## Facts

- New York Bronze sold the assets of a business known as Benjamin F. Rich Company to Benjamin for $4.5 million, with Benjamin assuming certain liabilities.
- Near closing, Benjamin raised concerns about asset valuation, and the parties executed an amendment deferring $350,000 of the purchase price.
- Benjamin issued New York Bronze a $350,000 non-negotiable note payable in two installments: one tied to delivery of an audited balance sheet and the second due July 30, 1991.
- The amendment provided that if the audited balance sheet showed net worth below $4.5 million, Benjamin would receive a dollar-for-dollar credit against the $350,000 deferred amount.
- The accounting firm never completed the audit, and Benjamin did not pay the note.
- The note stated that the noteholder “shall be required to surrender this Note for cancellation upon the maturity or prepayment in full of this Note in order to receive payment.”
- When New York Bronze sued for nonpayment, it could not locate the original note but had reason to believe it was held by its lender with other original transaction documents.
- The trial court entered judgment for New York Bronze; the intermediate appellate court reversed, treating surrender as a condition precedent to payment.

## Issues

1. Whether the note’s requirement that the noteholder surrender the note for cancellation “in order to receive payment” created an express condition precedent to the maker’s duty to pay.
2. Whether, if the note could not be physically surrendered, the noteholder was barred from recovering despite the underlying payment obligation.

## Decision

- The Court of Appeals of Maryland reversed the intermediate appellate court and reinstated judgment for New York Bronze.
- The court held the surrender-of-note language was not an express condition precedent to Benjamin’s duty to pay.
- The clause was construed as a promise or constructive condition related to payment mechanics and cancellation of the instrument.
- New York Bronze’s inability to produce the original note did not discharge Benjamin’s payment obligation.
- Any risk of double payment could be addressed through protective measures (e.g., indemnity or similar safeguards), not by forfeiting the debt.

## Legal Principles

- Ambiguous contractual language will be construed as creating a promise or constructive condition rather than an express condition, particularly when an express-condition reading would create a substantial risk of forfeiture.
- Express conditions generally require clear conditional language and will not be inferred from wording that reasonably functions as a procedural term governing performance.
- Terms requiring surrender of an instrument upon payment ordinarily serve to effect cancellation and protect the obligor from multiple liability; failure to surrender does not automatically extinguish the underlying payment duty where adequate substitute protections can be provided.

## Conclusion

The court treated the surrender requirement as a procedural term tied to cancellation of the note rather than a strict condition precedent, allowing enforcement of the $350,000 payment obligation despite the missing original note, while preserving the maker’s right to protection against double liability.


N.Y. Bronze Powder Co. v. Benjamin Acquisition Corp., 351 Md. 8, 716 A.2d 230 (Md. 1998)