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should become due. In the latter case the time of payment is certain, and it can be hastened only by default on the part of the maker, while in the former case the whole question of the date of maturity is at the option of the holder. Hence the court, while approving the law as laid down in the preceding note, held that the note in suit was non-negotiable by reason of uncertainty as to the time of payment. The court said:
"The provisions of the Negotiable Instruments Law, which it is claimed are applicable to the note, are as follows:
"An instrument to be negotiable must conform to the following requirements: (1) It must be in writing and signed by the maker or drawer; (2) must contain an unconditional promise or order to pay a sum certain in money; (3) must be payable on demand or at a fixed or determinable future time; (4) must be payable to order or to bearer; and (5) where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
"The sum payable is a sum certain within the meaning of this act, although it is to be paid: (1) With interest; or (2) by stated instalments; or (3) by stated instalments, with a provision that upon default in payment of any instalment or of interest the whole shall become due; or (4) with exchange, whether at a fixed rate or at the current rate; or (5) with costs of collection or an attorney's fee, in case payment shall not be made at maturity.
"An instrument is payable at a determinable future time, within the meaning of this act, which is expressed to be payable: (1) At a fixed period after date or sight; or (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.
"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 (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.' Sections 5254, 5255, 5257, and 5258, Gen. Stat. 1909.
"The defendant contends that under these provisions of the statute the note is non-negotiable for three reasons: (1) It is not for a sum certain; (2) it is not due at a fixed or determinable future time; (3) it contains promises to do acts in addition to the payment of money.
"If for any of the reasons suggested the note is non-negotiable, the case should have gone to the jury on the evidence offered in support of the plea of a failure of consideration, and, on the other hand, if it be held negotiable it was error to direct a verdict in view of the de
fendant's evidence which tended to show that the bank was not a holder in due course. Although the failure to submit the issues of fact to the jury require a reversal, it is necessary to determine the question of the negotiability of the note.
"In our opinion the most serious objection to the form of the note, the particular provision which most clearly destroys the negotiable character of the instrument, is the agreement as to matters other than the payment of money. This is the stipulation by which the maker agrees to deliver, when demanded, additional collateral security to the satisfaction of the holder, in default of which the note shall mature at once. It would hardly be different if the note recited that it was secured by a chattel mortgage upon certain live stock, and contained an agreement that in case their value should depreciate, and the holder should deem the security insufficient, the maker would, on demand, execute and deliver to the holder a mortgage upon certain real estate for such amount as would satisfy the holder, and that otherwise the note should mature at once. Such an instrument would not be an unconditional promise to pay money, but would be a promise to do something in addition thereto, and would fall, as we think this instrument falls, within the principle settled by the case of Killam v. Schoeps, 26 Kan. 310, 40 Am. Rep. 313. There a note, otherwise negotiable in form, provided that the property in payment of which the note was given should remain the property of the payee, and in default of payment should be returned to the payee. The sole question involved was whether the instrument was a negotiable, promissory note. It was said in the opinion:
"The contract stated in this instrument is not simply a promise to pay money, but a stipulation concerning the title to property, and a promise in reference to the future disposition of such property. It is essential to the negotiability of paper that there is in it but the simple promise to pay money. You may not incorporate with such a promise stipulations and agreements as to other matters, and then say that the absolute promise to pay money lifts the contract into the region of negotiable paper. This is the general rule, and whatever exceptions there may be, this is not one.' Citing 1 Daniel on Negotiable Instruments, § 59. Now this instrument touches other matters and contains other stipulations and provisions than those respecting the payment of money. It is a contract in respect to the title to property. It is also a contract for the possession of property, and because of these additional stipulations it is something more than a simple promise to pay money. There might as well be included in one agreement a contract for the lease of real estate, or the hiring of chattels, or the performance of labor with an absolute promise to pay a sum certain at a certain time, and then affirm that by reason of this absolute promise the entire contract is a negotiable instrument. This is not the law. Doubtless many of the rules respecting negotiable paper are purely arbitrary, but nevertheless they are well settled, and ought to be rigorously enforced. Among these rules is that of the unity of the contract, the singleness of the promise to pay, and we think no departure should be made from the spirit or letter of those rules.' The doctrine of this case has been often approved. Lyon v. Martin, 31 Kan. 411, 413, 2 Pac. 790; Iron Works v.
Paddock, 37 Kan. 510, 15 Pac. 574; Gilmore v. Hirst, 56 Kan. 626, 629, 44 Pac. 603; De Hass v. Roberts, (C. C.) 59 Fed. 853, 855; Lincoln Nat. Bank v. Perry, 66 Fed. 887, 894, 14 C. C. A. 273.
"The Negotiable Instruments Law, which is merely declaratory of the mercantile law on the subject, contains a provision which, as we construe it, makes the note in the instant case non-negotiable. Section 5258 of the General Statutes of 1909 reads: 'An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable.' The section then enumerates certain things which are not to be regarded as falling within the inhibition. None of these exceptions cover such a promise as the one under consideration.
