38 F. 283 | U.S. Circuit Court for the Southern District of Iowa | 1889
This suit was brought for the purpose of foreclosing a mortgage executed by S. A. McMahon, given to'secure the payment of a promissory note for §14,000. The note bears date at Council Bluffs, Iowa, and provides that “both principal and interest payable at the office of J. W. and E. L. Squire, Council Bluffs, Iowa, with exchange on New York.” The jurisdiction of the court is now questioned by a suggestion on behalf of the defendant that the note is payable to the order of William B. Somers, and it is admitted by the parties that at the date of the bringing the suit the mortgagor and payee of the note were citizens of the state of Iowa. Under the provisions of the act of 1875, in force when the suit was commenced, this court has not jurisdiction of a suit founded on a contract in favor of an assignee, unless the assignor could have prosecuted the same in this court in case no assignment had been made, “except in cases of promissory notes negotiable by the law-merchant, and
As already stated, the question is whether a note which provides that the several installments of interest as they come due, and also the principal sum, shall be paid at Council Bluffs, Iowa, with exchange on New York, is or is not negotiable according to the rules of the law-merchant. Upon this question, the authorities are not in accord. The general rule has long been established that certainty in the sum to be paid is one of the elements essential to render notes negotiable. Many cases hold that the spirit of the rule is observed if the principal sum to be paid is made certain, even though there may be some slight addition by way of interest or exchange to be made thereto. While the argument in support of the conclusion is certainly plausible, yet the difficulty with it is that it opens the way to introducing too many uncertainties; that it may ultimately obviate the rule'itself; and that is not advisable. If we adhere to the principle that, to render a note negotiable, the amount to be paid at maturity must be ascertainable from the face of the note, without resort to evidence dehors the instrument, we have a fixed and certain rule for guidance; but, if we depart from this principle, doubt and uncertainty will arise as to the true character of notes and other like instruments for the payment of sums depending on contingencies. If there was a fixed rate of exchange established by law, or if the note provided the rate to be paid, so that from the face of the note it could be computed what the exchange would be, then the note itself would contain all the facts necessary to be known in order to ascertain the sum necessary to be paid at maturity in discharge of the obligation of the maker, and in that case there would not be any uncertainty in the amount of the note. When,
The contract evidenced by the note hinds the maker thereof to pay the installments of interest and the principal, with exchange on Now York, and the latter provision is just as much a part of the contract as are the provisions touching the principal sum and the interest. Resolving the contract into its several parts, we find it to be a contract for the payment of the principal sum of $14,000 in five years from date, for the payment of $490 every six months as interest, and for the payment on each installment of interest, and also on the principal sum when paid, of the current rate of exchange between Council Bluffs, Iowa, and New York. The party is bound to pay this current rate of exchange, as a part of the contract. The amount thereof is left wholly dependent on what the rates may be when the several payments come due, and there is no legal or business rule by which the amounts can be ascertained until the day of payment arrive. It is difficult to conceive of any other provisions that could have been incorporated into this note that would have rendered the amounts to be paid more uncertain than this one touching the payment of exchange. True, the fluctuations in the rate of exchange may not have been very great, yet this could not have been foreseen with certainty when the note was executed. When the note was signed it was impossible to know whether the rate of exchange to-be paid upon the principal sum when it matured five years thereafter would be one-tenth of one per cent, or one per cent. Therefore it is clear that, unless we abandon the rule of requiring certainty in the amount to be paid at maturity as an essential element in negotiable paper, this note cannot be held negotiable under the principles of the law-merchant.
Counsel cite a number of cases wherein it has been held that provisions waiving the benefit of appraisement or exemption laws, or for the payment of attorney’s fee and the like, do not destroy the negotiability of the note containing them. These jiro visions do not affect or render
Counsel have not cited, nor have I been able to find, any decision of the United States supreme court upon the exact question. It may be, as counsel urge, that the supreme court, having regard to what it is claimed is the common understanding in the business community, may hold that notes containing the provision found in the one now in question are negotiable. When, however, the jurisdiction of the court is involved, as in the present instance, it is the safer rule not to entertain jurisdiction when reasonable doubt exists, as it is better for the parties to have resort to a court whose jurisdiction cannot be assailed,, especially in cases wherein the title to realty may become involved. But it cannot be said that in this circuit we are without controlling authority on the point, as in the case of Hughitt v. Johnson, 28 Fed. Rep. 865, the circuit judge held, in a case pending in the Eastern district of Missouri, that a clause binding, the maker to pa,y exchange rendered the amount payable upon a note uncertain, and defeated its negotiability. If, then, the note sued on is not negotiable, this court had not jurisdiction when the suit was brought, and the order must be that it be'dismissed without prejudice.