face, or a contemporaneous memorandum on the same paper. Its character depends upon its terms at the time it is made, and if it then purports a payment to be made upon a contingency, or a condition or uncertain event, the subsequent happening of the event or contingency will not change it.65 b. Examples of conditional promises.— A promise made by A. to pay B. out of any of A.'s money that might arise from a "reversion of forty-three pounds when sold" was held not to be a negotiable note.66 A note which had words written across its end to the effect that it was given for advancements and on the understanding that it would be renewed at maturity, was held to be thereby deprived of its negotiability, because contingent and conditional.67 And where a note contained a condition that as soon as the amount of it was received by the payees it should be given up to the maker, it was held by the Supreme Court of Massachusetts to be a contract to pay a sum of money on a condition, and not a promise to pay it to the payee or holder absolutely and at all events and, therefore, not negotiable. An order or promise to pay out of the profits of a partnership or other enterprise is conditional, and, therefore, neither a bill of exchange nor a promissory note. 68 65. Blackman v. Lehman, 63 Ala. 547, 35 Am. Rep. 57. In the case of White v. Smith, 77 Ill. 351, 353, 20 Am. Rep. 251, the court said: "The principle is undoubted, that, to constitute a valid promissory note, it must be for the payment of money which will certainly become due and payable one time or another, although it may be uncertain when that time will come. And where the payment depends upon a contingency, it will make no difference that the contingency does, in fact, happen afterward, on which the payment is to become absolute, for its character as a promissory note cannot depend upon future events, but solely upon its character when created." 66. In Carlos v. Fancourt, 5 T. R. (Eng.) 482, 2 R. R. 647, Lord Kenyon held that a writing containing such a promise could not be declared upon as a negotiable instrument, but that an action might be framed upon it as upon a special agreement, and the rule is laid down that an instrument creating a liability of payment upon a contingency cannot be a negotiable bill of exchange or note. 69 67. Citizens' Nat. Bank v. Piollet, 126 Pa. St. 194, 12 Am. St. Rep. 860. 68. Hubbard v. Mosely, 11 Gray (Mass.), 170, 71 Am. Dec. 698. 69. Promise to pay out of partnership funds. In Munger v. Shannon, 61 N. Y. 251, the instrument under consideration was addressed to the defendant as follows: "Mr. Harrison Shannon. You will please pay to Messrs. Wilkin & Hair the amount of a note for $2,000 dated on December 31st, 1868, and deduct the same from my share of the profits of our partnership business in malting. Note made by myself as principal to order of myself, and indorsed by Nathan Randall and Herrick Munger. L. A. Gulick, per E. Gulick. January 26, 1869." The said order was thereupon transferred to Wilkin & Hair and afterward accepted by the defendant. It was held by the Court of Appeals in an action brought upon the acceptance that the writing was not a bill of exchange but an equitable assignment of sufficient of the profits to pay the note, which was irrevocable as soon as assented to by defendant, so far as to require him to appropriate the If a note is made payable out of the proceeds of certain carriages whenever they shall be sold, it is not negotiable for two reasons: it is payable out of a certain fund, and on the uncertain event of a sale. 70 A promise to pay " when any dividend shall be declared " by a certain corporation is payable on a contingency, being de pendent upon the will of the corporation, and is, therefore, not a promissory note." An agreement in writing by A. to pay B. a certain sum of money upon his completing a piece of work for A. is not a promissory note; and, in order to fix the liability of A., it is necessary to show that B. has done the work as provided in the agreement.72 A promise in writing to refund a sum of money received from another on condition that a specified receipt be produced is not a promissory note; but in many cases, contrary to this decision, a certificate of deposit with a statement that the amount deposited will be paid on the return of the certificate has been held to be a negotiable promissory note.74 A written acknowledgment of indebtedness, with a promise to pay as soon as circumstances will permit, is not a promissory note. And where profits, if any, to its payment; but that he was not absolutely bound to pay, and the absence of profits was a good defense. This case contains a very good review of all the authorities. See also other cases cited in notes under § 36 (d) of this chapter. 