consideration;27 or that the notes were for accommodation merely and that there was no consideration, and that the notes were given for the purpose of increasing the apparent assets of a bank;28 or that the indorsement was for the accommodation of a bank, and that defendant received no benefit whatever from the note.29 § 423. Accommodation paper-Bona fide holders-Assignees-Notice or knowledge.-A benefit accruing to the person accommodated is a sufficient consideration to sustain the liability of an accommodation maker or indorser.30 As a rule, therefore, it constitutes no defense, in an action by a bona fide holder who took the note before maturity and for value in due course, to show the accommodation character of a note or indorsement, or that the defendants were accommodation makers, even though said. note was received by plaintiff with knowledge of the character of the paper.31 31 The defense that the defendant, an accommodation. the amount of an excess loan made by him is not without consideration, and not made solely to accommodate the bank. First Nat. Bank v. Hubbard (Mo. App.), 240 S. W. 854. 27 Day v. Billingsly, 3 Bush. (66 Ky.) 157; holding that there was no binding consideration in this case. 28 Chicago Title and Trust Co. v. Brady, 165 Mo. 197, 65 S. W. 303. Defense held good as against receiver. 29 Higgins v. Ridgway, 153 N. Y. 130, 47 N. E. 32, affg. 90 Hun 398, 35 N. Y. S. 944. 30 Chase v. DuPont Nat. Bank, 277 Fed. 235; Rodabaugh v. Kauffman, 53 Cal. App. 676, 200 Pac. 747; First Nat. Bank v. Lang, 94 Minn. 261, 102 N. W. 700. 31 Rudulph v. Brewer, 96 Ala. 189, 11 So. 314 (one signing a note after delivery to enable the payee to negotiate it can not set up in a suit on the note that there was no consideration for his signature); Marks v. First Nat. Bank, 79 Ala. 550, 58 Am. Rep. 620 (an accommodation indorser of a note is liable to the holder, who has taken the note for value bona fide before maturity, even though the holder knew at the time that the indorsement was for accommodation merely); Connerly & Co. v. Planters & Merchants Ins. Co., 66 Ala. 432 (holding also that maker can not show that he could have protected himself from loss if he had been notified that notes were unpaid, the payee being solvent at their maturity); Pendleton V. Smissart, 1 Colo. App. 508, 29 Pac. 521 (the defendant testified that he delivered the note as accommodation paper for the purpose of saving the credit of the payee under a promise that it should not be used in any way except to show it, and this was held no defense); Maher v. Moore (Del.) 42 Atl. 721 (the fact that a note was made for the payee's accommodation and on his representation that defendant would never be held liable upon it does not relieve the maker from liability thereon to a bona fide indorsee for value before maturity); Willard v. Crook, 21 App. D. C. 237; Code D. C., § 1333. party, received no consideration is not available, except in an action by the accommodated party, the consideration or benefit moving to (The defense in an action by an indorsee against the maker that he was an accomodation maker within the knowledge of the indorsee and holder is in direct opposition to the Negotiable Securities Act of the District of Columbia and is therefore not available.) Jones v. Bank of New York, 90 Ga. 334, 17 S. E. 88; Hodges v. Nash, 43 Ill. App. 638; Dawson v. Tolman, 37 Ill. App. 134; Waite v. Kalurisky, 22 Ill. App. 382; Miller v. Larned, 103 Ill. 562 (it is no defense as against the maker in an action by a holder into whose hands an accommodation note may have come in the usual course of business for a valuable consideration that said holder may have taken the notes with knowledge that it was accommodation paper); Harlaw v. Boswell, 15 Ill. 56; Hall v. First Nat. Bank, 133 I11. 