very purpose of making accommodation paper is that the party favored may dispose of it, and unless restricted he may transfer it either before or after maturity, and the maker will be equally bound. The usage in this regard is sanctioned by the practice that has prevailed in mercantile transactions everywhere, in this country and in England. That usage has now the consistence of law. Any other rule would permit the maker of such paper to practice a fraud on persons who should take paper he had put out to be negotiated in the usual course of business. The only safe rule is, that where a bill or note is given, with no restriction as to the mode or time of using it by the party accommodated, and the same has been transferred in good faith in the usual course of business, the holder, if he paid a valuable consideration for it, will be entitled to recover the full amount, although he may have had full knowledge it was accommodation paper.' f. When paper is transferred after maturity.— Ordinary commercial paper transferred after its maturity is transferred, as a general rule, subject to all equities and defenses existing between the original parties." The same rule does not exist as to accommodation paper which is transferred after maturity, for in such case the weight of authority, both in this country and in England, seems to be in favor of permitting the holder of paper so transferred to recover thereon from the accommodation party, if he is a holder for value, and the terms under which the accommodation paper was made did not prohibit its use after its maturity.' It St. Rep. 896; Mosser v. Crisswell, 150 An acceptor of drafts for the accommodation of the drawer cannot defend against the same in the hands of the payee or an indorsee, on the ground that he received no consideration, where full consideration was received by the drawer. Levy & Co. v. Kauffman, 114 Fed. 170. 11. See post, § 77. 12. Taking after dishonor.- One who takes an accommodation note after its dishonor may recover from the maker or indorser, if it be used for the purpose for which it was given. 2 Parsons on Note, and Bills, 28. In the case of Dunn v. Weston, 71 Me. 270, 36 Am. Rep. 310, it was held that, unless there is an agree 12 ment restraining the transfer of an accommodation note after due, and it is used for the purpose for which it was given, it is immaterial whether the holder advances money upon it before or after its maturity." See also Redfield & Bigelow's Lead. Cas. 217, where it is said: "The indorser for accommodation is equally bound, whether the transfer is made before or after the paper falls due, or whether the purchaser knew the indorsement was made for accommodation or not. To hold otherwise would be to encourage fraud, and to relieve the party from the very responsibility which he expected to meet, and which upon every principle of justice and fair dealing he should be compelled to abide by." In New York there is some diversity in the opinions of the courts, although the Court of Appeals seems to have settled the proposition that an cannot be denied, however, that in many States accommodation paper, transferred after maturity, is treated in the same way, and subjected to the same rule as other commercial paper, upon the ground that an accommodation party lends his credit only for the period specified in the instrument, that is until its maturity; and if transferred thereafter such party should not be made liable except as an ordinary party to commercial paper. 