NOTE APPOINTING HOLDER TO CONFESS JUDGMENT, WAIVING EXEMPTION AND PAYMENT OF COLLECTION FEES

$1,000.00

Philadelphia, Sept. 1, 19—. Three months after date I promise to pay to the order of Fairman A. Sadler & Co. One Thousand Dollars, without defalcation, with interest, and further do hereby authorize and empower any attorney of any Court of Record in Pennsylvania, or elsewhere, to appear for and confess judgment for the above sum, with or without declaration, with costs of suit, release of errors, without stay of execution, and with five per cent added for collection fees, and also waive the right of inquisition on my real estate that may be levied upon to collect this note, and do hereby voluntarily condemn the same and authorize the Prothonotary to enter upon the Fi. Fa. said voluntary condemnation; and further agree that said estate may be sold on Fi. Fa., and hereby waive and release all relief from any and all appraisement, stay, or exemption laws of any State, now in force, or hereafter to be passed, and also waive the benefit of the present and any future bankrupt law that may be passed by the United States.

SAMUEL P. BLAIR.

187. Collateral notes. Collateral means security given in addition to a principal promise; therefore a collateral note is one which contains security for payment of money in addition to the principal security. The principal security is the bare promise of the maker to pay the sum named; the collateral security is any stocks, bonds, warehouse receipts or other tangible property given to the holder of the note. The maker of the note gives the holder the power to sell the collateral in case the note is not paid at maturity. The stocks, bonds or other securities given with the note are not the property of the party who loaned the money, and must not, under any circumstances, be used by him except in default of payment. They are only pledged to make the loan secure, and when the money is repaid they must be returned to the borrower. The nominal value of the collateral usually exceeds the amount of the loan, because

at a forced sale the collateral might not bring a sum equal to the amount loaned.

As this method has become a very common practice of obtaining loans, we will more fully illustrate by supposing Mr. Brown wanted to obtain a loan from the American National Bank for $10,000.00. Not wishing to ask anyone to endorse his paper, as he would then feel under obligation to return the favor, he offers the bank 250 shares of stock of $100.00 each in the Consolidated Gas Co., Kansas City, which they can hold as security. The bank, being thus protected, makes the loan upon these terms. Mr. Brown will deliver to the bank with his note the stock endorsed in blank. If the note be paid at maturity the stock will be returned to Mr. Brown. If not paid, the stock will be sold and the proceeds of the sale will be applied in settlement of the note. If the proceeds from the sale of the stock be in excess of the loan, such excess will be returned to Mr. Brown. But if the proceeds be not sufficient to settle the loan the borrower will be liable for the deficiency. We herewith submit two forms of a collateral note:

188. Forms of collateral notes.

$7,000.00

Philadelphia, Pa., Sept. 1, 19—.

Sixty days after date I promise to pay to the order of Second National Bank of Philadelphia, Pa., Seven Thousand Dollars, value received, without defalcation, and I further deliver to the said payee One Hundred and Twenty-five shares ($100.00 par) Capital Stock of Pullman Car Co., Chicago, Ill., as collateral security for the payment of the said note on the day it becomes due, which collateral I hereby authorize and empower the holder of the promissory note (provided the same be not paid at maturity) to sell or transfer at public or private sale without further reference or notice; to apply the proceeds in payment thereof together with interest and charges thereon; thereafter should any deficiency remain, I further promise and agree to pay the same to the holder thereof on demand.

CHARLES LEE MANN.

189.

$25,000.00

Chicago, Ill., Sept. 6, 19—. Four months after date I promise to pay to the order of Union Trust Company, at their office in Chicago, Twenty-five Thousand Dollars, for value received, with interest at the rate of 6 per cent per annum, after maturity until paid.

I have transferred and delivered to said Union Trust Company, as collateral security, for the payment of this and of any other liabilities of the undersigned to said payee, due or to become due, or that may hereafter be contracted, the following property, value of which is Twentyseven Thousand Five Hundred Dollars, viz.: Three hundred seventy-five shares, Chicago, Milwaukee & St. Paul Railroad Stock. Certificates: No. 3114 for 100 shares, No. 3115 for 200 shares and No. 3476 for 75 shares. And the undersigned hereby gives the said payee and assigns authority to sell said property, or any part thereof, or any substitutes therefor, and all additions thereto, on the maturity of the above note, or any time thereafter, or before, in the event of said security depreciating in value, at any public or private sale, without advertising the same or demanding payment or giving notice, with the right to said payee and assigns themselves to be the purchasers, when sale is made at any brokers' board or public sale. And after deducting all costs and expenses, to apply the residue to the payment of any, either or all liabilities as aforesaid, as said payee or assigns shall elect returning the overplus to the undersigned; and in case the proceeds of the sale of said property shall not cover the principal, interest and expenses, the undersigned engages to pay the deficiency forthwith after such sale, with legal interest.

IRA WILLIS.

190. Giving holder option to require money or something else. Rule: An instrument to be negotiable must be payable in money, and an agreement to pay money and do something else, or to pay money or do something else at the maker's option is not negotiable.

However, if the instrument provides that the holder may require the payment of money or that something else be done in lieu of money the instrument is negotiable. Where an instrument provided for the payment of $1,000.00 with interest thereon, or upon surrender of the note for the issuance of ten shares of stock in the same company in exchange for the note,

the instrument was negotiable. It called for the payment of a certain sum of money absolutely, and merely gave the holder an option to choose something else instead of money.

QUESTIONS

1. What stipulations may be embodied in a note without affecting its negotiability?

2. What is meant by waiving exemptions?

3. How does a judgment note differ from an ordinary promissory note? 4. What is meant by a collateral note?

5. Give an illustration of a collateral note.

6. Does it destroy the negotiability of a note to embody a provision that the holder may take something else in lieu of money payment?

CHAPTER XVII

FORM OF DRAFT AND NOTE

191. Formality not required. No particular form of words is essential to constitute a draft or note. All that is necessary is that such instruments contain the essential requisites as previously explained.

We give a detailed analysis of the following forms which are in general use, in order that the student may see the composition or make-up of a draft and note from the beginning of the date to the completion of the same by the signing of the signature:

FORM 1.-FOREIGN BILL OF EXCHANGE. -(Drawn at Sight.)

Philadelphia. Ock 27.19At sight pay William J Harman, or order. Nine Hundred. Twenty-five and... Dollars value received and charqe' to account of FWW Aument

St. Louis, Mo.

D. W. Howard Ho.

FORM 2.-INLAND BILL OF EXCHANGE.-(Drawn at Thirty Days' Sight.)

$1000 700

Baltimore Sept 1, 19

Thirty days after sight pay to the

order of Charles L Wilson

Ine Thousand.

Dollars