234, 24 N. E. 546; Bankers Iowa State Bank v. Mason Hand Lathe Co., 121 Iowa 570, 90 N. W. 612; Winters v. Home Ins. Co., 30 Iowa 172; Maitland v. Citizens National Bank of Baltimore, 40 Md. 540, 17 Am. Rep. 620; Kenworthy v. Sawyer, 125 Mass. 28; Davis v. Randall, 115 Mass. 547 (no defense that draft was accepted for accommodation); Monument Nat. Bank V. Globe Works, 101 Mass. 57, 3 Am. Rep. 322; Van Etten v. Hemann, 35 Mich. 513 (can not defend against new notes in bona fide holder's hands. The factor of knowledge also entered into the decision); Thatcher v. West River Nat. Bank, 19 Mich. 196 (holding also that agreement between maker and payee no defense); First Nat. Bank v. Lang, 94 Minn. 261, 102 N. W. 700 (that a note was made solely for the accommodation of a third person, for no valid consideration passing to the maker, is no defense in an action by the an holder thereof with notice of those facts at the time of delivery, who has in the regular course of business and for value taken it before maturity); Tourtelot v. Bushnell, 66 Minn. 1, 68 N. W. 104; Hawkins v. Neal, 60 Miss. 256 (no difference in this respect between a promissory note and bill of exchange); Edwards v. Thomas, 66 Mo. 468 (a case of paper indorsed by unauthoriezd agent); Chaffe v. Memphis, C. & N. W. R. Co., 64 Mo. 193; Macy v. Kendall, 33 Mo. 164; National Bank of Republic v. Young, 41 N. J. Eq. 531, 7 Atl. 488 (unless paper was taken with actual knowledge, mere notice of facts to put holder on inquiry not sufficient); Duncan Sherman & Co. v. Gilbert, 29 N. J. L. 521; National Bank v. White, 19 App. Div. 390, 46 N. Y. S. 555; Arnson v. Abrahamson, 30 N. Y. St. 657, 16 Daly 72, 9 N. Y. S. 514; Moynihan v. McKeon, 74 N. Y. St. 316, 16 Misc. 343, 38 N. Y. S. 61; First Nat. Bank v. Schuyler, 39 N. Y. Super. Ct. (7 J. & S.) 440; Lincoln Nat. Bank v. Butler, 74 N. Y. St. 116, 16 Misc. 566, 38 N. Y. S. 776. See Grant & Cary v. Ellicott, 7 Wend. (N. Y.) 227 (there being no fraud); Brown v. Mott, 7 Johns (N. Y.) 361 (there being no fraud); Mechanics Banking Assn. v. New York & Saugerties White Lead Co., 35 N. Y. 505; Holland Trust Co. v. Waddell, 75 Hun 104, 26 N. Y. S. 980 (certificate of deposit); Pierson v. Boyd, 9 Super. Ct. (2 Duer.) 33 (suit was against maker and indorser); Pettigrew v. Chave, 2 Hilt. (N. Y.) 546 (rule applied where note given without restriction as to its use); Bridgeport City Bank v. Empire Stone Dressing Co., 30 Barb. (N. Y.) 421, 19 How. Prac. 51. (Rule applied to holder without notice of defenses); Pitts v. the party benefited or the detriment suffered by another, being sufficient. 32 Nor is it a defense to an action on an accommodation Foglesong, 37 Ohio St. 676 (rule that accommodation indorser liable applied where note without restriction, and not induced by fraud); White v. Savage, 48 Ore. 604, 87 Pac. 1040; Philler v. Patterson, 168 Pa. St. 468, 32 Atl. 26, 47 Am. St. 896; Newbold v. Boraef, 155 Pa. St. 227, 26 Atl. 305. (Where no consideration has passed from the maker to an accommodation indorser, it will not prevent a recovery by one who discounts the same before maturity); Garden City Nat. Bank v. Fitler, 155 Pa. St. 210, 26 Atl. 372, 35 Am. St. 874. (There was no allegation that plaintiff was not a bona fide holder); Ashton v. Sproule, 35 Pa. St. 492. (Failure of consideration intended to be given an accommodation indorser for his becoming surety will not release him if the holder is not at fault); Halloway v. Quinn, 18 Wkly. Notes Cas. (Pa.) 284; Laib v. Lanagan, 2 Leg. Chron. (Pa.) 386 (following Moore v. Baird, 30 Pa. St. 138); Central Typesetting Co. v. Ober, 36 Pa. Super. Ct. 291 (defense of no consideration