Court Opinion

ID: 9862959
Source: CourtListenerOpinion
Date Created: 2023-09-25 02:34:23.990798+00
Date Added: 2024-06-11T11:45:18.611572
License: Public Domain

SAM D. JOHNSON, Justice
(dissenting).
This dissent is respectfully submitted on the issue of D. M. Darden, Jr.’s accommodation status. An accommodation party must be a surety. Darden was never a surety and there was no intent that he ever becomes such. Darden is therefore not entitled to claim the defense of accommodation maker and the judgments of the *929courts below should accordingly be affirmed.
Section 3.415(a) of the Texas Business & Commerce Code, Vernon’s Annotated Civil Statutes, recites, “[a]n accommodation party is one who signs the instrument in any capacity for the purpose of lending his name to another party to it.” Comment 2, clarifying Section 3.415, reads :
“2. Subsection (1) eliminates the language of the old Section 29 requiring that the accommodation party sign the instrument ‘without receiving value therefor.’ The essential characteristic is that the accommodation party is a surety, and not that he has signed gratuitously. He may be a paid surety, or receive other compensation from the party accommodated. He may even receive it from the payee, as where A and B buy goods and it is understood that A is to pay for all of them and that B is to sign a note only as a surety for A.”
Comment 2 clearly indicates that the accommodation party must be a surety and this is the requirement Darden fails to meet. For suretyship to exist, there must be an obligee and more than one obligor; e. g., a tripartite arrangement involving the lending of credit. “Broadly defined, a surety is a party to a contract who agrees to pay the obligation of another under some circumstances.” Peters, Suretyship Under Article 3 of the Uniform Commercial Code, 77 Yale L.J. 833 (1968). “Sure-tyship is the relation which exists where one person has undertaken an obligation and another person is also under an obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform.” RESTATEMENT, Security § 82 (1941). “Suretyship is invariably a tripartite relationship in which the obligation of the surety is intended to supplement an obligation of the principal (also described as the debtor or obligor) owed to the creditor (also described as the obligee).” Clark, Suretyship in the Uniform Commercial Code, 46 Tex.L.Rev. 453 (1968).
Under the singular facts in this case, Darden is not a surety. Warren testified and the jury found that Tirey intended to list these notes on his financial statement. The notes were not negotiated and there is no evidence in the record that Tirey or Darden contemplated their negotiation. That being so, Darden did not lend his credit to Tirey on the instrument. A tripartite arrangement involving the lending of credit never came into existence. No creditor was looking to Tirey as principal debtor and Darden as surety on the instrument. Failure to prove suretyship is fatal to Darden’s case for, as comment 2 of Section 3.415 of the Texas Business & Commerce Code, V.A.C.S., clearly specifies, “[t]he essential characteristic is that the accommodation party is a surety, . . .” [Emphasis supplied.]
Cases in which a party obligated on an instrument has defended by claiming that the payee is an accommodated party are few in number, but support the result reached here. Cases in which the defendant seeks to avoid liability on a note by claiming he signed as an accommodation to the payee break down into two categories: (1) cases which actually turned on lack of consideration; and (2) cases which turned on true accommodation status. Keeping this distinction in mind clarifies prior cases immensely.
Several cases which denied the payee recovery against the maker speak in terms of accommodation parties and thus appear at first glance to be relevant to the instant case. Whitesboro Nat. Bank v. Wells, 143 Tex. 232, 184 S.W.2d 276 (1944); First Nat. Bank v. Reed, 198 Cal. 252, 244 P. 368 (1926); Central Nat. Bank v. Lawson, 27 S.W.2d 125 (Tex.Comm’n App.1930, jdgmt adopted); Lepori v. Hilson, 109 Cal.App. 295, 293 P. 86 (1930); and Deems v. Wilson, 114 Ga.App. 341, 151 S.E.2d 230 (1966). However, in each of these cases the discussion about accommo*930dation parties was dicta because the instruments in each case were not supported by consideration. With the exception of Deems v. Wilson, supra, all of the cases were decided under the Uniform Negotiable Instruments Law which varied in one critical respect from the Uniform Commercial Code. The Uniform Negotiable Instruments Law, Article 5933, Section 29, V.A.C.S., required that an accommodation party sign “without receiving value therefor.” Thus, in the context of the above cases, where the payee sued the maker, the result turned solely on lack of consideration. If the maker proved no consideration, the court sometimes termed him an accommodation maker, but the failure of consideration was a defense in itself. Some of the confusion in thinking and terminology is illustrated in Central Nat. Bank v. Lawson, supra, where the court said, “[i]t is also insisted that parol evidence was not admissible to show a promise by the bank’s president that he (Lawson) would never be called on to pay the note . . . but in all those cases the rule is recognized that parol evidence is admissible to show a failure of consideration.” 27 S.W.2d 125 at 127. Further on in the opinion the Lawson court said, “[i]n this case Lawson pleaded two complete defenses, one of failure of consideration, which includes that of accommodation maker, . . .” 27 S.W.2d 125 at 128.
