It is evident that by the term "current money" is meant such circulating media as is legal tender or is lawfully circulating at par with legal tender at the time and place of payment. See 3017 and 3018.

by

Under the Negotiable Instruments Act an instrument payable in any medium other than money would not be negotiable, and this rule prevails. In Georgia, however, promissory notes are declared by the N. I. Act to be negotiable, though they provide that payment is to be made in "cotton or other articles of value." See Georgia Negotiable Instruments Act, § 1 subdivision 2 under title Statutes. In Tennessee the Negotiable Instruments Act of Tennessee would control. This means that the note submitted you, while it can be transferred freely from one to another, the holder takes the instrument subject to any defenses which may be interposed by prior parties. Some bankers are confused on this point and are unable to distinguish between transferability and negotiability. The latter term means that the instrument can be transferred free of any equities or defenses in the hands of the holder which the prior parties may have. See 3435 for definition of negotiability. (1924.)

3624a. Negotiability of note payable "in New York Exchange." Decisions conflict upon negotiability of note so payable. One of our customers offered us for discount a few days ago, three large notes payable at Richmond, Va., "in New York exchange." We would appreciate it if you would give us your opinion as to whether or not this phrase "in New York exchange" makes the notes non-negotiable.

Opinion: The Negotiable Instruments Act provides, § 1, subdiv. 2, that, to be negotiable, an instrument "must contain an unconditional promise or order to pay a sum certain in monev." It further provides that, §2 subdiv. 4, "the sum payable is a sum certain within the meaning of this Act, although it is to be paid with exchange, whether at a fixed rate or at the current rate."

The question is whether an instrument payable at Richmond, Va., "in New York exchange" would be negotiable, under the above provisions. Before the passage of the Negotiable Instruments Act it was held by the courts in several cases that an instrument payable in New York or in Chicago exchange was not negotiable. For example, in Chandler v. Calvert, 87 Mo. App. 362, cited in 1279a, 1281a, 1993, 1994a, it was held that a note payable "in New York exchange" was not payable in money and therefore not negotiable. The court said: "New York exchange is not money; it is a commodity or, in other words, it is property." Likewise in Hogue v. Edwards, 9 Ill. App. 153, cited in 1281a, a check drawn on a Peoria banker payable "in Chicago exchange" was held not payable in money and not negotiable. The court said: "a bank is not obliged to pay a check drawn by a depositor in anything but money. Whether it will give exchange upon a request contained in a check is a matter of agreement."

But since the passage of the Negotiable Instruments Act it has been held by a Federal Court in Iowa that notes payable "in New York or Chicago exchange" are negotiable within the provisions of the Act above quoted. Security Trust Co. v. Des Moines County, 198 Fed. 331. Quoted in 1281a; and cited in 1286a. The court said:

"It was argued that the obligation in suit is not payable in money, because it is made payable in exchange, and not with exchange. This is very critical, and the distinction so refined, that it is difficult to see it. Whether in' and 'with' are synonyms, and whether there are such things as synonyms, I leave to others who have time for such discussions. But great commercial questions like this ought not to turn on the particular shade of meaning of some preposition. The defendant agreed to pay so much money, and the payee was to receive it. The payee was in another state. It must either come after the money, or the money when

paid at the county t.easurer's office was to be carried in some form to Rochester, N. Y. It was a method of carriage to Rochester, which would be attended with cost, and it was agreed that the payor should pay the cost. I do not say the distinction between 'in' and 'with' cannot be seen, but it is difficult to see. The great per cent. of the business of the country is done in commercial paper, and a great per cent. of that paper is payable both 'in' and 'with' exchange."

