People's Bank of Mobile v. Moore

• Decision Date: 16 May 1918
• Docket Number: 1 Div. 16
• Citation: 78 So. 789,201 Ala. 411
• Parties: PEOPLE'S BANK OF MOBILE v. MOORE.
• Court: Alabama Supreme Court

78 So. 789

201 Ala. 411

PEOPLE'S BANK OF MOBILE v. MOORE.

1 Div. 16

Supreme Court of Alabama

May 16, 1918

Appeal from Circuit Court, Mobile County; Saffold Berney, Judge.

Assumpsit by the People's Bank of Mobile against Hattie B. Moore. Judgment for defendant, and plaintiff appeals. Affirmed.

Stevens McCorvey & McLeod, of Mobile, for appellant.

Gregory L. & H.T. Smith, of Mobile, for appellee.

SOMERVILLE J.

The notes sued on are dated May 21, 1914, and were presumptively executed on that date. They are payable "on demand after date." On their faces they are, as to their maker unquestionably negotiable instruments, payable unconditionally, and without restriction as to the source from which the funds for their payment are to be drawn.

The defendant did not execute the notes as a maker, but indorsed them before delivery, and is sued as indorser. Her liability depends upon the terms of her indorsement as expressed upon the back of the paper, viz.:

"The undersigned indorsers assume the contract shown by the face of this note.

"Payable from Pass Aux Heron U.S. Government contract to be completed about June 1st, 1914."

It is noteworthy that the maker of the notes signed this stipulation along with the two indorsers.

The meritorious question presented by the demurrers is whether the indorsers are absolutely liable for the payment of the notes, or whether they are liable only in case the proceeds of the government contract were sufficient for that purpose.

It is well settled by the authorities that instruments drawn upon, or payable out of, a particular fund, are not negotiable bills or notes, because they do not carry the general personal credit of the obligor, and payment is contingent upon the sufficiency of the fund referred to. 8 C.J. p. 121, § 214; Waters v. Carleton, 4 Port. 205; West v. Foreman, 21 Ala. 400; Gliddon v. McKinstry, 28 Ala. 408; Blackmon v. Lehman & Co., 63 Ala. 550, 35 Am.Rep. 57; Heflin Co. v. Hilton, 124 Ala. 365, 27 So. 301; First Nat. Bk. v. Lightner, 74 Kan. 736, 88 P. 59, 8 L.R.A. (N.S.) 231, 118 Am.St.Rep. 353, 11 Ann.Cas. 596, 599; First Nat. Bk. v. Sullivan, 66 Wash. 375, 119 P. 820, Ann.Cas. 1913C, 930, and note 932; Kimpton v. Studebaker, 14 Idaho, 552, 94 P. 1039, 125 Am.St.Rep. 185, and note 196, 14 Ann.Cas. 1126.

In the case of bills of exchange, neither the indication of a particular fund out of which the drawee is to reimburse himself, nor, indeed, any direction as to resulting debits or adjustments as between the drawer and drawee, are regarded as affecting negotiability, provided that the order to pay is itself absolute.

So, also, in the case of promissory notes, the mere statement of the consideration, or of the transaction out of which the promise to pay originated, does not affect negotiability, since it does not qualify the obligation to pay. The authorities cited above furnish many illustrations.

The principles under discussion have been codified in the Negotiable Instruments Law as follows:

"An unqualified order or promise to pay is unconditional within the meaning of this chapter, though coupled with (1) an indication of a particular fund out of which reimbursement is to be made, or a particular account to be debited with the amount; or (2) a statement of the transaction which gives rise to the instrument. But an order or promise to pay out of a particular fund is not unconditional." Code, § 4960 (Neg.Ins.Law, Sess.Acts 1909, p. 126, § 3).

Taking them at their face value, and giving to the language used its plain and ordinary meaning, we are convinced that defendant's indorsements on the notes here exhibited were qualified indorsements, and import, as an undisputable legal conclusion, that defendant's liability is limited to the fund to be derived by the maker of the notes from the government contract specified, and conditioned upon its sufficiency to pay the notes, whether in whole or in part. It is certainly true that as to...