c. When order or promise is unconditional; statutory provision. -The Negotiable Instruments Law contains the following provisions: "An unqualified order or promise to pay is unconditional "within the meaning of this act, though coupled with: "1. An indication of a particular fund out of which reim"bursement 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." 88 As will be noticed hereafter, it is an unquestioned rule, independent of statute, that an order or promise to pay money out of a particular fund is neither a negotiable bill nor note, although it is generally held that such an instrument may be valid as an equitable assignment.89 If an order or promise to pay is unqualified, it is not conditional because it contains a statement indicating a particular fund out of which the maker or drawee is to reimburse himself.90 Thus an order requesting the defendant to pay to the plaintiff, or order, £9 10s., 66 as my quarterly half-pay, to be due from the 24th of June to 27th of September, next, by advance," was held to be a bill of exchange. The court said: "The mention of the halfpay is only by way of direction how he shall reimburse himself, but the money is still to be advanced on the credit of the person.' The statute has not changed the pre-existing rules in respect to 91 88. Neg. Inst. Law (N. Y.), § 22. Munger v. Shannon, 61 N. Y. 251, it For same section in statutes of other appeared that a person gave to the States see Appendix. holders of a promissory note made by The English Bills of Exchange Act, her, a writing directed to the defend1882, § 3, subd. 3, is as follows: "An ant, her partner, requesting the payorder to pay out of a particular fund is not unconditional within the meaning of this section; but an unqualified order to pay, coupled with an indication of a particular fund out of which the drawee is to reimburse himself or a particular account to be debited with the amount, or a statement of the transaction which gives rise to the bill is unconditional." 89. Brice v. Bannister, 3 Q. B. D. (Eng.) 569, 47 L. J. Q. B. (Eng.) ment to the holders of the amount of the note, followed by the expression "and deduct the same from my share of the profits of the partnership business;" it was held that the writing was not a bill of exchange, but an equitable assignment of so much of the profits as should suffice to pay the note. See also Brill v. Tuttle, 81 N. Y. 454. 90. Munger v. Shannon, 61 N. Y. 251. 722. 91. Macleod v. Snee, 2 Stra. (Eng.) In the leading New York case of 762. charges upon particular funds. Now as before the true test in determining whether an instrument is a negotiable promissory note or a bill of exchange is, whether the maker or drawee is to be confined absolutely to a particular fund therein mentioned, or whether, though a particular fund is mentioned, the drawee would have the power to charge the bill up to the general account of the drawer, or the payee could compel payment of the note by the maker, if the designated fund should turn out to be insufficient. In the final analysis of each case, it must appear that the alleged note or bill is made payable absolutely by the maker or drawn on the general credit of the drawer.92 The question has frequently arisen in respect to orders or warrants issued by municipal corporations payable out of particular municipal funds or chargeable to particular accounts; and while it has been generally held that such orders and warrants are nonnegotiable, they may be so worded as to come within the general rules relating to other negotiable instruments containing words indicating the "particular fund out of which reimbursement is to be made." For example, it has been held that a statement in a municipal warrant for the payment of a sum certain at a fixed time to a person or his order, that the same is payable "out of any funds belonging to the city, not before specially appropriated," and "chargeable to general city fund," does not deprive the instrument of the character of a negotiable promissory note.' An order 92. Munger v. Shannon, 61 N. Y. 251. 93 An order to pay from a savings bank deposit is not negotiable. In the Personal credit of drawer.- The case of National Sav. Bank v. Cable, court in the case last cited quotes 73 Conn. 568, 572, 48 Atl. 428, the with approval the language used by court said in speaking of such an orthe court in the case of Dawkes v. der: "If the order had been negoDe Lorane, 3 Wils. (Eng.) 207, as tiable it might have been held to imfollows: "The instrument or writing port a consideration, but it is not newhich constitutes a good bill of ex- gotiable. It is payable out of a parchange is not confined to any certain ticular fund; it is to pay $300, or form, or set of words, yet it must have what may be due on a specified book; some essential qualities, without which the amount to be paid is made to deit is no bill of exchange; it must carry with it a personal and certain credit given to the drawer, not confined to credit upon anything or fund; it is upon the credit of a person's hand, as 93. Municipal orders or warrants.— on the hand of the drawer, the in- See Bull v. Sims, 23 N. Y. 570. dorser, or the person who negotiates this case the court said: "It is it, he to whom such bill is made pay- claimed by the defendant that the payable or indorsed, takes it upon no ment depended upon the condition of particular event or contingency, ex- the funds at the time they became cept the failure of the general per- due, and that the city would not be sonal credit of the persons drawing bound to pay them unless there was or negotiating the same." sufficient moneys in the city treasury pend upon the adequacy of a specified fund; such an order is conditional and so not negotiable under the Negotiable Instruments Law." In for the payment of a sum certain to a third person is none the less a bill of exchange because it shows on what account it is to be debited, or the consideration which has been received, or the transaction upon which it is based." 