Under the present condition of law, therefore, it cannot be said with certainty that a note payable at Richmond, Va., "in New York exchange" is, or is not negotiable. There is evidenced a conflict of judicial decision on the point, and I find no decision in Virginia on the subject. Before the passage of the Negotiable Instruments Act it was the rule of the law merchant that, to be negotiable, an instrument must be in money and where an instrument was payable "with exchange on New York" the courts differed upon its negotiability, some holding that the amount was sufficiently certain to satisfy the requirements of negotiability and others that it was not; while in the case of an instrument payable "in New York exchange" such decisions as were rendered on the subject were apparently uniform that the instrument was not payable in money but in a commodity. There was, therefore, recognized before the Act a distinction between "in" and "with" and it is not unlikely that some courts under the Act, will draw the same distinction although the Federal Court in the case above cited holds that the words in the sense used are synonymous. A country banker, for example, who carries a small cash reserve and keeps the larger amount with his city correspondent will, in case of a customer who has occasion to draw large checks, agree with the customer that such checks shall be drawn "in New York exchange" with the intention that they may be paid for, not in cash, but by delivery of a draft for the amount on a city correspondent. Here is one reason, therefore, to indicate that when an instrument is payable "in New York exchange" it is not intended to be paid in money but in a draft on New York.

Until the law is more clearly settled, either one way or the other upon the negotiability of a note payable "in New York exchange," it would be the safer course for the bank to which such a note is offered for discount to proceed on the theory that it might be held nonnegotiable. (1916.)

NOTE. See notes payable "with exchange" 3661 also 1281 et seq. for checks payable "in exchange".

DEMAND NOTES

3628a. Reasonable time for negotiation of demand note-Rights of holder in due course.-Under date of July 1, 1920, A gives to B a note for $2,500, payable on demand at any bank in a certain city. On November 3, 1920, B presents his note to us for discount with A's note attached as collateral, which we discount for thirty days, and on December 3 we permit a renewal for another thirty days. After the renewal it soon dedevelops that B is insolvent and has disappeared. We then demand payment of A's note; whereupon A refuses to make payment, stating, first, that he had previously given his check to B in payment of the note given us as collateral, and that B made the statement to A that he (B) had destroyed A's note, and A says he told B that was all right, and dismissed the matter from his mind till we made demand for payment; second, A says he does not wish to have to make a second payment of the obligation unless forced to do so, and A's attorney advises that he does not believe the note was negotiable when we took it on November 3, and that we are not, therefore, a holder in due course.

It seems that the Negotiable Instruments Law says that a demand note must be negotiated within a reasonable length of time; otherwise the holder ceases to be a holder in due course.

Your opinion in the above matter will be very highly

appreciated. It appears to us that we have a good case against A on three points, viz.: First, we do not believe four months to be an unreasonable length of time in which to negotiate a demand note; second, it is questionable as to whether or not A can establish sufficient proof of his off-set in the way of payment, as his check does not state for what purpose it was given to B, and it was for exactly $2,500 on July 12, whereas it would be reasonable to assume that if he had paid the note twelve days after date with a check, the check would have included twelve days' interest, and we believe the only witness by whom he could prove payment is B, and he cannot be found; third, and last, by unwarranted, unusual and unreasonable negligence on the part of A, and by an absolute failure on his part to perform his duty, he (A) made it possible for an innocent party to suffer for the negligence of A and the dishonesty of B.

A reply in detail covering all the above points will be very highly appreciated, and we would like also to have you cite decisions of similar cases in other states, as this particular point does not seem to have yet been in the Courts of West Virginia.

Opinion: The main question presented is whether negotiation of A's demand note by B, the payee, four months after its date was within reasonable time so as to constitute the purchaser a holder in due course with right of enforcement free from defense of the maker that he had paid the note to the original payee, before its negotiation, without taking up the note.

The rule at common law is that paper payable on demand is not overdue for the purpose of transfer until after the lack of unreasonable time, and that it is then overdue; and the Negotiable Instruments Act, § 71, expressly provides that where an instrument payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed a holder in due

course.

The Act, § 193, also provides that in determining what is a reasonable time, regard is to be had to the nature of the instrument and the facts of the particular

case.

