Bombolaski v. First National Bank of Newton, Illinois
| Decision Date | 16 May 1913 |
| Docket Number | 7,993 |
| Citation | 101 N.E. 837,55 Ind.App. 172 |
| Parties | BOMBOLASKI ET AL. v. FIRST NATIONAL BANK OF NEWTON, ILLINOIS |
| Court | Indiana Appellate Court |
Rehearing denied December 11, 1913, Reported at: 55 Ind.App 172 at 187.
From Perry Circuit Court; William Ridley, Judge.
Action by the First National Bank of Newton, Illinois, against John Bombolaski and others. From a judgment for plaintiff, the defendants appeal.
Affirmed.
John W Ewing, William H. Roose and Dennis F. Seacat, for appellants.
Oscar C. Minor, for appellee.
Appellee sued appellants on a note and recovered. The note sued on was in the words and figures following:
The complaint counts upon the note and alleges that the plaintiff was a banking corporation located and doing business in the town of Newton, Illinois. Facts are also alleged showing that the bank acquired title to the note in suit by endorsement in writing under such circumstances as would make it a bona fide holder if the note is negotiable as an inland bill of exchange. A statute of the state of Illinois on the subject of negotiable instruments is pleaded as a part of the complaint. If the note in suit is to be construed in accordance with this statute as interpreted and applied by the supreme court of that state, it is a negotiable note; but if it is to be construed in accordance with the statute of Indiana on the subject, it is not negotiable for the reason that it is not payable at a bank within the State. § 9076 Burns 1908, § 5506 R. S. 1881; Ray v. Baker (1905), 165 Ind. 74, 74 N.E. 619; Midland Steel Co. v. Citizens Nat. Bank (1904), 34 Ind.App. 107, 72 N.E. 290. By certain paragraphs of answer to which demurrers were sustained, the appellants pleaded a defense against the payees of the note. These answers are not models of pleading and it might be difficult to determine from their averments whether they proceed upon the theory of fraud, or upon the theory of a warranty and its breach; but it is practically conceded by appellee that they state facts sufficient to constitute a cause of defense to the note if it is not a negotiable instrument. By sustaining the demurrers to these paragraphs of answer, the trial court held that the note in suit was negotiable.
We are thus confronted with a conflict of laws, and are required to determine whether the character and effect of this note as to its negotiable qualities depend upon the law of the State of Indiana where it was executed, or whether they depend upon the laws of the state of Illinois where the note by its terms was made payable. Where suit is brought in this State upon a contract which does not disclose upon its face the place of its execution, it will be presumed that it was executed in this State. Rose v. President, etc. (1860), 15 Ind. 292; Baltimore, etc., R. Co. v. Scholes (1896), 14 Ind.App. 524, 43 N.E. 156, 56 Am. St. 307. The note in suit is dated at Siberia, Indiana, and suit is brought to enforce it in this State, and the presumption will be indulged that it was executed in Indiana.
