1

not have to pay the additional amount; that it is consonant with public policy because it adds to the value of the paper; has a tendency to lower the rate of discount, not only because it promises less expensive collection, but bears evidence of a greater degree of confidence on the part of the maker in his ability to pay without suit; and that it does not impair the negotiability of the instrument, for the reasons: that the sum to be paid at maturity is certain; that commercial paper is expected to be paid promptly; that if so paid, no element of uncertainty enters into the contract; that it ceases to be negotiable, in the full sense of the term, if not paid at maturity, and that the additional agreement relates rather to the remedy upon the note, if a legal remedy be pursued, than to the sum which the maker is bound to pay; and that it is not different in its character from a cognovit, which, when attached to promissory notes, does not destroy their negotiability.

Second. The second class of cases enforce the stipulation,

value to authorize a finding therefor. In Hubbard v. Harrison, 38 Ind., 325 (1871), it was held that the promise in the note to pay attorney's fees might be enforced against the indorser. In Walker v. Woollen, 54 Ind., 164 (1876), in dorsee sued maker on note which agreed to pay a reasonable attorney's fee it suit be instituted. Held valid. In Indiana it has been provided by statute, I R. S., 1876, p. 149, “that any and all agreements to pay attorney's fees, depending upon any condition therein set forth, and made part of any bill of exchange, acceptance, draft, promissory note, or other written evidence of indebtedness, are hereby declared illegal and void, provided that nothing in this section shall be construed as applying to contracts made previous to the taking effect of this act." After this act it was held that the stipulation in a note to pay attorney's fees "if suit be brought," was conditional and void; Churchman v. Martin, 54 Ind., 380 (1876). But if such stipulation were unconditional, it would be valid Brown v. Barber, 59 Ind., 533 (1877); Smock v. Ripley, 62 Ind., 81 (1878). See also Garver v. Pontius, 66 Ind., 191 (1879); Maxwell v. Morehart, 66 Ind., 301 (1879). In Farmers' National Bank v. Rasmussen, 1 Dakotah, 60 (1875), suit was brought on note payable to R. B. or bearer, for a certain sum and interest, and "ten dollars attorney's fees if action is commenced herein." Held valid and negotiable. Howestein v. Barnes, U. S. C. C., Kansas, May, 1879; Foster, J., reported in 29 Am. Rep., 406; Wilson Sewing Machine Co. v. Moreno, U. S. C. C., Oregon, Aug., 1879, reported in 29 Am. Rep., 406; Deady, J., saying upon the question considered, and as to the views of the text, that they "are more in accordance with the advanced views of the present time."

Billingsley v. Dean, 11 Ind., 332 (1858).

2 Heard v. Dubuque Bank, 8 Neb., 10 (1878).

ช

Sperry v. Horr, 32 Iowa, 184 (1871); Stoneman v. Pyle, 35 Ind., 103 (1871)

but deny the negotiability of the instrument.

They rest on the considerations as stated in Pennsylvania, by Sharswood, J. (in Woods v. North), where to the note was added, "and five per cent. collection fees if not paid when due," that "it is a necessary quality of negotiable paper, that it should be simple, certain, unconditional, and not subject to any contingency. . . . . . Interest and costs of protest after non-payment at maturity are necessary legal incidents of the contract, and the insertion of them in the body of the note would not alter its negotiability. Neither does a clause waiving exemption, for that in no way touches the implicity and certainty of the paper. But a collateral agreement as here, depending too, as it does, upon its reasonableness, to be determined by the verdict of a jury, is entirely different."

