The First National Bank of Hutchinson v. Lightner

• Decision Date: 08 December 1906
• Docket Number: 14,765
• Citation: 74 Kan. 736,88 P. 59
• Parties: THE FIRST NATIONAL BANK OF HUTCHINSON, KANSAS, v. GEORGE W. LIGHTNER
• Court: Kansas Supreme Court

88 P. 59

74 Kan. 736

THE FIRST NATIONAL BANK OF HUTCHINSON, KANSAS, v. GEORGE W. LIGHTNER

No. 14,765

Supreme Court of Kansas

December 8, 1906

Decided July, 1906.

Error from Edwards district court; CHARLES E. LOBDELL, judge.

STATEMENT.

THE First National Bank of Hutchinson brought this action against George W. Lightner. Two causes of action are declared upon in the petition: The first, upon a check for $ 1000, drawn in favor of the bank by defendant; the second, upon an order for $ 1500, drawn by the Snyder Planing-mill Company upon the bank, and accepted by defendant. It was alleged that the $ 1000 check was given by defendant to take up an order for that amount which was drawn upon the bank by the planing-mill company about the same time the other order was drawn and which likewise had been accepted by defendant; that both orders and the check were acquired by the bank in the regular course of business for value; and that payment had been refused upon both the check and the order.

The answer admitted the acceptance of the orders and the making and delivery of the check, but alleged that the orders were non-negotiable and were nothing more than a mere assignment of the rights of the Snyder Planing-mill Company to payment for the erection of a barn when the same should be completed according to the terms of a written contract made by the defendant with the company; that soon after the orders were accepted the planing-mill company became, and still was insolvent, and had failed to complete its contract; that defendant had been compelled to complete the barn himself, at considerable loss; and admitted a balance due upon the contract very much less than the amount of the two orders which defendant averred a willingness to pay.

The cause was tried to the court without a jury. The court made the following special findings of fact and conclusions of law:

"FINDINGS OF FACT.

"That the Snyder Planing-mill Company entered into a contract with the defendant, Lightner, for the erection of a certain barn at the contract price of $ 3500. That prior to the completion of said barn, and on the 28th day of September, 1903, the Snyder Planing-mill Company was duly adjudicated bankrupt and the defendant, Lightner, was compelled to and did complete the barn.

"That prior to the adjudication of the Snyder Planing-mill Company as bankrupt, at the request of said company, Lightner accepted two orders, one for $ 1000 and one for $ 1500, which said orders and acceptances were identical, with the exception of the amounts and dates. The one for $ 1500 reads as follows:

"'HUTCHINSON KAN., August 10, 1903.

"'G. W. Lightner, Offerle, Kan.:

"'DEAR SIR--Pay to the order of the First National Bank of Hutchinson, Kansas, $ 1500, on account of contract between you and the Snyder Planing-mill Company.

THE SNYDER PLANING-MILL COMPANY.

Per J. F. DONNELL, Treasurer.

"'Accepted: G. W. LIGHTNER.'

"Said two orders, so accepted, were by the Snyder Planing-mill Company hypothecated with the First National Bank of Hutchinson, Kansas, to secure two certain demand notes drawing ten per cent. interest and of even amounts with said orders; the $ 1000 order being hypothecated about August 22, 1903, and the $ 1500 order on or about August 11, 1903. The proceeds of said notes were at said dates duly received from said bank and used by the Snyder Planing-mill Company. Said notes are still due and unpaid.

"That said orders were so accepted by Lightner on or about August 10, 1903, and that about September 30 Lightner took up the $ 1000 order by giving therefor his check for $ 1000 to the cashier of plaintiff, which was as follows:

"'KINSLEY, KAN., September 30, 1903.

"'The National Bank of Kinsley:

"'Pay to E. W. Eagan, cashier, or order, $ 1000. One thousand dollars.

GEORGE W. LIGHTNER.'

"That said Lightner stopped payment on said check prior to its presentation, and no part thereof has been paid, nor has any part of the $ 1500 order been paid. That prior to the giving of the two orders Lightner paid the Snyder Planing-mill Company $ 1000 upon said contract, and that he was compelled to expend $ 1624.04 to complete the barn. That there was a balance due and unpaid on said contract of $ 875.96 when this action was commenced."

"CONCLUSIONS OF LAW.

"(1) That said orders were non-negotiable and were subject to the same defenses in the hands of the First National Bank of Hutchinson, Kansas, as though they had remained in the hands of the Snyder Planing-mill Company.

"(2) That the plaintiff is entitled to judgment in this action in the sum of $ 970, with interest from this date at six per cent. per annum, and for costs.

CHARLES E. LOBDELL, Judge."

