secured,2 298 and no further.299 Where the defense would not be admissible against the indorsee, he will not be precluded by a prior judgment rendered against him in favor of an intermediate indorser.3 300 And in New York it has been held that such defense may be set up against one who takes the note in payment of an existing debt; 301 and that the accommodation indorser may be protected against such holder by a bill in equity.302 Release, Satisfaction, and Set-Off. § 1895. If the drawer of a bill releases the acceptor before the bill is issued, the acceptor cannot set up the release against a bona fide purchaser for value before maturity.303 So, the drawer cannot set up that he has received satisfaction from the acceptor, and surrendered the bill to him before its transfer to the plaintiff.304 So, an agreement between the original parties for a particular satisfaction of the bill is not admissible; 305 nor a release by one who fraudulently pretended to hold all the notes secured by a trust deed, and indorsed a satisfaction on the deed; 306 nor a release of the payee, the accommodation maker claiming a discharge under it.307 And the payee of a negotiable note has no authority to satisfy it after its transfer to a bona fide purchaser, and such satisfaction will be canceled in equity.308 So, an agreement for a compromise between maker and payee will not be binding upon such purchaser. 309 298 Chicopee Bank v. Chapin, 8 Metc. (Mass.) 40. 299 Stoddard v. Kimball, 6 Cush. (Mass.) 469. 300 National Bank of Republic v. Brooklyn City & N. R. Co., 14 Blatchf. 242, Fed. Cas. No. 10,039. 301 Moore v. Ryder, 65 N. Y. 438; Prentiss v. Graves, 33 Barb. 621. 302 Comstock v. Hier, 73 N. Y. 269. 303 Byles, Bills, 242; Chit. Bills, 351; Benj. Chalm. Dig. art. 239; Dod v. Edwards, 2 Car. & P. 602. Although he purchased at discount, and without diligence. Schoen v. Houghton, 50 Cal. 528. And where a note is payable to A. or bearer, the maker cannot set up a release by the husband of A. against a bona fide holder, McCann v. Lewis, 9 Cal. 246. 304 Morley v. Culverwell, 7 Mees. & W. 174. 305 Edwards v. Jones, 2 Mees. & W. 414, 7 Car. & P. 633; 5 Dowl. 585. 306 Gottschalk v. Neal, 6 Mo. App. 596. 307 Union Bank v. Crine, 33 Fed. 811. 308 Gordon v. Mulhare, 13 Wis. 22. 309 Gutwillig v. Stumes, 47 Wis. 428, 2 N. W. 774. E. g. by agreement to In like manner the acceptor of a bill cannot set off against a bona fide holder a debt due from the drawer,310 nor the maker a debt due from the payee. 311 But in Massachusetts the maker may set off a debt due from the payee of a demand note.312 And by the statute in New Jersey set-offs were formerly allowed, unless the note contained the words "without defalcation or discount." 313 In Massachusetts a note payable to A. or bearer at a time certain is not subject to set-off against A. in a suit brought by a subsequent holder as bearer. 314 So, where the payee of a note sues on it for the use of a subsequent bona fide purchaser, the maker cannot avail himself of a set-off existing against intermediate parties.315 And if an accommodation indorser pays a note to a bona fide purchaser, he may recover against the maker, although the maker had a set-off against the payee, which was known to the indorser at the time he indorsed, but was not available against such bona fide holder.316 In like manner, payment made to the payee or any prior holder without surrender of the bill constitutes no defense against a bona fide holder; 317 especially if made after transfer by the party re set off the debt of the payee to the maker and A. as executors. Cripps v. Davis, 12 Mees. & W. 159. 310 In re Agra & Masterman's Bank, 2 Ch. App. 391. Nor conversely, Bank of Martin v. Cassedy (Ky.) 45 S. W. 110; Manning v. Maroney, 87 Ala. 563, 6 South. 343. 811 Price v. Keen, 40 N. J. Law, 332; Tillou v. Britton, 9 N. J. Law, 120; Farmers' Bank of Saratoga Co. v. Maxwell, 32 N. Y. 579; Council Bluffs Iron Works v. Cuppey, 41 Iowa, 104; Tredwell v. Blount, 86 N. C. 33; Bostick v. Scruggs, 50 Ala. 10; Pavey v. Stauffer, 45 La. Ann. 353, 12 South. 512; Leavitt v. Peabody, 62 N. H. 185; Patterson v. Wright, 64 Wis. 289, 25 N. W. 10; Stevens v. Gregg, 89 Ky. 461, 12 S. W. 775. Especially where it arises out of other transactions. Cumberland Bank v. Hann, 18 N. J. Law, ១១១ And under the Alabama statute usurious interest paid in advance for an extension cannot be set off against a bank which took the note as collateral for a precedent debt without notice. Oates v. Bank, 100 U. S. 239. 