67

e. Provision for exchange. The provision of the Negotiable Instruments Law that a sum payable is a sum certain, although it is to be paid with exchange at a fixed rate, or at the current rate, is not a doctrine of universal acceptance, particularly where the rate of exchange provided for is of some other place than the place of payment. It would seem that, independent of the statute, the better doctrine is that bills and notes drawn in one place and payable in another at a rate of exchange not fixed in the instrument itself but at a current rate of exchange at a place other than that of payment are contingent in amount and, therefore, nonnegotiable; the weight of authority is evidently in favor of this proposiMany of the text-writers and the courts of a number of the States have, however, maintained that instruments containing

Iowa.- Culbertson v. Nelson, 93 Iowa, 187, 61 N. W. 854, 27 L. R. A. 222, 57 Am. St. Rep. 266.

67. Flagg v. School District, No. 7, 4 N. D. 30, 58 N. W. 499, 25 L. R. A. 363, where it was held that an instrument providing for the payment of ex- Missouri.-Fitzharris v. Leggatt, 10 change, on a point other than the Mo. App. 527. But in the case of place of payment, in addition to prin- Christian County Bank v. Goode, 44 cipal and interest, is not a negotiable Mo. App. 129, it was held that the instrument; and one who purchases fact that a bill of exchange provides the same before maturity for value, for payment of exchange will not affect and without notice of any defense its negotiability, where the bill is thereto, nevertheless takes it subject made payable at the place where it to the defense of want of considera- is drawn. tion, good as between the original parties to the instrument. The court in this case argues at length the question of the effect of providing for exchange. It is an argument well worthy of consideration and seems almost convincing as against the principle laid down in the statute. 68. Nonnegotiability of instruments providing for the payment of exchange, see the following cases:

United States.- Hughitt v. Johnson, 28 Fed. 865; Second Nat. Bank v. Basuir, 65 Fed. 58, 12 C. C. A. 517, 27 U. S. App. 541; Windsor Sav. Bank v. McMahon, 38 Fed. 283, 3 L.

R. A. 192.

Canada.- Palmer v. Fahnstock, 9 U. C. C. P. 172; Saxton v. Stevenson, 23 U. C. C. P. 503; Cazet v. Kirk, 4 Allen (9 N. Brunsw.), 543.

Illinois.- Lowe v. Bliss, 24 Ill. 168, 76 Am. Dec. 742.

Indiana.- Nicely V. Commercial Bank, 15 Ind. App. 563, 44 N. E. 572, 57 Am. St. Rep. 245; Nicely v. Winnebago Nat. Bank (Ind. App.), 47 N. E. 476; John Church Co. v. Spurrier (Ind. App.), 50 N. E. 93.

North Carolina.-First Nat. Bank v. Bynum, 84 N. C. 24, 37 Am. Rep. 604.

North Dakota.-Flagg v. School District No. 70, 4 N. D. 30, 58 N. W. 499, 25 L. R. A. 363.

Pennsylvania.- Philadelphia v. Newkirk, 2 Miles, 442.

Bank

South Carolina.- Read v. McNulty, 12 Rich. L. 445, 78 Am. Dec. 467; Carroll County Savings Bank Strother, 28 S. C. 504, 6 S. E. 313.

V.

Payment of exchange on New York. -In Read v. McNulty, 12 Rich. L. (S. C.) 445, 78 Am. Dec. 467, the instrument provided for payment to certain parties or order at a definite place and for value received," with exchange on New York." This was held not to be a promissory note because the exchange was not constantly fixed by law but fluctuated from day to day with the changes of commerce. The court says: "This, if the instrument be supported as a note of hand, is equivalent to saying that that is a good note of hand which imports a promise to pay one sum to-day and another tomorrow a thing incompatible with the character of a commercial paper."

