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if the drawer pays the bill.3 20 And a dividend received from the insolvent estate of the drawer will discharge an acceptor pro tanto, at the suit of a holder with notice (although the acceptance was not strictly for the drawer's accommodation), if the drawer could not have sued the acceptor because of the balance in their account being largely in the acceptor's favor. 3 21 But the drawer who pays a bill may, in general, bring his action on it against the acceptor, if the acceptance was not for his own accommodation.322 And in such suit the drawer's possession of the bill is prima facie evidence of the payment by him. 323
But in an action against an accommodation acceptor upon a bill payable to the drawer's order, and indorsed by him, a memorandum on the face of the bill, “Due on 15th Sept.,” is not evidence, without indorsement, to show a prior negotiation of the bill and payment by the drawer. 324
If the drawer takes the bill up, an action may be brought for his use in the payee's name against the acceptor.3 25 And the acceptor cannot set up the payment by the drawer in his own defense, 3 26 either in bar of the action or to reduce the damages.3 27
§ 1428. In like manner, the acceptor of a bill, in an action brought by the holder, is not discharged by payment on the drawer's part, 328 although it was formerly held that he was only liable in such
320 Byles, Bills, 225; Lazarus v. Cowie, 3 Q. B. 459; Parr v. Jewell, 16 C. B. 684. But not if the drawer merely gives his boud and warrant in payment. Smith v. Knox, 3 Esp. 46.
321 Cook y. Lister, 13 C. B. (N. S.) 543.
322 Benj. Chalm. Dig. art. 234; Story, Bills, § 422; the acceptance having been credited to the acceptor as payment on an account. Louviere v. Laubray, 10 Mod. 36.
323 Drew v. Phelps, 18 X. H. 572. But see, as to the necessity of an indorsement by the payee to the drawer in such case, Thompson v. Flower, 1 Mart. X. S. (La.) 301; Price v. Sharp, 24 N. C. 417.
324 Jewell v. Parr, 13 C. B. 909; since the memorandum, which was in another handwriting, might have been made when the drawer was about to get the bill discounted.
325 Williams v. James, 15 Q. B. 498; Davis v. McConnell, 3 McLean, 391, Fed. Cas. No. 3,610.
326 Williams v. James, supra.
328 Byles, Bills, 224; 2 Daniel, Veg. Inst. 264; Johnson v. Kennion, 2 Wils. 262; Walwyn v. St. Quintin, 1 Bos. & P. 658; Agra & Masterman's Bank v. Leighton, L. R. 2 Exch. 56, 4 Hurl. & C. 636. RAND.C.P.-130
case for whatever deficiency might remain due to the holder. 3 29 Where the holder has already received payment in whole or part from the drawer, he holds the bill to that extent as trustee for him. 330 But the acceptor is entitled to a defense of set-off or failure of consideration, which would have been available against the drawer, although the drawer became bankrupt after paying the bill.331 And if the drawer has paid in part, the set-off will be good pro tanto, the holder being the drawer's trustee to that extent, and standing in his place. 332
On payment of the bill, the drawer may reissue it, and it will then be equivalent to a new bill drawn by himself,333 and will be binding on the acceptor, 334 but not on a prior accommodation acceptor, 335 or an indorser.
329 Hemming v. Brook, 1 Car. & M. 57; Scholey v. Ramsbottom, 2 Camp. 185.
330 Byles, Bills, 225; 2 Daniel, Neg. Inst. 264; Jones v. Broadhurst, 9 C. B. 173; Randall v. Moon, 12 C. B. 261. And it is not necessary to aver that the payment was made at the acceptor's request, either at the suit of the drawer, Jones v. Broadhurst, supra; or of his indorsee, Agra & Masterman's Bank v. Leighton, supra. In the words of Cresswell, J., in Jones v. Broadhurst, 9 C. B. 182: "Payment of the bill by a drawer or an indorser may or may not, according to circumstances, entitle the party paying to the possession of the bill. There may be a satisfaction of the bill between such parties, which may not entitle them to the possession of the bill. The plea in question has no statement to the effect that the drawers, by reason of the satisfaction made, were entitled to have the bill delivered up. It only states that the plaintiff's hold the bill against the consent of the drawers, which is by no means equivalent to a statement that they were entitled to have the bill delivered to them.”