70. De Forrest v. Frary, 6 Cow. (N. Y.) 151. 71. Brooks v. Hargreaves, 21 Mich. 254. 72. Chandier v. Carey, 64 Mich. 237, 31 N. W. 309. The instrument in question in this case reads as follows: "$119.00. For value received, we jointly or severally promise to pay Alonzo Heath, or bearer, one hundred and nineteen dollars, on or before the first day of October, next, upon completion of the work to be done by said Heath on a dwelling-house to be built by him for said first parties. February 7, 1884. "ABBEY J. CAREY, 73 contract price and charge the same to the account of the contractors," on account of contract when completed and satisfactory. It was held that the order was not a bill of exchange absolutely payable at the end of forty days. 73. Mason (Tenn.) 440. V. Metcalf, 4 baxt. 74. Miller v. Austen, 54 U. S. 218, 14 L. Ed. 119; Kirkwood v. First Nat. Bank, 40 Neb. 484, 58 N. W. 1016, 42 Am. St. Rep. 683, 24 L. R. A. 444; Frank v. Wessels, 64 N. Y. 155; Smilie v. Stevens, 39 Vt. 315; Bellows Falls Bank v. Rutland County Bank, 40 Vt. 377; Bean v. Briggs, 1 Iowa, 488, 63 Am. Dec. 464; Drake v. Markle, 21 Ind. 433, 83 Am. Dec. 358; Birch v. Fisher, 51 Mich. 36, 16 N. W. 220; 62 N. W. 173. Beardsley v. Webber, 104 Mich. 88; Contra. But the following cases may be cited against this proposition, upholding the doctrine in the case of Mason v. Metcalf, supra: Patterson v. Poindexter, 6 Watts & S. (Pa.) 227, See also Duffield v. Johnston, 96 N. 40 Am. Dec. 554; Lebanon Bank v. Y. 369. In the case of Home Bank v. Drumgoole, 109 N. Y. 63, 15 N. E. 747, contractors delivered an order upon the owner of property directing him to pay to their own order the Mangan, 28 Pa. St. 452; Dempsey v. 75. Salinas v. Wright, 11 Tex. 572. a written promise is made to pay a certain sum" at such times and in such articles as the payee may need for her support," it is contingent as to time and manner of payment, and is not a promiзsory note.76 A promise to pay money provided the ship Mary arrives at a European port of discharge, free from capture and condemnation by the British, is not valid as a bill of exchange or a promissory note;" nor is a promise to pay when a person is married,78 or when a certain suit is terminated,79 or a certain sale made,80 or as soon as you receive the amount of my account from the government." 81 An instrument containing a promise to pay a certain amount to a person when he arrives at the age of twenty-one is dependent upon a contingency which may never happen and is, therefore, not a negotiable promissory note.82 An instrument conditioned to be void in case of the happening of a certain event is not a negotiable promissory note or bill of exchange and cannot be sued on as such.83 A promissory note which 66 185. shall be certainly payable. This case is cited by Story and Daniel as authority for the proposition that a written promise to pay money when the payee shall become of age is not a good promissory note: "for non constat that he will ever arrive at that period of life; and we do not find that the correctness of the decision has ever been questioned." V. 83. Conditioned to be void on happening of event.- Conover Stillwell, 34 N. J. L. 54. In this case the instrument was in the "For value following form: re 82. Rice v. Rice, 43 App. Div. 458, ceived, thirty days after date I promise 462, 60 N. Y. Supp. 97. This case to pay, etc., on condition, nevertheinvolved a consideration of an inless, if J. P. S. procure and deliver to strument in the following form: For value received I promise to pay Oliver James Rice, or order, the sum of fifteen hundred dollars when he is twenty-one years of age, with interest (Signed) Rachel C. from date. Rice." The court based its decision upon the case of Kelley v. Hemmingway, 13 Ill. 604, and said: "The court in that case held