say, "I accepted the bill for the accommodation of the drawer, and the payee or holder took it knowing it to be an accommodation acceptance,18 and I will not pay it," these would be very serious objections to the bill being negotiated. The reason which has influenced the courts is well stated by Judge Lawrence in Charles v. Marsden.10 "It is to be supposed," he says, "that the drawer persuades a friend to accept a bill from him because he cannot lend him money. Now, would there be any objection, if, with the knowledge of the circumstance that this is an accommodation bill, some person should advance money upon it before it was due?" The indorsee has discounted the bill on the faith of the acceptor's promise, and it is no answer for the acceptor to say to him, "I have received nothing for this acceptance."

We cannot do better than follow Mr. Daniel in his succinct statement of reasons for the rule that the acceptor warrants, when the bill was indorsed before acceptance, that the payee was competent to indorse. To insure negotiable securities a ready circulation, a person may not dispute the power of another to indorse an instrument, when he asserts by the instrument which he issues to the world that the other has such power. The drawer of the bill, on his putting it into circulation, holds out to all the world that there is such a payee as is described in the instrument, and that, having made the instrument payable to such payee's order, the payee on his part may order the instrument paid to some one else in turn. When the drawee accepts the bill, he assents to these two propositions, and to the proposition, especially, that the payee is competent to indorse. Hence the acceptor may not say that the payee was an infant, or an insane person, or a bankrupt, or a corporation without legal existence.2 "Indeed," says Mr.

20

18 Grant v. Ellicott, 7 Wend. (N. Y.) 227; HARGER v. WORRALL, 69 N. Y. 370, 25 Am. Rep. 206, Moore Cases Bills and Notes, 142; Heuertematte v. Morris, supra; Canadian Bank of Commerce v. Coumbe, 47 Mich. 358, 11 N. W. 196.

19 Charles v. Marsden, 1 Taunt. 224.

20 N. I. L. §§ 60, 62; Pontiac Sav. Bank v. Reinforced Concrete Co. (Mich.) 144 N. W. 486. A bona fide holder of a note, made payable

Daniel, "there could be no reason why the acceptor should be interested to show that the payee was incompetent to make the order, for he has been guarantied in that regard by the drawer, and may charge the amount in account against him, whether the payee were competent or not." 21

FACTS WHICH THE ACCEPTOR DOES NOT

ADMIT

71. An acceptance does not admit:

(a) That the payee's or subsequent indorsements are gen

uine.

(b) That all the terms contained in the bill at the time of acceptance are genuine.22

The rules of the acceptor's estoppel, as we have seen, are based upon the supposed negligence of the drawee in failing, by an examination of the signature when the bill is presented, to detect the forgery of the drawer's name, and to refuse payment. The drawee should be supposed to know the handwriting of the drawer, who is usually his customer or correspondent, and, as between him and an innocent holder, the drawee from his imputed negligence should bear the loss. But here the courts stop. It is only the facts pertaining to the drawer, such as his existence, capacity, and authority, that the drawee can be reasonably presumed to be familiar with. But of the payee's indorsement, aside from his competency to indorse, he can know nothing.23 Nor is there any reason why the acceptor

to a foreign corporation doing business in the state without complying with its law, may recover on the instrument against the maker. National Bank of Commerce v. Pick, 13 N. D. 74, 99 N. W. 63 (N. I. L.).

21 Daniel, Neg. Inst. § 536; N. I. L. § 29. Under this section it has been held that one who signs a negotiable instrument as guarantor cannot be an accommodation party to the note within the meaning of the N. I. L. Noble v. Beeman-Spaulding Woodward Co., 65 Or. 93, 131 Pac. 1006, 46 L. R. A. (N. S.) 162 (N. I. L.).

22 This rule probably applies to the acceptor supra protest. 23 Holt v. Ross, 54 N. Y. 474, 13 Am. Rep. 615. The general rule is

should know that the body of the bill is in the drawer's handwriting, or in any handwriting known to the acceptor. If the alteration or forgery committed is that of the payee's name, or consists in altering the date or amount of the bill, there is no reason why the acceptor should be better able than the indorsers to detect an alteration or forgery. The forgery being in the body of the bill, or in the payee's signature, the greater negligence here is chargeable upon the party who received the bill from the perpetrator of the forgery. The result of the foregoing rule is that, if the signature of the payee or of the indorser be forged, the acceptor will not be bound to pay the bill to any one who traces title through such indorsements. And, if he has gone so far as to pay the bill to any one holding it under such forged indorsement, he may, as a general rule, recover back the amount.25 So, also, if the bill has been altered so

24

that the acceptor admits the handwriting of the drawer, but not of the indorsers, and the holder is bound to know that the previous indorsements, including that of the payee, are in the handwriting of the parties whose names appear upon the bill. And, if it should appear that one of them is forged, he cannot recover against the acceptor, although the forged name was on the bill at the time of acceptance. Taney, C. J., in Hortsman v. Henshaw, 11 How. 177, 13 L. Ed. 653.

