Partial illegality of original instrument. Where there is a partial illegality in the original instrument, a bill or a note given in renewal thereof is tainted with this original illegality.12 But where a renewal note is given for that part of the original consideration which is valid, it is itself valid.13 [§ 392] F. Consideration for Particular Contracts-1. Indorsement Other Than for Transfer. The indorsement of a party other than the payee or the holder requires a valid consideration,11 Miss. Carradine V. Wilson, 61 Miss. 573 (holding that, if there are several notes each exceeding the amount of the illegal consideration, the holder may elect to which the defense shall apply and recover on the other); Clopton v. Elkin, 49 Miss. 95. Oh.-Doty v. Knox County Bank, 16 Oh. St. 133; Siders v. Gem City Concrete Co., 33 Oh. Cir. Ct. 552. Pa.-Lancaster City School Dist. v. Lamprecht, 198 Pa. 504, 48 A 434 (where part of an issue of municipal bonds is made applicable to an illegal debt); Yundt v. Roberts, 5 Serg. & R. 139. R. I.-McGuinness v. Bligh, 11 R. I. 94. Wis.-Lemon v. Grosskopf, 22 Wis. 447, 99 AmD 58 and note. Eng. Crookshank v. Rose, 5 C. & P. 19, 24 ECL 432; Scott v. Gillmore, 3 Taunt. 226, 128 Reprint 90. [a] Illustration. In an action on several notes given for various shipments of fertilizer, each consisting of several sacks, it was error to instruct that if one sack did not have the tag attached, as required by law, plaintiff could not recover on the notes. Alabama Nat. Bank v. Parker, 146 Ala. 513, 40 S 987. [b] Provision for attorney's fees. -Conceding that a provision in the note for compound interest and attorney's fees was not enforceable, such fact would not affect the recovery of the debt. Marshall Field Co. v. Oren Ruffcorn Co., 117 Iowa 157, 90 NW 618. See also supra § 389. [c] Slave notes.-So held when notes given in part for slaves were made void by the constitutional provision. McLean v. Elliot, 26 La. Ann. 385; Spyker v. Hart, 22 La. Ann. 534; Smith v. McWaters, 22 La. Ann. 431; Castille v. Offutt, 22 La. Ann. 430; Conrad v. Callery, 22 La. Ann. 428; Allen v. Tarlton, 22 La. Ann. 427; Merritt v. Merle, 22 La. Ann. 257; Walker v. Ducros, 22 La. Ann. 214; Hebert v. Chastant, 22 La. Ann. 152; Satterfield v. Spurlock, 21 La. Ann. 771; Sandidge v. Sanderson, 21 La. Ann. 757; Burbridge v. Harrison, 20 La. Ann. 357; Brou v. Becnel, 20 La. Ann. 254, 22 La. Ann. 189; Wainwright v. Bridges, 19 La. Ann. 234. 12. Pierce v. Kibbee, 51 Vt. 559. 13. Crookshank v. Rose, 5 C. & P. 19, 24 ECL 432. 14. Funk v. Hossack, 129 Ill. A. 421; Fear v. Dunlap, 1 Greene (Iowa) 331; Slater v. Laboree, 10 Ont. L. 648, 6 OntWR 628. But see Ward v. Grayson Banking Co., 4 KyL 535 (statute). 15. Davidson v. King, 51 Ind. 224; Newton Wagon Co. v. Diers, 10 Nebr. 284, 4 NW 995. See also supra § 344. 16. Barkhead v. Williams, 1 Mich. N. P. 38; Fitzhugh v. Love, 6 Call (10 Va.) 5, 3 AmD 568. 17. Ala.-Carter v. Long, 125 Ala. 280, 28 S 74; Carter v. Odom, 121 Ala. 162, 25 S 774. Colo. Good v. Martin, 2 Colo. 218. Ill.-Carroll v. Weld, 13 II. 682, 56 AmD 481. Iowa.-Brenner v. Gundershiemer, 14 Iowa 82. Ky.-Krachts v. Obst, 14 Bush 34; whether indorsed after 15 or before 16 delivery. But where the note and the indorsement are one transaction and simultaneous, the consideration for the note is sufficient for the indorsement, whether the indorser is regarded as a guarantor 18 or as a joint maker,19 and even though the indorser did not know the nature of that consideration.20 On the other hand, if the indorsement was made after delivery, a new consideration is necessary 21 unless made pursuant to a prior agreement between Md.-Nabb v. Koontz, 17 Md. 283. 20. Robertson v. Rowell, 158 Mass. Mass.-Austin v. Boyd, 24 Pick. 64. 94, 32 NE 898, 35 AmSR 466. Minn.-Priedman V. Johnson, Minn. 12; Dunning v. Pond, 5 Minn. 296. 21 N. H.-New York L. Ins. Co. v. McKellar, 68 N. H. 326, 44 A 516. N. Y. Uvalde Asphalt Pav. Co. v. National Trading Co., 135 App. Div. 391, 120 NYS 11; Chapman v. Ogden, 37 App. Div. 355, 56 NYS 73 [aff 165 N. Y. 642 mem, 59 NE 1120 mem]; Bailey v. Freeman, 11 Johns. 221, 6 AmD 371. Wash.-Wilkie v. Chandon, 1 Wash. 355, 25 P 464. Wis.-Frederick v. Winans, 51 Wis. 472, 8 NW 301. See also supra § 343. The con [a] Illustrations.—(1) tract of one who indorses a draft for the accommodation of the payee is supported by the consideration which moves to the payee from the person to whom he negotiates the draft. Alabama Nat. Bank v. Rivers, 116 Ala. 1, 22 S 580, 67 AmSR 95. (2) Where a creditor accepts his debtor's note in payment, on the strength of an indorsement made for that purpose, his relinquishment of his right to proceed against the maker on the preexisting debt furnishes a consideration, as against the indorser, although the note is payable on demand. Kelly v. Theiss, 21 Misc. 311, 47 NYS 145. (3) Taking a promissory note indorsed in blank by husband and wife on the strength of the wife's indorsement furnishes a sufficient consideration as against her. Foster v. Leach, 160 Mass. 418, 36 NE 69. [b] A failure of consideration for the indorsement of a note is not established by evidence that such indorsement was made relying on the promise of a particular individual to observe his contract obligations with a third person. Blatchford v. Harris, 115 Ill. A. 160. 