Plaintiff brings the cause here upon a transcript, and alleges error in the conclusions of law upon which the judgment is based and error in denying the motion for a new trial.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

NEGOTIABLE INSTRUMENTS--Payment Not Conditional. The following order is a negotiable bill of exchange, payable absolutely on demand:

"HUTCHINSON, KAN., August 10, 1903.

"G. W. Lightner, Offerle, Kan.:

"DEAR SIR--Pay to the order of the First National Bank of Hutchinson, Kansas, $ 1500, on account of contract between you and the Snyder Planing-mill Company.

THE SNYDER PLANING-MILL COMPANY,

Per J. F. DONNELL, Treasurer.

"Accepted: G. W. LIGHTNER."

The words "on account of contract between you and the Snyder Planing-mill Company" are not a direction to charge a particular fund, but merely indicate the fund to which the drawee is to look for reimbursement.

Fairchild & Lewis, and E. C. Cole, for plaintiff in error.

F. Dumont Smith, for defendant in error.

PORTER J. All the Justices concurring.

OPINION

PORTER, J.:

The main controversy is whether the orders given by the planing-mill company to the bank and accepted by defendant are negotiable instruments. It is true that no specific time of payment is mentioned, but that does not affect their validity as such instruments; and, where no date is mentioned, they are payable on demand. (4 A. & E. Encycl. of L. 133, and note 3; Douglass v. Sargent & Bro., 32 Kan. 413, 4 P. 861.) Each of them, therefore, possesses all the essential elements of a bill of exchange, unless the words "on account of contract between you and the Snyder Planing-mill Company" make them payable out of a particular fund, and conditionally, so that the acceptance is thereby qualified.

The law is well settled that a bill or note is not negotiable if made payable out of a particular fund. (1 Dan. Neg. Inst., 5th ed., § 50; White v. Cushing, 88 Me. 339, 34 A. 164, 32 L. R. A. 590, 51 Am. St. Rep. 402.) But a distinction is recognized where the instrument is simply chargeable to a particular account. In such a case it is beyond question negotiable; payment is not made to depend upon the sufficiency of the fund mentioned, and it is mentioned only for the purpose of informing the drawee as to his means of reimbursement. (1 Dan. Neg. Inst., 5th ed., § 51; Tiedeman, Bills & Notes, § 20.) In Ridgely Bank v. Patton & Hamilton, 109 Ill. 479, it was said:

"A bill or note, without affecting its character as such, may state the transaction out of which it arose, or the consideration for which it was given." (Page 484.)

"So, also, the insertion into a bill or note of memoranda explaining the nature of the business or debt for which the instrument is given will not make it nonnegotiable, for such a memorandum does not make the payment conditional." (Tiedeman, Com. Paper, § 26.)

The test in every case is said to be, "Does the instrument carry the general personal credit of the drawer or maker, or only the credit of a particular fund?" (4 A. & E. Encycl. of L. 89.) A promise to pay a certain sum "out of my next quarter's mail pay, which becomes due January 1, 1883," was held, in Nichols v. Ruggles, 76 Me. 25, to be an absolute promise to pay a certain sum of money. In Haussoullier v. Hartsinck, 7 Durn. & E. (Eng.) 733, it was held that an instrument promising to pay a certain sum, "being a portion of a value as under deposited in security for the payment hereof," was a promissory note payable at all events. In Pierson v. Dunlop, 2 Cowp. (Eng.) 571, an order which was to be charged "to freight" was held negotiable. A note expressed to be in payment of certain tracts of land was held negotiable. (Bank v. Michael, 96 N.C. 53, 1 S.E. 855.) Likewise a note which stated that it was given in consideration of certain personal property, the title to which was not to pass unless the note was paid. (Chicago Railway Co. v. Merchants' Bank, 136 U.S. 268, 10 S.Ct. 999, 34 L.Ed. 349.) This court held, in Clark v. Skeen, 61 Kan. 526, 60 P. 327, 49 L. R. A. 190, 78 Am. St. Rep. 337:

"A note for the payment of a certain sum at a fixed date is not rendered non-negotiable by a stipulation that upon default in the payment of interest the whole amount shall become due at the option of the holder and then draw a greater rate of interest." (Syllabus.)

In Corbett v. Clark and another, 45 Wis. 403, 30 Am Rep. 763, an order to pay a certain sum "and take the same out of our share of the grain," referring to grain harvested or growing on certain farms, accepted by the drawee, was said to be a valid bill of exchange, and the order and acceptance absolute, the words above quoted merely indicating the means of disbursement. In Redman v. Adams, 51 Me. 429, a bill directing the drawee to charge the amount against the drawer's share of fish caught on a certain schooner was held valid and negotiable. One of the leading cases is Macleed v. Snee, 2 Stra. (Eng.) 762. There a bill of exchange was dated May 25, for the payment of a...