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National Bank of Newbury vs. Charles S. Wentworth; Same vs. Same

Massachusetts Supreme Judicial Court1914-05-22
218 Mass. 30

Summary

Holding. The court affirmed judgment for the plaintiff, holding that the phrase "as per terms of contract" written on the notes by the maker does not render his promise conditional or destroy negotiability, because the language refers only to the consideration for the notes rather than expressing a contingency affecting payment.

The National Bank of Newbury held promissory notes as an indorsee and sued Charles Wentworth, the maker, to recover on them. Wentworth had written the phrase "as per terms of contract" on each note after "Value received," referring to an underlying lumber sales agreement between the original parties. Wentworth argued this language made his promise conditional on the payee's performance under that separate contract, thereby destroying the notes' negotiability and his liability.

The court rejected this argument. Although Wentworth clearly intended to protect himself against payment without receiving equivalent value, the specific language he used—"as per terms of contract"—was insufficient to create a condition precedent to payment. The court distinguished between phrases that would truly subordinate the note to an external agreement (such as "subject to the contract") and mere references to the consideration underlying the note. The positioning and wording of Wentworth's notation suggested it identified the consideration for the notes rather than modifying or restricting his promise to pay. Under the negotiable instruments statute, such a reference to consideration does not affect negotiability or the maker's obligation.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether words on a promissory note referring to an underlying contract destroy negotiability
  • Whether a maker's promise is conditional when it references terms of a separate agreement
  • What language is necessary to subordinate a negotiable instrument to an external contract

Procedural posture

The trial judge found the bank was a holder in due course, and the defendant appealed the judgment entered against him on the notes.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Braley, J.

We assume, as the counsel for the respective parties have assumed at the argument and in their briefs, that the promissory notes in suit were delivered to the payee in this Commonwealth and are governed by our negotiable instruments act found in the R. L. c. 73. Nashua Savings Bank v. Sayles, 184 Mass. 520, 522. American Malting Co. v. Souther Brewing Co. 194 Mass. 89.

The plaintiff bank is the indorsee, and the presiding judge was warranted upon the evidence in finding, that it is a holder in due course unless the words “as per terms of contract” written by the defendant on the face of each note after the words “Value received” make his promise as maker conditional upon the performance by the payee of the preceding contract between them appearing in the record for the sale and shipment of lumber. The defendant urges, that, the words having been placed upon the notes before delivery, the original parties must have intended to incorporate this contract, and that negotiability is lacking, because a sum certain is not payable at a time fixed in the future. Costello v. Crowell, 127 Mass. 293. R. L. c. 73, § 18, cl. 3. If the words had been, “subject to the contract for lumber,” or even “subject to the contract,” the principle invoked would have been applicable. The notes would not have been the defendant’s unconditional promise to pay a definite sum. Hubbard v. Mosely, 11 Gray, 170. American Exchange Bank v. Blanchard, 7 Allen, 333. Sloan v. McCarty, 134 Mass. 245. But, while the defendant doubtless intended to guard against the payment of money for which in the future he did not receive an equivalent, and the payee has gone into bankruptcy, the language used does not affect the payment of the amounts shown by the notes. By their position, the words well might lead the plaintiff, who is not charged with actual notice, to understand that they were not to be disconnected and applied to an independent outstanding agreement by which the promise was to be modified or restricted, but that they referred solely to the consideration for which the notes were given. R. L. c. 73, § 69. We are unable consequently to. distinguish the case at bar from Taylor v. Curry, 109 Mass. 36, where the phrase relied on to destroy negotiability was, “for value received. On policy No. 33,386.” It was said by Chief Justice Chapman in delivering the opinion of the court: “The words ... do not express any contingency as to the payment of the notes, or refer to any fund out of which they are to be paid, but appear to refer to the consideration for which they were given. Such a reference may be for mere convenience, or for any other reason, but it cannot be interpreted as a modification of the promise.” See also Chicago Railway Equipment Co. v. Merchants’ National Bank, 136 U. S. 268, 283, 285; Jury v. Barker, El., Bl. & El. 459. By the terms of the report judgment is to be entered for the plaintiff for the amount of each note with interest from maturity and costs.

So ordered.