National City Bank of Cleveland v. Erskine & Sons
| Decision Date | 21 January 1953 |
| Docket Number | No. 32968,32968 |
| Court | Ohio Supreme Court |
| Parties | , 49 O.O. 395 NATIONAL CITY BANK OF CLEVELAND v. ERSKINE & SONS, Inc. |
Syllabus by the Court.
1. The work, 'breach,' as applied to contracts is defined as a failure without legal excuse to perform any promise which forms a whole or part of a contract, including the refusal of a party to recognize the existence of the contract or the doing of something inconsistent with its existence.
2. A promissory note, regular on its face and payable in installments and which by its terms is in all events due and payable at a time therein specified, is a negotiable instrument, although it contains a provision that the due date may be accelerated at the option of the holder upon failure of the maker to pay installments when due or upon a breach of the provisions of a chattel mortgage referred to in and securing the note.
3. A provision of a promissory note permitting the acceleration of payment at the option of the holder upon the breach by the maker of the note of the provisions of a chattel mortgage securing the note, which provision does not purport to render conditional or uncertain the maker's otherwise absolute and certain obligation in the earlier parts of the note, does not render the note nonnegotiable.
This cause originated in the Court of Common Pleas of Mahoning County.
The parties will be referred to as they were in that court.
The plaintiff-appellee, The National City Bank of Cleveland, is a national banking association under the laws of the United States and has its principal place of business in Cleveland.
The defendant-appellant, Erskine & Sons, Inc., is an Ohio corporation with its principal place of business at Lowellville, Ohio.
On May 26, 1949, the plaintiff filed its petition in the short form for judgment on a certain promissory note date December 15, 1948, claiming that there was due it from the defendant the sum of $16,301.35 with interest, and alleging that 'the defendant has failed and refused to pay said note according to its terms and conditions, and that by reason thereof the unpaid principal amount of said note is due and payable forthwith,' with interest.
Attached to the petition as exhibit A is a copy of the note, the essential parts of which are as follows:
'$16,529.58 City Lowellville State Ohio Date December 15, 1948.
'For value received, the undersigned jointly and severally promise to pay to the order of The Gibson-Stewart Co. the sum of sixteen thousand five hundred and twenty-nine & 58/100 dollars, in 11 consecutive monthly installments of $1,377.47 each, commencing on the 15 day of January, 1949, and a final consecutive installment of $1,377.41, together with interest from maturity at the highest lawful rate, until paid.
'In the event any installment hereof is not paid when due and/or in the event that the chattel mortgage securing this note is breached in any respect, then this note shall immediately become due at the holder's option without demand or notice. * * * [Cognovit clause omitted.].
'Secured by cattel mortgage. Erskine & Sons, Inc.
Jas. Erskine, Pres.'
By virtue of the warrant of attorney incorporated in the note, an answer was filed entering appearance of the defendant, waiving the issuance and service of process and confessing judgment in favor of the plaintiff in the sum prayed for. In connection therewith, judgment was rendered for such sum and execution issued thereon.
On June 23, 1949, upon motion of the defendant the trial court, pending trial of the cause on the merits, suspended the judgment, preserving all liens and securities obtained thereunder and enjoining the plaintiff from instituting or carrying on any further proceedings in aid of execution.
An amended answer was filed by the defendant containing four defenses which may be summarized as follows:
The first defense constitutes a general denial; the second defense is allegations that the mining equipment for which the note was given to the payee, The Gibson-Stewart Company of Cleveland, was defective, unusable and unsatisfactory, that the plaintiff had knowledge of the facts and was not a holder in due course, and that, by reason of the failure of the equipment sold, defendant was not liable to the plaintiff on the note; the third defense is an allegation of material alteration of the note and chattel mortgage by the payee without the consent of the defendant, to which alteration the plaintiff was a party; and the fourth defense is a charge that plaintiff took possession of the mining equipment and converted it to its own use, the equipment having been voluntarily returned to the payee of the note by the defendant. The defendant states that the value of the property so converted was $20,000, which was in excess of the note in suit, and prays that the petition of the plaintiff be dismissed and that the defendant recover its costs.
