White v. Hatcher

Mr. Justice Green delivered the opinion of the Court. This is a suit by the indorsee of several promissory notes, claiming to be an innocent holder. The defendant, the maker, admits the execution thereof, hut avers failure of consideration and denies that the notes were negotiable. There was a decree for the complainant in the court of civil appeals, that court finding him to he an innocent holder and construing the notes sued on to he negotia- ■ hie instruments. A petition for certiorari has been granted and the cause argued here. All the notes are of like effect and the first is, in words and figures, as follows: “$25.00. September 15,1913. “Sixty days after date I promise to pay to the order of Jas. L. Akers twenty-five and no one hundredths dollars, with interest from date at the rate-of six per cent, per' annum, value received. This note is first of a series of twelve notes given for the purchase of one Marathon roadster automobile. The conditions of said purchase are, that the title to the above car is to remain'in the hands of Jas. L. Akers, and so remain, until all the notes are paid in full with interest and cost — 611 — of collection, including attorney’s fees. In default of payment on .any of the said notes, the whole shall become due, and the said Jas. L. Akers shall have the right to take possession of said car and sell the same for the balance of purchase money as provided by law. W. T. Hatcher. ’ ’ Indorsed on back: “Jas. L. Akers.” It is only necessary to consider that provision of the notes declaring that the whole series shall become due upon default in payment of any one of said notes. Other provisions of the notes have been elsewhere considered by the court and held not to affect negotiability. It is urged in behalf of the maker that the insertion of the words under consideration rendered the time of payment of the notes uncertain and contigent within the meaning of section 4", chapter 94, of the Acts of 1899. The Negotiable Instruments Act. An instrument to be negotiable must be payable on demand, or at a fixed or determinable future time. Subsection 3, section 1, chapter 94, Acts 1899. Further quoting from this statute: ‘£ Sec. 4, An instrument is payable at a determinable future time, within the meaning of this act, which is expressed to be payable: ' “1. At_a fixed period after date or sight; or, “2. On or before a fixed or determinable future time specified therein; or, “3. Omor at a fixed period after the occurrence of a specified event, which is certain to happen, though the time of happening be uncertain. — 612 — “An instrument payable upon a contingency is not negotiable, and the happening of the, event does not cure the defect.” The notes in suit are not payable on a contingency. They are payable at all events at the several times fixed on their faces. Any may become due earlier if the maker defaults in payment of one maturing previously. The statute authorizes the execution of a negotiable instrument payable “on or before a fixed or determin.able future time specified therein. ’ ’ If thus expressed, negotiability is not impaired, although the maker may, if he find it convenient, treat the note as matured and discharge it any day after issuance. Since under subsection 2, section 4, a negotiable note may be so written as to mature at any time before the fixed date, according to the convenience of the maker, may not this language of the statute be held to justify a more definite acceleration, dependent upon the act of the maker? Such a construction seems to bé sound. Maturity would not be controlled by the whim or caprice of the holder, as where the latter was authorized to confess judgment for the maker, whenever the note was deemed insecure, and Bank v. Russell, 124 Tenn., 618, 139 S. W., 734, Ann. Cas., 1913A, 203, and like cases have no application. The exact question before us came before the supreme court of the' United States. 'While that case did not arise under the negotiable instruments statute, the court recognized the general rule of the law merchant to be that: — 613 — “To constitute a valid promissory note it must be for tbe payment of money at some fixed time, or upon some event which must inevitably happen, and that its character as a promissory note cannot depend upon future events but solely upon its character when created.” The court further recognized the negotiability of a note payable on or before a named date, and after a review of the decisions said: “In view of these authorities, as well as upon principle, we adjudge that the negotiability of the notes in suit was not affected by the provision that upon the failure of the maker to pay any one of the notes of the series to which those in suit belonged, the rest should become due and payable to the holder.” Chicago Railway Equipment Co. v. Merchants National