b. Who deemed indorser; statutory provision.- The Negotiable Instruments Law provides that: "A person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor "is deemed to be an indorser, unless he clearly indicates by appro"priate words his intention to be bound in some other capacity." 36 This section should be construed in connection with subdivision 6 of section 36 of the statute, which provides that where a signature is so placed upon an instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser.37

§ 84. Liability of irregular indorser.

a. Statutory provision.- The Negotiable Instruments Law provides that: "Where a person, not otherwise a party to an instru(6 ment, places thereon his signature in blank before delivery, he is "liable as indorser in accordance with the following rules:

"1. If the instrument is payable to the order of a third person, "he is liable to the payee and to all subsequent parties.

"2. If the instrument is payable to the order of the maker or "drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer.

"3. If he signs for the accommodation of the payee, he is liable "to all parties subsequent to the payee.'

" 38

b. General rule. It has been held that an indorsement in blank of a note, whether negotiable or not, made by a stranger, for the benefit of the payee, implies, in the absence of countervailing proof, that the maker will be able to pay it at maturity, and that it is collectible by due diligence. Such an indorsement does not make the indorser a joint maker nor an absolute guarantor, liable at all events on the dishonor of the note.39 The rule as to the

eration paid him, or may be held as a party without notice."

36. Neg. Inst. L. (N. Y.), § 113. For same section in statutes of other States see Appendix.

37. See ante, § 47 (g). 38. Neg. Inst. L. (N. Y.), § 114. For same section in statutes of other States see Appendix.

38 Ala. 389, the indorsement in question was an irregular one, made by a person not a party to the instrument. The court said: "Whatever may be the decisions in other countries, the law is settled in this State, with respect to such indorsements, that unexplained they impose a liability in favor of a person to whom the 39. Indorsement before delivery im- indorsement is made against the inposes same obligations as ordinary dorser, which is strictly analogous to indorsement, see Perkins V. Cat- the liability upon a regular indorselin, 11 Conn. 213, 29 Am. Dec. ment." Citing Tiller v. Shearer, 20 282; Welton v. Scott, 4 Conn. 527. Ala. 596; Hullum v. State Bank, 18 In the case of Price v. Lavender, Ala. 805; Hall v. Chilton, 3 Ala. 633;

liability of an irregular indorser, that is, a person who places his name on an instrument in blank before delivery, has varied in the several States. The rule as above stated is that which has controlled in the State of Connecticut. In New York the rule has been, prior to the statute, that the liability of a stranger who signs his name on the back of a negotiable instrument before delivery is that of an indorser. If the note is payable to order, the payee must be the first indorser; and when indorsed in blank by the third person, before it is indorsed by the payee, the law implies that such third person intended to assume the liability of a subsequent indorser. He was held under no liability to the payee, nor to any one to whom the note was transferred, with notice of the facts, and if he paid the note, he could have recourse to the payee as the first indorser.40 But as the paper itself furnishes only prima facie evidence of the intention of the indorser to become liable as second indorser, and not to the payee, it is competent to rebut the presumption by parol proof that the indorsement was made to give the maker credit with the payee." The New York rule has prevailed in several other States, among which are Pennsylvania, Oregon,13 Tennessee, and Wisconsin. In Massachu

42

Jordon v. Garnett, 3 Ala. 610. See also Carrington v. Odom, 124 Ala. 529, 27 South. 510.

40. Coulter v. Richmond, 59 N. Y. 478; Phelps v. Vischer, 50 N. Y. 69; Bacon v. Burnham, 37 N. Y. 614; Tilman v. Wheeler, 17 Johns. (N. Y.) 325; Herrick v. Carman, 10 Johns. (N. Y.) 224; Howard v. Van Gieson, 46 App. Div. (N. Y.) 77, 61 N. Y. Supp. 349.

Indorsement in blank before delivery. -In the case of Coulter v. Richmond, supra, Church, Ch. J., said: There is considerable diversity of sentiment among the courts as to the nature of the contract implied by a blank indorsement of a negotiable instrument before delivery to the payee. In some of the States such an indorser is prima facic regarded as a guarantor, in others an indorser, and in others a joint promisor. In this State it has been repeatedly held, and is too strongly settled by authority to be disturbed, that a person making such an indorsement is presumed to have intended to become liable as second indorser, and that on the face of the paper, without explanation, he is to be regarded as second indorser, and of course not

41

liable upon the note to the payee, who is supposed to be the first indorsee."

