honor given to the accommodation indorser. | Waterfield Co., 55 Ohio St. 596, 45 N. E. [3] It has also been well settled by this 1094, 35 L. R. A. 786, 60 Am. St. Rep. court that an accommodation indorser is one who signs his name to paper, without any consideration therefor, and for the sole purpose of giving credit to some other party to the paper; and it is not disputed that Mrs. Young was an accommodation indorser in the sense that she signed her name on the back of the note, without receiving any consideration or benefit therefor, and for the sole purpose of giving credit to Carr and Young. But, notwithstanding the fact that her attitude on the paper fulfilled all the requirements necessary to constitute her an accommodation indorser, it is yet insisted that because she did not at any time own the paper or have title to it, or transfer the title to some other party, she is not to be considered an indorser in the sense that it was necessary, to hold her liable, that the paper should have been presented and protested and notice given her of its dishonor.

719, where the court said: "Precisely what is the nature of the legal obligation contracted by a stranger, who indorses his name in blank on the back of a negotiable, promissory note before or at the time it takes effect, is a question upon which the courts have widely differed; some holding that his obligation is that of a second indorser, others have held him liable as a guarantor, and still others as a maker, with the rights of a surety. The rule established in this state is that, when the name of such third party appears upon the note at the time it takes effect, his undertaking rests upon the consideration which supports the note, and the presumption is he intended to be liable as a surety for its payment, and is held accordingly, unless he can show that there was a different agreement or understanding between the parties, which it is competent for him to do."

In support of this position, we are refer- Counsel also insist that the opinion of the red by counsel to a number of decisions Supreme Court of the United States in Rey from other courts, some of which directly v. Simpson, 63 U. S. (22 How.) 341, 16 L. Ed. hold that an indorser, such as Mrs. Young 260, gives support to their contention. We was, is not released from liability by the do not so understand that case. It appears failure to present the paper or protest it or from the opinion that Rey executed a note give notice of its nonpayment. Among the to Simpson, and, simultaneously with the exrepresentative cases so holding is Sibley v. ecution of the note, Marshall & Co. placed American Exchange National Bank, 97 Ga. their names on the back of it for the pur126, 25 S. E. 470. In the course of its pose of giving credit to the maker Rey. opinion in that case, the court said: "The It was not indorsed by the payee Simpson, contract of indorsement is one which, in its or any person except them, and the court very essence, involves the transfer of title said: "They placed their names there at the to promissory notes and bills of exchange; inception of the note, not as a collateral and before one can become an indorser at undertaking, but as joint promisors with all, or be classed as such, his contract must the maker, and are as much affected by the involve the transfer of title to that class of consideration paid by the plaintiff [Simpson], securities. The mere fact that one's name and as clearly liable in the character of appears to have been written upon the back original promisors, as they would have been of a note does not make him necessarily an if they had signed their names under the indorser of that paper. His liability is not name of the other defendant [Rey] upon the to be determined by the physical relation of inside of the instrument." Under these cirhis name to the paper, but by his legal rela- cumstances, the court ruled that Marshall tion to the contract. If his legal relation to & Co. should be treated as joint promisors the contract were such that, in the course of with the maker, and not as indorsers. In its due transmission from one holder to an- the subsequent case of Good v. Martin, 95 other, the name of the person appearing on U. S. 90, 24 L. Ed. 341, the court, after rethe back was properly indorsed in order to ferring to the Simpson Case, again laid accomplish that result, then he may be prop-down the doctrine that when a third party, erly classed as an indorser, whether his at the time the note is made, puts his name name was placed upon the back of the paper on the back of it before it has been indorsed in the capacity of a bona fide holder trans- by the payee or any one else, he becomes ferring to another, or in the capacity of a joint maker of the paper. But in neither one who, without consideration, but for the of these cases did the court hold that an accommodation of the real beneficiary for indorser, subsequent to the payee, should be whom the paper was drawn, had indorsed treated as a joint maker, surety, or guaranhis name upon it; but if he be a stranger tor, nor do we find in these opinions any to the note, the legal title thereto never hav-intimation that this rule should be applied. ing been in him, nor, in fact, passed through In the full note to Cadwallader v. Hirshhim as an indorsee, a mere blank indorse-feld, 62 N. J. Law, 747, 42 Atl. 1075, 72 Am. ment of his name upon it renders him liable St. Rep. 671, there will be found a reference as a guarantor or surety, as his contract to the courts holding these different views may be, and without the right to notice of referred to, and it does not seem necessary

make further allusion to the opinions of oth- | payment of the bill. In sustaining this deer courts.