To sustain the ruling of the trial court appellee asserts the law to be, that where a note is executed in one state and, by its terms, is made payable in another, the question of its negotiability is to be determined by the law of the state in which it is payable and not by that of the state in which it was executed. To sustain its position it cites a number of Indiana cases bearing upon the question, but none of them are exactly in point. Fordyce v. Nelson (1883), 91 Ind. 447; Patterson v. Carrell (1877), 60 Ind. 128; Midland Steel Co. v. Citizens Nat. Bank (1901), 26 Ind.App. 71, 59 N.E. 211; Garrigue v. Kellar (1905), 164 Ind. 676, 74 N.E. 523, 69 L.R.A. 870, 108 Am. St. 324. In the opinion of the court in the case first cited, language is used which apparently is decisive of the question, but an examination of the facts of the case will show that the question was not presented for decision. The note sued on in that case was executed in the state of Missouri and was also payable in that state, and it is quite clear that the law of Missouri would control the question of its negotiability in a suit to enforce it in another state, where the statutes of Missouri were pleaded. The second case cited is similar to the first in that the note in suit was executed in the state of Ohio and was payable in that state. It was held that, as no statute of Ohio was pleaded, it would be presumed that the common law prevailed in that state, and that, the note sued on was not negotiable as an inland bill of exchange for the reason that such notes were not so negotiable by the law merchant, which formed a part of the common law, but are only made so by statute. The facts in the third case are similar to the facts in the case at bar, but the question here presented was not there decided. The note sued on in that case was executed in Indiana and was made payable at a bank in Pennsylvania, and was assigned to a bank at Kokomo, Indiana. The bank sued the maker but did not allege in its complaint, facts showing that a note of the character of the one in suit was negotiable under the statutes of Pennsylvania. The statutes of that state were not pleaded as a part of the complaint and no facts were alleged, therein showing that the bank was a bona fide holder of the note. The defendant by way of answer set up a defense against the payee of the note. As a reply to this answer the bank pleaded a statute of Pennsylvania on the subject of commercial paper and alleged that, under the decisions of the supreme court of that state construing that statute, notes such as the one sued on had been held to be negotiable in that state. Facts were also averred showing that the bank was a bona fide holder of the note. The Appellate Court held that the reply was a departure from the theory of the complaint and that a demurrer thereto should have been sustained for that reason. The court did not decide whether the facts stated in the reply were sufficient to show that the note was a negotiable instrument. An examination of the facts presented by the case of Garrigue v. Kellar, supra, shows that the note in suit was executed in the state of Illinois and was by its terms payable at a bank in Indiana. Under the statutes of Illinois a married woman may, by contract, become liable as surety, but in Indiana a married woman is prohibited by statute from entering into any contract of suretyship. An action was brought to enforce the note in this State and Mrs. Garrigue answered, setting up her coverture and her suretyship. As a reply to this answer, the statute of Illinois was pleaded and it was further averred that the note was executed and delivered in that state for money there loaned. It was held that the question of her liability on the note as surety was controlled by the law of the state where it was executed and not by that of the state wherein it was payable. The question for decision in this case depended upon the capacity of one of the parties to bind herself as a surety. Questions pertaining to the formal validity of a contract or the capacity of the parties are always determined by the lex loci contractus. For the reason stated, this case is not decisive of the question here presented. In the case of Ray v. Baker (1905), 165 Ind. 74, 74 N.E. 619, the note sued on, was dated at Lebanon, Indiana, and was payable at the Citizens Bank of Homer, Illinois. The statute of Illinois was not pleaded and the court would presume that the common law was in force in that state. The court held that the note was not negotiable under the laws of Indiana, but the question as to whether it was negotiable as an Illinois contract was not presented or decided. The case of Mix v. State Bank (1859), 13 Ind. 521, may be distinguished in the same manner.
The question of negotiability or nonnegotiability of a note is one of construction or interpretation. It is determined by the form and conditions of the instrument when considered in the light of the law subject to which it is made. The quality and characteristics of a note as to its negotiability or the want of it attach at the time and at the place such note has its legal inception. When its obligations attach and it comes into legal being, it is either negotiable or nonnegotiable, and the quality thus impressed upon it at its inception will not be altered, either by lapse of time or change of place. If a note is nonnegotiable in the state or country where it has its legal origin it can not become negotiable because at a subsequent time it is carried or transmitted to another jurisdiction.
Unquestionably the note in suit had its legal inception in Indiana, and if it is to be construed by the lex loci contractus, it was nonnegotiable in this State and it was therefore nonnegotiable in Illinois or any other state. It was payable however, in the state of Illinois and if the lex loci solutionis is to control its interpretation, it was negotiable in Indiana at the time of its inception, and it was therefore negotiable in Illinois or in any other state. Where a contract is made in one state and, by its terms provides for its performance in another, and the laws of the two states differ, no...
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