Court Opinion

ID: 6691222
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:38:04.933437+00
Date Added: 2024-06-11T16:01:06.996879
License: Public Domain

GATES, P. J.
This is an action brought on 5 of a series of 50 promissory notes for $1,072 each, given for the purchase of 50 tractors. Only 33 tractors were delivered, and 10 other of the notes besides the 5 in suit remain unpaid. Each of the 5 is in words and figures as follows (italics ours) :
“$1,072.00 Waterloo, Iowa, Dec. ,15, 1917.
“Six and one-half months after date for value received I promise, to pay to the order of Interstate Tractor Co. at the office of the First National Bank, in Waterloo, Iowa, ten hundred, seventy-two and 110/100 dollars. With interest at 7 per cent, per .annum, payable annually. Principal or interest if not paid when due shall bear interest at 7 per cent, per annum, payable annually. A failure to pay interest when due shall cause this note to mature. The makers, indorsers, guarantors and sureties agree to pay any attorney’s fee as provided by the laws of Iowa in case note is not paid at maturity and consent that any justice of the.peace shall *305have jurisdiction of action brought hereon to the amount of three hundred dollars, and also severally -waive protest and diligence in ■bringing suit hereon. .It is also agreed that this note is an Iowa contract, to be construed according to the lazvs of Iowa. No interest if paid zxihen due."
Before the maturity of the notes they were indorsed to plaintiff, who agreed to pay the Interstate Tractor Company the full amount of the face of the notes, and did pay 75 per cent, thereof, leaving, by agreement, the payment of the other 25 per cent, until collected. This case was before us on a former appeal, 43. S. D. 564, 181 N. W. 99, which see. Plaintiff appeals from the judgment and from an order denying new trial. Our colleague says that appellant was not a holder in due course because it purchased' the notes with full knowledge of respondent’s defense thereto- as against the payee. The trial court did not so find, nor would the evidence have sustained a finding to that effect. The evidence shows without dispute that plaintiff paid the 75 per cent on or about April 25th, while knowledge of the defenses did not come to it until May 2d.
The interpretation of these notes, by their terms, is governed by the law of Iowa. Two questions are raised as to the negotiability of these notes. It is -contended by respondent: (1) That the provision that the notes should not bear interest if paid when due renders them nonnegotiable; (2) that the attorney fee clause in the notes renders them nonnegotiable.
 Taking up the first contention, what is the law of Iowa on that question? The law of Iowa thereon was neither pleaded nor proved. Therefore we must presume that the law of Iowa is the same as the law of South Dakota. What, then, is the law of South Dakota?
Prior to the adoption of the Negotiable Instruments Daw in 1913/ the law of South Dakota -clearly was that such provision for discount, if paid on or before due, rendered the amount uncertain, and therefore that the note was nonnegotiable. Nat. Bank of Commerce v. Feeney, 12 S. D. 156, 80 N. W. 186, 46 L. R. A. 732, 76 Am. St. Rep. 594. The Negotiable Instruments Daw does not contain any express provision covering the question (5 Uniform Daws Ann. 26, note) ; therefore by reason of section 196, *306Negotiable Instruments Law (section 194, c. 279, Laws 1913), the rules of the law merchant govern. That section says:
“In any case not provided for in this act the rules of law and equity including the law merchant shall govern.”
Therefore the law merchant was the law of South Dakota on this subject at the time the transactions in question were had, and has been ever since the adoption of chapter 279, Laws 1913. In the Code revision of 1919 that section was omitted from its place under the Negotiable Instruments Law, but was inserted in section 3, Rev. Code 1919, as follows:
“The evidence of the common law, including the law merchant, is found in the decisions of the tribunals. In this state the rules of the. common law, including the rules of the law merchant, are in force, except where they conflict with the will of the sovereign power, expressed in the manner stated in the preceding section.”