Third. The third class of cases maintain the negotiability of the instrument, but regard the stipulation as penal and

'Woods v. North, 84 Penn. St., 410 (1877). In Sweeney v. Thickstun, 77 Penn. St., 131 (1874), the note contained a warrant to any attorney of record to confess judgment for principal and interest, and five per cent. collection fees, with costs of suit, release of errors, and without stay of execution. Held not negotiable, "by reason of the warrant of attorney contained in it." In Johnston v. Speer, 92 Penn. St., 227 (1879), Albany L. J., Vol. 23, p. 13, it was held that a note for a certain sum and interest, "with per cent. attorney's commission if collected by legal process," was not negotiable, for, in any event, oral testimony would be necessary, but that such an agreement could not be regarded as a penalty, but as an agreed compensation for expense and trouble in collecting the note. In First N. B. v. Gay, 63 Mo., 33 (1876), the note agrees to pay, if put in attorney's hands for collection, an additional sum of ten per cent. as attorneys' fee. Held not a promissory note, and not negotiable because a portion of the amount to be paid depended upon the contingency whether the other portion was paid at maturity. In First N. B. v. Bynum, 84 N. C., 24 (1881), Albany L. J., Vol. 13, p. 202, the note agreed to pay "all counsel fees and expenses in collecting if it is sued on or placed in the hands of an attorney for collection." Held that part of the amount was uncertain, and the paper not negotiable. In Samstag v Conley, 64 Mo., 477 (1877), note promised to pay reasonable attorney's fee if suit be brought thereon. Held not negotiable. See also Storr v. Wakefield, 71 Mo., 622 (1880); First N. B. v. Marlow, 71 Mo., 618 (1880); First N. B. v. Gay, 71 Mo., 627 (1880). In Jones v. Raditz, 27 Minn., 240 (1882), C. L. J., Vol. II, p. 512, the note promised to pay a reasonable attorney's fee if suit were instituted. Held not negotiable, and that the requisite certainty in negotiable paper must continue until the obligation is discharged." In Morgan v. Edwards, S. C. of Wisconsin, Dec., 1881, reported in Central L. J. of Jan'y 13, 1882, Vol. 14, p. 33, the note was payable with "all expenses, including attorney's fees, incurred in collecting. Held not negotiable, the court pointing out that the additional amounts were not payable only upon the contingency of default in payment at maturity.

void. They proceed on the ground that the paper is nego. tiable, because as long as current the amount contemplated to be paid is certain, and that after that its negotiable office is performed; but that the insertion of such provisions tends to encourage litigation, to oppress debtors, and is against the policy of the law and void.1

Fourth. The fourth class of cases hold that the stipulation to pay the additional amount renders the transaction usurious, and subjects the instrument to the operation of the statutes against usury."

§ 62a. Such instruments should, we think, be upheld as negotiable. They are not like contracts to pay money and do some other thing. They are simply for the payment of a certain sum of money at a certain time, and the additional stipulations as to attorney's fees can never go into effect if the terms of the bill or note are complied with. They are, therefore, incidental and ancillary to the main engagement, intended to assure its performance, or to compensate for trouble and expense entailed by its breach. At maturity, negotiable paper ceases to be negotiable in the full commercial sense of the term, as heretofore explained, though it still passes from hand to hand by the negotiable forms of transfer; and it seems paradoxical to hold that instruments evidently framed as bills and notes are not negotiable during their currency, because when they cease to be current they contain a stipulation to defray the expenses of collection.*

Such stipulations do not, we think, render such instruments usurious. The additional amounts are in considera

1 Gaar v. Louisville Banking Co., 11 Bush (Ky.), 182 (1874); note held negotiable, and stipulation void; Witherspoon v. Musselman, 14 Bush (Ky.), 214 (1878). In Bullock v. Taylor, 39 Mich., 138 (1878), agreement added to note to pay $15 attorney's fees above all taxable costs. Held stipulation void because susceptible of being made the instrument of the most grievous wrong. Myer v. Hart, 40 Mich., 517 (1879); see Kemp v. Claus, 8 Neb., 24.

'Dow v. Updike, 11 Neb., 95; 7 N. W. Reporter, 185 (1881); State v. Taylor, 10 Ohio, 378 (1841); Shelton v. Gill, 11 Ohio, 417.

See ante, §§ 1, 1a.

'Benjamin's Chalmer's Digest, 17.

tion of additional trouble and expense inflicted on the holder, and not excessive interest for the loan or forbearance of money.

