§ 1278. Due diligence required of transferee by delivery.— When the debtor transfers by delivery merely the bill or note of another for an antecedent debt, he is undoubtedly not entitled to require strict presentment and notice, as he is not a party to the instrument.80 Still, by accepting the instrument in conditional payment, the creditor comes under an obligation to use due dili gence in making it subserve the purpose for which it was given; and if by his delay and laches he loses the opportunity to collect and apply the proceeds, he cannot then enforce the original right of action against the transferrer.81 But the burden of proof is on the defendant in an action on the original consideration to show that there had been laches on the creditor's part; for if the bill or note remains in his hands, it is presumptive evidence that it has been dishonored by nonpayment. 82

§ 1278a. Debt discharged by laches of the creditor in the collection of collaterals. When the creditor accepts a chose in action from his debtor as collateral security for the payment of his debt, he incurs the obligation of taking such seasonable steps as may be necessary to preserve the liability of him against whom the right of action exists. His duties respecting the collaterals in his hands, are, with reference to their preservation, the same as those of a bailee or pledgee of chattels; he must exercise, in that regard, the care and diligence of a prudent business man. He cannot, therefore, passively allow the Statute of Limitations to become a bar to their enforcement. If, through his negligence, a right of action once accrued has been lost, the conditional character of their acceptance is gone, and they become an absolute satisfaction of the debt.83

221; Roberts v. Thompson, 14 Ohio, 1; Lawrence v. McCalmont, 2 How. 426; Hamilton v. Cunningham, 2 Brock. 350; Easton v. German-American Bank, 24 Fed. 536; Rumsey v. Laidley, 34 W. Va. 721, 12 S. E. 866, 26 Am. St. Rep. 935.

80. Story on Bills, § 109; Story on Notes, § 117.

81. Tobey v. Barber, 5 Johns. 68; Dayton v. Trull, 23 Wend. 345, 2 Am. Lead. Cas. 256.

82. Goodwin v. Coates, 1 Moody & R. 221; Bishop v. Rowe, 3 Maule & S. 362; 2 Parsons on Notes and Bills, 183; Byles on Bills (Sharswood's ed.) [*372], 551. But see Dayton v. Trull, 23 Wend. 345. See Rush v. First Nat. Bank, 17 C. C. A. 627, 71 Fed. 102.

83. Semple v. Detwiler, 30 Kan. 386; Ludden v. Marsters, 16 Nebr. 657; Easton v. German-American Bank, 24 Fed. 526; Martin v. Home Bank, 30 App. Div. 498, 52 N. Y. Supp. 466, citing text; First Nat. Bank v. O'Connell, 84 Iowa, 377, 51 N. W. 162, 35 Am. St. Rep. 313.

SECTION IV.

THE EFFECT OF TAKING A BILL OR NOTE UPON A LIEN.

§ 1279. By the common law a party selling personal property has a right of lien for the purchase money as long as he retains possession of the property. A lien is simply a right to hold, and without possession there can be no lien. The vendor's lien may be waived expressly. "It may also be waived by implication at the time of the formation of the contract, when the terms show that it was not contemplated that the vendor should retain possession until payment; and it may be abandoned during the performance of the contract, by the vendor's actually parting with the goods before payment." 85

86

1279a. When lien is regarded as waived. The circumstances under which the lien will be regarded as waived are as follows: (1) In the first place, it will be regarded as waived by implication when the goods are sold on credit, unless there be an express agreement to the contrary, or an established usage to the same effect in the particular trade of the parties be shown.7 (2) In the second place, the vendor's lien will also be waived by taking a bill, note, or other security payable in future for the goods bought.88 A promissory note payable on demand, however, would not defeat the vendor's lien.8

89

§ 1280. When lien revives. But if the goods are permitted to remain in the vendor's hands until the bill or note given for them by the buyer falls due, and it is then dishonored, the

84. Heywood v. Waring, 4 Campb. 291.

85. Benjamin on Sales, 598.

86. Spartali v. Benecke, 10 C. B. 212, 19 L. J. C. P. 293.

87. Field v. Lelean, 6 H. & N. 617, 30 L. J. Exch. 168, overruling on this point Spartali v. Benecke, supra.

88. In Chambers v. Davidson, L. R., 1 P. C. App. 296, 4 Moore P. C. C. (N. S.) 158, Lord Westbury said: 'Lien is not the result of an express contract; it is given by implication of law. If, therefore, a mercantile transaction which might involve a lien is created by a written contract, and security given for the result of the dealings in that relation, the express stipulation and agreement of the parties for security exclude lien, and limit their rights to the extent of the express contract that they have made. Expressum facit cessare tacitum." Bunney v. Poyntz, 4 B. & Ad. 568 (24 Eng. C. L.); Barrett v. Goddard, 3 Mason, 107; Byles on Bills (Sharswood's ed.) [*385], 566.