331 Jones v. Broadhurst, 9 C. B. 173; Randall v. Moon, 12 C. B. 261. On the other hand, if the acceptor had assigned certain book accounts to secure his acceptance, and afterwards became bankrupt, the drawer would be entitled to have them applied for his benefit only if he paid the bill. Ex parte Jann, 5 Ch. Div. 367.
332 Thornton v. Maynard, L. R. 10 C. P. 695.
334 Callow y. Lawrence, 3 Maule & S. 95. And the acceptor will be liable to the indorsee, although the transfer by the drawer is long afterwards. Hubbard v. Jackson, 3 Car. & P. 134, 4 Bing. 390, and 1 Moore & P. 11.
335 Benj. Chalm. Dig. art. 234; Beck v. Robley, 1 H. Bl. 89, note; Jewell v. Parr, 13 C. B. 909; Parr v. Jewell, 16 C. B. 684; Blenn v. Lyford, 70 Me. 149; Bartrum v. Caddy, 9 Adol. & E. 275. 836 Gardner v. Maynard, 7 Allen (Mass.) 456.
Payment by Indorser. $ 1429. A bill or note may come back into the hands of an indorser in the course of business without being thereby discharged; 337 and payment of a bill by the indorser does not discharge it.338 Money received by the holder from the payee is prima facie a payment, but it is a question for the jury, to be determined by the circumstances.339 And it will be a payment by the indorser, although made with money due him in the hands of the principal debtor.340 If payment is made by charging the indorser's account with the note, it will not inure to the benefit of the maker.341 But a mere renewal of an accommodation indorsement by a similar indorsement is not such a payment as will enable the indorser to recover of the maker.3 42 $ 1430.
When the indorser of a bill or note takes it up at maturity, such payment will, in general, discharge all subsequent parties to it,343 but will not discharge prior parties.344 The indorser who pays a
337 West Boston Sav. Bank v. Thompson, 124 Mass. 506.
388 Benj. Chalm. Dig. art. 234; Lanata v. Bayhi, 31 La. Ann. 229; Hartzell v. McClurg (Neb.) 74 N. W. 626; although it was payable to bearer, and discounted for the bearer on his agreement to be liable as indorser; Bishop 7. Rowe, 71 Me. 263. But payment by the indorser is a discharge where the note was made for his accommodation. Schultz v. Noble, 77 Cal. 79, 19 Pac. 182.
339 Dougherty v. Deeney, 45 Iowa, 413. The assent of the holder is necessary to a transfer, although the note is paid by the payee's own check, out of money borrowed for the purpose from the plaintiff. Lancey v. Clark, 64 Y. Y. 206, affirming 3 Hun (N. Y.) 575.
340 National State Bank v. Davis, 24 Ohio St. 190. In this case, payment by an accommodation indorser without protest, on being informed by the principal debtor that he would not pay, was held to be a payment which he was compelled to make, and to be secured as such by the mortgage given. But if the indorser holds a fund provided by the maker for that purpose, it will create a trust in favor of a prior indorser, as well as of the holder. Price v. Trusdell. 28 N. J. Eq. 200. 341 North Nat. Bank v. Hamlin, 125 Mass. 506. 342 Lentell v. Getchell, 59 Me. 135. 84. Story, Bills, 422; Howe Mach. Co. v. Hadden, 8 Biss. 208, Fed. Cas. No. 6,785; Hayling v. Mullhall, 2 W. Bl. 1235; MacDonald v. Bovington, 4 Term R. 825; Adrian v. McCaskill, 103 N. C. 182, 9 S. E. 281. And see $ 772, supra. 344 Byles, Bills, 226; 2 Daniel, Neg. Inst. 252; Story, Bills, $ +22; Story, Prom.
note may bring an action on it against the maker.345 And if he has taken it up in the hands of a bona fide purchaser for value before maturity, he will be a purchaser from such holder, and will succeed to his rights, and as such will not be subject to a defense available against the original payee, although it was known to him at the time of indorsing the note.346 And the indorser will be subrogated, on his payment, to a collateral security held against the maker. 347 If a payment is made by the indorser after the maker becomes bankrupt, it will not discharge the maker, and proof may be made against the maker's estate for the whole amount of the note. 3 4 8 And if the note is taken up by the indorser after the maker's death, he will become a creditor of his estate, and entitled to present his claim as such within the time allowed by
Xotes, $ 400; Woodward v. Pell, L. R. 4 Q. B. 55; Davis v. Miller. 14 Grat. (Va.) 1; Bank of Louisiana v. Roberts, 4 La. 530; Leeke v. Hancock, 76 Cal. 127, 17 Pac. 937. In the words of Poland, J., in Norton v. Downer, 33 Vt. 26: “The principle seems now to be settled conclusively that, when a note or bill is paid or taken up by any party to it, it not only destroys its negotiability, but extinguishes all right of recovery upon it against all parties subsequent to him upon it, and to whom he would be liable to pay it while they held it, but that as to all parties prior to him, and to whom he has the right to look for payment when the note comes again to his hands by taking it up, he has the same right that he had before he indorsed the first transfer, and that, as against them, he has the same right to again transfer it that he had orig. inally, and that this continues until the note or bill is finally extinguished by being paid by the party liable to make ultimate payment.”
