Moynihan v. McKeon

This is an action by an alleged accommodation indorser of a negotiable promissory note against the accommo'da- ■ tion maker. The' defendant McKeon made the note -t.o the order of the defendant Smith to enáble him to pay a bill of lumber then due. The creditor required the indorsement of the plaintiff, who ■ *345had guaranteed the hill. Plaintiff indorsed and had to pay the note when it fell due, receiving it from the holder, and now claims that he succeeds to all the rights of the holder against the maker. ■ The latter claims that he made the note for the accommodation not only of the payee,' but of the plaintiff as well, who was liable with the payee for the debt which the note was given to extinguish, or to extend.

It is the established rule that the parties to ordinary commercial paper, negotiated for value in the.regular course of business, are liable to each other in succession as their names appear upon the instrument. The same rule applies, in the absence of special agreement, to successive accommodation parties; and a subsequent accommodation indorser who has been compelled to meet the obligation may maintain an action upon the instrument against any prior accommodation party, and recover the whole amount paid, although he knew that the latter’s signature was given for accommodation merely. The reason for the rule is that each indorser is presumed to have indorsed upon the faith of all prior signatures. 1 Am. & Eng. Ency. of Law (2d ed.), 356-7.

As was said by Marshall, O. J., in McDonald v. Magruder, 3 Peters, 470, which was an action upon a promissory note between accommodation indorsers, the second indorser who had taken up the note suing the first: “ The second indorsergives his name on the faith of the first indorser as well as of the maker. The first indorser gives his name on the faith of the maker.” If the second indorser in such a case pays the note at maturity in ■ the hands of a bona fide holder, he stands in the same position toward the first indorser as if he had originally given full consideration for it to the person for whose accommodation the first indorser lent his name. The principle expressed in that- case must determine the present one. If the jury were to find as a fact that the plaintiff indorsed the note upon the faith of the maker’s signature, plaintiff would be entitled to recover. If, on the other hand, plaintiff knew that the’ note was intended to be used to pay, or extend, the debt which he had guaranteed and that the note was made for that purpose, the fact is sufficient to warrant an inference that' plaintiff indorsed and delivered it with the understanding that it was made for his accommodation as well as that of the payee. If the jury inferred this to be the case from the evidence plaintiff could not enforce the note against the defendant.

*346The position of the parties upon the paper raises the presumption that, the second-indorser pnt his name, upon the note upon the' faith of the signature of the payee and the maker; hut tkis: presumption may be rebutted by circumstances showing that he:did not do so. In this' case the chief circumstances relied upon are. that the plaintiff was hable upon his guaranty of the payee’s debt to Russell, and that he must have understood that McKeon, in making this note, accommodated him as much as the payee. But, unless it can be inferred that the plaintiff so uUderstood at the time of his indorsement, it might be reasonably inferred that he indorsed it on the faith of the maker and in the expectation that the maker would be hable to him if he had to protect it

Upon the evidence the question for the jury Was whether the plaintiff indorsed the note upon the faith of the' maker, or whether he understood that the note was made for his accommodation as well as that of the payee. If- the evidence warranted the inference that the plaintiff indorsed in reliance upon the maker, then he could have recourse against the latter, although he knew when he indorsed that the note had been made for the accommodation of the payee. - '

The case was left to the jury and they found for the defendant; but it was submitted to them upon conflicting theories and certain instructions which were erroneous. They were charged that plaintiff was entitled to recover if he knew that the defendant made the note. without consideration. Such knowledge of plaintiff would not be conclusive, but was one circumstanee to be considered in determining whether he.indorsed on the faith of the maker.

On the other hand, the court charged, at plaintiff’s request, that if the note was used to pay a debt for which the plaintiff was liable it constitutes no defense unless it was obtained for' that purpose on an agreement with the plaintiff to hold the defendant harmless.. This was error, as it was not necessary for defendant to prove that he,made the note upon any such agreement. The question is, whether, when plaintiff indorsed it, he understood that it was made for his accommodation as well as that of the payee.

' Judgment must be reversed and new trial ordered, with costs to abide the event. .

MoAdam and Bischoit, JJ., concur.

Judgment reversed and new trial ordered, with costs to abide event. . '