There is an unfortunate lack of unanimity among the authorities as to the precise period of time at which a demand instrument becomes overdue so that its trans

fer thereafter is subject to equities. For example, paper payable on demand has been held not to be overdue, under the circumstances of the particular case, when transferred in one day (Poorman v. Mills, 39 Cal. 345, 2 Am. Rep. 45); two days (Dennet v. Wyman, 13 Vt. 485); five days (Stewart v. Smith, 28 ÎÌl. 397); seven days (Seaver v. Lincoln, 21 Pick. [Mass.] 267); twenty-three days (Mitchell v. Catchings, 23 Fed. 71); one month (Ranger v. Cary, 1 Metc. [Mass.] 369); five weeks (Wethey v. Andrews, 3 Hill [N. Y.] 582); five months (Sanford v. Mickles, 4 Johns. [N. Y.] 224); ten months (Chartered Mercantile Bank v. Dickson, L. R. 3 P. C. 574); or two years (Tomlinson Carriage Co. v. Kinsella, 31 Conn. 268 [holding that the time when such a note is to be regarded as overdue must depend upon the particular circumstances, indicating the intention and understanding of the parties; and that this is properly a question of fact, to be determined by the jury]).

On the other hand, such paper has been held overdue in two months (Camp v. Scott, 14 Vt. 387); ten weeks (Losee v. Dunkin, 7 Johns. [N. Y.] 70); three months (Herrick v. Woolverton, 1 Am. Rep. 461, 41 N. Y. 581, cited in 3635a); four months (La Due v. Kasson First Nat. Bank, 31 Minn. 33); five months (Bull v. First Nat. Bank of Kasson, 14 Fed. 612 [rev'd. in 123 U. S. 105, 31 L. ed. 97, 8 Sup. Ct. Rep. 62, cited in 35a, 368a, 1203a, 3132a, on ground that drawer was not injured]); six months (Thompson v. Hale, 6 Pick. [Mass.] 259); eight months (American Bank v. Jenness, 2 Metc. [Mass.] 288); ten months (Emerson v. Crocker, 5 N. H. 159); one year (McAdam v. Grand Forks Mercantile

Co., 24 N. D. 645, 140 N. W. 725, 47 L.R.A. (N.S.) 246 and note, cited in 3132a [holding that "it is well es tablished that a note payable on demand is due within a reasonable time after its date, and there are practically no authorities which hold that such reasonable time can be extended beyond a year"]); thirteen months (Cross v. Brown, 51 N. H. 486); fourteen months (Wylie v. Cotter, 170 Mass. 356, 49 N. E. 746); two years (Loomis v. Pulver, 9 Johns. [N. Y.] 244); three years (Shirley v. Todd, 9 Me. 83); four years (Miller v. Del Rio Min. & Mill. Co., 25 Ida. 83, 136 Pac. 488), or six years (Gregg v. Union County Nat. Bank, 87 Ind. 238). I find no West Virginia cases upon the proposition.

In the case of Philpott's Estate, 151 N. W. 825, decided under the Negotiable Instruments Act, it was held that whether a demand note negotiated six months af ter date was negotiated an unreasonable length of time after its issue so that the holder was not a holder in due course was a question for the jury in view of the provision of the Act requiring the facts of the particu lar case to be considered in determining what is a reasonable time. In that case the plaintiff claimed as a holder in due course and a defense was pleaded, good as against the payee. The trial court directed a verdict for the plaintiff on the ground that he was a holder in due course. On appeal, this was reversed. The Supreme Court, after citing the conflicting authorities, said: "There is, however, no definite rule to be applied and among other elements the facts of the particular case are to be considered.' It is clear, therefore, that the defendant was entitled to go to the jury on this question if upon no other."

In your case, therefore, the question whether the transfer to you for value on November 3 of a demand note dated July 1 was within a reasonable time after its issue is a question of fact to be passed upon by a jury under proper instructions from the court. If a jury

can be made to believe and to find that the transfer of the note to your bank, four months after its date, was within a reasonable time under the particular facts of the case, you will be entitled to recover. If, however, the jury finds that the note was transferred an unreasonable length of time after its issue, then it would be subject in your hands to the same defense as in the hands of the payee. The maker's defense would be payment and his proof would be his check for the amount of the note given twelve days after its issue and his testimony that the note was not taken up because he believed the payee's statement that it had been destroyed. I think this would be sufficient proof to convince a jury that he had paid the note, and the fact that twelve days' interest was not included in the check would not be of material significance, as the note did not bear interest. Nor would the fact that he omitted to take up the note estop him from pleading and proving payment if the note was not in the hands of a holder in due course. I think, therefore, your sole ground

of recovery upon this note will depend upon whether a jury should find it was negotiated within a reasonable time after its issue so as to constitute your bank a holder in due course. (1921.)