Bank, 136 U. S., 268 [10 Sup. Ct., 999], 34 L. Ed., 349. It is tó be noted that section 4 of the statute, defining “determinable future time” contains nothing materially different from the provisions of the law merchant, as these provisions were understood by the supreme court, and we are accordingly inclined to follow Chicago Railway Equipment Co. v. Merchants’ National Bank, supra, and to hold the notes here in suit negotiable. - The Negotiable Instruments Act declares that the sum payable is a sum .certain, although payable “by stated installments, with a provision that upon default in payment of any installment, or of interest, the whole shall become due,” Subsection 3, section 2. — 614 — ■ The supreme court of Wisconsin lias held that a stipulation maturing a whole series of notes upon default in the payment of one does not impair negotiability. The Wisconsin statute, however, is slightly different from the Tennessee statute. The former statute has an additional subsection among those defining instruments payable at a determinable future time, as follows: “4. Ata fixed period after date or sight, though payable before then on a contingency.” St. Wis., 1915, section 1675 -4. This subsection seems to have been added to the statute to meet former decisions of the Wisconsin court, and the holding of the court referred to above is rested on the statute. Thorp v. Mindeman, 123 Wis., 149, 101 N. W., 417, 68 L. R. A., 146, 107 Am. St. Rep., 1003. The ease of Iowa National Bank v. Carter 144 Iowa, 715, 123 N. W., 237, is cited in opposition to the views we have indicated. The notes there held to be nonnegotiable, in addition to the stipulation for the maturity of all upon default in respect to one, provided “If the said party of the first part shall sell, assign, dispose of, or attempt to sell, assign, dispose of, or remove from said county of Iowa without the consent of said Port Huron Machine Co., Ltd., the whole or any part of said , goods or chattels, or if at any time the said party of the second part shall deem themselves insecure,” —the whole of the notes should become due. — 615 — The Iowa court might obviously have based its conclusion, as to the character of the notes, upon that portion of their contents just quoted, without consideration of the acceleration clause. Roblee v. Union Stockyards National Bank, 69 Neb., 180, 95 N. W., 61, is not in point. In that case, by a collateral agreement, the maker undertook to make payments on the notes by the delivery of milk to a certain creamery, by which deliveries his notes were to be credited. The court said the transaction involved the payment of uncertain sums at uncertain times, that it would be impossible to tell how much would be due on these notes at maturity, and that such notes were not negotiable. Inasmuch, therefore, as we fiord no direct construction of the Negotiable Instruments Act to the contrary, and, believing the act, in this particular, made no change in the rules of the law merchant, we prefer to follow the interpretation of the latter rules adopted by the supreme court in Chicago Railway Equipment Co. v. Merchants’ National Bank, supra, and adjudge that the negotiability of a series of notes is not affected by a provision that upon the failure of the maker to pay any one of the notes, the whole of the series shall become due. Such a .result is undoubtedly desirable in furtherance of trade and industry. A conditional vendor, selling implements, equipment, and machinery, with lien or title retained, is thus protected against depreciation of his security, incident to its use. Purchase — 616 — money notes, so secured, may be more readily marketed. The security being better, credit will be easier, and small enterprises may be organized and outfitted with less difficulty. It is said that these notes might find their ways into different hands, and that the holder of the later notes would not know it if default was made upon ah earlier note; that such default would mature the whole series, and the holder of the later notes would thus unwittingly and perhaps unwillingly have the notes in his possession rendered past due. The answer to this is that the provision that the series of notes shall become due upon the failure of the maker to pay any one of -them means that such other notes shall become due' at the option of the holder. Chicago Railway Equipment Co. v. Merchants’ National Bank, supra. Unless the holder of the other notes so elects, said notes will not become due until their fixed maturities. • The holder of earlier notes, upon one of which default is made, can only declare due and payable the notes in his possession. His act cannot affect the notes in the possession of another. Upon the whole case we think the correct result was reached by the court of civil appeals, and the decree of that court is affirmed.