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v. Hudson, 2 Camp. 447; ante, p. 150, 51. And when a negotiable note made by one person is endorsed by another, without a previous endorsement by the payee, the endorser cannot be sued as maker. He must be sued on his collateral Gwinnell v. Herbert, 5 Adol. & El. 436, 31 Eng. Com. Law Rep. 373.
In New York, if a note not payable to the defendant be endorsed by him, and afterwards endorsed by the payee, it will be intended that the defendant meant only to become the second endorser with all the rights incident to that situation. Herrick v. Carman, 12 Johns. 159.
8. Nature of liability on an accommodation note or bill.
An accommodation bill is an instrument which it is intended the party for whose benefit it is accepted, should be enabled to carry into the market for the purpose of raising money. If another person, without consideration, add his name to the bill to give it additional credit, the acceptor is liable to such other person as to any person by whom money may be advanced upon it. In this respect there is no difference as to the liability of the acceptor whether the money be obtained on the joint credit of the drawer and acceptor or on that of the drawer, acceptor and endorser. Hammon v. Sedgwick, 6 Hare 260, 31 Eng. Ch. Rep. 260.
It is, says Lord Eldon, no answer to an action on a bill that the defendant, the acceptor, accepted it for the accommodation of the drawer, and that that fact was known to the holder; in such case the holder, if he gave a bona fide consideration for it, is entitled to recover the amount, though he had full knowledge of the transaction. Smith v. Knox, 3 Esp. 47.
The acceptor is certainly responsible to an endorser who, on his failure and that of the drawer to pay, is compelled to take up the bill unless there be something in the transaction to change the order of responsibility-something besides its being mere accommodation paper. The different parties who sign as sureties are presumed to know the order of their responsibility, and to look to all prior parties, in the order in which they stand, for their indemnity upon the failure of the real principal. Eldridge v. Duncan, 1 B. Monroe 102.
One who endorses a note for the accommodation of another can maintain no action on it before he pays; but when he performs his duty by taking it up, the note which he has thus paid is a valid note to him, founded on good consideration. On such payment the law raises a promise to him; and his right of action is complete against the prior parties. Wood
v. Repold, 3 Har. & J. 131; Brown v. Mott, 7 Johns. 360; Havens v. Huntington, 1 Cow. 394.
The principle is the same when the note is taken up and sued on by the second endorser. It is no defence to the first endorser that he endorsed the note for the mere accommodation of the maker, and that this fact was known to the plaintiff when he subsequently endorsed the note. Money having been raised on the note with the endorsement of both parties, and the subsequent holder having returned the note to the plaintiff, who took it up for its full value, the plaintiff then has as good a right to resort to the prior endorser as if he had originally received it for its value. Brown v. Mott, 7 Johns. 362.
In short, as it regards the rights and liabilities of the endorsers in relation to one another, there is no difference between a negotiable instrument made for the accommodation of one of the parties and one put into circulation in the usual course of business. Wood v. Repold, 3 Har. & J. 125; 7 Id. 101; Keeler v. Bartine, 12 Wend. 116; Youngs v. Ball, 9 Watts 141; Mullen v. French, Id. 97; Stoddard &c. v. Kimball, 6 Cush. 470. The legal effect of the contract in the former as in the latter case, is that every endorser is conditionally liable to pay in case of the failure of the maker or acceptor, that is upon the condition that the bill or note be presented to the acceptor or maker when due, and if not paid that such endorser be seasonably notified of its non-payment; and any endorser who is called upon to pay may look to his immediate endorser, or to either of the prior parties, for an indemnity for the whole amount thus paid. Church &c. v. Barlow, 9 Pick. 547.
If a bill or note be made payable to two or more jointly, and be jointly endorsed by them, each will be bound to contribute his just proportion. But if the bill or note be made payable to one of them, and be endorsed by the others in succession, the legal effect of the instrument, whether made for accommodation or in the way of business, is to bind them in respect to each other in succession, in the order in which they endorsed; and they must be taken to have intended to be so bound until the contrary appears.
The author is aware that one case has been decided on a different principle; a case in Ohio. Douglass v. Waddle, 1 Hammond 413. But he considers, nevertheless, that the rule as above laid down is now well established generally. It is certainly established in Maryland, Wood v. Repold, 3 Har. & J. 131; Virginia, Farmers Bank v. Van Meter, 4 Rand. 563; Bank of U. S. v. Beirne, 1 Grat. 265; Hogue v. Davis &c.
8 Grat. 4; North Carolina, Hubbard &c. v. Williamson &c. 5 Iredell 397; and in the supreme tourt of the United States, Donald v. McGruder, 3 Peters 477.
The face of the paper determines, prima facie at least, the legal position of the parties. A prior cannot recover against a subsequent endorser unless under very special circumstances. Bishop v. Hayward, 4 T. R. 470; Herrick v. Carman, 12 Johns. 159. If it be alleged that the person appearing to be second was in point of contract first endorser, the allegation must be clearly proved. Chalmers v. McMurdo &c. 5 Munf. 252. Uuder peculiar circumstances the position of the parties, as it appears on the face of the paper, may perhaps be changed by matter dehors. Allison v. Purdy, 6 Barr 502.
9. How far endorser transfers his right or makes himself liable by delivery or endorsement made after instrument becomes due. Whether there must be demand on maker and notice of dishonour.
Before a bill becomes due, it is endorsed in blank to B & Co. for a valuable consideration. After it becomes due, they, by delivery to the plaintiff, and without their endorsement being upon it, transfer their title, which is a perfectly good one, to the plaintiff. In such case the plaintiff is, in law, in the same condition as the holder of the bill at the time when it was endorsed to B & Co. If the name of B & Co. had been endorsed on, and then struck off, the back of the bill, the effect would be merely to exonerate them from liability on the instrument it would not operate as an extinguishment of the title which they had to the bill, and which they transferred to the plaintiff by the delivery. Fairclough v. Pavia, 9 W. H. & G. 690.
