Young v. Exchange Bank of Kentucky

• Decision Date: 18 February 1913
• Citation: 152 Ky. 293
• Parties: Young v. Exchange Bank of Kentucky.
• Court: Kentucky Court of Appeals

Page 293

152 Ky. 293

Young v. Exchange Bank of Kentucky.

Court of Appeals of Kentucky.

Decided February 18, 1913.

Appeal from Fayette Circuit Court.

SHELBY & SHELBY, for appellant.

JOS. S. BOTTS, GEO. C. WEBB, for appellee.

OPINION OF THE COURT BY JUDGE CARROLL — Reversing.

On June 11, 1903, E. B. Carr drew a thirty-day sight draft on himself, payable to W. A. Young, for $4,000. He accepted the draft, which was payable at the Market Street National Bank of Philadelphia, by writing his name across the face of it, and W. A. Young endorsed it by writing his name on the back of it.

With the draft in this condition, it was presented for discount to the appellee, Exchange Bank of Kentucky. The bank officers declined to accept the draft unless it was endorsed by the appellant, Mrs. Amelia A. Young, who was the mother of W. A. Young; whereupon W. A. Young procured his mother to endorse the draft, which she did by writing her name on the back of the draft under the name of W. A. Young. After the draft was thus endorsed, it was accepted and discounted by the bank.

On July 9, 1903, two days before the maturity of the draft, Young and Carr came to the bank and requested a renewal of the loan, but the bank officers declined to do this, and thereupon Carr drew a check on the Market Street National Bank of Philadelphia in favor of W. A. Young for $4,000, and Young endorsed the check and delivered it to the bank in payment of the draft, which, after being stamped "paid," was then delivered to one of them. In due course of business the bank sent the check to the Market Street National Bank, and on July 15th the Market Street National Bank protested the check and immediately notified the appellee Bank. On July 15th the cashier of the appellee bank went to see Mrs. Young and informed her that the check given for the draft which she had endorsed had been protested, and that the bank would look to her for the payment of the draft. The cashier and Dr. Sherley, who was an officer of the bank, testify that Mrs. Young on this occasion, as well as at other times subsequently, promised to pay the bank the amount of the draft. Mrs. Young admits having conversations with the cashier and Sherley in reference to the matter, but denies that she in any manner, or at any time, agreed to pay the draft or become responsible for the amount of it.

The only issue of fact in the case relates to the conversations had between Mrs. Young and the officers of the bank after the check had been returned protested, and as Mrs. Young could not be made liable even if she promised to pay the draft at the times testified to by the cashier and Sherley, as there was no new consideration for the promise, if one was made, it is not necessary to notice further this feature of the case. Mechanics & Farmers Savings Bank v. Katterjohn, 137 Ky., 427; Sebree Deposit Bank v. Moreland, 96 Ky., 150.

The bank, failing to collect the draft from any of the parties, brought this suit against Mrs. Young, and on a trial before a jury, a verdict was returned in favor of the bank, and judgment entered accordingly. Mrs. Young asks a reversal of this judgment upon the ground that she was merely an accommodation endorser of the paper and was discharged from liability on it by the failure of the bank to protest the paper at its maturity and give her notice of its dishonor.

In answer to this the bank insists: (1) That Mrs. Young was not an endorser of the paper in a legal and technical sense, and therefore was not entitled to notice of its non-payment; (2) That even if Mrs. Young should be treated as a legal and technical endorser of the draft, it was excused from giving her notice of its dishonor sooner than it did by reason of the fact that before its maturity it accepted in good faith the check given for the payment of it, and believing that the check would be paid, delivered the draft, as before stated, and did not have possession of it when it matured on July 11, or have any notice that the check would not be paid until July 15th, on which date it notified Mrs. Young of the protest of the check.

Upon the facts, about which there is no dispute, we may say at the outset that if Mrs. Young was, in the legal and technical sense, an accommodation endorser of the paper, she was released from liability by the failure of the bank to protest it for non-payment at maturity and give her notice, as it could have done on the same or the next day, unless it be that the circumstances connected with the acceptance of the check and the delivery of the draft excused the bank from the duty of protest and notice.

