Anstine, W. Burg

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Penn State Dickinson Law: IDEAS

Volume 37 Issue 4 Dickinson Law Review - Volume 37, 1932-1933 6-1-1933 Requirement of Certainty in Negotiable Instructions: Effect of Interpretation of N.I.L. by State Courts on Federal Courts W. Burg Anstine Follow this and additional works at: https://ideas.dickinsonlaw.psu.edu/dlra Recommended Citation W. B. Anstine, Requirement of Certainty in Negotiable Instructions: Effect of Interpretation of N.I.L. by State Courts on Federal Courts, 37 DICK. L. REV. 261 (1933). Available at: https://ideas.dickinsonlaw.psu.edu/dlra/vol37/iss4/4 This Article is brought to you for free and open access by the Law Reviews at Dickinson Law IDEAS. It has been accepted for inclusion in Dickinson Law Review by an authorized editor of Dickinson Law IDEAS. For more information, please contact lja10@psu.edu. NOTESREQUIREMENT OF CERTAINTY IN NEGOTIABLEINSTRUMENTS; EFFECT OF INTERPRETATIONOF N. I, L. BY STATE COURTS ONFEDERAL COURTSFirst National Bank of Miami v. Bosler, 297 Pa. 353,147 Atl. 74, decided that a note is not negotiable under theprovisions of sections I and 2 of the Negotiable Instru-ments Law where it contains the words, "with interest atthe rate of 8% per annum until fully paid", and also theprovision, "Deferred payments are to bear interest frommaturity at 10% semi-annually". The note was drawn andmade payable in Florida. Suit was begun in Pennsylvania,and there having been no proof of the law of Florida, thequestion of negotiability was determined in the light of theNegotiable Instruments Law as adopted in Pennsylvania.,As a matter of fact the same act has been in force in Floridasince 1897. The court found the above provisions irre-concilable as to the rate of interest payable after maturity,thus rendering the amount payable uncertain.Long before the adoption of the Negotiable Instru-ments Law it was a well established rule that a negotiableinstrument had to contain "an unconditional promise ororder to pay a sum certain in money' ' 2 As to what con-stituted a "sum certain" was a matter of frequent dispute."By section 2 of the N. I. L., it was sought to clarify themeaning of "sum certain" by making definite provision asregards the usual cases in which dispute arose and about'Act of May 16, 1901, P. L. 194.2Smith v. Nightingale, 2 Stark, N. P. 375, (Eng. 1818); Ayrey v.Feamsides, 4 M. & W. 168 (Ex. 1838); Lowe v. Bliss (1860) 24 111.168.sNational Bank v. Feeney, 12 S. D. 156, 80 N. W. 186, 46 L. R. A.732; Farmers Loan & Trust Co. v. McCow, 32 Okla. 277, 40 L. R. A.(N S.) 177; Woods v. North, 84 Pa. 407; Johnson v. Speer, 92 Pa. 227.DICKINSON LAW REVIEWwhich there was a split of authority. This section did notprovide for the problem of uncertainty raised by this case.nor was it directly ruled upon by the courts of Pennsyl-vania before the adoption of the N. I. L.The question which appears to have been left unsettledis the time when certainty of amount must appear. Is itessential that such certainty appear after as well as at orbefore maturity? It might be argued that certainty aftermaturity is immaterial; that dishonor renders the note non-negotiable to the extent that one cannot become a holderin due course after maturity; and that if the amount due onthe note at any time before or at maturity is fixed andcertain, its negotiability is not affected by a provision whichmay render the amount uncertain after it has been dis-honored. There are several decisions of the Federal courtswhich support this proposition.' But this would seem toignore the express provision of section 47 of the N. I. L.:"An instrument negotiable in its origin continues to benegotiable until it has been restrictively endorsed or dis-charged by payment or otherwise." There are cases con-struing this section which hold a bill or note negotiable aftermaturity.5 If this section of the act contemplated notes thatare negotiable after maturity, surely the provision requiringa promise to pay a "sum certain" must be held equally toapply after maturity in all those cases which do not fallwithin the express provisions of section 2 of the act.In Merill v. Hurley, (1895) 6 S. D. 592, 62 N. W.958, the court said:"According to one theory, a note is certain whenthere is no date at which the exact amount then duecannot be ascertained by inspection and computation.According to other authorities, such a degree of cer-tainty is required that the amount to become due andpayable at any future date must be clearly ascertain-4Farmers National Bank v. Sutton Mfg. Co. 52 Fed. 191; CapitalCity Bank v. Swift, 290 Fed. 505.5Williston on Contracts, vol. 2, p. 2138; Pensacola State Bank v.Melton. 