where it is made payable, the bank becomes the holder's agent for the collection of the note, and the maker will be discharged by a payment at the bank, although the bank does not pay over the amount to the holder.33

c. How payment to be made. A bill or note payable in anything else than money is not negotiable, and is not governed by rules applicable to the payment of negotiable instruments. It follows, therefore, that a negotiable promissory note or a bill of exchange cannot be discharged except by a payment of money. The holder of such an instrument is not bound to accept anything in payment thereof, but money, at its true and proper value.35

In a previous section we have considered what constitutes money, currency, or current funds.36 As a general rule an executory agreement will not operate as an extinguishment of the note; as where an oral agreement was made by an heir with an administrator that the balance due on a note of the estate against her should be deducted from her share before final settlement;37 and

an agreement to deliver property or perform services in payment of a note will not extinguish the note until the property has been received or the services have been performed.38 If the holder of a note at its maturity takes the check of the payee and surrenders the note, it does not operate as a payment, unless it is expressly received as such, or the circumstances clearly show that such was the intention of the parties. Where a holder accepts the check of a third person in payment of the note, it will not operate to discharge the note, unless it was received with the express understanding that it should have such an effect. But a person who takes a check in payment on a note or bill must use due diligence to obtain the money thereon, and if he is guilty of laches, whereby the drawer is injured, it will operate as a payment and discharge.*

39

38. Walker v. Greene, 22 Ala. 679; Graydon v. Patterson, 13 Iowa, 256, 81 Am. Dec. 432.

41

as an absolute payment when So agreed by the parties. See, generally, Henry v. Connelly, 48 Ark. 267, 3 S. W. 181; Heartt v. Roads, 66 Ill. 351.

sentment of a draft to the drawee does not amount to a payment of the draft if the check is not paid; and a Agreement to receive payment in subsequent return of the check on reservices or property.- Where it was ceipt of the draft, and its protest in agreed that the payee of a note due season, preserves the life of the should receive payment in services draft, and entitles the holder to reof a debtor of the maker, per- cover the amount from the drawer. formance of part of the services will In the case of Strong v. King, 35 Ill. not operate as a payment pro tanto, 9, 85 Am. Dec. 336, it was held that the contract being an entirety. Weeks the reception of a check by the holder v. Elliott, 33 Me. 488. And in the from the drawee, upon presentation of case of Damon v. De Bar, 83 Mich. a bill of exchange, will be considered 262, 47 N. W. 216, it was held that a voluntary promise by the payee of a note to receive a quantity of posts in part payment, which the maker agreed to have ready on his farm, is of no 40. In the case of Pratt v. Foot, 9 validity until the posts have been ac- N. Y. 463, revg. 12 Barb. (N. Y.) 212, cepted by the payee; and where they it appeared that a person offered to a are burned on the maker's farm be- bank in payment of a note nearly due, fore acceptance, the payee is entitled a check drawn upon the bank by one to recover the amount of the note. of its own customers. The bank deAnd see, generally, Hook v. White, 36 clined to accept it as payment, but Cal. 299; Bacon v. Lamb, 4 Colo. 578; consented to retain and apply its proNashua L. R. Co. v. Nutting, 15 Gray ceeds to the note if the check were (Mass.), 25; Nunnemacker v. John- paid on the day the note fell due. On son, 38 Minn. 390, 38 N. W. 351; that day a balance appeared against Whittaker v. Ordway, 69 N. H. 182, the drawer of the check; but soon 38 Atl. 789; Cushman v. De Mallie, after new credits having been made 46 App. Div. (N. Y.) 379, 61 N. Y. to him, the bank charged the check Supp. 878; Brady v. Wasson, 6 Heisk. to his account, and credited the note (Tenn.) 131; Dudley v. Stiles, 32 Wis.

371.

as paid. This transaction was held to operate as an absolute payment of the note. See also Canonsberg Iron Co. v. Union Nat. Bank (Pa.), 6 Atl. 574.

39. Payment by check.-Olcott v. Rathbone, 5 Wend. (N. Y.) 490; Burkhalter v. Second Nat. Bank, 42 N. Y. 538; Kelty v. Second Nat. 41. Crowell v. Wing, 1 Hall (N. Bank, 52 Barb. (N. Y.) 328. In Y.), 56; First Nat. Bank of Meadthe last case it was held that ville v. Fourth Nat. Bank of New the giving of a check on the pre- York, 16 Hun (N. Y.), 332; Merchant

Where a new bill or note is accepted in the place of one which has matured, the original instrument is not thereby discharged, unless by an understanding or agreement of the parties to that effect.2 But in Massachusetts the rule seems to be that where a new note is given for the amount due on an old note between the same parties, it will be presumed to have been received in payment of the old note and will operate as a discharge thereof unless the contrary is shown.43 Where a part payment is made on a note and a new note given for the balance, the original note will be deemed to have been discharged, upon the ground that by such a transaction it is presumed that all the differences between the parties were adjusted and settled when the new note was given.** 44 But where a note is surrendered to the maker, and new notes of a third person are delivered to the payee, the acceptance of such new notes constitutes a conditional payment only, unless it was agreed that they should be received as an absolute payment." 45 Where a note is left at a

Nat. Bank v. Samuel, 20 Fed. 664. See Robbins v. Klein, 60 Ohio St. 199, 54 N. E. 94.

