after stating the.case in the opinion of the court as above reported, continued:
Are the writings in suit to be regarded as promissory notes to be protected, in the hands of bona fide holders for value, according to the rules of general mercantile law as applicable to negotiable instruments, or are they anything more than simple contracts subject, in the hands of transferees, to such equities and defences as would be available between the original parties ? This is the question upon which, it is conceded, depends the correctness of the several rulings to which the assignments of error refer.
By the statute of Illinois revising the law in relation to promissory notes, bonds, due bills and other instruments in writing,- approved March 18, 1874, and in force July 1, 1874, (Rev. Stats. Illinois 1874, p. 718; 2 Starr <& Curtis’ Anno. Stat. 1651, c. 98; Rev. Stats. 1845, p. 384,) it is provided:
“ Sec. 3. All promissory notes, bonds, due bills and other instruments in writing, made or to be made, by any person, body politic.or corporate,;whereby such person promises or agrees to pay any sum of money or articles of personal property, or any sum of money in personal property, or acknowledges any sum of money or article of personal property to be due to any other person, shall be taken to be due and payable, and the sum of money or article of personal property therein mentioned shall, by virtue' thereof, be due and payable as therein expressed.
“ Sec. 4.- Any such note, bond, bill or other instrument in writing, made payable to any person named as payee therein, shall be assignable,- by endorsement thereon, under the hand of such person, and of his assignees, in the same manner as ■bills of exchange are, so as absolutely to transfer and vest the property thereof in each and every assignee succéssively.” • ’
Other sections of the statute throw some light on the ques *276 tion before us. The fifth section provides that any assignee to whom such sum of money or personal property is by endorsement made payable, or, he béing dead, his executor or administrator, may, in his own name, institute and maintain the .same kind of action for the recovery thereof against the person making and executing the note, bond, bill or other instrument in writing, or against his heirs, executors or administrators, as might have been maintained against him by the obligee or payee, in case it had not been assigned. By the. sixth section no maker of, or other person liable on, such note, bond, bill or other instrument in writing, is allowed to allege payment to the payee, made after notice of assignment, as a defence against the assignee. The eighth section provides: “ Any note, bond, bill, or other instrument in writing, made payable to bearer, may be transferred by delivery thereof, and an action .may be maintained thereon in the name of the holder thereof. Every endorser of any instrument mentioned in this section shall be held as a guarantor of payment unless otherwise expressed in the endorsement.” The' ninth section allows the defendant, when sued upon a note, bond or other instrument in writing, for the payment' of money or property, or the performance of covenants or conditions, to prove the want or failure of consideration, “provided that nothing in this section contained shall be construed to affect or impair the right of any bona fide assignee of any instrument made assignable by this act, when such assignment was made before such instrument became due.” The eleventh section provides that “ if any such note, bond, bill or other instrument in writing, shall be endorsed after the same becomes due, ■ and any endorsee shall institute an action thereon against the maker of the same, the defendant, being maker, shall be allowed to set up the same defence that he'might have done had the action, been instituted in the name and for the use of the person to whom such instrument was originally made payable, or any intermediate holder.” Under the twelfth section, if the instrument has been assigned or transferred by delivery to the plaintiff after it became due, “ a set-off to the amount of the plaintiff’s debt may be made of a demand existing against any *277 person or persons who shall have assigned or transferred such instrument after it became due, if the demand be such as might have been set off against the assignor, while the note or bill belonged to him.” If the instrument is assigned before the day the money or property therein mentioned becomes due and payable, then, by the thirteenth section, the defendant, in an action brought by the assignee, is allowed to give in evidence at the trial any money or property actually paid on the note, bond, or bill or other instrument in writing, before it was assigned to the plaintiff, on proving that the plaintiff had “sufficient notice of the said payment before he accepted or received such assignment.”
It is contended by the defendant that these statutory provisions, so far as they embrace instruments not negotiable at common law, relate only to the manner of their endorsement or transfer, and that the endorsee takes them, as before the statute, subject to all the defences that might be interposed in an action between the original parties. This view is inconsistent with the decisions of the Supreme Court of Illinois. Some of these decisions will be referred to as indicating the scope and effect of the local statute, as well as the views of that court upon the general principles of commercial law involved in this case.