not available); Norfolk Nat. Bank v. Griffin, 107 N. Car. 173, 11 S. E. 1049, 22 Am. St. 868; United States v. Metropolis Bank, 15 Pet. (U. S.) 377, 10 L. ed. 774; Earle v. Enos, 130 Fed. 467. (Even though the holder who discounts an accommodation note knew its character at the time such fact does not permit the maker to avail himself of the defense of want of consideration); Perry v. Crammond, 1 Wash. (C. C.) 100, Fed. Cas. No. 11,005 (accommodation bill); Collins v. Martin, 1 Bos. & P. 651 (bills were indorsed in blank. Held, that trover could not be maintained for the bills); Mallett v. Thompson, 5 Esp. 178; Smith v. Knox, 3 Esp. 46. As to knowledge or notice see also the fol lowing additional cases: Diversy v. Moor, 22 Ill. 330, 74 Am. St. 157; Reed v. Trentman, 53 Ind. 438; Schwartz v. Wilmer, 90 Md. 136, 44 Atl. 1059; Yates v. Donaldson, 5 Md. 389, 61 Am. Dec. 283; Lincoln v. Stevens, 7 Metc. (Mass.) 529; Brown v. Mott, 7 Johns. (N. Y.) 361; Beall v. General Electric Co., 16 Misc. 611, 38 N. Y. S. 527; Second Nat. Bank v. Morrison, 3 Ohio Dec. 534; Stephens v. Monongahela Nat. Bank, 7 Wkly. Notes (Pa.) Cas. 491. (Liable, although holder have notice of want of consideration); Bonsall v. Bauer, 2 Wkly. Notes (Pa.) Cas. 298; Perry v. Crammond, Fed. Cas. 11,005, 1 Wash. (C. C.) 100; Israel v. Gale, 77 Fed. 532; Armstrong v. Scott, 36 Fed. 63. But see, Nailor v. Daniel, 5 Houst. (Del.) 455; Wagner v. Diedrich, 50 Mo. 484; Prall v. Hinchman, 6 Duer (N. Y.) 351; Holbrook v. Mix, 1 E. D. Smith (N. Y.) 154; Small v. Smith, 1 Denio (N. Y.) 583; Powell v. Waters, 8 Cow. (N. Y.) 669, affg. 17 Johns. (N. Y.) 176; Stone v. Vance, 6 Ohio 246; Moulton v. Posten, 52 Wis. 169, 8 N. W. 621. The making of an accommodation note is a loan of the maker's credit with no restriction as to its use, and in an action thereon by an indorsee for value before maturity, want of consideration, even though known to the indorsee on receiving the note, constitutes no defense. First Nat. Bank v. Dick, 22 Pa. Super. Ct. 445; Pennsylvania Safe Deposit Co. v. Kennedy, 175 Pa. 160, 34 Atl. 660. 32 Crowther v. Bell, 190 Ill. App. 48; Vandeventer v. Davis, 92 Ark. 604, 123 S. W. 766; Consolidated Lumber Co. v. Fidelity & Deposit Co., 161 Cal. 397, 119 Pac. 506; Hurlbut v. Quigley, 180 Cal. 265, 180 Pac. 613 (indorse note, that the transferee for value, plaintiff, knew that it was accommodation paper, and that the defendant received no consideration.33 In order to constitute a valuable consideration between the parties to negotiable paper, and thus defeat the defense of want of consideration on the ground that the maker was an accommodation maker, the maker must have received something other than collateral security for the note executed by him.34 Thus, an accommodation note is supported by sufficient consideration, where it had been transferred to a third person as collateral security, for, or in payment of, a pre-existing debt;35 if the use of the note had not been restricted.36 However, the defense of want of consideration may be set up in an action by the accommodated party.37 And, under the Negotiable Instruments Act,38 lack of consideration for accommodation indorsement is not a defense, although the plaintiff is a purchaser with notice, after maturity.3 So, where the payee indorses a nonnegotiable note for the maker's accommodation, the assignor has been held bound as against a bona fide holder for value.40 And, as against a bona fide holder of an ac ment of corporation note for corporate debt, by officers and stockholders of company); Rheney v. Anderson, 22 Ga. App. 417, 96 S. E. 217; First State Bank v. Davis, 139 La. 723, 72 So. 185; Conrad v. Clarke, 106 Minn. 430, 119 N. W. 214; State Bank v. Forsyth, 41 Mont. 249, 108 Pac. 914, 28 L. R. A. (N. S.) 501; Uvalde Asphalt Pav. Co. v. National Trading Co., 135 App. Div. 391, 120 N. Y. S. 11; Wicks v. Metcalf, 83 Ore. 687, 163 Pac. 988, L. R. A. 1918A, 493; Central Bank & Trust Co. v. Ford (Tex. Civ. App.), 152 S. W. 700; Gilbreath v. Cage & Crow (Tex. Civ. App.), 198 S. W. 972; Van Wormer v. Gallier (Tex. Civ. App.), 196 S. W. 307; Gauss-Langenberg Hat. Co. v. Alley (Tex. Civ. App.), 154 S. W. 1062; Hogson v. Marsh, 69 Wash. 326, 124 Pac. 612; Marling v. Jones, 138 Wis. 82, 119 N. W. 931. 