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L. 1909, ch. 43

Form and Interpretation

§ 22

Negotiable bill of exchange not an assignment of fund: see infra, § 211. Check not an assignment of fund: see infra, § 325.

Common law rule.-" Section 22, defining an unconditional promise to pay, embodies the rules of the common law and law merchant as they had been established before the passage of any statute upon this point." Hibbs v. Brown, (1907) 190 N. Y. 167, 82 N. E. 1108, affirming 112 App. Div. 214, 98 N. Y. S. 353. And see also, as to the common law rule, Munger v. Shannon, (1874) 61 N. Y. 251; Waddell v. Hanover Nat. Bank, (1905) 48 Misc. 578, 97 N. Y. S. 305.

Order payable out of particular fund.—An order payable out of a specified fund is not a bill of exchange requiring an acceptance, but is an assignment of the funds of the drawer to the amount specified in the order, where the drawer has received a consideration for the order. Alger v. Scott, (1873) 54 N. Y. 14. "It is well settled that a draft, drawn upon the general credit of the drawer with the drawee, does not operate to assign a particular account or fund, even though one is indicated, to which the draft is to be charged or out of which the drawee is to reimburse himself, as the case may be. If, however, it was the intention and understanding of the parties that the draft would be paid from a particular fund and not absolutely and at all events, it will operate as an assignment thereof." Muller v. Kling, (1912) 149 App. Div. 176, 133 N. Y. S. 614, affirmed (1913) 209 N. Y. 239, 103 N. E. 138.

When the language of a draft is ambiguous, the attendant circumstances may be shown to determine whether it is drawn on the general credit of the drawee or whether it is to be paid out of a particular fund. Brill v. Tuttle, (1880) 81 N. Y. 454, 37 Am. Rep. 515.

"This

An instrument for the payment of money in the following form, amount to be paid out of our profits on the 3 East 40th Street job," is a promise to pay out of a particular fund, and the instrument is non-negotiable. Fulton v. Varney, (1907) 117 App. Div. 572, 102 N. Y. S. 608. An instrument requesting the payment of a certain sum and directing the addressee to charge the same to the account of the drawer on a certain heating contract, is nonnegotiable. American Boiler Co. v. Fontham, (1898) 34 App. Div. 294, 55 N. Y. S. 923. Where an order on a third person provides that the sum mentioned shall be deducted from the money due the drawer on a loan on certain houses to be constructed, the order is not an unconditional order and is not a negotiable bill of exchange. Tisdale Lumber Co. v. Piquet, (1912) 153 App. Div. 266, 137 N. Y. S. 1021.

A letter written by a consignor of cotton to the consignee thereof, stating that he had drawn on the latter for $500 payable to a third person when the cotton should be sold, is a specific appropriation to the use of the latter payable on the presentation of the consignor's order. Lowery v. Steward, (1862) 25 N. Y. 239, 82 Am. Dec. 346. An order drawn on the comptroller of a city to pay certain persons a certain sum on plank road and sidewalk accounts and charge to my account," is a valid equitable assignment of the demand which the drawer has against the city. Parker v. Syracuse, (1865) 31 N. Y. 376.

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An instrument directed to a partner of the drawer requesting such partner to pay to the payee thereof a certain sum and requesting such partner to deduct the same from the drawer's share of the profits of the partnership, is an equitable assignment of sufficient of the profits to pay the note. Munger v. Shannon, (1874) 61 N. Y. 251.

Not drawn on particular fund.-A bill of exchange is not rendered nonnegotiable because it contains a notation which means that a quantity of eggs are shipped by the drawer to the drawee but does not indicate that the

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amount of the draft shall be paid only from the proceeds of the assignment. Waddell v. Hanover Nat. Bank, (1905) 48 Misc. 578, 97 N. Y. S. 305.

