4. By any other act which will discharge a simple contract "for the payment of money; 97 98 "5. When the principal debtor becomes the holder of the in"strument at or after maturity in his own right." The English Bills of Exchange Act provides, in effect, for the discharge of a bill by payment in due course, as provided in the above section.99 The English act also authorizes the discharge by the party accommodated,1 and provides also that the bill is discharged where it is intentionally canceled by the holder or his agent, and the cancellation is apparent thereon,2 and where an acceptor of a bill becomes the holder thereof after its maturity in his own right.3 "Payment in due course," means payment made at or after the maturity of the instrument to the holder in good faith and without notice that his title is defective.1 § 121. Discharge by payment. a. By whom payment to be made. The maker of a promissory note and the acceptor of a bill of exchange are primarily liable upon the bill or note, and are bound to pay it at its maturity.5 When a negotiable instrument is paid by or on behalf of the maker of the note or the acceptor of the bill it ceases to exist as a valid contract; and the indorsers thereon and the drawer thereof are discharged." If the instrument is transferred to the maker or acceptor in the regular course of trade, it is extinguished." When commercial paper is paid by an accommodation party whose debt it appears to be, it is commercially dead, and no longer re 98. Neg. Inst. L. (N. Y.), § 200. For same section in statutes of other States see Appendix. 99. English Bills of Exchange Act, § 59 (1). 1. English Bills of Exchange § 59 (3). 2. English Bills of Exchange § 63 (1). 3. English Bills of Exchange $61. Act, Act, Act, ment, without any right to call upon another party to repay the amount, is no longer a valid contract. It has performed its office, and ceases to be a legal entity. See also Dooley v. Virginia Fire and Marine Ins. Co., Fed. Cas. No. 3,999, 3 Hughes (U. S.), 221; American Bank v. Jenness, 2 Metc. (Mass.) 288; Christman v. Harman, 29 Gratt. (Va.) 494. As to payment by person receiving note for collection, see Peoples & Drovers' Bank v. Craig, 63 Ohio St. 374, 59 N. E. 102. 7. Transfer of note or bill to maker. Wallace v. Branch Bank, 1 Ala. 6. Effect of payment. In the case 565; Long v. Bank of Cynthiana, 1 of Ballard v. Gremburch, 24 Me. Litt. (Ky.) 290. In the case of Mat336, the court said: "A bill of tix v. Leach, 16 Ind. App. 112, 43 N. exchange, promissory note, or or E. 969, it was held where the maker der, made payable to a particular of a note after being discharged in person, which has been paid by one, bankruptcy, and, therefore, under no whose duty it was to make the pay- obligation to pay it, contracted with 4. Neg. Inst. L. (N. Y.), § 148; ante, § 107. 5. Edwards on Bills and Notes, p. 532. tains the character that it originally had. It is then but evidence of the transaction, and the accommodation party who has paid it may use it as such in connection with other proof, to compel reimbursement from the real debtor.8 If the maker of a note as the agent of another person purchases the note, recovery thereon by such person will not be defeated. But if the maker, in paying the money to the holder, does not indicate that he acts in behalf of a third person and the holder accepts it as a payment, it will operate as a discharge of the note.10 Where a payment is made by a third person at the request of the maker the instrument will be extinguished, and a subsequent transfer by the payee to the person who makes the payment will not revive it.11 Where a note is paid by one of two or more joint the payee to purchase it, and for that purpose paid certain sums to him, such sums will be treated as payments made on the note in favor of sureties thereon, since a bankrupt maker of a note after his discharge cannot purchase and indorse it as against his sureties. 