as between themselves, cosureties.30 Under this rule, evidence is admissible to show that by the agreement of the parties their liability is joint,31 and also that there was an agreement that one was to be bound as a prior indorser.32

31

d. Indorsement by joint payees and indorsees.— The rule of the statute that joint payees or joint indorsees who indorse are deemed to indorse jointly and severally, and are, therefore, jointly and severally liable to subsequent holders in due course is apparently new, and has doubtless been included to dispose of a number of questions more or less disputed. Before the statute the rule, as stated by Mr. Daniel, was: "The parties will not be regarded as successive indorsers where they are joint payees of a note, and themselves indorse it. In such a case it matters not which signs first, the note being payable only to their joint order, and transferable only by their joint act, they will be considered joint indorsers." 33 The statute evidently changes this rule; and it would seem that there is some doubt of the advisability of such change.34

§ 88. Liability of agent or broker.

a. Statutory provision.— The Negotiable Instruments Law provides that: "Where a broker or other agent negotiates an instru

30. Apparent liability of successive indorsers modified by agreement.Easterly v. Barber, 66 N. Y. 433. As between the original parties, the apparent right of the indorser on the face of the note and the contract of indorsement may be qualified and changed by parol evidence, and the intention of the parties established by showing the facts and circumstances of the transaction. Witherow v. Slayback, 158 N. Y. 649, 53 N. E. 681. See also Philips v. Preston, 51 How. (U. S.) 278; Reinhart v. Schall, 69 Md. 352; Patch v. Washburn, 16 Gray (Mass.), 82; Brennan v. Furniss, 90 Pa. St. 186; Morrison Lumber Co. v. Hotel Co., 92 Tenn. 6; Bank of Jamaica v. Jefferson, 92 Tenn. 537; Hale v. Danforth, 46 Wis. 554. 31. Easterly v. Barber, 66 N. Y. 433. In the case of Woodward v. Severance, 7 Allen (Mass.), 340, it was held that if successive indorsers of an accommodation note have made no agreement that as among themselves their liability shall be joint, and a second indorser who has taken up the note, before its maturity, may, upon

due demand and notice, recover the amount from the first indorser. See also Clapp v. Rice, 13 Gray (Mass.), 403; Weston v. Chamberlain, 7 Cush. (Mass.) 404; Sweet v. McAllister, 4 Allen (Mass.), 354; Edelen v. White, 6 Bush (Ky.), 408.

32. Reinhart v. Schall, 69 Md. 352; Slagel v. Rust, 4 Gratt. (Va.) 274.

33. Daniel on Negotiable Instruments, § 704. This rule seems to have been derived in the form stated by Mr. Daniel from the case of Lane v. Stacy, 8 Allen (Mass.), 41, 42, where the court said: "The note was made payable to their joint order, and could only be transferred by their joint act. Which name is first put upon the paper is, therefore, immaterial, as by the indorsement they incurred a joint responsibility for the debt of the promisor."

See also Cummings v. Herrick, 43 Me. 203; Culver v. Leovy, 19 La. Ann. 202; West Branch Bank v. Armstrong, 40 Pa. St. 278.

34. See article by Prof. James Barr Ames, in Harvard Law Review, for December, 1900.

"ment without indorsement, he incurs all the liabilities prescribed "by section 115 of this act,35 unless he discloses the name of his "principal, and the fact that he is acting only as agent.” 36

87

b. General rule.- The provision of the statute is in recognition of the general rule that where a party acts as agent without disclosing his agency he will be personally liable to the person with whom he deals, provided such person chooses to treat him as principal. It has been held that one who procures notes to be discounted at a bank is not the less responsible for the genuineness of the signatures because he does it as agent of another, unless the bank knew or had reasonable cause to know his agency. 38 We have discussed in a previous chapter the authority of agents to bind their principals by their signatures to commercial paper; and also their liability while acting as such agents.

§ 89. Liability of accommodation indorsers.