210 Fed. 57; Barnes v. Carr, 65 Fla. 87, 61 So. 184; Lane v.Hyder, 163 Mo. App. 688, 147 S. W. 514.DICKINSON LAW REVIEWable at the date of the note, uninfluenced by any con-dition not certain of fulfilment".Applying the first test suggested here to the note in ques-tion, we find that there is a date at which the exact amountthen due cannot be ascertained by inspection or computa-tion. What interest is to be paid subsequent to maturity,8% or 10%? If we apply the second test we find that at thedate of the note the amount to become due after maturityis not ascertainable.In Davis v. Bradey, 17 S. D. 511, 97 N. W. 719 suitwas brought by an endorsee of a note containing the sameconflicting provisions as appeared in the Bosler case. Theprovisions follow: "with interest until fully paid at the rateof 10% per annum" and "If said interest is not paid whendue, it becomes a part of the principal and draws interestat the rate of 12o per annum until paid". The court said,"It is doubtful whether the amount for which thenote was given and unpaid interest draws interest an-nually at 10% or whether the principal augmented bythe first and subsequent installments of overdue and un-paid interest draws interest at 12% until the entireamount is paid. Such uncertainty destroys the nego-tiability of the instrument".That this case should have some weight in support ofthe decision of the court in the Bosler case is shown byreference to section 196 of the N. I. L. which provides, "Inany case not provided for in this act the rules of the lawmerchant shall govern". But what is the "law merchant"?As pointed out by Dean Trickette "This expression revealsthat the Commissioners were subject to the hallucinationthat there was such a thing as the 'law merchant'. Thereis no more a law about bills and notes detached from anyparticular sovereignty than there is a law about real prop-erty or torts". This section merely adopts the rules of thecommon law when the particular case is not provided forby the act. There are analogous cases, decided in Penn-6Trickett. "Some Observations on the Negotiable Instruments Act",21 Dickinson Law Review 35.DICKINSON LAW REVIEWsylvania before the adoption of the N. I. L., which holdthat uncertainty as to the amount payable after maturity.as in the case of a provision for the payment of reasonableattorney's fees, renders the note nonnegotiable.7It has been argued that the note here can be con-strued in two different ways, and that under either con-struction it can be held negotiable., First, by allowing the8% interest provision to prevail after maturity, the sumpayable becomes definite enough and is expressly providedfor in Section 2 (1) of the N. I. L. as being within themeaning of "sum certain"; or second, allow the 10% inter-est provision to prevail after maturity, and the case willfall in line with those holding a note providing for a higherrate of interest after maturity negotiable." But, does notthe very fact that the note is possible of two construc-tions render it nonnegotiable? Let us suppose that this noteis offered to two prospective purchasers,-the one mightconstrue the 8% interest provision to prevail after matur-ity, while the other might construe the 10% interest pro-vision to prevail. The necessary result of such a situationwould tend& to restrict and limit the free saleability of thenote, the very purpose of negotiability. The offer of thisnote, containing the conflicting interest provisions, to theaverage layman, would be to raise a doubt as to the cer-tainty of the amount payable after maturity.Because of the common law rule in Pennsylvania whichholds notes in analogous cases nonnegotiable, and becausethe burden placed on the prospective buyer of construingthe conflicting provisions of such a note would impair itssaleability, it would seem that the decision of First NationalBank of Miami, Fla. v. Bosler, 297 Pa. 353 was proper.The decision of this case raises a second interestingproblem. As already stated, the Pennsylvania court de-cided the case under its interpretation of the N. I. L. AfterTWoods v. North, 84 Pa. 407 (1877); Johnson v. Speer, 92 Pa. 227(1879).&Herbert F. Goodrich, Penna. Bar Quarterly, December 1929.951 A. L. R. 294; Hutson v. Rankin (1922) 36 Idaho 169, 213 Pac.345; Kuhn v. National City Bank (1918) 187 Ind. 726, 119 N. E. 145.DICKINSON LAW REVIEWthe decision of this case, a lower court in Florida held asimiliar note negotiable.1o It is not known to the writer.whether this case was decided on the same point as wasraised in the Bosler case. Subsequently suits involvingsimilar notes were brought in the Federal courts and thequestion now arises whether the Federal courts are boundto follow (1) the Pennsylvania decision; (2) the decisionof the lower court in Florida; (3) or ignore both on theground that such a case presents a matter of general com-mercial law. about which the Federal courts are at libertyto exercise their own independent judgment?As a general rule, the question of the negotiability of anote is one of general commercial law which, at one time,was determined by the Federal courts without reference todecisions of state courts.' Before the universal adoptionof the Negotiable Instruments Law, when an action wasbrought in a Federal court on what purported to be anegotiable note, the court was not concerned about thestate decisions which might govern the matter. This free-dom which the Federal courts exercised before the adop-tion of the N. I. L. by all the states was not an attempt toestablish a common law of