Payment to a wrong party of a bill or note long dishonored, or of a check long after it was drawn, or of a check which had been torn into pieces and pasted together, does not discharge the payor," for the circumstances convey reasonable notice that the instrument has been canceled.8 86 SECTION V. 85 THE EFFECT OF PAYMENT, AND WHO MAY REISSUE A BILL OR NOTE. § 1235a. Cancellation or obliteration of paid note or bill.— When a bill or note is paid it should either be destroyed, or some memorandum should be made upon it unequivocally indicating that it has been canceled. This may be done either in writing, or by stamping lines upon its face. For, unless payable at a specific time, the fact that it was overdue might not be apparent from its face, and the parties to it would incur risk of liability to a bona fide purchaser without notice.8 § 1236. The maker of a note and the acceptor of a bill are the principal parties bound for its payment, the drawer and indorsers being liable as sureties; and hence a payment by the maker or acceptor discharges the drawer or indorsers and cancels the instrument and the obligation.88 When the bill is accepted for accommodation of the drawer, the latter is bound to refund the amount, should it be paid by the acceptor, and satisfy him for all damages. But the acceptor cannot sue him on the bill which is his own obligation, canceled by his payment,90 though it is an item of evidence to show the amount on settlement with the drawer. It has been 85. Scholey v. Ramsbottom, 2 Campb. 485. 91 89 87. District of Columbia v. Cornell, 130 U. S. 659; Burbridge v. Manners, 3 Campb. 193; Watson v. Wyman, 161 Mass. 96, 36 N. E. 692. Following this principle, the Supreme Court of Massachusetts has held that "Payment of the mortgage note on the day when it falls due is performance of the promise, and very possibly would discharge the note given as against the one who took it for value and without notice later on the same day. But payment before the day, or a satisfaction like that in the present case, is a defense which binds only the party receiving payment and those who stand in his shoes." 88. Suydam v. Westfall, 2 Den. 205; Eastman v. Plumer, 32 N. H. 238; First Nat. Bank v. Maxfield, 83 Me. 576, 22 Atl. 479. 89. Baker v. Martin, 3 Barb. 634. 90. See chapter XXXVII, on Action, §§ 1181, 1206; Griffith v. Reed, 21 Wend. 502. 91. Bank of Vergennes v. Cameron, 7 Barb. 143. held that where a bill was drawn by one person as principal, and another as surety, the undertaking of the latter is with the payee or subsequent holder that the bill shall be accepted and paid, but that he incurs no obligation to the drawee who accepts and pays it for accommodation.92 But this doctrine has been overruled on the ground that all the parties signing a bill are responsible as for money paid at their request.93 § 1236a. Effect of payment by a comaker. It is true as a general principle, that a note or bill is extinguished by payment when made by the maker of the one, or the acceptor of the other. But when made by one of several accommodation makers of a note, the instrument is kept alive in his hands as the evidence of his right to contribution from his cosureties. This, it has been held, he may transfer to a purchaser for value, who will succeed to his rights, with power to maintain an action for contribution against the cosureties.94 And whenever a joint maker has paid the note, and has a claim against his comaker for contribution, he may assign the note not. indeed as a live security, but as evidence of his right to recover contribution.95 § 1237. Effect of payment by drawer. If the drawer of a bill pay part of it to the holder, the better opinion is that the holder may nevertheless sue and recover of the acceptor the whole amount, in which case he would receive that portion already paid by the drawer or trustee for him, and would be liable to him, pro tanto, for money 92. Griffith v. Reed, 21 Wend. 502. 93. Suydam v. Westfall, 4 Hill, 211, 2 Den. 205; Edwards on Bills, 534, 535; Story on Bills, § 420. 