it may be considered in the same action though the damages be unliquidated.33

§ 3497. Counterclaim — set-off. Where a negotiable promissory note, not yet due, is taken bona fide as collateral security for a pre-existing debt, it is not subject to any defense existing at the date of the assignment between the parties.34

§ 3498. Covenant that certain sum is due. The assignee of a promissory note who purchases it in good faith before it falls due, without knowledge that payments have been made on it, and receives a covenant from the payee that the sum he pays for it is due, can not maintain an action on the covenant if the amount is not due, for he sustains no loss, as the payor is liable to him for the face of the note.35

§ 3499. Delivery. To a complaint on a promissory note, where plaintiff alleged the making of the note by defendant, and delivery to plaintiff, and the answer denied the delivery to plaintiff, it was held that denial raised the issue on the making of the note so far as making includes delivery.36

§ 3500. Denial of nonpayment. A specific denial of the allegation in the complaint that the note was not paid, and the answer stated that on, etc., the note had been paid, forms a good issue between the parties.37

33 Cal. Code Civ. Pro., § 438; Stoddard v. Treadwell, 26 Cal. 305; Pattison v. Richards, 22 Barb. 146; Wheelock v. Pacific P. G. Co., 51 Cal. 226. In an action on a promissory note, the defendant can not set up by way of counterclaim a cause of action in his favor against the plaintiff and other persons arising out of a partnership relation existing between them, until an accounting has been had, and a balance struck. Wood v. Brush, 72 Cal. 224. In such action a defendant may set up a counterclaim for an indebtedness upon an account for nursery stock, destroyed by the cattle of the plaintiffs, before the commencement of the action, which the plaintiffs promised and agreed to pay to the defendant. Poly v. Williams, 101 Cal. 648.

34 Payne v. Bensley, 8 Cal. 260; 68 Am. Dec. 318; affirmed in Robinson v. Smith, 14 Cal. 94.

35 Swall v. Clarke, 51 Cal. 227.

36 Russell v. Whipple, 2 Cow. 536; Sawyer v. Warner, 15 Barb. 286.

37 Van Giesen v. Van Giesen, 12 Barb. 520; see Farmers', etc., Bank v. Christensen, 51 Cal. 571. Complaint in action on note must allege its nonpayment. Arcata, etc., R. R. Co. v. Murphy, 71 Cal. 122.

Vol. II-91

3501. Duress. A plea of duress by the maker of a note, as against the assignee, is bad, unless there be an averment of notice to the assignee.88

§ 3502. Former judgment. In an action against an indorser of a promissory note, a former verdict and judgment in favor of the defendant, in an action where the note was offered in evidence under a count on an account stated, is no bar.39 Judgment against plaintiff, as holder of a note under one title, is no estoppel to a subsequent suit upon it under another.40

§ 3503. General issue. Where a declaration was upon a joint note, and the defendant pleaded that the note was the separate note of one of the defendants, and was given to and accepted by the plaintiff in full satisfaction of a debt, it was held that the plea was bad upon special demurrer, as amounting to the general issue.41

§ 3504. General denial. Suit was instituted on a promissory note made by defendants. The complaint, not verified, sets out the note, and avers assignment thereof by payee to plaintiff. The answer contained a general denial; it was held that the answer does not admit but denies the assignment, and hence the plaintiff must prove it, and is not entitled to judgment on the pleadings. 42 That the plaintiff is not the owner and holder of the note in suit may be proved under a general denial of a complaint which alleges that he is.43 But a denial that he is the owner and holder raises no material issue. But it is otherwise where no indorsement or delivery is averred. A complaint to subject to sale a contract for the sale and purchase of land held as collateral security for the payment of promissory notes, where the general denial is in a paragraph of the answer, alleging that the defendant was not a maker

38 McClintick v. Johnson, 1 McLean, 414.

89 Lindell v. Liggett, 1 Mo. 432; 14 Am. Dec. 298.

40 Wheeler v. Ruckman, 2 Abb. Pr. (N. S.) 186.

41 Van Ness v. Forrest, 8 Cranch, 30.

42 Hastings v. Dollarhide, 18 Cal. 390.

43 Hull v. Wheeler, 7 Abb. 411.

44 Wedderspoon v. Rogers, 32 Cal. 569; Poorman v. Mills, 35 id. 118; 95 Am. Dec. 90; Butterfield v. Macomber, 22 How. Pr. 150; Fleury v. Roget, 5 Sandf. 646.

45 McKnight v. Hunt, 3 Duer, 615; Metropolitan Bank v. Lord, 4 id. 630; S. C., 1 Abb. Pr. 185; Hull v. Wheeler, 7 id. 411.

but merely an indorser of the notes, and did not assign the contract for the sale of the land to the plaintiff, either by delivery or indorsement, is demurrable.*

46

§ 3505. Holder in good faith. A negotiable note taken after maturity is taken subject to all the equities between maker and payee.47 So with a certificate of deposit.48 An indorsee after maturity takes the same interest that the indorser had, and his claim is subject to the same defense.49 But he takes it free from all equities subsisting between the maker and any intermediate holder.50 As a general rule, a bona fide holder of a negotiable instrument for a valuable consideration before the same is overdue or presumptively dishonored, and taken without notice of any facts which tend to impeach its validity as between antecedent parties thereto, may recover thereon, although as between such antecedent parties the legal validity of the instrument or the title thereto may be successfully impeached.51 A purchaser of a negotiable note before due, and without notice of payment made on it, can collect the face of the note and interest.5

