84-3-419. Instrument 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 endorser 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 endorsement 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 K.S.A. 84-3-605, 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 (1) execution of judgment against the other party has been returned unsatisfied, (2) the other party is insolvent or in an insolvency proceeding, (3) the other party cannot be served with process, or (4) 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.
History: L. 1991, ch. 296, § 56; February 1, 1992.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official Text except that the lower case roman numerals have been replaced by arabic numbers in subsection (d). This section is derived from the former provisions 84-3-415 and 84-3-416, with many changes and omissions. Historical case and statutory references can be obtained from the 1965 and 1983 bound volume 7 of the Kansas Statutes Annotated.
This section should be read in conjunction with part 6, especially 84-3-605 regarding potential discharge of sureties. In addition, 84-3-305(c) and (d) deal with accommodation parties.
Subsection (a). This section deals with suretyship only where both the accommodation party (the one serving as surety) and the accommodated party (hereafter, the "party accommodated," the true debtor who is receiving some benefit) are on the instrument. The creditor, the one giving consideration to the party accommodated, is usually the payee. If the suretyship is in a separate instrument, other suretyship law, which more often grants the surety a full discharge, applies. The former provisions are close to a codification of the common law of suretyship.
Subsection (b). When an accommodation party is involved, the true relationship of the parties is: party accommodated, the one ultimately liable, though often judgment proof; the accommodation party, the surety signing so that the party accommodated can get credit, can collect from the party accommodated and will have to pay creditor; and the creditor, the one who extends credit to the party accommodated with the assurance that the accommodation party will pay the debt if the party accommodated can not.
The parties may sign in any order or capacity, though, and they are liable on the instrument in the capacity in which they sign. The signature of the accommodation party satisfies the statute of frauds. The accommodation party can receive reimbursement from the party accommodated by proving the accommodation contract.
The consideration to support the accommodation party's contract is the consideration received by the party accommodated, and if the party accommodated does not receive consideration, that is a defense for the accommodation party. See State ex rel. Ludwig v. Bryant, 237 K. 47, 697 P.2d 898 (1985), 84-3-305 and Kansas Comment 1996. The accommodation party does not need to receive any separate consideration, although professional sureties do receive separate consideration.
Subsection (c). Certain forms of signing are notice that one of the parties signed for the accommodation of another. These include the anomalous indorsement (84-3-205), most commonly a signature as indorser on a note in which the creditor is commonly the payee and the party accommodated is the maker. Where one of the parties signs as a guarantor or surety, it is notice of possible accommodation.
In such cases the accommodation party is still liable, but later holders should be careful not to impair the collateral (84-3-605) or otherwise change the underlying relationship between the accommodation party and the party accommodated.
Subsection (d). This subsection is the replacement for the former 84-3-416. Guarantees are presumed to be guarantees of payment, which permits the one enforcing the instrument to collect from the guarantor without first attempting to collect from the issuer. "Collection guaranteed" language requires the person enforcing the instrument to bring what amounts to a creditor's bill, forcing proof that collection efforts against the primary obligor are futile.
Subsection (e). This subsection reiterates the underlying relationship of the accommodation party and the party accommodated. Once the relationship is proven, the accommodation party always has recourse against the party accommodated. See Kansas Comment 1996 to subsection (b), above.
Revisor's Note:
Former section 84-3-419 was repealed by L. 1991, ch. 296, § 111 and the number reassigned to the current text.
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