Cooper v. Greenberg

Decision Date27 November 1950
Docket NumberNo. 3702,3702
PartiesBECKIE COOPER v. ABE GREENBERG. Record
CourtVirginia Supreme Court

Bertram S. Nusbaum and James G.

Martin, for the plaintiff in error.

Bangel, Bangel & Bangel, for the defendant in error.

JUDGE: EGGLESTON

EGGLESTON, J., delivered the opinion of the court.

On February 25, 1948, H. & L. Corporation, trading as Suburban Delicatessen, through David Levin, its president, executed and delivered to L. Greenberg its promissory note in the sum of $3,500, payable in one hundred weekly installments, the first of which was due on the following April 5. The note was also signed by David Levin, Beckie Cooper and Abe Greenberg as comakers, all of whom by its terms, were 'jointly and severally' bound to the holder. The makers likewise agreed, upon default, to pay the cost of collection, including an attorney's fee of 10% if incurred.

At the time of the execution of the note David Levin and Abe Greenberg were the principal officers and stockholders of the corporation. All of the interested parties are related or connected by marriage. David Levin is the son of Beckie Cooper, while Abe Greenberg is her son-in-law. L. Greenberg, the holder of the note, is the father of Abe Greenberg. At the time the note came due the corporation had become insolvent and L. Greenberg, the holder, exacted the full payment with interest and costs from Beckie Cooper, one of the comakers.

Shortly thereafter Beckie Cooper instituted the present action at law against Abe Greenberg, alleging that she had signed the note merely as an accommodation maker and as such was entitled to full exoneration at the hands of the comakers, David Levin and Abe Greenberg; and that inasmuch as Levin was insolvent and had left the jurisdiction, she, the plaintiff, was entitled to recover of Abe Greenberg, the full amount of the debt which she had been compelled to pay.

After Abe Greenberg had filed a plea of the general issue the matter was heard by the court without a jury. It adjudged that Beckie Cooper, Abe Greenberg and David Levin were all accommodation makers of the note and that in the present action Beckie Cooper, the plaintiff, was entitled to recover of Abe Greenberg, by way of contribution, one-third of the amount of the debt which the plaintiff had been compelled to pay to the holder thereof, with interest.

To this judgment the plaintiff excepted and upon her petition the present writ of error has been allowed. For convenience the parties will be referred to according to the positions which they occupied in the court below.

The first contention of the plaintiff is that since Abe Greenberg and David Levin were the officers and principal stockholders of the corporation, and were interested in its continuation and financial success, they were not accommodation makers of the note, while she, on the other hand, having no interest in the corporation, was a pure accommodation endorser and was therefore entitled to full exoneration from the two officers of the corporation for whose benefit the note was made.

The Negotiable Instruments Law (Code, sec. 6-381) defines 'an accommodation party' as 'one who has signed the instrument as maker, drawer, acceptor, or indorser without receiving value therefor and for the purpose of lending his name to some other person.'

Daniel on Negotiable Instruments, 7th Ed., Vol. 1, sec. 216, p. 277, defines 'an accommodation bill or note' as 'one to which the accommodating party has put his name, without consideration, for the purpose of accommodating some other party who is to use it and is expected to pay it.'

Whether an officer, or stockholder, who signs as comaker or endorses a corporation's note for the purpose of lending his credit to the corporation, is an accommodation party is a subject on which the authorities are not in accord. See Fletcher Cyclopedia, Corporations, Perm. Ed., Vol. 13, sec. 5745, p. 51; 11 C.J.S., Bills and Notes, sec. 742-a, p. 297.

Some courts take the view that the interest which the officer, director or stockholder has in procuring the loan for corporate purposes is a sufficient consideration to remove him from the status of an accommodation party. See Reed v. First Nat. Bank, 23 Colo. 380, 48 P. 507; Commercial Inv. Co. v. Graves (Tex. Civ. App.), 132 S.W. (2d) 439, 443.

For the opposite view, see Houser v. Fayssoux, 168 N.C. 1, 83 S.E. 692, Ann. Cas. 1917B, 835; Rommel Bros. v. Clark, 255 Ky. 554, 74 S.W. (2d) 933; Goldstein v. Brastone Corp., 254 App.Div. 288, 4 N.Y.S. (2d) 909; Sinkey v. Steffens, 126 Ohio St. 66, 183 N.E. 866.

But here the determination as to whether Levin and Greenberg were accommodation makers of the note does not depend upon their mere relation to or interest in the corporation. It is well settled that the rights and liabilities of comakers, as between themselves, depend on the terms of their contract which may be proved by parol evidence. Houston v. Bain, 170 Va. 378, 391, 196 S.E. 657, 662; 10 C.J.S., Bills and Notes, sec. 37-f, p. 465 ff; 11 C.J.S., Bills and Notes, sec. 675, p. 140.

