Cudahy Packing Co. v. State Nat. Bank of St. Louis, Mo.

• Decision Date: 24 December 1904
• Docket Number: 2,057.
• Citation: 134 F. 538
• Parties: CUDAHY PACKING CO. v. STATE NAT. BANK OF ST. LOUIS, MO.
• Court: U.S. Court of Appeals — Eighth Circuit

134 F. 538

CUDAHY PACKING CO. v. STATE NAT. BANK OF ST. LOUIS, MO.

No. 2,057.

United States Court of Appeals, Eighth Circuit.

December 24, 1904

Syllabus by the Court

An unsigned contract printed on the back of a mortgage, and not referred to therein, cannot in any way qualify the terms of the mortgage.

A provision for the payment of attorney's fees in case a note is not paid at maturity does not destroy the negotiability of a note otherwise negotiable.

The certainty required in commercial paper is commercial certainty, not mathematical. The courts ought not to hold any provision fatal to the negotiability of such paper which by the general usage of the business world does not have that effect.

A mortgage securing a negotiable note so far partakes of its character as to pass free from equities between the original parties to a bona fide indorsee of the note.

Quaere Whether the mortgagor of a mortgage securing a nonnegotiable debt can, after an assignment of the mortgage, by any dealings with the mortgagee short of actual payment, though had in ignorance of the assignment, raise 'an equity' as against the assignee.

Edwin A. Krauthoff (Thomas Creagh, J. V. C. Karnes, and Alexander New, on the brief), for plaintiff in error.

C. H Kohler (M. A. Fyke, E. L. Snider, and J. H. Richardson, on the brief), for defendant in error.

Before SANBORN and VAN DEVANTER, Circuit Judges, and AMIDON District judge.

AMIDON District Judge.

June 5, 1901, Humphrey & Fleming executed and delivered to Tamblyn & Tamblyn, live stock agents and brokers, of Kansas City, Mo., their promissory note for $7,000, payable December 1st of that year, with interest at 8 per cent. To secure the payment of this note the makers executed a chattel mortgage of even date upon 300 head of four and five year old steers, which mortgage was duly filed in the proper office June 8th following. June 10th Tamblyn & Tamblyn, for value, indorsed and transferred the note and assigned the mortgage to the defendant in error (the plaintiff below), the State National Bank of St. Louis, Mo. The assignment was not recorded, and was not required to be by law, and no actual notice of the transfer was given to the mortgagors. Before the maturity of the note, namely, August 12, 1901, the mortgagors, without the knowledge or consent of the bank, shipped to the mortgagees, Tamblyn & Tamblyn, 78 head of the cattle covered by the mortgage, who sold the same to the plaintiff in error (the defendant below) the Cudahy Packing Company, and received in payment therefor $2,331.11, which they applied in partial extinction of another indebtedness due to them by the mortgagors. This action is brought by the bank against Cudahy & Co. for the conversion of the 78 head of cattle. By stipulation it was tried to the court without a jury, and resulted in a general finding and judgment in favor of the plaintiff for $2,331.11.

Two errors of law are assigned, which it is claimed require a reversal of this judgment: (1) It is contended that the mortgage authorized the sale and the payment to the mortgagees, notwithstanding its assignment. (2) It is urged that the note was not negotiable, within the law merchant, and that the sale having been made by the mortgagors, through the original mortgagees, in ignorance of the assignment of the mortgage, the assignee cannot maintain this action.

The first contention is based upon the following language, which is printed on the back of the mortgage:

'All of said cattle, as herein mentioned, are to be held in said pasture and fed by the mortgagor during the term of this mortgage, and at least three days before the maturity of the note herein mentioned they shall be shipped and consigned to Tamblyn & Tamblyn at the stockyards at Kansas City, Missouri, and when sold by them the proceeds thereof shall be applied, first, in payment of the usual commissions to said Tamblyn & Tamblyn for selling the same and the balance, or so much thereof as may be necessary shall be applied to the indebtedness hereinbefore mentioned.

'If said cattle or any part thereof be consigned to or sold by any person except Tamblyn & Tamblyn, then said mortgagee shall be paid the proceeds of said sale and a commission of fifty cents per head on all the above described cattle so sold.'