In disposing of the case we will first consider the attitude that Mrs. Young occupied toward the draft. In behalf of the bank it is argued by counsel that, as Mrs. Young signed her name on the back of the draft before it was delivered to the bank, for the sole purpose of giving credit to Carr and Young, and to enable them to secure money from the bank, which they did on her credit, that she was never either the payee, or assignee, or owner of the draft, and therefore could not transfer title to it or put it in circulation, and so was not an endorser in the legal meaning of the word, but a surety, maker, or guarantor of the paper, and consequently not entitled to notice.

As the transaction occurred before the adoption in this state of what is known as the "Negotiable Instruments Law," and we had no statute treating of the rights and liabilities of persons who occupy toward commercial paper the attitude of Mrs. Young, the question whether she should be treated as a surety, maker, or guarantor, or as an accommodation endorser in the legal meaning of the words, must be settled according to the law merchant as administered in this state, if the matter has been put at rest by the decisions of this court, and if it has not been, then we will determine it as a new question upon what we conceive to be correct principles of commercial law.

We are led to say that we will adopt the rule announced in this state, if one has been announced, because before the adoption of the Negotiable Instruments Law, there was great diversity of opinion among the courts of the country on this subject, and the courts of each state followed the precedents they had laid down without attempting to modify or change them to conform to the ruling in other jurisdictions. Some of the courts held that a party who signed his name on the back of a bill, as Mrs. Young did, for the sole purpose of giving credit to the party for whose accommodation he endorsed, should be treated as a joint maker or surety. Other courts held that such a party was a guarantor, and others that he was an endorser.

In this state the exact question submitted by counsel for the bank has never been directly adjudicated by this court, although in a number of cases, beginning with the early history of the court, it has been announced that to hold an accommodation endorser liable it was necessary that the paper should be presented for payment and if payment refused, protested for non-payment, and notice of its dishonor given to the accommodation endorser.

It has also been well settled by this court that an accommodation endorser is one who signs his name to paper without any consideration therefor, and for the sole purpose of giving credit to some other party to the paper, and it is not disputed that Mrs. Young was an accommodation endorser in the sense that she signed her name on the back of the note without receiving any consideration or benefit therefor, and for the sole purpose of giving credit to Carr and Young. But notwithstanding the fact that her attitude on the paper fulfilled all the requirements necessary to constitute her an accommodation endorser, it is yet insisted that because she did not at any time own the paper or have title to it, or transfer the title to some other party, she is not to be considered an endorser in the sense that it was necessary, to hold her liable, that the paper should have been presented and protested and notice given her of its dishonor.

In support of this position we are referred by counsel to a number of decisions from other courts, some of which directly hold that an endorser such as Mrs. Young was, is not released from liability by the failure to present the paper or protest it or give notice of its non-payment. Among the representative cases so holding is Sibley v. American Exchange National Bank, 97 Ga., 126, 25 S. E. Rep., 470. In the course of its opinion in that case the court said:

"The contract of endorsement is one which in its very essence involves the transfer of title to promissory notes and bills of exchange; and before one can become an endorser at all, or be classed as such, his contract must involve the transfer of title to that class of securities. The mere fact that one's name appears to have been written upon the back of a note does not make him necessarily an endorser of that paper. His liability is not to be determined by the physical relation of his name to the paper, but by his legal relation to the contract. If his legal relation to the contract were such that in the course of its due transmission from one holder to another, the name of the person appearing on the back was properly endorsed in order to accomplish that result, then he may be properly classed as an endorser, whether his name was placed upon the back of the paper in the capacity of a bona fide holder transferring to another, or in the capacity of one who, without consideration, but for the accommodation of the real beneficiary for whom the paper was drawn, had endorsed his name upon it, but if he be a stranger to the note, the legal title thereto never having been in him, nor, in fact, passed through him as an endorsee, a mere blank endorsement of his name upon it renders him liable as a guarantor or surety, as his contract may be, and without the right to notice of non-payment."

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