18. Cal.-Riggs v. Waldo, 2 Cal. 485, 56 AmD 356. Colo.-Kiskadden v. Allen, 7 Colo. 206, 3 P 221. Ill.-Parkhurst v. Vail, 73 Ill. 343 (prima facie so); Heintz v. Cahn, 29 Ill. 308; Klein v. Currier, 14 Ill. 237; Carroll v. Weld, 13 Ill. 682, 56 AmD 481; Van Kleeck v. Channon, 175 Ill. A. 626. Iowa.-Veach v. Thompson, 15 Iowa 380 (original consideration prima facie sufficient for indorsement). Ky.-Kracht v. Obst, 14 Bush 34. N. Y.-Schwarzansky v. Averill, 7 Daly 254. Contra Jones v. Ritter, 32 Tex. 717. And compare Crooker V. National Phonograph Co., (Tex. Civ. A.) 135 SW 647 (as supporting the majority rule). [a] It is not necessary that it should be adequate (1) in value (Oakley v. Boorman, 21 Wend. (N. Y.) 588), (2) except where the indorsement is made after delivery of the note (Tenney v. Prince, 4 Pick. (Mass.) 385, 16 AmD 347). 19. Nathan v. Sloan, 34 Ark. 524; Cherry v. Sprague, 187 Mass. 113, 72 NE 456, 105 AmSR 381, 67 LRA 33. [a] To be a joint maker he must share in the original consideration. Hayden v. Weldon, 43 N. J. L. 128, 39 AmR 551. [a] And it is immaterial that he indorsed the note without consideration at the request of the maker, for the accommodation of the payee, if the payee did not authorize such a request or know of its being made. Spaulding v. Putnam, 128 Mass. 363. 21. U. S.-McAtee v. Shade, 185 Fed. 442, 107 CCA 512. Ark.-Killian v. Ashley, 24 Ark. 511, 91 AmD 519. Ill.-White v. Weaver, 41 Ill. 409; Funk v. Hossack, 129 Ill. A. 421; Grier v. Cable, 45 Ill. A. 405. Kan.-Fuller v. Scott, 8 Kan. 25. Me.-Lambert v. Clewley, 80 Me. 480, 15 A 61. Mass.-Mecorney V. Stanley, 8 Cush. 85; Howe v. Merrill, 5 Cush. 80; Tenney v. Prince, 4 Pick. 385, 16 AmD 347. Mo.-Montgomery County v. Auchley, 92 Mo. 126, 4 SW 425; Stagg v. Linnenfelser, 59 Mo. 336; Gieseker v. Vollmer, 88 Mo. A. 462; Burnham v. Gosnell, 47 Mo. A. 637. Okl. Carrollton Bank v. Latting, 37 Okl. 8, 130 P 144, 44 LRANS 481 and note. S. C.-Layton v. Lewis, 86 SE 483. Tex.-People's State Bank v. Fleming-Morton Co., (Civ. A.) 160 SW 648 (holding that a surety or an indorser who becomes such after the delivery of a note, in the absence of a prior agreement or a new consideration, is not liable, but that if he becomes surety at the time of renewal of the debt in consideration thereof he is liable). Ont.-Stack v. Dowd, 15 Ont. L 331, 10 OntWR 633 [foll Ryan v. McKerral, 15 Ont. 460]. See also supra § 344. "If made at the inception of the note, it is presumed to have been for the same consideration and a part of the original contract expressed by the note. If made subsequently to the date of the note and without a prior indorsement by the payee, it will be presumed that it was not made for the same consideration, and the party, if liable at all, will be regarded as a guarantor. Such a contract to guaranty the debt of a third person must be in writing, and there must be sufficient proof of the consideration. . . . But if his indorsement was subsequent to the making of the note and to the delivery of the same to take effect, and he put his name there at the request of the maker, pursuant to a contract of the maker with the payee for further indulgence or forbearance, he can only be held as guarantor, which can only be done where there is legal proof of consideration for the promise, unless it be shown that he was connected with the inception of the note." Good v. Martin, 95 U. S. 90, 93, 24 L. ed. 341. [a] Sufficiency of consideration.— (1) Where the payee, while the note is in his hands, secures third persons to write their names on the back thereof, with knowledge that he wished to use the note to raise money, and thereafter the payee writes his name below the others and sells it to plaintiff, the payment of the purchase money of the note was sufficient to sustain the collateral prom the maker and his creditor for such an indorsement.22 Sufficiency of consideration. Forbearance to the principal,23 or the extension given to him,24 or the release of collateral by the holder,25 is sufficient, as is any other consideration which will support the contract of any other party to the bill or note.26 It is sufficient consideration for a stranger's indorsement of a note, without which the purchaser would not take it, that, from the proceeds of the sale, he was to be and was paid what the payee of the note owed him.27 [393] 2. Modification.28 Every modification of the original contract requires a fresh consideration.29 The legal sufficiency of such consideration is in general the same as in other commercial contracts,30 and ise of such indorsers. Hill V. Coombs, 93 Mo. A. 264. (2) A promise not to force a farmer into involuntary bankruptcy is not a sufficient consideration to support an indorsement after delivery by a third person, as the Bankruptcy Act exempts farmers from involuntary bankruptcy. Funk v. Hossack, 129 Ill. A. 421. 