Coming now to the decisions of this court, we find that in Lawrence v. Ralston, 3 Bibb, 102, decided in 1813, the facts were these: Aaron Burr on December 9, 1806, at Frankfort, Ky., drew a bill of exchange on George M. Ogden, of New York, requesting him at 120 days sight to pay Charles Lynch or order $700. The bill was indorsed by Lynch to Ralston, by Ralston to Sebastian, and by Sebastian to Lawrence. Payment being refused by the drawee of the bill, Lawrence brought suit on it against Ralston, who defended upon the ground that he had been released from liability by the failure to give him due notice of the dishonor of the paper. In holding that Ralston was an accommodation indorser, entitled to notice, and released for failure to give it, the court said: "Every indorser of a bill impliedly undertakes that it will be accepted upon presentment to the persons upon whom it is drawn and paid when it becomes due, if presented in proper time for that purpose, and in default of acceptance or payment is liable to the indorser or holder on due diligence being executed on his part. But, whether the bill be inland or foreign, to make the indorser liable he should have notice of its nonacceptance, if it is payable after date, or at a certain time after sight, in reasonable time, unless, under particular circumstances, such notice is made necessary; and if notice is not given in such cases, where it is necessary, in reasonable and convenient time, the indorser is discharged from his liability."

In Taylor v. Bank of Illinois, 7 T. B. Mon. 576, Taylor and others indorsed a bill of exchange for the accommodation of Nicholas Casey, the drawer of the bill, and it was discounted by the bank. In a suit by the bank on the bill against Taylor, one of the accommodation indorsers, he pleaded his discharge from liability on account of the failure to give him notice of the dishonor of the paper. In holding this a good defense, the court said: "Having seen that the presentment is supplied and the dishonor of the bill established, we shall turn our attention to another indispensable requisite that is, notice to the defendant of the dishonor of the bill. We say indispensable, because it is well settled, by high authority, that an accommodation indorser is entitled to strict notice."

fense, the court said: "If a bill be drawn for the accommodation of the drawer or acceptor, and indorsed by the payee and subsequent indorsers, if the holder intends to hold any or all of said indorsers responsible to him, as many as he intends to make responsible are entitled to notice of the dishonor of the paper, because the indorser who pays it has a right to hold the prior parties on the bill responsible to him, and he should be notified so that he may take the necessary steps to secure himself."

In Mechanics' & Farmers' Savings Bank v. Katterjohn, 137 Ky. 427, 125 S. W. 1071, Ann. Cas. 1912A, 439, it appears that one Rinkliffe executed a note payable to F. W. Katterjohn, which was indorsed by him, and also by Thomas Wilson & Co., a corporation. Katterjohn indorsed the note for the accommodation of Rinkliffe, who discounted it to the bank; and, in a suit by the bank on the note, Katterjohn defended on the ground that he was an accommodation indorser and discharged from liability by reason of the fact that the note was not presented for payment, and he had no notice of its dishonor. In excuse of its failure to comply with the requirements necessary to hold an indorser, the bank contended that Katterjohn was not an accommodation indorser, but merely a surety, and therefore not entitled to notice. But the court rejected this contention and held that Katterjohn was an accommodation indorser, and not a surety, and so entitled to notice. It is true this case was ruled by the provisions of the negotiable instruments law; but it illustrates the prevailing doctrine in this state that a party who signs his name on the back of a note is an accommodation indorser.

[4] Counsel for the bank, while conceding the rule to be firmly established in this state that, in order to make liable an accommodation indorser, there must be presentment, protest, and notice, yet insist that the cases cited are not controlling authority for the position taken by Mrs. Young, because in each of them it appeared that the note in question was transferred by the indorser making the defense to another indorser, and therefore the accommodation indorser, making the defense, was a link in the chain of title to the note, while Mrs. Young was not; and it is upon this narrow ground they rest the argument that Mrs. Young, although an acIn Todd v. Edwards & Co., 7 Bush, 89, commodation indorser in the usual and ordiGray and Todd drew a bill of exchange on nary acceptation of the word, should be treatR. P. Pepper, payable to E. H. Taylor 60 ed as a maker or surety or guarantor of the days after date. Pepper accepted it, and note. It is true that in these cases it apTaylor, the payee, indorsed it to Temple, peared that there was more than one indorsand he indorsed it to Todd, by whom it was er, and that the indorser making the defense indorsed to Edwards & Co. In a suit on the transferred the paper to a subsequent inbill by Edwards & Co., Todd set up the de- dorser; but as all the indorsements were fense that he was only an accommodation merely for accommodation, we do not regard indorser, and was released from liability by the unsubstantial circumstance that there

tion indorser as creating any material difference in the attitude of the parties to the paper.

