Bills and Notes, Liability of indorsers. Contract, In writing. Evidence, Extrinsic affecting writings.
In an action brought on behalf of one indorser of a note against one of two other indorsers, the defendant may be allowed to show that the indorsements were for accommodation and that by an oral agreement among the indorsers his liability in no event was to exceed one third of the amount at any time due on the note; and if such an agreement is proved, his liability is governed thereby irrespective of the order in which the indorsers signed the note.
If a promissory note is payable to the order of the maker and is indorsed in blank by the maker and by several accommodation indorsers, who orally have agreed among themselves as to the proportions for which they shall be liable in case of a default by the maker, and one of the accommodation indorsers, after a default by the maker, pays the entire amount due on the note to the holder and then writes above the indorsements on the note the words, "Pay to the order of" an agent of such indorser, it seems, that an action in the name of the agent against another of the indorsers cannot be maintained upon the note, the remedy of the indorser who paid being by an action upon the oral agreement of the indorsers for contribution.
RUGG, C.J.
There was evidence from which it might have been found that the plaintiff was simply the agent of one of the indorsers of the note in taking up the note after maturity and in bringing this action.
The defendant was the first of the four indorsers upon the note. The true relation as between themselves of parties liable on a note may be shown by oral evidence in actions between them to determine their respective obligations. It is only in the absence of proof to the contrary that the law fixes the legal effect of their liability on the instrument in accordance with the order of the signatures. Enterprise Brewing Co. v. Canning, 210 Mass. 285. When an outside agreement is proved, the rights of the parties as to each other are fixed in accordance with its terms regardless of the order in which the signatures appear on the note. Lewis v. Monahan, 173 Mass. 122. There was ample evidence to support a finding that the indorsers, of whom there were three at the outset, agreed before signing the original note that they should share equally whatever they might be required to pay on it, and that later when the wife of one of the three signed a renewal of the original note, making four indorsers, it was agreed that the proportion of liability of the defendant should remain the same. The jury, as shown by the verdict, believed that this agreement was made. The plaintiff technically was not entitled to recover on the note. The action should have been by the indorser who has paid for contribution upon the oral agreement. The rulings were sufficiently favorable to the plaintiff.
Exceptions overruled.