13 But many of the leading text-writers have favored the former view,14 and it seems to us the better reasoning, and the authorities of equal or greater weight are in its support. The maker of an accommodation note holds himself out to the public to be absolutely bound to every person who shall take the same for value.15 As has been observed in a New York case,' 16.66 a party who lends his note without limitation as to the time of its use cannot therefore be presumed in law to have limited such time to that before its maturity." g. Rights and liabilities of accommodation party. The liabilities of an accommodation indorser will also be hereafter considered in the chapter on Liabilities of Parties.17 If there be no wrongful diversion, or other fraud, in the acquisition of an accommodation. paper, it may be enforced by a transferee to whom it was transferred before maturity as collateral security for the payment of an antecedent debt;' or by a transferee to whom it was transferred in payment of such a debt.19 .18 h. Accommodation party as surety; subrogation; contribution.The relationship of principal and surety exists as between the accommodation indorser, without con- v. Hutchinson, 36 Pa. St. 285; Cotsideration, is not liable to a trans- trell v. Watkins, 89 Va. 801. feree, after maturity, where the transfer is made from the person for whose accommodation it was indorsed, although full consideration was paid. Chester v. Dorr, 41 N. Y. 279. But see Harrington v. Dorr, 1 Rob. (N. Y.) 351; Corbitt v. Miller, 43 Barb. (N. Y.) 305; East River Bank v. Butterworth, 45 Barb. (N. Y.) 476. Other cases holding that the maker of an accommodation note made without restriction is liable to a third person who acquires it for value after maturity are: First Nat. Bank v. Grant, 71 Me. 374, 36 Am. Rep. 334; Renwick v. Williams, 2 Md. 356; Miller v. Larned, 103 Ill. 562; Seyfert v. Edison, 45 N. J. L. 393. 14. Story on Promissory Notes, § 191; 2 Parsons on Notes and Bills, 28; Daniel on Negotiable Instruments, §§ 726, 786; Chitty on Bills, pp. 218, 219; Byles on Bills (Sharswood's ed.), 285. Me. 374, 36 Am. Rep. 334. 16. Robertson, C. J., in Harrington v. Dorr, 3 Rob. (N. Y.) 275. 17. See post, chap. VII. 18. De Zeng v. Fyfe, 1 Bosw. (N. Y.) 335; Inglis v. Kennedy, 6 Abb. Pr. (N. Y.) 32; Schepp v. Carpenter, 51 N. Y. 602; Todd Nat. Union Bank, 132 Pa. St. 312, 19 Atl. 218; Atkinson v. Brooks, 26 Vt. 569. 19. Grocers' Bank of New York v. Penfield, 69 N. Y. 502, 25 Am. Rep. 231; Ward v. Howard, 88 N. Y. 74; Schepp v. Carpenter, 51 N. Y. 602; Smith v. Van Loan, 16 Wend. (N. Y.) 659; Crosby v. Lane, Fed. Cas. No. 13. Chester v. Dorr, 41 N. Y. 279; Battle v. Weems, 44 Ala. 105; Carroll v. Peters, 1 McGloin (La.), 88; Kellogg v. Barton, 94 Mass. 524; Hoffman v. Foster, 43 Pa. St. 137; Bower 3,423. 20 person for whose benefit a note was made and the accommodated party, at least so far as their own interests are concerned.2 An accommodation party, being a surety for the person benefited, is entitled to be subrogated to all the rights and securities of the holder, for the purpose of obtaining reimbursement; and it is the duty of such holder, having such securities from the principal, to retain or dispose of them for the benefit of the sureties. And, if holding such securities, he surrenders them to the principal, or otherwise disposes of them to his advantage, without the assent of the sureties, he thereby discharges them to the amount of the value of the securities so surrendered.22 But such right of subrogation does not exist until the accommodation party has paid the instrument.23 And it may also be said as a general rule that the accommodation party is subrogated to all the defenses and equities possessed by his principal except such as are personal to such principal, and also such as are impliedly or expressly waived by his signature. Where one of several joint and several makers of an accommodation paper pays the same such paper remains in his hands as evidence of his right to contribution, and he or his assignee may maintain an action against his comakers to recover their pro rata shares.25 20. In re Babcock, 3 Story (U. S.), 393; Knighton v. Curry, 62 Ala. 411; Cummings v. Little, 45 Me. 183; Parks v. Ingram, 22 N. H. 292, 55 Am. Dec. 153; State Bank v. Smith, 155 N. Y. 185, 49 N. E. 680, affg. 85 Hun (N. Y.), 200, 32 N. Y. Supp. 999. But the fact that the accommodation maker of a note was a surety for the payee does not affect the rights of a subsequent holder against such maker. King v. Parks (Tex. Civ. App.), 63 S. W. 900. 