Midland Steel Co. v. Citizens' Nat. Bank of Kokomo

• Decision Date: 23 November 1904
• Docket Number: No. 4,709.,4,709.
• Citation: 72 N.E. 290,34 Ind.App. 107
• Parties: MIDLAND STEEL CO. v. CITIZENS' NAT. BANK OF KOKOMO.
• Court: Indiana Appellate Court

34 Ind.App. 107

72 N.E. 290

MIDLAND STEEL CO.

v.CITIZENS' NAT. BANK OF KOKOMO.

No. 4,709.

Appellate Court of Indiana, Division No. 1.

Nov. 23, 1904.

Appeal from Circuit Court, Henry County; John M. Morris, Judge.

Action by the Citizens' National Bank of Kokomo against the Midland Steel Company. From a judgment for plaintiff, defendant appeals. Affirmed.Ryan & Thompson and Elliott, Elliott & Littleton, for appellant. Blacklidge, Shirley & Wolf and Forkner & Forkner, for appellee.

ROBINSON, J.

Suit by appellee, as indorsee upon a promissory note payable at a bank in Pittsburgh, Pa., to the order of the Muncie Land Company. This is the second appeal. Midland Steel Co. v. Citizens' National Bank, 26 Ind. App. 71, 59 N. E. 211. The note in suit is as follows: “Midland Steel Company. $2,000. Muncie, Ind., April 23, 1896. Four months after date we promise to pay to the order of the Muncie Land Company two thousand dollars, value received, negotiable and payable without defalcation or discount, at the Union National Bank, Pittsburgh, Pa., with interest at six per cent. per annum from date. R. J. Beatty, President.” The amended complaint avers that appellee is a banking corporation at Kokomo, Ind.; that appellant is a manufacturing corporation organized under the laws of Indiana, and with its office and place of business at Muncie, Ind.; that, prior to the execution of the note in suit, appellant adopted the name and style of “R. J. Beatty, President,” in and by which to execute the commercial obligations, bills of exchange, and promissory notes in the usual course of appellant's business; that, on the date named, appellant, by and in the name of “R. J. Beatty, President,” executed to the Muncie Land Company the above note, whereby appellant promised to pay the land company the amount named as therein specified; that after the execution of the note, and before it became due, the Muncie Land Company sold, transferred, and indorsed the same, in writing, and for a valuable consideration, to appellee; that appellee purchased the note in the usual course of business, without notice of any defense; that at the time the note was executed, and up to the present time, the note was and is negotiable under the rules of the law merchant, as the law was determined and adjudged by the highest judicial tribunals of Pennsylvania, and that the indorser thereof, before maturity, in the usual course of business, and without notice of any defense, took the same free from all defenses, and that, under such laws, appellee so held the note; that, at the maturity of the note, appellee presented the same for payment at the Union National Bank of Pittsburgh, where the same was payable, and payment was refused; and that thereupon appellee caused the note to be duly protested.

It is first argued against the sufficiency of the complaint that it is not averred that the note was executed by appellant in the usual and ordinary course of its business, nor that it was executed for a debt of the corporation, nor that the Muncie Land Company or the appellee took it as the note of the appellant. The complaint avers that, at and prior to the execution of the note in suit, appellant adopted and used the name and style of “R. J. Beatty, President,” in and by which to execute notes in the usual and ordinary course of its business; that, on the date named, appellant, by and in the above name, “executed and delivered to the Muncie Land Company” its promissory note, a copy of which is set out in the complaint; that, by the terms of the note, appellant, by the above name, promised to pay the land company the sum mentioned, for value received; that after the execution of the note, and before it became due, the payee, for a valuable consideration, sold and transferred the same by written indorsement to appellee, who took the same in the usual course of business, without notice of any defenses thereto. It is seen that it is averred that appellant executed the note, which implies both a signing by appellant and a delivery by appellant. In that respect the complaint shows a complete contract. Nicholson v. Combs, 90 Ind. 515, 46 Am. Rep. 229;Prather v. Zulauf, 38 Ind. 155. Where a pleading avers the execution of a promissory note, and gives a copy, it need not otherwise show a promise to pay. Reynolds v. Baldwin, 93 Ind. 57. An averment that the note was executed renders an averment that the note was signed surplusage. Jaqua v. Woodbury, 3 Ind. App. 289, 29 N. E. 573. A corporation may contract a debt or execute a note when necessary in the furtherance of its legitimate objects, and it is averred that, when the note was executed, appellant was a corporation. Unless the contrary appears, it must be presumed that it exercised the power in a legitimate way. We fail to see the necessity of an averment that the note was executed in the usual course of business. Nor was it necessary to aver that it was executed for a debt of the corporation. It is averred that appellant executed the note by the name of “R. J. Beatty, President,” and the note states it was for value received. In Second National Bank v. Midland Steel Co., 155 Ind. 591, 58 N. E. 833, each of the several paragraphs of complaint was held sufficient. The note sued on in that case and the note in the case at bar are the same, except as to the date and time of payment. We do not understand that case to hold that the averments contended for by appellant are necessary. See, also, Midland Steel Co. v. Citizens' National Bank, 26 Ind. App. 71, 59 N. E. 211.