8. First Nat. Bank v. Maxfield, 83 Me. 576, 22 Atl. 479; Pearce v. Wilkins, 2 N. Y. 469; Muir v. Demarce, 12 Wend. (N. Y.) 468; De Barry v. Withers, 44 Pa. St. 356; Planters' Bank v. Douglas, 2 Head (Tenn.), 699; Sublett v. McKinney, 19 Tex. 438. Payment by accommodation party. - In Edwards on Bills and Notes, p. 532, it is said: "When a bill is accepted for the accommodation of the drawer and paid by the acceptor, a contract is raised or implied on the part of the drawer to indemnify the acceptor; or refund to him the amount so paid with such damages as he may have sustained in the transaction. Citing Baker v. Martin, 3 Barb. (N. Y.) 634. But though an action may be maintained on this implied contract, it cannot be based upon the bill itself, for as a security it has answered the purpose for which it was drawn, and has been canceled. Griffith v. Reed, 21 Wend. (N. Y.) 502; Wing v. Terry, 5 Hill (N. Y.), 160. Having been paid, it remains in the hands of the acceptor as a voucher to be used by him in his settlement with the drawer, or as an item of evidence in an action brought for the recovery of the money paid. The same principles apply to the case of a promissory note made for the accommodation of the payee, or of some other person to whom it is delivered for negotiation." 9. Bowman v. St. Louis Times, 87 Mo. 191. 10. Cason v. Heath, 86 Ga. 438, 12 S. E. 678; White v. Fisher, 62 III. 258; Eastman v. Plumer, 32 N. H. 238. 11. Moran v. Abbey, 63 Cal. 56. Payment by guarantor.- In the case of Voltz v. National Bank, 158 Ill. 532, 42 N. E. 69, 30 L. R. A. 155, it appeared that a national bank guaranteed the payment of the checks of another bank for the purpose of clearing the checks of the latter through a clearing-house. Such bank afterward paid one of the checks guaranteed by it, and it was indorsed by it. It was held that, the check being paid pursuant to the guaranty, the bank was not necessarily a volunteer, and was not, therefore, precluded from claiming the rights of the person to whom the payment was made. Where one guarantees payment of a note or check, and on default of payment by the principal debtor pays the same to the holder, the law will imply a promise to repay on the part of the persons primarily liable, and the guarantor will be subrogated to the rights of the holder to whom he makes payment. Babcock v. Blanchard, 86 Ill. 165; Hamilton v. Johnston, 82 Ill. 39. makers, the note is thereby extinguished;12 and payment made by a joint promisor on a note due cannot, by an arrangement with the payee, be revoked so as to revive the debt against the third party.13 If, before maturity, a note is assigned to one of several joint makers, the assignment operates as a discharge of the note.1 Payments by a person secondarily liable upon an instrument, as by an indorser or drawer, do not discharge the instrument. This subject will be discussed in a later section.15 .17 b. To whom payment should be made.- Payment of a bill or note should be made to the holder and real owner thereof or to some person authorized by him to receive it.16 The possession of a negotiable instrument by a person other than the payee is prima facie evidence of the right to receive payment for the owner; and this is so, although the instrument has not been indorsed by the payee." Where money is paid to the holder of a note a demand should be made for the surrender and delivery thereof; if this is not done the payment is made at the risk of the person paying it, and if the party receiving payment had no right thereto, the payment will not discharge the note as against the true 18 If notice of the loss or theft of an instrument be given to the person liable to pay, such person will not be protected in a payment made to the finder or to the thief or any other person, unless a clear title to the instrument is established, or adequate indem 12. Gulett v. Sweat, 6 Ill. 476; Hopkins v. Farwell, 32 N. H. 425; Rockingham v. Claggett, 29 N. H. 292. 13. Frost v. Martin, 26 N. H. 422; Davis v. Stevens, 10 N. H. 186. Payment by one of several accommodation makers.