This instrument was not signed by the mortgagors nor is it in any way referred to in the mortgage. It could not, therefore, be treated as a binding contract between the mortgagor and mortgagee. It is a mere blank paper, with no force whatever. The fact that it is printed upon the back of the mortgage, but not executed, might properly indicate that the mortgagors intentionally refused to be bound by its terms. A more natural interpretation would be that the mortgage was executed by the mortgagors without any knowledge whatever of this printed indorsement of the back of the instrument, and it would be a wholly unjustified interpretation to hold that they were bound by terms to which they never subscribed. For these reasons, we consider that this indorsement was not binding even as between the original parties. Much less could it be held to be binding upon an assignee of the mortgage, or to qualify in any way his rights under the mortgage itself. But even if the instrument were binding as between the original parties, a fair construction of its language would limit it to the time during which the mortgagees continued to be the owners of the mortgage. Its primary object was to secure to the commission merchants their commissions on the sale of the cattle. It was never intended to destroy the mortgage itself. This, however, would be the result of a construction that would leave this indorsement binding notwithstanding a transfer of the mortgage. The assignee would really have no security whatever, under such an arrangement. He would be dependent upon the fidelity of the commission merchants. If the contention of counsel for the plaintiff in error is sound, the mortgagor and mortgagee had the right to sell and dispose of the mortgaged property, and whether the assignee of the mortgage would ever derive any benefit from it would be entirely dependent upon the fidelity of Tamblyn & Tamblyn. Instead of having a lien upon the property, the assignee of the mortgage would simply have the personal obligation of the original mortgagees. Neither the instrument nor the nature of the transaction justifies any such interpretation.

The note was payable to the order of Tamblyn & Tamblyn, but it contained the following provision: 'And in case legal proceedings are instituted to enforce the collection of this note, we agree to pay ten per cent. of the entire amount due as attorney's fees. ' It is contended that this language destroyed the negotiability of the note, or, more accurately, made the instrument not a promissory note at all, but a mere chose in action. This is the holding of the Supreme Court of Missouri-- the state in which this action arose. First National Bank v. Gay, 63 Mo. 33, 21 Am.Rep. 430; Samstag v. Conley, 64 Mo. 476; First National Bank v. Marlow, 71 Mo. 618; McCoy v. Green, 83 Mo. 626; Creasy v. Gray, 88 Mo.App. 454. The question, however, is one of general commercial law. The federal courts, in respect of it, are required to exercise an independent judgment. Such has been their uniform practice in regard to all questions affecting negotiable instruments. Swift v. Tyson, 16 Pet. 1, 10 L.Ed. 865. The case of Mercer County v. Hackett, 1 Wall. 83, 17 L.Ed. 548, presented a question very similar to the one now under consideration. The instrument in that case was executed by a corporation, and bore the corporate seal. The case arose in the state of Pennsylvania. The courts of that state had uniformly decided that the presence of a corporate seal destroyed the negotiability of such instruments. The Supreme Court, however, refused to follow this holding, the court saying:

'If this decision of the learned court was founded on the construction of the Constitution or statute law of the state, or the peculiar law of Pennsylvania as to titles to land, we would have felt bound to follow; but we have often decided that on questions of mercantile of commercial law, or usages which are not peculiar to any place, we do not feel bound to yield our own judgment.' There is a statute in the state of Missouri which has some bearing on the question. It reads as follows:

'Every promissory note for the payment of money to the payee therein named or order or bearer, and expressed to be for value received, shall be due and payable as therein expressed, and shall have the same effect and be negotiable in like manner as inland bills of exchange.'

The decisions of the Supreme Court of Missouri above referred to are not based upon this statute, but rest upon general considerations of the common law, as defining the essential elements of negotiable paper. The statute is affirmative in its language. It declares what elements must be found in a promissory note, but it does not declare what effect the presence of incidental provisions, such as the payment of attorney's fees, shall have. It is conceded that all the elements mentioned in the statute are present in the note in question. It would not be a proper construction of the language which the Legislature has used to hold that every instrument which contained provisions other than those mentioned in the statute should be nonnegotiable. It is not correct to say that promissory notes were not negotiable in England at common law. The statute of Anne is declaratory simply of the common law. It has never been construed by the English courts as creating any new rule. It was enacted to remove the courts created by the decisions of Chief Justice Holt. This whole subject is...