22. Sulphur Deposit Bank v. Peak, 110 Ky. 579, 62 SW 268, 23 KyL 19, 96 AmSR 466; Allen v. Pryor, 3 A. K. Marsh. (Ky.) 305; Montgomery County v. Auchley, 92 Mo. 126, 4 SW 425; Eitel v. Farr, 178 Mo. A. 367, 165 SW 1191; Mitchell v. Planters' Bank, 8 Humphr. (Tenn.) 216 (although the money was obtained thereon before he indorsed); Hoover v. McCormick, 84 Wis. 215, 54 NW 505 (where the indorser was the agent of the indorsee and indorsed under a prior agreement with his principal). See also supra § 344. 23. Jaffray v. Brown, 74 N. Y. 393 (forbearance to bring an action which was contemplated); Porter v. Thom, 30 App. Div. 363, 51 NYS 974 (note payable on demand). [a] Aliter, if such action could not have been brought. Smith V. Easton, 54 Md. 138, 39 AmR 355. See also Funk v. Hossack, 129 Ill. A. 421 supra note 21 [a]. 24. Utica City Nat. Bank v. Tallman, 63 App. Div. 480, 71 NYS 861 [aff 172 N. Y. 642 mem, 65 NE 1123 mem]; Colver v. Wheeler, 11 Oh. Cir. Ct. 604, 5 Oh. Cir. Dec. 278; Lyndon Sa v. Bank v. International Co., 78 Vt. 169, 62 A 50, 112 AmSR 900 (holding that an extension of the time of payment of a note is a sufficient consideration for the indorsement of the note by one not previously a party thereto). [a] Where a bill of exchange was renewed, an indorser of the new bill was liable thereon whether or not he was liable on the old bill, the time secured to the principal debtor being a sufficient consideration for his indorsement. Murphy v. Citizens' Sav. Bank, 110 Ky. 930, 62 SW 1028, 22 KyL 1872. [b] It is not sufficient, however, where the creditor merely agrees to extend payment until he wants the money. Strong v. Sheffield, 144 N. Y. 392. 39 NE 330 [aff 66 Hun 349, 21 NYS 505]. 25. Rüst v. Hauselt, 46 N. Y. Super. 22. 26. See supra §§ 350-379. 27. Farmers', etc., State Bank v. Falvey, (Tex. Civ. A.) 175 SW 833. 28. See also supra § 345. 29. Ala.-Johnson v. Washburn, 98 Ala. 258, 13 S 48 (an agreement not to transfer the note). Ill.-Gross v. Weary, 90 Ill. 256 (an agreement to allow a set-off which had been duly waived); Weaver v. Fries, 85 Ill. 356 (an agreement not to collect); Reid v. Degener, 82 II. 508 (providing for payment by assignment of a claim of the maker's against a third person); Heckenkemper v. Dingwehrs, 32 Ill. 538 (an agreement to allow a set-off, sub- the 3 Minn.-Colter V. Greenhagen, Minn. 126 (a change made in the terms of payment making it payable at a particular place). Pa.-Dickson v. Tunstall, 3 Pa. C. Pl. 128 (providing for the payment of a larger sum as principal). S. C.-Sanders v. Bagwell, 37 S. C. 145, 15 SE 714, 16 SE 770, 32 S. C. 238, 10 SE 946, 7 LRA 743 (increasing the rate of interest). Ont.-Ryan v. McKernal, 15 Ont. 460. 30. Jenness v. Lane, 26 Me. 475 (holding that a new note with additional indorsement is a sufficient consideration for reducing the amount). [a] Illustration.-Where there was an agreement that, if the maker of a note would withhold payment until certain proceedings instituted against the payee were settled, no interest would be charged thereon after maturity, and the maker retained the money until such proceedings were settled, the agreement, although oral, having been executed, had the effect to change the stipulation of the note as to interest. Righetti v. Righetti, 5 Cal. A. 249, 90 P 50. [b] Performance of condition is [c] Release of obligation to pay 31. McGregor v. McKenzie, 30 N. 32. Pemberton v. Hoosier, 1 Kan. See generally Release [34 Cyc 34. Colo.-Edmonston v. Ascough, 43 Colo. 55, 95 P 313. Ga. Fowler v. Coker, 107 Ga. 817, Ill-Weaver v. Fries, 85 Ill. 356. Pa.-Kidder v. Kidder, 33 Pa. 268. Wis.-Templeton V. Butler, 117 Wis. 455, 94 NW 306. Eng. Parker v. Leigh, 2 Stark. 228, 3 ECL 388. [a] Illustration. A verbal promise to one of the makers of a note by the payee that he would release him and look to the other maker alone for payment of the note, where based on no consideration, does not release such maker. Edmonston v. Ascough, 43 Colo. 55, 95 P 313; Fowler v. Coker, 107 Ga. 817, 33 SE 661. 35. Carrier V. Sears, 4 Allen (Mass.) 336, 81 AmD 707. 36. Herndon V. Henderson, Miss. 584. 41 37. Richardson v. Noble, 77 Me. 390. 38. See Gifts [20 Cyc 1206-1208, 1211]. 39. Ala.-Carpenter v. Murphree, 49 Ala. 84 (the substitution of another party's note). Ill. Roberts v. Carter, 31 Ill. A. 142 (holding that a waiver of accrued interest may be supported by the giving of new notes for the principal with attorney's fees). Mass.-First Nat. Bank v. Watkins, 154 Mass. 385, 28 NE 275 (the maker's reliance on the holder's promise to look to a collateral mortgage only and damage sustained by extension and depreciation of the property). Mo.