A draft drawn on the executor of the estate of the drawer's mother requesting such executor to pay to a certain named person, or his order, at a certain time, a certain sum with seven per cent interest, and requesting the executor to "charge the amount against me and of my mother's estate," is a negotiable instrument, for the reference in the draft to the estate is not a direction to pay the money out of it, but merely a reference to the estate as a means of reimbursement. Shmittler v. Simon, (1886) 101 N. Y. 554, 5 N. E. 452, 54 Am. Rep. 737.

An instrument made by a city in the form of a bill drawn by its mayor on its treasurer, attested by its clerk, and countersigned by its comptroller, directing the treasurer to pay to the order of a certain person certain sums therein specified with interest, "out of any funds belonging to the city not before specially appropriated," and adding that the same were on the date thereof allowed for dredging and were chargeable to the general city fund, is negotiable. Bull v. Sims, (1861) 23 N. Y. 570.

Bonds of a joint stock association.-A provision in bonds issued by a joint stock association to the effect that the shareholders of such association shall not be liable as partners or otherwise with respect to the bonds or the coupons appertaining thereto, but that the same shall be payable only out of the assets of the association, is not ar order or promise to pay out of a particular fund," within the meaning of this section, and hence such bonds may be negotiable. Hibbs v. Brown, (1907) 190 N. Y. 167, 82 N. E. 1108, affirming 112 App. Div. 214, 98 N. Y. S. 353.

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Statement of transaction.-A note may be negotiable though it contains a statement relative to the transaction. Merchants Nat. Bank v. Santa Maria Sugar Co., (1914) 162 App. Div. 248, 147 N. Y. S. 498. An instrument whereby one promises to pay money may be a negotiable promissory note, though it is in the form of a receipt and there is annexed to the promise to pay the words, on the return of this receipt." Frank v. Wessels, (1876)

64 N. Y. 155.

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Note secured by contract of conditional sale. A promissory note may be negotiable, though it recites that the sum mentioned therein is in part payment for certain personal property, and that the title to such property shall remain in the vendor until the payment of the note. Third Nat. Bank v. Bowman Spring, (1900) 50 App. Div. 66, 63 N. Y. S. 410, reversing 28 Misc. 9, 59 N. Y. S. 794; Mott v. Havana Nat. Bank, (1880) 22 Hun 354; Arnold v. Rock River Valley Union R. Co., (1856) 5 Duer 207. See also Chicago R. Equipment Co. v. Merchants' Bank, (1889) 136 U. S. 268, 10 S. Ct. 999, 34 U. S. (L. ed.) 349.

An instrument in the ordinary form of a promissory note is not rendered non-negotiable because it contains a waiver of protest, an agreement that the title to the property for which the note is given should remain in the payee until the note is fully paid, and a statement that no person is authorized to receive payment on the note unless it is presented and indorsement is made at the time, and that no agent is authorized to extend the time of payment or to renew the note. Third Nat. Bank v. Bowman Spring, (1900) 50 App. Div. 66, 63 N. Y. S. 410, reversing 29 Misc. 9, 59 N. Y. S. 794.

Cited.— Equitable Trust Co. v. Taylor, (1911) 146 App. Div. 424, 131 N. Y. S. 475.

8 23. Determinable future time; what constitutes. An instryment is payable at a determinable future time, within the meaning of this chapter, which is expressed to be payable:

1. At a fixed period after date or sight; or

L. 1909, ch. 43

Form and Interpretation

§ 24

2. On or before a fixed or determinable future time specified therein; or

3. On or at a fixed period after the occurrence of a specified event, which is certain to happen, though the time of happening be uncertain.

An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.

Computation

This section was derived from the Negotiable Instruments Law of 1897, § 23. time when last day falls on holiday: see supra, § 5. Note payable at the death of maker.- Under the statutes in force prior to the enactment of the Negotiable Instruments Law, even though in a particular case it was not important to determine whether an instrument was negotiable or non-negotiable, it was sometimes necessary to ascertain whether it was a promissory note." Under such statutes, it was held that a note payable at the death of the maker was a valid promissory note. Hegeman v. Moon, (1892) 131 N. Y. 462, 30 N. E. 487; Carnwright v. Gray, (1891) 127 N. Y. 92, 27 N. E. 835, 24 A. S. R. 424, 12 L. R. A. 845; Root v. Strang, (1894) 77 Hun 14, 28 N. Y. 273; Hopkins v. Marlette, (1892) 20 N. Y. S. 576, 47 N. Y. St. Rep. 916.

