Case Name: HADDOCK, BLANCHARD & CO. v. HADDOCK
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1907-03-13
Citations: 103 N.Y.S. 584
Docket Number: 
Parties: HADDOCK, BLANCHARD & CO. v. HADDOCK.
Judges: 
Reporter: West's New York Supplement
Volume: 103
Pages: 584–587

Head Matter:
(118 App. Div. 412)
HADDOCK, BLANCHARD & CO. v. HADDOCK.
(Supreme Court, Appellate Division, Third Department.
March 13, 1907.)
j. Bills and Notes—Construction and Operation—Accommodation Parties.
Negotiable Instruments Law, Laws 1897, p. 734, c. 612, § 114, subd. 2, declares that if the instrument is payable to the maker or drawer an irregular indorser is liable to all parties subsequent to the maker or drawer. Section 118 provides that indorsers as respects one another are liable prima facie in the order in which they indorse, but evidence is admissible to show that as between themselves they have agreed, otherwise. Held, that an irregular indorser who indorses negotiable paper for the purpose of giving credit to the acceptors, and under an agreement that he should become liable for the goods furnished the acceptors for which the negotiable paper was executed is liable upon the acceptors’ failure to pay.
2. Same.
The statute destroys a legal right formerly existing under the rules of the law merchant, and should be strictly construed.
Smith, P. J., dissenting.
Appeal from Trial Term, Broome County.
Action by John C. Haddock against Haddock, Blanchard & Co. From a judgment for plaintiff, defendant appeals. Affirmed.
. Haddock, Blanchard & Co. was a corporation doing a wholesale coal business at Binghamton. The Lenaps Coal Company, the Livingston Coal Company, and the Montauk Coal Company were corporations retailing coal. The majority of the Stock of those corporations was owned by John C. Haddock, the defendant: The plaintiff sold these several companies coal, and, in payment therefor, signed drafts upon them for the amount of the consideration. These drafts were payable to the order of the plaintiff which was the drawer. These drafts were accepted by the respective coal companies, and thereafter, and before delivery to the plaintiff, were indorsed by the defendant, Haddock: They were indorsed by him for the purpose of giving credit to the acceptors, and under an agreement that he should become liable for the coal furnished by the plaintiff to the said companies. Among these drafts was one note in which one of these companies was the maker, and the defendant was an irregular indorser. The indorsement of that note was made under the same circumstances and agreement. These drafts were discounted by the plaintiff, and, upon failure of the acceptors to pay the same, they were duly protested, and the plaintiff was compelled to take them up. This the plaintiff did, and now brings action against the defendant, Haddock, upon his indorsement. At special term, the facts were found practically as above stated, and the-defendant was held liable both upon the drafts and upon the note. From the judgment entered upon that decision, this appeal is taken by defendant.
Argued before SMITH, P. J., and CHESTER, KELLOGG, and COCHRANE, JJ.
M. Edward Kelley, for appellant.
Israel T. Deyo, for respondent.

Opinion:
JOHN M. KELLOGG, J.
By section 114 of the negotiable instruments Law (chapter 613, p. 734, Laws of 1897), the liability of an irregular indorser is defined. It is there declared:
"Where a person,' not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser in accordance with the following rules: (1) If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties. (2) If the instrument is payable to.the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer. (3) If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee."
Prior to the statute an irregular indorser upon a note was presumptively not liable to the payee.
Section 118 of that law provides:
"As respects one another, indorsers are liable prima facie in the order in, which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise. Joint payees or joint indorsees who indorse are deemed to indorse jointly and severally."
This statute is substantially a re-enactment of the law as established by the cases. Moore v. Cross, 19 N. Y. 227, 75 Am. Dec. 326; Coulter v. Richmond, 59 N. Y. 478; Culliford v. Walser, 158 N. Y. 65, 52 N. E. 648, 70 Am. St Rep. 437; Davis v. Bly, 164 N. Y. 527, 58 N. E. 648, 79 Am. St. Rep. 670.
It is an exception to the rule that the terms or legal effect of a written instrument cannot be changed by parol. This case is squarely within the terms of section 118 and the above authorities. Subdivision 2 of section 114 of that statute does not purport to fix the rights of the various indorsers as between themselves, but declares that the irregular indorser is liable to all the parties subsequent to the "drawer," not subsequent to the "payee." The drawer, the payee, and the indorser are different parties to a bill; but the same person may occupy all those positions upon it. This section does not refer to persons, but to the parties to the bill. This statute, as the defendant construes it, destroys a legal right formerly existing under the rules of the law merchant, which rules section -7 preserves in any case not provided for by the státute. It should therefore be strictly construed. If it was _ the intent to prevent the payee from, recovering against the indorser,, he and not the drawer would have been mentioned. In any event the section does not purport to define the liability of one indorser to another. That matter is governed entirely by section 118. The two sections read well together.—one as showing the position of the parties while the paper is with the public as a negotiable instrument, the other as defining the rights of the indorsers as between themselves where the negotiable character of the instrument is unimportant.
The judgment should be affirmed. All concur, except SMITH, P. J., dissenting in opinion.