-Lowrey v. Danforth, 95 Mo. A. 441, 69 SW 39 (services). N. J.-Lodge v. Hulings, 63 N. J. Eq. 159, 51 A 1015 (holding that an agreement by the maker's heir to pay the interest for the payee's lifetime will support a release of the principal and a surrender of the note). N. Y.-Ludington v. Bell, 77 N. Y. 138, 33 AmR 601 [rev 43 N. Y. Super. 557] (the substitution of the note of one partner for his proportionate share of a partnership debt); Pesant v. Pickersgill, 56 N. Y. 650 (holding that, if the drawer gives security for the payment of the bill at maturity, it will be a sufficient consideration for the release of his liability for statutory damages on nonacceptance). Vt.-Ridlon v. Davis, 51 Vt. 457 (an executory agreement by the maker to pay certain expenses for the holder, although they amount to less than the debt released). See generally supra §§ 350-379. [a] A contemporaneous condition that certain notes sued on were not to be paid in case defendant satisfactorily performed certain subsequent duties was supported by a sufficient consideration. Howell v. Ware, 175 Fed. 742, 99 CCA 318. [b] Assumption of existing obligation.-(1) The maker's promise to pay and his payment of another note of his, on which he was already liable, are not sufficient. Bragg v. Danielson, 141 Mass. 195, 4 NE 622. (2) Nor is the assumption by one joint maker of an existing joint obligation sufficient. Amend v. Becker, 37 Misc. 496, 75 NYS 1095. 41 resulting from the acts of the parties, no new con- tension is, however, sufficient to support such a promise.17 [396] 5. Guaranty and Suretyship.48 The rules relating to the necessity and the sufficiency of consideration for a guaranty of a bill or note are the same as those governing the consideration for all guaranties,* ,49 and the rules relating to consideration for becoming a surety on a bill or note are identical with those applicable to suretyship in general.50 XIV. ACCOMMODATION PAPER 51 or in part from those governing other bills and notes. [398] B. Definition and Nature of-1. Definition. Accommodation paper is a bill or note to which the acceptor, drawer, maker, or indorser, as the case may be, has put his name without consideration, for the purpose of accommodating by a loan of his credit some other person who is to provide for the bill or note when it falls due.52 It Ill-Miller v. Larned, 103 Ill. 562, | paper and indemnify the lender 569 (where it was said: "Accommodation paper is, either a negotiable or non-negotiable bill or note made by one who puts his name thereto without consideration, with the intention of lending his credit to the party accommodated"). See Bouton v. Cameron, 99 Ill. A. 600 [aff 205 Ill. 50, 68 NE 800]. [§ 397] A. Introductory. Accommodation paper constitutes a considerable part of the commercial paper used in business. In many respects the rules which govern the rights and liabilities of the different parties to the paper are not the same as those relating to paper based on a consideration. It has therefore been deemed advisable to state separately in this connection the rules relating to accommodation paper, at least in so far as they differ wholly [c] Part payment (1) is not sufficient for a release, whether made by a sole maker (Smith v. Bartholomew, 1 Metc. (Mass.) 276, 35 AmD 365) (2), or by one of several joint makers (Potter v. Green, 6 Allen (Mass.) 442; Ruggles v. Patten, 8 Mass. 480; Catskill Bank v. Messenger, 9 Cow. (N. Y.) 37), (3) and being ineffectual as to the payer it will not effect a discharge of his comaker (Smith v. Bartholomew, 1 Metc. (Mass.) 276, 35 AmD 365; Line v. Nelson, 38 N. J. L. 358). (4) So payment of the principal of a note is not a good consid'eration for a promise to release the interest. Willis v. Gammill, 67 Mo. 730. 40. Robinson v. Barnett, 19 Fla. 670, 45 AmR 24 (waiver of protest at or before maturity); Lyon v. Phillips, 106 Pa. 57 (the confirmation of a note originally obtained by fraud). 41. Way V. Sperry, 6 Cush. (Mass.) 238, 52 AmD 779; Hobough v. Murphy, 114 Pa. 358, 7 A 139. 42. Sheldon v. Horton, 43 N. Y. 93, 3. AmR 669. 43. Smith v. Winter, 4 M. & W. 454, 150 Reprint 1507; Mayhew v. Crickett, 2 Swanst. 185, 36 Reprint 585, Wils. Ch. 418, 37 Reprint 178. 44. Pelton v. Prescott, 13 Iowa 567. 45. Hooper v. Pike, 70 Minn. 84, 72 NW 829, 68 AmSR 512; Bramble v. Ward, 40 Oh. St. 267. 46. Henry v. Gilliland, 103 Ind. 177, 2 NE 360; Ray v. McMurtry, 20 Ind. 307, 83 AmD 322; Gilmore v. Green, 14 Bush (Ky.) 772; Porter v. Hodenpuyl, 9 Mich. 11. 47. Brown V. Indianapolis First Nat. Bank, 115 Ind. 572, 18 NE 56. Iowa.-Jefferson County V. Burlington, etc., R. Co., 66 Iowa 385, 16 NW 561, 23 NW 899. Minn.