Opinion
No. 29339
Decided July 28, 1943.
Negotiable instruments — Promissory note an instrument for unconditional payment of money on demand — Additional provisions for payment and default of installment — Pleading — Short form of petition not demurrable, when — Phrase "which he claims" omitted — Allegations of pleading liberally construed — Sections 11334 and 11345, General Code.
1. A promissory note which contains the provision, "On demand I promise to pay to the order of" the named payee a definite sum of money therein specified, is an instrument for the unconditional payment of money only, and is payable on demand even though the note, which is otherwise regular in form, contains an additional provision for payment of "not less than the best can do dollars on the first day of each month," and provides further, upon "default of any installment, the entire sum shall, at the option of the holder, become due and payable."
2. Under the provisions of Section 11345, General Code, requiring that the allegations of a pleading be liberally construed with a view to substantial justice between the parties, the absence of the phrase, "which he claims," from a petition under the special form of pleading authorized by Section 11334, General Code, does not render the pleading vulnerable to a general demurrer when it is evident, from the language used in the petition, what the plaintiff claims.
APPEAL from the Court of Hamilton county.
This case originated in the Common Pleas Court of Hamilton county as an action for money only based on an alleged negotiable instrument.
The amended petition filed by the plaintiff reads as follows:
"The defendant on the 11th day of August, 1930 executed and delivered to Otis and Company a promissory note of that date, a true copy of which is hereto attached marked exhibit A and made a part of this petition.
"Said note is unpaid and there is now due the plaintiff on said note the sum of seventy-seven thousand three hundred sixty-two and 11/100 ($77,362.11) dollars in accordance with statement hereto attached marked exhibit B and made a part of this petition.
"Wherefore plaintiff prays judgment against said defendant for the sum of seventy-seven thousand three hundred sixty-two and 11/100 ($77,362.11) dollars."
Attached to this petition were two exhibits. Exhibit A was a photostatic copy of the note which, except certain insertions therein, as set forth in italic type, was printed, and is as follows:
"Promissory Note. "Due on demand "$77,127.59 Cleveland, Ohio, Aug. 11, 1930
" On demand I promise to pay to the order of Otis Co. seventy seven thousand one hundred twenty seven and 59/100 dollars, with interest at the rate of 6% per annum, payable monthly on the first day of each month, having deposited with Otis Co. as collateral security for payment of this or any other liability or liabilities of the undersigned to Otis Co. due or to become due, or that may be contracted hereafter, the following property:
" 1,000 U.S. Realty.
"Otis Co. have the right to call for additional security when deemed necessary for their protection and upon failure to respond this obligation shall be deemed due and payable on demand, and in the event of nonpayment Otis Co. shall have full power and authority, either before or after judgment, to sell, assign and deliver at public or private sale all of the aforesaid property as Otis Co. or their assigns shall deem proper, returning the overplus, if any, after deducting all expenses, to the undersigned.
"Otis Co. is hereby authorized to repledge, rehypothecate (either for the amount due them from the undersigned, or for a greater sum) all or any of said property, and loan the same from time to time, separately or together with other securities, either generally or to or for account of their customers, and they shall not be obliged to deliver to the undersigned the same certificates or securities deposited or received.
" I hereby authorize any attorney-at-law to appear in any court of record in the United States after the above named indebtedness becomes due, and waiving the issuing and service of process, to confess a judgment against me for the amount thereof and costs of suit, and also to release and waive all errors, right of appeal or stay of execution on such judgment and hereby authorizing the holder to apply hereon at any time any moneys owing by such holder to the undersigned or any of the undersigned and further agreeing that in case of insolvency, bankruptcy, business failure or default on this or any other obligation to the holder, then at the option of the holder this and all such other obligations shall at once become due and payable without demand or notice. The makers of this note, when more than one, shall be jointly and severally liable hereon.