42. Accepting new notes of maker. In the case of Scott v. Gilkey, 153 Ill. 168, 39 N. E. 265, it appeared that a bank, holding notes for collection, accepted other notes of the maker, payable to the bank for the principal sum, and credited the bank account of the payee therewith surrendering the notes. No credit was given the account of the payer of the notes as for borrowed money, and no cash passed in the transaction. The bankers absconded, and the owner of the surrendered notes sued the maker; it was held that there was no payment and the owner could recover. See also Savings Bank of San Diego County v. Central Market Co., 122 Cal. 28, 54 Pac. 223; Williams v. Chisholm, 128 Ill. 115, 21 N. E. 215; Jansen v. Grimshaw, 125 Ill. 468, 17 N. E. 850; Tyler v. Hyde, 80 Ill. App. 123; Jones v. Rider, 60 N. H. 452; Holland Trust Co. v. Waddell, 75 Hun (N. Y.), 104, 26 N. Y. Supp. 98; First Nat. Bank v. White, 60 N. J. Eq. 487, 46 Atl. 1092; Moses v. Trice, 21 Gratt. (Va.) 556, 8 Am. Rep. 609; Boston Nat. Bank v. Jose, 10 Wash. 185, 38 Pac. 1026; First Nat. Bank v. Finck, 100 Wis. 446, 76 N. W. 608. But where a note is delivered to the maker, and a new note given in its stead, no action can be maintained on the original note,

upon the ground that the surrender of the note is evidence that it was extinguished by agreement of the parties. Wickenkamp v. Wickenkamp, 77 Ill. 92; Neff v. Clute, 12 Barb. (N. Y.) 466; Horne v. Young, 40 Ga. 193. And the intention that a renewal note is to be accepted in payment of the original is sufficiently shown by the indorsement of the word "paid" upon the original, with the knowledge and consent of the payee. Montague v. Bill, 14 Ky. L. Rep. 890.

43. Willis v. Twambley, 13 Mass. 204; Huse v. Alexander, 2 Metc. (Mass.) 157; Adams v. Jenkins, 16 Gray (Mass.), 146; Devey v. Bell, 5 Allen (Mass.), 165; Agawam Nat. Bank v. Downing, 169 Mass. 297, 47 N. E. 1016. But whether it operates as a discharge is a question of fact, depending upon the circumstances surrounding the transactions, and the intention of the parties. Kendall v. Life Assur. Soc., 171 Mass. 568, 51 N. E. 464.

44. Piper v. Wade, 57 Ga. 223; Compton v. Patterson, 28 S. C. 115, 5 S. E. 270; Cable v. Hardin, 67 N. C. 472.

45. Van Eps v. Dillaye, 6 Barb. (N. Y.) 244; Stevens v. Anderson, 30 Ind. 391; Merchants' Nat. Bank v. Good, 21 W. Va. 455; Gresham v. Morrow, 40 Ga. 487; Hedge v. McQuade, 11 Cush. (Mass.) 352; Woods v. Woods, 127 Mass. 141.

bank for collection the bank is only authorized to accept money in payment, unless by the express consent of the holder it may receive something else.40

§ 122. Discharge otherwise than by payment.

a. By cancellation and surrender.— The rule seems to be well settled by the authorities that where an obligee delivers up the obligation which he holds against another party, with the intent and for the purpose of discharging the debt, where there is no fraud or mistake alleged or proven, that such surrender operates in law as a release and discharge of the liability thereon; nor is any consideration required to support such a transaction when it has been fully executed.47 So where the holder of a promissory note voluntarily cancels the same and surrenders it to the maker, in the absence of mistake or fraud, it will operate in law as a release and discharge of the maker's liability.48 The gift of a promissory note by the holder to the maker extinguishes the note and the debt evidenced thereby.49 A surrender of a note or bill to the person primarily liable thereon is prima facie evidence of a discharge,50 and if made for the purpose and with the intent of discharging the debt, it will have that effect.51 Where words are written on the face of this instrument indicating that it has been discharged or satisfied in full, by, or with the consent of, the owner the instrument is extinguished.52 A mere promise by the

47. In the case of Beach v. Endress, 51 Barb. (N. Y.) 570, it was held that no action is maintainable on a bond, in the absence of fraud or mistake, after the money due on a bond or undertaking has been paid by the obligors, and receipted in full on the back of the bond by one of the obligees, and the bond delivered up to the obligors for the purpose of being canceled. See also Larkin v. Hardenbrook, 90 N. Y. 333, 43 Am. Rep. 176; Doty v. Wilson, 5 Lans. (N. Y.) 10; Albert's Exrs. v. Ziegler's Exrs., 29 Pa. St. 50.

this was a valid cancellation of the note. Edwards v. Campbell, 23 Barb. (N. Y.) 423. See also Booth v. Smith, Fed. Cas. No. 1,649, 3 Woods (U. S.), 19; Tarbell v. Parker, 101 Mass. 165; Miller v. Tharel, 75 N. C. 148.