DEMAND NOTES-EFFECT OF STATUTE OF LIMITATIONS

(For statute of limitations in each state, see that title). 3634a. Statute of limitations on demand note runs in favor of indorsers as well as maker-Liability of indorser signing after delivery.-A, a corporation, makes a note payable on demand over seven years ago, the note being issued in 1911, and having several individual indorsements on the back. At the time of the signing of the note each indorser waived presentment. demand of payment, protest and notice of non-payment The note has only recently been called, no dema? having been made upon the indorsers during the seven years. Would the individual indorsers be liable at this

time on account of the Statute of Limitations having expired a year ago?

Opinion: In a majority of jurisdictions, including New Jersey, an instrument payable on demand is due immediately, so that an action can be brought at any time without any other demand than the suit; and the time when the Statute of Limitations begins to run in favor of the maker is to be computed from the date of the making of the note. See 3630. De Raismes v. De Raismes, 70 N. J. L. 15, aff'd in 71 N. J. L. 650, cited in 2002. In this case the court said: "We have not overlooked the contention of the plaintiff that as the note sued upon bore interest, it did not become due until actual den.and made, but we consider it without merit. It was decided by this court, as early as 1831, in Larason v. Lambert, 12 N. J. I. 247, that in the case of a promissory note payable on demand, the time when the Statute of Limitations began to run against the maker should be computed from the making of the note, and the correctness of that decision has never been questioned. In that case the note did not draw interest, but the rule is the same whether the note draws interest or not. Ang. Lim., § 95, and cases cited."

The action on the note submitted is, therefore, barred not only against the maker, but necessarily also against the indorsers, unless there has been some new promise or part payment by one of them to take the case as to him out of the running of the statute. The six years' limitation provided by the New Jersey statute is, among other things, of all actions of debt founded upon contract, and such action is barred thereby not only against the maker, but against the indorser. (1918.)

NOTE. Where indorsement of a bill or note is made after delivery and not as part of the original transaction, the indorsement creates a new contract and the Statute of Limitations begins to run from the date of the indorsement. 37 C. J. 847; Colley v. Rowan, 71 Colo. 17, 203 Pac. 669.

3635a. Demand note although due immediately does not draw interest before demand or commencement of action. Demand note as collateral.-We are offered for discount a $15,000 note made by a local association for three or four months and secured by collateral which would consist of 30 demand notes of $500 each which would read "On demand I promise to pay to the order of the Fruit Growers Association, Inc., Five Hundred Dollars, John Doe." Will you kindly advise. me if it would be better for us to have the 30 collateral notes made payable at a definite place like this bank, or some other bank, or the association's office, or whether collection could be forced on a demand note just as well without a definite place of payment. Also, how long is a demand note good (providing the parties are responsible) without having any payments made on it? Also, would the demand note draw interest if it was made as above? Or would it have to read "with interest"? If one of the makers of the 30 demand notes should withdraw from the association do you think it would affect the value of his note any, so long as it was held by the bank

Opinion: 1. I think it would be preferable to have the demand notes which are given as collateral to the principal note made payable at your bank. The object of having a note made payable at the bank is convenience. If the maker has an account at the bank it can be charged up at maturity without other formality and if the maker has no account, the fact that the note is in the bank at maturity is sufficient presentment.

