A banker is liable if he pays a promissory note, domiciled with him, bearing a forged indorsement.
1 t frequently happens that where money is borrowed by way of promissory note that another person also signs the note as surety for the borrower. By signing the note, however, he becomes a maker of it and is liable as a maker. If Brown borrows on a joint and several promissory note and Jones signs as surety for Brown, either of them is liable to pay the amount at maturity, or, if on demand, when the banker calls for repayment. A banker should not refer to Brown as the principal and Jones as the surety, but to Brown and Jones as " the makers of the note." If Brown does not pay the note at maturity Jones is not dis charged from lack of notice of dishonour, but it is advisable to give such notice. ]f the note continues for more than six years and during that time the interest, as well as any instalments in reduction of the amount, are paid by Brown, the payments so made by Brown will not operate to keep the note alive as against Jones. If Jones has paid nothing and given no acknowledgment of the debt for six years from the date of the note, he will be discharged. It is necessary, therefore, before the six years are up, to obtain an acknowledgment from Jones (or from the maker who has not paid anything or confirmed the debt in any way). The best plan is to get a fresh note signed by both makers before the six years expire. Each time that a payment in reduction of a promissory note on demand is made, a pay ing-in slip should be signed in order to afford evidence of the payment.
If a loan is made to a society or institution upon a promissory note signed, say, by the members of the committee, the members should sign as private individuals, without any reference to the name of the society or institution.
Where an advance is obtained from a banker upon a promissory note payable on demand, signed by the borrower and one or more makers (as sureties), the amount is usually debited to a separate loan account and the proceeds credited to the borrower's current account ; if payable at so many months after date it is discounted. It
frequently happens that when an after date promissory note is about due, it is arranged to renew it for a further period on the same signatures, and sometimes, for various reasons, it is impossible to obtain all the signatures to the new note, before the old one is due. In such a case the old note should not be cancelled but should be pinned to the new note till all the makers have signed, as in the event of any signature not being obtained the old note may be sued upon.
Where a promissory note signed, say, by Brown in favour of Jones is lodged as security for an overdraft to Jones, the note should be indorsed by Jones and a memorandum should be signed by him to show the purpose for which the note is given ; and where a note is signed, say, by J. Brown and J. Jones. payable to the bank and is given as security for Brown's account, a memorandum should be signed by the two makers. The memo randum of deposit should state that the note is given for the sum and sums of money which shall from time to time be due or owing from the customer on whose behalf it is given, either alone or with any other person or persons either on the balance of his current account or otherwise, and that the moneys intended to be secured by the promissory note shall be recoverable there upon, although the bank may have taken or may hereafter take any further security, or may have given time for the payment thereof.
A promissory note payable on demand, which is held as security for an account, should, for safety, be renewed, if still re quired, before six years from the date of the note have expired.
A promissory note payable at a fixed period after date is not regarded as a con tinuing security for an account and to establish the contrary, evidence is required. In the case of In re Boys, Eedes v. Boys (1870, 10 Eq. 467), where a note payable eight months after date was given as security, Lord Romilly said : " 1 think that the burden of proof should lie upon those who seek to establish that it was intended to be a running security for the balance of the account from time to tune."