the United States, but wasmerely an assertion of a right to interpret the common lawof a state so as to bring about uniformity of the law ofnegotiable instruments as among the states. As expressedby the court in Hudson Furniture Co. v. Harding, 70 Fed.468, "There is no common law of the United States exceptpossibly as the common law of England has been adoptedwith reference to the construction of powers granted to theFederal Union". In this case the court announced the rulethat state legislation with respect to the law merchant mustbe enforced by the Federal courts, and that the Federalcourts are bound by decisions of the State courts constru-ing the same. Since the purpose sought by the FederallONew Miami Shores Corp. v. J. D. Edley, No. 11450, Civil Courtof Record of Dade County of Florida. Opinion by Judge A. J. Small,lCapital City State Bank v. Swift, supra; Swift v. Tyson, 16 Pet.1, 10 L. Ed. 865; Burgess v. Seligman. 107 U. S. 20; Pana v. Bowler,107 U. S. 529,DICKINSON LAW REVIEWcourts in exercising their independent judgment in mattersof commercial law was accomplished with the generaladoption of the N. I. L. by the states, it would seem thatthe Federal courts are bound by decisions of state courtsconstruing such statutes.In view of whathas been said, it is interesting to notewhat was said in the recent case of Marion Wood v.Thomas R. Heyward:12"While it is true that the Federal courts will or-dinarily accept decisions of appellate courts of a statein respect to the statutes of that state, they are not re-quired to do so upon a question of general law such asraised in the instant case, and accepting fully, as wedo, the conclusions of the court of Pennsylvania in theBosler case, we should not feel bound by a contriarydecision even though it were that of an appellate courtand not, as it is, that of a lower court".More in line with the view of the writer is the recent caseof Wood v. Formad, 13 in which Judge Kilpatrick, in de-termining the negotiability of a note similar to the note inthe Bosler case, both the Pennsylvania decision and thedecision of the lower court of Florida being before thecourt, said:"The terms of the Negotiable Instruments Law.in force in Florida govern. There is no interpretationof that statute by the Florida court of last resort. Sincethe adoption of the Uniform Negotiable InstrumentsAct, the provisions of that act must be followed,wherever in force."The purpose of the N. I. L. was to make uniform thelaw of negotiable instruments and eliminate the conflictin doctrines which tended to hinder commercial transac-tions. It sought to codify the law so as to relieve the courtsof the burden of choosing between conflicting cases anddiscordant views, and to render certain the matter of12United States District Court, Western Dist. of Pennsylvania.Opinion by Justice Gibson, October 31, 1932.'sUnited States District Court, Eastern Dist. of Pennsylvania, No.16924, March Term. Decided Oct. 25, 1932.DICKINSON LAW REVIEWnegotiability, so that the business of the commercial worldcould be conducted in conformity to a law that was itselfcertain. That the states were desirous of accomplishingthis purpose is shown by the general and speedyadoption of the act. If we are to follow the decision inMarion Wood v. Thomas R. Heyward, supra, allowing theFederal courts to exercise their independent judgmentwhenever a matter of commercial law arises, thus establish-ing a common law of the United States separate from thestate law, then the purpose of the N. I. L. fails.In Savings Bank of Richmond v. National Bank ofGoldsboro, 3 Fed. (2nd) 970, 39 A. L. R. 1374, the courtsaid:"The interpretation placed by a state's highestcourt upon its statutes will be accepted and followedby the Federal courts though questions of commerciallaw and general jurisprudence may be involved or in-cidentally arise, and especially where the statute isone enacted in the interest of uniformity in commerciallaw as a Uniform Negotiable Instruments Act".In light of the considerations above, it would seemthat the Federal courts are bound to follow the interpre-tation of the act as pronounced by the appellate courts ofFlorida. But, since there has been no interpretation of theact by an appellate court of Florida, the Federal courts arebound to follow the interpretation of the act as laid downin First National Bank of Miami v. Bosler, 297 Pa. 353.W. Burg Anstine.LIABILITY OF A MASTER FOR A LOANEDSERVANTIt is a well established principle that one having aservant in his general employ may lend or hire the servantto another person for a particular piece of work.' When a'Milwaukee Loco. Mfg. Co. v. Point Marion Coal Co., 294 Pa. 238(1928); Tarr v. Hecla Coal & Coke Co., 265 Pa. 519 (1920); StandardOil Co. v. Anderson, 212 U. S. 215.

Requirement of Certainty in Negotiable Instructions: Effect of Interpretation of N.I.L. by State Courts on Federal Courts

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Requirement of Certainty in Negotiable Instructions: Effect of Interpretation of N.I.L. by State Courts on Federal Courts

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