312 Lewis v. Brooks, 9 Metc. 367. tificate of deposit issued by a bank. But this statute does not apply to a cer- 313 Youngs v. Little, 15 N. J. Law, 1. 314 Pettee V. Prout, 3 Gray, 502. 815 Sykes v. Lewis, 17 Ala. 261. 816 Barker v. Parker, 10 Gray (Mass.) 339. 817 Bank of University v. Tuck, 96 Ga. 456, 23 S. E. 467; Hecksher v. Shoe ceiving payment,318 and after maturity of the paper.319 So, too, an involuntary payment made to the payee by his sale of collateral held by him.320 maker, 47 Pa. St. 249; Flower v. Noble, 38 La. Ann. 938; Trustees of Internal Imp. Fund v. Lewis, 34 Fla. 424, 16 South. 325. And see § 1415, supra. 318 First Nat. Bank of Salisbury v. Michael, 96 N. C. 53, 1 S. E. 855; Williams v. Keyes, 90 Mich. 290, 51 N. W. 520. And see § 1462 et seq., supra. 319 Capital City Ins. Co. v. Quinn, 73 Ala. 558. 820 Glasscock v. Balls, 24 Q. B. Div. 13. (2647) § 1896. The acceptor of a bill of exchange or other party to it is only bound by the terms of his agreement.321 And parol evidence is inadmissible to vary such agreement by showing a contemporaneous verbal agreement of a different character,322 or conversations had at the time or before.323 Such evidence is, however, admissible to prove the circumstances under which the paper was executed; 324 e. g. to show the coverture of the maker (which was not disclosed in the note); 325 or to show that the note was given to take up another note; or to show when a written memorandum on the note was made; or that the execution of the note was obtained by threat of criminal prosecution against one of the maker's family,828 or by fraudulent representations.329 It is evident, indeed, that fraud, il 326 327 321 Everard v. Warner, 36 Minn. 383, 31 N. W. 353. 322 Foglesong v. Wickard, 75 Ind. 258; Ewing v. Clark, 76 Mo. 545. This protection against varying by parol extends to a printed memorandum on the back of the note. Seymour v. Farquhar, 93 Ala. 292, 8 South. 466. 323 Before, Herndon v. Henderson, 41 Miss. 584; or contemporaneous, Burlingame v. Foster, 128 Mass. 125. 324 Fisk v. Reser, 19 Colo. 88, 34 Pac. 572 (indorsement by a stranger to the note). 325 Mount v. Zisken, 7 N. J. Law J. 71. So, to explain the circumstances of issuing a nonnegotiable note. Smith v. Van Blarcom, 45 Mich. 371, 8 N. W. 90. 326 Duncan v. Gilbert, 29 N. J. Law, 521. 327 Heywood v. Perrin, 10 Pick. (Mass.) 228. 328 Snyder v. Willey, 33 Mich. 483. 829 Hines v. Driver, 72 Ind. 125. legality, and alteration or forgery can, in general, be established only by parol evidence. 330 333 331 The real consideration may be shown by parol, where it is admissible as a defense; e. g. that it was for forbearance or extension given, or for accommodation; or that there was no consideration, 332 or that it was illegal,3 334 or had failed; or that a note was given as a payment to be credited on the maker's account,335 or as collateral for an existing debt; 336 or was not to be construed as a relinquishment or waiver of a set-off claimed against such debt.337 So, parol evidence is admissible to show that a note was delivered conditionally.338 But it is not admissible to render the contract itself conditional; e. g. that a note was not to be transferred,340 or was to be used for a particular purpose only,341 or was to be released if the maker became insolvent,342 or was to be first allowed judicially against the estate of the maker's testator; 339 343 or that a draft was to take effect as an assignment of the fund in the drawee's hands.3 344 330 Kelly v. Theiss, 21 Misc. Rep. 311, 47 N. Y. Supp. 145. And see § 565, as to parol evidence of consideration. 331 Breitengross v. Farr (Wis.) 75 N. W. 893; Moynihan v. McKeon, 16 Misc. Rep. 343, 38 N. Y. Supp. 61; Goldsmith v. Holmes, 36 Fed. 484. 332 Kulenkamp v. Groff, 71 Mich. 675, 40 N. W. 57. 333 Groesbeck v. Marshall, 44 S. C. 538, 22 S. E. 743. 334 Braly v. Henry, 71 Cal. 481, 11 Pac. 385, and 12 Pac. 623; Brown v. Summers, 91 Ind. 151. 335 Bennett v. Tillmon, 18 Mont. 28, 44 Pac. 80. And see § 1899, infra. 336 Keeler v. Printing Co., 16 Wash. 526, 48 Pac. 239. 337 Bohn Mfg. Co. v. Harrison, 13 Mont. 293, 34 Pac. 313. 338 See §§ 227, 231, supra. 339 See § 94, supra. So, Hunt v. Johnson, 96 Ala. 130, 11 South. 387; Beecher v. Dunlap, 52 Ohio St. 64, 38 N. E. 795. 340 Dolson v. De Ganahl, 70 Tex. 620, 8 S. W. 321. 341 Wislizenus v. O'Fallon, 91 Mo. 184, 3 S. W. 837. 842 Harrison v. Morrison, 39 Minn. 319, 40 N. W. 66. 343 McGrath v. Barnes, 13 S. C. 328. 344 Baer v. English, 84 Ga. 403, 11 S. E. 453. (2649) |