Payment. Bills and Notes. Judgment, Entry of. Where the negotiable promissory note of a third person indorsed by a debtor is delivered by such debtor to his creditor as conditional payment only, to be credited as payment of the debt when such note is paid, the creditor, if he has not negotiated such note and it is overdue and unpaid, can surrender it and recover the amount of his debt.
Where in an action on the debt in such a case it appears that the note has not been surrendered to the defendant and, upon a demand by the defendant for its surrender, the plaintiff is unable to produce the note because he has lost or mislaid it, it is right for the trial judge to order judgment for the plaintiff and to order that the entry of such judgment be stayed until the note is filed in court by the plaintiff.
Whether, if the plaintiff in such a case should fail to file the note, he would be entitled to judgment on giving a sufficient bond, here was mentioned as a question that was not before the court.
BRALEY, J.
The defendant having admitted the sale and delivery of the goods, nothing remained but the issue of payment.
It is settled that where a debtor delivers to his creditor for the whole amount of his indebtedness the promissory note of another as in the case at bar, there is a presumption that it is received in payment. But this presumption may be rebutted by showing that the plaintiff did not intend to extinguish his original demand or claim; and the finding on evidence not reported, that the promissory note of a third party, payable to the defendant's order and indorsed by him to the plaintiffs, was taken only as conditional payment, disposes of this defence. American Malting Co. v. Souther Brewing Co. 194 Mass. 89, 94, and cases cited.
The fourth, fifth, sixth and seventh requests were properly denied. If the plaintiffs had negotiated the note, there could be no recovery while it was outstanding in the possession of a third person who had the right to collect it. Morton v. Austin, 12 Cush. 389. But, there being no evidence of negotiation, the eighth request could not have been given.
The report states that the defendant in open court demanded of the plaintiffs a return of the note, "but the plaintiffs then failed and refused to surrender" the note, stating that it "was either lost or mislaid by them." The defendant thereupon by the first request asked the judge to rule that "upon all the evidence . . . the plaintiffs cannot recover." The judge ruled, "If this means they cannot now have judgment, I give it. If it means they cannot have a finding, I refuse it," and the defendant contends that the request should have been given without modification. It is true that so long as the note is outstanding the defendant not only may be exposed to the hazard of being obliged to pay a second time but may suffer inconvenience from the loss of the instrument if he brings an action against the maker; yet the debt for which he has been held liable had not been ended. If instead of suing on the account the action had been brought on the defendant's indorsement, the plaintiffs could have had judgment on giving a bond of indemnity. Fales v. Russell, 16 Pick. 315. Hinckley v. Union Pacific Railroad, 129 Mass. 52. And, while upon the record the note should be surrendered, the order staying judgment until the plaintiffs produce and file the note in court affords the defendant sufficient protection. See Davis v. Parsons, 157 Mass. 584, 588.
The question, whether the plaintiffs upon giving bond would be entitled to judgment if they fail to file the note, is not before us. Tuttle v. Standish, 4 Allen, 481.
Order dismissing report affirmed.