In cases where the maker could not prove a failure of consideration, the courts have been more careful of their terminology. In all cases where the maker, co-maker, or endorser defended by claiming that the payee-plaintiff was actually an accommodated party, the courts have denied recovery to the payee only where the alleged accommodation party was a surety. For example, in McKeever v. Brooks-Davis Chevrolet Co., 74 S.W.2d 311 (Tex.Civ.App. — Eastland 1934, writ dism’d), the payee requested the endorser’s signature so he could “sell said note, or borrow money thereon.” See also United Refrigerator Company v. Applebaum, 410 Pa. 210, 189 A.2d 253 (1963). Since the parties to the notes in these two cases contemplated that the payee would further negotiate the note, the defense of accommodation endorser was correctly asserted. The taker of the note from the payee would be the creditor with the right to call on both the original payee and the endorser. As between themselves, the endorser was lending his credit to the payee to make further negotiation of the note possible.
Where the note is not negotiated and no intent to further negotiate the note is shown, the payee is not an accommodated party. The Missouri Court of Appeals has twice denied relief to a maker who claimed to have accommodated the payee. McIntosh v. White, 447 S.W.2d 75 (Mo.Ct.App.1969); Morrison v. Painter, 170 S.W.2d 965 (Mo.Ct.App.1943). As explained in these cases, for the maker to be lending his credit to the payee, the purpose of the transaction must be for the payee to obtain credit on the strength of the maker’s name by further negotiating the note. A Texas court of civil appeals followed the same logic in denying relief to a co-maker in Brinker v. First Nat. Bank, 16 S.W.2d 965, 967 (Tex.Civ.App. — Austin 1929). Although the court of civil appeals opinion was affirmed in part and reversed in part on appeal (Tex., 37 S.W.2d 136, 1931, jdgmt. adopted), the commission of appeals found that the co-maker had accommodated the other maker, never reaching the question of facts necessary to prove that the payee was an accommodated party. In a subsequent Texas case where an endorser claimed to have accommodated the payee, the court said, “[i]t is only in those cases where the note is executed for the sole purpose of its negotiation by the payee in order that he may obtain credit thereby, and under an agreement that he is to provide for payment at maturity and indemnify the maker, that the instrument becomes in law accommodation paper for the payee.” Paden v. American State Bank & Trust Co., 103 S.W.2d 243, 245 (Tex.Civ.App. — El Paso 1937, writ dism’d).
*931There is a line of cases establishing that a payee may not rely on a prior or contemporaneous agreement between the maker and the payee that the note will not be enforced; oral testimony regarding such agreement violates the parol evidence rule and will not be received. McPherson v. Johnson, 436 S.W.2d 930 (Tex.Civ.App.—Amarillo 1968, writ ref'd n. r. e.); Martin v. Coastal States Gas Producing Company, 417 S.W.2d 91 (Tex.Civ.App.-Eastland 1967, no writ). In both McPherson and Martin the maker claimed that the plaintiff had told him the note would not be enforced, and in both cases the court said this was an attempt to vary the terms of the note with a prior or contemporaneous oral agreement and as such was no defense. See also Snowden v. Franklin National Bank of Long Island, 338 F.2d 995 (5th Cir. 1964). Other jurisdictions have recognized that public policy estops the parties to a note from claiming an agreement not to enforce a negotiable instrument. Perfect Pictures Frames, Inc. v. Consolidated Fine Arts, Ltd., 9 U.C.C.R.S. 283 (N.Y.Sup.Ct.1971); Lincoln National Bank v. Govern, 5 U.C.C.R.S. 382 (N.Y.Sup.Ct.1968); National Bank of North America v. Around the Clock Truck Service, 5 U.C.C.R.S. 866 (N.Y.Sup.Ct.1968); Marine Midland Trust Co. of New York v. Couphos, 3 U.C.C.R.S. 66 (N.Y.Sup.Ct.1965); Anderson, Uniform Commercial Code, Vol. 2, § 3.415.10 at 1003 (1971).
Suretyship should be distinguished. In a suretyship arrangement it is understood at the outset that the note is enforceable. It is implicit in such relationship that if the party making the accommodation is called upon to pay the note he may require reimbursement from the accommodated party.
What Tirey and Darden did in the instant case was agree between themselves that Tirey would not enforce the instruments Darden executed, precisely the type of agreement Texas courts hold invalid. If Tirey and Darden had contemplated negotiation of the notes with the understanding that Tirey would be ultimately liable despite Darden’s signature as maker, then the defense he asserted here, that of accommodation maker, might be held valid. The instant record is utterly devoid of any such indication or proof of this, however. The distinction is between an invalid agreement that a note will not be enforced and a valid suretyship reimbursement agreement. Absolving Darden from liability abolishes the suretyship requirement in the Uniform Commercial Code and overturns McPherson v. Johnson, supra, and like cases.
STEAKLEY, J., joins in this dissent.