94. Dillenbeck v. Dygert, 97 N. Y. 303; Hodgson v. Shaw, 3 Mylne & K. 183. But in North Carolina, it has been decided that payment of a note by a surety without having it transferred to a trustee for his benefit, is a discharge of the debt and an extinguishment of a lien by which it was secured, and, therefore, where a surety, on a purchase-money note for a house retaining title and duly recorded, paid it and did not have it transferred to a trustee for his benefit, and the principal debtor, after mortgaging the house to another person, delivered it to the surety, the mortgagee has a first lien and is entitled to possession. Browning v. Porter, 116 N. C. 62, 20 S. E. 961; Truss et al. v. Miller, 116 Ala. 494, 22 So. 863. Contra, Williams v. Gerber, 75 Mo. App. 18. 95. Conrad v. Smith, 91 Va. 292, 21 S. E. 501, in which the note was indorsed by the cashier of the bank to whom it was paid, as " paid by W. G. K.,” who was one of the comakers. 98 had and received to his use. 96 Even if the drawer has paid the whole amount to the holder, yet if he have left the bill in his possession, and he should sue the acceptor, it would be no defense as to him.97 For while on the one hand it may be contended that payment by the drawer, who is a surety for the acceptor, is an entire extinguishment of the instrument, yet if this were so, the drawer himself could not sue the acceptor upon it, but would have to sue him for money paid at his request. It is more correct to regard the payment as a mere extinguishment of the drawer's liability. And it cannot matter, nor be good ground of defense to the acceptor who is bound to pay the bill, and may discharge that obligation by payment to any holder who sues. It seems, however, that if the acceptance were for accommodation, and the drawer accommodated were to pay the bill, it would operate as an absolute extinguishment, there being no person in existence entitled to receive the money of the acceptor. In England, where the drawer paid part of a bill and went into bankruptcy, the acceptor on being sued for the whole amount by the holder was sustained to the extent of the partial payment made in an equitable plea as set-off of an amount due him by the drawer, the holder being regarded as suing as trustee for the drawer as to the part paid by him. If a guarantor make payment with an agreement that the instrument be kept alive, the maker is not discharged from liability upon it.2 96. Johnson v. Kennion, 2 Wils. 262; Walwyn v. St. Quintin, 1 Bos. & P. 652; Jones v. Broadhurst, 9 C. B. 173, in which case the whole subject is elaborately and ably discussed; Callow v. Lawrence, 3 Maule & S. 95; Hubbard v. Jackson, 1 Moore & P. 11 (17 Eng. C. L.); Byles on Bills (Sharswood's ed.), 354; 2 Parsons on Notes and Bills, 218; Story on Bills, § 422. Contra, Bacon v. Searles, 1 H. Bl. 88, now overruled; Conrad v. Smith, 91 Va. 292, 21 S. E. 501, in which case the note was indorsed by the cashier of the bank to whom it was paid as " paid by W. G. K." who was one of the comakers. 97. Jones v. Broadhurst, 9 C. B. 173; Thornton v. Maynard, L. R., 10 Com. Pl. 695, Moak's Eng. Rep. 522. The principle announced in the text is equally applicable to indorsers. Madison Square Bank v. Pierce, 137 N. Y. 444, 33 N. E. 557. 98. 2 Parsons on Notes and Bills, 218, note k; Byles on Bills (Sharswood's ed.) [*214], 353, note k. 99. Lazarus v. Cowie, 3 Q. B. 459 (43 Eng. C. L.). See Walwyn v. St. Quintin, 1 Bos. & P. 652; Bacon v. Searles, 1 H. Bl. 88; Redf. & Big. Lead. Cas. 350, 351; Story on Bills, § 422; Byles on Bills (Sharswood's ed.) [*215], 354. 1. Thornton v. Maynard, L. R., 10 Com. Pl. 695 (1875). 2. Granite Nat. Bank v. Fitch, 145 Mass. 567. § 1238. Who may reissue a bill or note. As a bill or note when paid at maturity by the acceptor or maker is thereby utterly extinguished, it is clear that if he were to reissue it, and it were to pass into the hands of even a bona fide holder, he could not hold the drawer or indorsers liable, for its being overdue would in itself be sufficient notice of payment. It is equally clear that if the last of several successive indorsers were to pay the bill or note to his indorsee, he could reissue the instrument with or without his own indorsement remaining upon it, and that all parties claiming under his second transfer could sue and recover from all prior parties who remain liable to him; and from him also if his indorsement were upon the instrument.