39

a. Liability as imposed by statute.- An accommodation indorser is liable on an instrument indorsed by him, to a holder for value, although such holder, at the time of taking the instrument, knew him to be only an accommodation party." 40 And the statute, in imposing upon general indorsers an absolute engagement that the instrument will be paid according to its tenor, makes no exception in the case of an accommodation indorser, and the presumption, therefore, is that such an indorser is subject to the same liabilities as are imposed by the statute upon general indorsers.11

b. Contract of indorsement; liability in general. An indorsement for accommodation, like every other indorsement, is an original contract binding the indorser in favor of the holder. 42

35. See 85, ante, p. 418.

36. Neg. Inst. L. (N. Y.), § 119. For same section in statute of other States see Appendix.

37. Fuller v. Smith, 1 Car. & P. (Eng.) 197; Gurney v. Womenley, 4 El. & Bl. (Eng.) 133; Canal Bank v. Bank of Albany, 1 Hill (N. Y.), 287. 38. Cabot Bank v. Morton, 4 Gray (Mass.), 156.

the transaction must have been such that the purchaser understood, or ought, as a reasonable man, to have understood, that he was dealing with the principal.

39. See Neg. Inst. L. (N. Y.), § 39, ante, p. 82.

40. Neg. Inst. L. (N. Y.), § 55. See chap. IV, § 55, ante, p. 309. 41. See § 86, ante, p. 424. 42. Crane v. Trudeau, 19 La. Ann.

In the case of Worthington V. Cowles, 112 Mass. 30, it was held that 307. to relieve an agent from liability upon an implied warranty of the genuineness of a promissory note sold by him, which afterward proves to be forged,

Not a surety.- An accommodation indorser is not a surety in the sense that he may discharge himself from liability on the note by requesting the

The relative rights and duties of such indorsers are the same as in the case of any other instrument;13 and they are subject to the same obligations." Where the indorsement is made for the accommodation of the payee, the indorser assumes the same liability as every other indorser, and the holder is entitled to recover against him, although at the time of the transfer he knew it to be for accommodation only.15 And where a signature of an accommodation indorser is placed immediately after that of the payee, merely for the purpose of identifying the payee, the indorser nevertheless assumes all the obligations and liabilities of an indorser.46 And

where the payee of a note who discounts it with his own indorsement and subsequently takes it up, he has a right of action against an indorser for the accommodation of the maker, though in form his indorsement is subsequent to that of the payee." But the right of a holder to recover is to be determined by his right to recover against the maker.48 And where a note is transferred subsequent to the accommodation indorsement, the holder can only recover from the indorser the consideration actually paid for the note.1o

c. Liability of several accommodation indorsers.- Prima facie, accommodation indorsers are liable in the order in which they indorse. This is the general rule as declared in the Negotiable

50

Ind. 571, 39 Am. Rep. 113, the ma- the draft as an accommodation interial statements contained in the dorser, with the knowledge of the answer were: "That appellant went plaintiff bank. The plaintiff therewith one Wilson to the Prairie City upon purchased the draft from the Bank, of Terre Haute, for the pur- stranger. The draft was paid by pose of identifying the said Wilson as drawee, but the money was refunded the payee and holder of the bill of on discovery of the forgery. In an exchange sued on; that the agent of action on the indorsement, it was held the bank requested the appellant to that the indorser could not be prewrite his name on the back thereof, sumed to have known of the forgery; for the purpose of identifying Wilson; and that he was not liable on his inthat he, the appellant, never owned or dorsement without demand, refusal, had possession of said bill; that he and notice of nonpayment. did not negotiate it; that he did not sign it as maker, surety, or indorser; that the sole purpose for which he wrote his name on the back thereof was to identify the said Wilson as the payee of said bill; that Wilson was the identical person he represented himself to be; that appellant was not requested to write his name as indorser by Wilson or anybody else; that he was not informed, nor did he understand, that he was signing as indorser." The court held the answer to be insufficient, and that the contract of indorsement in writing and regular upon its face is not to be modified by evidence that it was not intended thereby to bind the indorser. See also Prescott Bank v. Caverly, 7 Gray (Mass.), 217, 66 Am. Dec. 473; Cochran v. Atchison, 27 Kan. 728.

In the case of Susquehanna Valley Bank v. Loomis, 85 N. Y. 207, 39 Am. Rep. 652, a stranger presented to a bank a draft drawn by a New Jersey bank upon a New York bank, which had been fraudulently altered by raising the amount and changing the date and the name of the payee. The defendant's testator came to the bank with the stranger and put his name to

In the case of Simonowitch V. Schwartz, 67 App. Div. (N. Y.) 535, 74 N. Y. Supp. 221, where the drawer of a check indorses the same at the request of the payee, in order to enable the latter to obtain money thereon from the bank without being identified, and such check, after being lost by the payee, but before notice of its loss had been given either to the bank or the drawer, is presented to the bank bearing the forged indorsement of the payee, and is paid by the bank, it was held that the drawer was not liable to the payee for the amount of the check.