- When one of several accommodation makers of a joint and several promissory note paid the same, and subsequently transferred and delivered it for a valuable consideration to a third person, the note itself is extinguished by the payment, and while it cannot be sued upon as a note, it remains, in the hands of the maker who paid it, the evidence of his right to reimbursement from his comakers. Dillenbeck v. Dugart, 97 N. Y. 303, 49 Am. Dec. 525. 14. Gordon v. Wansey, 21 Cal. 77; Swen v. Newell, 19 Colo. 397, 35 Pac. 734; Stevens v. Hannan, 86 Mich. 13, 49 N. W. 874; s. c., 86 Mich. 305, 48 N. W. 951, 24 Am. St. Rep. 125; Knee land v. Miles (Tex. Civ. App.), 24 S. W. 1113. 15. See § 123, post. 16. Edwards on Bills and Notes, p. 537. 17. Streeter v. Poor, 4 Kan. 412; Cothran v. Collins, 29 How. Pr. (N. Y.) 113. 19. Wheeler V. 18. Paulman v. Claycomb, 75 Ind. 64; Edwards v. Parks, 60 N. C. 598. Guild, 20 Pick. But (Mass.), 545, 32 Am. Dec. 231. N. W. 687, where, under section 4497 see Reid v. Kellogg, 8 S. Dak. 596, 67 of the Compiled Laws of North Dakota, which provides that a person paying a negotiable instrument may require as a condition precedent that the same be surrendered, it was held that the section did not prevent a payment to one who has been given ostensible authority to receive it from being binding on the payee, although no demand was made for the instrument. 24 20 nity is given against the claim of any other person. If a note is paid by the maker to a fraudulent holder without notice of the fraud, he is discharged from liability.21 The possession by an assumed agent of a promissory note payable to the order of the payee, but not indorsed by him, is not of itself sufficient to authorize a payment thereof to such agent.22 A note may be discharged by a payment to one of two or more joint payees.23 Where payment is made in good faith to the person having possession of a note or other instrument payable to bearer, it will discharge the debtor, since the possession of such an instrument is strong prima facie evidence of a right to receive payment.2 Mere suspicion that the holder of such a note is not its legal owner will not justify the maker in refusing payment, but to exonerate him there must be circumstances amounting to clear proof that the possession is fraudulent.25 If a person is not in the actual possession of a negotiable instrument, a payment to him is presumptively unauthorized.20 But it has been held that the fact that a supposed agent of the payee was not in possession of the instrument at the time the maker made payment to him, is not conclusive as to his lack of authority to receive the payment, although the maker knew that the note had been transferred to a bank for collection.27 20. Payment to finder or thief. Solomons V. Bank of England, 13 East (Eng.), 135. In the case of Cothran v. Collins, 29 How. Pr. (N. Y.) 113, it was held that the payment of a note which has been lost or stolen from the real owner, by the maker thereof, to the finder or thief, under the belief that he was the true owner, but under circumstances showing that the maker was grossly negligent in not learning the facts, and which would have excited suspicion in an ordinary person, is not available as a defense in an action against the maker by the real owner of the note. 21. Alexander v. Rollins, 14 Mo. App. 109; Brennan v. Merchants & Manufacturers' Bank, 62 Mich. 343, 28 N. W. 881. 22. Doubleday v. Kress, 50 N. Y. 410, 10 Am. Rep. 502; Central Trust Co. v. Folsom, 167 N. Y. 285, 289, 60 N. E. 599; Wangner v. Grimm, 169 N. Y. 421, 429, 62 N. E. 569. In the case of Whelan v. Reilly, 61 Mo. 565, it was held that the fact of the possession of notes and a deed of trust by an attorney, to whose firm they are shown to have been intrusted, was pre- 23. Delano v. Jacoby, 96 Cal. 275, 31 Pac. 290, 31 Am. St. Rep. 201; Perry v. Perry, 98 Ky. 242, 32 S. W. 755; Bruce V. Bonney, 12 Gray (Mass.), 107. 