* § 1238a. Whether drawer may reissue bill. Differences of opinion have arisen as to the right of a drawer to reissue a bill. Thus, if A. were to draw a bill upon B., payable to the order of C., and C. were to indorse it to D. after its acceptance, and then A. were to pay it to D.- query arises whether or not A. could reissue the bill to E., so as to give him the right to sue the acceptor upon it. Clearly E. could not sue C., for C. was the surety of the drawer, and was discharged by the payment made by him. § 1239. Cases in which drawer cannot reissue bill; acceptance for drawer's accommodation.— There are two cases in which the drawer who has taken up a bill at maturity cannot sue the acceptor, and in which he cannot, consequently, so reissue the bill as to enable the holder to sue the acceptor. First: When the acceptance was for the drawer's accommodation; for in that case the acceptor was under no liability to the 3. Gordon v. Wansey, 21 Cal. 77; Gardner v. Maynard, 7 Allen, 456; Stevens v. Hannan, 88 Mich. 13, 49 N. W. 874. 4. St. John v. Roberts, 31 N. Y. 441; French v. Jarvis, 29 Conn. 348; Kirksey v. Bates, 1 Ala. 303; Montgomery R. Co. v. Trebles, 44 Ala. 258. See Fenn v. Dugdale, 40 Mo. 63; Coleman v. Dunlap, 18 S. C. 595, approving the text; Columbia Falls Brick Co. v. Glidden, 157 Mass. 175, 31 N. E. 801. Held, that payment by one indorser operates as a transfer of the old debt to him and does not create a new debt. "The undertaking of the maker to the surety is one of indemnity against any loss or damage which he may suffer in consequence of the failure of the maker to pay the note. It is an implied, and not an express, contract. The contract of the maker, on the other hand, with the payee or indorser, is an express contract." Kelly v. Staed, 136 Mo. 430, 37 S. W. 1110, 58 Am. St. Rep. 648, citing text. drawer when the latter reissued the bill. And, as after the bill became due, the drawer could only negotiate it subject to equitable defenses, the acceptor could defend himself on this ground.5 An early case may be referred to as authority for this view. Brown drew the bill upon Robley, payable to Hodson or order, and it was accepted by Robley and indorsed by Hodson. Not being paid by the acceptor at maturity, Brown, the drawer, paid it and took it. up with Hodson's indorsement remaining thereon. And then Brown gave the bill to Beck as security for money, not telling him whether or not there were effects in Robley's hands; and Beck sued Robley as acceptor. It was held that the action could not be maintained, on the ground, as found by the jury, that "the acceptor was discharged by Brown's taking up the bill, and that there was an end of its negotiability," from which it would seem that the bill was made for accommodation of the drawer. So understood, this case is unassailable; and so it has been construed and approved. It has been said to be "no longer law" by an English compiler, but without assignment of reason or authority for the statement. And in Massachusetts it has been said that "it has never been overruled or denied." 9 § 1240. Second: When drawer is liable to an indorser.— The drawer could not reissue the bill if the name of any indorser to whom he himself was liable remained upon it. For in that event. the holder could not trace title against the acceptor, the indorsements having been discharged. Besides, the indorser, whose name remains upon the bill, would be exposed to liability to a holder, and, therefore, such a bill is held to be not negotiable. 10 The same principle would apply to forbid the reissue of a bill or note by an intermediate indorser, when the names of subsequent indorsers remained upon it, the general doctrine being that a bill or note cannot be indorsed or negotiated after it has once been paid, if such 5. Jones v. Broadhurst, 9 C. B. 173. 6. Beck v. Robley, 1 H. Bl. 89, note (1774); approved in Gardner v. Maynard, 7 Allen, 456 (1863). 7. Jones v. Broadhurst, 9 C. B. 173. See opinion of Cresswell, J. But the fact that it was an accommodation bill is not noticed in Gardner v. Maynard, 7 Allen, 456. See Byles on Bills [*166], 290. 8. Chitty, Jr., on Bills, vol. I, p. 390. 9. Gardner v. Maynard, 7 Allen, 457, Metcalf, J. 10. Gardner v. Maynard, 7 Allen, 456 (1863). See also Beck v. Robley, 1 H. Bl. 89; Jones v. Broadhurst, 9 C. B. 173. |