such a provision are negotiable.69 The framers of the uniform Negotiable Instruments Law presumably weighed the authorities both for and against the negotiability of instruments containing such a provision and apparently concluded that the preponderance was in favor of their negotiability. By the adoption of this law the question has ceased to be a live one in more

than a majority, at least in importance, of the jurisdictions. of this country. The English Bills of Exchange Act contains a similar provision. It is likely that the great preponderance of authority in favor of the negotiability of such instruments, occasioned by the adoption of the uniform law in so many important States, will have a perceptible influence in modifying the course of judicial decision upon this much-controverted question in those States where the law is yet to be adopted. This will certainly be a desirable result. There is no branch of the law where fixed and settled rules are more to be desired than in that respecting the rights and liabilities of parties to, and the construction and effect of, commercial paper. It may with propriety be observed in this connection that one strong argument in favor of the adoption of the uniform law of negotiable instruments is the fact that by it many controverted and unsettled rules pertaining to the use of such instruments in commercial transactions are fixed. and determined. Where an instrument providing for the payment of exchange is payable at the place where it is drawn,' от where the rate of exchange provided for is that of the place of payment," there would not be any objection to the character of the instrument as a negotiable promissory note or bill of exchange, under the law as it exists independent of statute.

70

f. Costs of collection and attorney's fees. Here, as in the case of an instrument containing a provision for the payment of exchange, the statute has declared a fixed and determined rule in contravention of a large number of decisions of courts of the highest respectability. As the statute stands "the sum payable is a sum certain although it is to be paid (5) with costs of collection or as attorney's fee, in case payment shall not be made

* * *

70. Hill v. Todd, 29 Ill. 101; Christian County Bank v. Goode, 44 Mo. App. 129; Orr v. Hopkins, 3 N. M. 45, 1 Pac. 181.

they were made payable at East Saginaw, and it, therefore, became the duty of the promisors to be at any expense necessary in the transmission of the money to that place. Whether they sent by draft or by express, the expense would equally fall upon them. and an express promise to pay it could add nothing to their liability. the subject may been inserted in the notes more perfect understanding

71. Bullock v. Taylor, 39 Mich. 137, 33 Am. Rep. 356. In this case a promissory note made at Mt. Pleasant, Mich., and payable at the "Second National Bank, East Saginaw," contained a promise to pay a sum certain, The provision on "with current exchange or express have charges." Judge Cooley said: We for a quite agree with counsel for the plain- of the agreement, but the surety tiff, that the provision for the pay- could ment of exchange or express charges is merely nugatory. By the agreement as well as by the terms of the notes,

cause

not complain. of it, beit could not in any manner add to his liability, or vary his undertaking.”

at maturity." 72 It is somewhat difficult to logically conclude that a note or bill containing a stipulation for unliquidated attorney's fees or for an uncertain amount of costs of collection provides for the payment of a sum certain. It must be admitted, however, that there are a great many cases upholding the negotiability of such a provision. In many of these cases it will be found that attorney's fees or costs are fixed at a definite sum or a sum ascertainable upon the face of the instrument. The cases which support the negotiability of an instrument containing such a stipulation proceed on the theory that so long as the amount payable is certain up to the time of maturity and dishonor, it is not essential after that, when the instrument has become nonnegotiable for other reasons, that the amount should continue certain. But this leaves out of account the real contract of the indorser or drawer which is to pay the amount called for by the instrument in the event of its dishonor, and that that amount should be made certain. Moreover, a bill or note may retain much of its negotiable character, even after dishonor, and may circulate with many of the main attributes of a proper bill or note payable upon demand.73 But without regard to the absolute correctness of the rule as declared in the statute, in view of the almost hopeless confusion of the law as established by the courts of the several States, the stability of the rule as so declared will do much toward simplifying commercial transactions. Uniformity of legislation upon this subject will produce a beneficial result in the way of promoting certainty in the construction of the