that inasmuch as the payment was conditional upon the attainment of his majority by the payee said W. W. C. a bond executed by me and C. H., in thirty days from date hereof, indemnifying said W. W. C. against any claim that is or may hereafter arise, relating to the premises which said S. and wife sold and conveyed heretofore to said C., then this note to be void, otherwise to be in full force. April 3, 1861. JOHN P. STILLWELL." And it was held not to be a nego an event which might never happen it was made dependent upon a con- tiable promissory note. See also tingency, and, therefore, lacked one Shaver v. Western Union Tel. Co., 57 of the essential elements of a promis- N. Y. 459; Chapman v. Wright, 79 sory note, which is that the money Me. 595. states that it is to be held as collateral security for the payment of certain debts of a third person is not negotiable.84 But a note 84. Haskell v. Lambert, 16 Gray (Mass.), 592; American Nat. Bank v. Sprague, 14 R. I. 410. face or the back of a promissory note, which has relation to the subject-matter of the note, by the maker of it before delivery, is a part of the contract; and that if by such language payment of the amount is not necessarily to be made at all events, and of the full sum in lawful money, and at In the case of Fralick v. Norton, 2 England, the general tenor of the Mich. 130, 55 Am. Dec. 56, the in- American decisions, and the language strument read: "$60.00. Plymouth, of all the elementary writers upon Jan. 11, 1841. Two years from date for bills of exchange and promissory notes value received, we or either of us prom- are the other way." See also Blackenise to pay E. Woodruff, or bearer, sixty hagen v. Blundell, 2 B. & Ald. (Eng.) dollars, with use. Said Woodruff 417; Hartley v. Wilkinson, 4 Mau. & agrees that if fifty dollars be paid on Sel. (Eng.) 25. the first day of January, 1843, it shall cancel this note. (Signed) A. B." The court said: "The whole of the instrument must be taken and construed Note given as collateral. A promtogether in order to determine the issory note on the margin of which are question [as to whether the instru- written the words "Given as collateral ment engaged absolutely and uncon- security with agreement," is not ditionally to pay the sum mentioned.] negotiable. Costello v. Crowell, 127 The first clause taken by itself clearly Mass. 293. The court said: "In this imports such an agreement; but by Commonwealth, it is settled by an unthe last clause, it is made subject to interrupted series of decisions that any the condition that if a smaller sum language, put upon any portion of the should be paid at an earlier day, such payment should cancel the note. Now if the condition had been, that the note should become void provided the makers should convey a certain estate or perform certain labor, or deliver certain goods within a limited time, no one would pretend that the instrument was a promissory note. Such a time certain to arrive and subject an instrument would simply import an to no contingency, the note is not neengagement to do one of two things gotiable. (Citing Jones v. Failes, 4 at the option of the maker, and not Mass. 245; Springfield Bank v. Merabsolutely and at all events to do rick, 14 Mass. 322; Heywood v. Perrin, either. And could such an instrument 10 Pick. (Mass.) 228; Makepeace v. be distinguished from the one under Harvard College, 10 Pick. (Mass.) 298; consideration? The purport of it is, Wheelock v. Freeman, 13 Pick. (Mass.) that the defendants engage to pay 165; Barnard v. Cushing, 4 Metc. $50 on the first day of January, or (Mass.) 230; Cota v. Buck, 7 Metc. at their option to pay $60 and inter- (Mass.) 588; Osgood v. Pearsons, 4 est on the eleventh of the same month. Gray (Mass.), 455; Palmer v. Ward, They were bound absolutely to pay 6 Gray (Mass.), 340; Hubbard V. the one sum or the other, but not to Mosely, 11 Gray (Mass.), 170; Way v. pay either sum at all events. The Smith, 111 Mass. 523; Stults v. Silva, sixty dollars with use they engaged to 119 Mass. 137.) The words writpay only in the event of their not ten upon the face of the note, paying the fifty dollars at a specified given as collateral security with time. The instrument de- agreement,' being incorporated in clared on does not come within the and made a