It is also argued that the law of Pennsylvania, where the note is payable, is not well pleaded. The note sued on is not governed by the law merchant. It is not payable at a bank in this state, and is subject to defenses in the hands of a bona fide holder for value. It is, no doubt, true that the complaint, aside from any averments as to the law of Pennsylvania, states a cause of action upon the note as a nonnegotiable instrument. But if the complaint is held good upon that theory only, the demurrers to appellant's answersshould not have been sustained. This is the effect of the ruling upon the former appeal. Midland Steel Co. v. Citizens' Nat. Bank, supra. However, the theory of the pleading is that the note is negotiable under the laws of the state of Pennsylvania, and it must be good upon the theory upon which it proceeds, or it will not be good at all.

In pleading the Pennsylvania law, the complaint avers “that at the time said note was executed as aforesaid, and at the time it was indorsed and taken by this plaintiff as aforesaid, and for many years prior thereto, and up to the present time, it was and is the common and unwritten law of the state of Pennsylvania, as ruled, established, and adjudicated by the highest judicial courts of that state, that said note was and is negotiable according to and under the rules of the law merchant, as determined and adjudicated by the highest judicial courts of said state, and that the indorsee thereof before maturity in the usual course of business, without notice of any defenses thereto, took the same freed from all defenses thereto, and that under and by the said laws of the state of Pennsylvania the plaintiff took and now holds said paper free from all defenses thereto; that promissory notes payable to order or bearer, containing the words ‘negotiable and payable without defalcation or discount’ at a bank in said state, were and are negotiable by indorsement, and by indorsement before due, for which, in good faith, the holder takes the same freed from all defenses thereto, and set-off and cross-demand.”

It is quite true there is no common law, strictly speaking, peculiar to the state of Pennsylvania or Indiana. Neither is the general law merchant one thing in Pennsylvania, and another in Indiana. In applying the principles of the general law merchant to a contract, the law of the forum and of the place of the contract is the same. “The whole current of authorities,” said the court in Piatt v. Eads, 1 Blackf. 81, “from the commencement of the history of our jurisprudence down to the present day, goes to establish the doctrine that the custom of merchants is and always has been regarded as a part of the common law of England, and that bills of exchange, both foreign and inland, are under its regulation. It is a law of a general nature, and not local to that kingdom, and is there recognized and acknowledged by the courts as a part of their system, from the circumstance of its universal application and use in all mercantile transactions throughout the commercial world; being in those cases a rule of decision to which all nations agreed, and of which all courts take notice.”

As we have already observed, promissory notes at common law and under the law merchant were not, in this state, negotiable, so as to be free from defenses in the hands of a bona fide holder; and the note in suit, as it is not payable at a bank in this state, is not commercial paper under the law of this state. However, it seems that the law of the foreign state need not necessarily be statute law. Our statute provides that “the unwritten or common law of any other of the United States *** may be proved as facts by parol evidence.” And in Alford v. Baker, 53 Ind. 279, where the court had under consideration a note made in Kentucky, and payable at a bank in that state, it is said: “Where the law of another state, claimed to be different from the common law, is involved in a judicial proceeding in this state, it becomes matter of fact in such proceeding, and must be proved, and, indeed, alleged, unless the question arises in such a way as to render the pleading unnecessary. If by any statute of Kentucky, or by the general course of the decisions of the courts of that state, such note is placed upon the footing of bills of exchange, and governed by the law merchant, that fact might have been, but was not, shown. Our statute makes...