In Stewart v. Smith, 28 Illinois, 397, 406, 408, the principal question was as to the negotiability under the above statute of the following instrument: “Chicago, 21st of January, 1859. Eeceived from teams in our pork-house, No, 114 West Harrison Street, 280 hogs, weighing 45,545 pounds,' the product of which we promise to deliver to the order of Messrs.. Stevens & Brother endorsed hereon. G-. & J. Stewart.” The court said: “ Testing the writing by this statute, there cannot be a doubt upon its assignability. It is an instrument in writing; it purports to be made by persons; by it, those persons promise and .agree to deliver a certain article of personal property, to .the order of certain other persons. By force of the statute, this article of personal property mentioned in the instrument of writing so piade, by virtue of its being- so mentioned and in such form of words, must be *278 taken to' be due and payable to the person to whom the instrument in writing, is made. The statute does not require, that the note or instrument in writing shall be payable at any particular time or place, or be expressed to be for value received, or that any consideration whatever should appear in the writing — an acknowledgment of indebtedness, in the simplest form, would seem to be all the statute requires to give it the character of negotiability. A writing in this form, •probably the simplest, would be a perfect negotiable note under this statute: Due John Brown, ten dollars, July 4, 1862, and signed by the maker. Such an instrument is clothed with all the attributes of negotiability, and imports a consideration, and no averments or proofs are' necessary on those points. . . . The other point made by plaintiffs, that the instrument was overdue on the 26th of January, 1859, when it was endorsed, to such an extent. as to put a prudent man upon inquiry in respect to all equities which the makers might have against it in the hands of the promisee, we do not consider a strong one. ; . . The endorsement being in season cut off all equities, if there were any, in defendant’s favor, and the only hazard incurred in holding it back for payment, was that the release of the endorsers might have been caused by it, but not the release of the maker.”
In Cisne v. Chidester, 85 Illinois, 524, the action was upon the following note: “ $120. May 2, 1871. On the first day of September, 1871 (or before, if made out of the 'sale of J. B. Drake’s horse hay fork and hay carrier), I promise to pay James B. Drake, or to order, one hundred and twenty dollars, for value received, with use.” On this note was an endorsement by Drake to Chamberlain, and by the latter to Chidester. The trial court instructed the jury that, in the hands of, an assignee before maturity, the question of consideration did not arise until, it was shown by evidence that the assignee purchased the note with. actual knowledge of the want of consideration ; and, also,, that the note was, in its effect, payable absolutely on the 1st day of September, 1871, with interest at six per cent from date. The Supreme Court of Illinois said: • “.The pleas were, the general issue, and fraud and circumven *279 tion in obtaining the making of the note. There was no evidence whatever as to the time of the endorsement of the note, or of any -want of good faith in or notice to the endorsee in respect to the consideration of the note, or the circumstances under ■ which it was given, more than appears upon the face of the note itself. The plaintiff was presumed to be a bona fide endorsee of the note for a valuable consideration. As against the plaintiff, there was, under the evidence, no question of consideration before the jury, and the giving of the first instruction could .form no just cause of complaint. The construction of the note was a question of law and for the court. The proper construction was put upon the note.”
In White v. Smith, 77 Illinois, 351, 352, the principle was said to be undoubted, that to constitute a valid promissory note it must be for the payment of money, which will certainly become due and payable one' time or another, though it may be uncertain when that time will come. In Canadian Bank v. McCrea, 106 Illinois, 281, 289, 292, the court, construing the local statute, said that it did not embrace “ covenants or agreements for the performance of individual services in. and about property' — mutual, dependent and conditional covenants and agreements, or covenants and agreements to pay money or deliver property upon uncertain contingencies or events” —but applied “only'to absolute and unconditional promises to pay money or deliver property.” It was further said to be clear, under previous cases, that “ the promise or undertaking must be restricted to the payment of money or delivery of property at a time that will certainly happen.” “ It may be,” the court added, “ unknown, in advance, when it will be, but it must be absolutely certain that it will be at some time; and although it may be within the power of the party to whom the promise is made to render it certain, by his subsequent act, that the time will happen, this will not be sufficient • — • it cannot depend upon his will or pleasure.” See also Harlow v. Boswell, 15 Illinois, 56; McCarty v. Howell, 24 Illinois, 311; Bilderback v. Burlingame, 27 Illinois, 338; Houghton v. Francis, 29 Illinois, 211; Baird v. Underwood, 74 Illinois, 176.
