Bright v. Offield

• Decision Date: 15 September 1914
• Docket Number: 11935.
• Citation: 81 Wash. 442,143 P. 159
• Parties: BRIGHT v. OFFIELD et al.
• Court: Washington Supreme Court

143 P. 159

81 Wash. 442

BRIGHT v. OFFIELD et al.

No. 11935.

Supreme Court of Washington

September 15, 1914

Department 1. Appeal from Superior Court, King County; King Dykeman Judge.

Action by George W. Bright against J. W. Offield and others. Judgment for plaintiff, and defendant Offield and wife appeal. Reversed as to the appealing defendants.

Charles E. Congleton, of Seattle, for appellants.

Hamlin & Meier, of Seattle, for respondent.

ELLIS J.

The plaintiff brought this action to recover judgment against the defendants as maker and indorsers of an instrument which reads as follows:

'On the first day of December, 1913, for value received I promise to pay to Guaranty Loan & Investment Company, of Spokane, Washington, or order, the principal sum of fifteen hundred dollars ($1,500), with interest thereon, at the rate of eight per cent per year, from the date hereof until maturity, payable semiannually according to the tenor of six interest notes, each for sixty dollars (60) bearing even date herewith; both principal and interest notes payable at the office of Guaranty Loan & Investment Co., Spokane, Wash. (with exchange on New York). And if default be made in the payment of any of said notes so secured, or any part of them, as the same mature, for the space of thirty days, or if the maker of this note and interest notes attached hereto shall allow the taxes or any other public rates and assessments on the mortgaged property, or any part thereof, securing the aforesaid notes, to become delinquent, or shall do any act whereby the value of said mortgaged property shall be impaired, or in case any taxes or assessments shall be levied against the holder of this note, on account of this note, then upon the happening of any of said contingencies, the whole amount herein secured shall at once become due and payable, and the mortgagee, its legal representatives or assigns, may proceed at once to collect these notes and foreclose the mortgage given to secure the same, and sell the mortgaged property, or so much thereof as shall be necessary to satisfy said debt, interest and costs, and all taxes, public rates, or assessments that may be due thereon, together with a reasonable attorney's fee, if suit be commenced for the purpose of collecting this debt or foreclosing the mortgage securing the same. It is expressly agreed and declared that these notes are made and executed under and are in all respects to be construed by the laws of the state of Washington, and are secured by mortgage of even date herewith, duly recorded in Spokane county, of the state of Washington. This note bears interest at the rate of twelve per cent per annum, payable yearly, after maturity.

'Dated at Spokane, State of Washington, this first day of December, 1910.

'J. P. James.'

This instrument was, by the payee, indorsed and delivered to defendant Harry E. Watson, and by the defendant Harry E. Watson to defendant J. W. Offield, and by the defendant Offield to one Samuel J. Nunn. The plaintiff is merely a holder for Nunn for collection. The defendants Offield interposed a general demurrer to the complaint, which was overruled. The issues having been formed, the case was tried to the court without a jury. Judgment was rendered against the defendants James P. James and J. W. Offield, and each of them, and against the community composed of J. W. Offield and wife. The defendants Offield and wife have appealed.

The appellants contend that the instrument in question is not negotiable because of the provisions of the negotiable instruments act. It is clear that if the note runs counter to that act, it is because of some of the following provisions found in sections 1, 2, 3, 4, and 5, of the act. We quote by section numbers from Rem. & Bal. Code:

'Sec. 3392. An instrument to be negotiable must conform to the following requirements: * * *

'2. Must contain an unconditional promise or order to pay a sum certain in money; '3. Must be payable on demand or at a fixed or determinable future time.'

'Sec. 3393. The sum payable is a sum certain within the meaning of this act, although it is said to be paid----

'1. With interest; or

'2. By stated installments; or

'3. By stated installments, with a provision that upon default in payment of any installment or of interest, the whole shall become due; or

'4. With exchange, whether at a fixed rate or at the current rate; or

'5. With costs of collection or an attorney's fees, in case payment shall not be made at maturity.'

'Sec. 3394. An unqualified order or promise to pay is unconditional within the meaning of this act, though coupled with--* * *

'2. A statement of the transaction which gives rise to the instrument.'

'Sec. 3395. 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. On or at a fixed period after the concurrence of a specified event, which is certain to happen, though the time of happening be uncertain.

'An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.'

'Sec. 3396. An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable character otherwise negotiable is not affected by a provision which----

'1. Authorizes the sale of collateral securities in case the instrument be not paid at maturity; or

'2. Authorizes a confession of judgment if the instrument be not paid at maturity; or

'3. Waives the benefit of any law intended for the advantage or protection of the obligor; or

'4. Gives the holder an election to require something to be done in lieu of payment of money.

'But nothing in this section shall validate any provision or stipulation otherwise illegal.'

The appellants claim that the conditions in the note providing for an acceleration of maturity on certain contingencies render the note nonnegotiable. One decision is cited which holds that a mere recital in the note that it is of even date with a mortgage which is collateral to the note imports into the note all of the conditions contained in the mortgage and renders the note nonnegotiable. Brooke v. Struthers, 110 Mich. 562, 68 N.W. 272, 35 L. R. A. 536. According to what we believe to be the better rule, a mortgage securing a note, though referred to in the note, but without expressly adopting its conditions, is merely ancillary to the note, and the conditions found in the mortgage alone will not change the character of the note as a negotiable instrument. The promise to pay is held to be a distinct agreement from the mortgage, and if couched in proper terms, the note is negotiable. Thorp v. Mindeman, 123 Wis. 149, 101 N.W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003; Frost v. Fisher, 13 Colo. App. 322, 58 P. 872. This would seem to follow from the provision found in the third section of the negotiable instruments act (Rem. & Bal. Code, § 3394), above quoted. The reference to the mortgage would be a mere 'statement of the transaction which gave rise to the instrument.'

Here, however, the conditions which it is claimed render the note nonnegotiable are found in the note itself. Segregating the conditions contained in the note so as to consider their effect separately, the first we shall notice is this:

'* * * If default be made in the payment of any of said notes so secured, or any part of them, as the same mature, for the space of thirty days * * * them * * * the whole amount herein secured shall at once become due and payable.'

This and the provisions for payment 'with exchange on New York' and for a reasonable attorney's fee in case of suit are clearly covered by the second section of the act (Rem. & Bal. Code, § 3393), above quoted. They do not render the note nonnegotiable. Slover, Negotiable Instruments (2d Ed.) § 40, p. 54 et seq.

Another condition is as follows:

'If the maker * * * shall allow the taxes or any other public rates and assessments on the mortgaged property * * * to become delinquent * * * or in case any taxes or assessments shall be levied against the holder * * * on account of this note, * * * then * * * the whole amount herein secured shall at once become due and payable, and the mortgagee, its legal representatives or assigns, may proceed at once to collect these notes and foreclose the mortgage,' etc.

It is urged that these provisions run counter to sections 1 and 4 of the act (Rem. & Bal. Code, §§ 3392, 3395, supra), in that they render the note not 'payable on demand or at a fixed or determinable future time,' as provided in section 1 and not payable 'on or at a fixed period after the occurrence of a specified event, which is...