89. Clark v. Draper, 19 N. H. 419. Contra, Hutchins v. Olcott, 4 Vt. 549.

vendor's lien will be revived.90 In such a case Lord Tenterden said: "We are of the opinion that, on nonpayment of the bill, the defendant ought to retain the goods." 91 Unless, indeed, the bill or note had been negotiated and were outstanding in the hands of a transferee, in which case the lien would not be revived by its dishonor.92

27 94

§ 1281. Vendor's lien on realty. When real property is sold, the principle relative to personal property does not apply, and the acceptance of a bill or note, upon which no third person is security, even when it is negotiated to a third party by discount or otherwise, does not amount to a relinquishment of the vendor's lien on the land for the unpaid purchase money.93 The Master of the Rolls said in an English case: "The effect of a security of a third person has never been decided; but I concur with Lord Redesdale that bills of exchange are not security, but a mode of payment." Nor will a check drawn on a bank by the vendee, which is not presented or paid, operate a relinquishment of the vendor's lien, nor any instrument whatever involving merely the vendee's responsibility, even if another person be substituted for the original payee. In Kansas, where a note was given and indorsed, it was said by Brewer, J.: "The lien which the vendor has is something more than a bare right, a personal privilege. It is an interest created by the contract of the parties, and is as fixed, complete, and absolute as the interest of a mortgage. It is more, for the mortgagee has no estate in the land under the decisions of this court, while the vendor, in a bond to convey, holds the legal title. It is a general rule that the incident follows the principal; the transfer of a debt carries with it the security. The vendor holds the legal title as security. He transfers the

96

90. New v. Swain, 1 Dan. & Ll. 193; Valpy v. Oakeley, 16 Q. B. 641; Dixon v. Yates, 5 B. & Ad. 341; Benjamin on Sales, 623.

91. New v. Swain, 1 Dan. & LI. 193.

92. Bunney v. Poyntz, 4 B. & Ad. 568 (24 Eng. C. L.); Byles on Bills [*373], 553; 2 Parsons on Notes and Bills, 166.

93. Magruder v. Peter, 11 Gill & J. 217; Tompkins v. Mitchell, 2 Rand. 428; Bayley v. Greenleaf, 7 Wheat. 46; Ex parte Loring, 2 Rose, 79; Hughes v. Kearney, 1 Shoaies & L. 135; Hall v. Mobile & M. R., 58 Ala. 10; 1 Lomax Digest [218], 268; Byles on Bills [*374], 554.

94. Grant v. Mills, 2 Ves. & B. 306; Story Eq. Jur., § 1226.

95. Honore v. Blakewell, 6 B. Mon. 67; Mims v. Macon, etc., R. Co., Kelly,

96. Irvin v. Garner, 50 Tex. 48.

debt which is secured. Why may not the indorsee, the holder of the debt, avail himself of the security? In the case of a mortgage the rule is well settled. What is this but an equitable mortgage?" 97 And the ruling accorded with these views. If a negotiable note is drawn by the vendee, and indorsed by a third person, or drawn by a third person, and indorsed by the vendee, it is considered by high authorities that it will repel the lien presumptively.98

§ 1281a. Whether bond for purchase money waives vendor's lien. -It has been held that taking a bond for the purchase money of land waives the vendor's lien;99 but the better opinion is to the contrary, and that the bond is mere evidence of the debt.1 And when such securities are taken as to raise the presumption.

97. Stevens v. Chadwick, 10 Kan. 406.

98. Brown v. Gilman, 4 Wheat. 526, 1 Mason, 192; Foster v. Trustees, 3 Ala. 302; Burk v. Gray, 6 How. (Miss.) 527; Woods v. Bailey, 3 Fla. 41; Boon v. Murphy, 6 Blackf. 1272; Campbell v. Baldwin, 2 Humphr. 248; White v. Dougherty, Mart. & Y. 309. See Cresap v. Manor, 63 Tex. 488; 1 Lomax Digest [218], 269. Contra, Magruder v. Peter, 11 Gill & J. 217. In Brown v. Gilman, 4 Wheat. 255, Marshall, C. J., said: The notes for which the vendors stipulated are to be indorsed by persons approved by themselves. This is a collateral security on which they relied, and which discharges any implied lien on the land itself for the purchase money." And in the same case, when before the lower court (1 Mason, 191), Story, J., said: "On a careful examination of all the authorities, I do not find a single case in which it has been held, if the vendor takes a personal collateral security, binding others as well as the vendee - as, for instance, a bond, or note, with a security or indorser, or a collateral security by way of pledge or mortgage - that under such circumstances a lien exists upon the land itself."

