Rylee v. Wilkerson

• Decision Date: 12 May 1924
• Docket Number: 24134
• Citation: 99 So. 901,134 Miss. 663
• Court: Mississippi Supreme Court
• Parties: RYLEE v. WILKERSON. [*]

99 So. 901

134 Miss. 663

RYLEE v. WILKERSON. ^[*]

No. 24134

Supreme Court of Mississippi

May 12, 1924

Division B

Suggestion of Error Overruled May 26, 1924.

APPEAL from circuit court of Tallahatchie county, HON. J. W KUYKENDALL, Special Judge.

Action by W. R. Wilkinson against W. J. Rylee. Judgment for plaintiff, and defendant appeals. Reversed and Judgment rendered.

Judgment reversed.

Featherstone & Breland, for appellant.

The court below erred in giving a peremptory instruction in favor of the appellee. The appellant had the same defenses to the note herein sued on against the appellee as he would have had against the payee therein. There was no liability by the appellant, the maker of the note, to the payee herein. One who draws or indorses accommodation paper for the accommodation of another is not liable on it to him (See 3 R. C. L., sec. 336; 8 C. J. 259, sec. 409). All the authorities seem to hold that as between the accommodation maker and the accommodation party there is no consideration. (See Green v. McCord (Ala.), 85 So. 750.) This case is governed by the Uniform Negotiable Instrument Act; see section 52, section 28, and section 57.

The holder of accommodation paper can recover from the accommodation maker, without being subject to any defense of the maker, where he acquires such paper for value, in due course of trade, and before the paper is over-due. All persons who give value for paper are holders for value in respect to all parties who become such prior to that time, but the fact they gave value for the paper will not preclude the maker from setting up any defense against such holder that he would have against the original payee, if the paper was not acquired in due course and for value. If this rule is not applicable to negotiable accommodation paper the same as to ordinary negotiable commercial paper, then accommodation paper is in a class to itself, and the Uniform Negotiable Instrument Act has not made negotiable paper uniform, and the main purpose for which it was enacted has failed, and the sections of the Code first above referred to, are empty and meaningless as far as it applies to accommodation paper. Merchants' National Bank v. Smith, 59 Mont. 280, 196 P. 523, 15 L. A. R. 430.

Furthermore, there is another rule of law, applicable here. "On a bill or note which is void between the original parties for want of consideration, as being mere accommodation paper, a bona-fide indorsee is only entitled to recover the amount that he, or some prior holder, through whom he derives title, paid for it, together with interest on such amount." (See 3 R. C. L. 1053, sec. 257 and cases cited under note 8). If the above rule is applicable to a bona-fide holder of accommodation paper, how much greater is the reason for the rule where the holder became such three years after the note became due.

R. L. Cannon, for appellee.

The note is supported by a valid and sufficient consideration. When an accommodation note is delivered to the purchaser, his purchase constitutes a consideration sufficient to support the contract. Meggett v. Baum, 57 Miss. 22; Hawkins v. Neal, 60 Miss. 256; Millsaps v. Bank, 71 Miss. 361, 13 So. 903; Marling v. Jones, 138 Wis. 82, 119 N.W. 931, 131 Am. St. Rep. 996; Hemingway's Code, section 2603 (section 25, Un. Neg. Inst. Act): "Consideration--What constitutes. Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time." Appellee's testimony shows such consideration.

The mere fact of appellee's purchase of the note after its maturity does not preclude his recovery on the ground that it was an accommodation note. The common-law rule, or rather, the rule of the law merchant, is that a transferee taking accommodation paper after maturity from the accommodated payee takes such paper free of the defense that it is accommodation paper and without consideration. Norton on Bills and Notes (3 Ed.), 180; Marling v. Jones, 138 Wis. 82, 119 N.W. 931, 131 St. Rep. 996; Mersick v. Alderman, 77 Conn. 634, 2 A. & E. Ann. Cas. 254.

There was no diversion of the note from the purpose for which it was made. The mere promise or statement of the accommodated party that he will use accommodation paper for a particular purpose will not amount to such a restriction as to its use as will render the violation of the promise a legal diversion of the paper, unless it is exacted or made as the condition on which the accommodation is given and is relied on by the party giving the accommodation. 8 C. J. 279, sec. 437; Farley & C. Bank v. Henderson, 118 Ala. 441, 24 So. 428.

OPINION

COOK, J.

On June 20, 1918, W. J. Rylee, defendant in the court below, executed and delivered to J. H. Cook his promissory note for two hundred dollars, payable on or before December 1, 1918, and bearing interest at eight per cent. per annum from maturity. Cook indorsed the note, with out recourse, and more than three years after its maturity, he delivered it to W. R. Wilkinson, plaintiff in the court below, in settlement of an account owing by Cook to Wilkinson. Payment of the note having been refused, the plaintiff instituted this suit for the recovery of the amount thereof, with interest and attorney's fees. The defendant filed a plea of the general issue, and gave notice thereunder that, as a defense to said note, he would offer evidence to show that there was no consideration whatever for said note, but that it was executed and loaned to the payee, Cook, solely for his accommodation, and under an agreement that it would be returned to the maker before the maturity thereof, and that the plaintiff received the note from the payee long after it was due. At the conclusion of the testimony the court granted the plaintiff a peremptory instruction, and from the judgment entered in pursuance thereof the defendant has prosecuted this appeal.

Other than the note sued on, the only testimony introduced was that of the appellant and appellee. The appellee testified that he made the note for the accommodation of the payee, without receiving any consideration therefor, and that he promised that he would "take care of the note and return it" to the maker. This testimony is undisputed, and it is admitted that the note was negotiated to the appellee by the payee about three years after its maturity.

So far as this record discloses, the negotiation of this note to appellee was the first negotiation thereof, and the question for decision is whether the accommodation maker of the note is liable to a holder for value who acquired it from the payee after its maturity. .

On this question there is a conflict of authority, and there is an apparent conflict in the several controlling provisions of the Negotiable Instruments Law. Section 29 of the Uniform Negotiable Instruments Act (section 2607, Hemingway's Code) 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," and provides that "such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party." Section 26 of said act (section 2604, Hemingway's Code) provides that "where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time." If this definition of a holder for value, and the provision that an accommodation party is liable on the instrument to a holder for value, be considered alone, it would seem that where an accommodation note has been negotiated for value after it is overdue even though it be the first negotiation and to one having knowledge of the accommodation, the accommodation maker is liable to such holder for value, and it was so held in the cases of Marling v. Jones, 138 Wis. 82, 119 N.W. 931, 131 Am. St. Rep. 996; Mersick v. Alderman, 77 Conn. 634, 60 A. 109, 2 Ann. Cas. 254; and the three English cases of Charles v. Marsden, 1 Taunt. ...