"In consideration of the acceptance of this note by Otis Co. I hereby agree to pay not less than the best can do dollars on the first day of each month, out of which interest shall first be credited, the balance to apply on the principal. In the event of default of any installment, the entire sum shall, at the option of the holder, become due and payable. Waiver of any default shall not be deemed a waiver of any succeeding default.
"Address Cincinnati, Ohio. Dr. Lee McHenry "Tel. No. .........."
On the reverse side of the copy of the note is the following endorsement:
"Pay to the order of The Union Trust Co. without recourse.
"Otis Co. "By C.S. Gotz "A partner.
"Pay to the order of Union Properties, Inc.
"S.H. Squire, Superintendent of Banks in charge of liquidation of The Union Trust Company, Cleveland, Ohio.
"By Dan A. Hart "Special Deputy Superintendent of Banks.
"Without recourse or warranty. Said endorsee and all subsequent holders waive all warranties imposed upon the last above named endorser by law. O. K."
Exhibit B consisted of an account of the dealings between Otis Company, the payee of the note, and the defendant Lee McHenry, and shows the credits and also the balance claimed by the plaintiff to be due from the defendant.
A demurrer was filed on behalf of the defendant which was sustained by the Court of Common Pleas, the announced holding being:
"That the instrument pleaded in the petition is not a negotiable instrument for the reason that it is not an absolute promise to pay a sum certain in money at a specified time or time certain.
"The court is, however, of the opinion that the instrument does constitute a promissory note, non-negotiable in character, the time for payment being determinable upon the happening of certain contingencies.
"Inasmuch as the petition fails to allege a breach of any condition which would cause payment to be due of all or any part of said note, the demurrer should be sustained."
The plaintiff not desiring to plead further, the Court of Common Pleas dismissed his petition and the plaintiff thereupon prosecuted an appeal on questions of law to the Court of Appeals. That court found for the plaintiff and reversed the judgment of the Court of Common Pleas on the ground that the instrument in question was a negotiable instrument for the unconditional payment of money only and that the petition complied with the requirements of the statute.
The case is before this court following the allowance of a motion to certify the record of the Court of Appeals.
Mr. Frank J. Richter, for appellee.
Mr. James A. McDonald and Mr. Richard T. Carroll, for appellant.
The sufficiency of the averments of the amended petition to state a cause of action is challenged by the demurrer. Plaintiff evidently sought to frame the amended petition pursuant to and in accordance with the provisions of Section 11334, General Code, specifying a so-called short form of pleading in a cause of action based upon an instrument for the payment of money only. Section 11334, General Code, provides as follows:
"In an action, counterclaim, or set-off, founded upon. an account, or upon an instrument for the unconditional payment of money only, it shall be sufficient for a party to set forth a copy of the account or instrument, with all credits and the indorsements thereon, and to state that there is due to him, on such account or instrument, from the adverse party, a specified sum which he claims, with interest. When others than the makers of a promissory note, or the acceptors of a bill of exchange, are parties, the facts which fix their liability also must be stated."
It is contended, however, that if it be assumed that the instrument sued upon comes within the provisions of Section 11334, General Code, the amended petition is fatally defective because of the absence of the phrase, "which he claims." In determining the sufficiency of the pleading in question, this court must give the amended petition a liberal construction. Section 11345, General Code, provides:
"The allegations of a pleading shall be liberally construed, with a view to substantial justice between the parties."
Following and applying this admonition, it must be concluded that the mere omission of the phrase, "which he claims," does not render the amended petition vulnerable to a demurrer when, as here, it is evident from the language used what the plaintiff claims. Bates' Pleading, Practice, Parties Forms (4 Ed.), 913, Section 974 c.
Exhibit B, attached to and made a part of the petition, may be regarded as surplusage, except insofar as it shows credits for payments conceded to have been made on the note.
