Post v. Kinzua Hemlock Railway Co.

Opinion bt Mr. Justice McCollum, The single question in this ease is whether the instrument declared upon is a negotiable promissory note. If it is the plaintiffs are entitled to maintain their suit as it was brought, and the learned court below erred in the ruling complained of in the first specification. If it is not, both specifications must [619] be overruled. In passing upon the question of the negotiability of the paper it will be observed that the sum referred to in it represents rent to accrue under a contract of lease and conditional sale of rolling stock, and that the plaintiffs’ contention, if successful, will enable them to avoid a defense available against the payee. In other words if the plaintiffs are bona fide purchasers of the paper before maturity, and it is negotiable, they may recover the sum named in it, although the maker may have a good defense against the payee, arising from the latter’s non-compliance with the terms of the contract. But for the protection the negotiability of the instrument would afford them against such a defense they might as well have brought suit upon it, or on the contract, in the name of the payee to their use. We allude to this, not as a matter affecting the question before us, but as explanatory of what might otherwise seem to be a merely technical and unnecessary contest. The instrument in suit and the contract to which it refers were executed and delivered on the same day and the former is more in the nature of a statement of a stipulation in the latter than of an independent undertaking for a past or present consideration to pay a sum certain at the time stated in it. It says in substance that under a contract of lease and conditional sale “ of even date herewith ” there will be due to the payee or order on the first of July, 1891, for rental of rolling stock, two hundred and fifty dollars “ with interest at six per cent per annum added,” payable at the office of the payee in New York. The payee in the instrument on which the action is based was the lessor in the contract and the sum to become due on the first of July was rental for the rolling stock that was leased. If the lessor refused to deliver the stock to the lessee in accordance with the terms of the contract the rent reserved for the use of it did not become due on the first of July or at any time. What the lessee said in the paper in question regarding the sum to become due on the first of July for rental of rolling stock was based on compliance with the lease and is not applicable to a repudiation of it. We cannot therefore regard the paper in suit as creating a liability independent of and unaffected by the contract to which it refers. We think it embraces a contingency which renders it non-negotiable, and if the maker is liable upon it to the plaintiffs or to the payee the liability is [620] qualified and measured by the “contract of lease and conditional sale.” Nothing is better settled than the rule which requires that an instrument to be negotiable shall be free from contingencies and conditions: Overton v. Taylor, 3 Pa. 346; Sweeny v. Thickstun, 77 Pa. 131; Woods v. North, 84 Pa. 407, and Iron City Bank v. McCord, 139 Pa. 52. The specifications of error are overruled and the judgment is affirmed.