2

dence from which a positive inference can be drawn, will make such transaction a discharge of the debtor upon the first claim. The actual intention of the parties will govern. Evidence is admitted to show that the negotiation of such paper was as collateral security and not as payment. The burden of showing that the receipt by the creditor of a note of a third person constituted an absolute payment of an antecedent debt, is upon the party so alleging. And if such paper, properly indorsed, is shown to have been negotiated as conditional payment, and by the gross neglect of the creditor holding the same to apply in time to the maker thereof, the amount of the note is lost, the antecedent debt is extinguished.*

244; Schaub v. Arrowsmith, 9 N. J. Eq. 323; Freeholders v. Thomas, 20 Ib. 41; Hutchinson v. Swarts weller, 32 Ib. 205; Wildrich e. Swain, 34 Ib. 167; Swain v. Frazier, 37 N. J. Eq. (14 Rep. 277); Morris &. Harveys, 75 Va. 1881, 13 Rep. 480; Butts v. Dean, 2 Met. 76; Parham Machine Co. v. Brock, 113 Mass. 195; Dows v. Swett, 134 Mass. (15 Rep. 466); Valpy v. Oakley, 162 B. 949; Miles . Gorton, 2 Cr. & M. 512; Sibree v. Tripp, 15 M. & W. 23; Belshaw v. Bush, 11 C. B. 206. In Day v. Thompson, supra, there was an express agreement by the creditor to take a N. Y. draft "in payment, of bill in full." The bank failed before presentment, but the effect of the receipt of the draft as payment was not avoided thereby. Lowry v. Murrell, 2 Port. 280; Carriere v. Ticknor, 26 Ala. 571; Fulford v. Johnson, 15 Ib. 385. The receipt of a non-negotiable note will in no sense operate as a payment of the antecedent indebtedness, unless such is the express intention of the par

ties. Bristol Co. v. Probasco, 64 Ind. 406; Stout v. Stout, 77 Ind. 541. McIntyre v. Kennedy, 29 Pa. St

448.

McLean v. Walker, 10 Johns. 471; Comstock Smith, 23 Me. 202; Partee v. Bedford, 51 Miss. 84; Stone v. Miller, 16 Pa. St. 450; Sykes . Gerber, 98 Ib. 179; Butts v. Dean, 2 Met. 76; Parham Machine Co. Brock, 113 Mass. 195; Dows v. Swett, supra.

In re Parker, 11 Fed. Rep. 397. 4 Gallagher's Exec. v. Roberts, 2 Wash. 191. As where a person receives a promissory note drawn to his own order for a debt due to him, and gives a receipt wherein he states that he has settled and received payment in full by taking the note, and subsequently brings suit upon such note and judgment is given for the defendant. Such judgment is a bar to any subsequent action upon the original demand, the subject of both suits being in fact the same. Sykes v. Gerber, 98 Pa. St. 179.

§ 30. THE RULE IN MASSACHUSETTS AND VERMONT. -The rule in Massachusetts is, that where a debtor gives his own negotiable promissory note to his creditor for the amount of a pre-existing simple contract debt, it is prima facie a payment or satisfaction of the debt.' If such note be given for an amount due on an execution, and the execution be discharged, it is prima facie evidence of payment.' This presumption is founded upon the consideration that when a note is given for goods, it is equally convenient for the creditor to sue on the note as on the original consideration, and no reason exists for any further vitality of the original claim.' The presumption is one of fact, and not of law, and may be rebutted, and does not apply to nonnegotiable paper, nor does it exist where the creditor, upon taking such new note, retains the obligations of third parties held by him, nor upon receiving a new note and mortgage where the note surrendered was secured by mortgage also. But if such new note and mortgage is taken. for an old note unsecured, which is surrendered, it is presumed to be payment. Where such new note is taken for a pre-existing debt, secured by mortgage, it is only presumptive evidence of payment, and a question of fact for the jury. Checks of a third party dishonored, and not paid, are not payment.

10

Under the decisions of the Supreme Court of Vermont, a promissory note, either of the debtor or of a third person, given in settlement of an account, or for a pre-existing debt, is prima facie payment." Such presumption may be

'Dodge v. Emerson, 131 Mass. 467; Thacher v. Dunsmore, 5 Ib. 299. Day v. Hickney, 14 Allen, 255. Curtis v. Hubbard, 9 Met. 322. 4 Medledge v. Boston Iron Company, 5 Cush. 170.

5 Howland Coffin, 9 Pick. 54. Butts v. Dean, 2 Met. 76; Appleton v. Parker, 15 Ib. 173.

Taft v. Boyd, 13 Allen, 84.

467.

Adams v. Jenkins, 16 Gray, 146.
Dodge v. Emerson, 131 Mass.

10 Small v. Franklin Ins. Co. 99 Mass. 277.

11 Hutchins v. Olcott, 4 Vt. 549; Torrey v. Baxter, 13 Ib. 452; Farr ". Stevens, 26 Ib. 299; Collamer v. Langdon, 29 Ib. 32; Wait v. Brewster, 31 Ib. 516.

