"As the act regulating interest stood at the institution of this suit, the excess of the usurious interest over the real sum of money advanced was adjudged against the lender, and it became a debt of record, upon which the party setting up usury, could on motion have judgment. This provision presents a serious difficulty in allowing the defense to be set up by a surety, as it would seem to be the intention of the legislature that the party whose necessities had been taken advantage of should alone be entitled to the benefit of this provision. But, however this may be, and whatever would be the proper course when a case of this kind arises, it is clear that to construe the act so as to preclude sureties from setting up its provisions as a defense, would enable usurers, by a very simple and easy device, to evade the law completely."10 So evidence has been held admissible in an action against an accommodation indorser by the indorsees to show that the whole consideration of the note, or the greater part of it, had failed; that the note was given on account of goods which the plaintiffs had agreed to sell to the maker; that only a small portion of such goods had been delivered and that the amounts so delivered had been actually paid for.11 And a discharge in bankruptcy may be set up or waived by the bankrupt at his pleasure, and it is no defense to an action by the second indorser against the first that the former negligently omitted, in an action against him on the note, to avail himself of this defense in conse

a right to any defense the maker could avail himself of." Per Ingraham, J. Sawyer v. Chambers, 43 Barb. (N. Y.) 622; Gunnis v. Weigley, 114 Pa. St. 191, 6 Atl. 465: "As a general rule a surety is allowed to stand upon the rights of his principal." Per Mr. Justice Clark. The plea in an action against indorsers that their indorsements were without consideration and for accommodation of the payee can not stand where it is shown that they indorsed the note in order to make it acceptable. Burton v. McCaskill, 79 Fla. 173, 83 So. 919.

10 Weimer v. Shelton, 7 Mo. 237, 240.

11 Sawyer v. Chambers, 44 Bart (N. Y.) 42, the court said: "I am at

a loss to see any ground on which this evidence could be excluded. Surely an accommodation indorser is in no worse condition than the maker. He has a right to any defense which the maker could avail himself of. If the makers had been sued upon the note, they could have shown that the note was given on account of goods to be delivered, and that such goods had never been received. The plaintiffs, under such proof, would have no proof against defendants, as the note would be with consideration. So long as the court permits the consideration of a note to be inquired into, under any circumstances, the facts presented in the defendants' offer come within the rule."

quence of which he was obliged to pay a judgment recovered thereon.12 In Louisiana this general rule is also affirmed; an exception, however, being apparently made in the case of pleas or defenses personal to the maker. 13 In a case where one wrote his name on the back of a blank note form to be afterwards filled out and executed and used by another for a specified purpose, he was held liable thereon to an innocent holder for value.14 In another case where one indorsed a negotiable promissory note in blank and delivered it to another for his accommodation, by whom it was delivered without indorsement to a third party in settlement of an indebtedness, the latter agreeing to pay the difference in cash, which he failed to do, but indorsed the note and delivered it to a fourth party, who brought an action against the accommodation indorser for the amount of the note, it was decided that an affidavit of defense, which set forth the above facts and alleged that plaintiff was not a bona fide holder, was sufficient.15

§ 63.

Accommodation indorsers not liable to accommodated party. It is a well established rule that, as between an accommodation party and the person accommodated, there is no liability, as has already been shown.16 Thus, one who indorses commercial paper without consideration, to enable the payee to use the paper as collateral security, can not be held liable in an action by the payee; and this is true, although the accommodation party, at the time, was indebted to the accommodated party, unless it was agreed or contemplated by the parties that such indebtedness should serve as consideration for the indorsement.17

§ 64. Liability of accommodation indorser as surety.-As we have seen, prior to the enactment of the Uniform Negotiable Instruments Law, it was very generally held that one, not otherwise

12 Bowman v. Pope, 33 Miss. 94. 13 Johnson v. Marshall, 4 Rob. (La.) 157; Satterfield v. Compton, 6 Rob. (La.) 120, may show usury, sustaining general rule.

14 Proctor v. Banchard, 75 N. H. 186, 72 Atl. 210; Brown v. Cook, 77 W. Va. 356, 87 S. E. 454, L. R. A. 1916D, 220.

15 Gunnis, Barrett & Co. v. Weigley, 114 Pa. St. 191, 6 Atl. 465.

16 See ante, § 55; Green v. McCord, 204 Ala. 356, 85 So. 750; Conners Bros. v. Sullivan, 220 Mass. 600, 108 N. E. 503; State Bank v. Pangerl (Minn.), 165 N. W. 479.

17 Cox v. Heagy (Mo. App.), 184 S. W. 495.

a party to a note, who indorsed it in blank before it was negotiated, was an original promisor or maker,18 or a surety.19 But notwithstanding the fact that the Negotiable Instruments Law declares that an irregular indorser shall be "liable as indorser," we find decisions in some of the states to the effect that accommodation indorsers are in effect sureties;20 and, if they indorse under an agreement to be equally liable, in case of default on the part of the maker, they are treated as his sureties in the adjustment of ultimate rights and liabilities among themselves.21 So, where defendant was an accommodation indorser of a corporation note, which was taken up and a new note executed by the corporation to the holder for the same debt, and a note signed by the corporation and indorsed by defendant, but otherwise blank, was delivered as collateral security, it was held that defendant's status was that of surety for payment of the principal note.22 In an Arkansas case, on a note executed after the adoption of the Negotiable Instruments Act against persons as joint makers, the court said: "If appellants did not sign the note until after delivery, their liability would only have been collateral as indorsers." But as "they signed the note before delivery," they were primarily and absolutely liable as sureties.23 And the Ohio circuit court holds that the rule adopted in that state prior to the enactment of the Uniform Negotiable Instruments Act, that one who places his name on the back of a note before its delivery is either a maker

18 See ante, § 47, "Liability of indorser as maker."

19 Kissire v. Plunkett-Jarrell Grocer Co., 103 Ark. 473, 145 S. W. 567; Preston v. Dozier, 135 Ga. 25, 68 S. E. 793; Connor v. Hodges, 7 Ga. App. 153, 66 S. E. 546; James v. Calder, 7 Ga. App. 707, 67 S. E. 1125.