21. Cummings v. Little, 45 Me. 183; Farmers & Citizens' Bank v. Sherman, 33 N. Y. 69; Merchants' Nat. Bank of Syracuse v. Comstock, 55 N. Y. 24, 14 Am. Rep. 168; Nat. Exch. Bank v. Silliman, 65 N. Y. 475, where it was held that, where collaterals were deposited with a bank as security for loans and discounts, the bank cannot, as against an accommodation indorser, apply them instead to the payment of notes of such persons purchased by it after maturity; First Nat. Bank of Buffalo v. Wood, 71 N. Y. 405, 27 Am. Rep. 66. The existence of the relationship of principal and surety between the orig inal parties to an accommodation paper, and knowledge thereof by the plaintiff, entitles the makers, upon payment of the debt, to all the rights, remedies, and securities that the plaintiff had with reference to the notes. State Bank v. Smith, 155 N. Y. 185, 197, 49 N. E. 680. See also Stevenson v. Austin, 3 Metc. (Mass.) 347; Sublett v. McKinney, 19 Tex. 438. 22. Cummings v. Little, 45 Me. 183; Dunn v. Parsons, 40 Hun (N. Y.), 77; Nat. Exch. Bank v. Silliman, 65 N. Y. 475. 23. Higgins v. Wright, 43 Barb. (N. Y.) 461; First Nat. Bank of Buffalo v. Wood, 71 N. Y. 405, 27 Am. Rep. 66; Mosser v. Crisswell, 150 Pa. St. 409. 24. Weimer v. Shelton, 7 Mo. 237, where it was held that an indorser for accommodation might avail himself of the defense of usury to the same extent as the maker. See also Gunnis v. Weigley, 114 Pa. St. 191; Sawyer v. Chambers, 43 Barb. (N. Y.) CHAPTER V. Negotiation. 56. What Constitutes Negotiation. b. Negotiation by delivery. $ 57. Indorsement, how Made. a. Statutory provision. b. General requirement. c. Place of indorsement; allonge. d. Indorsement on collateral instrument. 58. Indorsement Must be of Entire Instrument. a. Statutory provision. b. Indorsement to two or more indorsees. $ 59. Kinds of Indorsement. a. Statutory provisions. b. Special indorsement. c. Indorsement in blank. d. Effect of indorsement in blank. $60. Restrictive Indorsements. a. When indorsement restrictive; statutory provision. b. Indorsements for collection. c. Indorsements for deposit. d. Indorsements in trust. e. Effect of restrictive indorsement; statutory provision. 61. Qualified Indorsement. a. In general. b. How made. c. Statutory provision. $62. Conditional Indorsement. a. In general. b. Statutory provision. i 63. Indorsement of Instrument Payable to Bearer. a. Statutory provision. § 64. Indorsement of Instrument Payable to Two or More Persons. a. Statutory provision. b. Authority to indorse. 65. Indorsements by or to Cashiers, Corporate Officers, and Other Persons Acting in a Representative Capacity. a. Indorsement to a cashier or officer of a corporation; statutory provision. b. Indorsement to bank or corporation. c. Indorsement by cashier or treasurer of corporation. d. Indorsement in representative capacity. § 66. Misspelled Name of Payee or Indorsee; Presumption as to Time and Place of Indorsement. a. Indorsement where name is misspelled; statutory provision. b. Presumption as to time of indorsement; statutory provision. c. Presumption as to place of indorsement; statutory provision. 67. Negotiable Character of Instrument Continued. a. Statutory provision. b. Effect of negotiation of overdue paper. c. Discharge of instrument. 68. Striking out Indorsement. a. Statutory provision. b. Striking out subsequent indorsements. 69. Transfer Without Indorsement. b. Effect of transfer. c. Effect as equitable assignment. d. Notice of transfer without indorsement. e. Indorsement when made does not relate back to time of transfer. § 70. When Prior Party May Negotiate Instrument. a. Statutory provision. 871. Assignment of Commercial Paper. a. Assignability in general. b. Assignment of nonnegotiable instruments. c. Assignment of separate writing. d. Effect of assignment. e. Rights of parties. 56. What constitutes negotiation. a. Statutory provision. By the Negotiable Instruments Law it is provided that: "An instrument is negotiated when it is trans |