99. Fawell v. Heelis, 2 Amb. 724; Winter v. Anson, 1 Sim. & S. 434. 1. White v. Casanove, 1 Harr. & J. 106; Cox v. Fenwick, 3 Bibb, 183; Young v. Wood, 11 B. Mon. 23; Lagow v. Badollet, 1 Blackf. 416; Cole v. Withers, 33 Gratt. 193; Yaney v. Mauck, 15 Gratt. 300; Knisely v. Williams, 3 Gratt. 253; Story Eq. Jur., § 1226. Chancellor Kent has said on this subject in his Commentaries, vol. IV, § 58 [*153], "In several cases it is held that taking a bond from the vendee for the purchase money, or the unpaid part of it, affected the vendor's equity, as being evidence that it was waived, but the weight of authority and better opinion is, that taking a note, bond, or covenants from the vendee for the payment of the money, is not of itself an act of waiver of the lien, for such instruments are the only ordinary evidence of the debt. Taking a note, bill, or bond, with distinct security, or taking distinct security exclusively by itself, either in the shape of real or personal property from the vendee, or taking the responsibility of a third person, is evidence that the seller did not repose upon the lien, but upon independent security, and it discharges the lien."

of a waiver of the lien, that presumption may be repelled by proof.2

§ 1281b. Transfer of note for purchase money. When a note is given for purchase money of land, and is transferred by the vendor, the lien passes also to the transferee,3 unless the indorsement were without recourse or the vendor who transfers guarantees the payment, in either of which cases the lien is defeated.*

§ 1282. Mechanics' liens. In many of the States of the United States statutes have been enacted giving mechanics' liens on the buildings or works constructed, for the amount of materials furnished and labor done upon them. And, as a general rule, it may be stated that such liens are not waived by the receipt, on the part of the mechanic, of a bill of exchange or negotiable promissory note for the amount of the debt which such lien secures, but pass as an incident of the debt by the transfer of the security for its payment. Taking a bond even for such a debt would not be regarded as waiving such a lien. Additional securities are in their nature cumulative, and where parties have not expressly or impliedly so stipulated, there is no reason why the one should be regarded as a relinquishment of the other.

5

2. Story Eq. Jur., § 1226.

3. Sloan v. Campbell, 71 Mo. 387; Hall v. Mobile & M. R., 58 Ala. 10; Edwards v. Bohannon, 2 Dana, 98; Woods v. Bailey, 3 Fla. 41; Stevens v. Chadwick, 10 Kan. 406, 15 Am. Rep. 352, 353; Buchanan v. Kimes, 58 Tenn. 275, 36 Am. Rep. 493; Hamblen v. Folts, 70 Tex. 135; Felton v. Smith, 84 Ind. 485; Hagerman v. Sutton, 91 Mo. 520. See ante, §§ 748, 834. In some cases it has been held that if the vendor's lien be not reserved, but is merely equitable in its character, the transfer of the vendee's note by the vendor does not carry with it the lien. Pollow v. Helm, 7 Baxter, 545; Green v. De Moss, 10 Humphr. 374. But the assignment of the lien is in any event merely equitable, and the distinction as to the assignment of express and implied liens does not seem tenable. See 2 Parsons on Notes and Bills, 167169, and notes. The payee of the transferred note cannot, after the transfer before maturity, impair the security of the lien inuring to the transferee, by entering satisfaction of the debt on the record. Lee v. Clark, 89 Mo. 551; Hagerman v. Sutton, 91 Mo. 520; Degenhart v. Short, 15 Tex. Civ. App. 636, 40 S. W. 150.

4. Woods v. Bailey, 3 Fla. 41; Schnebly v. Ragan, 7 Gill & J. 120. 5. Sweet v. James, 2 R. I. 270; Gable v. Gale, 7 Blackf. 218; Steamboat Charlotte v. Hammond, 9 Mo. 58; Mix v. Ely, 2 Greene, 508, 513; Rhodes et al. v. Webb-Jameson Co. et al., 19 Ind. App. 195, 49 N. E. 283.

6. Jones v. Hurst, 67 Mo. 568.

7. Kinsley v. Buchanan, 5 Watts, 118; Henchman v. Lybrand, 14 Serg. & R. 32.