National Citizens' Bank of the City of New York, Respondent, v. Emma Ida Toplitz, Appellant

National Citizens’ Bank of the City of New York, Respondent, v. Emma Ida Toplitz, Appellant. Accommodation note — an extension of the time of payment thereof without the consent of the accommodation maker does not discharge him from liability thereon. Where a promissory note, made by the maker for the accommodation of the payee with the intent that the payee should raise money thereon, is discounted by a bank for the benefit of the payee, with knowledge of its accommodation character, the action of the bank in extending, after the maturity of the note, the time of payment thereof, without the knowledge or consent of the accommodation maker, does not operate to discharge the. accommodation maker. In such a case the accommodation maker is primarily liable upon the note and the relation of principal and surety does not arise. The rights of the accommodation maker are not impaired by the extension of the time of payment, as she cannot maintain an action against the payee on the note itself. Appeal by the defendant, Emma Ida Toplitz, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 24th day of October, 1902, upon the verdict of a jury rendered by direction of the court after a trial at the New York Trial Term. Richard L. Sweezy, for the appellant. Charles Blandy, for the respondent. [MAJORITY — Patterson, J.:] Patterson, J.: On the 26th of December, 1899, the defendant made her promissory note by which she promised, five months after date, to pay to the order of L. Toplitz, Son & Co., $5,000 at the Chemical National Bank, New York, for value received. The note was indorsed by L. Toplitz, Son & Co. and was discounted by the Ninth National Bank, to the rights of which bank the plaintiff has succeeded by consolidation of the tfvo corporations. This was an accommodation note, and when it was discounted by the Ninth National Bank that bank had full notice that it wa's an accommodation note. It was not paid at maturity, and at the request of the indorsers for whose benefit it was discounted the time of payment was extended without the knowledge of the maker. ;The complaint is in the usual form of an action upon a promissory note against the maker, with an admitted credit of $1,000 paid on account. The answer sets up that the note was delivered as an accommodation note for the express purpose of having the same discounted by the Ninth National Bank of the City of New York, and upon the distinct understanding that at its maturity;it should' be taken up and paid by the indorsers; and that subsequent to the' delivery of the note the Ninth National Bank had knowledge that it was given for accommodation; and that after its maturity the Ninth National Bank, without the knowledge or consent of the defendant, entered into an agreement by which it extended the time of payment of the note, and that for a certain fixed .time it would not collect or enforce payment thereof. When the case came on for trial the facts set up in defense were admitted, and the simple question arising was whether as to the plaintiff in the action, the defendant, the maker of the note, stood in the attitude of a surety and was released from her obligation as maker of the note by reason of the extension of the time of payment given to the person for whose benefit the note was discounted, ' without her knowledge or consent. The trial judge held that the facts thus set up did not constitute a defense, and that the defendant was primarily liable as the maker of the note, notwithstanding the extension of the time of payment. In this ruling the trial court was right. Concededly this was .an .accommodation note; it was given with the intention that the indorser should raise money on it, on the liability of the maker, and the maker is liable primarily notwithstanding the knowledge of the holder that she was an accommodation maker only. (Neg. Inst. Law [Laws of 1897, chap. 612], | 55, as amd. by Laws of 1898, chap. 336.) This note was discounted on the credit of the maker whose very purpose was to become absolutely liable. Thus she became primarily liable. There is no relation of surety. By section 3 of the Negotiable Instruments Law, the person primarily liable is the one who hj the terms of the instrument is absolutely required to pay the same, and all other persons are secondarily liable. No other question of liability can arise in this case than such as appears upon the face of the instrument. The case is entirely unlike that of Grow v. Garlock (97 N. Y. 81), in which it was held that, as between two debtors standing to each other in the relation of principal and surety, the fact being known to a creditor, that creditor was bound to respect such relationship, no matter how or when it arose, or whether he consented to it or not. But the present case, if not determinable by the ordinary rules relating to negotiable paper, is controlled by the 3d section of the Negotiable Instruments Law. The .note was made by the defendant in order that the indorsers might receive money upon her credit. That is the very essence of an accommodation note. That credit was- given and the indorser received the money. The maker was thus a principal debtor. She lost nothing by the extension of time to the indorser, for she had no right of action on the note itself as against the indorsers. She could not sue them on the note and she lost nothing of her claim against them, for by paying the note at any timé she could have maintained her action to recover from the indorsers notwithstanding the extension of the time of payment of the note by the bank. On the note itself the maker never could recover against the indorsers. It may be evidence of an indebtedness of them to her, the circumstances under which it was made being shown; but the liability of the indorsers to the maker would arise, not on the note, but out of the original credit given for their benefit and her payment of money on their behalf. The verdict for the plaintiff was properly directed and the judgment should be affirmed, with costs. Van Brunt, P. J., O’Brien, Ingraham and Hatch, JJ., concurred. Judgment affirmed, with costs.