O.C.G.A. § 11-3-419 (2019)

Annotations

Cross references. Proof of suretyship by parol, § 10-7-45.

Law reviews. For article discussing parol evidence in the law of commercial paper, see 13 Ga. L. Rev. 53 (1978).

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION PAROL EVIDENCE General Consideration Editor’s notes. - In light of the similarity of the statutory provisions, certain decisions under former Code 1933, §§ 14306, 14-604, 14-605, 14-607, 14-609, 109A3-415 and former Code Section 11-3-415 are included in the annotations for this Code section. Surety. - An accommodation party is always a surety. Griswold v. Whetsell, 157

Ga. App. 800, 278 S.E.2d 753, 1981 Ga. App. LEXIS 2015 (1981) (decided under former Code Section 11-3-415). Factors in determining status. - In resolving question of whether one is an accommodation party and in resolving issue as to identity of party accommodated, intention of parties is the determinative element. Barylak v. Jordan, 156 Ga. App. 508, 274 S.E.2d 846, 1980 Ga. App. LEXIS

3096 (1980) (decided under former Code 1933, § 109A-3-415). Two primary factors are usually found to indicate accommodation party status: (1) the accommodation party received no benefits from the proceeds of the instrument, and (2) the signature was needed by the maker to acquire the loan. Other factors which have been required to be shown in order to determine whether a party can claim this status include the purpose in signing the instrument, and the intent of the parties to the instrument. Bank S. v. Jones, 185 Ga. App. 125, 364 S.E.2d 281, 1987 Ga. App. LEXIS 2462 (1987) (decided under former Code Section 11-3-415). Accommodated party need not be actual party to note. - The concept of an “accommodation party” as it is recognized in Georgia is a broad one, and there is no requirement that the accommodated party personally be an actual party to the note. Scott v. Citizens Bank, 188 Ga. App. 618, 373 S.E.2d 633, 1988 Ga. App. LEXIS 1117 (1988) (decided under former Code Section 11-3-415). The fact that a note may have been signed by defendant in the capacity of the maker thereof and that a bank’s president personally did not sign the note in any capacity whatsoever would not preclude a finding that, under the existing circumstances, defendant, in signing the note, was in actuality signing it as an accommodation party for the bank’s president. Scott v. Citizens Bank, 188 Ga. App. 618, 373 S.E.2d 633, 1988 Ga. App. LEXIS 1117 (1988) (decided under former Code Section 11-3-415). One person who lends name to another party to negotiable instrument in any capacity is an accommodation party regardless of whether that person received any compensation for so acting or did so gratuitously. Lewis v. Citizens & S. Nat’l Bank, 139 Ga. App. 855, 229 S.E.2d 765, 1976 Ga. App. LEXIS 2021 (1976) (decided under former Code 1933, § 109A-3-415). One signing name to instrument for purpose of lending credit to that of maker becomes an accommodation party, regardless of whether that person receives any compensation for so acting or does so gratuitously. Griswold v. Whetsell, 157 Ga. App. 800, 278 S.E.2d 753, 1981 Ga.

App. LEXIS 2015 (1981) (decided under former Code Section 11-3-415). One who lends name to another party to a negotiable instrument in any capacity is an accommodation party regardless of whether that person received any compensation for so acting or did so gratuitously, and one cannot legally assert lack of consideration for accommodation since value received by principal debtor is consideration for which accommodation party bargained. Motz v. Landmark First Nat’l Bank, 154 Ga. App. 858, 270 S.E.2d 81, 1980 Ga. App. LEXIS 2418 (1980); Callicott v. Reeves & Wagner Constr. Co., 199 Ga. App. 486, 405 S.E.2d 116, 1991 Ga. App. LEXIS 498 (1991) (decided under former Code Section 11-3-415). Accommodation party cannot assert lack of consideration for accommodation as value received by principal debtor is consideration for which accommodation party bargained. Lewis v. Citizens & S. Nat’l Bank, 139 Ga. App. 855, 229 S.E.2d 765, 1976 Ga. App. LEXIS 2021 (1976) (decided under former Code 1933, § 109A-3-415). One signing back of note, without more. - One placing name on back of promissory note, without more, for purpose of lending credit to the instrument for accommodation of maker, is nevertheless an endorser, in the legal sense of the word, and is not a surety unless as between original parties that person is shown to be a surety by agreement. Massell v. Prudential Ins. Co. of Am., 57 Ga. App. 460, 196 S.E. 115, 1938 Ga. App. LEXIS 313 (1938) (decided under former Code 1933, §§ 14-604, 14-605, and 14607). Endorsement by maker under payee’s endorsement. - Where check was endorsed by payee, and maker then endorsed it under name of payee, in addition to liability on the check as maker, the latter was an accommodation endorser and therefore liable to all parties subsequent to payee on said check. Stewart v. Western Union Tel. Co., 83 Ga. App. 532, 64 S.E.2d 327, 1951 Ga. App. LEXIS 901 (1951) (decided under former Code 1933, §§ 14-604 and 14-609). Accommodation maker is bound on instrument without any resort to princi-