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Since the enactment of the Negotiable Instruments Law, it has been said that a note payable to the estate of a certain named person upon his death, is not payable at a determinable future time," and is not negotiable. Kerr v. Smith, (1913) 156 App. Div. 807, 142 N. Y. S. 57.

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Payable at majority of infant.-An instrument whereby the signer agrees to pay a certain sum to the payee when he becomes 21 years of age, is not a negotiable instrument, for the attainment of majority by the payee is an event which may never happen. Rice v. Rice, (1899) 43 App. Div. 458, 60 N. Y. S. 97.

Note payable "when we get it."-A note payable "when we get it from the brewery after date," is not payable at a determinable future time, and is not a negotiable instrument. Wray v. Miller, (1910) 120 N. Y. S. 788.

Note for services to be performed.—A promissory note for services to be performed is due according to its terms, and its maturity will not be postponed until the completion of the services. Desmond-Dunne Co. v. FriedmanDoscher Co., (1900) 162 N. Y. 486, 56 N. E. 995. See also Home Bank v. Drumgoole, (1888) 109 N. Y. 63, 15 N. E. 747.

Cited. DuBosque v. Munroe, (1915) 168 App. Div. 821, 154 N. Y. S. 462; Equitable Trust Co. v. Madsen, (1911) 132 N. Y. S. 316.

§ 24. Additional provisions not affecting negotiability. An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable character of an instrument otherwise negotiable is not affected by a provision which:

1. Authorizes the sale of collateral securities in case the instrument be not paid at maturity; or

2. Authorizes a confession of judgment if the instrument be not paid at maturity; or

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3. Waives the benefit of any law intended for the advantage or protection of the obligor; or

4. Gives the holder an election to require something to be done in lieu of payment of money.

But nothing in this section shall validate any provision or stipulation otherwise illegal.

This section was derived from the Negotiable Instruments Law of 1897, $ 24.

Confession of judgment: see Code Civ. Pro., § 1273 et seq.

Sale of collateral.—A promissory note does not lose its negotiability because it recites that the maker has deposited certain bonds as collateral security for the payment of the note, and gives the depositee authority to sell the bonds at the maturity of the note and to apply the proceeds toward payment of the note. Arnold v. River Val. Union R. Co., (1856) 5 Duer

207.

The fact that a note contains a provision pledging collateral or the substitution of other collateral on certain conditions does not change the character of the instrument. New York Security, etc., Co. v. Storm, (1894) 81 Hun 33, 30 N. Y. S. 605.

Election to receive stock for railway note.-An instrument executed by a railroad company in the form of a note, containing an absolute and unconditional engagement to pay money on a day fixed, is negotiable, although the instrument gives an election to the payee to exchange it for stock in the company upon its surrender within six months before its maturity. Hodges v. Shuler, (1860) 22 N. Y. 114.

Election to receive goods in lieu of money.-A written promise to pay a certain sum of money in goods is not a valid promissory note, but is a mere contract; but an instrument which gives the bearer thereof the election between receiving the amount thereof in money or in goods, is a valid promissory note. Hosstatter v. Wilson, (1862) 36 Barb. 307.

Election to convert note into bonds.-A United States treasury note issued under the Act of Congress of March 3, 1865, is none the less a negotiable instrument because it gives the holder an option upon maturity to convert it into bonds. Dinsmore v. Duncan, (1874) 57 N. Y. 573, 15 Am. Rep. 534.