41. Coulter v. Richmond, 59 N. Y. 478; Davis v. Bly, 164 N. Y. 527, 58 N. E. 648. In the latter case it was held that where a note is indorsed before it is delivered to the payee, at the request of the maker, the indorser knowing, before such indorsement, that his name is required by the payee as a condition precedent to making the loan to or procuring it for the maker, and as security for its payment, the into the payee as if he had indorsed by dorser is placed in the same relation express agreement with him, and is liable as first, and not as second indorser. See also Witherow v. layback, 158 N. Y. 649, 53 N. E. 681; Moore v. Cross, 19 N. Y. 227. Clothier v. Adriance, 51 N. Y. 322;

42. Slack v. Kirk, 67 Pa. St. 380; Taylor v. McCune, 11 Pa. St. 460; Temple v. Baker, 125 Pa. St. 634.

43. Kamm v. Holland, 2 Ore. 59: Delsman v. Friedlander (Ore.), 66 Pac. 297.

Brockway,

44. Comparree V. Humph. (Tenn.) 355. 45. Cady v. Shepard, 12 Wis. 639.

11

$ 84.

setts, the rule is that where a person places his signature on the back of a negotiable instrument at the time of the execution of the note, and before its delivery, or subsequently thereto, and in pursuance of a previous arrangement, he becomes liable thereon as an original promisor or maker of the note.16

47

48

Where the indorsement is made after the instrument has taken effect and under a subsequent arrangement, the contract is considered as a guaranty. The presumption is that the signature of a third person on the back of a note was placed there at the time the instrument was made, although this presumption may be rebutted by parol testimony. 49 And where a note is indorsed by a person not a party to the instrument and a stranger to the title, after the payee has indorsed it, his liability is that of an indorser, and it cannot be shown by parol testimony that a different liability

46. Indorser before delivery liable as promisor or maker.- Noyes Bird, 11 Mass. 436, 6 Am. Dec. v. 179; Union Bank v. Willis, 8 Metc. (Mass.) 504; Reilly v. Gerrish, 9 Cush. (Mass.) 104; Hawkes Philips, 7 Gray (Mass.), 284; NaV. tional Pemberton Bank v. Longee, 108 Mass. 371, in which case the court said: "It is to be presumed that one who puts his name upon a note intends to add security and credit to it by his promise and to become liable upon it in some form, either as maker or indorser or guarantor, either absolutely or conditionally. The time when, with reference to its negotiation, the note is signed by the parties sought to be charged will often determine the nature of the liability. But in the absence of anything to the contrary, it is presumed in favor of the honest holder for value, that all the names on the note, whether on the back or on the face, were placed there at the same time and before delivery. Benthall v. Judkins, 13 Metc. (Mass.) 265. If a person, not the payee, writes on the note at its inception, that he is to be holden as surety, he is liable as an original promisor. true if the signature is simply inAnd this is dorsed on the back of the instrument before delivery."

47. Liability as guarantor.- Where one places his name on the back of a promissory note, while in the hands of an indorsee for value, at the request of such indorsee, for a consideration

moving solely from him, and without
first indorsee, he becomes a guarantor
any request, express or implied, of the
and not a second indorsee. Nelson v.
Harrington, 16 Gray (Mass.), 139.
legal effect of this contract with the
The court said: "What then was the
bank? Certainly not to make him an
indorsee upon the note in relation to
the bank, or to give him the character
of an indorsee toward the promisor or
prior indorsers. The note had never
been in his hands; no title to it was
conveyed by his indorsement; there
was no privity of contract subsisting
between him and the first indorser.
He did not, strictly speaking, become
a party to the note. His contract was
one of guaranty only, and he was liable
solely by virtue of the separate and in-
dependent agreement which he had en-
tered into with the bank. He had no
title to the note itself, had incurred no
liability upon it, and had acquired no
right as against the first indorser at
the time of the commencement of the
insolvent proceedings." See also Green
v. Shepherd, 5 Allen (Mass.), 589;
Mecomey v. Stanley, 8 Cush. (Mass.)
85: Tenny v. Prince, 4 Pick. (Mass.)
551, 57 N. E. 1020, 51 L. R. A.
385; Edgerly v. Lawson, 176 Mass.
432.