2. A demand note is good against the maker for Six years. In New York, if an instrument be payable on demand, the Statute of Limitations begins to run immediately from its date, as payment might be immediately demanded, or suit brought without any preious demand. Mills v. Davis, 113 N. Y. 243, 3 L.R.A. 394; McMullen v. Rafferty, 89 N. Y. 456; Wheeler v. Warner, 47 N. Y. 519; Herrick v. Woolverton, 41 N. Y. 581, 1 Am. Rep. 461, cited in 3628a. See also Shults

v. Fingar, 100 N. Y. 539. And in such case if the action is not commenced within six years years after the date of the instrument, action thereon is barred by the statute. McMullen v. Rafferty, 89 N. Y. 456; N. Y. Code Civ. Proc., § 382.

3. If you desire the demand note to carry interest it should contain a provision for payment "with interest." It has been held in New York that a note payable on demand after date at a particular place, but making no provision for interest, though deemed due, for purposes of the Statute of Limitations, on the day after its date, does not draw interest before demand or commencement of action. Van Vliet v. Kanter, 124 N. Y. Supp. 63, cited in 2881, where the court said: "Here is a note evidencing a contract in which the parties saw fit to make no provision for interest, and it therefore draws no interest until a demand is duly made, which puts the maker in default. Sanford v. Crocheron, 8 Civ. Proc. R. 146. See also, Ledyard v. Bull, et al., 119 N. Y. 62, 23 N. E. 444; Lawrence et al. v. Church, 128 N. Y. 324, 332; 28 N. E. 499; Herrick v. Woolverton, 41 N. Y. 581, 596, 1 Am. Rep. 461, cited in 3628a; Crim et al. v. Starkweather, supra; Bishop v. Sniffen, 1 Daly, 155, cited in 2881 (where the note drew interest the rule may be different). There are exceptions to this rule where the obligation is a bond, or the nature of the obligation and the attendant circumstances show that the payment of interest was contemplated by the parties. Chester v. Jumel et al., 125 N. Y. 237, 26 N. E. 297, cited in 2881; Purdy v. Philips, 11 N. Y. 406;" In re Williams' Estate, 118 N. Y. Supp. 562, cited in 2881; In re McMullen, 148 N. Y. Supp. 1092.

4. The withdrawal of one of the makers of the collateral notes from the association which gives the prin cipal note would not affect his liability on the demand note. The maker who signs an accommodation note would be liable to the bank as holder for value of the principal note notwithstanding the bank at the time of taking the demand note knows that it is given for accommodation. See § 29 Negotiable Instruments Act. His liability would not be affected by the circumstance that after giving the note for the accommodation of a local association of which he was a member, he afterwards withdrew from such association. See also 2888a. (1919.)

NOTES PAYABLE AT DETERMINABLE FUTURE TIME. NEGOTIABLE INSTRUMENT MUST BE CERTAIN AS TO TIME OF PAYMENT

3637a. Note payable "six months or on demand" held non-negotiable in Washington.-Will you kindly advise us as to the effect and the wisdom of making a note payable "Six months or on demand." We believe we have seen a ruling that the fact of the indefiniteness of the person who is to make the demand, avoids the whole note.

Opinion: With respect to the effect of a provision in a note making it payable "six months or on demand," submitted in the above case, such a provision would render the note non-negotiable, according to the ruling in Puget Sound State Bank v. Washington Paving Co., 94 Wash. 504, 162 Pac. (1917) 870, cited in 3639a, 3640, 3641, holding that under Rem. Code, 1915, § 3392, [N. I. Act, § 1 (3)] providing that an instrument, to be negotiable, must be payable on demand or at a fixed or determinable future time, and § 3395 [id. § 4 (3)] providing that an instrument is payable at a determinable future time, which is expressed to be payable on or at a fixed period after the occurrence of a specified event certain to happen, although the time of happening is uncertain, and that an instrument payable on a contingency is not negotiable and the happening of the event does not cure the defect, notes providing that they should become due and payable on demand at the option of the payee when he deemed himself insecure was nonnegotiable, since the word "contin

gency," as used in § 3395, refers to contingency as to time, though it may refer to other contingencies.