If the additional stipulations be regarded as in the nat ure of penalties, and therefore void, they would simply be surplusage, and would not impair the negotiability of the paper. And this is the view which commends itself, as it seems to us, to judicial favor. Unless there be some statute under which such stipulations are permissive, it certainly tends to the oppression of debtors to sanction their incorporation in commercial instruments; and they are, therefore, against the policy of the law and void. But when the added stipulation is deemed valid, and the bill or note negotiable, such stipulation becomes a part of the acceptor's or indorser's contract,' and need not be sued for by the attorney, but are recoverable by the holder of the instrument. When the amount of fees is fixed by a certain percentage, or certain sum, as in many cases, the objection to negotiability of the paper becomes extremely technical and sophistical, if the validity of the additional stipulation is supported, and it is only when their amount is left undetermined that such objection seems to be forcible. The holder, it has been held, must prove the amount of the attorney's fees in order to recover them.

SECTION VII.

DELIVERY.

§ 63. In the seventh place, the instrument must be deliv ered. Delivery is the final step necessary to perfect the

'Smith v. Muncie N. B., 29 Ind., 158; Hubbard v. Harrison, 38 Ind., 323; First N. B. v. Canatsey, 34 Ind., 334; Bank v. Ellis, 2 Fed. R., 44.

Johnson v. Crossland, 34 Ind., 334; Walker v. Woollen, 54 Ind., 164; Bank r. Ellis, 2 Fed. R., 44. Contra, Ware v. City Bank, 59 Ga., 848.

Sperry v. Horr, 32 Iowa, 184, ten per cent.; Dietrich v. Baylie, 23 La. An., 767, ten per cent.; Overton v. Mathews, 35 Ark., 147, ten per cent.; Farmers' N. B. v. Rasmussen, 1 Dakotah, 60, ten dollars; and cases cited ante, § 62. Wyant v. Pattorf, 37 Ind., 512.

existence of any written contract; and, therefore, as long as a bill or note remains in the hands of the drawer or maker it is a nullity. And even though it be placed by the drawer or maker in the hands of his agent for delivery, it is still undelivered as long as it remains in his hands, and may be recalled; and, while there, the payee has no right to it, unless it be wrongfully withheld by the agent. If the agent to whom a note is delivered, to be issued on condition, refuses to return it to the party who has executed it upon the failure of that condition, such party may restrain him from its negotiation, and compel the cancellation of his signature thereon.3 It is not necessary to aver the delivery of a bill or note, for the averment that a bill was drawn or a note made includes the idea of a delivery, without which the drawing or making is not complete. So essential is delivery, that it has been held that where a promissory note, the writing of which was unknown to the grantee, lay in the grantor's possession, and was found amongst his papers after death, the payee could not claim. or sue upon it; and though such a note should be found, accompanied with written directions to deliver it to the payee, the payee will still have no right of action, unless the directions be valid as a testament.

be con

It is to be observed, however, that delivery may structive as well as actual, by manual passing of the instru

1

1 Bailey v. Taber, 5 Mass., 286; Marvin v. McCullum, 20 Johns, 288; Freeman v. Ellison, 37 Mich., 459; Lansing v. Caine, 2 Johns, 300; Woodford v. Dorwin, 3 Vt., 82; Ward v. Churn, 18 Grat., 801; Hopper v. Eiland, 21 Ala., 714; Richards v. Darst, 51 Ill., 141; Roberts v. Bethell, 12 C. B., 778; Cox v. Troy, 5 B. & Ald., 474; Howe v. Ould, 28 Grat., 7; Bartlett v. Same, Id.; Devries v. Shumate, 53 Md., 216.

2 Thomson on Bills, 90-91; The King v. Lambton, 5 Price, 428; Byles [*146], 265; Edwards on Bills, 186; 1 Parsons N. & B., 48-50; Devries v. Shumate, 53 Md., 216.

4

Devries v. Shumate, 53 Md., 212.

Churchill v. Gardner, 7 T. R., 596; Smith v. McClure, 5 East., 477; Binney

v. Plumley, 5 Vt., 500; Peets v. Bratt., 6 Barb., 662; Chester, etc., R.R. Co. v Lickiss, 72 Ill., 521; Black v. Duncan, 60 Ind., 522.