Strand Amusement Co. v. Fox

• Decision Date: 13 January 1921
• Docket Number: 3 Div. 469
• Citation: 87 So. 332,205 Ala. 183
• Parties: STRAND AMUSEMENT CO. v. FOX.
• Court: Alabama Supreme Court

87 So. 332

205 Ala. 183

STRAND AMUSEMENT CO. v. FOX.

3 Div. 469

Supreme Court of Alabama

January 13, 1921

Appeal from Circuit Court, Montgomery County; Leon McCord, Judge.

Assumpsit by George W. Fox against the Strand Amusement Company. Judgment for the plaintiff, and defendant appeals. Transferred from Court of Appeals under Acts 1911, p. 449, § 6. Affirmed.

McClellan J., and Anderson, C.J., and Thomas, J., dissenting.

Weil Stakely & Vardaman, and Walton H. Hill, all of Montgomery for appellant.

Arrington & Arrington, of Montgomery, for appellee.

SOMERVILLE J.

The single question presented by the record is whether or not the negotiable character of the notes sued on is destroyed by the words "as per contract," which are written on the face of the notes.

The Negotiable Instruments Law (Code, § 4960) provides that--

"An unqualified order or promise to pay is unconditional, *** though coupled with: *** (2) A statement of the transaction which gives rise to the instrument."

This is merely declaratory of the old law merchant (8 Corp.Jur. 120, § 213; People's Bank v. Moore, 201 Ala. 411, 78 So. 789), and--

"It may be stated as the general rule that wherever a bill of exchange or promissory note contains a reference to some extrinsic contract in such a way as to make it subject to the terms of that contract, as distinguished from a reference importing merely that the extrinsic agreement was the origin of the transaction, or constitutes the consideration of the bill or note, the negotiability of the paper is destroyed." 3 R.C.L. 883, § 69.

But "the negotiability of a note is not affected by a reference which is simply a recital of the consideration for which the paper was given, or a statement of the origin of the transaction, or by a statement that it is given in accordance with the terms of a contract of even date between the same parties." 3 R.C.L. 918, § 112.

In short, to destroy negotiability, the reference to a collateral contract must show that the obligation to pay is burdened with the conditions of that contract.

In the application of this general principle to particular cases, the decisions, as might be expected from the nature of the subject, are by no means harmonious. In this state, so far as we are advised, there is no precedent sufficiently in point to be of assistance in the solution of the instant case.

Where the promise to pay is made "subject to" some other contract referred to, the authorities seem to be agreed that the obligation is conditional, and negotiability is destroyed. Klots, etc., Co. v. Manufacturers', etc., Co., 179 F. 813, 103 C.C.A. 305, 30 L.R.A. (N.S.) 40, and note, citing numerous cases; L.R.A.1918B, 639; 8 Corp.Jur. 124, § 216. So, where the payment was to be made "according to the requirements of a certain agreement of even date herewith," the note was held nonnegotiable. Chicago, etc., Bank v. Chicago T. & T. Co., 190 Ill. 404, 60 N.E. 586, 83 Am.St.Rep. 138.

Where the words "as per terms of contract" were written after the words "value received," it was held that negotiability was not affected by the reference. Nat. Bk. of Newbury v. Wentworth, 218 Mass. 30, 105 N.E. 626.

In Slaughter v. Bank of Bisbee, 17 Ariz. 484, 154 P. 1040, it was held that a memorandum under the signature of the maker, "for payment under contract of even date," did not affect negotiability, and the court, per Ross, C.J., said:

"The usual way to condition or to make contingent a promise to pay is to use language clearly carrying that intention and purpose either by direct expression or by reference to some extrinsic contract in such manner as to make the payment of the note subject to the terms and conditions of the contract. *** If it can be said that the expression (quoting it) fairly or reasonably means that the note was given and its payment was to be made 'subject to the terms of the contract,' therein referred to, it would follow that, if the contract was executory, the payment of the note was subject to its conditions. There is nothing in the language to indicate that the contract referred to was an unexecuted contract. From what appears in the expression the contract may have been fully performed and executed. It has neither subject nor predicate; it does not assert or affirm anything--it is a mere combination of words from which it may be inferred that a contract had been entered into between somebody on its date. We cannot enter into the speculation of inserting or supplying omitted words, as appellant would have us do, in order to give it the force and effect of limiting and qualifying the unconditional promise of the makers as contained in the body of the note--we must accept the words actually used, which do not declare anything, or assert anything, or affirm anything, but are a mere allusion to or signpost of the transaction out of which the note originated. It does not mean the same, as suggested by appellant, as the expression, 'this note is made subject to contract of even date,' for in the latter expression there is carried the idea of a subsisting and unfulfilled contract, an executory contract. *** In the case at bar there is an absence of language to indicate that this note was to be burdened with the conditions of any agreement. At most it is a mere reference to the origin of the transaction and 'constitutes notice of the existence of the contract,' but 'not of the breach thereof.' "

The court alluded to the case of Klots, etc., v. Mfrs., etc., Co., supra, and quoted with approval its statement that if the memorandum "merely constitutes notice of the existence of the contract, and not of the breach thereof, it would not affect negotiability."

In Doyle v. Considine, 195 Ill.App. 311, it was held that negotiability was not affected by a memorandum that "this note is given in accordance with a land contract of even date" (italics supplied). The memorandum in that case is materially different from the one which led to a different conclusion in 190 Ill. 404, 60 N.E. 586, 83 Am.St.Rep. 138, cited supra.

In Waterbury-Wallace Co. v. Ivey, 99 Misc.Rep. 260, 163 N.Y.Supp. 719, the words "as per contract of Nov. 12, 1915," followed the phrase "value received," and it was held that negotiability was not affected. In that case it was observed that--

"The tendency of the courts is to construe commercial instruments having on them a memorandum or reference to dealings between the parties as negotiable, if they in other respects have all the characteristics of negotiability"

--a principle of construction which is affirmed in the text of 8 Corp.Jur. 119, § 212.

In First Nat.Bk. v. Badham, 86 S.C. 170, 68 S.E. 536, 138 Am.St.Rep. 1043, a majority of the court held that the words "as per contract of November 23, 1899," following the phrase "for value received," did not render the note nonnegotiable. The headnote of the reporter in this case is erroneous, as an examination of the individual opinions of the justices will clearly show. This error has led to its erroneous citation in several instances by judges and annotators.

In Coleman v. Valentin, 39 S.D. 323, 164 N.W. 67, it was held that the memorandum, "This note is one of a series given in payment of land under the contract this day executed," did not affect negotiability.

On the other hand, the case of Continental B. & T. Co. v. Times Pub. Co.,...