94 order directed the drawee to pay the plaintiffs or order "the two hundred and fifty dollars due us by you on account of cash paid for repairing engine, and this will be receipt in full of all demands of us;" it was held to be a good bill of exchange. In the case of Wells v. Brigham, 6 Cush. (Mass.) 6, the order was in the following form: "Mr. BrighamDear Sir: You will please pay E. W. $30, which is due me for the two-horse wagon bought last spring; and this may be your receipt." The court held that the order had all the essentials of a bill of exchange, and the fact that it indicated a debt due from the drawee as the consideration between the parties did not make it any less a cash order or draft. See also Rice v. Ragland, 10 Humph. (Tenn.) 545. at that time, not specially appro94. Statement of consideration.priated, to meet the demand. Such Hillstrom v. Anderson, 46 Minn. 382, is not their meaning. An indebted- 49 N. W. 187. In this case the ness to the amount specified is acknowledged, and it is stated for what it has been incurred, and on what fund it is chargeable, and although it directs the treasurer to pay the amounts 'out of any funds belonging to the city not before specially appropriated,' no inference can be drawn from this direction that it is chargeable and payable out of any particular or specified fund; on the contrary such an inference is repelled. The financial officer of the city is, in effect, directed that he shall not pay the amount out of any specific moneys appropriated and set apart to other objects, but that he must make the payment out of the general funds of the city, and charge the general city fund therewith in his accounts. It is not contemplated that there will be a deficiency of funds to meet the demands at the time fixed for payment. The order to pay is abso- In Redman v. Adams, 51 Me. 433, lute. It does not direct the payment where the bill said: "And charge the to be made, if in funds or upon any same against whatever may be due express condition or contingency, nor me for my share of fish," it was held do the words which have been men- that payment was not limited to the tioned give color to the idea that after proceeds of the fish. acknowledging the indebtedness, the In the case of Defee v. Smith, 43 liability of the corporation to pay was Ark. 221, the instrument read: "Mr. in any way to depend on the condition John Defee: Please pay J. G. Smith of the city treasury. A presumption the sum of $450, amount due me for to that effect will not be implied carrying the mail from Camden to El against a creditor having a debt Dorado for the last quarter of 1880. chargeable to the city at large, and R. S. Kendrick." The court said: not against a special fund. The in- "The reference in the draft to the struments were, therefore, in the na-amount due' the drawer for mail ture of negotiable promissory notes, service' is merely an indication to the and could be treated as such." drawee how to reimburse himself See also Garvin v. Wiswell, 83 Ill. or to show to what account it should 215, where an order upon a county be charged. Such a statement as to treasurer payable out of a fund "ap- a particular fund does not vitiate the propriated for bounties to volunteers" bill." was held to be negotiable. It was The case of Nichols v. Ruggles, 76 held in the case of Furgerson v. Sta- Me. 25, involved a similar state of ples, 82 Me. 159, 19 Atl. 158, that a facts and was decided in the same town order might be so worded as to way as the case last cited. See also be negotiable under the rules ap- Spurgin v. McPheeters, 42 Ind. 527; plicable to commercial paper. See also Sylvester v. Staples, 44 Me. 496; Hoyt Floyd County Comrs. v. Day, 19 Ind. v. Lynch, 2 Sandf. (N. Y.) 328. 450; Sheffield School Township v. Andress, 56 Ind. 157. 95. Statement of transaction.— An instrument reciting "Please pay Abra The mere fact that the consideration for which a note is given is recited in it, although it may appear thereby that it was given for or in consideration of an executory contract or promise on the part of the payee, will not destroy its negotiability, unless it appears, through the recital, that it qualifies the promise to pay, and renders it conditional or uncertain, either as to the time of payment or the sum to be paid.9 Words added merely by way of explana 96 ham Steers or order two thousand dollars, and charge the same to the balance due on my contract for the erection of two buildings [describing them]" is a negotiable draft, and not an order on a particular fund. Gunther v. Darmstadt, 14 Daly (N. Y.), 368. One having purchased an engine, gave a note in the following form: "Fourteen and a half months after date I promise to pay to the order of the American Engine Company, one hundred and fifty dollars, at seven per cent., at the Havana National Bank at Havana, N. Y., value received, being in part payment for a portable engine, which engine shall be and remain the property of the owner of this note, until the amount hereby secured is fully paid." Signed. Held, that this was a negotiable note and that it was the duty of the holder to demand payment of the maker and notify the indorser of its nonpayment. Mott v. Havana Nat. Bank, 22 Hun, 354, citing Arnold v. Rock River, etc., R. R. Co., 5 Duer (N. Y.), 207; Willoughby v. Comstock, 3 Hill (N. Y.), 389; Hodges v. Shuler, 22 N. Y. 114. And where an instrument is made by a railroad corporation, promising to pay to W. S., or order, "a thousand dollars, with interest thereon payable semi-annually as per interest warrants hereto attached as the same shall become due, or upon the surrender of this note together with the interest warrants not due to the treasurer, at any time until six months of its maturity," it was held to be a negotiable note. Hodges v. Shuler, 22 N. Y. 114. 