party who holds the bill to give the promptest notice of dishonor, and secure the liability of all prior parties.88

90

89

§ 1258. The formal mode of making payment supra protest is this: The party proposing to make such payment goes before a notary public after the bill has been noted for protest 8 (though it is not necessary that the protest should have been formally extended), and makes a declaration for whose honor he makes payment, which declaration should be recorded by the notary, either in the protest or in a separate instrument.91 He must then, in a reasonable time, notify the party for whose honor he pays, otherwise such party will not be bound to refund."

It is observed by Byles, that " the most obvious and advantageous course to be pursued by a man desiring to protect the credit of any party to a dishonored bill is simply to pay the amount to the holder, and take the bill as an ordinary transferee. But the holder may possibly object; for example, the bill may not have been indorsed in blank, and the holder may refuse to indorse even sans recours. In such an event a payment supra protest becomes essential." 93

The privilege of payment supra protest is not extended by the law merchant to promissory notes, which are not designed for such general circulation as bills of exchange, and the party making such payment acts at his peril.9

94

88. Wilkinson v. Johnson, 3 B. & C. 428, 5 Dowl. & R. 403. See chapter XVIII, on Acceptance, § 528, note, vol. I; Chitty on Bills [*509], 575.

89. Vandewall v. Tyrrell, Moody & M. 87. See chapter XVIII, section VI, § 522, vol. I.

90. Geralopulo v. Wieler, 10 C. B. 690 (70 Eng. C. L.).

91. Byles on Bills (Sharswood's ed.) [*260], 407; Chitty on Bills [*509], 575, 576; Edwards on Bills, 441.

92. Wood v. Pugh, 7 Ham. 164.

93. Byles on Bills (Sharswood's ed.) [*261], 408.

94. Byles on Bills (Sharswood's ed.) [*262]; Story on Notes, § 453.

CHAPTER XXXIX.

CONDITIONAL AND

ABSOLUTE PAYMENT.- TAKING BILL OR

NOTE FOR OR ON ACCOUNT OF DEBT.

SECTION I.

WHEN THE PRESUMPTION OF PAYMENT ARISES FROM TAKING A BILL OR NOTE.

§ 1259. When a bill or note is taken for or on account of a debt, the question arises whether it was taken in absolute discharge of it, and operates as a complete merger, or simply as a collateral security, or in suspension of the debt, during its currency. The intention of the parties is the controlling element.1 And if there be any distinct agreement on the subject all controversy is silenced. But when no particular intention is manifested, and no express or implied agreement appears, the question is to be solved by principles of law which make presumptions as to the intention of the parties according to the circumstances of each particular case. Sometimes the debt is antecedent to the giving of the bill or note; sometimes contemporaneous. And the debtor may give (1) his own bill or note; or (2) transfer the bill or note of another without indorsement; or (3) transfer it with indorsement.

§ 1260. Debtor's bill or note for precedent debt. Firstly, let us consider the case when the debtor gives his own bill or note for or

1. Bolt v. Dawkins, 16 S. C. 214; Weaver v. Nixon, 69 Ga. 700; Stewart v. Life Ins. Co., 155 N. Y. 257, 49 N. E. 876. The giving and acceptance of a note is prima facie evidence of the settlement of account between the parties at the time. The ordinary presumption is that the demands between the parties were then liquidated, and the note was given for the balance found to be due from the maker. Wright v. Wright, 74 Hun, 138, 26 N. Y. Supp. 238; Morse v. Woodworth, 155 Mass. 233, 27 N. E. 1010, 29 N. E. 525; Parks v. Smith, 155 Mass. 26; Matter of Utica Nat. Brewing Co., 154 N. Y. 268, 48 N. E. 521; Orcutt v. Rickenbrodt, 42 App. Div. 238, 59 N. Y. Supp. 1008; McCullough v. Kervin, 49 S. C. 445, 27 S. E. 456; Witte v. Weinberg, 37 S. C. 579, 17 S. E. 681; Continental Ins. Co. v. Dorman, 125 Ind. 189, 25 N. E. 213; Kirkland v. Dreyfus & Rich, 103 Ga. 127, 29 S. E. 612; Wipperman v. Hardy, 17 Ind. App. 142, 46 N. E. 537; State ex rel. Crider v. Wagers, 47 Mo. App. 431; Hadden v. Dooley, 34 C. C. A. 338, 92 Fed. 274, citing text.

