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original contract, or on the note, at his election. And where money was borrowed by a partner for the firm, he signing his own name to the note, the giving of such a note did not constitute a payment of the firm debt. But before the creditor can sue on the original obligation, he must surrender the note, otherwise the debtor might also be held on his note. But “where the note of a third person is received upon the sale of goods, or for an indebtedness contracted at the time, the note will be deemed to have been taken by the vendor in satisfaction, unless the contrary be expressly proved, or unless the note be void and there be fraud or misrepresentation respecting it.” The giving of a non-negotiable order drawn by a debtor on a third person is prima facie payment only and if the money is not received on the order and there was no laches on the part of the creditor, the latter may recover on the original obligation. Accordingly, where a subcontractor who had furnished lumber and labor for a schoolhouse assigned an order on the school board given him by the principal contractor to a third person, it was held that this did not extinguish the debt, although it would have had that effect if the parties had so agreed. Payment of money on Sunday discharges the debt if the money is retained. If a bill or note payable to bearer, either originally made so or become so by an indorsement in blank, be stolen or lost, payment to the thief or finder will discharge the maker or acceptor, provided such payment be not made with knowledge or suspicion of the infirmity of the holder's title, or under circumstances which might reasonably awaken the suspicion of a prudent man.
By and to whom payment may be made.- The payment must be made to the creditor or his agent and must be accepted in discharge of the debt. Whether a person is such an agent that payment to him is equal to paying the creditor himself, will depend upon circumstances. In case of dispute, the debtor must show the actual or ostensible authority of the agent. If an agent has authority to receive payment, he can receive only money. If he receives anything else in payment it will not discharge the debt. (See the subject of Agency.)
When there has been an assignment of an indebtedness by a creditor, and notice thereof has been given to the debtor, payment to the assignee discharges the debt. But before the debtor has notice of an assignment, he may pay the orig
inal creditor and this discharges the debt, although it may have been assigned. After notice of assignment, the debtor can only satisfy the claim by paying the assignee. The object of the notice is to discharge the debtor with the duty of payment to the assignee. A debtor cannot discharge his debt by paying to the creditor's debtors, nor has a parent authority to receive payment for a child, unless an agency can be shown. Our statutes make the payment to a sheriff by one indebted to an execution creditor a discharge of the debt. Where, at the time of borrowing money, it was agreed that the money should be paid by the borrower to a third party and the money was so paid, but was never turned over to the lender, it was nevertheless a good payment to the borrower, the third party being the agent of the latter. Where a bank was requested to send the amount a person had on deposit by draft to a certain place, the debt of the bank was discharged by properly mailing a draft, although the creditor never received the money. But the general rule is that the debtor must seek the creditor and if the debtor seeks to use the mails or other medium for transmitting the money, he does so at his risk.
Money voluntarily paid for another cannot be recovered back. “The law does not permit one, by voluntarily performing a service or expending money for another, to make that other his debtor." If a person voluntarily pays a void tax, with knowledge of the facts which render it void, he cannot recover back the money thus paid, but money paid by compulsion on account of a void tax may be recovered, Our statutes prescribe that such actions must be commenced against the municipality which collected the illegal tax within one year after payment. Thus, an excessive tax exacted by misconduct or fraud of officers, is recoverable. Generally speaking, the defect or irregularity in order to warrant a recovery, must go to the validity of the assessment and to the groundwork of the tax. The general rule is that money paid under a mistake of fact cannot be recovered back, unless such mistake was mutual. Nor can money voluntarily paid under a mistake of law, that is, the legal effect of one's acts, be recovered back. "Ignorance of the law excuses no one", applies. Thus, a court will not order a re-payment of money paid because the party thought he would be sued if no payment had been made, and where a party was arrested and
paid a fine under an unconstitutional ordinance, he could not recover. However, most cases in which money is sought to be recovered back are tainted with compulsion, fraud or duress, and in such cases there can be a recovery. Thus, money paid under an abuse of process, or under a threat to arrest if payment is not made, can be recovered back.
Time and place of payment. - Payment should be made when the indebtedness becomes due. If no time is fixed, the sum is due immediately. The debtor has no right to pay the creditor before the maturity of the debt. If the debt is not paid within the time mentioned in the statute of limitation, it is barred. (See chapter on Statutes of Limitation.)