96. Siegel, Cooper & Co. v. Chicago Trust & Savings Bank, 131 Ill. 569, 23 N. E. 417, 19 Am. St. Rep. 51. In this case the instrument was in the following form: "On July 1, 1887, we promise to pay D. Dalziel, or order, the sum of $300, for the privilege of one-framed advertising sign, size X inches, one end of each of one hundred and fifty-nine street cars of the North Chicago City Railway Co., for a term of three months from May 15, 1887. 66 Siegel, Cooper & Co." Such instrument was indorsed by Dalziel, the payee, to the bank, for value, on the day of its execution. It appeared that the contract was never fulfilled because of Dalziel's forfeiture of his right to use the cars. The recital of the consideration in the note was held not to affect its negotiability. For a similar New York case decided in like manner see Chase v. Behrman. 10 Daly, 344. Notes in land transactions. In the case of Ferriss v. Tavel, 87 Tenn. 386, 11 S. W. 93, a promissory note given for land sold by a parol contract contained a recital that it was given for the "third payment on twenty-eight lots in Rains' Addition, Ninth District, this day purchased of Albert Tavel." The court said: "Following the weight of authority, and what is regarded as better public policy, we hold that the statement of the consideration in the face of the note did not impair its negotiability, and should not be allowed to prejudice the right of White [the indorsee] to enforce its collection." Citing Doherty v. Perry, 38 Ind. 15; Bank v. Barrett, 38 Iowa, 126; Hereth v. Bank, 34 Ind. 380; Sackett v. Kellar, 22 Ohio St. 558; Taylor v. Curry, 109 Mass. 36. See also Hubert v. Grady, 59 Tex. 502; Garrett v. Interstate Bank, 79 Tex. 133. The English cases are somewhat different from the majority of the American cases, and for the most part have held that the recital must be that of a consideration which has already been executed. See Jarvis v. Wilkins, 7 Mees. & W. (Eng.) 410: Dixon v. Nuttal, 6 C. & P. (Eng.) 320, 25 E. C. L. (Eng.) 418. tion to a positive order to pay do not affect the instrument.97 Indeed, it is very common to specify in the bill the object or purpose for which it was drawn, as well as the account to which it is to be charged, without intending to make the order to pay either conditional or contingent.98 d. Order or promise to pay out of a particular fund.— It has been long established that a bill or note made payable out of a particular fund is not negotiable; that such an instrument is merely a special agreement to be treated in the same manner as an ordinary contract. When a bill or note is made payable out of a particular fund, the promise is made contingent upon the sufficiency of the fund; and if it fail, the promise becomes nugatory; and, therefore, the law does not regard such instruments, incumbered as they are with conditions and contingencies, as negotiable paper. If assigned, as they may be, the assignee must take them subject to all the equities.99 The general rule, as stated by Story, is "that a bill of exchange always implies a personal general credit, not limited or applicable to particular circumstances and events, which cannot be known to the holder of the bill, in the general course of its negotiation; and if the bill wants upon the face of it this essential quality or character, the defect is fatal." As an example, where the plaintiff drew upon A. and ordered him to pay B. £7 per month out of the plaintiff's growing subsistence, it was held no bill of exchange, for had the plaintiff died, or his subsistence been taken away, the bill would not have been payable. And an order from the owner of a ship upon the charterer, to pay money on account of freight, is not a bill, for the future existence and amount of any debt due for freight are subject to a contingency. Nor is an order to pay out of the rents or other moneys of the drawer, in the hands of the drawee; or out of the proceeds 3 97. Leonard v. Mason, 1 Wend. (N. Y.) 522. This case was brought on a bill written under a note as follows: "Please pay the above note, and hold it against me in our settlement." 98. Goodrich v. Gordon, 15 Johns. (N. Y.) 6. Where the mayor of Brooklyn drew a bill upon the treasurer of the city in these terms: "Pay Alexander Lyon, or order, fifteen hundred dollars for award No. 7, and charge to Bedford road assessment," it was decided to be a good bill of exchange; because the payment was not, on the face of the 2 bill, either conditional or restricted to any particular fund. Kelly v. Mayor, etc., of Brooklyn, 4 Hill (N. Y.), 263. 99. Edwards on Bills and Notes, p. 143. 1. Story on Bills of Exchange, § 46, citing Dawkese v. Earl of Deloraine, 2 Wm. Bl. (Eng.) 782; Carlos v. Fancourt, 5 T. R. (Eng.) 482. See Andrews v. Harvey, 39 Tex. 123. 2. Josselyn V. Lacier, 10 Mod. (Eng.) 294. 3. Banburry v. Lissett, 2 Stra. (Eng.) 1211. 4. Morton v. Naylor, 1 Hill (N. Y.), 583, in which a written order by a |