This is the rule independent

ment of money is not negotiable.45 of the provisions of the Negotiable Instruments Law. As stated by Mr. Edwards: "It is also requisite that bills and notes be made for the payment of money only, and not for the payment of money and for the performance of some other act." 46 It does not, however, impair the validity of a note to mention in it by way of recital, a circumstance or fact that does not qualify or add to the undertaking expressed in it.*7 Where an agreement is engrafted on a note, it takes from the instrument its character as a promissory note, and converts it into an ordinary contract.

48

To be a promissory note, the writing should be one entire instrument for the payment of money. If it be in form and substance a note up to a certain point, as where it is given for the payment of £695 in installments, payable from time to time, and concludes with a provision that the balance, £95, shall be applied as a set-off in a manner specified, the instrument is not a promissory note.49 Reference has already been made to cases where certificates of deposit have been given, containing a statement that they are payable in cash upon the return of such certificates;50 it seems to be a general rule that such certificates are negotiable. And where a note for a certain amount was indorsed by the maker by a written order, as follows: "Please pay the above note, and hold it against me in our settlement," the order was held to be operative as a bill of exchange, and the drawee after acceptance was held liable thereon.51 But in another case an instrument in writing by which

45. Neg. Inst. L. (N. Y.), § 24. For same section in statutes of other States see Appendix.

46. Edwards on Bills and Notes, 138. 47. Fancourt v. Thorne, 9 Q. B. (Eng.) 312.

50. See cases cited under § 36 (b), of this chapter, ante, pp. 177–181.

51. Leonard v. Mason 1 Wend. (N. Y.) 522. In this case the court said: "It is supposed that this case depends on the same principles as the case of Cook v. Satterlee, 6 Cow. (N. Y.) 108. The rule there recognized is, that a bill of exchange must be for the payment of money, and nothing else. In that case, the drawees were required to pay a certain sum of money, and take up a note given by the drawer to third person. Here it is to a note, which is referred to the amount; the

48. Bolton v. Dugdale, 4 B. & Ad. (Eng.) 619. The contract in this case was in these words: "Received and borrowed of Timothy Bolton, laborer, the sum of £30 which I do hereby promise to pay with interest, at the rate of five per cent. I also promise to pay the demands of the sick club at H, in part of interest, and the remaining stock and interest to be pay a paid on demand to the said Timothy merely to ascertain Bolton, his executors, administrators or assigns." It was held not to be a promissory note.

49. Edwards on Bills and Notes, p. 139, citing Davies v. Wilkinson, 10 Ad. & El. (Eng.) 98.

and the

note retaining of as a voucher is no more the another performance of act beside the payment of the money, than the retaining the order itself for the same purpose."

X. directed Y. to pay Z., or bearer, a certain amount and take X.'s note therefor was held not to be a bill of exchange.5

§ 38. Certainty as to sum.

52

53

a. In general. An instrument to be negotiable must contain an unconditional promise or order to pay a sum certain in money. No principle of law is more fully established by authority and the universal concurrence of the commercial world, than that to make a written promise a valid promissory note, it must be for a fixed and certain, and not for a variable amount. In France it is so determined by the provisions of the Code Napoleon. It is the recognized mercantile law of continental Europe. In England and in this country, it has received the sanction of repeated and well-considered adjudications. Without this essential requisite, a written promise, though in terms payable to order, is to be regarded as a simple contract and not negotiable.54

52. Cook v. Satterlee, 6 Cow. (N. Y.) 108.

53. Neg. Inst. L. (N. Y.), § 20. See Appendix.

"In Smith v. Nightingale, 2 Stark. (Eng.) 375, the promise was to pay the payee sixty-five pounds and all other sums that may be due him, and 54. Sum must be fixed and certain. it was claimed for the plaintiff, to -Dodge v. Emerson, 34 Me. 96. In whom the interest in the contract had this case the note provided for the passed by indorsement, that he might payment of a certain sum to an in- disregard the latter clause and recover surance company or order, "with such on the certain sum set forth in his additional premium as may arise on contract as indorsee, but the court depolicy, No. 50." The court said, in cided otherwise. Davis v. Wilkinson, considering this instrument: 10 Ad. & El. (Eng.) 98."

"The defendants in this case have promised to pay two several sums; one certain and definite, the other uncertain and contingent. The defend ants' liability, being for both these sums, is obviously for an unascer

tained and indefinite amount.

A similar case in the same State is that of Marrett v. Equitable Ins. Co., 54 Me. 537, where a premium note for a sum certain, "and such additional premium as may become due," on a policy named, and at a time therein specified was held not negotiable.

