itself to proof of insolvency), and a balance is then due to the acceptor from the drawer, the collateral will be applied, under the general banker's lien, to the acceptor's general creditors, and not to the holders of the acceptances.' 608 If bills are remitted by A. to B. to cover the latter's acceptances, and B. becomes insolvent, and pays a dividend on such acceptances, and is indebted to A. over and above the bills remitted to him, but not used, such bills will belong to the drawer (who is not shown to be insolvent) rather than to the acceptor's estate or the holders of the acceptances; 609 and to the holders of the bills in preference to general creditors,610 But if the acceptor and drawer are both insolvent, and the drawer has made a composition with his creditors without an assignment, and remains liable on the bill, the holder cannot claim payment out of the collateral furnished by the drawer.611 So, if bills are drawn generally, and bills of lading forwarded independently to the consignee; or if the bills of exchange contain an express request to charge to shipments, but the drawer fails before the bills are accepted or the shipments arrive. 613 So, if a bill is drawn on a consignee with the direction "to place to account of cargo per A.," and the consignee is jointly interested with the drawer in the venture, the cargo will belong to the drawee's general account, and not be subject to any claims on the part of the holder of the bill, although the bill of lading was not attached to the bill of exchange, and the latter was accepted before its arrival.®

612

615

614

Where a mortgage is given to indemnify an accommodation indorser, and the maker and indorser are both insolvent, the mortgage will be applied in equity to the benefit of the holder of the

608 Hickie's Case, L. R. 4 Eq. 226.

609 Ex parte Gomez, 10 Ch. App. 639.

610 Ex parte Dever, 14 Q. B. Div. 611, reversing 13 Q. B. Div. 766, although the bills of lading were surrendered by the agreement to the acceptor, and not attached to the acceptances.

611 Ex parte General South American Co., 10 Ch. App. 635; and the drawer will not be entitled to have it so applied, Levi's Case, L. R. 7 Eq. 449.

612 Phelps v. Comber, 29 Ch. Div. 813, affirming 26 Ch. Div. 755.

613 Brown v. Kough, 26 Ch. Div. 848; the shipments being applied to the general indebtedness of the drawer to the consignee.

614 Robey v. Ollier, 7 Ch. App. 695.

615 Ex parte Arbuthnot, 3 Ch. Div. 477.

note, 616 But if the indorser, to whom the indemnity is given, is discharged for want of notice of dishonor, the indorser will not be subrogated to the indemnity.17 Accommodation drawer and indorsers are not co-sureties, and, who e securities are given to such indorsers by the party accommodated, the drawer will not be entitled to share pro rata in the benefit.618

If a bill of lading is forwarded with a draft, and the draft is accepted, the drawee will be entitled to the bill of lading on such acceptance, and the collecting bank to which the draft was sent will not be liable to the holder for surrendering the bill of lading to him.619 But if a bill of lading is payable to the order of the shipper, and is delivered with the bill of exchange on its being discounted, with instructions not to deliver it to the drawee until payment of the bill, the drawee will not be entitled to the bill of lading on mere acceptance of the draft.629

16 Rice V. Dewey, 13 Gray (Mass.) 47.

617 Bank of Virginia v. Boisseau, 12 Leigh (Va.) 387.

18 McCune v. Belt, 45 Mo. 174.

619 National Bank of Commerce v. Merchants' Nat. Bank, 91 U. S. 92. 620 Dows v. Bank, 91 U. S. 618.

(2171)

1516.

Satisfaction-A Question of Intention.

1517. Presumption of Payment-Massachusetts Rule. 1518.

Rebutted.

§ 1509. If the debtor gives his own note for a debt, it will not be an absolute payment, unless it is taken as such by the agreement

of the parties. This applies to the note of any party already liable.2

4

And this is so whether it is given by the debtor for goods purchased at the time, or in payment of a previous debt, or in satisfaction of a debt by specialty. In Indiana, however, the debtor's

5

1 Davis v. Gyde, 2 Adol. & E. 623; Dixon v. Holdroyd, 7 El. & Bl. 903; Lyman v. Bank, 12 How. 244; Segrist v. Crabtree, 131 U. S. 287, 9 Sup. Ct. 687; Lawrence v. U. S., 71 Fed. 228; Davis v. Allen, 3 N. Y. 168; Coxe v. Hankinson, 1 N. J. Law, 85; Freeholders of Middlesex v. Thomas, 20 N. J. Eq. 39; Morgan v. Bitzenberger, 3 Gill (Md.) 350; Matthews v. Dare, 20 Md. 248; Matteson v. Ellsworth, 33 Wis. 488; Breiting v. Lindauer, 37 Mich. 217: Blunt v. Walker, 11 Wis. 334; Kelsey v. Rosborough, 2 Rich. Law (S. C.) 241; McLaren v. Hall, 26 Iowa, 297; Edwards v. Trulock, 37 Iowa, 244; Farwell v. Grier, 38 Iowa, 83; Gilman v. Stevens, 63 N. H. 342, 1 Atl. 202; Brewster v. Bours, 8 Cal. 501; Griffith v. Grogan, 12 Cal. 317; Citizens' Bank of Steubenville v. Carson, 32 Mo. 191; Sturdevant Bank v. Peterman, 21 Mo. App. 512; Mooring v. Insurance Co., 27 Ala. 254; McWilliams v. Phillips, 71 Ala. 80; Washington Slate Co. v. Burdick, 60 Minn. 270, 62 N. W. 285; Fry v. Patterson, 49 N. J. Law, 612, 10 Atl. 390.

