. C. O. S. 157.

Unauthorized credits indorsed upon a promissory note, may properly be obliterated by a payee: Burtch v. Dent, 13 Ind. 542.

If two persons make a promissory note, and one of them afterwards obtains possession of it as his own property from the payee, the note is discharged Cox v. Hodge, 7 Black. (Ind.) 146.

:

Payment of a joint and several note by one of the makers, is ordinarily a discharge of the debt: Rockingham Bank v. Claggett, 29 N. H. 292.

Where a note was assigned, on which a part payment had been made, and the assignor truly stated to the assignee the amount actually due on the note, the assignee cannot recover more than the actual amount due: Buckner v. Curry, 1 Bibb. (Ky.) 477.

Where stock had been purchased and notes given for $5,500 to C, payable at different dates, who, after they had become due, indorsed the last one "without recourse," to M. During the currency of the notes, it was found that the value of the goods had been misrepresented, and C thereupon agreed to reduce $500 from the face value of the notes ;;-Held, that M was bound by said agreement: McGregor v. Bishop, 14 Ont. R. 7. Any moneys received as payment by the holder of a note from the indorser will operate as a valid discharge of the accommodation maker: Lyman v. Dion, 13 L. C. J. 166.

Where the indorsee, having sued the acceptor of a bill, receives from him a part payment, and takes a security for the remainder, with the exception of a nominal sum only, he discharges the indorser: English v. Darley, 2 B. & P. 61.

The acceptance, by the holder, of the terms of an assignment made by two joint debtors for the benefit of their creditors is a satisfaction of their joint liability on bills and notes, and precludes the holder from suing one of such joint debtors: Whitney v. Wall, 17 U. C. C. P. 474.

A merchant abroad drew upon certain persons in this country (England) a bill, and upon its becoming due paid the holder a part of the amount of the bill, both parties being at the time abroad; but such payment was made and received in full satisfaction; and was, according to the law of the foreign country where the bill was made, full satisfaction of the bill;-Held, that such payment operated as a discharge of the bill in this country: Ralli v. Dennistoun, 6 Ex. 483.

By the mercantile law, if the drawer pays the bill, his indorsee is bound to hand the bill back to him, and then the drawer has a right to sue the acceptor, not as surety, but upon the original obligation between them as drawer and acceptor: Per Lord Esher, M. R., in Baines v. Wright, 16 Q. B. D. 330. The word "retire" as applied to a bill by

Sec. 59. mercantile usage, has two meanings and effects. If the acceptor "retires" a bill, the bill is in effect paid, and withdrawn entirely from circulation. If an indorser "retires" it, he merely withdraws it from circulation, so far as he himself is concerned, and he may hold the bill with the same remedies as if he had been called upon to pay, and had paid it in due course: Elsam v. Denny, 18 Jur. 981.

ILLUSTRATIONS.

A bill or note cannot be indorsed or negotiated after it has been once paid, if such indorsement or negotiation would make any of the parties liable who would otherwise be discharged: Beck v. Robley, 1 H. & Bl. 89, n. See Bartrum v. Cuddy, 9 A. & E. 275.

Where a payee discounts a note and afterwards takes it up, he may recover against the maker: McNab v. Wagstaff, 5 U. C. Q. B. 588.

A bill which has been paid by the drawer in default of payment by the acceptor, may be re-issued by the drawer, and the acceptor will still be liable on it: Hubbard v. Jackson, 4 Bing. 390.

4 This clause determines the rights of the indorser when he pays the bill as a surety or quasi surety for the acceptor. He may negotiate the bill as an overdue bill, or he may enforce it against the other parties liable to him. And he would also be entitled, on such payment, to all securities held by the holder as collaterals: Ewart v. Latta, 4 Macq. H. L. 983. Where the drawer or indorser pays the bill without its being delivered to the party paying, and the holder afterwards assigns it to a third party, such third party would take it as an overdue bill, and therefore like a chose in action, subject to the equities and rights of the party or parties who have paid the bill and are entitled to its possession. And such third party would take the title of his assignor, and be a trustee for such drawer or indorser; and should he collect the amount of the bill from the acceptor, he would be bound to account for the proceeds to the proper parties. And such proper parties could also compel the original holder or his assignee, to account for any securities held as collateral to the bill. And the holder or his assignee would not be allowed to vary the position of such drawer or indorser, with reference to such securities: Pearl v. Deacon, 24 Beav. 186. Every indorser who is called upon to take up a bill by the holder, should perfectly assure himself not only that the party applying for payment is the true and lawful holder of the bill, but also that there have not been any laches, either by such holder, or by any other party which will affect the merits of the claim against him; for if there have been such laches, by which the prior parties on the bill have been discharged, any indorser who shall unnecessarily pay the bill, will not thereby revive the liability of the prior parties, or be entitled to recover against them. Thus, if a bill has been refused acceptance or payment, and due notice thereof has not been given by the holder or other party to the bill, so as to bind the antecedent parties, payment by any subsequent indorser who has not received due notice, will not revive the liability of the antecedent parties, but they will remain discharged: Story on Bills, s. 423.