"It is insisted in argument, that In Iowa, under section 2085 of the the plaintiff may abandon all claim for Code, which provides that "instruthe additional premium, which is un- ments by which the maker promises to certain and proceed only for the cer- pay a sum of money in property or tain sum expressed in the contract. labor, or acknowledges property, or Undoubtedly he may take judgment labor, or money to be due to another, for any sum less than the amount are negotiable whenever it is manifest due, and in that mode abandon a por- from their terms that such was the intion of his legal claims, but that still tent of the maker," does not render a leaves the contract in its original state, bill of exchange negotiable, when it is and can in no way affect its legal con- uncertain as to the amount to be paid. struction. He could not erase the Culbertson v. Nelson, 93 Iowa, 187, 61 clause relating to the additional pre- N. W. 854, 57 Am. St. Rep. 266, 27 mium, without thereby making such L. R. A. 222. an alteration in the instrument declared on, as would discharge the defendants.

In the case of Smith v. Marland, 59 Iowa, 645, 13 N. W. 852, a note given for a corn-crusher, and containing a

b. What constitutes certainty as to sum; statutory provision.The Negotiable Instruments Law contains the following provision,55 more or less declaratory of the existing law as established by judicial decisions, and similar in many respects to the English Bills of Exchange Act of 1882:56

"The sum payable is a sum certain within the meaning of this 66 act, although it is to be paid:

"1. With interest; or

"2. By stated installments; or

"3. By stated installments, with a provision that upon default "in payment of any installment or of interest, the whole shall "become due; or

"4. With exchange, whether at a fixed rate or at the current 46 rate; or

"5. With costs of collection or an attorney's fee, in case pay"ment shall not be made at maturity."

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c. Payment of interest. The agreement to pay interest is a mere incident or accessory to the debt itself, and where the debtor reserves an alternative right to pay interest with coin or paper, the negotiability of the instrument is not affected thereby." An instrument which, in its terms and form, is a negotiable instrument, does not lose its character of negotiability because it also recites that an additional rate of interest will be paid after ma

In South Dakota a promissory note having a statement written on its face that it is to be discounted at a certain per cent. if paid before maturity was held to be nonnegotiable, for, at the time of its execution, it is impossible to ascertain what amount will be required to pay it, without considering

provision that "the payee or his in- assignable by indorsement. Whorter dorsee has full power to declare this v. Norris, 9 Ind. App. 490, 34 N. E. note due, and take full possession of 854. said property at any time they may deem themselves insecure, even before the maturity of this note, and sell the same where this note is payable, on five days' notice in writing," was held not negotiable, for the reason that the amount recoverable on the note is uncertain. See also Gaar v. Louisville Banking Co., 11 Bush (Ky.), 180; Cushman v. Haines, 20 Pick. (Mass.) 132; Palmer v. Ward, 6 Gray (Mass.), 340; American Nat. Bank v. Sprague, 14 R. I. 410; Bacon v. Bates, 53 Vt. 30.

In Indiana, under Rev. Stat. 1881, § 5501, providing that all notes or instruments in writing, signed by any person who promises to pay money, or acknowledges money to be due, shall be negotiable by indorsement, it was held that an agreement to pay interest on a certain sum during the lifetime of the payee or his wife was

the discount, depending upon a condition uncertain of fulfilment. National Bank of Commerce V. Feeney, 12 S. D. 156, 80 N. W. 186, 76 Am. St. Rep. 594.

55. Neg. Inst. L. (N. Y.), § 21. For same section in statutes of other States see Appendix.

56. § 9 (1). Subd. 5 of the above section of the Negotiable Instruments Law was not contained in the English Bills of Exchange Act.

57. Dinsmore v. Duncan, 57 N. Y. 573, 15 Am. Rep. 534..

turity 58 And the fact that a bill provides that it shall bear interest from date in case of its nonpayment at maturity will not affect its negotiability;59 the requirement that negotiable paper should be for a precise amount applies rather to the principal amount than to ancillary and incidental additions of interest.60 A note is negotiable, notwithstanding it is on its face usurious.

67.

58. Towne V. Rice, 122 Mass.

per annum, 8 per cent. if paid when due" is not negotiable under section 4457 of the Compiled Laws of South Dakota, providing that a negotiable instrument shall contain no conditions not certain of fulfilment.

59. Interest if not paid at maturity. In the case of Hope v. Barker, 112 Mo. 338, 20 S. W. 567, 34 Am. St. Rep. 337, a promissory note, negotiable in terms, contained the words "without interest thereon, if paid at

Additional rate of interest after maturity. In the case of De Haas v. Roberts, 59 Fed. 853, a certain instrument, made in the State of Kansas, contained a promise to pay to K. or order, five years after date, a sum certain, "with interest at 8 per cent., payable semi-annually, as per annexed coupons; both principal and interest payable at K.'s bank, in Topeka." It recited that both " this note" and the maturity; if not paid at maturity to coupons were to be construed by the laws of Kansas in every particular, and were secured by a mortgage on land, and provided that they should draw 12 per cent. interest after maturity; that in default of payment of any coupon the principal should become due, and the amount of such defaulted coupon should be added to the principal, and the whole bear interest at 12 per cent. It was held that this was a negotiable instrument.