24 Bank of Commerce v. Union Bank, 3 N. Y. 230; White v. Continental Nat. Bank, 64 N. Y. 620, 21 Am. Rep. 612. Want of consideration for the accommodation obligation is a defense against a holder with notice. Cowan v. Hudson (Miss.) 62 South. 275, 45 L. R. A. (N. S.) 720. So also a breach of faith in completing the accommodation obligation by delivery is a defense against a holder with notice. The authority given the accommodated maker by an irregular accommodation indorser to complete the obligation of such accommodation party to the payee is revocable, although based on a consideration. First Nat. Bank of Teague v. Hare (Tex. Civ. App.) 152 S. W. 501.

25 See Bank of Williamson v. McDowell County Bank, 66 W. Va. 545, at page 570, 66 S. E. 768, at page 771, 36 L. R. A. (N. S.) 605. In that case Brannon, J., concurring, said: "Judge Poffenbarger seems to think that it makes no difference whether the forged name is that of the payee or maker of the check. There is a big difference. The next indorser insures the genuineness of a prior indorser's name to a later indorser and the payee bank." But see note 11, supra. The reason for the conclusion, stated in the text, seems to be that, where

as to purport to bind the drawer for a larger sum or in a different manner than in the original bill, he will not be bound to pay the bill. And, if the bill is paid, he may in the same way recover back the money paid upon it.20

ACCEPTOR SUPRA PROTEST

72. The undertaking of the acceptor supra protest is analogous to that of the indorser.

73. To consummate the liability of the acceptor supra protest, it is necessary to take three steps:

(a) To present the bill at maturity to the original drawee. (b) Upon refusal of the original drawee to pay, to protest for nonpayment.

(c) To present the bill for payment to the acceptor supra protest.

The foregoing doctrines are common among the text writers, and are probably the positions which would be taken on the subject by the courts. The cases, however, involving questions of such acceptances, are not many, and

the bill is genuine in its inception, a holder under a forged indorsement is guilty of a conversion. The drawee bank can charge the drawer only for paying the payee or his indorsee. The payee or his indorsee has a right of action against any holder under a forged indorsement, unless for some reason estopped, in which the full value of the instrument could be recovered. The "equities" of the drawee bank and the holder under a forged indorsement are therefore not equal, within the meaning of the rule of Price v. Neal. See article by Professor Ames, 4 H. L. R. p. 297.

26 Holt v. Ross, 54 N. Y. 479, 13 Am. Rep. 615; White v. Continental Nat. Bank, 64 N. Y. 316, 21 Am. Rep. 612; New York Produce Exch. Bank v. Twelfth Ward Bank of City of New York, 135 App. Div. 52, 119 N. Y. Supp. 988 (N. I. L.). But see N. I. L. § 62, and comments by Professor Ames, Brannan, Anno. N. I. L. (2d Ed.), 74. See infra, chapter X. In the absence of express agreement to the contrary accommodation parties to negotiable paper are liable to each other in the order in which they appear on the paper. Noble v. Beeman-Spaulding Woodward Co., 65 Or. 93, 131 Pac. 1006, 46 L. R. A. (N. S.) 162 (N. I. L.) ; Shea v. Vahey, 215 Mass. 80, 102 N. E. 119 (N. I. L.); Erwin v. E. I. Dupont de Nemours Powder Co. (Tex. Civ. App.) 156 S. W. 1097.

the rules relating to them, therefore, not established.27 The meaning and process of an acceptance supra protest have already been explained.28 As a contract, it is an undertaking to pay on presentment if the original drawee, upon a presentment to him, should persist in dishonoring the bill, and such dishonor by him be notified by protest to the person who has accepted for honor.29 It is thus not like the contract of the acceptor-an absolute engagement to pay at all events-but only a collateral conditional engagement to pay if the drawee does not. Hence the reason of the giving of the acceptance requires a second resort to the drawee when the bill is in the hands of the holder under an acceptance supra protest, and a further protest for nonpayment by such drawee.30 It might happen that in the meantime effects would reach the drawee, who had refused in the first instance, out of which the bill might and would be satisfied, if again presented to the drawee when the period of payment arrived. "An acceptance for honor," said Lord Tenterden,31 "is to be considered not as absolutely such, but in the nature of a conditional acceptance. It is equivalent to saying to the holder of the bill: 'Keep the bill. Don't return it. And when the time arrives at which it ought to be paid, if it be not paid by the party on whom it was originally drawn, come to me, and you shall have the money.' This appears to me to be a very sensible interpretation of the nature of acceptances for honor, where the parties say nothing upon the subject." The courts thus clothe with language and interpret the intention of the acceptor supra protest in giving an acceptance and of the holder in receiving it.

27 Cf. N. I. L. §§ 161-170.

28 See pages 145, 146, supra.

29 Hoare v. Cazenove, 16 East, 391. In this case it was held that the acceptors of a foreign bill of exchange, who, after presentment to drawees and refusal to accept, and protest for nonacceptance, accept the same for the honor of the first indorsers, are not liable on such acceptance unless there has been a presentment to the drawees for the payment and a protest for nonpayment.

30 Schofield v. Bayard, 3 Wend. (N. Y.) 488; Lenox v. Leverett, 10 Mass. 1, 6 Am. Dec. 97.

31 Williams v. Germaine, 7 Barn. & C. 468.