2 E. g. an indorser's note. Schmidt v. Livingston, 16 Misc. Rep. 554, 38 N. Y. Supp. 746; Stanley v. McElrath, 86 Cal. 449, 25 Pac. 16; Hall v. Engine Co., 91 Ala. 363, 3 South. 348; Myatts v. Bell, 41 Ala. 222; Keel v. Larkin, 72 Ala. 493; Marshall v. Marshall's Ex'r, 42 Ala. 149; Heath v. White, 3 Utah, 474, 24 Pac. 762. So, in Illinois, if the note is not sealed. Rayburn v. Day, 27 Ill. 46. And whether it is sealed or not. Walsh v. Lennon, 98 III. 27; Pelzer v. Steadman, 22 S. C. 279.

32 Daniel, Neg. Inst. 286; 2 Pars. Notes & B. 157; Bill v. Porter, 9 Conn. 23. And recovery may be had in New York on the original debt, notwithstanding such note, Vancleef v. Therasson, 3 Pick. (Mass.) 12. So, the goods may be stopped in transitu without offering first to return the purchaser's note... Hays v. Mouille, 14 Pa. St. 48.

2 Daniel, Neg. Inst. 284; 1 Edw. Bills & N. § 278; 2 Pars. Notes & B. 150; Story, Bills, § 419; Bank of U. S. v. Daniel, 12 Pet. (U. S.) 32; Allen v. King, 4 McLean, 128, Fed. Cas. No. 226; Raymond v. Merchant, 3 Cow. (N. Y.) 147; Putnam v. Lewis, 8 Johns. (N. Y.) 389; Wildrick v. Swain, 34 N. J. Eq. 167; Swain v. Frazier, 35 N. J. Eq. 326; Nightingale v. Chafee, 11 R. I. 609; Farwell v. Salpaugh, 32 Iowa, 582; Smith v. Owens, 21 Cal. 11; Morriss v. Harveys, 75 Va. 726; Wiles v. Robinson, 80 Mo. 47; Foster v. Hill, 36 N. H. 526; Geib v. Reynolds, 35 Minn. 331, 28 N. W. 923. So, a note given for taxes is not a payment. Jaffrey v. Cornish, 10 N. H. 505.

Byles, Bills, 388; 2 Daniel, Neg. Inst. 296; Drake v. Mitchell, 3 East, 251. And see Curtis v. Rush, 2 Ves. & B. 416.

own negotiable note has been held to be payment of a precedent debt, in the absence of an agreement to the contrary. But the debtor's nonnegotiable note is not a payment, and an action will still lie on the original debt. So, a county order is no discharge of a debt due from the county; s and an interest coupon is no payment of the interest on a bond or note. So, notes given in a bankruptcy composition are not "money" (as required by the bankrupt act), and do not discharge the debt unless paid.10

In like manner, an agreement to pay partly in cash and partly by note does not constitute a payment, unless it is so agreed.11 So. where a creditor agrees to take in payment an order for hardware, and returns a note (sent him instead of the order) after an ineffectual effort to get the hardware upon it, it will not be a payment.12

In general, a covenant to give a bill implies a covenant for its payment. But a negotiable note is, until its actual delivery, merely evidence of a promise to pay.14 If a buyer agrees to surrender the vendor's own note in part payment for goods, the note will not be discharged until the contract is carried out; and, if the buyer fails to deliver it then, the seller may recover the entire purchase

• Krutsinger v. Brown, 72 Ind. 466; so, prima facie, Nixon v. Beard. 111 Ind. 137, 12 N. E. 131.

v. Baker, 53 Ind. 279;

7 Greenwood v. Curtis, 4 Mass. 93; Dutton Ministerial & School Fund v. Kendrick, 12 Me. 381. So, in Indiana, as to notes not payable in bank, Alford Jeffries v. Lamb, 73 Ind. 202; Lindeman v. Rosenfield, 67 Ind. 246, without express agreement and new consideration; or payable at bank, but not payable to order or bearer, Albright v. Griffin, 78 Ind. 182.

8 People v. Johnson, 100 III. 537.

9 Hoodless v. Reid, 112 III. 105.

10 Pupke v. Churchill, 16 Mo. App. 334. 128, Fed. Cas. No. 11,675; In re Hatton, 7 L. R. 7 C. P. 519.

And see In re Reiman, 13 N. B. R.
Ch. App. 723; Edwards v. Coombe,

11 East River Bank v. Kennedy, 9 Bosw. (N. Y.) 543.

12 Surdam v. Lyman, 36 Vt. 733.

13 Byles, Bills, 392; Dixon v. Holdroyd, 7 El. & Bl. 903. An indorser's note is, however, sufficient payment to support his action, while it is still outstanding. against the maker of the original note. Stanley v. McElrath, 86 Cal. 449, 25 Pac. 16. But see, contra, Lentell v. Getchell, 59 Me. 135, as to a renewal by an accommodation indorser. So, payment of a judgment by a negotiable bond, to support the payor's action against an agent for negligence to which the judgment was due. Sioux City v. Weare, 59 Iowa, 95, 12 N. W. 786.

14 Arnold v. Delano, 4 Cush. (Mass.) 33.