§ 25. Omissions; seal; particular money. The validity and negotiable character of an instrument are not affected by the fact that:

1. It is not dated; or

2. Does not specify the value given, or that any value has been given therefor; or

3. Does not specify the place where it is drawn or the place where it is payable; or

4. Bears a seal; or

5. Designates a particular kind of current money in which payment is to be made.

But nothing in this section shall alter or repeal any statute

L. 1909, ch. 43

Form and Interpretation

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requiring in certain cases the nature of the consideration to be stated in the instrument.

This section was derived from the Negotiable Instruments Law of 1897, $ 25.

Private seal: see GENERAL CONSTRUCTION LAW, § 44. "L. S." as sufficient seal: see 11 Ann. Cas. 250 note. Word "seal" as sufficient seal: see 11 Ann. Cas. 1110 note. Seal as presumptive evidence of consideration: see Code Civ. Pro., § 840.

Absence of date. The absence of a date on a note does not render it invalid. Church v. Stevens, (1907) 56 Misc. 572, 107 N. Y. S. 310.

"Value received."-Even prior to the enactment of the Negotiable Instruments Law, the omission of the words "value received" was thought not to affect its negotiability. Underhill v. Phillips, (1877) 10 Hun 591.

The omission from a note of the words "for value received," does not impair the note, or affect the presumption under section 50 that it was given for value. McLeod v. Hunter, (1899) 29 Misc. 558, 61 N. Y. S. 73, affirmed 49 App. Div. 131, 63 N. Y. S. 153.

Seal. Prior to the enactment of the Negotiable Instruments Law, it was held that the commercial paper of a corporation, negotiable in form, did not lose the quality of negotiability by having affixed thereto the corporate seal. Chase Nat. Bank v. Faurot, (1846) 149 N. Y. 532, 44 N. E. 164, 35 L. R. A. 605. See also Weeks v. Esler, (1894) 143 N. Y. 374, 38 N. E. 377. Bonds issued by a railroad company, although having the seal of the corporation affixed, may be negotiable. Brainerd v. New York, etc., R. Co., (1862) 25 N. Y. 496; Evertson v. Newport Nat. Bank, (1876) 66 N. Y. 14, 23 Am. Rep. 9. And state bonds under seal may be classed as negotiable instruments. Illinois v. Delafield, (1840) 8 Paige 527, 2 Hill 159. Likewise, village bonds may be negotiable. Rome Bank v. Rome, (1859) 19 N. Y. 20, 75 Am. Dec. 272. And a United States treasury note issued under the Act of Congress of March 3, 1865, is a negotiable instrument, although it is under the seal of the United States treasury. Dinsmore v. Duncan, (1874) 57 N. Y. 573, 15 Am. Rep. 534.

The addition of a seal to the signature of the maker of a note does not convert the instrument into a sealed instrument, so as to make the limitation for an action thereon twenty years instead of six. In re Pirie, (1910) 198 N. Y. 209, 91 N. E. 587, 19 Ann. Cas. 672. The mere fact that a copy of a note set up in a complaint contains the word "seal," where there is no reference to it in the pleadings either to show whose seal it was or by what authority it was affixed, does not make the instrument any the less a promissory note. New York Security, etc., Co. v. Storm, (1894) 81 Hun 33, 30 N. Y. S. 605.

Kind of money.-A bill of exchange payable in merchandise or anything except money, is not a good negotiable bill of exchange; but a bill payable in 66 gold dollars" is negotiable. Chrysler v. Renois, (1870) 43 N. Y. 209. And a note payable "in bank notes, in the city of New York," is negotiable. Judah v. Harris, (1820) 19 Johns. 144. Also a note payable in "York state bills or specie" has been regarded as payable in lawful current money of the state. Keith v. Jones, (1812) 9 Johns. 120. But a note made, negotiated, and payable in this state is not a negotiable note, if it is payable in Canadian money. Thompson v. Sloan, (1840) 23 Wend. 71, 35 Am. Dec. 546. A United States treasury note issued under the Act of Congress of March 3, 1865, is a negotiable instrument, although it contains a clause giving the government the option of paying the interest in coin or in paper money. Dinsmore v. Duncan, (1874) 57 N. Y. 573, 15 Am. Dec. 534.

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