on account of a precedent debt. It is a general principle of law that one simple executory contract does not extinguish another for which it is substituted, and negotiable securities form no exception. And by the general commercial law, as well of England,” as of the United States, a bill of exchange drawn or promissory note made by the debtor does not discharge the precedent debt 2. Keller v. Singleton, 69 Ga. 703; Rhodes et al. v. Webb-Jameson Co. et al., 19 Ind. App. 195, 49 N. E. 283; Combs v. Bays, 19 Ind. App. 263, 49 N. E. 358; Brown et al. v. Shelby, 4 Ind. App. 477, 31 N. E. 89.

3. Dowse v. Master, Style, 263; Smith v. Chester, 1 T. R. 655; Richardson v. Rickman, 5 T. R. 517; Price v. Price, 16 M. & W. 232.

4. The Kimball, 3 Wall. 45; Bank of the United States v. Daniel, 12 Pet. 32; Peters v. Beverley, 10 Pet. 532; Downey v. Hicks, 14 How. 240; Clark v. Young, 1 Cranch, 181; Sheehy v. Mandeville, 6 Cranch, 253; Lewis v. Davison. 29 Gratt. 226; McCluny v. Jackson, 6 Gratt. 96; McGuire v. Gadsby, 3 Call, 324; Armistead v. Ward, 2 Pat. & H. 515; Middlesex v. Thomas, 5 C. E. Green, 39; Glenn v. Smith, 2 Gill & J. 512; Clopper v. Union Bank, 7 Harr. & J. 120; Walton v. Bemiss, 16 La. 140; McLaren v. Hall, 26 Iowa, 298; Steamboat Charlotte v. Hammond, 9 Mo. 63; Yarnell v. Anderson, 14 Mo. 619; Doebling v. Loss, 40 Mo. 150; Archibald v. Argall, 53 Ill. 307; Miller v. Lumsden, 16 Ill. 161; Logan v. Attix, 7 Iowa, 77; Davis' Estate, 5 Whart. 537; Jones v. Strawhan, 4 Watts & S. 261; McIntyre v. Kennedy, 29 Pa. St. 448; Hutchinson v. Woodwell, 107 Pa. St. 510; Lee v. Green, 83 Ala. 491; Keel v. Larkin, 72 Ala. 501; Day v. Thompson, 65 Ala. 269; McGuire v. Bidwell, 64 Tex. 43; Henry v. Conley, 48 Ark. 271, citing the text; Hopkins v. Detwiler, 25 W. Va. 748; Hornbrooks v. Lucas, 24 W. Va. 493; Reeder v. Nay, 95 Ind. 164; Warring v. Hill, 89 Ind. 501; Silby v. McCullough, 26 Mo. App. 67; Sturdevant Bank v. Peterman, 21 Mo. App. 512; Commiskey v. Pike, 20 Mo. App. 82; Wiles v. Robinson, 80 Mo. 47; Cheltenham Stone Co. v. Gates Iron Works, 124 Ill. 626; Riverside Iron Works v. Hall, 64 Mich. 168; Geib v. Reynolds, 35 Minn. 331; Segrist v. Crabtree, 131 U. S. 287; Brill v. Hoile, 53 Wis. 538; Stanley v. McElrath (Cal.), 25 Pac. 16, citing the text; Dougal v. Cowles, 5 Day, 511; Merrick v. Boury, 4 Ohio St. 60; Sutliff v. Atwood, 15 Ohio St. 186; Burdick v. Green, 15 Johns. 249; Cole v. Sackett. 1 Hill, 516; Winsted Bank v. Webb, 39 N. Y. 325; Hawley v. Foote, 19 Wend. 516; Frisbie v. Larned, 21 Wend. 450; Syracuse R. Co. v. Collins, 3 Lans. 29; Smith v. Miller, 43 N. Y. 171; Board of Education v. Fonda, 77 N. Y. 350. Nor even operate as an extension of the time of payment of the debt for which it was given. Graham v. Negus, 62 N. Y. S. C. (55 Hun) 440; Gordon v. Price, 10 Ired. 385; McNeil v. McCamley, 6 Tex. 163; Union Bank v. Smiser, 1 Sneed, 501; Marshall v. Marshall, 42 Ala. 149; Myatts v. Bell, 41 Ala. 222; Guion v. Doherty, 43 Miss. 538; Stam v. Kerr, 31 Miss. 199; Welch v. Allington, 23 Cal. 322; Smith v. Owens, 21 Cal. 11; Edwards on Bills, 203; Breitung v. Lindauer, 37 Mich. 217; Poole v. Rice, 9 W. Va. 73; Feamster v. Withrow, 12 W. Va. 611; In re Hurst, 1 Flipp. C. C. 462; Walsh v. Lennon, 98 Ill. 27; Wilbur v. Jernegan, 11 R. I. 113; Nightingale v. Chafee, 11 R. I. 609; Crawford v. Roberts, 50 Cal. 236; Brown v. Olmsted, 50 N. Y. 163; Caldwell v. Hall, 49 Ark. 508; Fry v. Patterson, 49 N. J. L. 612. And if the paper be