49. Hale v. Rice, 124 Mass. 292; Stewart v. Hidden, 13 Minn. 43; Edwards v. Campbell, 23 Barb. (N. Y.) 423; In re Campbell, 7 Pa. St. 100, 47 Am. Dec. 503.

50. Sherman v. Sherman, 3 Ind. 337; Fellows v. Kress, 5 Blackf. (Ind.) 536.

51. Vanderbeck v. Vanderbeck, 3 Stew. (N. J.) 265; Miller v. Tharel, 75 N. C. 148. But a surrender or can

48. Larkin v. Hardenbrook, 90 N. cellation without the consent of the Y. 333, 43 Am. Rep. 176.

Where the payee of a promissory note, in her last sickness, handed the note to her sister, to be given to the maker in payment for boarding and taking care of her, it was held that

owner does not discharge the maker. McLemore v. Hawkins, 46 Miss. 715. See also Clark v. Butts, 73 Minn. 361, 76 N. W. 199.

52. Succession of Foerster, 43 La. Ann. 190, 9 South. 17.

payee to surrender the note to the maker does not discharge the latter from his liability thereon.53 Where the return or surrender of a note is induced by fraud, the maker is not released from liability thereon;54 and where a note has been surrendered by mistake upon the supposition that it was fully paid, the maker will remain liable for the balance still unpaid.55

b. Statutory provision as to cancellation.- The Negotiable Instruments Law provides that: "A cancellation made uninten"tionally, or under a mistake, or without the authority of the "holder, is inoperative; but where an instrument or any signature "thereon appears to have been canceled, the burden of proof lies on the party who alleges that the cancellation was made unin"tentionally, or under a mistake, or without authority." 56 This is, in effect, the same as a provision of the English Bills of Exchange Act,57 and seems to be declaratory of the general rule.58

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c. By accord and satisfaction. A distinction should be made between an extinguishment and a satisfaction of a bill or note. As for an example, as stated by Justice Story, taking a security of a higher description, such as a bond or judgment, will extinguish the claim of the holder upon the note against the party giving the security; but it will not amount to a satisfaction thereof, so as to discharge the other parties upon the note.59 And although an agreement never to sue the maker will operate as an extinguishment of the debt as to him, it is not a satisfaction as to the other parties to the note.60 It is a general rule that whatever is received by the payee of a note in full satisfaction of the claim against the

53. Greenbaum v. Elliott, 60 Me. 25. 54. Reynolds v. French, 8 Vt. 85, 30 Am. Dec. 456; Shurer v. Green, 3 Coldw. (Tenn.) 419; Findley Cowles, 93 Iowa, 389, 61 N. W. 998.

56. Neg. Inst. L. (N. Y.), § 204. For same section in statutes of other States see Appendix. V. 57. English Bills of Exchange Act, 63 (3). And see Novelli v. Rossi, 2 B. & Ad. (Eng.) 757; Castrique v. Imrie, L. R., 4 H. L. (Eng.) 435; Warwick v. Rogers, 5 M. & G. (Eng.) 340; Prince v. Oriental Bank, 3 App. Cas. (Eng.) 325.

55. Banks v. Marshall, 23 Cal. 223; Manufacturers' Bank v. Thompson, 129 Mass. 438, 37 Am. Rep. 376; Blodgett v. Bickford, 30 Vt. 731, 73 Am. Dec. 334. In the case of Liesemer v. Burg, 106 Mich. 124, 63 N. W. 999, a note was delivered by the payee to the maker when payment was demanded, and retained by the maker, although the full amount was not paid, the maker having claimed a credit which the payee refused to allow. It was held that the maker could not destroy the character of the note as an evidence of indebtedness, by marking it "paid."

58. Larkin v. Hardenbrook, 90 N. Y. 333, 43 Am. Rep. 176.

59. Story on Promissory Notes, § 409; Fisher v. Fisher, 98 Mass. 303; Tradesmen's Nat. Bank v. Looney, 99 Tenn. 278, 42 S. W. 149, 38 L. R. A. 837.

60. Dean V. Newhall, 8 T. R. (Eng.) 168; Fowell v. Forrest, 2 Saund. (Eng.) 47, n.