General Consideration (Cont’d) pal. Murphy v. Bank of Dahlonega, 151 Ga. App. 264, 259 S.E.2d 670, 1979 Ga. App. LEXIS 2524 (1979) (decided under former Code Section 11-3-415). Where all three defendants signed note as makers, and amount of loan in form of certified check shows all three as named payees therein, all are liable on the note even though two claim only to be accommodators. Kerr v. DeKalb County Bank, 135 Ga. App. 154, 217 S.E.2d 434, 1975 Ga. App. LEXIS 1600 (1975) (decided under former Code 1933, § 109A-3-415). Accommodation maker not relieved by payee’s knowledge of accommodation. - Knowledge of payee that one is signing promissory note as accommodation maker will not relieve such signatory from liability thereon. Kerr v. DeKalb County Bank, 135 Ga. App. 154, 217 S.E.2d 434, 1975 Ga. App. LEXIS 1600 (1975) (decided under former Code 1933, § 109A-3-415). Payee’s knowledge of accommodation does not relieve accommodation party of liability in the capacity in which that party has signed the instrument. Brice v. Northwest Ga. Bank, 186 Ga. App. 871, 368 S.E.2d 816, 1988 Ga. App. LEXIS 500 (1988) (decided under former Code Section 11-3-415). Liability to party accommodated. - Party for whose benefit accommodation paper has been made acquires no rights against accommodation party, who may set up want of consideration as a defense to action by accommodated party, since as between them there is no consideration, a fact which is always a defense to a suit on negotiable paper between immediate parties. One is not liable to party accommodated, although also signed for accommodation of another party, or although a comaker received value from party accommodated, or although the person signed for accommodation of two other parties and a valuable consideration passed between parties accommodated. McLendon v. Lane, 51 Ga. App. 409, 180 S.E. 746, 1935 Ga. App. LEXIS 719 (1935) (decided under former Code 1933, § 14-306). If acceptance is for accommodation of payee, acceptor will not be liable to payee.

McLendon v. Lane, 51 Ga. App. 409, 180 S.E. 746, 1935 Ga. App. LEXIS 719 (1935) (decided under former Code 1933, § 14306). Where one not otherwise party to an instrument places thereon a signature in blank before delivery, for accommodation of payee, that person is liable to all parties subsequent to payee, but not to payee. Parker v. Vrooman, 87 Ga. App. 287, 73 S.E.2d 777, 1952 Ga. App. LEXIS 669 (1952) (decided under former Code 1933, § 14-306). Repossession of collateral does not void contract as to surety and result is not changed when maker is a minor. Murphy v. Bank of Dahlonega, 151 Ga. App. 264, 259 S.E.2d 670, 1979 Ga. App. LEXIS 2524 (1979) (decided under former Code 1933, § 109A-3-415). Plain and unambiguous terms of note did not show accommodated party. - Trial court did not err by granting summary judgment to a bank in its action against the obligor on three promissory notes because the clear and unambiguous terms of the notes did not show that there was an accommodated party as they simply identified the obligor as the obligated borrower. Wooden v. Synovus Bank, 325 Ga. App. 876, 756 S.E.2d 19, 2014 Ga. App. LEXIS 95 (2014). Parol Evidence Admissibility generally. - Parol evidence is generally inadmissible to alter unconditional nature of promissory note, absent fraud, accident, or mistake. Brice v. Northwest Ga. Bank, 186 Ga. App. 871, 368 S.E.2d 816, 1988 Ga. App. LEXIS 500 (1988) (decided under former Code Section 11-3-415). Capacity of signer. - Where there has been no negotiation of instrument, accommodation party may show by parol what understanding or agreement was as to the accommodating party’s capacity in signing. Deems v. Wilson, 114 Ga. App. 341, 151 S.E.2d 230, 1966 Ga. App. LEXIS 756 (1966) (decided under former Code 1933, § 109A-3-415). Proof of accommodation admissible against one taking overdue instrument knowing no payments had been made. - Because plaintiffs took instrument after it was due with knowledge that no payments had been made on