After quoting the provisions of the Washington Negotiable Instruments Law, the court said:

"These provisions, we think answer this question according to the contention of counsel for respondent. We think of the word 'contingency,' as here used, refers to contingency as to time, though it may also refer to other contingencies. We note here that the above quoted provision in these notes gives the Olympia Bank, the payee, the unrestricted power to declare the notes due at any time before maturity, and that the right to exercise such power possessed by the payee is not dependent upon nor does it grow out of any act, promise or agreement of the paving company, the maker of the notes. In other words, it is a contingency over which the maker of the notes has no control. After quoting from decisions, in a number of other jurisdictions in support of its position, the court concluded on this point in the following language:

"It might be contended that these notes, by reason of the power of election on the part of the payee as to their maturity, became in effect demand notes, and were, therefore, negotiable under Rem. Code, § 3392, above quoted, and that, being transferred to appellant Puget Sound Bank within a reasonable time after their execution, they would be freed from equitable defenses of the maker, as apparently is contemplated as to demand notes by Rem. Code, § 3444. We think, however, the authorities above noticed answer any such contention and render it clear that the making of the notes payable at a certain time, with the reserved power to the payee to declare them due before the stated time of maturity if he deems himself insecure, does not make them demand notes within the meaning of §§ 3392 and 3444. We feel constrained to hold that these notes are not negotiable, and are, therefore, subject to any defense the paving company may have against them, which existed at the time of their transfer to the Puget Sound Bank. (1923.)

3638a. Note containing option in maker to pay "on or before" maturity-Negotiability.-What is the effect on the negotiability of a note of a provision which gives the maker an option to pay at any time after the date of execution, where a definite date of maturity is provided for? We submit a note reading as follows: "Date, Place, State. On or before Jan. 15th, 1926, I promise to pay to the order of John Doe, Three thou sand dollars, $3.000, with interest at 6 per cent. (Signed) B. Miles."

Is this a valid negotiable instrument? When must it be presented for payment? What is the reason for making a note payable "on or before" a given date?

Opinion: The provision in a note that it is payable "on or before" a certain date is valid, and its effect is to allow the maker to pay at any time after execution when he is in funds, and thus to save interest. It does not destroy negotiability. Section 4 of the N. I. Act provides: "An instrument is payable at a determinable future time, within the meaning of this act, which is expressed to be payable, 2. On or before a fixed or determinable future time specified therein." Negotiability, it is well settled, is not impaired by this provision, although it makes the actual time of payment uncertain by allowing the maker to pay whenever he sees fit. 3 R. C. L. Bills & Notes, § 94. See, for example, Pagal v. Nickel (1900) 107 Wis. 471. 83 N. W. 767; First Nat. Bk. v. Skeen (1890) 101 Mo. 683, 11 L.R.A. 748 and note; Lovenberg v. Henry, 104 Tex. (1911) 550, 140 S. W. 1079.

If the maker at any time after the execution makes a valid tender of payment, and keeps the tender good, interest stops.

This note need not be presented for payment until the date of maturity specified. In fact, the holder has no right to demand payment before that date. For the courts generally construe this provision to give an op

at The X Bank of Wisconsin, with interest at the rate of Six (6%) per cent. per annum after date until paid. John Doe."

Opinion: The object in mind is to have a definite date for a showdown and still enable the bank to demand payment prior to the maturity date.

The following sections of the Negotiable Instruments Act are pertinent to the consideration of the question submitted.

"An instrument to be negotiable must be payable on demand or at a fixed or determinable fu ture time" (§ 1).

"An instrument is payable at a determinable future time, within the meaning of this act, which is expressed to be payable:

1. At a fixed period after date or sight; or

2. On or before a fixed or determinable future time specified therein; or

3. On or at a fixed period after the occurrence of a specified event, which is certain to happen, though the time of happening be uncertain.

An instrument payable on a contingency is not negotiable, and the happening of the event does not cure the defect" (§ 4).

In the Negotiable Instruments Act of Wisconsin the following is inserted before the last sentence of § 4: "4. At a fixed period after date or sight though payable before then on a contingency."