dorser;" and in subsection 29 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;" and in section 63 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 appropriate words his intention to be bound in some other capacity;" and in section 64 that, "where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as an indorser in accordance with the following

It is quite difficult to understand the difference between the attitude of Mrs. Young on this paper, as it stands; and her attitude if the name of some other indorser appeared subsequent to her name, although it would not be seriously contended by counsel for the bank that, if her name had been followed by a subsequent indorser for accommodation, she would have been released. In other words, the argument, as we understand it, comes to this: That if John Smith, for the accommodation of Carr and Young, and for the purpose of giving them better credit, had signed his name on the back of the note un-rules: der Mrs. Young's name, she would be an indorser in the strict sense of the term; but, because the bank was willing to accept the paper with her indorsement alone, she is to be treated as a surety or maker or guarantor, and not as an indorser of it. It seems to us that this is an attempt to make a dis

tinction without a difference, and an effort to convert an accommodation indorser into a surety or a maker or a guarantor, without any good reason for so doing. Therefore, if the question should be treated as an open one in this state, and if the cases to which we have referred should not be regarded as exactly in point, we would, nevertheless, hold with the courts of New York, Connecticut, Indiana, Pennsylvania, Oregon, Alabama, California, Mississippi, and Wisconsin that Mrs. Young was an accommodation indorser of the note, in the legal signification of the word, and, under the facts of this case, not liable, and we are strongly confirmed in the correctness of this conclusion by the provisions of the negotiable instruments act, and the construction that has been given to these provisions.

[5] The negotiable instruments act is, with few exceptions, merely a codification of the general principles of the law merchant, as it was understood and applied in states like ours, that had no statute on the subject. It was prepared to remove the confusion and uncertainty that existed in commercial affairs, caused by the lack of uniformity in the administration of commercial law by the courts of the different states, and it was not the intention of its framers to depart from any well-settled and sound principle of commercial law, but rather to incorporate into this statute those principles of commercial law that experience had pointed out as being reasonable and just and sound in their practical application.

Looking now to this law, which has been adopted in nearly all the states, and which is contained in section 3720B of the Kentucky Statutes, we find in subsection 17 of the act that, "where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same

* If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee;" and in subsection 66 that, "Every indorser who indorses without qualification, warrants to all and, in addition, he engages that on due presubsequent holders in due course, # sentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and if the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it;" and in subsection 89 that, "except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged." Nowhere in this act do we find any suggestion or intimation that an accommodation indorser is, under any circumstances, to be treated as a maker, surety, or guarantor of the paper, or otherwise than as an indorser in the strict legal meaning of the word, or that a party who indorses a note for the accommodation of another is converted into a maker, surety, or guarantor by the mere circumstance that no other party subsequently indorses the paper, or that the attitude of an accommodation indorser is in any manner affected by the fact that he is the only indorser. That we are correct in this interpretation of the rights and liabilities of an accommodation indorser, under the provisions of the negotiable instruments law, is supported by ample authority.

In Rockfield v. First National Bank, 77 Ohio St. 311, 83 N. E. 392, 14 L. R. A. (N. S.) 842, the question before the court was whether persons who had signed their names on the back of a negotiable note were to be treated as sureties, or as indorsers entitled to presentment, protest, and notice, and the court said, in substance, that, before the adoption in Ohio of the negotiable instruments law, such persons would be treated as sureties, but that since the adoption of

to be treated as indorsers. The same con- | select out of a number the following: In clusion as to the proper construction and effect of the negotiable instruments law, in relation to the attitude of indorsers, was reached in Toole v. Crafts, 193 Mass. 110, 78 N. E. 775, 118 Am. St. Rep. 455; McLean v. Bryer, 24 R. I. 599, 54 Atl. 373; Deahy v. Choquet, 28 R. I. 338, 67 Atl. 421, 14 L. R. A. (N. S.) 847; and Baumeister v. Kuntz, 53 Fla. 340, 42 South. 886-although these courts formerly held with the Ohio court, also by this court in the Katterjohn Case, supra, and in First Nat. Bank v. Bickel, 143 Ky. 754, 137 S. W. 790.

Without further elaboration of our views on this feature of the case, we hold, to sum up the matter, that Mrs. Young was an accommodation indorser and released from liability on the bill by the failure of the bank to present it for payment, protest it, and give her notice on July 11th, or the following day of its nonpayment, unless the failure to do these things was excused.