Leaving out of consideration for the present the attorney fee clause, there is nothing uncertain in this note as to the amount necessary to pay it. On any day from its date, to and including July 1, 1918, the amount required was $1,072. On any date after July 1, 1918, the amount required was $1,072, with interest at 7 per cent, from December 15, 1917, payable annually, together with like interest on unpaid interest. Those sums could be, and necessarily were, foreseen on the date the note was given; therefore it cannot consistently be said that there was any uncertainty as to the amount to be paid. Loring v. Anderson, 95 Minn. 101, 103 N. W. 722; Capital City St. Bank v. Swift (D. C.) 290 F. 505.
The great weight of authority both in number and soundness of reasoning is contrary to the holding of this court in Nat. Bank of Commerce v. Feeney, supra. We, therefore, are satisfied that the law merchant does not hold that such a provision renders a note nonnegotiable. Such, therefore, is today the law of South Dakota, and, therefore, upon the record before us, is presumptively the law of Iowa.
Now as to the attorney fee clause: By pleading and proof the plaintiff established that under the law of Iowa such a provision was lawful. It did not plead and prove what effect such attorney fee clause had upon the negotiability of the note, although it might easily have pleaded and proved the provisions of *307section 5916, Iowa Comp. Code 1919. We must therefore ascertain what the law of South Dakota is as to the negotiability of a note containing such a clause. Prior to the adoption of chapter 16 of the last territorial Legislature of Dakota in 1889, such a provision rendered a note nonnegotiable according to the law of Dakota Territory. But such act declared such a clause to be contrary to- public policy and void, and such is the law today. Section 1, e. 16, Laws 1889; section 412, Rev. Code Civ. Proc. 1903; sections 2604, 1706, Rev. Code 1919.
The decisions of this court since statehood have consistently held that such attorney fee clause does not render the note nonnegotiable; therefore we will presume that under the law of Iowa such clause does, not render the note nonnegotiable.
To be sure, this court has rested its decision upon the ground that such clause was a nullity, and, therefore, the note was to be interpreted the same as though such clause were absent, but that matter only goes to the process of reasoning by which this court arrived at its conclusion. The law of 'South Dakota being that the negotiability of the note is not destroyed by such clause, we will presume the law of Iowa to be the same. AVe are -unable to declare what the law of South Dakota is as to the negotiability of such note, where the attorney fee clause must be held to be valid. There is and can be no such law in South Dakota so long as section 2604, Rev. Code 1919, stands. It is unthinkable. If we should speculate as to what the law of South Dakota might be as to the negotiability of the note in case such clause was lawful, we would find, on the one hand, the territorial decision Garretson v. Purdy, 3 Dak. 178, 14 N. W. 100, and decisions of a minority of the courts holding that such clause destroyed negotiability, while, on the other hand, the preponderance of authority at common law, including the law merchant, was to the effect that the negotiability of the note was not thereby destroyed. 4 A. & E. Ency. of Law, 98; Capital City State Bank v. Swift, supra. Therefore, even if we should feel compelled to analyze the reasoning of this court which led to the holding that such clause does not destroy ther negotiability of the note, and' if we should feel compelled to hold that by reason of such analysis we should not presume the law of Iowa to be the same as here because there the clause is lawful, yet we would still find that under the common law, including the-*308law merchant, the attorney fee clause did not destroy the negotiability of the note, and we would therefore presume that such was the law of Iowa. We are therefore led to the conclusion that appellant was a holder in due course of the notes in suit.
But, even if the notes are negotiable, the plaintiff is only entitled to recover from defendant 75 per cent, of the face value of the notes. Section 1758, Rev. Code 1919 (section 54, Negotiable Instruments Law), provides:
“Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount theretofore paid by him.”
In this case plaintiff has paid only $4,020. It is therefore only entitled to recover that sum, with interest.
We are of the opinion that the judgment of this court should remand the cause to the trial court, with directions to enter judgment for plaintiff for $4,020, with interest at 7 per cent, from December 15, 1917, and for its costs.
In this court no costs will be taxed.
CAMPBELL, J., disqualified, not sitting.