City National Bank v. Adams
| Decision Date | 25 February 1929 |
| Citation | 266 Mass. 239 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | CITY NATIONAL BANK v. OSCAR A. ADAMS & another. |
September 20, 1928.
Present: RUGG, C.
J., CROSBY, PIERCE CARROLL, WAIT, & SANDERSON, JJ.
Bills and Notes What constitutes negotiable instrument, Holder in due course Payment. Estoppel.
A promissory note payable on demand to the order of a stated payee is negotiable within the provisions of the negotiable instruments act although it contains on its face a statement that the maker has deposited with the payee a warehouse receipt for certain goods as collateral security "for the payment of this or any other liability or liabilities of the undersigned to" the payee, and agreements in substance, with respect to keeping the payee protected by sufficient security, that, if the maker did not fulfill the agreements, the note in question and all his other liabilities to the payee should forthwith become due and payable without demand or notice, and that the payee might sell the securities and apply the proceeds to the satisfaction of the note and other obligations, with provisions applicable to such sale and an agreement to remain liable for any deficiency which might arise.
If the payee of such a note indorsed and delivered it for a consideration within two days after receiving it to one who for the first time more than a year and five months after its date notified the maker of the indorsement and demanded payment, the indorsee is a holder in due course within the provisions of the negotiable instruments act and entitled to maintain an action thereon against the maker, although the maker, not having notice or knowledge of the indorsement, but without requiring an exhibition and delivery of the note, within two months after the date of the note had paid the amount thereof to the original payee.
CONTRACT by an indorsee against the makers of a promissory note described in the opinion. Writ dated January 27, 1927.
In the Superior Court, the action was heard by Broadhurst, J., without a jury. Material evidence and facts found are stated in the opinion. The judge found for the plaintiff in the sum of $1,743.39. The defendants alleged exceptions.
The case was argued at the bar in September, 1928, before Rugg, C.J., Pierce Carroll, Wait, & Sanderson, JJ., and afterwards was submitted on briefs to Crosby, J.
F.W. Campbell, for the defendants.
A.B. Green, for the plaintiff.
This is an action by the holder and indorsee against the makers of a demand note. It was heard by a judge, sitting without a jury. The note was given by the makers for valuable consideration on the day of its date to the Eastern States Warehouse and Cold Storage Company, the payee, and within two days, on or before December 12, 1924, was indorsed by the payee and delivered to the Chicopee National Bank which received and held it for the plaintiff. The Chicopee National Bank at that time was in possession for the plaintiff of a note of the Eastern States Warehouse and Cold Storage Company to the plaintiff for $7,500; and of other notes given by customers of the warehouse company and payable to its order which were held as collateral security for the payment of the $7,500 note. The note in suit was delivered to the Chicopee National Bank to be held with such collateral. That bank remained in possession until October 6, 1925, when it delivered the note for $7,500, and the collateral, including the note in suit to the plaintiff. On May 20, 1926, the plaintiff notified the defendants that it held their note, and demanded payment. This was the first demand for payment that they had received and the first notice that the note had ever passed from the warehouse company. On January 31, 1925, they had delivered to the warehouse company their check for $1,523.24 in payment of the note and charges for storage and insurance of their goods in its possession. No demand for payment of the note, or for other collateral, or for payment of any other obligation to it by the warehouse company had been made. The defendants had not, nor have they since, failed in business, or become bankrupt or insolvent. The check did not indicate the purpose for which it was given. It was deposited with the Chicopee National Bank to the credit of the warehouse company and was paid the next day. The Chicopee National Bank neither knew nor had cause to know, that it had been given in payment of the note. Neither the plaintiff nor the Chicopee National Bank had authorized the warehouse company to receive payment of the note on behalf of either bank. The defendant Blake, when he delivered the check, did not ask for the note, and neither he nor any defendant inquired before May 20, 1926, where the note was or who held it. It does not appear, except from recitals in the note, whether any warehouse receipt was, in fact, deposited with the warehouse company, or whether there were other obligations of the defendants to the company or other property of the defendants in its possession at the time of the delivery of the note.
The note read: Boston, Mass-, Dec. 10th, 1924. $1485.00 (Insert your location and date on above line)
ON DEMAND after date, for value received We promise to pay to the order of the
EASTERN STATES WAREHOUSE & COLD STORAGE CO. at its office in SPRINGFIELD, MASS.
THE SUM OF ____ Fourteen Hundred Eighty-five -- -- 00/100 Dollars with interest at the rate of -- per cent per annum, having deposited with said Company as collateral security for the payment of this or any other liability or liabilities of the undersigned to said Company, due or to become due, direct or contingent now existing, or hereafter arising, the following property, viz.:
THE EASTERN STATES WAREHOUSE & COLD STORAGE Co.'s warehouse receipt. No. -- for 400 Bags Pea Beans Car # 215235 and the undersigned agrees to deliver to the said Company additional securities, to its satisfaction, should the market value of the said securities, as a whole, suffer any decline, and also hereby gives to the said Company a lien for the amount of the said liabilities upon the property or securities given unto or left in the possession of the said
Company by the undersigned, and also upon any balance of the account of the undersigned with the said Company.
On the non-performance of this promise; or upon the non-payment of any of the liabilities above mentioned, or upon the failure of the undersigned, forthwith, with or without notice, to furnish satisfactory additional securities in case of decline, as aforesaid, then and in any such case, this note and all other liabilities of the undersigned shall forthwith become due and payable without demand or notice, and full power and authority are hereby given to said Company to sell, assign, and deliver the whole of the said securities, or any part thereof, or any substitutes therefor, or any additions thereto, or any other securities or property given unto or left in the possession of the said
Company by the undersigned, for safe keeping or otherwise, at any broker's board, or at public or private sale, at the option of the said
Company or of its President or Treasurer, without other demand, advertisement or notice of any kind, which are hereby expressly waived.
At any such sale the said Company may itself purchase the whole or any part of the property sold, free from any right of redemption on the part of the undersigned which is hereby waived and released. In case of sale for any cause, after deducting all costs or expenses of every kind for collection, sale or delivery, the said Company may apply the residue of the proceeds of the sale or sales so made, to pay one or more or all the said liabilities to the said Company, as it or its President or
Treasurer shall deem proper, whether then due, or not due, making proper rebate for interest on liabilities not then due, and returning the overplus, if any, to the undersigned, who agree to be and remain liable to the said Company for any deficiency arising upon such sale or sales. (Signed) BENJ. COLE, JR. & COMPANY Per OSCAR A. ADAMS
No. 6588. The defendants, in addition to a general denial, and demand for proof of signatures, set up payment; and that no notice of indorsement or assignment was given before full payment was made on or about January 21, 1925, nor until on or about May 20, 1926, and the plaintiff was estopped to make any claim against the defendants upon the instrument.
It is not denied that on these facts the defendants are entitled to prevail, unless the plaintiff is the holder in due course of a negotiable promissory note.
The judge ruled and held that the instrument was a promissory note, was negotiable, and was negotiated within a reasonable time after its date; that the plaintiff was a holder in due course, and was not estopped from demanding payment; and that the payment on January 21, 1925, by the defendants without requiring surrender of the note was not payment in due course. He denied requests for findings and rulings in substance to the contrary. In so doing, he relied upon the negotiable instruments act, and the cases of Finley v. Smith, 165 Ky. 445, and Security Bank & Trust Co. v. Foster, 249 S.W. (Texas) 227.
It is manifest upon the agreed facts that negotiation on December 12, of a demand note made on December 10, is made...
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