Under the Negotiable Instruments Act a note is ne gotiable which is payable "on or before" a specified date. Under such form of note the courts hold the maker has the option to pay before the due date fixed and possibly save the running of interest.

But you desire a form of note which provides a specified date of maturity but gives the bank the option to demand payment at any time before such specified maturity date.

The form you suggest is "On demand before June 1. 1923." This is not a positive promise to pay on June 1, if not demanded before, although it might be so construed, but a promise to pay on demand before that time. June 1 limits the time of demand and, if payment was not demanded before June 1, an indorser might claim he was discharged. Assuming the note is to be construed as if it provided a promise to pay on June 1 or on demand before that time, question might arise as to the negotiability of such an instrument. It would virtually be a promise to pay "on or before" a fixed date, which is made negotiable by § 4. At the same time, under this section, where a note payable at a fixed future time contained the following: This note shall become due and payable on demand at the option of the payee when it deems itself insecure." The Supreme Court of Washington in Puget Sound State Bank v. Washington Paving Co. 94 Wash. 504, 162 Pac. 870, full digest 3637a, cited in 360, 3641, held the note nonnegotiable, as payable on a contingency as to time of payment, within the meaning of the last sentence of § 4.

The Supreme Court of Massachusetts in Mahoney v. Fitzpatrick, 133 Mass. 151, has also held nonnegotiable a note promising to pay "on demand or in three years from date."

Under the special provision of the Wisconsin Negotiable Instruments Act, Wis. Stat. (1921), § 1675-4, how

ever, that an instrument is payable at a determinable future time, when payable "at a fixed period after date or sight though payable before then on a contingency" the object you desire might be safely accomplished by making your note provide a promise to pay "on June 1 or on demand before that date, if the holder deems himself insecure." This would conform to the precise language of the Negotiable Instruments Act of your state and avoid possible questions of negotiability, indorser's liability and maturity arising from the form of note you submit. (1923.)

3643a. Acceleration of maturity of all unpaid notes of series upon default in payment of any one.-is a note negotiable or nonnegotiable, in which there appears a clause such as the following:

"It is agreed that failure to pay any one note at maturity shall, at the option of the holder, mature all unpaid notes of this series."

The writer finds that in a good many sections of this country, many notes are issued in which upon the happening of some certain event, that usually at the option of the holder, unmatured notes become payable at once, a clause of course being in each note to this effect, and it is his impression that under the Negotiable Instruments Act, that this renders a note non-negotiable by reason of the fact that the maturity date is not fixed at some certain definite time.

Opinion: Notes of this character have been held both negotiable and non-negotiable in different jurisdictions. The highest court in the country, the Supreme Court of the United States, has declared in favor of their negotiability; while some of the state courts have held the contrary. The question therefore is not universally settled one way or the other.

In Chicago R. Equipment Co. v. Merchants' Bank, 136 U. S. 268, 34 L. ed. 349, 10 Sup. Ct. Rep. 999, it was held that the negotiability of a promissory note (one of a series of twenty-five issued at the same time) was not affected by the fact that it might, at the option of the holder, and by reason of the default of the make upon one or more of the other notes of the series, become due at an earlier date than that fixed. Mr. Justice Harlan, in the course of a long opinion, and an ex haustive review of the authorities, said, inter alia: "Without deciding whether the notes here in suit would or would not have been negotiable securities if the transaction between the parties had been a conditional sale, we are of the opinion, that they are of the class of instruments that are negotiable according to the law merchant, and which, in the hands of a bona fide holder for value, are protected against defenses of which the maker might avail himself if sued by the payee. They are promises in writing to pay a fixed sum of money to a named person or order, at all events, and at a time which must certainly arrive. Independent School District v. Hall, 113 U. S. 135, 139, 140, 28 L. ed. 954, 956, 5 Sup. Ct. Rep. 371; Story on Promissory Notes, § 27; Cota v. Buck, 7 Met. 588. It is true that, upon the failure of the maker to pay the principal and interest of any note of the whole series of twenty-five, the others would become due and payable; that is, due and payable at the option of the holder. But a contingency under which a note may become due earlier than the date fixed is not one that affects its negotiability."