If a bill or note, which before it became due was negotiable, be endorsed after it is due, the legal effect of the endorsement in favour of any person is to make the instrument payable to him or to his order, and his endorsement will transfer the note to another. Leavitt v. Putnam, 3 Comstock 597. It is so, notwithstanding that in the first mentioned endorsement there may have been omitted the words, "or order." S. C.
What then is the nature of the endorser's contract? The bill or note, which before it became due was negotiable, does not cease to be negotiable by being dishonoured. An endorsement of a note, after it becomes due, is equivalent to an order on the maker to pay the amount; the endorsement is still but a conditional contract to pay in the event of a demand or due diligence to make a demand on the maker, and notice of his
default. So it has been decided in New York, Berry v. Robinson, 9 Johns. 121; in South Carolina, Course &c. v. Shackleford's adm'xr, 2 Nott & M. 283; Poole v. Totteson, 1 McCord 199; Stockman v. Riley, 2 Id. 398; Allwood v. Haseldon, 2 Bailey 458; Connecticut, Bishop v. Dexter, 2 Conn. 419; and Massachusetts, Colt &c. v. Barnard, 18 Pick. 260. "If," says Shaw, C. J., "it be asked at what time payment of the note shall be demanded, the day originally named for payment having passed, the answer is obvious. As between maker and promisee, a note is payable on demand at any time after it becomes due. When it is endorsed after due, it is in legal effect a note on demand, and is to be so understood by the parties as if written on demand.' In that case the law is well settled: the demand must be made within reasonable time, and if not paid immediate notice of non-payment must be given to the endorser." See ante, p. 174.
In Pennsylvania, the case of the Bank of North America v. Barriere, 1 Yeates 360, was regarded by Duncan, J. as decided on its own particular circumstances. McKinney v. Crawford, 8 S. & R. 35. But the general rule laid down in the case of the Bank of North America v. Barriere, was followed in Leidy v. Tammany, 9 Watts 358. The observation made by Duncan, J. on McKinney v. Crawford, Coulter, J. thought would not be sustained by a careful inspection of the case. Jordan v. Hurst, 2 Jones 273. Lewis, J. thinks differently. He approves the decision in McKinney v. Crawford, and considers the case of Leidy v. Tammany like that in 1 Yeates 360, to have been decided on its special circumstances. Patterson v. Todd &c. 6 Harris 432, 3. He thinks the observations of Coulter, J. had a tendency to mislead the judge who decided this cause in the court below. In Pennsylvania, a note over-due and a note payable on demand are now regarded as on the same footing; proof of demand on the maker and notice to the endorser is as necessary in the one case as the other. The interrogatories of Duncan, J. in McKinney v. Crawford, Lewis, J. remarks, have never been satisfactorily answered by those who desire to convert an endorsement into an absolute and unconditional engagement to pay the amount. "If it was a contract of absolute and immediate liability why endorse ?" "Why not give his own note?" 8 S. & R. 353, 6 Harris 433.
10. Where a negotiable instrument is taken up by the payee, and afterwards assigned by him, who may sue on it.
Upon the authority of Beck v. Robley, 1 H. Bl. 89, note, it
was decided in Massachusetts, that when a negotiable instrument had been paid and taken up by any party to it, it ceased to be negotiable. Blake v. Sewell, 3 Mass. 556; Boylston v. Greene, 8 Id. 465. The effect was to require the action to be brought in the name of the party paying the note;-to require it to be brought in his name for the benefit of his assignee. Those Massachusetts decisions have been since revised; and the court has taken a view of Beck v. Robley consistent with Gomez Serra v. Berkley, 1 Wils. 46, and Callon v. Lawrence, 3 M. & S. 95. "There is no doubt," says Parker, C. J., "that in England at this day the proposition which has been received here without qualification, that a negotiable note, once paid, cannot afterwards be transferred, is restrained to cases, where, by such transfer, some party to the bill or note might be prejudiced, or troubled with a suit, who ought to be discharged. As for instance, if there be several endorsers, none shall be allowed to transfer it but the last: because if the note is taken up by any prior endorser, and again put in circulation by him, the subsequent endorsers may be exposed to a suit by the new assignee. But where no such consequence will follow, an assignment by the party taking up the bill is lawful, and the assignee may maintain an action upon it in his own name." Guild v. Eager &c. 17 Mass. 620. The law as stated in Bayley on Bills 66, is approved, the cases of Blake v. Sewell and Boylston v. Greene are overruled, and the right of action is sustained in the name of the assignee of the payee who took up the note; there being on the note no endorsement but that of the payee. S. C. The same rule is established in New York, Havens v. Huntington, 1 Cow. 392; and is now acted on in England. Hubbard v. Jackson, 1 Mo. & P. 11, 4 Bingh. 390, 15 Eng. Com. Law Rep. 12; Purssord v. Peck, 9 M. & W. 196. Though the very holder who was paid by the drawer should be the plaintiff in the action against the acceptor, this will not always be a valid objection. The drawer, who is also payee, paying the bill, with an understanding that it should not be extinguished, but that his remedy should be preserved, may sue on it in his own name, or employ his endorsee to do so. Williams &c. v. James, 15 Adol. & El. N. S. 498, 69 Eng. Com. Law Rep. 498. The case is different when the bill is payable, not to the drawer's order but to a third person. After such a bill has been paid by the drawers, they cannot put it in circulation again; no action can be maintained on it by a person claiming under their endorsement. Price v. Sharp, 2 Iredell 417.