The Common Pleas Court decided that the note is a negotiable instrument and stated that there was 'no issue for the jury on the so-called conversion,' but submitted to the jury what it deemed the only issue, 'the good faith of the plaintiff.'
Upon trial the jury returned a verdict for the defendant. A motion for judgment notwithstanding the verdict was overruled and judgment was thereupon entered upon the verdict. A motion for a new trial was also overruled.
An appeal on questions of law was perfected in the Court of Appeals, 110 N.E.2d 593, which court reversed the judgment of the Court of Common Please, ordered the original judgment reinstated in full force and effect as of the date thereof, May 26, 1949, and remanded the cause for the allowance of a credit to the defendant in the amount of the proceeds received from the sale of the chattel property made upon the order of the trial court.
The cause is before this court upon the allowance of a motion to certify the record of the Court of Appeals.
David C. Haynes and Warren E. Grant, Youngstown, for appellant.
Harrington, Huxley & Smith, C. Kenneth Clark, Youngstown, and W. J. Papenbrock, Cleveland, for appellee.
The question presented to this court, as stated by the defendant, is as follows:
Is a promissory note a negotiable instrument under the Ohio Negotiable Instruments Act, Gen.Code, § 8106 et seq., where such note is payable in monthly installments commencing on a date therein stated, the final installment being due and payable at a date also stated therein, but contains a clause accelerating the payment of the balance due thereon at the option of the holder where the maker fails to pay any installment when due or where the chattel mortgage securing the note is breached in any respect?
The reference to the chattel mortgage requires consideration of the language thereof to ascertain the meaning and effect of the phrase in the note, 'in the event that the chattel mortgage securing this note is breached in any respect.' The portion of the mortgage pertinent to a decision of the issues herein is as follows:
'* * * the mortgagor does hereby covenant and agree that said mortgagor is lawfully possessed of said chattels as mortgagor's own property; that the same is free from all encumbrances and that mortgagor will warrant and defend the same unto said mortgagee against all claims and demands of all persons; * * * that the mortgagor will keep the chattels insured at all times against loss by fire and/or other hazards * * * in amounts sufficient to protect mortgagee against loss of or damage to said chattels; * * * that said chattels shall remain at R D No. 2 Lowellville, Ohio, and that mortgagor will not remove or attempt to remove or permit the same to be removed therefrom, nor dispose of, encumber, or misuse said chattels, nor permit the same to be disposed of, encumbered, or misused; that he will pay, when due, all taxes, license fees and other public charges that may be levied against or upon the chattels and satisfy any and all claims and liens that may be assessed or impressed upon the same.
'* * *
'Mortgagor further covenants and agrees that in case default shall be made in the payment of any installment aforesaid, or of any of the covenants expressed herein, or whenever the mortgagee shall, for any reason, deem said indebtedness insecure, the mortgagee may, at its option and without notice, elect to treat the balance remaining unpaid on said note immediately due and payable forthwith, whereupon mortgagor agrees upon demand to deliver the chattels to mortgagee and mortgagee may without notice or demand, with or without the aid of legal process, make use of such force as may be necessary to enter upon, with or without breaking into any premises where the chattels may be found, and take possession thereof and remove the same to such other place as it may deem safe and covenient * * *.
'* * *
'Whenever used herein, the words 'mortgagor' and 'mortgagee' shall include the heirs, successors, legal representatives and assigns of such party.' (Emphasis added.)
The determination of the question whether the note is a negotiable instrument involves the application of Section 8106, 8107, 8109, 8110, General Code, which are as follows:
Section 8106. 'An instrument to be negotiable must conform to the following requirements:
* * *
* * *
Section 8107. 'The sum payable is a sum certain within the meaning of this chapter although it is to be paid;
'1. With interest; or
'2. By stated installments; or
'3. By stated installments; or with a provision that upon default in payment of any installment or of interest, the whole shall become due; or
'4. With exchange, whether at a fixed rate or at the current rate; or
Section 8109. 'An instrument is payable at a determinable future time within the meaning of this chapter, which...
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