72. Neg. Inst. Law (N. Y.), § 21. See ante, p. 199, and Appendix, post. 73. Leavitt v. Putnam, 3 N. Y. 494. Payment of attorney's fees.-In the case of Roads v. Webb, 91 Me. 406, 40 Atl. 128, the court, in considering this question, said: "A more formidable objection is the provision for the pay ment of attorney's fees.' It is said that, if the note should be paid at maturity, there would be no attorney's fees. This is true. But a note which, by its terms, is negotiable under the rules of the law, does not lose that characteristic until merged in a judgment. The only infirmity attending its negotiation after maturity is that the indorser takes it subject to the same defense that the maker could have made against the original payee. A note cannot be negotiable before maturity, and not negotiable after that,

by reason of the terms of the note itself. After these notes were dishonored and had been placed in an attorney's hands, his fees commenced to run. How much they would be, depended upon the service then rendered and to be rendered. But, until merged in judgment, they were still negotiable, if negotiable at any time after their creation. Hence arose an uncertainty in the amount due. That uncertainty attached to the notes in their inception, although attorney's fees would not accrue until after dishonor. The notes provided for the payment of such uncertain fees in case they should accrue, and thus rendered the amount the makers were liable to pay in one event uncertain. This infirmity destroyed the negotiable quality of the notes." Citing Altman v. Rittershofer, 68 Mich. 287, 36 N. W. 74.

terms of commercial paper, which, as has been said in respect to the provision for the payment of exchange, should be one of the cardinal features of mercantile law. It may be well to consider the several authorities arrayed on both sides of this question; such a consideration will remove all doubt as to the advisability of establishing by statutory enactment a fixed rule as to the effect of including in commercial paper a provision as to the payment of attorney's fees and cost of collection, if the sum mentioned is not paid at maturity. Perhaps the best and most conclusive argument in favor of the negotiability of an instrument containing such a provision is that of Mr. Justice McClellan in the Alabama case of Montgomery v. Crossthwait, an extract of which is included in the footnote.74 We have also inserted in the footnotes a list of

74. 90 Ala. 553, 24 Am. St. Rep. 832, 12 L. R. A. 140. The following is an extract from the opinion in this

case:

146, 147; 2 Am. & Eng. Encyc. of Law, 324.

66

'The cardinal principle that the sum to be paid must be certain in Costs of collection.-"One of the amount, and not dependent upon conprominent questions presented by this tingencies, is fully recognized and acrecord is, whether the stipulation in a commodated in this doctrine. It is promissory note to pay all costs of true the stipulation involves a concollecting, if not paid at maturity, de- tingency, in that there may or may stroys its negotiability. Upon no not be any costs of collection to be other question in the law, perhaps, are the authorities so irreconcilably and, at the same time, so equally divided, both in respect to the number of adjudged cases and the respectability of the courts upon either hand. [Čiting cases for and against this proposition.]

So

paid, depending primarily upon failure to pay the note at maturity, and, secondarily, upon whether the note should be paid, even after dishonor, without resort to attorneys or legal proceedings. It is true, also, that the amount of such costs, if any, is uncertain. But it is fully assured that "The question has never been deter- no costs will be incurred before matumined in this State. It was mooted rity; and no costs will have to be somewhat in the case of Hanover paid at all, unless there is default in Nat. Bank v. Johnson, 90 Ala. 549, the payment of the sum promised at and dismissed with an indication, on maturity; and the paper ceases by the part of the present writer, un- reason of that fact alone to be a cirfavorable to the negotiability of such culating medium, performing in a instruments. Such was the inclination sense the functions of money. of my mind at that time. A more that as long as the paper, considered careful investigation into the adjudged apart from the stipulation, would be cases, and especially a more critical negotiable, it will have that characconsideration of the reasons upon ter, notwithstanding the stipulation. which the divergent conclusions of other courts are made to rest, have produced the contrary conviction, and lead me to adopt the view first advanced by the Indiana and Kentucky courts, and which has since received the sanction of all recognized texts which discuss the point. Tiedeman on Commercial Paper, § 286; 1 Randolph on Commercial Paper, §§ 205, 206; 1 Daniel on Negotiable Instruments, §§ 62, 62a; Parsons on Notes and Bills,

Looked at in this way, stipulated attorney's fees and the costs of collection after maturity stand upon the same footing as to contingency of liability therefor, and uncertainty as to the amount thereof, as do protest fees, attorney's tax fees, court costs, and statutory damages, in the event a resort is had to legal remedies to enforce payment; and it is not conceivable why the former class of charges should destroy negotiability,