Case ID: ny-super-ct_24/html/0351-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court, Bosworth, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Henry J. Harrington, plaintiff and appellant, vs. James A Dorr, defendant and respondent.
    An accommodation indorsement is.not binding unless the instrument indorsed is transferred before maturity. The rule that a note transferred after due is subject to all the equities attaching to it in the hands of the person so transferring it, is not applicable to accommodation paper transferred to subserve the purpose forw hich it was made.
    (Before Bosworth, Ch. J. and White and Monell, JJ.)
    Heard November 9,1863;
    decided November 28, 1863.
    This was an appeal by the plaintiff. The plaintiff sued the defendant as payee and first indorser of six promissory notes, made by the “Northfield Brick Company, by James A. Dorr, Treasurer.”
    The evidence showed that this company was indebted to one Myers, who held its notes past due. Myers took the notes in suit in exchange for the notes over due. The testimony tends to show that Dorr indorsed the notes in suit at the request of Myers, and to accommodate him, and that after they became due, Myers transferred them to the plaintiff, in payment of notes of like • amount held by the plaintiff and made by Myers.
    ■ At the close of the testimony “ the court charged the jury that, it appearing* to be undisputed that the plaintiff came into possession of the notes after they matured, and also that the defendant indorsed them without consideration, as a matter of accommodation for M. Myers, they should render a verdict for the defendant.” The jury found accordingly. The plaintiff excepted to the charge, and moved for a new trial on the judge’s minutes, which motion was denied. From the order denying this motion, and from the judgment entered on the verdict, the plaintiff appealed to the general term.
    
      E. W. Chester, for the plaintiff, appellant.
    I. The notes being for a valuable consideration, were indorsed by the defendant for the purpose of being used by Myers. Myers’ use of them was in strict accordance with the understanding between him and the indorser. (De Zeng v. Fyfe, 1 Bosw. 335, affirmed in the Court of Appeals.)
    
    II. All the cases and authorities agree that it is no defense to a bill or note, held by an indorser who has given value for it, that it was made without consideration paid to the acceptor or indorser, where no fraud is practiced in the use made of it, or where such use is in accordance with the purpose for which it was accepted or indorsed. It does not affect the responsibility of such an acceptor or indorser that it was passed away after maturity, or that the purchaser for value knew that the acceptor or indorser was an accommodation acceptor or indorser, or that he took it in payment or as security for a precedent debt. (Edw. on Bills, 316. Smith v. Knox, 3 Esp. R. 46, per Lord Eldon. Bank of Rutland v. Buck, 5 Wend. 66. Powell v. Waters, 17 John. 176. Grandin v. Le Roy, 2 Paige, 509. Seneca County Bank v. Neass, 3 Comst. 442. Deuel v. Spence, 1 Abb. 237. Mohawk Bank v. Corey, 1 Hill, 513. Brown v. Mott, 7 John. 361. Grant & Cary v. Ellicott, 7 Wend. 227. Story on Prom. Notes, p. 214, §§ 194, 195. Parsons on Notes and Bills, p. 29, and cases there referred to. Charles v. Marsden, 1 Taunt. 224. Caruthers v. West, 11 Queen’s B. 143. Sturtevant v. Ford, 4 Man. & Gr. 101. Thompson v. Shepherd, 12 Met. 311. 4 Scott N. P. 668.)
    III. Taking a note in payment of or security for a precedent debt, or with the knowledge that it was made or indorsed for the accommodation of the party using it, or after maturity, all stand upon the same footing. Against holders taking notes in either of these ways, the maker or indorser can not set up as a defense that he became a party to it entirely for the accommodation of the party who held and passed it away. It is enough that the use of it is consistent with the purpose for which it was made or indorsed.
    
      E. T. Rice, for the defendant, respondent.
    I. The indorsements were given without consideration, and for the accommodation of Myers. Myers transferred them when past due, to the plaintiff. Upon this state of facts the defendant was of right entitled to a verdict.
    II. The plaintiff held the notes subject to all defenses, legal or equitable, which existed against the notes in the hands of Mr. Myers. (De Mott v. Starkey, 3 Barb. Ch. 403.)
    III. The cases cited by the plaintiff’s counsel are cases where the holder of an accommodation note at the time of maturity had taken it for value. Such holder, by a subsequent transfer, would of course pass the same right of action which he himself held.
    In Thompson v. Shepherd, (12 Met. 311,) cited by the plaintiff, the true rule is stated in the opinion given by the court. (See also 1 Abb. Dig. 471, § 504, and cases cited; Furniss v. Gilchrist, 1 Sandf. 53 ; Anderson v. Busteed, 5 Duer, 485 ; Chitty on Bills, 12th Am. Perkins’ ed. marg. p. 69, note 1; also marg. p. 217, 218, 220, note 2; Story on Bills, § 187; Story on Prom. Notes, § 178, &c; Edw. on Bills, 321.)
   By the Court, Bosworth, Ch. J.

The judge at the trial ordered a verdict for. the defendant, apparently on the idea that an accommodation maker or indorser of a note is not liable upon it to a party to whom it is transferred by the party accommodated, after maturity. In this, we think, he inadvertently erred.

A note made or indorsed for the general accommodation of a party, without any restriction as to the manner in which it is to be used, or the time in which it is to be negotiated, may be transferred by him either before or after maturity, and the indorsee, if he takes it for value, may recover upon it, even though he took it with notice that it was made or indorsed for the accommodation of his immediate indorser. This is settled by repeated adjudications. (Grant et al. v. Ellicott, 7 Wend. 227. Sturtevant v. Ford, 4 Mann. & Gr. 101. Caruthers v. West, 11 Q. B. 143.)

The payee of an accommodation note can never recover upon it from the maker, nor the indorser of a note against his accommodation indorser. The fact that Myers could not recover against Dorr, is not, therefore, any reason why the plaintiff, his indorsee, should not. Allowing the latter to recover, is only allowing payment to he enforced against the indorser in accordance with the purpose and object for which the indorsement was made.

The rule that a note transferred after due is subject to all the equities attaching to it in the hands of the one so transferring it, has no application to accommodation paper transferred to subserve the purpose for which it was made. That rule is to protect parties from being defrauded, by being compelled to pay the note in any event where it is transferred after it is due, or with notice of its infirmities, and places the indorsee of the maturity in the precise position he would have been if he had taken it before maturity with notice.

A party who takes accommodation paper before maturity, with notice of its character, may recover if he "has paid value. The only thing essential to his right to recover, is that he has paid value ; and that allowing him to recover is enforcing payment in accordance with the object for which the note was, as matter of accommodation, made or indorsed. When such is the character of the transaction, it is of no consequence to the defendant, whether the note was transferred before or after ' maturity. The cases above cited determine these questions as we have stated them, and no conflicting authority has been brought to our notice.

The judgment should be reversed, the verdict set aside, and a new trial granted, with costs to abide the event.

Ordered accordingly.