Thompson v. Wheatland Mercantile Co.

Corn, Justice. The defendant in error brought suit and obtained a judgment against the plaintiff in error for the sum of $470.44 and interest alleged to be due under the following agreement : “In consideration of Mrs. Fannie Tait’s assigning to me her equity in the S. E. of sec. (7) seven, township 24, range 68, I hereby agree with the Wheatland Mercantile Co. that they shall hold an equity in the above described land to the amount of the balance of their account and claim against Lewis Tait, and that the said Fannie Tait and Lewis Tait or myself will either pay the amount claimed by the Wheatland Mercantile Co. against Lewis Tait and Fannie Tait out of the equity in the above described land or out of the crop raised on the said land, on or before Nov. 1, 1896, together with interest thereon at 12%. H. J. THOMPSON, “FANNIE TAIT, “LEWIS TAIT.” The evidence discloses that on February 16th, 1894, Mrs. Tait had entered into a written agreement with the Wyoming Development Company to purchase the quarter section of land mentioned, with the appurtenant water right, at $15 per acre, to be paid in ten yearly installments. She paid the first installment and went into possession. On September 30th, 1895, the date of the agreement sued on, she was in default of payment of the installment due February 16, 1895, but she and her husband were in possession of and farming [93] the land and the Wyoming Development Company had taken no steps toward declaring a forfeiture. The Taits owed the Wheatland Mercantile Company about $600 and Thompson, the plaintiff in error, some $400, and the agreement sued on was entered into with a view to securing the payment of these sums, Mrs. Tait on the same day having assigned her interest in the land contract to Thompson. Plaintiff in error insists that his agreement of September 30 was not an absolute promise to pay to the Mercantile Company the amount of their claim, and that in any event the promise is without consideration. There was no allegation in the plaintiff’s petition that any part of the amount claimed had been realized out of the land itself or the crops raised on it, or that the defendant was negligent in failing to realize from either source. And the evidence tends to show that while, at the time the agreement was entered into, all the parties to the transaction supposed that both debts could easily be paid out of the equitable interest of the Taits in the land and out of the crops, it subsequently proved that the land would not bring more than the incumbance upon it, and the defendant, plaintiff in error, had applied the crops, as far as they would go, to the payment of plaintiff’s claim. The courts in England and this country have repeatedly construed instruments like the one _ sued on, and it is held, we think, with practical uniformity that the character of the instrument as a bill or note is destroyed if it be made payable expressly or by implication out of a particular fund, for its payment becomes then conditioned on the sufficiency of that fund, which may prove inadequate. (Daniel on Neg. Inst., Sec. 50.) A careful distinction is made where the statement as to a particular fund, as for instance in a bill of exchange, is inserted merely as an indication to the drawee how to reimburse himself, or to show to what account it should be charged. In such cases it is held that the money is to be advanced on the credit of the person and the payment is not limited to the proceeds of the particular fund. But [94] where the payment, either expressly or by implication, is to be made out of a particular fund, all the cases, so far as we have been able to find, hold that there, is no personal liability unless the fund proves adequate for the purpose or its inadequacy is due to the fault of the party sought to be charged. In the case of VanVacter v. Flack, suit was brought against VanVacter as the acceptor of a bill of exchange by which he was requested to pay $500 on the 1st day of January, 1837, “out of the notes left in your hands by me for collection.” VanVacter accepted generally. .The declaration contained no averment that the notes, out of the proceeds of which the bill was to be paid, had been collected. The court say: ■ “The decisions are numerous on similar instruments, and in no instance that we are aware of have they been held to be bills of exchange. (Chitty on Bills, 157-8, and notes.) This case is distinguished from that class of cases in which the particular fund is mentioned merely as a direction to the drawer how he may reimburse himself. This bill is predicated exclusively on a particular fund, not stated to be in hand, but to arise out of notes left for collection. ■The understanding of the parties must have been that the payment of the order depended on the collection of these notes. * * * The acceptance was general and must be understood only as an engagement to pay out of that particular fund, if it should come to hand by the time appointed for payment. .On this acceptance an action may be maintained, but it can only be done by averring and proving the collection of the fund.” (VanVacter v. Flack, 1 S. & M. (Miss.), 398.) In a later case in the same court the instrument sued on was: “Please pay to the order of J. L. Covert three hundred and fifteen dollars out of the twelve bales of cotton attached by you.” The court say the instrument is not payable generally and absolutely, but is payable out of a particular fund. If that fund should fail, or never be realized by the drawer, although he might have accepted, he would be under no liability. (Wadlington v. Covert, 51 Miss., 635.) [95] In Worden v. Dodge the plaintiff relied upon an agreement by which, for value received, the defendants jointly and severally promised to pay to the plaintiff, by his name or order, $250, with interest, payable one-half in two years and the other half in three years out of the net proceeds of a certain bed of ore, the bed to be opened and the ore disposed of as soon as conveniently might be. The plaintiff introduced the agreement and rested and the court, upon the motion of the defendant, directed a non-suit. The New York Supreme Court, in denying a new trial, say the non-suit was proper; that, although the promise was to make payments at certain specified times, the payments were to be made out of the net proceeds of ore to be raised and sold from a certain ore bed. That here was a contingency; the fund might turn out to be inadequate, in which case there would be no obligation to pay at any time. (Worden v. Dodge, 4 Denio, 159.) In Parsons on Notes and Bills, after stating the general doctrine and citing the cases supporting it, the author adds that “in many of the above cases it was -an order rather than a promise, and the question was not whether a' certain instrument was a promissory note, but whether it was a bill of exchange. In this respect, however; these instruments are precisely the same.” (Parsons on Notes and Bills, 44-5. See also Story on Bills, Secs. 46, 47.) Instruments drawn ' upon a particular fund, whether the fund has already accrued or is to accrue in future, are not negotiable bills or notes, since they do not carry the general personal credit of thé maker and since they are contingent upon the sufficiency of the fund on which they are drawn. (4 Am. & Eng. Ency. Daw (2d Ed.), 87.) The instrument under consideration comes clearly within the rule. It is declared upon as an unconditional promise to pay, but by its express terms it is only a promise to pay “out of the equity in the above described land of out of the crop raised on the said land.” There is a good deal of evidence in the record directed [96] to the question whether the parties to the transaction understood the instrument as binding Thompson unconditionally to pay the claim of defendant in error. Much of this testimony is a mere statement of the opinions of the parties upon the subject and was not competent evidence. But it appears that one of the officers of the company supposed it bound Thompson absolutely to the payment, while another testifies that he never supposed that it did. And Thompson testifies that he never considered himself bound to pay unless the necessary funds were realized out of Tait’s interest in the land or out of the crops. He further testifies that from conversations with the officers of the company prior to, and at the time of, entering into the arrangement he thinks they never considered him personally liable. But, however this may be, it is clear from the evidence that at the time the instrument was executed all parties supposed that the fund would be ample to pay the claims of both defendant in error and plaintiff in error, so that there was no occasion for them to give special consideration to the question of Thompson’s personal liablity in case the fund should prove inadequate. Consequently the agreement went no further than to provide that Thompson should handle the property out of which the fund was to be realized, and out of it pay the company’s claim, his own claim being postponed until the other was satisfied. It is clear from the evidence that plaintiff in error was applying the proceeds of the crops to the payment of the claim of defendant in error; that the property in his hands had not yielded, and could not be made to yield, anything additional to the fund out of which payment was to be made, and that, consequently, plaintiff in error was guilty of no breach of his contract. The judgment will be reversed and the cause remanded for a pew trial. Reversed. PoTTER, C. J., and Knight, J. concur.