Smith v. Crane

33 Minn. 144 | Minn. | 1885

Berry, J.

“$100. Good Thunder, July 24, 1882.

“For value received on or before the first day of January, 1884, I, or we, or either of us, promise to pay to the order of D. M. Osborne & Co. the sum of one hundred dollars, at the office of Gebhard & Moore, in Mankato, with interest at ten per cent, per annum from date until paid; seven, if paid when due.

“W. J. B. Crane.”

A negotiable promissory note must be certain as to amount. Jones v. Radatz, 27 Minn. 240. It is so certain when the sum to become absolutely payable upon it at any given time is ascertainable upon its face. 1 Daniel, Neg. Inst. § 53; Towne v. Rice, 122 Mass. 67; Jones v. Radatz, supra.

The defendant’s position is that the foregoing instrument is rendered uncertain as to amount by the interest clause, and therefore is not a negotiable promissory note. As to the legal effect of such a clause the authorities disagree. Some, hold that the contract reserves the higher rate of interest, with a provision for its abatement, upon a condition to be performed, and that, therefore, the difference between the two rates is not a penalty, but the contract is to be enforced according to its literal terms. The cases holding this view rest upon Nicholls v. Maynard, 3 Atk. 519. See Walmesley v. Booth, Barn. Ch. 478, 481; Bonafous v. Rybot, 3 Burr. 1370; Waller v. Long, 6 Munf. (Va.) 71. Other authorities hold that the clause is the same in effect as if it had reserved the lower rate of interest, with a provision that if the indebtedness is not paid at maturity, interest shall, run at a higher rate. Seton v. Slade, 7 Ves. 265; and see Stanhope v. Manners, 2 Eden, 197; Brockway v. Clark, 6 Ohio, 45; Longworth v. Askren, 15 Ohio St. 370; Brown v. Barkham, 1 P. Wms. 652. If this be the true construction of the clause, it is generally agreed that the difference between the two rates is to be treated as a penalty. Talcott v. Marston, 3 Minn. 238, (339;) Newell v. Houlton, 22 Minn. 19; and cases last cited.

In our opinion the view taken by the authorities last mentioned, as to the legal effect of the interest clause under consideration, is the more sensible, and most in accordance with what would seem to be the real object of the parties to the contract. What the payee really wants is his money at the due date of the contract, and to secure this he holds an increase of the rate of interest over the debtor’s head. In other words, the increase is a penalty for the debtor’s delinquency. Treating the increase as a penalty, it follows, under the decisions of Ae court before cited, that the note in suit will in law draw the same ¡rate of interest before as after maturity, — that is to say, 7 per cent., —and that, therefore, (whatever might be the case if the interest clause were upheld according to its literal terms,) the sum absolutely payable upon the instrument at any given time is thus made certain as the principal, and 7 per cent, interest.

This conclusion will very likely dispose of the case; but, with reference to a possible new trial, it is proper to refer to McCormick Harv. Mach. Co. v. Chesrown, ante, p. 32, as to the point upon appellant’s brief .in reference to the necessity of returning the machine, to which this suit has some relation, and to add that Exhibits D and E were, as respects plaintiff, the mere declarations or statements of third persons, which could not bind plaintiff unless brought home to him. Adler v. Apt, 30 Minn. 45.

Order reversed, and new trial directed.