If a debtor gives and a creditor receives, in full satisfaction of the debt, the note of a third person for a smaller sum than the amount of the debt, it is a valid discharge. Parol evidence is admissible to show what was the real nature of the transaction to which the words of a receipt apply, and explain their meaning.
Per Curiam.
It is not necessary to consider in this case whether or not the general law is the law of Rhode Island. It is, undoubtedly, the general rule, that the payment of a less sum of money than the whole debt, is not a satisfaction of the whole debt, without a release under seal; but only discharges the debt pro tanto. But this case stands upon an exception to this rule. The rule is evidently distasteful to the courts, and they have always been anxious to escape it by nice distinctions. Thus, in Kellogg Dermont v. Richards Sherman, 14 Wend. 116, and in Brooks and another v. White, 2 Met. 283, the court held that a note for a sum of money less than the debt, which was given as a full discharge of the debt, should operate as a discharge, although the money itself would not have that effect. The receipt of the note of Vaughan as a full discharge brings this case within the exception. The defendant is discharged by this discharge of the prior parties. The stipulation not to sue, is another defence, and would discharge, the defendant if founded upon a good consideration, which we think is the case, — the note given by Vaughan being both a consideration for the discharge, and for the contract not to sue.
It was objected that evidence was not admissible to show that the receipt was for a note by Vaughan; and that by the receipt itself it does not appear that the payment was not in money; but we think it was competent for the defendant to show what the real nature of the transaction was, in order to explain the meaning of the words employed.