Before the passage of the Negotiable Instruments Act a number of state courts held that a note payable at a fixed time, but with an option to the maker to pay the note before the time fixed, was negotiable. Thus in Mattison v. Marks, 31 Mich. 421, 18 Am. Rep. 197, an action on a note payable on or before a certain day, the court, by Cooley, J., said: "The legal rights of the holder are clear and certain; the note is due at a time fixed, and it is not due before. True, the maker may pay sooner if he shall choose, but this option if exercised would be a payment in advance of the legal liability to pay, and nothing more. Notes like this are common in commercial transactions, and we are not

aware that their negotiability is ever questioned in business dealings. It ought not to be questioned for the sake of any distinction that does not rest upon sound reason." But in this same jurisdiction, it was held later than an instrument promising to pay a stated sum, with interest, "on or before two years after date," but providing that if it be paid within one year no interest shall be paid, is not negotiable, as it lacks certainty in time and amount. Story v. Lamb, 52 Mich. 525. In Cowing v. Cloud, 16 Colo. App. 326, it was held that a promissory note made payable on a certain date is not rendered non-negotiable by a provision giving the maker an option to pay it before maturity. This rule is carried into the Negotiable Instruments Act § 4, by the provision that "an instrument is payable at a determinable future time within the meaning of this act which is expressed to be payable or before a fixed or determinable future time specified therein. . . ." And instruments payable "on or before" a specified time, the option resting with the maker, are quite universally made negotiable by virtue of this act.

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Where the note gives the option to the holder to mature it earlier than the time fixed therein, the decisions have been in conflict as to the effect of such option upon negotiability. In Clark v. Skeen, 61 Kan. 526, it was held that a note for the payment of a certain sum at a fixed date is not rendered non-negotiable by a stipulation that upon default in the payment of interest the whole amount shall become due at the option of the holder, and then draw a greater rate of interest. And in First Nat. Bank v. Garland, 160 Ill. App. 407, cited in 3645a, [cited in L.R.A.1915B, 472 note, on effect on negotiability of provisions accelerating maturity] an option to declare the principal due upon default in payment of interest does not affect the negotiable character of the instrument. But in 213 Mass. 330, Pierce v. Talbot (1913), 100 N. E. 553, [cited in 35 L.R.A. (N.S.) 391 and 11 L.R.A. 748 notes] it was held that a note secured by mortgage, which authorizes the maker to anticipate payment of the whole or any part of the amount of the note, is not negotiable. See also Stutts v. Silva, 119 Mass. 137, wherein an election of the holder to call for payment at an earlier time than that fixed in the note was held to destroy negotiability.

Coming again to the precise form of note in question, which we have seen has been held negotiable by the Supreme Court of the United States, we note a contrary decision by the Supreme Court of Iowa in 1909 under the Negotiable Instruments Act. Iowa Nat. Bank v. Carter, 144 Iowa, 715, 123 N. W. 237. In that case the court said:

"The notes and chattel mortgage were all executed at the same time, and as a part of the same transaction, and the chattel mortgage contained this provision: 'If the said party of the first part shall sell, assign, dispose of, or attempt to sell, assign, or dispose of, or remove from said county of Iowa without the written consent of said Port Huron Machine Company, Limited, the whole or any part of said goods or chattels, or if at any time the said party of the second part shall deem themselves insecure, then the whole amount of said sum of money in said notes mentioned, which shall not have been paid, shall be immediately

due and payable.' Again, each note contained this provision: In case of default in the payment of this note, the said Port Huron Machinery Company, Limited, shall have the option to declare any or all other notes given for the purchase price of said property to be at once due and payable.' It is argued that these provisions render the notes uncertain both as to time and amount of payment. It is fundamental, of course, that to make a note negotiable it must be certain both as to time and amount of payment. Section 3060-al, Code Supp. 1907. By section 3060-a4 [Neg. Inst. Act, § 4] of the same code it is provided: 'An instrument is payable at a determinable future time, within the meaning of this