-Rea v. McDonald, 68 Minn. 187, 71 NW 11. against loss on its account. It is paper which is made, indorsed, or accepted by one party, without consideration, for the accommodation of another, for the purpose and with the intention that the latter shall obtain money or credit upon it of some third party." Greenway v. William D. Orthwein Grain Co., 85 Fed. 536, 537, 29 CCA 330 [appr Citizens' Bank v. Frederickson, 83 Nebr. 755, 120 NW 462]. [c] An accommodation indorser (1) is one who indorses a bill or note in order to enable another to ob Mo.-Chicago Title, etc., Co. V. Brady, 165 Mo. 197, 65 SW 303; Sing-tain credit or money on it. Citizens' er v. Dickneite, 51 Mo. A. 245. Nebr.-Citizens' Bank v. Frederick- N. J.-Jackson v. Jersey City First N. C.-Brown Carriage Co. V. Pa.-Peale v. Addicks, 174 Pa. 543, Tex. Vitkovitch v. Kleinecke, 33 Wis.-Gillmann v. Henry, 53 Wis. Ont.-Canadian Bank of Commerce v. Woodward, 8 Ont. A. 347. [a] Other definitions.—(1) "Ac [a] Forbearance on a former note which was nearly barred by limita-commodation paper is such as is tions is sufficient. Parsons v. Frost, 55 Mich. 230, 21 NW 303. 48. Forbearance as consideration see supra § 355. Necessity for independent consideration where surety or guarantor signs after delivery see supra § 344. 49. See Guaranty [20 Cyc 14131419]. Consideration from payee to maker as supporting liability of contemporaneous guarantor see supra § 343. 50. See Principal and Surety [32 Cyc 54-57]. 51. Admissibility of parol evidence to show real relation between the parties see Evidence [17 Cyc 722]. Nature of liability of indorsers before delivery see supra §§ 118-134. 52. U. S.-Greenway v. William D. Orthwein Grain Co., 85 Fed. 536, 29 CCA 330; Blair v. Mansfield First Nat. Bank, 3 F. Cas. No. 1,485, 2 Flipp. 111. See Lyons v. Westwater, 181 Fed. 681, 104 CCA 663 [rev 173 Fed. 111]. made, accepted or endorsed by one [b] "Accommodation paper con- Commercial, etc., Bank v. Platt, 135 Mich. 267, 97 NW 694. (2) An "accommodation indorser" is one who signs his name to a commercial paper without any consideration for the sole purpose of giving credit to another party to the paper. Young v Exchange Bank, 152 Ky. 293, 153 SW 444, AnnCas1915B 148. (3) "An accommodation indorsement may be said to be the execution of commercial paper, without consideration, for the purpose of lending credit to the accommodated party.' Waller V. Gorman Mercantile Co., (Tex. Civ. A.) 141 SW 833. [d] Paper held not accommodation paper.-(1) Where a corporation acquires the business and capital stock of another corporation and gives its note in exchange for notes of the former corporation, secured by stock in the new corporation for which the holder exchanged the stock of the old corporation which he had held as collateral for former notes, the note so given is not accommodation paper notwithstanding an agreement between the holder of the note and certain officers of the new corporation that when the note is paid the stock should become the property of those officers. Bollschweiler V. Packer House Hotel Co., 83 N. J. Eq. 459, 91 A 1027. (2) A note secured by a trust deed made by a wife on her husband's representation that he could procure a loan from an estate for which he was trustee is not "accommodation paper," although he procured the loan elsewhere. Burr v. Beckler, 264 I11. 230, 106 NE 206, LRA1916A 1049, Ann Cas1915D 1132 [rev 182 Ill. A. 228]. [e] Matters to be considered. (1) In determining whether or not a promissory note was given only as accommodation, the inconsistency of the conduct of the party denying that such was the case will be considered in conjunction with the indefiniteness and improbability of the agreement which he sets up in answer. Calhoun v. Williams, (Alta.) 17 DomLR 68, 28 WestLR 236. (2) 53 represents and is a loan of credit to the party accommodated. The phrase "accommodation paper" is also used in a narrower sense, including only bills accepted or notes made for accommodation.54 The Negotiable Instruments Law expressly provides that an accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.55 The clause "without receiving value therefor" has been held to mean value for the negotiable instrument and not the loan of the name by way of accommodation.56 53. Burr v. Beckler, 264 Ill. 230, 234, 106 NE 206, LRA1916A 1049, Ann Cas1915D 1132 [cit Cyc]; Rea v. McDonald, 68 Minn. 187, 71 NW 11. See also infra § 402. 54. Miller v. Larned, 103 Ill. 562; Bouton v. Cameron, 99 Ill. A. 600 [aff 205 Ill. 50, 68 NE 800]. posit therein for the accommodation of the latter.58 It includes nonnegotiable as well as negotiable bills or notes, and also an accommodation signature to a blank note.60 Effect of restricting use of paper. The term "accommodation paper" has been used as including in its strictest sense only paper containing a loan of credit without restriction as to the manner of its use; but the great weight of authority seems to be opposed to this view.62 61 63 .68 man [400] 3. Party Accommodating. Accommodation paper presupposes an accommodation partyone who has signed as drawer, acceptor, maker, or [§ 399] 2. Kinds of Paper Included. The term indorser, without