When no place is agreed upon between the parties, the debtor must seek the creditor and pay him personally, but he need not follow him out of the state. If a place for payment is agreed upon, payment must be made at that place.
Application of payments.-When several debts are due the creditor, and a payment is made, it becomes important to know to which indebtness the payment must be applied. This is especially so where one or more of the debts are, or are about to be, barred by the statute of limitation. The debtor may direct at or before the time of payment on which debt the amount paid shall be applied and this is binding on the creditor, but if the debtor fails to make a specific application, the creditor may apply the amount as he pleases. Our supreme court says: “Where the debtor makes any payment to the creditor holding different demands against him, he has the right to apply it to whatever debt he pleases. If the debtor makes no specific appropriation, the creditor may apply the money as he pleases, and when neither party appropriates the payment, the law will apply it according to its own notion of the intrinsic equity and justice of the case." The creditor cannot apply it unless the debtor has had his election to make the application. Thus, where the money is remitted for the debtor by a third person, the creditor cannot apply the payment as he chooses, as the debtor did not have his election. The creditor, if he has the right of applying the payment, may apply it to a debt barred by the statute of limitation, but this will not have the effect of reviving the balance; he may apply it to non-enforceable claims, or equitable claims, or unsecured debts, but he cannot apply the payment to a debt growing out of an illegal transaction and
then claim on the legal obligation. Courts will usually apply payments on account to the extinguishment of the indebtedness first incurred, unless there is an agreement to the contrary. Equity will also generally apply a payment to an unsecured claim rather than on a secured claim against the same party.
Partial payments; interest.-Payment of a part is not an extinguishment of the whole debt, and this is so even if the parties so agree, unless another consideration enters into the agreement, as the paying of the part before it was due, or some other benefit, or the delivery of a chattel in addition, etc. A mutual agreement by creditors to take less than 100 per cent. is binding. In such a case, the promise of one is consideration for that of the others. The creditor is not bound to receive a part payment on account, but if he does receive it, he must apply it as the debtor directs. “An unconditional, unqualified and unequivocal part payment voluntarily made by the debtor or any person legally liable to pay it, of a debt already barred by the statute of limitation, is sufficient evidence of a new and continuing contract, whereby to take the cause out of the operation of the statute of limitation.” The statute begins to run anew from the time of the last payment.
Our Supreme Court has laid down the following rule in regard to applying partial payments and figuring interest thereon: "When partial payments have been made, the payment is to apply in the first place to the discharge of the interest due. If the payment exceeds the interest, the surplus goes towards discharging the principal, and the subsequent interest is to be computed on the balance of principal remaining due. If the payment be less than the interest, the surplus of interest must not be taken to augment the principal, but interest continues on the former principal until the period when the payments, taken together, exceed the interest due, and then the surplus is to be applied towards discharging the principal, and the interest is to be computed on the balance." Under this rule no compound interest can be allowed.
STATUTES OF LIMITATION.
Statutes of limitation provide a fixed time within which the actions specified therein must be brought. It was formerly the idea that the defense of the statute of limitation was “hard and unconscionable,” in that it barred just claims, and that courts should do all in their power to prevent its operation, but such statutes are now universally regarded as "statutes of repose". The law discourages stale claims and will not lend its aid to the injured party, unless he asserts his rights within a reasonable time. At common law, there was no fixed time within which an action must be brought, although courts recognized the principle that the payment of a debt may be inferred or presumed from a failure to make demand for a long period of time and from other circumstances inconsistent with the continuance of the debt. Courts finally decided that after twenty years had elapsed since a debt became due, this was prima facie evidence of payment, while a lapse of time less than twenty years was only a circumstance which might, with others, afford proof of payment, but was of itself insufficient for that purpose. Statutes now prescribe the periods within which actions must be brought; when the time has expired, the claim is said to be "barred by the statute of limitation", or "outlawed." Our supreme court has decided that after the statute of limitation has run on a claim, it not only effects the remedy but directly destroys the right itself, and that this rule applies both to real and personal property and in case of real property its effect is similar to that of a conveyance. After the period of limitation has expired, the legislature cannot revive the right of action, as such legislation would interfere with a vested right. Existing causes of action, however, may be barred within a shorter time than that prescribed when they