47. Moore v. Cross, 19 N. Y. 227, 75 Am. Dec. 326.

48. Cake v. Northumberland County Nat. Bank, 6 Wkly. Notes Cas. (Pa.)

88.

49. Grabbe v. Bosse, 10 Mo. App. 492; Brown v. Mott, 7 Johns. (N. Ÿ.)' 361; Cook v. Clark, 4 E. D. Smith (N. Y.), 213.

50. Accommodation indorsers liable in order named.- See the following cases:

Alabama.-Moody v. Findley, 43 Ala. 167; Abercrombie v. Connor, 10 Ala. 293; Spence v. Barclay, 8 Ala. 581.

Instruments Law, and doubtless applies to accommodation as well as general indorsers. There is some conflict among the earlier authorities, particularly in Ohio 51 and North Carolina;52 but it is now well settled, even without regard to the statute, that successive accommodation parties are liable to each other in succession, according to the order in which their names appear upon the instrument. The reason for this rule may be found in the presumption that each accommodation indorser placed his name upon the instrument trusting in the strength of the prior accommodation indorsers.53 Facts may be shown, as in the case of other indorsers, to show that the liability is joint because of an agreement between

Georgia.- Stiles v. Eastman, 1 Ga.

205.

Indiana.- Dunn v. Sparks, 7 Ind. 490; Gore v. Wilson, 40 Ind. 204.

Kentucky.-Denton v. Lytle, 4 Bush, 597; Smith v. Bacon, 3 J. J. Marsh. 312; Hixon v. Reed, 2 Litt. 174.

Maine.- Hagerthy v. Phillips, 83 Me. 336, 22 Atl. 223; Westcott v. Stevens, 85 Me. 325, 27 Atl. 146; Coolidge v. Wiggin, 62 Me. 568.

Massachusetts.- Moore v. Cushing, 162 Mass. 594, 39 N. E. 177; Shaw v. Knox, 98 Mass. 214; Clapp v. Rice, 13 Gray, 403, 74 Am. Dec. 639; Barker v. Parker, 10 Gray, 339.

Michigan.- McGurk v. Huggett, 56 Mich. 187, 22 N. W. 308; Farwell v. Ensign, 66 Mich. 600, 33 N. W. 736. Missouri.- McCune v. Belt, 45 Mo. 174; McNeilly v. Patchin, 23 Mo. 40, 66 Am. Dec. 651.

New Hampshire.-Johnson v. Crane, 16 N. H. 68.

Vermont.- Pitkin v. Flanagan, 23 Vt. 160, 56 Am. Dec. 61.

Virginia.- Hogue v. Davis, 8 Gratt. 4; Bank of United States v. Beirne, 1 Gratt. 539, 42 Am. Dec. 551.

51. Douglas v. Waddle, 1 Ohio, 413, 13 Am. Dec. 630.

52. Richards v. Simms, 18 N. C. 48; Daniel v. McRae, 9 N. C. 530, 11 Am. Dec. 787.

66

53. Reason for rule.- McDonald v. Magruder, 3 Pet. (U. S.) 470, 478, where the court says: But in the case at bar the parties do not stand in the same relation to each other. The second indorser gives 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 only. Unquestionably these liabilities may be changed by contract; but no contract existing between these parties, it is not a case to which the principle of contribution applies." And in the case of Gillespie v. Campbell, 39 Fed. 724, it is said: "The principle upon which the rule is New York. Kelly v. Burroughs, 102 founded is this: 'The indorser has N. Y. 93, 6 N. E. 109, in which case it incurred a contingent liability upon was held that where a second in- the faith of the antecedent names to dorser of a promissory note has paid the paper, and by payment becomes and taken it up, he becomes a holder entitled to all the rights of an infor value and may maintain an action dorser for value, with remedy over to recover the amount thereof of the for the whole amo int paid against the first indorser, although both are ac- prior parties.' The obligation of the commodation indorsers. Palmer v. one is primary; of the other secField, 76 Hun, 229, 27 N. Y. Supp. ondary. It is of no moment that the 736; Watson V. Shuttleworth, 53 accommodation indorser knew that the Barb. 357; Brown v. Mott, 7 Johns. 361.

New Jersey.-Johnson v. Ramsey, 43 N. J. L. 279, 39 Am. Rep. 119; Laubach v. Pursell, 35 N. J. L. 434.

acceptance was without consideration. He has incurred and met his obligation upon the faith of the acceptance. and stands in the light of a holder for value."