Sheahan v. Davis

Opinion by Mr. Justice Moore. The question here presented is whether the maker of a negotiable promissory note will become liable to one who, without his request, indorses it for the accommodation of another, in case such indorser is compelled to pay it upon default of the maker. The rule is well settled that one who voluntarily and officiously pays the debt of another, without any request or authority to do so from the debtor, cannot recover from him the sum so paid: 2 Edwards on Bills and Notes, § 728; Byles on Bills, 273. The reason for this rule doubtless is that by the voluntary payment of the debt no privity of contract is created between the debtor and the person paying the debt; but when a creditor assigns the debt, though without the request of the debtor, a privity of contract between the assignee and the debtor is established. The maker of a negotiable note promises to pay at maturity to the person lawfully holding it the amount of money named therein, and an indorser of such note who, upon the default of the maker, satisfies the demands of the indorsee, and takes up the note, becomes the lawful holder, and may enforce the terms of the contract against all prior indorsers who have been notified of the dishonor, as well as against the maker, who, by putting such a note in circulation, invites indorsements thereof, which invitation, when accepted, creates a privity of contract between the maker and indorser: Barker v. Parker, 10 Gray, 349. If the plaintiff indorsed these notes to accommodate McCaffrey, his liability was equally as great as though 281 he had at one time been the lawful holder for value, and transferred them in the ordinary course of business: 2 Randolph on Commercial Paper, § 692. The plaintiff having incurred this liability upon the faith of the maker’s promise and the obligation of the payee’s indorsement, shall the defendant be allowed to escape his liability as maker because he did not request the plaintiff to indorse these notes? It is true the plaintiff alleged he was an accommodation indorser for the defendant; but, having taken up the note upon the maker’s default, his right of action depends upon the fact of his indorsement, and not upon the manner of it: 2 Randolph on Commercial Paper, §743. If the plaintiff, to accommodate McCaffrey, indorsed the notes in good faith, believing them to have been executed for a valuable consideration, and the indorsees discounted them before maturity, in good faith, without knowledge or notice of any infirmities therein, the plaintiff incurred a conditional liability, and when the maker made default in their payment his liability to the indorsees became fixed, and it was his duty to satisfy their demands, and take up the notes: 2 Randolph on Commercial Paper, § 747. Upon such a payment of the notes the law subrogated him to all the rights the indorsees had against the payee and maker; and he, being a Iona fide holder, became entitled at once to proceed against the maker, and it could make no difference with his legal or equitable rights what he may have heard or ascertained in regard to fraud in the original consideration after his liability had been incurred: Beckwith v. Webber, 78 Mich. 390, (44 N. W. 330,) for when an indorsement has been made in good faith, and the indorser has been compelled to pay and take up a negotiable promissory note at or after its maturity, his title relates back to the date of his indorsement, and he thus be 282 comes the lawful holder for value and without notice although after his indorsement he may learn of the want or failure of the original consideration. The indorsees having acquired these notes before maturity, for value, and without knowledge or notice of their want or failure of consideration, they had such a title as rendered the defendant liable to them for the amount thereof; and if the plaintiff indorsed them in good faith, believing that they had been executed for a valuable consideration, then upon acquiring the title from the indorsees the defendant became liable to the plaintiff for their payment; and it can make no difference whether the indorsement was made for the accommodation of another or for value, since an accommodation indorser cannot recover from the maker until he has paid and satisfied the demands of the indorsees. The defendant by executing-his negotiable promissory notes impliedly requested the plaintiff to indorse them, and, having done so, a privity of contract between them was established, and it was error to instruct the jury that the defendant would not be liable thereon if the plaintiff without his request had indorsed them for McCaffrey’s accommodation alone, for which reason the judgment is reversed and a new trial ordered. Eeversed.