The evidence here clearly shows that it was agreed at the time of the execution of the note that the three individuals, David Levin, Abe Greenberg and Beckie Cooper, were to sign as accommodation makers. Sidney Siegel, the attorney who prepared the note and attended to its execution and the procuring of the loan from L. Greenberg for the benefit of the corporation, so testified. He said that Abe Greenberg did not actually sign the note until after it had become due and then did so because it 'carried into effect his promise to be an accommodation maker for the corporation.' All three individuals, he said, signed as accommodation makers.

Since both the plaintiff and the defendant were accommodation makers of the note, the plaintiff cannot prevail in her contention that she is entitled to full exoneration from the defendant.

In the absence of an agreement to the contrary, accommodation makers of a promissory note are presumed to be cosureties, and as such they are liable for contribution to the one of their number discharging the obligation. 3 Michie's Jurisprudence, Bills, etc., sec. 172, pp. 359, 360; Stovall v. Border Grange Bank, 78 Va. 188, 193, 195; Huffman v. Manley, 83 W.Va. 503, 98 S.E. 613; 11 C.J.S., Bills and Notes, sec. 756, p. 342.

This brings us to the consideration of the measure of contribution which the plaintiff is entitled to exact of the defendant in the present action at law. While the plaintiff alleged that David Levin, one of the comakers, is insolvent, the proof falls far short of this. But inasmuch as the evidence does show that Levin was at the time of the institution of the present action a nonresident, his insolvency, as we shall presently see, is not a determinative factor.

The plaintiff insists that since Levin is a nonresident she is entitled to recover from Abe Greenberg, the other comaker, in this suit, one-half of the amount which she was compelled to pay, with interest. The defendant, Greenberg, insists that the lower court correctly held that in the present action at law he can be compelled to contribute only one-third of what the plaintiff has paid, with interest.

The right of one surety to call upon his cosurety for contribution arises from a principle of equity growing out of the relation which the parties have assumed towards each other; the equity springs up at the time of entering into that relation, and is fully consummated when the surety is compelled to pay the debt. ' Houston v. Bain, supra (170 Va., at page 390, 196 S.E., at page 662). See also, Wayland v. Tucker, 4 Gratt. (45 Va.) 267, 268,50 Am.Dec. 76.

The enforcement of contribution originally belonged to courts of equity on general principles of justice. While the jurisdiction to proceed in courts of law to enforce contribution is well recognized in some cases, equity retains its original jurisdiction, especially where the relief in a court of law is inadequate. Wayland v. Tucker, supra.

But there is a well-recognized difference in the measure of contribution which is applied at law and in equity.

In actions at law, according to the great weight of authority, contribution can be enforced only for the aliquot share of each co-obligor, and the insolvency or nonresidence of a co-obligor does not exclude him from consideration in computing the amount or proportion to be contributed by each of the others. In equity, on the other hand,...

To continue reading

Request your trial
18 cases
  • In re Wetzler
    • United States
    • U.S. Bankruptcy Court — District of Maryland
    • January 11, 1996
    ...A guarantor who is insolvent is not considered for the purposes of an equitable claim for contribution. Cooper v. Greenberg, 191 Va. 495, 502, 61 S.E.2d 875, 879 (1950). Accord, Restatement of Security, § 154(2). See also Jackson v. Cupples, 239 Md. 637, 640, 212 A.2d 273, 275 (1965). Since......
  • Fox v. Comm'r of Internal Revenue (In re Estate of Leavitt )
    • United States
    • U.S. Tax Court
    • February 10, 1988
    ...have owned various percentages of VAFLA, their obligations arising from their guarantees were identical. 21 See Cooper v. Greenberg, 191 Va. 495, 61 S.E.2d 875, 877 (1950). Pursuant to the guarantees, the Bank of Virginia could proceed against any one of the shareholder/guarantors for the f......
  • Good Gateway, LLC v. NRCT, LLC (In re Bay Circle Props., LLC)
    • United States
    • U.S. Bankruptcy Court — Northern District of Georgia
    • August 23, 2022
    ...per capita share, meaning the subsequent insolvency of a cosurety increases the exposure of solvent cosureties."); Cooper v. Greenberg, 191 Va. 495, 503, 61 S.E.2d 875 (1950) ("Contribution in a court of equity proceeds upon the application of the fundamental rule that equality is equity, a......
  • Hammons v. Ehney
    • United States
    • Missouri Supreme Court
    • June 25, 1996
    ...Millers Mutual Ins. Co. v. United States Fidelity and Guaranty Corp., 306 Pa.Super. 88, 452 A.2d 16, 18 (1982); Cooper v. Greenberg, 191 Va. 495, 61 S.E.2d 875, 878 (1950). Contribution may still be brought in equity. Tindall v. Holder, 892 S.W.2d 314, 324 (Mo.App.1994); Automobile Club Int......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT