On June 30, 1914, defendants made to plaintiff a promissory note for $1,800, due October 1, 1914, with interest at 8 per cent. Payments were made thus:
December 30, 1915 .................................. $216.00
January 18, 1916, Principal, ......................... $284.00
November 4, 1916, Paid on interest, ................... $121.28
August 8, 1917, Credit, .............................. $247.40
On June 23, 1919, the jury found a verdict against Johnson for $1,516 and interest at 8 per cent from December 30, 1916, less the credit of $247 on August 8, 1917. Judgment was entered against Johnson for $1,535.29, and he appeals.
The defense of Johnson is that, though he signed on the face of the note, he received no consideration, and he signed only as guarantor or surety; also, that plaintiff has received and accepted payment or ample security for the balance due on the note. It appears that to' secure the note and several prior notes, amounting to a large sum, Marion Edwards, the principal maker of the note, conveyed to the bank 441.61 acres of land. And, excepting 80 acres in Pierce county, the land was all sold and applied on the notes in full payment, and a •balance of $247.40 was left to apply on the note in question. In April, 1917, the 80-acre tract was sold to Prank Rumley and he made to Marion Edwards a purchase-money note and mortgage for $1,600, and interest. Then Edwards delivered to plaintiff the Rumley promissory note and mortgage, with an assignment of the mortgage, and the bank conveyed to Rumley a good title to the 80 acres, which it had held in trust to secure the note in question. The debt to Rumley, the mortgage, and the assignment of the same, were duly recorded. Then, *343as it appears, the coupon notes were only 5 per cent, or $80 a year, while the principal note was for 6 per cent. Edwards asked for a return of the note and coupons, to have the same corrected so as to read 6 per cent in lieu of 5 per cent. The plaintiff bank returned the note and the coupons to Edwards, and no one seems to know what became of them. Burnley refused to pay the mortgage debt without his notes or an idemnity bond. Hence this suit was commenced.
Evidenly the Burnley note and mortgage were given to apply on the note in suit, either as an absolute payment or as collateral and in lieu of the lien on the 80-acre tract. The case does not present any question concerning the primary or secondary liability of Johnson. Consequently he was a guarantor of payment, and any payment of the debt or security given for the same at once inured to his benefit. The plaintiff was not at liberty to return a payment or a good and valid security and still hold the guarantor as if no payment had been made or security given. Scandinavian American Bank v. Westby, 41 N. D. 276, 172 N. W. 666. Then we have the maxim: “When one of two innocent parties must suffer by the act of a third, he by whose negligence it happened must be the sufferer.” Comp. Laws, § 7278. If the plaintiff must suffer any detriment from the loss of the $1,600 note, it should be charged to its own negligence. There is some evidence that plaintiff received the Burnley $1,600 note and mortgage as payment of the debt, the same as it had received from Edwards other securities in payment of other debts. The sum due the plaintiff was less than $1,500, and it was the wind-up of a long protracted deal. If the plaintiff did not receive the Burnley note and mortgage as payment, then it was ample security for the debt, and it was given as the close of an old and long-standing deal, — as the final determination of all dealings between the plaintiff and Marion Edwards. If the bank received the note in payment, then it was making about $100 or more in excess of the interest, — and that was about the way it was doing business. There is no showing that the $1,600 note or its coupons have been presented for payment. The chances are that it has been lost or mislaid, and that the remedy of the plaintiff is to recover on it as on a lost note. Had the plaintiff retained the Burnley note, and had it offered to transfer and deliver the same and the mortgage to Johnson, then it would have been in a position to maintain this action. Then there *344could be no defense only that the note and mortgage had been received in absolute payment.
Manifestly the court erred by striking from the answer all that was alleged concerning the Rumley note and mortgage, either as payment or as security, and by directing the jury to disregard all evidence concerning the same.
Judgment reversed.
Bronson, J. I concur in result.