*280 It is clear from these cases that the statute of Illinois has a much wider scope than the counsel for the ■ defendant supposes. It evidently intended to place negotiable promissory notes in the hands of bona fide holders for value on the same footing substantially, that they occupy under- the general rules of the mercantile law. It does not, in our judgment, do anything more. So that we are to inquire whether the notes in suit are not negotiable securities according to the custom and usages of merchants.
The defendant insists, that, in view of the agreement for the retention by the payee of the title to the cars until all the notes of the same series, principal and interest, are fully, paid, ■the transaction was only a conditional, sale of the cars. It is contended that the promise to pay the notes given -for the price, so far from being absolute as required by the mercantile law, is subject to the condition, running with the notes, that the title to the cars should not pass until all the notes were paid, -which could not occur if, before payment, the cars had been destroyed or sold to other parties. The fact that, by agreement, the title is to remain in the vendor of personal property until the notes for the price are paid, does not necessarily import that the transaction was a conditional sale. Each case must depend upon its special circumstances. In
Heryford
v. Davis,
It is a mistake to suppose that there is any conflict between these views and those expressed in the subsequent case of
Harkness
v.
Russell,
The agreement that the title should remain in. the payee until the notes were paid — it being expressly stated that they were given for the price of the cars sold by the payee to the maker, and were secured equally and ratably on the property — is a short form of chattel mortgage. The transaction is, .in legal effect, what it would have been if the maker, who purchased the cars, had given a mortgage back to the payee, securing the notes on the property until they were all fully paid. The agreement, by which the vendor retains the title and by which the notes are secured on the cars, is collateral to the notes, and does not affect their negotiability. It does not qualify the promise to pay at the time fixed, any more than would be done by an agreement, of the same kind, embodied in a separate instrument, in the form of a mortgage. So far as the notes upon their face show, the payee did not retain possession of the cars, but possession was delivered to the maker. The marks on the cars showed that they were to go into the possession of the maker, or of its transferee, to be used. The suggestion that the maker could not have been compelled to pay if the cars had been destroyed before the maturity of the notes, is- *284 without any foundation upon which to rest. The agreement cannot properly be so construed. The ears having been sold and delivered to the maker, the payee had no interest remaining.in them except by way of security for the payment of the notes given for the price. The reservation of the title as security for such payment was not the reservation of anything in favor of the maker, but was for the benefit of the payee and all subsequent holders of the paper. The promise of the maker was unconditional.
"Without deciding whether the notes here in suit would or would not have been negotiable securities if the transaction between the parties had been a conditional sale, we are of ■opinion that they are of the class of instruments that are negotiable according to the mercantile law, and which, in the hands of a
hona fide
holder for value, are protected against defences of which the maker might avail himself if sued by the payee. They are promises in writing to pay a fixed sum of money to
&
named person or order, at all events, and at a time which must certainly arrive.
Ackley School District
v.
Hall,
Upon like grounds it has been held that the negotiability of the note is not affected by its being made payable on or before a named date, or in instalments of a ..particular amount. Tn
Ackley School District
v.
Hall,
Our conclusion is that the court below did not err in holding the notes in. suit to be negotiable according to the custom and usage of. merchants. They bear upon- their face evidence that they were so intended by the maker and the payee. It was well said by Judge Bunn, at the trial, that the inference that any one contemplating the purchase of the notes would naturally and properly draw, would be, 25 Fed. Eep. 809, 811, “ that the freight cars had already been sold by the payee to the maker, and that the jjayee was to retain a lien and security upon them, in the way of mortgage, for the payment of the purchase price, which would enure equally and ratably to all the holders of the notes, according to their several amounts, without regard to the time when such notes should fall due. If this bé so, the contract was an executed one, the consideration for the notes had already passed, and the payment of the notes would not be made to depend upon any condition whatsoever.”
Judgment affirmed.