Elmore v. Rugely

• Decision Date: 09 January 1908
• Citation: 107 S.W. 151
• Court: Texas Court of Appeals
• Parties: ELMORE et al. v. RUGELY.

107 S.W. 151

ELMORE et al. v. RUGELY.

Court of Civil Appeals of Texas.

January 9, 1908.

Appeal from Matagorda County Court; Jesse Matthews, Judge.

Action by Henry Rugely against J. A. Elmore and another. From a judgment for plaintiff, defendants appeal. Reformed and affirmed, on condition.

Holland & Krause, for appellants. Gaines & Corbett, for appellee.

HODGES, J.

On April 30, 1902, appellant M. O'Connell, together with J. A. Elmore, executed the following described promissory note payable to the Bay City Bank: "Six months after date, for value received, I, we, or either of us, as principals, promise to pay to the order of the Bay City Bank at its office, two hundred fifty dollars with 10 per cent. interest per annum from maturity until paid, and 10 per cent. attorney's fees if suit be instituted on this note or if it is placed for collection. I, or we, the signers and indorsers, hereby waive protest and notice of protest, and agree to the extension of this note after maturity without notice. [Signed] J. A. Elmore. M. O'Connell." The Bay City Bank was a copartnership, composed of H. Rugely, Henry Rugely, and Hy Rugely, doing a banking business at Bay City, Matagorda county, Tex. Subsequent to the making of the note, and before suit was filed, the partnership was dissolved, and Rugely, appellee herein, became the owner of the note. The note not being paid at maturity, he instituted suit thereon in the county court of Matagorda county, and recovered a judgment against the makers for the full amount of the principal, interest, and attorney's fees. It appears that the note bore no written indorsement, and nothing in connection therewith in writing to indicate a transfer from the Bay City Bank to the appellee; and in the court below the only contention made by the appellants was that appellee had failed to prove his ownership of the note and the right to sue thereon, basing their contention upon the proposition that the note, being a negotiable instrument, could not be transferred except by a written indorsement, or other evidence in writing. Upon the trial of the case the plaintiff introduced the note in evidence, and himself testified as to the existence and dissolution of the Bay City Bank, and that he acquired the note sued on in the due course of trade for a valuable consideration, and was at that time the owner and holder. The appellants introduced no testimony, but relied exclusively upon the insufficiency of the evidence to authorize a recovery for appellee. It seems that O'Connell, who appears to have been a surety on the note, is the only one who has appealed.

The assignments of error contained in the record are based upon the refusal of the court to instruct the jury according to the appellants' theory concerning the proper and only legal method of transferring negotiable paper payable to order, which, he contends, is by indorsement, or other written transfer. In support of that proposition he cites Tiedeman on Commercial Paper and Am. & Eng. Ency. of Law, neither of which sustains his contention in full. There the common-law rule is stated, that a written transfer is necessary to assign the legal title, yet the equitable title may be transferred by a mere delivery of the instrument. Under our statute the owner and holder of any negotiable instrument may institute suit in his own name to recover the amount due thereon. Rev. St. 1895, art. 307, provides: "Any person to whom any of the said negotiable instruments may have been assigned may maintain any action in his own name which the original obligee or payee might have brought." Our Supreme Court has also settled this case adversely to appellants' contention. Word v. Elwood, 90 Tex. 130, 37 S. W. 414; Prouty v. Musquiz, 94 Tex. 90, 58 S. W. 721, 996.