receiving value, and for the pur"accommodation paper" is by the definition confined pose of lending his name to some other person as to a bill or note.57 But it seems that the term "aca means of credit." He may be a maker, a cocommodation paper" may also include a certificate maker,65 a drawer,66 an acceptor,67 or an indorser;" of deposit given by a bank to one who had no de- and because the Negotiable Instruments Law, in deThe fact that a promissory note bore another upon a negotiable instrument | modation paper, they do not deny conspicuously the words "renewable and receives payment for the accom- that the accommodation was extendon payment of $50.00 cash" is some modation, loses, as to that person, ed by the plaintiff and realized by evidence that the note was not given the right of an accommodation party, the person intended to be accommofor accommodation only. Walsh v. it would be subject to very just criti- dated. If it be true that nothing but Hennessey, (Man.) 3 Dom LR 823, 21 cism; since such a construction would strictly commercial paper negotiable WestLR 609. deprive an accommodation maker of by the law merchant can be accomhis rights, as against the person ac-modation paper or used as such, the commodated, if he had received any defence ought to prevail, but we can consideration, however slight. A discover no obstacle in the nature of careful reading of the section shows things to the use of any class of that this construction is not neces- paper whatever as a means of acsary. The words are not 'without re- commodation. When one ceiving value,' but without receiv- pledges his credit for the benefit of ing value therefor.' The structure of another without receiving any part the sentence is such that the last of the consideration himself, whatword can only refer to the negotiable ever be the form of instrument by instrument itself, not to the loan of which he makes the pledge, the paper the name by way of accommodation. has all the necessary elements, so This view was suggested by Mr. Mc- far at least as consideration is conKeehan in 41 Am. L. Reg. 499, 561 cerned, which any accommodation (reprinted in Brannan on the Negoti- paper requires"). See also Talmage able Instruments Act, at p. 133). v. Millikin, 119 Ala. 40, 20 S 843 this case, moreover, Austin did not (where a bond was treated as accomreceive value in any sense. What he modation paper). secured was the payment, out of the proceeds of the discounted note, of the commission due him. That was only the payment of a prior debt, not the giving of value for Austin's endorsement. The value received, within the meaning of section 29, must precede or be contemporaneous with the obligation upon the note; otherwise the party would be an accommodation party when the note given and would cease to be such when the subsequent payment was made him." Morris County Brick Co. v. Austin, 79 N. J. L. 273, 275, 75 A 550. [a] "A recognized definition (1) of accommodation paper is, either a negotiable or non-negotiable bill or note made by one who puts his name thereto without consideration, with the intention of lending his credit to the party accommodated." The true analogy is between a note made and a bill accepted for accommodation. Miller v. Larned, 103 Ill. 562, 569. (2) And this definition would seem to be misleading as applied to bills, in that it implies apparently that a bill must be drawn by an accommodation party in order to be accommodation paper. It is, however, adopted in Bouton v. Cameron, 99 Ill. A. 600 [aff 205 Ill. 50, 68 NE 800]. (3) In Scott v. Lifford, 9 East 347, 103 Reprint 605, it is held that, although no consideration passes between the payee and the drawer of a bill of exchange, it is not to be considered an accommodation bill as to the latter, if there was a valuable consideration as between the payee and the acceptor. (4) In Shirley v. Fellows, 9 Port. (Ala.) 300, 304, it was said of a drawer of a bill of exchange that "he was the drawer, not of an accommodation bill, in the usual sense of the term, but of a bill drawn for the accommodation of the acceptors." 55. Conn. Knapp V. Tidewater Md.-Weant V. Southern Trust, etc., Co., 112 Md. 463, 471, 77 A 289. N. Y.-Newport Nat. Bank v. H. P. Snyder Mfg. Co., 117 App. Div. 370, 102 NYS 478. Or.-Noble V. Beeman-SpauldingWoodward Co., 65 Or. 93, 131 P 1006, 46 LRANS 162; Murphy v. Panter, 62 Or. 522, 125 P 292. Pa.-Pittsburgh First Nat. Bank v. Brasch, 16 Pa. Dist. 993. Utah-Wolstenholme v. Smith, 34 Utah 300, 97 P 329. V. Wash.-Skagit State Bank Moody, 86 Wash. 286, 150 P 425, LRA 1916A 1215; Handsaker v. Pedersen, 71 Wash. 218, 128 P 230. 56. Morris County Brick Co. v. Austin, 79 N. J. L. 273, 75 A 550. [a] "This language has been criticised by Dean Ames, 14 Harv. L. Rev. 248, and if it must be construed to mean that one who loans his name to 57. See supra § 398. In was [a] A check, like a note, may at the time of its delivery to the payee be indorsed by a third party, for the drawer's accommodation. Emery v. Hobson, 62 Me. 578, 16 AmR 513; Colburn v. Averill, 30 Me. 310, 50 AmD 630; Bickford v. Gibbs, 8 Cush. (Mass.) 154; Gough v. Staats, 13 Wend. (N. Y.) 549. 