In the case of Gilmore v. Hirst, 56 Kan. 626, 44 Pac. 603, it was held that a provision in a promissory note for the payment of interest on interest after maturity did not render such note nonnegotiable. See also Parker v. Plymell, 23 Kan. 402.

bear ten per cent. interest from date;" it was held that such words did not deprive the instrument of its character of negotiability. The court said: "Interest is but an incident to the debt, and it is a thing as to which it is usual to contract even in negotiable paper. Surely it cannot be maintained that a note ceases to be negotiable because of the addition of such words as 'with interest from maturity at the rate of eight per cent. per annum.❜ This is but another way of expressing an agreement that if the note is not paid at maturity it shall from that time bear interest at the rate of eight per cent. per annum. The only difference in the case just supposed and the one at hand is that here the principal is to bear interest from the date of the note if not paid at maturity, instead of bearing interest from and after maturity. In both cases the amount to be paid is fixed, definite, and certain." See also Christian County Bank v. Goode, 44 Mo. App. 129.

The provision of a note drawing interest at 7 per cent., that if not paid when due, it shall draw interest at 10 per cent.," from date until paid " does not make the amount so uncertain as to render the note nonnegotiable. Crump v. Berdan, 97 Mich. 293, 56 N. W. 559, 37 Am. St. Rep. 345; Russell v. Klink, 53 Mich. 161; Smith v. Crane, 33 Minn. 144, 22 N. W. 633, 53 Am. Rep. 20; Kirkwood v. First Nat. Bank, 40 Neb. 484, 58 N. W. 1016, 42 Am. St. Rep. 683, 24 L. R. A. 444; Merrill v. Hurley, 6 S. D. 592, 62 N. W. 958. But in the case of Hegeler v. Comstock, 1 S. D. 138, 45 N. W. 331, 8 L. R. A. 393, it was held that a note for a sum certain, with interest 60. Goodin v. Buhler, 57 Mo. Appfrom date until paid, at 10 per cent. 63.

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An acceptance of a bill of exchange, with interest after maturity, is a contract to pay a sum certain at maturity and is, therefore, negotiable, for the provision as to interest becomes operative only after maturity. Farmers' Nat. Bank v. Sutton Mfg. Co., 52 Fed. 191, 3 C. C. A. 1, 6 Ü. S. App. 312, 17 L. R. A. 595.

But where a promissory note was made payable "with interest the same as savings banks pay," it was held nonnegotiable, because the rate of interest paid by a savings bank upon its deposits must be determined by the amount of the income of the bank, and, unless it can be shown by evidence that the rates of interest of all the banks which were intended by the parties have been the same during the whole period for which interest is to be computed, it is impossible to determine what rate of interest was intended by the promise; the instrument, therefore, lacks "that degree of certainty in regard to the amount of money to be paid which is requisite to constitute a negotiable promissory note." 61

d. Payment in installments.— The provisions of the Negotiable Instruments Law as to the effect of payment by installments are not new in that law but have been declared by the courts in a number of cases.62 Where a promissory note is payable by installments, subject to a condition that on default being made in payment of the first installment, the whole amount shall become immediately payable, the note is assignable within the Statute 3 & 4 Anne, chapter 9, and on default being made by the maker in payment of the first installment, an indorser is liable for the whole amount.63 In case of such a note where it is provided that in case of default in payment of an installment the holder might treat it as due immediately, it was held that the option must be exercised within a reasonable time.64 And it would seem that the time of the payment of each installment should be definitely indicated in the instrument.65 The reservation in a note to pay it in installments at any time before maturity does not in any way affect the certainty of the amount required to be paid.66

61. Whitwell v. Winslow, 134 Mass.

343.

62. Oridge v. Sherbourne, 11 Mees. & W. (Eng.) 374; Commercial Bank v. Crenshaw, 103 Ala. 497, 15 South. 741; Van Buskirk v. Day, 32 Ill. 260; Wright v. Irwin, 33 Mich. 32; Riker v. Sprague Mfg. Co., 14 R. I. 402, 51 Am. Rep. 413.

63. Carlon v. Kennealy, 12 Mees. & W. (Eng.) 139, 13 L. J. Exch. (Eng.) 64; Cooke v. Horn, 29 L. T. (N. S.) (Eng.) 369; Miller v. Biddle, 13 L. T. (N. S.) (Eng.) 334.

A note which states that it is payable to the order of the payee, at a certain fixed time, and states further that it is one of a series of notes given

for cars sold by the payee to the maker, and is to become due upon the failure to pay any one of the series, and that it is agreed that the title of the cars shall remain in the payee, until all the notes are paid, is a valid negotiable promissory note. Chicago Ry. Equipment Co. v. Merchants' Nat. Bank of Chicago, 136 U. S. 268, 10 Sup. Ct. 999, 34 L. Ed. 349.

64. Crossmore v. Page, 73 Cal. 213, 14 Pac. 787, 2 Am. St. Rep. 789.

65. Moffat v. Edwards, C. & M. (Eng.) 16, 41 E. C. L. (Eng.) 15; Commercial Bank v. Crenshaw, 103 Ala. 497, 15 South. 741.

66. Riker v. Sprague Mfg. Co., 14 R. I. 402, 51 Am. Rep. 413.