Hutson v. Rankin

• Decision Date: 19 October 1922
• Citation: 213 P. 345,36 Idaho 169
• Parties: WALTER HUTSON, Respondent, v. C. M. RANKIN, Appellant
• Court: Idaho Supreme Court

213 P. 345

36 Idaho 169

WALTER HUTSON, Respondent, v. C. M. RANKIN, Appellant

Supreme Court of Idaho

October 19, 1922

PROMISSORY NOTE-NEGOTIABILITY-EFFECT OF PROVISION FOR ATTORNEY'S FEE-EFFECT OF PROVISION ACCELERATING MATURITY IN CASE OF DEFAULT IN INTEREST PAYMENT AND INCREASING RATE OF INTEREST AFTER MATURITY-SPECIAL INDORSEMENT IN FORM OF GUARANTY.

1. The provision in a promissory note: "In case this note is collected by an attorney, either with or without suit, the makers agree to pay a reasonable attorney's fee," does not impair its negotiability under the provisions of C S., secs. 5868 and 5869, since the amount payable is certain up to the time of maturity, and the condition only goes so far as to provide for a contingency arising upon default in payment.

2. Under the provisions of C. S., sec. 5869, subd. 3, the negotiability of a promissory note is not destroyed by a provision therein that upon default in payment of interest the whole shall become due and that after maturity the rate of interest shall be increased from eight per cent to ten per cent.

3. An entry made and signed by the payee on the back of a negotiable promissory note: "For value received we hereby guarantee payment of the within note, including interest and costs at maturity or any time thereafter demanded," operates as a transfer of the title to the note and as an indorsement thereof.

APPEAL from the District Court of the Fifth Judicial District for Bannock County. Hon. O. R. Baum, Judge.

Action upon promissory note. Judgment for plaintiff. Affirmed.

Judgment affirmed. Costs awarded to respondent. Petition for rehearing denied.

E. C Boom and Morgan & Keane, for Appellant.

A note providing that "In case this note is collected by an attorney, either with or without suit, the makers agree to pay a reasonable attorney's fee," is not negotiable. (C. S., subd. 2, sec. 5868; subd. 5, sec. 5869; note, L. R A. 1916B, 675-677; Morgan v. Edwards, 53 Wis. 599, 11 N.W. 21.)

A note providing for interest on the principal sum at the rate of eight per cent per annum, payable quarterly, and that if the note is not paid when due it shall draw interest at the rate of ten per cent per annum, and also containing an acceleration clause under which the payee may, at his option, declare the whole note due and collectible in case default is made in the payment of the interest quarterly, is not negotiable. (C. S., subd. 3, sec. 5868; subd. 3, sec. 5869; sec. 5871; Kimpton v. Studebaker Bros., 14 Idaho 522, 94 P. 1039; Bell v. Riggs, 34 Okla. 834, 127 P. 427, 432; Davis v. Brady, 17 S.D. 511, 97 N.W. 719; Story v. Lamb, 52 Mich. 525, 18 N.W. 248; Holliday State Bank v. Hoffman, 85 Kan. 71, 116 P. 239; Pierce v. Talbot, 213 Mass. 330, 100 N.E. 553; Smiley v. Watson, 23 Cal.App. 409, 138 P. 367; Bright v. Oldfield, 81 Wash. 442, 143 P. 159; Reynolds v. Vint, 73 Ore. 528, 144 P. 526; Roblee v. Union Stockyards Nat. Bank, 69 Neb. 180, 95 N.W. 61; Randolph v. Hudson, 12 Okla. 516, 74 P. 946; First Nat. Bank of Iowa City v. Watson, 56 Okla. 495, 155 P. 1152; Lambert v. Harrison (Okl.), 171 P. 45; Cornish v. Woolverton, 32 Mont. 456, 81 P. 4.)

A note bearing on its back only a contract of guaranty, signed by the payee, is rendered non-negotiable, and, in the hands of a holder for value before maturity, it is subject to all equities and defenses existing in favor of the maker against the payee. Such a contract, standing alone, is not an indorsement, and the note is not thereby negotiated. (C. S., secs. 5897, 5898, 5930, 5933, 6062; Central Trust Co. v. First Nat. Bank, 101 U.S. 68, 25 L.Ed. 876; Miller v. Lewiston Nat. Bank, 18 Idaho 124, 108 P. 901; Noble v. Beeman-Spaulding-Woodward Co., 65 Ore. 93, 131 P. 1006; Jones County T. & S. Bank v. Kurt, 192 Iowa 965, 182 N.W. 409; Eastern Townships Bank v. St. Johnsbury etc., 40 F. 423; Lowry Nat. Bank v. Maddox, 4 Ga.App. 329, 61 S.E. 296; Swanson v. Stoltz, 36 Wash. 318, 78 P. 999; Ireland v. Floyd, 42 Okla. 609, 142 P. 401; Spencer v. Halpern, 62 Ark. 595, 37 S.W. 711; Hibernia Bank & T. Co. v. Dresser, 132 La. 532, 61 So. 561; McKee v. District Nat. Bank, 38 App. Cas. (D. C.) 465; Edgerly v. Lawson, 176 Mass. 551, 57 N.E. 1020; Iron City Nat. Bank v. Rafferty, 207 Pa. 238, 56 A. 445.)