58. Holland Trust Co. v. Waddell, 75 Hun 104, 26 NYS 980 [aff 151 N. Y. 666 mem, 46 NE 1148 mem]. See generally Banks and Banking § 239. 59. Exchange Nat. Bank v. Chapline, 109 Ark. 242, 158 SW 151; Miller v. Larned, 103 Ill. 562; Bouton v. Cameron, 99 Ill. A. 600 [aff 205 Ill. 50, 68 NE 800]. [a] Sealed notes.-Where a suit was brought against the accommodation indorser of a sealed instrument and the only defense was want of consideration, it was held that, conceding that a sealed note was not by strict commercial law a negotiable instrument, yet the court was right in directing a verdict for plaintiff. Farrar v. New York Bank, 90 Ga. 331, 334, 17 SE 87 (where the court said: "The pleas in the record set up no defence except the want of consideration, and yet, while declaring the instrument to be an accom 60. Spencer v. Brown, 143 NYS 994 (holding it immaterial whether an accommodation note was complete when delivered to the payee or whether the maker's name was originally signed to an otherwise blank note). 61. Altoona Second Nat. Bank v. Dunn, 151 Pa. 228, 232, 25 A 80, 31 AmSR 742 and note (where the court said: "The next question is as to the character of the note. If it were an accommodation note, that is to say commercial paper given without value to enable the party to whom it was given to use it for his own benefit without restriction as to the manner in which it should be used, there is no question that it could have been pledged as collateral security"). 62. See infra §§ 436-443. 63. U. S.-Bank of British North America v. Ellis, 2 F. Cas. No. 859, 6 Sawy. 96. Iowa.-Jefferson County V. Burlington, etc., R. Co., 66 Iowa 385, 16 NW 561, 23 NW 899. Mich.-Devereaux V. Phillips, 97 Mich. 104, 56 NW 228. Minn. Rea v. McDonald, 68 Minn. 187, 71 NW 11. Nebr.-Peoria Mfg. Co. v. Huff, 45 Nebr. 7, 63 NW 121; Pollard v. Huff, 44 Nebr. 892, 63 NW 58. Oh.-Cleveland Second Nat. Bank v. Morrison, 3 Oh. Dec. (Reprint) 534. Pa.-Newbold v. Boraef, 155 Pa. 227, 26 A 305; Lenheim v. Wilmarding, 55 Pa. 73. V. 64. See infra § 431. 65. Edmonston Ascough, 43 Colo. 55, 95 P 313. See also infra § 432. 66. 67. See infra § 433. 68. Proctor v. Blanchard, 75 N. H. 186, 72 A 210. See generally supra § 398. [a] Accommodation indorser lik 71 fining an accommodation party, mentions only per- Irregular indorsement. Under the Negotiable In- words his intention to be bound in some other capacity, persons putting their names on the back of a note before delivery for the accommodation of the maker are considered accommodation indorsers.75 [§ 401] 4. Party Accommodated. The accommodated party is he to whom the credit of the accommodation party is loaned,76 and is not necessarily the payee, since the inquiry always is as to whom did the maker of the paper loan his credit as a matter of fact.78 And the fact that one derives some incidental benefit from the paper will not make it accommodation paper as to him.7 77 79 Need not be party to instrument. An instrument signed, accepted, or indorsed by one for the accommodation of another is accommodation paper, although the party for whose accommodation it was signed is not himself a party to the instrument.80 plation of law the credit has been C. The court said: "The debt for loaned only to the person who, in which this note was given was unaccordance with the understanding questionably Feight's, and it was inof the parties, receives the proceeds cumbent on him to pay the note of the paper either directly or as a though he was not party to it. When payment of an antecedent debt." it fell due and Feight was unable to Dillingham v. Scott, supra. pay it, plaintiff being an indorser would have been liable to be called on by the bank for payment, and therefore to have the money raised on a new note made by defendant was in a certain popular sense an accommodation, that is a convenience, to the plaintiff, just as it is a convenience to a creditor who wants his money but cannot get it from his debtor in cash, to get payment by a note on which he can raise the money temporarily, though at the risk of an indorsement which he may ultimately have to pay. But this is very far from what the law means by accommodation paper. Prima facie therefore the note in suit was not accommodation paper as between plaintiff and defendant, though it was as between defendant and Feight"). [a] Indorser for accommodation 70. Noble V. Beeman-Spaulding- of accommodation indorser.