345 Morgan v. Reintzel, 7 Cranch, 273; National Bank of Gloversville v. Wells, 15 Hun (N. Y.) 51. So, against several joint makers, although only one had requested him to sign as indorser. Hoff man v. Butler, 105 Ind. 371. 4 N. E. 681. So, although the indorser who took up the note indorsed it for the accommodation of the bank that made it, and although he was himself president of the bank. Fenn v. Dugdale, 40 Mo. 63. So, although the bank had indorsed in violation of the banking act for an agreed compensation. National Bank of Gloversville v. Burr, 27 Hun (N. Y.) 109. But if the note was made for the indorser's accommodation, he cannot take it up with borrowed money for the benefit of the lender, so as to hold the accommodation maker, unless it is knowingly transferred to him by the bank; but mere surrender on payment is not such a transfer. Lancey v. Clark, 64 N. Y. 209.
346 Barker v. Parker, 10 Gray (Mass.) 339. And the maker cannot, at the suit of an indorsee, set up payment by the indorser to the plaintiff. Ticonic Nat. Bank v. Bagley, 68 Me. 249.
847 Telford y. Garrels, 132 Ill. 550, 24 N. E. 573.
law, reckoning from the date of the payment.349 In like manner, the indorser who pays a bill or note may bring his action against all prior indorsers who are not otherwise discharged.360 And any dividend afterwards received by the holder from the estate of a bankrupt prior indorser, on proof of claim previously made by him, will be received br him as trustee for the intermediate indorser who has paid the bill.331
Action by Indorser.
$ 1431. When an indorser pays a bill, and brings his action against parties primarily liable, he must prove the payment made by him.* 52 On the other hand, the fact that the note has been canceled by mistake, and marked “Paid,” will not prevent his recovery. The indorser who has paid a bill or note may recover the face of the instrument in such action, 354 although he has already received a part payment from a prior indorser. 355 But he can recover only the amount actually paid, if he has made the payment on behalf of the principal debtor.35. And it has been held that he cannot recover the costs paid by him in resisting a suit against him as indorser.357 His action is
349 Meriden Steam Mill Lumber Co. v. Guy, 40 Conn. 163.
250 Marr v. Johnson, 9 Yerg. (Tenn.) 1. And if he takes it up at the request of the prior indorser to avoid protest, it will be sufficient consideration for a note by the latter for the amount for which he would have been liable on protest. Meyer v. Spencer, 9 Mo. App. 590. 851 Selfridge v. Gill, 4 Mass. 95.
352 And production of the bill and protest has been held not to be sufficient without a receipt for the payment. Mendez v. Carreroon, 1 Ld. Raym. 712. And an agreement as to how payment is to be made by the indorser is not equivalent to payment. Longfellow v. Andrews, 45 Me. 75.
353 McLemore v. Hawkins, 46 Miss. 715; Whitlock v. Manciet, 10 Or. 166.
354 Bank of Louisiana v. Roberts, 4 La. 530; even though he has only paid half the face of the note, and was an accommodation indorser for the maker, Fowler v. Strickland, 107 Mass. 552.
355 The part already received from a prior indorser being recovered for the Use of such indorser. Johnson v. Kennion, 2 Wils. 262.
356 Pace v. Robertson, 63 X. C. 550. And if he pays the debt for which his indorsee pledged the note, he will hold all excess recovered from the maker for the indorsee. Scott v. Bank, 71 Ind. 13.
357 Dawson v. Morgan, 9 Barn. & C. 618; Fenn v. Dugdale, 31 Mo. 580; Peers v. Kirkham, 46 Mo. 146; without an express agreement, Newman v.