it prior to that time, they were not holders in due course and oral proof concerning accommodation character of defendant’s execution of note could be shown. Swida v. Adams, 138 Ga. App. 347, 226 S.E.2d 139, 1976 Ga. App. LEXIS 2156 (1976) (decided under former Code 1933, § 109A-3-415). Comaker of promissory note could offer parol proof that comaker was accommodation party and thereby establish rights as a surety. Bank of Terrell v. Webb, 177 Ga. App. 715, 341 S.E.2d 258, 1986 Ga. App. LEXIS 1526 (1986) (decided under former Code Section 11-3-415). Payment of note from proceeds of life insurance policy assigned by cosigner to creditor. - The statutes and cases barring a cosigner from introducing parol evidence that the cosigner signed the note as a surety are applicable only when the defense of suretyship is asserted by one who is primarily obligated on the note in an action brought by the payee or payee’s assign to collect on the note. That prohibition does not apply where the note was paid from the proceeds of a life insurance policy the cosigner had assigned to

the creditor, the creditor assigned the note and security deed to the estate, the maker then sued the creditor and the cosigner’s executor to cancel the security deed. Aultman v. United Bank, 259 Ga. 237, 378 S.E.2d 302, 1989 Ga. LEXIS 180 (1989) (decided under former Code Section 11-3415). Signature eliminating defense regarding breach of oral agreement. - An accommodation party argued that the party should not be held liable on certain notes, because commercial loan officers of the bank breached an oral agreement not to make loans to the accommodated parties without that party’s prior knowledge and consent. The accommodation party’s signature on the notes sued on, the authenticity of which was not contested, eliminated this defense. Richards v. First Union Nat’l Bank, 199 Ga. App. 636, 405 S.E.2d 705, 1991 Ga. App. LEXIS 635 (1991), cert. denied, No. S91C1145, 1991 Ga. LEXIS 725 (Ga. June 20, 1991) (decided under former Code Section 11-3415).

RESEARCH REFERENCES Am. Jur. 2d. 11 Am. Jur. 2d, Bills and Notes, §§ 84 et seq., 159 et seq., 234, 301, 418 et seq. 12 Am. Jur. 2d, Bills and Notes, §§ 474 et seq., 667, 671. C.J.S. 10 C.J.S., Bills and Notes, §§ 24 et seq., 190, 191. U.L.A. Uniform Commercial Code (U.L.A.) § 3419. ALR. Right of accommodation party to bill or note to revoke his signature, 22 A.L.R. 1348. Rights and remedies of accommodation party to paper as against accommodated party after payment, 36 A.L.R. 553; 77 A.L.R. 668. Rights of transferee after maturity of accommodation paper, 48 A.L.R. 1280.

Discharge of accommodation maker or surety by extension of time or release of collateral, under Negotiable Instruments Law, 65 A.L.R. 1425; 108 A.L.R. 1088; 2 A.L.R.2d 260. Amount paid for paper by holder as limiting recovery against accommodation party, 69 A.L.R. 1313. Admissibility of parol evidence that one signed negotiable paper for purpose other than assuming an obligation thereon, 75 A.L.R. 1519. Discharge of accommodation maker or surety by release of mortgage or other security given for note, 2 A.L.R.2d 260. Who is accommodation party under Uniform Commercial Code § 3-415, 90 A.L.R.3d 342.