
    EDWARD J. PETERS v. CANNON RIVER ELECTRIC POWER COMPANY.
    
    February 11, 1910.
    Nos. 16,334—(99).
    Promissory Note Marked “Paid” —Recovery Permitted.
    Defendant owed plaintiff $3,200, with interest, and held a note therefor-as security for indebtedness by plaintiff to defendant for $789.12, with interest. Defendant induced plaintiff to mark the note paid in full and to allow defendant to retain the same, upon the understanding that an accounting and settlement should be had, and that defendant should turn over-the balance found to be due. No settlement was made. No money was paid. It is held, that plaintiff is entitled to recover the balance due.
    
      Action in the district court for Goodhue county to recover $3,200 ■on a promissory note. In its answer defendant set up that its treasur■er received the note as security for plaintiff’s debt to it, as stated in the opinion, that the note was in defendant’s possession, and interposed a counterclaim for $12,000. The reply alleged that plaintiff having delivered his report to defendant, the note was returned to plaintiff. The case was submitted to a referee who made findings and found in favor of plaintiff for $3,200 and interest, less the sum •of $789.12 and interest. From an order, Williston, J., denying •defendant’s motion for a new trial, it appealed.
    Affirmed.
    
      Mohn & Mohn, for appellant.
    
      T. R. Johnson and F. M. Wilson, for respondent.
    
      
       Reported in 124 N. W. 826.
    
   Jaggard, J.

This action was brought to recover on an overdue promissory note made by defendant to plaintiff in November, 1903, for $3,200, and on another cause of action not here in issue. The npte was given to represent a portion of the purchase price of an electrical plant. Plaintiff, to induce the defendant to purchase the plant and as part consideration, agreed to take charge of and manage the same for defendant between October 1, 1903, and April 1, 1905. During this time he acted as.manager in charge, among other things, of the finances and affairs. lie applied to his own use, and never paid, a sum of defendant’s money. In April, 1905, plaintiff turned the note over to the treasurer of the company, to be held until plaintiff had made a satisfactory report to and settlement with the company of all his affairs during the time he was manager. He furnished a statement to the defendant, who refused to accept it as correct. Plaintiff after-wards consented that the note be marked “Paid in full” and retained by. defendant, with’, the distinct understanding that an account and settlement between the parties be had, and that defendant should turn over the balance found to be due. It was not plaintiff’s indention to surrender the note or that same should be canceled. No part of the note-lids "been paid; The amount plaintiff owed the defendant was $789.12, With interest from April 26, 1905. These facts were found by the referee, who gave plaintiff, judgment for the principal and five per cent, interest specified-in the note, less this sum, with interest. Defendant appeals from the order denying its motion for a new trial.

Tbe gist of appellant’s argument is tbat “tbe pledgee is tbe real party in interest and tbat the pledgor cannot maintain an action on tbe collateral,so long as tbe debt secured thereby remained unpaid.” That principle is certain enough as applied to appropriate conditions, but not to this case. Tbe situation was simply this: Tbe defendant owed tbe plaintiff on bis note $3,200, with interest; the plaintiff owed defendant $789.12, witb interest; the note was in tbe possession of tbe defendant as security; both parties were entitled to their money. Plaintiff is entirely within bis rights when be insists upon payment of tbe balance. Tbe court'properly ordered judgment for that sum. It is not consistent witb this view for defendant to urge that there was no note in existence, and therefore no pledge. Defendant was not, however, restricted by tbe old common-law rule as to inconsistency of defenses. If this defense was valid,- be could prevail. But we are clear tbat tbe defense was futile.' Tbe situation might be viewed as substantially tbe same as if tbe debtor'induced a creditor to sign a receipt on condition of payment and then refused to pay. Tbe receipt would fail. Tbat in tbe case at bar the receipt was written on tbe- back of tbe note does not alter the legal aspects of, tbe case.

Examination of the record has satisfied us tbat tbe record justified tbe triál court in finding that 'there was'no intention to canceT’tbe note. However this may be, tbe plaintiff was clearly entitled on- all tbe facts to tbe amount actually due him from tbe defendant. It was overdue. .It had not been paid. If tbe note, be regarded as canceled, tbe consideration for the cancelation bad not been paid. Tbe plaintiff would be entitled to-recover tbat amount in this case. It is true tbat the action was in form upon a promissory note. The answer,, however, set up eonditions .as'-hereinbefore-stated, and. tbe reply competed the issues as beiein set forth. Tbe resulting -action, if tbe note be regarded as'canceled, was: in the nature of an action-for1 money bad and received. ' The defendant'had been'unjustly éhriched at plaintiff’s expense, and was bound to reimburse plaintiff to that extent. Tbe mere defect of form in tbe action.un.der-code-,pleading would not be .material. The only difference would be that plaintiff would be entitled to a small increase in rate of interest.

Affirmed.  