Peterson & Coffin and Chas. H. Darling, for Respondent.

The provision in this note in regard to attorney's fees does not render the note non-negotiable. (McNary v. Farmers' etc., 33 Okla. 1, 124 P. 286, 41 L. R. A., N. S., 1009; First Nat. Bank of Sidney v. Baldwin, 100 Neb. 25, 158 N.W. 371; Pollard v. Huff, 44 Neb. 892, 63 N.W. 58; Mangold & Glandt Bank v. Utterback, 54 Okla. 655, 160 P. 713; Delsman v. Friedlander, 40 Ore. 33, 66 P. 297, 8 C. J. 354; Childs, Jr., v. Davidson, 38 Ill. 437.)

BUDGE, J. McCarthy and Dunn, JJ., concur.

OPINION

BUDGE, J.

This action was brought by respondent to recover upon a promissory note, which reads as follows:

"$ 1100.00. March 1, 1920.

"On or before the 1st day of March, 1921, for value received C. M. Rankin of Caldwell R. 4 promises to pay to Northwestern Investment Company, a corporation, or order, at Pocatello, Idaho, Eleven hundred Dollars, with interest thereon at the rate of eight per cent per annum, payable quarterly.

"But in case this note is not paid when due, then it shall draw interest at the rate of ten per cent per annum until paid. In case default is made in the payment of interest according to the terms hereof, the whole of this note may be declared due and collectible. In case this note is collected by an attorney, either with or without suit, the makers agree to pay a reasonable attorney's fee. The makers, sureties, endorsers or guarantors, severally waive presentment, protest and notice of protest, and the benefit of any law intended for their advantage or protection.

"(Signed) C. M. RANKIN."

Upon the back of the note the following notation appears:

"For value received, we hereby guarantee payment of the within note, including interest and costs at maturity or any time thereafter demanded.

"NORTHWESTERN INVESTMENT COMPANY.

"C. VOLKMEIER, Secy. "

Before maturity of the note, respondent became the bona fide purchaser thereof, for value and without notice of any defense thereto. The amount of the note and interest not having been paid, this suit was instituted on April 21, 1921, to recover $ 1,100 principal, with interest at the rate of eight per cent per annum from March 1, 1920, to March 1, 1921, and at the rate of 10 per cent per annum from said latter date until paid, as well as attorney fees in the sum of $ 225, and costs of suit.

The cause was submitted to the court upon the complaint and answer and an agreed statement of facts, which were stipulated by the parties. The court found the note to be a negotiable instrument, and rendered judgment in favor of plaintiff, as prayed for in the complaint. This appeal is from the judgment.

Appellant makes one assignment of error, viz., that the court erred in making and rendering its decision and judgment for the reason that the same is contrary to law, and the decision of this case under the stipulation of facts depends upon whether the note sued upon is a negotiable instrument.

It is first contended that the note is not negotiable for the reason that it provides that, "In case this note is collected by an attorney, either with or without suit, the makers agree to pay a reasonable attorney's fee." Appellant concedes the general proposition that the negotiability of a note is not destroyed by reason of a provision for the payment of a reasonable attorney's fee after maturity, but urges that a note may not provide for an attorney's fee without suit and before, or at the time of, maturity, inasmuch as such a provision destroys the certainty of the amount agreed to be paid.

C. S., sec. 5868, provides that: "An instrument to be negotiated . . . . 2. Must contain an unconditional promise or order to pay a sum certain in money."

And C. S., sec., 5869 provides: "The sum payable is a sum certain . . . . although it is to be paid: . . . . 5. With costs of collection or an attorney's fee, in case payment shall not be made at maturity."

In those states which have adopted the provision of the negotiable instrument law that the sum payable is a sum certain within the meaning of the act, although it is to be paid with costs of collection or an attorney's fee in case payment is not made at maturity, the contention that such a provision in a note destroys its negotiability is untenable (note, L. R. A. 1916B 675, 684, 685), and although there is a conflict in the authorities, the weight of authority and the better reasoning appear to support the same rule prior to the adoption of the negotiable instruments law. The rule is based upon the view that so long as the amount payable is certain up to the time of maturity, it is not essential that after that time, when the instrument has become non-negotiable for other reasons, the certainty as to the amount should continue.

As was said in Oppenheimer v. Bank, 97 Tenn. 19, 36 S.W. 705, 33 L. R. A. 767:

"Upon a careful review of the authorities, we can perceive no reason why a note, otherwise endowed with all the attributes of negotiability, is rendered non-negotiable by a stipulation which is entirely inoperative until after the maturity of the note and its dishonor by the maker. The amount to be paid is certain during the currency of the note as a negotiable instrument, and it only becomes uncertain after it ceases to be negotiable by the default of the maker in its payment. It is eminently just that the creditor who has incurred an expense in the collection of the debt, should be reimbursed by the debtor by whose default the action was rendered necessary and the...