part of the contract, definition of a promissory note, as indicate with clearness that there given by any elementary writer. I am may be a contingency, to wit, the aware, however, that there are some performance of the undertaking to American cases in which the qualities which this is collateral, in which it of a bill of exchange or a promissory would not be payable; and so it lacks note seem to have been given to in- that element of negotiability, which struments of this character. (Bayley requires that at all events a sum ceron Bills, 10, note i.) But the well- tain shall be payable at a time cersettled doctrine upon this subject in tain." * * * 86 which contains a statement to the effect that the maker has deposited collateral security for its payment does not thereby lose its character of negotiability;85 nor does the fact that a note is secured by collaterals affect such negotiability.8 But a written instrument for the payment of a specified sum at a time specified is rendered nonnegotiable by an alternative contract therein that the payee may sell the collateral securities mentioned therein, and, if these decline in value, may sell them before the money for which the instrument was given would otherwise become due, in which case the proceeds of the sale, less the expense thereof, shall be applied in payment or part payment of the debt, and if a deficiency remains, the amount thereof shall become due forthwith.87 if it is not furnished within two days, may proceed at once to sell the collateral, is not negotiable. Lincoln Nat. Bank v. Perry, 66 Fed. 887, 14 C. C. A. 273, 32 U. S. App. 15. 85. Note containing recital that tiable by a recital that certain notes collateral has been deposited. In the given to the payee as collateral are case of Valley Nat. Bank v. Crowell, to be surrendered when the note is 148 Pa. St. 284, 23 Atl. 1068, the in- due; Duncan v. City of Louisville, 13 strument had contained therein the Bush (Ky.), 378, 26 Am. Rep. 201. following words: "Having deposited But a note containing an agreement herewith a like amount of Crowell that if there shall be any depreciation, Company mortgage bonds as collateral prior to the maturity of the note, in security, which we authorize the the collateral security, the payee or holder of this note, upon the non- holder may call for such further seperformance of this promise at matur- curity as he deems satisfactory, and ity, to sell either at the brokers' board, or at public or private sale, without demanding payment of this note or the debt due thereon, and without further notice, and apply proceeds, or as much thereof as may be neces- In the case of Humphrey v. Becksary, to the payment of this note and with, 48 Mich. 151, 12 N. W. 28, the all necessary charges, holding us as instrument was in the following terms: makers and indorsers responsible for "I promise to pay to E., or order, any deficiency." The court said: $1,532.90, with interest at the rate of "We find nothing in this to de- ten per cent. per annum; interest not stroy the negotiability of the note. to be paid annually unless the said B. While it has been truly said that can make it convenient, and other sea promissory note is a courier curity to be taken in exchange for this without luggage, we find nothing in note when said B. can realize the same the language quoted above, beyond in proper shape from the C. homethe statement that the note is accom- stead. This note is secured by panied with certain collateral. The a real estate mortgage bearing even mere giving of collateral security with date herwith." It was held that the a promissory note does not destroy note was not a negotiable instrument. its negotiability." See also Knipper 86. Mumford v. Tolman, 54 Ill. App. v. Chase, 7 Iova, 145; Arnold v. 471; Begler v. Merchants' Loan & Rock River Valley Union R. Co. 5 Duer (N. Y.), 207; National Bank v. Gary, 18 S. C. 282; Towne v. Tice, 122 Mass. 67; Collins v. Bradbury, 64 Me. 37; Goss v. Emerson, 23 N. H. 38, in which last case it was held that a note is not rendered nonnego Trust Co., 62 Ill. App. 560; Blumenthal v. Jassoy, 29 Minn. 177, 12 N. W. 517; Craft v. Bunster, 9 Wis. 503. 87. Continental Nat. Bank v. MeGloch, 73 Wis. 332, 4 N. W. 409; Commercial Nat. Bank v. Consumers' Brewing Co., 17 App. (D. C.) 100. |