for which it is given, unless such be the agreement of the parties. The creditor may return the bill or note when dishonored by nonacceptance or nonpayment, and proceed upon the original debt. The acceptance of the instrument by the creditor is considered as accompanied by the condition of its payment. Thus, it was said, in the time of Lord Holt: "A bill shall never go in discharge of a precedent debt, except it be a part of the contract that it shall be Such has been the rule in England ever since; and it proceeds upon the obvious ground that nothing can be justly considered as payment in fact but that which is in truth such, unless something else is agreed to be received in its place; and that a mere promise to pay ought not to be regarded as an effective payment is manifest.

It is to be regretted that any exception should be found in the adjudicated cases to the adoption of a principle so generally prevalent and so well founded in reason. But the courts of Massachusetts, Maine, Vermont, Indiana, and Louisiana have held that the taking of a bill or note on account of a precedent debt is to be presumed to be a satisfaction of it; but they admit parol evidence to rebut this presumption, by proof of an express or implied contract that the debt should only be suspended, not discharged. And

expressly accepted as payment, it will not so operate if it was such as the maker had no capacity to execute. Godfrey v. Crisler, 121 Ind. 203. See cases cited in notes to § 1245 and § 1623. See also Delafield v. Construction Co., 118 N. C. 105, 24 S. E. 10; National Bank v. Jose, 10 Wash. 185, 38 Pac. 1026, and cases cited in notes to § 1623; Walsh v. Cooper, 10 Wash. 513, 39 Pac. 127; Taylor v. Slater, 16 R. I. 93, 12 Atl. 727. 5. Clark v. Mundal, 1 Salk. 124. Where note in payment of debt is received by creditor subject to approval within reasonable time-question of such reasonable time one for jury. Cutler v. Parsons, 13 App. Div. 377, 43 N. Y. Supp. 187; Novelty Mfg. Co. v. Connell, 88 Hun, 254, 34 N. Y. Supp. 717: Matter of Callister, 88 Hun, 88, 34 N. Y. Supp. 628; Fitch v. McDowell, 80 Hun, 207, 30 N. Y. Supp. 31; Metzger v. Carr, 79 Hun, 258, 29 N. Y. Supp. 410: Johnston v. Barrills, 27 Oreg. 251, 41 Pac. 656, 50 Am. St. Rep. 717, citing and approving text; Brantley Co. v. Lee, 109 Ga. 478, 34 S. E. 574; Kirkland v. Dryfus & Rich, 103 Ga. 127, 29 S. E. 612; Orner v. Sattley Mfg. Co., 18 Ind. 122; Rhodes et al. v. Webb-Jameson Co. et al., 19 Ind. App. 195, 49 N. E. 283; Combs v. Bays, 19 Ind. App. 263, 49 N. E. 358; McCormick V. Altneave & Co., 73 Miss. 86, 19 So. 198; National Ins. Co. v. Goble, 51 Nebr. 5, 70 N. W. 503; State ex rel. Crider v. Wagers, 47 Mo. App. 431. See Steinhart v. National Bank, 94 Cal. 362, 29 Pac. 717, 28 Am. St. Rep. 132; Savings & Loan Society v. Burnett, 106 Cal. 514, 39 Pac. 922.