[6] Taking up the second proposition advanced by counsel for the bank, we find it laid down, by all the authorities on commercial paper, that the failure to present paper in due time for payment, and to give notice of its nonpayment, will be excused by accident or misfortune not attributable to the fault or voluntary act of the holder that makes it impracticable or impossible to do these things. The circumstances that will operate to excuse presentment and notice are stated in Story on Promissory Notes, § 257, as follows: "(1) Inevitable accident or overwhelming calamity; (2) prevalence of a malignant disease which suspends the ordinary operations of business; (3) the presence of political circumstances amounting to a virtual interruption and an obstruction of the ordinary negotiations of trade; (4) the breaking out of war between the country of the maker and that of the holder; (5) the occupation of the country where the parties live, or where the note is payable, by a public enemy, which suspends commercial intercourse; (6) public and positive interdictions and prohibitions of the state which obstruct or suspend commerce and intercourse; (7) the utter impracticability of finding the maker or ascertaining his place of residence."

In Story on Bills of Exchange, § 327, the foregoing excuses are substantially adopted, as they are in Parsons on Bills and Notes, vol. 1, p. 460, and in Randolph on Commercial Paper, vol. 3, §§ 1320-1355, and in Daniel on Negotiable Instruments, vol. 2, § 1170. The sum of the principle announced in these textbooks is stated in the Negotiable Instruments Law, §§ 81, 113, where it is said that delay in making presentment or in giving notice of dishonor "is excused when the delay is caused by circumstances beyond the control of the holder, and not imputable to his default, misconduct, or negligence."

House v. Adams & Co., 48 Pa. 261, 86 Am. Dec. 588, and in Berry v. Southern Bank, 2 Duv. 379, it was held that the cessation of mails and commercial intercourse during the late war between the states was a sufficient excuse for the omission to give due notice of the dishonor of a bill. In Wilson v. Senier, 14 Wis. 380, it was held that the sickness of the holder of the note, if it was not only sudden but so severe as to prevent him from making the presentment and giving notice of nonpayment, would furnish a good excuse. In Windham Bank v. Norton, Converse & Co., 22 Conn. 213, 56 Am. Dec. 397, it was held that, where the failure to make presentment of a bill was caused by the mistake of the postmaster where it was mailed, this excused the failure to present it. In Garver. v. Downie, 33 Cal. 176, it was held that, where a notary, in good faith, made diligent inquiry of those most likely to know the residence of the indorsers, and acted upon the information so obtained in mailing them notice, the indorsers were not released, although the notice was sent to the wrong place. In Salisbury v. Bartleson, 39 Minn. 365, 40 N. W. 265, it was held that, where the party entitled to notice had removed his residence without the knowledge of the person charged with the duty of giving notice, the failure to give notice in due time was excused. In Pier v. Heinrichshoffen, 67 Mo. 163, 29 Am. Rep. 501, it was held that the sudden and unexpected suspension of a bank, to which the note had been sent for collection and payment in due course of mail, excused the prompt giving of notice. In Blodgett v. Durgin, 32 Vt. 361, it was held that the holder of a note was excused from giving notice to an indorser, where he did not know the residence of the indorser, and could not ascertain it by diligent inquiry. In Newbold v. Boraef, 155 Pa. 227, 26 Atl. 305, it was held that where a letter inclosing a bill was sent for presentment and protest to a notary, but not delivered to him by the letter carrier, because of his illness, this furnished a sufficient excuse for lack of due diligence in giving notice of protest.

[7] In no one of the authorities cited, or in any other that we have examined, do we find a state of facts precisely like the facts shown by this record. But we think, when the principle announced in these authorities is applied to the facts of this case, that the excuse relied on for not giving Mrs. Young notice was not sufficient, and is not embraced by any of the rules laid down by the books. The failure to give the notice was not due to misfortune or casualty or unavoidable accident, or to any circumstance or condition beyond the control of the bank. It was due entirely to the voluntary act of the bank officers in accepting, in satisfaction of the draft, the check given to the bank by Carr

As illustrative cases on the subject, we and Young. Mrs. Young was not a party to

this transaction. She had no notice or be paid; but this circumstance does not bring
knowledge of it whatever, nor did she have the transaction within the scope of any of
any information of it until July 15th, when
the bank received notice of the nonpayment
of the check.