The only other question presented is whether the instrument involved in this action is an instrument for the unconditional payment of money only, within the purview of Section 11334, General Code. It has been argued by the appellant that because the amended petition of the plaintiff does not expressly aver that it has title to the instrument in question the demurrer should have been sustained on that ground alone. With that contention we are not in accord for the reason that "whether the plaintiff be an original party to the note or not, the extrinsic facts, which show his right or title to the note, need not be expressly averred. The allegation of title is implied, by force of the statute, in the statement that there is due to him a specific amount on the note which he claims." Sargent v. Railroad Co., 32 Ohio St. 449; Schrock v. Cleveland, Recr., 29 Ohio St. 499.
The question which defendant seeks to present is one for consideration upon motion rather than general demurrer.
If there is any objection to the amended petition of the plaintiff, it must arise from the claim that the action is based upon an instrument which does not provide for the unconditional payment of money only. Defendant contends that since the note provides that the maker should pay installments "as best can do" (which phrase was written in a blank space in the printed form), the plaintiff is required to allege some breach of the condition of the note which brings it to maturity.
The fact that a note is payable in installments does not destroy the negotiable character of the note. Section 8107, General Code, provides:
"The sum payable is a sum certain within the meaning of this chapter although it is to be paid; * * *
"2. By stated installments; or
"3. By stated installments; or with a provision that upon default in payment of any installment or of interest, the whole shall become due * * *."
Neither does the fact that a note is secured by collateral destroy the negotiability thereof. Section 8110, General Code, provides:
"An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable character of an instrument otherwise negotiable is not affected by a provision which:
"1. Authorizes the sale of collateral securities in case the instrument be not paid at maturity; * * *
"But nothing in this section shall validate any provision or stipulation otherwise illegal."
It is to be observed that the sum to be paid in each monthly installment is not stated in the note sued upon and is therefore indefinite and uncertain. Standing alone, the provision that upon "default of any installment, the entire sum shall, at the option of the holder, become due and payable" necessarily would give rise to controversy as to when a default had occurred.
Even in such situation, however, the provisions of Section 8112, General Code, would make the note payable on demand. It provides:
"An instrument is payable on demand: * * *
"2. In which no time for payment is expressed."
The true intent of this instrument is readily determined from the first paragraph thereof wherein it is stated that the note is due upon demand. The words, "On demand I promise to pay to the order of Otis Co.," are clear and unambiguous and require no construction or interpretation. It is well settled that a promissory note payable on demand is due upon delivery thereof, and therefore the filing of an action is in itself a sufficient demand against the maker of a note to sustain the action and no demand for payment is required prior thereto. Hill v. Henry, 17 Ohio, 9; Darling v. Wooster, 9 Ohio St. 517.
It follows that the Court of Appeals was correct in its holding that the Court of Common Pleas was in error in sustaining the demurrer to the amended petition and in entering a judgment dismissing same. The judgment of the Court of Appeals is accordingly affirmed.
Judgment affirmed.
WEYGANDT, C.J., HART and WILLIAMS, JJ., concur.
ZIMMERMAN, BELL and TURNER, JJ., dissent.
A specific provision is to be taken as an exception to a general provision. Section 11334, General Code, makes a specific provision in derogation of the general rules of pleading by providing a minimum of contents for a petition in certain cases. No rule of liberal interpretation should permit the elimination of any part of the statutory form. Without stopping to explain what the phrase was intended to be a substitute for, I am of the opinion that a petition in short form under Section 11334, General Code, which fails to contain the phrase "which he claims" is fatally defective. Sargent v. Rd. Co., 32 Ohio St. 449; Swan's Pleading Precedents, 184; Kinkead's Code Pleading (2 Ed.), 428. See Tisen v. Hanford, 31 Ohio St. 193.
I also dissent for the reason that exhibit B attached to the petition discloses that the instrument sued on is not one for the unconditional payment of money only but is rather a memorandum in connection with a margin account.
ZIMMERMAN and BELL, JJ., concur in the foregoing dissenting opinion.