& O'Connor v. Hurley, 147 Mass. 149; Ely v. James, 123 Mass. 36, and held presumably the same in Maine; Parkham Sewing Machine Co. v. Brock, 113 Mass. 194; Dodge v. Emerson, Mass. S. C., Oct., 1881, Alb. L. J., vol. XXV,

7

when the old note is secured by mortgage the presumption of payment does not arise as in other cases. So if there be other security for the old debt and it is retained.8

§ 1261. Secondly: Debtor's note for contemporaneous debt.-When a person contracts a debt or purchases goods, and contemporaneously executes his own note for the amount, Story, considers it prima facie conditional payment only; while Parsons says:10 It seems to be substantially selling a note by barter, or exchanging it for goods." "And we can hardly conceive," he adds, "of a bill being taken at the time of the sale, unless it be the understanding of the parties to regard it as payment. The remedy on the note

No. 8 (Feb. 25, 1882), p. 155; Appleton v. Parker, 15 Gray, 173; Thatcher v. Dinsmore, 5 Mass. 302; Whitcomb v. Williams, 4 Pick. 231; Chapman v. Durant, 10 Mass. 51; Goodenow v. Tyler, 7 Mass. 38; Wood v. Bodwell, 12 Mass. 289; Varner v. Nobleborough, 2 Greenl. 124; Gooding v. Morgan, 37 Me. 619; Gilmore v. Bussey, 12 Me. 418; Ward v. Bourne, 56 Me. 161; Titcomb v. McAllister, 81 Me. 399; Bunker v. Barron, 79 Me. 62; Granite Nat. Bank v. Fitch, 145 Mass. 567; Nixon v. Beard, 111 Ind. 141. But if nonnegotiable, acceptance as payment in Indiana must be affirmatively proved. Olvay v. Jackson, 106 Ind. 286; Schierl v. Baumel, 75 Wis. 69; Hutchins v. Olcutt, 4 Vt. 549; Torrey v. Baxter, 13 Vt. 452; Dickinson v. King, 28 Vt. 378; Farr v. Stevens, 26 Vt. 299; Gaskins v. Wells, 15 Ind. 253; Smith v. Bettger, 68 Ind. 254; Hunt v. Boyd, 2 La. 109; Mehlberg v. Fisher, 24 Wis. 607. The learned editors of American Leading Cases attribute the departure of these cases from the general rule to a variation in the course of business, which attaches a different meaning to the same acts and declarations. Vol. II, 250; Forbes v. The Union Central Life Ins. Co., 151 Ind. 89, 51 N. E. 84; Wipperman v. Hardy, 17 Ind. App. 142, 46 N. E. 537; Keck v. State ex rel. Nat. Cash Register, 12 Ind. App. 119, 39 N. E. 899.

7. See § 1266a, and Taft v. Boyd, 13 Allen, 84; Parkham Sewing Machine Co. v. Brock, 113 Mass. 194; Bunker v. Barron, 79 Me. 62; Dodge v. Emerson, Mass. S. C., Oct., 1881, Alb. L. J., Feb. 25, 1882, p. 155.

8. Titcomb v. McAllister, 81 Me. 399.

9. Story on Notes, § 104; Hoodless v. Reid, 112 Ill. 110; Kirkham v. Bank of America, 26 App. Div. 110, 49 N. Y. Supp. 767, citing text. The court held, in this case, that where the agent of a bank in which a draft has been deposited for collection, surrenders the draft to the drawee, and accepts a draft for its amount, drawn by the drawee upon a third person, the first-mentioned draft is thereby paid, the presumption being that the drawee's draft was accepted in payment of the draft received for collection; in any event the collecting bank is bound either to return to its customer the draft received for collection, properly protested, so as to charge the drawer, or to pay him the money.

10. 2 Parsons on Notes and Bills, 157. See also Manning v. Lyon, 70 Hun, 345, 24 N. Y. Supp. 265.