the exceptions that will excuse notice. If
the holder of paper could absolve himself
from the duty of giving notice by showing
that he acted in good faith, or by showing
that he mistakably trusted to the solvency
of parties whose paper he accepted in place
of other paper, it is obvious that the excuse
for not giving notice in this class of cases
would rest entirely in the judgment and dis-
cretion of the party charged with the duty
of giving notice. The failure to give notice
would be due entirely to circumstances with-
in his control, and not to circumstances be-
yond his control. It would not be due to
accident, misfortune, or other casualty. Το
sanction this as an excuse would be a de-
parture from rules laid down by all the au-
thorities and that have been adhered to
without substantial change since their adop-
tion in the early history of commercial law.
We find no reason for enlarging or extending
existing excuses that the experience of many
years has pointed out as being sufficient.

It seems clear that the bank officers were
willing to and did accept the check in set-
tlement of the draft, and that they freely
trusted to the integrity and solvency of Carr
and Young for its payment without ascer-
taining, as they could have done, from the
bank, on which the check was drawn, wheth-
er or not it was good. Their conduct in ac-
cepting the check, and in surrendering the
draft after stamping it "paid," manifested
that they were willing at the time to look
to the check given to them for the payment
of the draft, and that they did not at that
time intend to hold Mrs. Young liable on it,
or anticipate that they would be required to
look to her for payment. If the bank had
accepted a note from Carr and Young with
other indorsers, in place of the draft, and
had delivered the draft to Carr and Young,
and it developed that the indorsers on the
note were insolvent, it could scarcely be
maintained that the bank, upon discovering
the worthless character of the note it had
accepted, could hold Mrs. Young liable; and
we see no substantial difference between the
supposed case and the one that actually ex- ROBERTSON v. COMMERCIAL SECURITY
ists.

When Mrs. Young indorsed this paper, the law wrote into the contract, for her benefit and protection, that she should have notice of the dishonor of the paper according to the course of commercial law, and, if not, that she should be released from liability. Or as said by Daniel on Negotiable Instruments, vol. 2, 970: "It is regarded as entering as a condition in the contract of the drawer and indorser of a bill, and of the indorser of a note, that he shall only be bound in the event that acceptance or payment is demanded, and he notified if it is not made. And, in default of notice of nonacceptance or nonpayment, the party entitled to notice is at once discharged, unless some excuse exists which exonerates the holder."

[8] This being so, it would seem to follow, as an indisputable consequence, that when the bank voluntarily chose to accept the check and surrender the draft, and not to give notice of the nonpayment of the draft at its maturity, Mrs. Young was discharged; and the fact that she may not have been damaged by the delay in giving her notice does not affect the question. Daniel on Negotiable Instruments, vol. 2, § 1170; Randolph on Commercial Law, vol. 3, § 1320; Smith v. Long, 40 Mich. 555, 29 Am. Rep. 558; Wymore First National Bank v. Miller, 37 Neb. 500, 55 N. W. 1064, 40 Am. St. Rep. 499.

It may be admitted that the bank officers believed, in good faith, that the check would

For the reasons stated, the judgment is reversed, with directions to proceed in conformity with this opinion.

1.

CO. et al.

(Court of Appeals of Kentucky. Feb. 19,
1913.)

BILLS AND NOTES (8 525*)-EVIDENCE-
BONA FIDE HOLDER.

Evidence held insufficient to show that the
holder of the note sued on was not a holder
in due course without notice.

[Ed. Note.-For other cases, see Bills and
Notes, Cent. Dig. §§ 1832-1839; Dec. Dig. §
525.*]

2. BANKS AND BANKING (§ 116*)—NOTICE TO
OFFICER.

facturing company was transferred to a secu-
Where a promissory note given a manu-
rity company and then transferred to a bank,
the fact that the president of the bank was
facturing company and the local attorney of
a stockholder and vice president of the manu-
the security company did not charge the bank
with notice of the conditions of a contract sign-
ly where it did not appear that the attorney
ed contemporaneously with the note, especial-
knew the conditions of the contract.

[Ed. Note.-For other cases, see Banks and
Banking, Cent. Dig. §§ 282-287; Dec. Dig. §
116.*]

3. BILLS AND NOTES (§ 103*) — DEFENSES —

FRAUD-DETACHMENT OF NOTE.

Where a contract had a perforated line near the bottom, and below this was a promissory note, and the contract provided that the note was to be detached by the payee, the act of the payee in detaching the note was not a fraud upon the maker.

[Ed. Note.-For other cases, see Bills and Notes, Cent. Dig. §§ 233-240; Dec. Dig. § 103.*]