2

rebutted by evidence that the note was not received as payment, the question whether it was so received being one of fact, depending upon the contract or understanding of the parties. So, a misunderstanding whether a third party is bound will defeat the presumption, and fraud of course will defeat it. But it is immaterial that the former note, representing the pre-existing indebtedness, should not have been surrendered on the giving of the new note. The retention of the original note will not affect the transaction as one of payment, if it be so in fact."

'Follett v. Steele, 16 Vt. 30; Farr *. Stevens, and Collamer v. Langdon, supra.

Dickinson v. King, 28 Vt. 378; Wemet v. Mississquoi Co. 46 Ib. 460. Wait o. Brewster, supra.

Hutchins . Olcott, Farr v. Stevens, Wemet v. Mississquoi Co., Wait v. Brewster, supra.

Dixon v. Dixon, 31 Vt. 450.

CHAPTER IV.

ACCOMMODATION PAPER AS COLLATERAL SECURITY.

§31. The title of the pledgee of accommodation paper.
32. The paper included in the term "accommodation."
33. As collateral security for a present advance.
34. As collateral security for a pre-existing debt.
35. The rule adopted in New York.

36. The rule in Ohio and Pennsylvania.

37. The English rule.

38. Misappropriation of accommodation paper as collateral security. 39. Such pledges not sustained as collateral security for antecedent debt, without more.

40. Pledgee chargeable with notice of fraud or forgery can not recover. 41. Pledge of accommodation paper, after maturity, supported.

$31. THE TITLE OF THE PLEDGEE OF ACCOMMODATION PAPER. The title of the pledgee, receiving accommodation paper as collateral security, as a holder for value in the usual course of business, where there has been no restriction placed upon the use of such paper by the party signing or indorsing the same, is especially favored in commercial law. The use of such paper as collateral security for a present advance, or for an antecedent debt, even in states where ordinary commercial paper taken as collateral security for such antecedent debt, without more, is subject to equities, is supported, and the obligation of the accommodating party who has held himself out to the world as absolutely bound to every person who shall take the note for value, is enforced in his favor. The pledgee, receiving such paper, after ma

1 Logan v. Smith, 62 Mo. 455; Continental Nat. Bank v. Townsend, 87 N. Y. 9; Southwick v. First Nat.

Bank, 84 Ib. 420, 436; Grocer's Bank v. Penfield, 69 N. Y. 502; Miller . Larned, 103 Ill. 562; Pitts v. Fogle

turity, as collateral security where the accommodated party has been allowed to retain the same by the maker, is protected, as his continued possession thereof creates a presumption that he has a continued right to use the paper.' Where, however, the act of pledge of accommodation paper is a fraud, and in violation of restrictions placed upon its use, the pledgee for value, without notice, is restricted. in his recovery against the accommodating party to the amount of his loan; and if chargeable with notice of the fraud, acquires no title whatever as against the defrauded party.

$32. THE PAPER INCLUDED WITHIN THE TERM “ACCOMMODATION."-Accommodation paper includes a negotiable or non-negotiable bill or note made or indorsed by a person without consideration, and includes the handing by a person of his signature upon a blank piece of paper to another, authorizing him to fill it up, which being done, as between the accommodating party and an innocent pledgee before maturity, without notice, and for a valuable advance in the usual course of business, the accommodating party is estopped to deny his signature.

song, 37 Ohio St. 676; Matthews v. Rutherford, 7 La. Ann. 225; Lord v. Ocean Bank, 20 Pa St. 384.

1 Connerly . Planters' Ins. Co. 66 Ala. 432; Dunn v. Weston, 71 Me. 270; Miller . Larned, 103 Ill. 562; Silverman . Bullock, 98 Ib. 11; Robbins . Richardson, 2 Bosw. 283; Harrington . Dow, 3 Robt. 275.

2 Maitland. Bank, 40 Md. 540; Allaire. Hartshorn, 21 N. J. L. 665; Dresser v. Railroad Co. 93 U. S. 92, 96; Fisher . Fisher, 98 Mass. 303; Stoddard e. Kimball, 6 Cush. 469; Small e. Smith, 1 Denio, 583.

Dayton National Bank e. Merchants' National Bank, 37 Ohio St.

Where a note is signed

208; Miller v. Larned, 103 Ill. 562; Davis v. Randall, 115 Mass. 547; Agawam Bank v. Strever, 18 N. Y. 502; Richardson v. Rice, 9 Baxter 290; Baldwin v. Ely. 9 How. 580; Matthews . Finley, 7 La. Anu. 225; Heywood v. Watson, 4 Bing. 496.

"An accommodation bill or note is one to which the accommodating party has put his name without consideration, for the purpose of accommodating some other party who is to use it and is expected to pay it.' Byles on Bills, Sharswood's Ed. 237.

4 Goodman v. Simonds, 20 How, 361; Violet v. Patton, 5 Cranch 142;