20 Schillinger v. Wickersham, 199 Ala. 612, 75 So. 11; Phillips v. Bridges, 144 Ga. 703, 87 S. E. 1059; Bank of LaFayette v. Wardlaw, 20 Ga. App. 741, 93 S. E. 236; Havlin v. Continental Nat. Bank, 253 Mo. 292, 161 S. W. 741; Osborne v. Fridrich, 134 Mo. App. 449, 114 S. W. 1045; Easton Furniture Mfg. Co. v. Caminez, 146 App. Div. 436, 131 N. Y. S. 157; Linton v. Chestnutt-Gibbons Grocer Co., 30

Okla. 103, 118 Pac. 385; Hunter v. Harris, 63 Ore. 505, 127 Pac. 786; Houston Transp. Co. v. Paine (Tex. Civ. App.), 193 S. W. 188; Plumley v. First Nat. Bank, 76 W. Va. 635, 87 S. E. 94. In an action upon the promise of an accommodation maker of a note, he may establish by parol that the plaintiff knew that he signed as surety without consideration. Westbrook Trust Co. v. Timberlake, 121 Maine 64, 115 Atl. 555.

21 Plumley v. First Nat. Bank, 76 W. Va. 635, 87 S. E. 94; Hunter v. Harris, 63 Ore. 505, 127 Pac. 786. 22 Union Trust Co. v. McCrum, 145 App. Div. 409, 129 N. Y. S. 1078. 23 Colvin v. Glover, 143 Ark. 498, 220 S. W. 832.

or a surety, was not changed by such act. But in view of the language of such act, and the decisions of other courts, it is difficult to understand how the court arrived at such conclusion.24

§ 65. Liability of accommodation indorser on note held as collateral-Order of liability.—Under the Uniform Negotiable Instruments Law, one who, before maturity, receives as collateral security for a pre-existing debt, a note indorsed for accommodation of another, is a holder for value, and entitled to enforce the endorser's undertaking.26

The Uniform Negotiable Instruments Law provides that: "As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise. Joint payees or joint indorsers who indorse are deemed to indorse jointly and severally."27 Such provision refers to irregular or accommodation indorsers as well as to regular indorsers. So, in the absence of proof of an agreement to the contrary, prior indorsers for accommodation are liable in solido to a subsequent indorser who has paid the note.28 However, in West Virginia, it is held that accommodation indorsers are prima facie liable to one another in the inverse order of the indorsements.29

§ 66. Liability of accommodation acceptor.-An acceptor of a bill is liable to the holder thereof, although he knew that the acceptance was for the accommodation of the drawer, and the acceptor can not claim that the acceptance was not supported by a consideration.30 The acceptor occupies the position of a surety, in equity,

as between himself and the drawer of the bill.31

So,

the maker and indorsers of a note to an accommodation indorser who paid the note and took a transfer thereof. Lingo v. Swicord, 150 Ark. 384, 234 S. W. 264.

29 Plumley v. First Nat. Bank, 76 W. Va. 635, 87 S. E. 94.

30 Milmo Nat. Bank v. Cobbs (Tex. Civ. App.), 128 S. W. 151.

31 Sexton v. Fensterer, 154 App. Div. 542, 139 N. Y. S. 811.

where a check is drawn by a third person for the accommodation of a debtor, which the creditor accepts, the drawer is liable thereon to the creditor, although the latter knew the drawer was only an accommodation party.32 However, if the acceptance shows that it is only for accommodation, and that the acceptor does not intend to pay anything thereon, it is not an acceptance within the meaning of the Negotiable Instruments Law.83

§ 67. Negotiable instruments for patent right or speculative purposes-Defenses.-Under the New York Negotiable Instruments Act, "A promissory note or other negotiable instrument, the consideration of which consists wholly or partly of the right to make, use or sell any invention claimed or represented by the vendor at the time of sale to be patented, must contain the words 'given for a patent right, prominently and legibly written or printed on the face of such note or instrument above the signature thereto; and such note or instrument in the hands of any purchaser or holder is subject to the same defenses as in the hands of the original holder; but this section does not apply to a negotiable instrument given solely for the purchase-price or the use of a patented article."3 In the construction of similar statutory provisions, the courts have held that such statutory provision does not require that the words "given for patent right" be stamped or written on notes given for the purchase of a patented article, as distinguished from the purchase of a patent or an interest therein.35 And where such words, or words showing that the note was given for a patent right, appear, on the face of the note, it is subject to all defenses that would exist in an action on the note between the original parties;36 as in such case the transferee can not take as a bona fide holder or holder in due course. 37 And, although such words, or words showing the nature of the consideration do not appear on the face of the note, if the indorsee has knowledge of the consideration, he takes subject to all de

32 Neal v. Wilson, 213 Mass. 336, 100 N. E. 544.

33 Lehnhard v. Sidway, 160 Mo. App. 83, 141 S. W. 430.

34 Negot. Inst. Act of New York, art. "Notes Given for Patent Rights and for a Speculative Consideration",

35 Granite City Banking v. Tvedt, 146 Minn. 12, 177 N. W. 767; Cohn v. Lunn, 133 Tenn. 547, 182 S. W. 584. 36 First Nat. Bank v. Jones, 12 Ga. App. 158, 76 S. E. 1042.

37 Lee v. Hightower, 3 Ga. App. 226, 59. S. E. 597.