The Widemer Lumber Company owed the plaintiff bank a balance of $500 on a note endorsed by J. J. Knox for his firm,, El Paso Lumber Company; A. N. Harper was president of the Widemer Lumber Company. Harper testified: “I taken the bill of lading into the bank, signed the bill of lading by the Coast Line, and told them I wanted the draft on the party I was shipping the lumber to, and attached a draft on the bill of lading, and the proceeds were to go to the credit of this note. I gave these instructions to one of the bank officials.”
It is well settled that where one signs a note and the plea of payment if set up as a defense, the burden is on the defendant to show payment. Ellison v. Rix, 85 N. C., 80.
The defendant’s testimony, if believed, tended to show in the instant case that to pay the note a draft of $500 with bill of lading attached was turned over to the officials of plaintiff bank. The'bill of lading showing a shipment of lumber hy the Coast Line Railroad, and a draft with the bill of lading attached, were left with plaintiff bank, and the proceeds were to go to the credit of the $500 note. The court below in the charge told the jury “The bill of lading hasn’t got anything to do with it.” In this we think there was error. We think the court should have instructed the jury that if from the evidence they found the facts to be that A. N. Harper, president of the Widemer Lumber Company, turned over to an official or officials of plaintiff bank a draft of $500 with bill of lading attached showing a shipment of lumber by the Coast Line Railroad, with the understanding and agreement that the proceeds were to go to the credit of the $500 note on which J. J. Knox and others were endorsers, the burden was on the hank to show due diligence and care, that is, such diligence and care as a man of ordinary prudence would exercise under the same or similar circumstances in collecting or enforcing the draft with' the bill of lading attached. If the plaintiff did not exercise this care and diligence, and by reason thereof the value of the lumber at the time the bill of lading *568attached to the draft was lost, the defendant J. J. Knox and other defendants would be entitled to credit for the market value of the lumber, at the time it was lost, on the note sued on.
“An order drawn by the debtor upon a third person in favor of the creditor, for the payment of money or goods, is not a payment of the debt unless such order has been actually paid or accepted by the creditor as a discharge of the debt fro tanto. It is not enough that the creditor accepts the order unless he accepts it as a payment. On the other hand, if the order is accepted by the creditor as payment, or is actually paid to the creditor, or if the creditor agreed to accept such an order when the debt was created, the debt is extinguished fro tanto. At any event, where due diligence is not used in collecting or enforcing the accefted order, whereby the claim is lost, the order is deemed a fayment.” 30 Cyc., p. 1191. (Italics ours.)
Page on the Law of Contracts (2 ed.), vol. 5, sec. 2814 (in part), lays down the just rule: “Omission of the creditor to use proper diligence in collecting the draft will make the draft operate as a payment to the extent.of the injury caused.”
Nash, J., in Ligon v. Dunn, 28 N. C., 137, says: “Payment may be made also in a bill of exchange or a promissory note though the receipt of neither is in itself a payment, for neither is money. But if received, and the creditor do not use the necessary diligence to get it faid, the defendant will be discharged.” (Itálics ours.) Terry v. Robbins, 128 N. C., 142.
“When this case was before us upon the defendant’s former appeal (Mauney v. Coit, 80 N. C., 300) we stated the rule, applicable to the facts then appearing to be, that If the drafts were given and received, for and in closing up the account, and were afterwards accepted by the company, it was the duty of the plaintiffs to present them at maturity for payment, and if not paid in a reasonable time, to take proper steps for their collection, and if they failed to do this and the drafts became worthless, it would in law be a discharge of the original debt, that is, of course, if they were lost by reason of the neglect of the holders to proceed to collect and could have been collected by the use of reasonable diligence on their part.’ It is now, however, shown that any effort to enforce payment by action would have been fruitless in consequence of the insolvency of the acceptor, and the law does not require the holder to do a Vain thing.’ ” Mauney v. Coit, 86 N. C., 471.
From the view we take of this case there must be a new trial, so that the jury can pass on the facts under the law as we interpret it to be. For the reasons given there must be a
New trial.
Stacy, J., took no part in the consideration or decision of this case.