Nebraska Uniform Commercial Code 3-419

UCC 3-419

3-419.

Instruments signed for accommodation.

(a) If an instrument is issued for value given for the benefit of a party to the instrument ("accommodated party") and another party to the instrument ("accommodation party") signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party "for accommodation".

(b) An accommodation party may sign the instrument as maker, drawer, acceptor, or indorser and, subject to subsection (d), is obliged to pay the instrument in the capacity in which the accommodation party signs. The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not the accommodation party receives consideration for the accommodation.

(c) A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous indorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument. Except as provided in section 3-605, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken by that person that the accommodation party signed the instrument for accommodation.

(d) If the signature of a party to an instrument is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if (i) execution of judgment against the other party has been returned unsatisfied, (ii) the other party is insolvent or in an insolvency proceeding, (iii) the other party cannot be served with process, or (iv) it is otherwise apparent that payment cannot be obtained from the other party.

(e) An accommodation party who pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. An accommodated party who pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.

Source

  • Laws 1991, LB 161, § 60.

Annotations

  • Under former section 3-415, accommodation party status may be shown through parol evidence; however, a party claiming accommodation party status bears the burden of proving its right to such status. Marvin E. Jewell & Co. v. Thomas, 231 Neb. 1, 434 N.W.2d 532 (1989).

  • Under former section 3-415, the intent of the parties is determinative of whether a party is an accommodation maker or the principal obligor of an instrument. Marvin E. Jewell & Co. v. Thomas, 231 Neb. 1, 434 N.W.2d 532 (1989).

  • A person receiving only an indirect benefit from a transaction can qualify as an accommodation party. Sack Lumber Co. v. Goosic, 15 Neb. App. 529, 732 N.W.2d 690 (2007).

  • Whether a person is an accommodation party is a question of fact. Sack Lumber Co. v. Goosic, 15 Neb. App. 529, 732 N.W.2d 690 (2007).

  • Under former section 3-415, an accommodation party is not liable to the accommodated party, and if the former discharges the obligation, he may claim recourse against one accommodated. Pioneer Ins. Co. v. Gelt, 558 F.2d 1303 (8th Cir. 1977).

  • COMMENT

  • 1. Section 3-419 replaces former sections 3-415 and 3-416. An accommodation party is a person who signs an instrument to benefit the accommodated party either by signing at the time value is obtained by the accommodated party or later, and who is not a direct beneficiary of the value obtained. An accommodation party will usually be a comaker or anomalous indorser. Subsection (a) distinguishes between direct and indirect benefit. For example, if X cosigns a note of Corporation that is given for a loan to Corporation, X is an accommodation party if no part of the loan was paid to X or for X's direct benefit. This is true even though X may receive indirect benefit from the loan because X is employed by Corporation or is a stockholder of Corporation, or even if X is the sole stockholder so long as Corporation and X are recognized as separate entities.

  • 2. It does not matter whether an accommodation party signs gratuitously either at the time the instrument is issued or after the instrument is in the possession of a holder. Subsection (b) of section 3-419 takes the view stated in comment 3 to former section 3-415 that there need be no consideration running to the accommodation party: "The obligation of the accommodation party is supported by any consideration for which the instrument is taken before it is due. Subsection (2) is intended to change occasional decisions holding that there is no sufficient consideration where an accommodation party signs a note after it is in the hands of a holder who has given value. The (accommodation) party is liable to the holder in such a case even though there is no extension of time or other concession.".

  • 3. As stated in comment 1, whether a person is an accommodation party is a question of fact. But it is almost always the case that a comaker who signs with words of guaranty after the signature is an accommodation party. The same is true of an anomalous indorser. In either case a person taking the instrument is put on notice of the accommodation status of the comaker or indorser. This is relevant to section 3-605(h). But, under subsection (c), signing with words of guaranty or as an anomalous indorser also creates a presumption that the signer is an accommodation party. A party challenging accommodation party status would have to rebut this presumption by producing evidence that the signer was in fact a direct beneficiary of the value given for the instrument.

  • An accommodation party is always a surety. A surety who is not a party to the instrument, however, is not an accommodation party. For example, if M issues a note payable to the order of P, and S signs a separate contract in which S agrees to pay P the amount of the instrument if it is dishonored, S is a surety but is not an accommodation party. In such a case, S's rights and duties are determined under the general law of suretyship. In unusual cases two parties to an instrument may have a surety relationship that is not governed by article 3 because the requirements of section 3-419(a) are not met. In those cases the general law of suretyship applies to the relationship. See PEB Commentary No. 11, dated February 10, 1994 (Appendix II at end of Vol. 3B, Uniform Laws Annotated, Master Edition or ULA Database on WESTLAW).

  • 4. Subsection (b) states that an accommodation party is liable on the instrument in the capacity in which the party signed the instrument. In most cases that capacity will be either that of a maker or indorser of a note. But subsection (d) provides a limitation on subsection (b). If the signature of the accommodation party is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the instrument, liability is limited to that stated in subsection (d), which is based on former section 3-416(2).

  • Former article 3 was confusing because the obligation of a guarantor was covered both in section 3-415 and in section 3-416. The latter section suggested that a signature accompanied by words of guaranty created an obligation distinct from that of an accommodation party. Revised article 3 eliminates that confusion by stating in section 3-419 the obligation of a person who uses words of guaranty. Portions of former section 3-416 are preserved. Former section 3-416(2) is reflected in section 3-419(d) and former section 3-416(4) is reflected in section 3-419(c). Words added to an anomalous indorsement indicating that payment of the instrument is guaranteed by the indorser do not change the liability of the indorser as stated in section 3-415. This is a change from former section 3-416(5). See PEB Commentary No. 11, supra.

  • 5. Subsection (e) like former section 3-415(5), provides that an accommodation party that pays the instrument is entitled to enforce the instrument against the accommodated party. Since the accommodation party that pays the instrument is entitled to enforce the instrument against the accommodated party, the accommodation party also obtains rights to any security interest or other collateral that secures payment of the instrument. Subsection (e) also provides that an accommodation party that pays the instrument is entitled to reimbursement from the accommodated party. See PEB Commentary No. 11, supra.

  • 6. In occasional cases, the accommodation party might pay the instrument even though the accommodated party had a defense to its obligation that was available to the accommodation party under section 3-305(d). In such cases, the accommodation party's right to reimbursement may conflict with the accommodated party's right to raise its defense. For example, suppose the accommodation party pays the instrument without being aware of the defense. In that case the accommodation party should be entitled to reimbursement. Suppose the accommodation party paid the instrument with knowledge of the defense. In that case, to the extent of the defense, reimbursement ordinarily would not be justified, but under some circumstances reimbursement may be justified depending upon the facts of the case. The resolution of this conflict is left to the general law of suretyship. Section 1-103. See PEB Commentary No. 11, supra.

  • 7. Section 3-419, along with section 3-116(a) and (b), section 3-305(d), and section 3-605, provides rules governing the rights of accommodation parties. In addition, except to the extent that it is displaced by provisions of this article, the general law of suretyship also applies to the rights of accommodation parties. Section 1-103. See PEB Commentary No. 11, supra.