Appellee in his brief suggests that this case was appealed mainly for delay, and asks that he be awarded the 10 per cent. damages that may be allowed in cases where appeals are resorted to for delay only. Appellant, in an amended brief, which was filed by permission of the court upon his motion, replying to the appellee's suggestion and demand for the 10 per cent. damages, insists that this opens up the entire record and authorizes this court to consider all errors, whether assigned or not, which may be gathered from the face of the record. They then direct attention to the allegations in the original petition and the proof offered in the court below upon which judgment was rendered in favor of appellee for the 10 per cent. as attorney's fees specified in the note. That portion of the appellee's petition referring to attorney's fees is as follows: After describing the note it says: "And providing for 10 per cent. attorney's fees, if suit should be instituted on said note, or if placed in the hands of an attorney for collection. That said note is now long since past due and unpaid, and the defendants, and each of them, though often requested so to do, have wholly failed and refused, and still fail and refuse, to pay the same, principal, interest, and attorney's fees, or any part thereof, to this defendant's damage (meaning plaintiff's) in the sum of $400. That because of the failure of the defendants, and each of them, to pay said note at its maturity, the plaintiff has been compelled to place the same in the hands of Gaines & Corbit, practicing attorneys of Bay City, Matagorda county, Tex., and to institute suit thereon in order to enforce its collection. That by reason thereof defendants, and each of them, became liable to and promised to pay to plaintiff an additional sum of 10 per cent. of the principal and interest due on said note as attorney's fees." As is shown in the preceding statement of the facts in this case, the evidence offered by the appellee upon the trial in the court below consisted of his own testimony as to who constituted the Bay City Bank, described as the payee in the note, its dissolution, and the method by which he acquired ownership, and the note itself. With this he rested his case and asked for judgment for principal, interest, and the stipulated attorney's fees. Appellants contend that both the allegations in the plaintiff's petition relative to that portion of the note sued on providing for attorney's fees, and the proof submitted in support thereof, were insufficient to warrant a judgment in favor of plaintiff for such fees.

In view of the fact that there has been some misapprehension among members of the profession regarding the degree of certainty and fullness required in pleadings where it is sought to recover attorney's fees in connection with the principal sum expressed in notes and other written contracts for the payment of money, it may not be inappropriate to make a brief résumé of the more recent decisions in this state relative to that matter, and which now appear to have established a well-settled rule on the subject. The custom, which has now become almost universal, of stipulating in negotiable promissory notes for the payment of attorney's fees in the event payment of the obligation is not made at maturity and it should be placed in the hands of an attorney for collection, or suit be instituted thereon, is not a very old one. For some length of time after its introduction into the commercial transactions of the country this particular provision seems to have been regarded as agreed amount of damages, which the debtor obligated himself to pay in case of default, and if the note should be placed in the hands of an attorney for collection, or legal proceedings instituted for that purpose. It seems to have been tacitly admitted that, when default in payment was made, and the holder of the note performed the conditions specified, the contract as to the attorney's fees provided for became an absolute promise to pay that sum in damages and that inured to the benefit of the holder of the note, regardless of the expense or damage the latter might have incurred or sustained in procuring the services of an attorney. Such constructions gave to this provision the character of liquidated damages. Under this construction it was generally deemed sufficient proof to authorize a recovery of all the attorney's fees to merely introduce in evidence the note sued on, and but little attention was paid to the allegations of the petition. If it were alleged that the note sued on provided for attorney's fees on the conditions stated, and that it had been placed for collection or suit filed, as the case might be, the sufficiency of such allegations to authorize a recovery of the attorney's fees generally went unchallenged. The nature of this provision in notes passing as negotiable instruments began to receive judicial attention when the question was raised as to its effect on their negotiability. It was suggested that the incorporation of this ancillary contract introduced such an element of uncertainty in the instrument as destroyed its negotiable character, and the courts in some jurisdictions sustained this view. The raising of this question in that manner called for a judicial construction and gave rise to many conflicting decisions among the different state courts. Some held that this provision in notes was in the nature of a penalty and was void; others, that it was liquidated damages, and, upon the happening of the contingency provided for, became absolute and inured to the exclusive benefit of the owner of the note. Still others held that it was a mere subterfuge for the collection of an usurious rate of interest and was, for that reason, void. As to the effect such provision under the various constructions had upon the negotiable character of the instrument in which it was incorporated, there was also great diversity of opinion; some holding that it absolutely destroyed its negotiability, while others took a contrary view.

In the case of Hamilton Mill & Gin Co. v. Sinker et al., 74 Tex. 51, 11 S. W. 1059, our Supreme Court, in discussing that question in the same...