"The note is non-negotiable for the further reason that the same provision renders doubtful and uncertain the time at which it shall become due. If the maker shall fail when demanded to furnish additional security to the satisfaction of the holder, the note shall mature at once. It is argued that this is no different in principle from the provision that default in the payment of any instalment shall accelerate the maturity of the note, and cases in which we have held that a similar provision will not render the note non-negotiable. See Clark v. Skeen, 61 Kan. 526, 60 Pac. 327, 49 L. R. A. 190, 78 Am. St. Rep. 337. The Negotiable Instruments Law itself expressly declares that a negotiable instrument may contain provisions of this kind. Gen. Stat. 1909, §§ 5255, 5257. The distinction between such a stipulation and the one in question lies in the fact that in the one instance the maturity is accelerated by the default of the maker alone, and the default is to consist in his failure to pay money. Here the maturity of the note is to be accelerated by the failure of the maker to do something in addition to the payment of money, and both contingencies are made to depend upon something over which he has not the absolute control. It is within the power of the holder, by refusing assent to what the maker has done, arbitrarily to make the note due at any time between the date of its execution and six months thereafter. If the holder not satisfied with the additional security, the note matures at once, and thus the time at which it may mature would depend upon the time at which the holder declared himself dissatisfied with the security delivered by the maker. The effect of this stipulation is to leave the time when payable uncertain and indefinite."
See Decision No. 1420.
Bills and Notes: Alteration of Instruments: Principal and Surety.
In Hess v. Schaffner, Decision No. 1421, Hy. Hess, W. F. Viereck, John Damek, Theo. Koy and John Roesler signed a note apparently as joint makers, but actually with Hess as the maker and the rest as sureties. Before delivery of the note the name of Damek was stricken from the note. It was held that the striking of the name of Damek off before delivery did not invalidate the instrument, but served only
to release Damek from liability so that the note became the note of the other four signers only.
It was further claimed that among the four original sureties, Viereck, Damek, Koy and Roesler, it was agreed that unless all were bound none would be, and that therefore the striking out of Damek's name released them all. The court held that the agreement between the sureties could not affect the rights of a third party who took the note for value and without notice of the agreement. Said the court:
"No agreement of the sureties among themselves, to the effect that if all of them were not bound none of them should be, would be binding upon or affect the rights of the payee of the note, unless he had knowledge or notice prior to or at the time he took the note and parted with the consideration of such agreement, and that it had been violated. 32 Cyc. 44, 45; Joyce v. Cockrell, 92 Fed. 838, 35 C. C. A. 38; Tabor v. Merchants' Nat. Bank, 48 Ark. 454, 3 S. W. 805, 3 Am. St. Rep. 241; Seaton v. McReynolds, 72 S. W. 874; Bopp v. Hansford, 18 Tex. Civ. App. 340, 45 S. W. 748; Bannister v. Wallace, 14 Tex. Civ. App. 452, 37 S. W. 250.
'Appellee, when the note was presented by Hess with the names of all the appellants signed to it, but with the name Damek, which had been signed, erased, in the absence of knowledge or notice to the contrary, had the right to assume that such erasure had been made with the consent of the others. The mere fact of such erasure did not put appellee upon notice that such erasure had been made without consent of the other sureties, and released them from liability. Having signed the note and intrusted it to Hess, upon them, and not upon appellee, must fall the consequences of any violation of duty by Hess to appellants."
It is to be remembered that the law construes most strictly in favor of the surety all contracts of suretyship, and that anything done without the consent of a surety, which changes the nature of his risk, immediately releases him. Since the one taking the note in suit must have been presumed to know this rule of law, it seems to us that the striking out of Damek's name should have put him on inquiry at least as to whether or not the striking out was done with or without the consent of the other sureties. We are, of course, going on the assumption that the taker knew that in reality four of the five signers of the note were sureties. Whether he did or did not is not stated in the report of the case, but it would be a fair inference from the facts stated that he did.
See Decision No. 1421.
Bills and Notes: Payment of Individual Debt by Corporate Check; Bona Fide Holders: Notice.
Several times we have had occasion to notice cases holding that where an individual pays an individual debt with a corporate check signed by himself as an officer of the corporation, the creditor is charged with notice, and if such payment is in point of fact unauthorized the corporation may recover the amount thereof. This rule is reaffirmed in Coleman v. Stocke, Decision No. 1422, where it is said:
"Where one receives the check of a corporation on its private funds in payment of the individual debt of the officer of the corporation who drew the check, or in payment of a debt for which such officer is. obligated, he is prima facie chargeable with notice that such officer is not authorized to use the corporate funds for that purpose, and is bound to inquire as to the real situation. In other words, where such a creditor of the officer of a corporation so receives the check of the corporation for such individual debt and draws the money thereon, he does so at his peril, and is liable to account therefor in an action by the corporation itself, and, of course, in the event of its bankruptcy, at the suit of the trustee in bankruptcy, who succeeds to the rights of the corporation in the premises for the benefit of its creditors. The law will not permit corporate funds to be thus misapplied by its officers for the individual benefit of its officers, and conclude the matter as an innocent transaction, when it appears the very medium by which the payment was made conveys notice on its face to the creditor of the individual officer that the funds employed are those of the corporation."
This rule was applied to the following state of facts: One Alex. R. Meier was surety for a debt due by his brother, Fred C. Meier, to the defendant, Stocke. Stocke was pressing for his money. Finally Alex. R. Meier drew a check on the National Bank of Commerce for $16,000 to the order of cash and signed it "Meier China & Glass Co. by Alex. R. Meier, Secy. & Treas." He gave this check to Stocke, told him to deduct therefrom the amount of his claim, $3,500, and return the balance in cash. This was done. It was held that the trustee in bankruptcy of the corporation could recover the whole amount of the check from Stocke.
See Decision No. 1422.
Bills and Notes: Checks.
An example of the law's adaptability to new conditions arising in the business world is to be found in the case of In re A. O. Brown & Co., Decision No. 1423. In that case the question arose as to whether one who gives a check but has no funds to meet the same is guilty