24. Long v. Thayer, 150 U. S. 520, 14 Sup. Ct. 189, 37 L. Ed. 1167; Paris v. More, 60 Ga. 90; Chimberg v. Gale Harrow Mfg. Co., 38 Kan. 228, 16 Pac. 462; Barnett v. Ringgold, 80 Ky. 289; Lamb v. Matthews, 41 Vt. 42; Ames v. Drew, 31 N. H. 475. 25. Stoddard v. Burton, 40 Iowa, 582. 26. Holland v. Van Beil, 89 Ga. 223, 15 S. E. 302; Fortune v. Stockton, 182 Ill. 454, 55 N. E. 367; Draper v. Rice, 56 Iowa, 114, 8 N. W. 797, 41 Am. Rep. 88; South Branch Lumber Co. v. Littlejohn, 31 Neb. 606, 48 N. W. 476. 27. Quinn v. Dresbach, 75 Cal. 159, 16 Pac. 762, 7 Am. St. Rep. 138. Where payment was made to the husband of the payee who had not possession of the note at the time, it was held to have been made at the maker's risk.28 29 Payment to the original payee without requiring production of the paper will not necessarily discharge the maker; it is a duty of the maker to require the production of the paper or to otherwise satisfy himself that the payee is still entitled to receive payment. After an indorsement for value by the payee, a payment to him is not a discharge of the instrument, unless it can be shown that the payee had a right to receive the same.30 If the maker have notice. of an assignment or transfer of the note, payment to the payee will not in any event operate as a discharge.31 If a note is payable at a bank, but is not left there for collection, the mere deposit of money at the bank by the maker, to be applied in payment of the note, will not discharge the maker; in such case the bank receiving the money is to be regarded as the agent of the maker and not of the payce. But where the note is left by the holder at the bank 32 that the money collected by the payee in fact reached the holder's hands." See also Exchange Bank v. Johnson, 30 Fed. 588; Loughbridge v. Wilson, 102 Ga. 524, 27 S. E. 665; Tuck v. National Bank, 108 Ga. 446, 33 S. E. 983; Hollinshead v. John Stuart & Co., 8 N. Dak. 35, 77 N. W. 89, 42 L. R. A. 659. 30. Perry v. Bray, 68 Ga. 293: Paris v. Moe, 60 Ga. 90; City Bank v. Taylor, 60 Iowa, 66, 14 N. W. 128; Wilkinson v. Sargent, 9 Iowa, 521; Doe v. Callow (Kan.), 67 Pac. 824; Hoffacker v. Manufacturers' Nat. Bank (Md.), 23 Atl. 579; Williams National Bank, 72 Md. 441, 20 Atl. 191; Farmers' Bank v. Maxwell, 32 N. Y. 579; Harpending v. Gray, 76 Hun (N. Y.), 351, 27 N. Y. Supp. 762. 28. Dunn v. Hornbeck, 72 N. Y. 80. (2) had special authority to collect 29. Payment to original payee. in the particular instance; or, (3) Bank of the University v. Tuck, 96 Ga. 456, 23 S. E. 467, in which case the court says: "One who pays a negotiable promissory note, executed by himself, to any person other than the holder, without taking up the instrument, ought to see to it that the person receiving payment has a right to make the collection. By making the note negotiable, the maker expressly contracts to pay the same to any person who may lawfully acquire title to it in due course of trade. He, therefore, cannot rest upon the assumption that payment to the original payee will necessarily discharge him. Of course, as against one who takes a promissory note after its maturity, the maker may set up the defense that he had already paid it to the original payee before its assignment by the latter; but where one takes such a note before its maturity, such a plea of payment will not, in other instances, be available. The rule as settled by the authorities seems to be, that in such a case the holder, notwithstanding the previous payment of the note by the maker to the original payee, may collect it again, unless one of three things appear: (1) That the payee was the holder's general agent for the collection of such paper; or, 31. Barbour v. Washington Fire and Marine Ins. Co., 60 Ala. 433; Mitchell v. Friedley, 126 Ind. 545, 26 N. E. 391; Merriam v. Bacon, 5 Metc. (Mass.) 95; National Bank of South Carolina v. Estell, 4 Baxt. (Tenn.) 413; Holden v. Kirby, 21 Wis. 149. 32. Deposit of money at bank where instrument is payable. Ward V. Smith, 7 Wall. (U. S.) 447, 19 L. Ed. 207; First Nat. Bank v. Hall, 119 Ala. 64, 24 South. 526; Wood v. Mer |