Arrington v. Mercantile Protective Bureau

• Decision Date: 19 February 1930
• Docket Number: (No. 1167-5478.)
• Parties: ARRINGTON v. MERCANTILE PROTECTIVE BUREAU, Inc.
• Court: Texas Supreme Court

24 S.W.2d 383

ARRINGTON v. MERCANTILE PROTECTIVE BUREAU, Inc.

(No. 1167-5478.)

Commission of Appeals of Texas, Section B.

February 19, 1930.

Error to Court of Civil Appeals of Tenth Supreme Judicial District.

Action by the Mercantile Protective Bureau, Inc., against O. P. Arrington. Judgment for plaintiff was affirmed by the Court of Civil Appeals [15 S.W.(2d) 663], and defendant brings error. Affirmed.

W. W. Mason, of Mexia, for plaintiff in error.

J. E. & B. L. Bradley and Mr. & Mrs. C. S. Bradley, all of Groesbeck, for defendant in error.

LEDDY, J.

The trade acceptance, made the basis of this suit, contained the following provision: "The obligation of the acceptor arises out of the purchase of goods from the drawer." A majority of the Court of Civil Appeals for the Tenth District held that, notwithstanding such provision, the instrument was a negotiable one, to which Justice Stanford dissented.

The writ of error was granted in this case to settle a conflict upon this question between the decisions of the Third Court of Civil Appeals and those rendered by Court of Civil Appeals for the Second and Fifth Districts.

The Third Court of Civil Appeals, in the cases of Harris v. Wuensche, 7 S.W.(2d) 595, and Harris v. Bucek, 8 S.W.(2d) 565, held instruments nonnegotiable containing provisions identical with that under consideration, while the Second Court of Civil Appeals, in Traders' Securities Co. v. Green, 4 S.W.(2d) 183, and the Fifth Court of Civil Appeals, in American Exchange Bank v. Steeley, 10 S.W. (2d) 1038, decided that instruments with such a provision were negotiable.

The Negotiable Instruments Act provides that an unconditional and unqualified order or promise to pay is negotiable, although coupled with "a statement of the transaction which gives rise to the instrument." Article 5932, § 3, subd. 2, R. S. 1925.

In order to render an instrument nonnegotiable by reference to some extrinsic agreement, it must appear therefrom that the paper is to be burdened with the conditions of the agreement. There is nothing in the language used indicating anything more than a mere reference to the transaction out of which the obligation arose. It is in effect a recital that the obligation disclosed by the instrument is one given for the purchase of goods from the drawer by the acceptor.

Our holding is not in conflict with the case of Lane Co. v. Crum, 291 S. W. 1084, decided by Section A of the Commission of Appeals. This case is relied upon by the Third Court of Civil Appeals to sustain the decisions rendered by it in the Harris Cases. The instrument involved in the Lane Case did not stop with a mere reference to the transaction out of which it arose, but the same contained the additional language that its maturity "being in conformity with original terms of purchase." Such language is not fairly susceptible of any other construction except...