Court Opinion

ID: 9868215
Source: CourtListenerOpinion
Date Created: 2023-09-26 18:24:13.93303+00
Date Added: 2024-06-11T07:45:48.089764
License: Public Domain

Mr. Justice Woods.
2 I concur in the conclusion reached in the opinion of Judge DeVore that the notes in suit were not rendered non-negotiable by reason of the provision therein for attorney’s fees. The learned Judge has reached the conclusion, 'however, that the words in the notes expressing the consideration “for value received in one machinery as per contract November 23, 1899,” prevented the notes from being negotiable instruments. I dissent from this conclusion, because it seems to me not only an unsound and unfortunate limitation on the negotiability of promissory notes, but clearly opposed to authority. The notes are identical in form and need not be separately referred to. The first note is in these words:
*203“$785.00. Columbia, S. C., July 12, 1902. On or before the first day of January, 1903, for value received in one machinery as per contract November 23, 1899, I, the undersigned, of Richland County, State of South Carolina, promise to pay to the order of V. C. Badham, of Columbia, S. C., seven hundred and eighty-five dollars, negotiable and payable at the Carolina National Bank, Columbia, without offset, with interest at the rate of eight per cent, per annum after maturity until paid, waiving all relief whatever from valuation, appraisement or exemption laws,, with all expenses if suits be instituted for collection of this note. And it is expressly understood and agreed that the said V. C. Badham neither parts with the title, nor do the undersigned acquire any title in the property .enumerated herein until this note and all other notes given in payment for same, and all extensions and renewals thereof are fully paid. And in case it becomes necessary to employ an attorney to collect this note, a further sum, not exceeding ten per cent, for fees. Presentment for payment and protest waived. Congaree, Richland Co., S. C. Sam J. Huffman.”
The following endorsements were on the back: “Pay to order of Richmond City Mill Works. V. C. Badham. Richmond City Mill Works. By H. A. Moore, Treasurer.”
There is not a word importing that the payment of the amount promised was to be subject to or dependent on any contract of sale or any contingency whatever. Had there been such an expression, without doubt the instrument would not have been negotiable. These cases will serve to illustrate the principle. In Dilley v. Van Wie, 6 Wisconsin, 206, the note was held not negotiable. There, however, the reference to a collateral contract was not, as in the note under discussion, explanatory of the consideration, but the words, “subject to the provisions contained in an agreement this day made between said Carter and myself,” were *204inserted in the body of the instrument, qualifying and rendering conditional the promise to pay. In Cushing v. Field, 70 Maine, 50; 35 Am. Rep., 283, the note was held not negotiable because of the indorsement: “This note is subject of a contract made November 13, 1874.” This was manifestly a limitation upon the promise 'itself and of course destroyed its certainty. In Costello v. Croxwell, 127 Mass., 293, the note was not an original promise in writing, but was itself collateral given to secure a contemporary agreement. The words, “given as collateral security with agreement,” were written on the margin and it is obvious, as stated by the Court, that the note was conditioned “upon the performance of the undertaking to which this is collateral.”
This case is entirely different. The promise to pay is not subject to a separate contract, nor according to a separate contract, nor subject to any contingency, but absolute and unconditional. The words relied on by the learned Judge as making the note not negotiable merely express the consideration, the reference to the contract being manifestly for the purpose of indicating a sale by which the title to the machinery had been reserved as a security for the debt. Such a reference to the consideration and the security does not take away from the paper a single element of a promissory note; it is none the less an unconditional written promise to pay a specified sum of money at a certain time to the order of the payee.
The generally recognized rule that the expression of the consideration does not affect the negotiability is thus stated in Daniel -on Negotiable Instruments, vol. I, sec. 51a: “The negotiability -of the instrument is not impaired by recitals or statements -upon its face, which merely state the consideration upon which it was made, and impose no other liability upon any -parties thereto than that for the payment of the sum of money therein expressed. Where there is a memorandum upon- the instrument that it is “secured *205according to the condition of a certain mortgage;” or that it was “given in consideration of a certain patent right;” or “as part pay for a pianoforte,” or for any other consideration, or “and the same will be credited on your joint note to me.” The statement that collateral security has been deposited for the performance of a promise contained in the bill or note is a recital only, which does not affect its negotiability; and though the recital contain the terms of the deposit, that does not alter the case, for it renders neither the amount, the time of payment, the payee, nor the engagement to pay, uncertain.”