-Where Woodward Co., 65 Or. 93, 131 P 1006, it appeared that plaintiff, for a con46 LRANS 162. sideration paid to him by the mak[a] "The Code has thus limited ers of a note, indorsed the note for accommodation parties to the four their accommodation and undertook classes of maker, drawer, acceptor, to raise the money on it, and that, or indorser. True enough, it has not being unable to discount the note made it unlawful for any person to without further indorsement, plainenter into a contract of guaranty as tiff procured defendant to indorse the to the debts of another party, but by note for him, plaintiff is as to defendthe law, 'the mention of one being ant the accommodated party, and the exclusion of the other,' such a cannot, after taking up the instruguarantor is not an accommodation ment, recover from defendant a conparty." Noble v. Beeman-Spaulding- tributory share of the amount paid. Woodward Co., 65 Or. 93, 101, 131 P Martin v. Marshall, 60 Vt. 321, 13 A 1006, 46 LRANS 162. 420. 71. Mechanics, etc., Sav. Bank v. Katterjohn, 137 Ky. 427, 125 SW 1071, AnnCas1912A 439 (holding that the payee of a note, who indorsed it to enable the maker to negotiate and discount it for his own benefit, is liable merely as an accommodation indorser). [a] It is common practice for a person for whose benefit accommodation paper is made to execute his note to his accommodation indorser, to obtain his indorsement in blank, and then to negotiate the paper himself. Winters v. Home Ins. Co., 30 Iowa 172. 72. Alabama Nat. Bank v. Rivers, 116 Ala. 1, 22 S 580, 67 AmSR 95; Rossi v. National Bank of Commerce, 71 Mo. A. 150. [a] But where a drawer of a check indorses it at the request of the payee in order to identify the latter, the drawer is not liable if the check is lost and the name of the payee is forged thereon, although it would be otherwise if the indorsement were not on the request of the payee. Simonowitch v. Schwartz, 67 App. Div. 535, 74 NYS 221. 73. Peoria Mfg. Co. v. Huff, 45 Nebr. 7. 63 NW 121. 74. Edmonston V. Colo. 55, 95 P 313. Ascough, 43 75. Deahy v. Choquet, 28 R. I. 338, 67 A 421, 14 LRANS 847. See also supra § 122. 76. Dillingham v. Scott, 19 Hawaii 421, 426; Thom v. Kibbee, 62 N. J. L. 753, 42 A 729. "It is evident that a person may be accommodated within a broad use of that term without being the accommodated party in the legal sense. The accommodated party has been defined as the one to whom the credit is loaned, but this definition merely results in a restatement of the question as to whether the testimony of the accommodation party as to whom he loaned his credit is decisive after verdict or whether in contem 77. Dillingham v. Scott, 19 Hawaii 421; Neal v. Wilson, 213 Mass. 336, 100 NE 544; Rea v. McDonald, 68 Minn. 187, 71 NW 11; Traders', etc., Bank v. Black, 108 Va. 59, 60 SE 743. [a] Illustration.-Where a check was given by a third person to a bank without consideration at the solicitation of the cashier and immediately passed to the credit of a depositor's overdue account to make the account whole, the check was given for the accommodation of the depositor rather than of the bank. Neal v. Wilson, 213 Mass. 336, 100 NE 544. 78. Rea v. McDonald, 68 Minn. 187. 71 NW 11. 79. Hawaii. Dillingham v. Scott, 19 Hawaii 421. Iowa.-Bankers' Iowa State Bank v. Mason Hand Lathe Co., 121 Iowa 570, 90 NW 612, 97 NW 70. N. J.-Thom v. Kibbee, 62 N. J. L. N. Y.-English v. Schlesinger, 55 Pa.-Mosser v. Criswell, 150 Pa. F. It was held that the relation of accommodation and accommodated parties did not exist as between M and C, and that M might maintain an action on the instrument against "While the case appears to be a novel one, we are of the opinion that the accommodated party upon whom the law casts the implied obligation of reimbursing the accommodation party is the party who, in accordance with the prior understanding of the parties, receives the direct benefit from the accommodation paper or its proceeds, and that this result follows even though, as is by no means clear from the evidence in this case, the motive actuating the accommodation maker was wholly a desire to accommodate some other party requesting the loan of credit:" Dillingham v. Scott, 19 Hawaii 421, 427. [a] Illustrations.—(1) Although plaintiff suggested to L that he procure a person whose note would be honored by a bank to make an accommodation note for L, so that L could meet his obligations to plaintiff, and L procured S to make his note to L, which was indorsed to plaintiff, the accommodation was not for plaintiff, which, were it the case, would prevent recovery from S by plaintiff. English v. Schlesinger, 55 Misc. 584, 105 NYS 989. (2) A corporation, being indebted to a bank, and desirous of borrowing more money, executed its note to defendant, a brother of the company's manager, who indorsed it to the bank, accompanying it with a letter saying that he wished to deposit it as security for any obligation that might be due or might become due by the company. It was held that defendant's indorsement was for the accommodation of the company, and not for that of the bank. Bankers' Iowa State Bank v. Mason Hand Lathe Co., 121 Iowa 570, 97 NW 70, 90 NW 612. 80. Ill-Miller v. Larned, 103 III. 562. |