52

§ 3506. Information and belief. In a suit brought by a firm upon a note, an answer which denies any knowledge sufficient to form a belief as to whether plaintiffs comprise the firm to whose order the note was payable is erroneously stricken out.53

§ 3507. Injurious diversion of note. An answer setting up that the note was made as an accommodation note does not show a misappropriation of the note sufficient to constitute a defense, by merely alleging that it was expected and intended that the plaintiff should have the proceeds of the note after it was negotiated, and that instead he had taken the note. The

46 Vaughn v. Cushing, 23 Ind. 184.

47 Vinton v. Crowe, 4 Cal. 309.

48 Coye v. Palmer, 16 Cal. 158.

49 Folsom v. Bartlett, 2 Cal. 163.

50 Hayward v. Stearns, 39 Cal. 58.

51 Himmelmann v. Hotaling, 40 Cal. 111; 5 Am. Rep. 600.

52 Swall v. Clarke, 51 Cal. 227. Any defense good as against the original owner of a nonnegotiable note is good as against the transferee or assignee. Stebbins v. Gardner, 2 S. Dak. 127; First

Nat. Bank v. Larsen, 60 Wis. 206.

53 Wales v. Chamblin, 19 Mo. 500.

answer should show a diversion of the note injurious to the defendant.54

$3508. Insufficient denials. The complaint set out the note in haec verba, and averred "that said note had not been paid, nor any part thereof," etc.; the answer thereto denied that said note had not been paid, and further denied "that there is due the plaintiff on said note any sum of money or anything;" it was held that said denials were of immaterial averments only; that said answer raised no issue, and was sham and irrelevant.55 An answer by the maker which admits the making and dishonor of the note, and notice of nonpayment given to the indorsers, and merely denies the corporate character of the plaintiffs, the partnership of the indorsers, and plaintiff's title to the note, is insufficient.56 Where the pleadings are verified, and it is alleged in the complaint that the note sued on was assigned to plaintiff for a valuable consideration, the fact of the assignment is not put in issue by denying that it was in writing and for a valuable consideration.57 Where the complaint contained two counts, each upcn a promissory note, an answer referring simply to "the note mentioned in the complaint" was held bad for uncertainty.58 A declaration in assumpsit contained a special count on a due bill and the common counts. A special plea commenced thus: "Now comes the defendant, and defends the wrong and injury, etc., and says that after making and delivering said due bill in said plaintiff's first count in said declaration mentioned, to-wit,” etc., proceeding to allege payment of the bill; it was held that the plea did not purport to answer the whole allegation, but only the special count on the due bill.59

§ 3509. Lost note. Where, in an action on a lost note, a verified complaint alleges that on a particular day the note in question was made by defendant and delivered to plaintiff, an answer denying the making and delivery of the note on the day mentioned is insufficient. Such denial does not reach the

54 Corbitt v. Miller, 43 Barb. 305.

55 Hook v. White, 36 Cal. 299.

56 The People v. McCumber, 18 N. Y. 315; 72 Am. Dec. 515; President, etc., of the Agawam Bank v. Egerton, 10 Bosw. 669.

57 Randolph v. Harris, 28 Cal. 561; 87 Am. Dec. 139.

58 Kneedler v. Sternberg, 10 How. Pr. 67.

59 Allen v. Breusing, 32 Ill. 505.

substantial matter of the averment, and only raises an immaterial issue as to time.60 Where, in an action on a lost note, the complaint, verified, alleges the loss, stating particularly the circumstances thereof, an answer denying that the note was lost as alleged does not put in issue the fact of loss, which is the gist of the averment, but only the circumstances of the loss, which are collateral and immaterial.61

§ 3510. Payment, what constitutes. Where a note was taken in payment for another note, it must be averred that such note was taken in full satisfaction and payment.62 In suit on a promissory note, an answer stating that defendant made two payments, the last of which extinguished the note, is sufficient. One who purchases a promissory note past due, but which has been paid before the purchase, takes it subject to the defense of payment. The surrender of a note is prima facie evidence of payment.65 But if surrendered by mistake, the maker is still liable for the balance unpaid.66 So an assignment to the maker amounts to payment.67 If a promissory note is assigned by the payee before maturity, payment to the assignor is no defense to an action brought by the assignee against the maker.68 But it would be a defense if the payment were made before assignment and the assignee took with notice. Arrangement between the indorser and the holder of

60 Castro v. Wetmore, 16 Cal. 379. Where a complaint upon a promissory note alleged payments of certain sums upon certain dates, and the answer admitted the payment of such sums, but denied that they were made upon the dates alleged in the complaint, and averred other dates, such allegations and denials form an issue as to the dates of the payments, and the dates alleged in the answer are not admitted by a failure to deny them in the replication. Anderson v. Perkins, 10 Mont. 154.

61 Castro v. Wetmore, 16 Cal. 379.

62 Homas v. McConnell, 3 McLean, 381. 63 Joy v. Cooley, 19 Mo. 645.

64 Elgin v. Hill, 27 Cal. 372.

65 Smith v. Harper, 5 Cal. 329.

66 Banks v. Marshall, 23 Cal. 223.

67 Gordon v. Wansey, 21 Cal. 77.

68 Morrill v. Morrill, 26 Cal. 288; Patterson v. Atherton, 3 McLean, 147.

69 Morrill v. Morrill, 26 Cal. 288; see Cal. Civil Code, § 3164, and Id., § 1697-1700.