24. Transfer Of Paper After Maturity

Negotiable paper may be transferred by indorsement after maturity, but the rights of the parties are not the same as in other cases. The indorser simply conveys his right or interest in the note, and the maker can interpose any defense against such a purchaser as he could against the original payee, had he not parted with it. But if the original payee has no defense, and is liable thereon, an indorser after maturity may also be held, provided that a demand has been made on the maker within a reasonable time after his indorsement and notice of his non-payment has been given to the indorser as in other cases. The courts do not declare what a reasonable time is, for the running of notes thus indorsed after maturity; each case therefore stands by itself.

25. Negotiation Of Accommodation Paper

As we have seen, promissory notes originate in two ways : they are issued either in payment of merchandise of other property, or for the purpose of borrowing money on them. Those which have their origin in business transactions are called business or commercial paper; the other kind of note is known as accommodation paper. This is made by an agreement between the maker and payee, who is also the in-dorser, for the benefit of one of them.

The maker's promise or undertaking is to pay his note to any holder at maturity. He is liable, except to the payee, like the maker of any other paper. The indorser promises, in effect, that if the maker does not pay his note at maturity, he will do so as soon as he has received due notice of the maker's failure to fulfil] his promise. Very frequently accommodation notes are made for the indorser's benefit, and when the)' are, he must pay them. On other notes, as the maker has received the proceeds, he is responsible therefor, and the indorser can recover from him whenever he has been obliged to pay them.

As accommodation paper is made for the purpose of borrowing money, it must necessarily pass into the posses-; sion of a third party. The indorsee acquires a good title, and in every respect his rights are as perfect as those of the indorsee of commercial paper. The maker, therefore, can not sucessfully defend against the indorsee that he is not the owner, and gave no consideration therefor, or that he knew its real character The indorsee is no more required to prove the consideration paid by him than he is in other cases.

An accommodation note given to party for his use, with out restriction, can be pledged as security for a debt, and the maker is cut off as completely from making defenses against the person to whom it has been pledged as the maker of ordinary business paper is cut off from defending against the indorsee. Said an eminent jurist, "He who chooses to put himself in the front of a negotiable instrument for the benefit of his friend, must abide the consequence, and has no more right to complain if his friend accommodates himself by pledging it for an old debt than if he had used it in any other way." 1