(Mass.) 504; Benthall v. Judkins, 13
48. Union Bank v. Willis, 8 Metc.
Metc. (Mass.) 265; Way v. Butter-
worth, 108 Mass. 509.

Way v. Butterworth, 108 Mass. 509.
49. Brown v. Butler, 99 Mass. 179;

was intended.50 The rule as it existed in Massachusetts is also that which obtains in Maine, 51 Maryland,52 Michigan,53 Minnesota, Missouri,55 Rhode Island,56 and South Carolina,57 and in a

61

number of other States.58 In Illinois the contract implied, where the indorsement of a stranger is prior to that of the payee, is of guaranty, and if after the indorsement of the payee, the contract is that of indorsement;59 and this rule also prevails in Kansas 60 and Ohio. Justice Clifford of the United States Supreme Court has considered the diversity of decision on this subject and declared that the weight of authority supports the following proposition: "Where the indorsement is in blank, if made before the payee, the liability must be either as an original promisor or guarantor; and parol proof is admissible to show whether the indorsement was made before the indorsement of the payee and before the instrument was delivered to take effect, or after the payee had become the holder of the same; and if before, then the party so indorsing the note may be charged as an original promisor, but if after the payee became the holder, then such a party can only be held as guarantor, unless the terms of the indorsement show that he intended to be liable only as second indorser, in which event he is entitled to the privileges accorded to such an indorser by the commercial law. Whether regarded as a second indorser or an original promisor, it is not necessary to allege or prove any other than the original consideration; but if it be attempted to charge the party as a guarantor, a distinct consideration must appear.'

62

Where a note, after execution and delivery, is indorsed by the payee and by a third person, and is then sold by the payee to another person before the maturity of the note, both the indorsers are ordinary indorsers, and not guarantors. Cornett v. Hafer, 43 Kan. 60, 22 Pac. 1015. See also Fullerton v. Hill, 48 Kan. 558, 29 Pac. 583, 18 L. R. A. 33.

61. Ohio.-Castle v. Rickly, 44 Ohio St. 490, 9 N. E. 136, 58 Am. Rep. 839; Bright v. Carpenter, 9 Ohio, 139, 34 Am. Dec. 432.

58. In other States the following cases are in point: Tabor v. Miles, Colo. App. 127, 38 Pac. 64; Byers v. Tritch (Colo.), 55 Pac. 622; Gilpin v. Marley, 4 Houst. (Del.) 284; Drexel v. Pusey, 57 Neb. 30, 77 N. W. 351; Currier v. Fellows, 27 N. H. 377; Strong v. Riker, 16 Vt. 554; Nash v. Skinner, 12 Vt. 219, 36 Am. Dec. 338. 59. Illinois.- Klein v. Currier, 14 Ill. 237; Webster v. Cobb, 17 Ill. 459; White v. Weaver, 41 Ill. 409. In the case of Dewitt County Nat. Bank v. Nixon, 125 Ill. 615, 18 N. E. 203, it was held that the 62. Good v. Martin, 94 U. S. 90, 97, placing of the name of a third party 24 L. Ed. 341. In this case it was also on the back of a note is prima held, in substance, that the question facie evidence only that the liability whether one who, not being a party to intended to be assumed is that of a note, writes his name upon the back guarantor. It may be shown what the thereof, in reliance on which the real contract is; that the liability in tended to be assumed is that of a simple indorser. See also Holmes v. Williams, 69 Ill. App. 114.

60. Kansas.-Firman v. Blood, 2 Kan. 496; Fuller v. Scott, 8 Kan. 25.

holder has brought it, should be treated as a maker, indorser, guarantor, or surety, should be determined by the actual intent, if the attendant circumstances in evidence enable them to be ascertained.