Case ID: ad_151/html/0128-01.html
Source: Caselaw Access Project
Author: {"author": "Spring, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Columbia Distilling Company, Appellant, v. Charles W. Rech and Frederick A. Rech, Respondents.
    Fourth Department,
    May 1, 1912.
    Bills and notes — alteration of instrument by addition of interest clause ^instrument and original indebtedness extinguished—proof showing fraud.
    Where the payee of a promissory note originally drawn without interest adds the words, “with interest at 6#,” without the knowledge or consent of the maker, there is a material alteration of the note within the meaning of the Negotiable Instruments Law, and a finding by the jury that the alteration was fraudulently made not only vitiates the note but extinguishes the original indebtedness.
    Evidence in an action on such altered note examined, and held, that the jury were justified in finding that the alteration was fraudulently made.
    Appeal by the plaintiff, the Columbia Distilling Company, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Monroe on the 16th day of November, 1911, upon the verdict of a jury, and also from an order entered in said clerk’s office on the same day denying the plaintiff’s motion for a new trial made upon the minutes.
    
      
      Isaac Adler, for the appellant.
    
      W. B. Simson, for the respondent Charles W. Eech.
    
      Corden T. Hackett, for the respondent Frederick A. Rech.
   Spring, J.:

The plaintiff is a domestic corporation, and the defendants copartners in business. On the 14th of September, 1910, the plaintiff sold and delivered to the defendants a quantity of liquors, for which they agreed to pay $330.51. The agent of the plaintiff, who made the sale, testified that the merchandise was sold on four months’ time, while the testimony of Charles W. Eech was that the agent “ told me that I could take my own time. Four months is sometimes a reasonable time and sometimes it is not. I would consider four months a very fair time. I have had longer time.”

On the 1st of November, 1910, at the request of the plaintiff, the defendants gave their promissory note to the plaintiff for the amount of the account, due -in three months from its date. The note was not drawn with interest. When received by the plaintiff it caused the words “With interest at 6% ” to be written in the note above the signature of the defendants and without their knowledge. About the time the note became due the defendants paid thereon $105.51, and gave another note dated February 1, 1911, due in three months, for $225, which, with the payment, equaled the face of the claim.

At the time of the giving of the second note the defendants did not know of the alteration of the first note, and the last note was not given with interest. Immediately after it was received, the bookkeeper of the plaintiff, with the knowledge of the officers of the plaintiff, altered the note by adding, “ With interest 6%.” When the note came due one of the defendants went to the bank where it was made payable for the purpose of paying it, and then first learned of the alteration. He first testified, that he “ wanted to pay the $225, hut I wouldn’t pay the interest. The hank refused to accept the $225. They said they couldn’t accept it.” Later he said: “ They [the plaintiff] didn’t say they would take $225. I didn’t offer to pay $225 at the bank. I didn’t offer them anything since then.”

The complaint set out two causes of action — one on the original indebtedness and the other on the note; and on the trial the plaintiff offered to surrender the note,- and sought to recover the balance alleged to be due on the account. The sole question submitted to the jury was whether the alteration of the note was made with “a fraudulent intent to compel the defendants to pay something more than they were morally or legally obligated to pay,” and if so, “then your verdict will be in favor of the defendants,” otherwise for the plaintiff.

The addition, “With interest 6%,” constituted a material alteration of the note. (Neg. Inst. Law [Consol. Laws, chap. 38; Laws of 1909, chap. 43], § 206, subd. 2.)

If the alteration was made fraudulently, as the -jury have found, the taint not only vitiates the note but also extinguishes the original indebtedness. (Meyer v. Huneke, 55 N. Y. 412, 417 et seq.; Kennedy v. Crandell, 3 Lans. 1, 6; Booth v. Powers, 56 N. Y. 22, 31; Maguire v. Eichmeier, 109 Iowa, 301, 304; Daniel Neg. Inst. [5th ed.] § 1410a; Rand. Com. Paper [2d ed.], § 1763;. Tiedman Bills & Notes, § 150.)

While the penalty imposed is severe to the plaintiff and the defendants have sustained no pecuniary loss, as they are asked-simply to pay the balance of the debt, which they originally incurred and which has not been paid, the reason for the drastic rule is found in the necessity for visiting the full measure of punishment on the one perpetrating the fraud. Loss to one person or gain to another are not considerations which induced the adoption of the rule adverted to.

As was said in Daniel on Negotiable Instruments (§ 1410a): “It is necessary that the law should impose this forfeiture of the debt itself upon one who fraudulently tampers with the instrument which evidences or secures it; and it is done upon the principle that no man should be permitted to take the chance of gain by the commission of a fraud, without running the risk of loss in the case of detection.’ ”

' The fraud might have extended to simulating the handwriting of the writer of the note, and the defendants might have been unable to detect the alteration; or, if they had died before the maturity of the note, discovery of the fraud might have been difficult. The plaintiff is responsible for the alteration, and “ it is for the purpose of discouraging such attempts that the law denies relief to a plaintiff who comes into court with his hands soiled with a fraud so inexcusable. That the effect of such denial will be to benefit the other party is not a sufficient ground for overlooking the fraud.” ' (55 N. Y. 419.)

It is claimed that the proof does not justify the inference that the alteration was fraudulently made. No officer of the plaintiff testified in its explanation. The bookkeeper in attempting to excuse it said the account was past due, and he “presumed it was an oversight on the part of the party that drew the note leaving it off. That is what caused me to put it on; ” and that in making the alteration he had no intention “to defraud anybody,” but it was made for the purpose of collecting the interest when the note matured. It is not important that the bookkeeper did not act with any purpose to defraud. He made the alteration with the knowledge of “the firm,” as he designated the plaintiff.. The alteration was in fact made, was material and with no effort to justify it by those responsible for it. The jury were warranted in determining that it was fraudulently made.

The judgment should be affirmed.

All concurred; Foote, J., not sitting.

Judgment and order affirmed, with one bill of costs to respondents.