33 Marling v. Jones, 138 Wis. 82, 119 N. W. 931; Security Trust & Safe 39 Deposit Co. v. Du Ross, 4 Boyce (Del.) 111, 86 Atl. 209; Lowell v. Bickford, 201 Mass. 543, 88 N. E. 1. 84 First Nat. Bank v. Boreing, 173 Ky. 327, 190 S. W. 1106. 35 Martin L. Hall Co. v. Todd, 139 N. Y. S. 111; Many, Blanc & Co. v. Krueger, 153 Ill. App. 327; United States Fidelity & Guaranty Co. v. Walker, 248 Fed. 42. 36 Lehrenkrauss v. Bonnell, 199 N. Y. 240, 92 N. E. 637. 37 First Nat. Bank v. Dorvall, 89 N. J. L. (4 Gum.) 298, 98 Atl. 476; Boqua v. Brady, 90 Ark. 512, 119 S. W. 677; First Nat. Bank v. Freeman, 83 W. Va. 477, 98 S. E. 558; Flinch v. Wood, 145 N. Y. S. 51. 38 Negot. Inst. Law, arts. "Form and Interpretation" and "Consideration", §§ 11, 63, 64. 39 Elgin Nat. Bank v. Goecke, 213 Ill. App. 559. 40 Macy v. Kendall, 33 Mo. 164. 41 commodation check the defense that no consideration passed to the drawer is not open to the latter. Misapplication of the note may, however, affect the extent of the recovery.42 Where accommodation parties get for and through another the exact consideration which they contemplate, it is the same as if they received it themselves, and a plea of want of consideration is not good.43 44 § 424. Accommodation paper-Particular decisions.-The rule is thus stated in an Illinois case: 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 for a valuable consideration is entitled to recover the full amount, although he had full knowledge that it was accommodation paper. And in another case in that state it is decided that one who takes negotiable paper before maturity and for value is not affected by the fact that it is accommodation paper, even if he knew such fact, unless notice is brought to him of restrictions placed upon its use by the maker.* So, in a Missouri case, it is held that negotiable notes or indorsements in the hands of indorsees, though made simply for the accommodation of original debtors, may be enforced against such makers or indorsers, although procured by misrepresentations made by the debtor to such makers or indorsers, if the indorsees or holders were not privy to the misrepresentation or fraud or unfulfilled promise of the debtor.46 And, under a Georgia decision, it was held that a note payable to a named person or order and indorsed by Examine Munson v. Cheesborough, 6 Blackf. (Ind.) 17. (Plea of notice held good.) 41 Metropolitan Printing Co. V. Springer, 90 N. Y. S. 376; Negot. Inst. Law, art. "Consideration of Negotiable Instruments", § 29. 42 Williams v. Smith, 2 Hill (N. Y.) 301. See Weill v. Trosclair, 42 La. Ann. 171, 7 So. 232. A bona fide holder of accommodation paper without notice or knowledge of defenses or equities is entitled to protection. Held, however, that the defense that the note was executed as accommoda 45 tion for the payee and suing holder must be clearly proved. Examine Bank v. Rider, 58 N. H. 512. Holding that an indorsee is bound by knowledge of such facts as should put him on inquiry. 43 Watkins v. Woodberry, 24 Ga. App. 80, 100 S. E. 34. 44 Waite v. Kalurisky, 22 Ill. App. 382, citing Miller v. Larned, 103 Ill. 562. 45 Holmes v. Bemis, 25 Ill. App. 232. 46 Whittemore v. Obear, 58 Mo. 280. |