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Present : De Sampayo J.
KARUNAWATTY v. DINESHAMY.
140—0. JR. Oampola, 4,048.
Promissorynote—Part Payment-Subsequent endorsement to holder in
due course—Part payment does not bind endorsee in due course—1
Note payable on demand overdue.
In July, 1017, the defendant made a note for Be. 122 payableon demand in favour of A. In April, 1918, the defendant paidBe. 100 to A. Thereafter A endorsed the note to the plaintiff.
Held,that if the plaintiff was an . endorsee in due course the
payment did hot bind him, and that he could recover the fullamount of the note.
A promissory note payable on demand as distinguished from abill of exchange isnotoverdue by reason onlythatit hadbeen
outstanding for an unreasonable time.
Payment of the full amount due on the note renders the noteincapable of further negotiation, but a part payment does not havethat effect.
*~p TTTC facts are set out in the judgment of the Commissioner*■ of Requests (R. B. Naish, Esq.):—
In this case plaintiffsuesdefendant on a promissorynote produced
and filed in the case for Bs. 122 dated July 27, 1917. defendant admitshaving made the note,butavers payment of Bs.100principaland
costs Bs. 15.56, intereston the whole amount up tothattime, onApril
-6, 1918, to one Gomas, the agent of the plaintiff’s endorser. .He, there-fore, pays Bs. 22, the balance of the principal, and Bs. 3.63, the interest… due thereon from April 7,1918, to January 27, 1919, into Conrt, and
prays that plaintiff's claim in excess of this amount be dismissed.
There is only one isBue, viz., whether defendant did, in point of fact,make the payment of Bs. 100 and interest as alleged.
On the issue of fact I accordingly find for the defendant.
It remains to consider the question whether the plaintiff, if he took' -the notewithoutnotice ofthis partpayment,is boundthereby.In
connectionwiththe question,plaintiff'sproctorreferred meto D.C.
Anuradhapura, 203, ' Sana Sathaswam v. Ena Vawaweepillai, reportedin Tamb. Rep.VII. On reading, thejudgmentin that case Iam,
however, unableto discoveranythingdirectlybearing inthe point
at issue in this case: and even if it was decided, in that case that partpayment does not bind a subsequent endorsee without notice, that casemust be considered to have been over-ruled byTenna v. Balaya,1
in which it was held that when payment is made the note is dischargedand ceases to be negotiable, and the endorsement and the delivery of the
1 [1908) 11 N. L. R. 27.
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rote after suchpayment toa third party gives suchthirdparty no
right to sue on it. In this latter case of Terma «. Balaya1 thefollowing words from Chalmerson Bills of Exchangewerequoted with
approval:“ Payment and other discharges are sometimes spoken of as
equities attaching to a bill, bnt this seems incorrect— they are rathergrounds of nnllity. That which purports to a bill is no longer such, it ismore waste paper." From thisfindingthe legal inference is that where
a bill has been partially paid,it ispro tanto wastepaper,i.e., that an
endorsee, even without notice,cannotrecover morethanthe balanoe
actually dne on the bill. To hold otherwise would be to perpetrate theabsurdity of saying that where Ss. 99.90 ont of Bs. 100 doe on a notehas been paid,an endorseewithont notice can recoverBs.100, bat
that where thewhole amountof the bill, i.e., one centmore,has been
paid, he can recover nothing.
There is, however, another ground on which the plaintiff is boundby the part payment. It is unquestionable law that am endorsee of apromissory note, who becomes such after the note is overdue, holds itsubject to equities, whether he had notice of the equities attaching tothe note or not. Now, a demand note, on which even a part paymentis made, must be dne, and any subsequent transaction in respect of thatnote must take place when it is overdue. In this case it. appears thatthe note was endorsed to the plaintiff after a part payment had beenmade on it. Therefore, the plaintiff holds it snbject to equities.
The decree will accordingly be that the defendant do pay tothe plaintiff Bs. 32. together with interest at the rate agreed upon onBs. 22, ic.
Bartholomeusz (with him Keuneman), for plaintiff, appellant.
Candkaratna, for defendant, respondent.
October 23, 1919. De Sampayo J.—
This is an action on a promissory note for Bs. 122 with certaininterest dated July 27,. 1917, made by the defendant in favour ofMessrs. Abeysinghe & Son, and endorsed by the latter to the plaintiff.The defendant pleaded that while Abeysinghe & Son were still theholders, namely, on April 6, 1918, he paid them Bs. 100 on accountof principal and all interest due up to that date. The issues framedat the trial were whether the defendant paid the sum alleged, andif so, whether that payment bound the plaintiff if he had no noticethereof. The Commissioner was satisfied that the payment wasmade by the defendant to Abeysinghe & Son. He also thought thatthe promissory note, even in the hands of the plaintiff, was dis-charged to that extent, and he gave judgment for the plaintiff forthe balance. The Commissioner in deciding that point relied onTenna v. Balaya.1 The Commissioner, however, misunderstood theeffect of that decision. What was held there was that payment ofthe note by the maker, that is to say, the full amount of the note,
111908) 11N. L. R. 27.
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rendered the note incapable of further negotiation, and any endorseethereafter had no remedy against the maker. The very authoritiescited in that case and other references, which may easily be made,.show that a part payment is quite different from payment ofthe note. A part payment constitutes what is called an equityattaching to the note, and operates against a subsequent endorseeif he was not an endorsee in due course. In this case there isnothing to prove that the plaintiff did not give good considerationfor the endorsement to him, or that he had notice of the prior pay-ment. The Commissioner further supported himself by sayingthat the promissory note was overdue at the time when the plaintifftook it, and therefore the part payment bound him, as he then mustbe taken to have had notice of the equity attaching to the note. Thenote having been made in July, 1917, and the endorsement beingsome time in 1918, I cannot say there was such unreasonable delayas to make the note overdue if the law is to that effect; but the lawon this subject is that a promissory note payable on demand asdistinguished, from a bill of exchange is not overdue by reason onlythat it had been outstanding for an unreasonable time. I think thejudgment is erroneous on the ground on which the Commissionerbased it. But I see that the defendant in his answer pleaded, as amatter of fact, that the plaintiff took the note with full knowledgeof the payment by the defendant to the payees. No issue wasstated on this point, nor has the matter been considered by theCommissioner. It is possible, as urged on behalf of the plaintiff-respondent, that the issue was overlooked, as the main question putbefore the Court was as to the effect of part payment if the plaintiffhad no notice. It was for the defendant to have seen such an issuestated and decided, but in the circumstances I think it is not unfairto have a further inquiry on that point. The judgment appealedfrom is set aside. The defendant must pay the costs of the Courtof Bequests and also of this appeal. The case is sent back for furtherinquiry on the point indicated.
KARUNAWATTY v. DINESHAMY