137 Ky. 362 | Ky. Ct. App. | 1910
— Affirming.
In the state of New York on July 3, 1905, the Buffalo Carriage Top Company executed to Newton J. Baxter the following note: “January 15, 1906, after date we promise to pay to Newton J. Baxter two hundred and fifty dollars at 58 Carroll St., Buffalo, N. Y.” On the back of the note Newton J. Baxter wrote his name, and before its maturity it was discounted by appellant, Wettlaufer, and delivered to him by Baxter. When the note fell due, it was presented to the Buffalo ■ Carriage Top Company for payment, and payment refused. Thereupon the note was protested by a notary, and notice of its dishonor mailed to Baxter at his residence in Owensboro, Ky. Baxter declining to pay the note, suit was brought on it against him in the Daviess circuit court. A general, demurrer was sustained to the petition, and, declining to plead further, the petition was dismissed.
The petition as amended, after setting out substantially the facts before stated, averred that the note was executed and delivered by the payer to Baxter in the state of- New York, and was indorsed and delivered by Baxter to Wettlaufer in that state; that before the execution of the note the Legislature of the state of New York had enacted what is known as the “negotiable instrument law,” which was in force when it was executed and transferred; and that its provisions applied to the note. It is conceded that the negotiable instrument law of the state of New York is identical with the negotiable instrument law enacted by the Legislature of Kentucky in March, 1904, and which is now chapter 90B, sec. 3720B, Ky. St.
The contention of counsel for Baxter is that the note was not a negotiable instrument, and that Baxter by signing his name on the back of the -note became merely an assignor and not liable, unless suit was brought on it at the first term of the court against the maker, the Buffalo Carriage Top Company, and it prosecuted to insolvency. In other words, the effort is to apply to this case the rule of law announced by this court in Francis v. Gant, 80 Ky. 190, and many other cases, holding that, before an assignee (as it is said Wettlaufer is) can recover of an assignor (as it is contended Baxter is), he must institute his action against the payer of the note at the first term of the court after the note falls due, obtain judgment, have execution issue, and a return of no property found, without unreasonable delay. If the law as declared in this line of cases applies to this note, it is manifest that the ruling of the lower court was correct, as there is no averment that the Buffalo Carriage Top Company was prosecuted to insolvency, or that any action was brought against it before proceeding against Baxter. On the other hand, the contention for Wettlaufer is that the liability of Baxter upon this note is to be determined by the negotiable instrument act, which repealed all
In considering the questions involved, we will for convenience refer to the negotiable instrument act adopted in this state. The sections of the act pertinent are:
“§ 3720B. Section 1. An instrument to be negotiated 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 the order of a specified person or to bearer; and (5) where the instrument is addressed to a drawee, he must be named or otherwise indicated therein within reasonable certainty. ’ ’
“Sec. 8. The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order. It may be drawn payable to the order of: (1) A payee who is not maker, drawer, or drawee; or (2) the drawer or maker; or (3) the drawee; or (4) two or more payees jointly; or (5) one or some of several payees; or (6) the holder of an office for the time being. Where the instrument is payable to order, the payee must be
“Sec. 9. The instrument is payable to bearer: (1) When it is expressed to be so payable; or (2) when it is payable to a person named thereon or bearer; or (3) when it is payable to the order of a fictitious or nonexisting person, and such fact was known to the person making is so payable; or (4) when the name of the payee does not purport to be the name of any person; or -(5) when the only or last indorsement is an indorsement in blank.”
“Sec. 30. An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof; if payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder, completed by delivery.”
“Sec. 34. A special indorsement ' specifies the person to whom or to whose order the instrument is to be payable; and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so- indorsed is payable to bearer, and may be negotiated by delivery.”
“Sec. 184. A negotiable promissory note within the meaning of this act is an unconditional promise in writing made by one person to another, signed by the maker engaging to pay on demand or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker’s own order, it is not complete until indorsed by him.”
The negotiable instrument act is not a new law. It is with few exceptions merely the codification of old laws that were in force and effect by virtue of
It will thus be seen that it was uniformly held that, in order to make a note or a bill negotiable, the words “to order” or “to bearer,” or equivalent words, must be used in the body of the note. It will be kept in mind, however, that the absence of these words do not affect the validity of a note or render it nontransferable or nonassignable. Their only effect is to make the instrument negotiable, and thereby cut off defenses that the maker, or either of the parties to the paper might have and make against a
In -our opinion section 9 wa's merely intended to describe or 'designate the conditions under which a note negotiable on its face might become payable to bearer, and was not intended to apply to a note not on its face or by its terms negotiable. To illustrate, if this note was payable to “Newton J. Baxter or order,” then the paper upon its face would be a negotiable instrument, although payable only to Baxter or order, and the only effect of the indorsement on the note by Baxter in blank would be to convert the note from a note payable to order into an instrument payable to bearer. But this indorsement would not in any manner change the negotiability of the note, nor change the attitude of any of the prior parties on the note, or increase their liability or cut off any defenses that they might have made, as it was at all times a negotiable instrument. Then, too, “when the only or last indorsement is an indorsement in blank, ’ ’ the payee without notice of any defect in the title of the holder may pay the same to him, as it will be presumed it came into his hands in due course; no indorsement being necessary. Although the note under our construction of the negotiable instrument act was not a negotiable instrument, yet Baxter had the right to indorse it and transfer it by delivery, and pass whatever title he had to the transferee or assignee. But the assignee would then .take the note, not subject to the provisions of the negotiable instrument -act, but under the law applicable to non-negotiable paper.
But the case was evidently prepared by counsel for appellant upon the theory that the note was a negotiable instrument, as the petition as amended does not set out the law of New York under which Baxter would be liable as.indorser, although the note was not negotiable. If it had been intended to hold Baxter upon the note under the law of New York, independent of the negotiable instrument act, then the law of that state should have been pleaded, so that we might determine from its provisions the liability, if any, undertaken by Baxter when he indorsed the paper. It is well settled that when, in an action brought in this state, it is attempted to hold a person liable upon a contract made in another state, under a statute of that state, the particular statute under
The judgment is affirmed.