Two cases in this State make it clear beyond all doubt that neither statement of the consideration nor provision for securing the promise affect the negotiability of the instrument. And these cases seem conclusive of the question here; for as above indicated, reference to the contract of sale was made in the note merely to indicate that the note was given for the purchase money of machinery, and that by the contract of sale the title to the machinery was reserved as a security for payment of the note. In National Bank v. Gary, 18 S. C., 282, a note held to be negotiable was in these words, fully setting out the security:
“$886.00. Charleston, S. C., July 31, 1877. On the first of November, 1877, I promise to pay to M. W. Gary or order, without offset, eight hundred and eighty-six dollars, for value received, with interest from date, interest after maturity at the rate of one per cent, per month, having deposited with M. W. Gary, as collateral security, seven hundred and thirty-five dollars Greenville and Columbia Railroad second mortgage coupons, past due. And in case this note shall not be paid when due, I hereby give the said M. W. Gary authority to sell the said security, or any part thereof, for my account, on the maturity of this note, or at any time thereafter, at public or private sale, at his discretion, without advertising the same, and to apply so much of the proceeds of said security to the payment of said *206note, as may be necessary to pay the same, with all interest due thereon, and also the payment of all expenses attending the sale of said' security. If the net proceeds of such security shall not cover the amount due on this note, I hold myself bound to pay the balance forthwith, after such sale, with interest, at the rate of one per cent, per month.”
In Dowie & Moise v. Joyner, 25 S. C., 123, the note was in these words, expressing the consideration, the security for the debt and a distinct undertaking on the part of the payee:
“Collateral note for fertilizers. $826.50. Eastover, S. C., April 23, 1884. On November 1, next, I promise to pay to the order of Dowie & Moise, eight hundred and twenty-six and 50-100 dollars at First National Bank of Charles^tom, for value received in fertilizers. And to secure the payment of this note, I hereby agree on or before May 15, next, to pay to the said Dowie & Moise all moneys collected from the sale of said fertilizers, and to deliver to them all notes given for purchase of same, inclusive of freight on said fertilizers, as said collateral security for the payment of this note. That on or about September 15, next, Dowie & Moise agree to return said planter’s notes for collection for their account, and that I agree in their behalf to collect the same, and remit to them the proceeds of such notes as may be collected, or transfer the original notes which, as trustees for them, we may be .unable to collect in part or in full, and this agreement to remain in force until this obligation is satisfied.”
This was held to be a negotiable note, notwithstanding the agreement as to the collateral and the agreement of the payees to réturn the collateral notes to- the maker for coD leciion.
It is a well settled doctrine in other jurisdictions also that the reservation to the payee of title in the property for which the note''is given or the statement of the consideration do not affect negotiability. Chicago Ry. v. Merchants *207Bank, 136 U. S., 268; Choate v. Stevens (Mich.), 43 L. R. A., 277; Seigel v. Chicago Trust & Savings Bank, 7 L. R. A., 537; Windmill Co. v. Honeywell (Kan.), 53 Pac., 488; Campbell v. Equitable Securities Co. (Col.), 68 Pac., 788; Collins v. Bradbury, 64 Maine, 37; Gilpin v. Peoples Bank (Ind.), 90 N. E., 91.
In Markey v. Corey, 108 Mich., 184, 62 Am. St. Rep., suit was brought on a promissory note on the face of which was written: “This note is 'given in accordance with the terms of a certain contract under the same date, between the same parties,” and the Court held that the negotiability of the note was not affected by these words. In Biegler v. Merchants’ Loan & Trust Co. (Ill.), 45 N. E.. 512, an indorsement on the note was as follows: “This note is secured by a lien upon my interest in certain horses named in the agreement this day made between S. W. Liehy & Son and myself.” It was held that the notes were negotiable and were not affected by the recital of the security and agreement.
In Bank of Sherman v. Apperson (Tenn.), 4 Federal, 25, the note recited that it was “for value received, being for a part of the payment on the Goree plantation purchased of said Gregg, as per agreement of the fourteenth of February, 1874.” The Court held that the note in question was negotiable and “the recital of the consideration in the face of the note did not at all affect its negotiable character.” In Taylor v. Curry, 109 Mass., 36, 12 Am. Rep., 661, a promissory note given to an insurance company and otherwise negotiable bore on its face the words: “On policy No. 33,386.” The policy referred to contained a provision for a set-off in case of loss. Yet the Court held that this did not make the note contingent upon tire happening of no loss and added, “a mere reference to the policy, without more, does not affect the negotiability of the note.”
If a written contract had been introduced and had contained a limitation on the liability of the maker of the note, *208that fact would not affect the liability of the defendant as endorser, for as we have shown, it would not affect the negotiability of the note. But it may seem important to observe that the record shows that defendant failed to offer in evidence any written contract limiting the liability of the maker, and himself testified that there was no written con-tract containing any limitation of the liability of the maker of the note.
On the trial counsel for defendant did not contend that the reference to the contract of sale in 'the note affected its negotiability and the Circuit Judge did not so hold. It seems to me clear that the notes are negotiable and that the judgment should be reversed and a new trial ordered for error of the Circuit Judge in holding otherwise.
As this was the main issue in the cause, and the course of the trial and the other rulings of the Court depended very largely on the holding that the notes were not negotiable, the labor of considering the exceptions in detail would be fruitless.