Case Name: The Portage County Branch Bank v. Gustavus Lane
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1858-12
Citations: 8 Ohio St. 405
Docket Number: 
Parties: The Portage County Branch Bank v. Gustavus Lane.
Judges: Sayan, C. J., and Brinkerhoee, Scott and Suture, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 8
Pages: 405–415

Head Matter:
The Portage County Branch Bank v. Gustavus Lane.
Where L., at the request of S. & Co., for the purpose of procuring from the plaintiff a loan for the benefit of S. & Co., joined them in a note for $3,000, payable to the plaintiff ninety days after date, and left the note with S. & Co. for negotiation, and the plaintiff knowing that L. was merely a surety, refused to discount the note at its face, but without the knowledge or consent of L., agreed with S. & Co. to loan them $2,000 upon it, and same day wrote across the face of the note — “ $2,000. This note was discounted for $2,000, which amount is due upon it — John H. Ebbert, Cashier,” — and the plaintiff, the note not haying been paid at maturity, brought suit against all the makers, describing it as a note for $3,000. Held:
1. That the note, up to the time of its transfer and delivery by S. & Co. to plaintiff, had no legal validity as a promissory note for any amount.
2. That the plaintiff, having refused to discount the note at its face, it never became operative as a note for $3,000.
3. That the note, when thus delivered and indorsed, became, and was, in legal effect, a note for $2,000, and no more.
4. That L. being merely a surety, and never having assented to the modification, was not liable upon it as a note for $2,000, nor for the money loaned, as upon request.
5. Where, upon the whole record, it is apparent that on a re-trial no recovery can be had, a judgment in favor of- the defendant will not be reversed merely because the court below may have erred in their instructions to the jury.
This is a petition in error to reverse a judgment of the District Court of Portage county.
Suit was originally instituted in the Portage common pleas, by the plaintiff in error, against the defendant in error, L. A. Seymour, H. E. Judd and W. D. Mann, jr., on the following note:
$3,005 [No. 453.]
$2,000
Ravenna, Ohio, July 25th, 1851.
Ninety days after date, we jointly and severally promise to pay the Portage County Branch, in Ravenna, or order, at the American Exchange Bank, New York city, three thousand dollars, for value received.
$31,00 Oct. 26. (Signed) L. A. SEYMOUR,
H. E. JUDD,
WM. D. MANN, Jr., GUSTAVÜS LANE.
Three thousand dollars in figures, on the face of the note, was erased, and two thousand dollars in figures, in pencil marks, was put on the note.
The following entry was made across the face of the note in red ink:
“ $2,000. This note was discounted for two thousand dollars, which amount is due on it.
“July 25, 1851. John H. Ebbekt, Cashier.”
Lane and Seymour only, were served with process and pleaded to the action, and the suit resulted, in the common pleas, in a verdict and judgment in favor of the plaintiff" in error, as against Seymour for $2154.88, upon said note, and a verdict and judgment in favor of Lane. From this judgment the plaintiff" in error appealed to the district court, in which the cause has been twice tried. The plaintiff in error, at the first trial, recovering a verdict against both. Seymour and Lane for $2190.00; which verdict, on motion of Lane, was set aside, and a new trial awarded; and at the second trial the jury rendered a verdict in favor of Lane, whereupon the plaintiff in error moved the court to set aside the verdict rendered in favor of Lane, and to grant a new trial:
1st. Because the verdict was against the law and evidence in the case.
2d. Because the court erred in their instructions to the jury-
The court overruled this motion and rendered judgment in favor of Lane, upon the verdict, to which rulings of the court the plaintiff in error excepted.
To revei-se this judgment this petition in error is prosecuted, and the causes for reversal assigned ax-e, that the coux-t erred—
1st. In instructing the jury as set forth in the bill of exceptions.
2d. In overruling the motion of the plaintiff for a new trial.
3d. In giving judgment for the defendant Lane, when, under the law and evidence, the judgment should have been for the plaintiff.
4th. Other ex-rox-s.
It appears from the bill of exceptions that the corporate capacity of the plaintiff, and the due execution of the note sued on, were admitted on the trial — that the note, with the erasures and the memox-anda thereon, were given in evidence to the jury — that the defendant Lane produced to the jux-y evidence tending to px-ove that he signed the note as surety only, and that this fact was well known to the plaintiff at and before the discounting of the note; that the note was first presented to the plaintiff for discount by Seymour, one of the defendants, and co-pax-tner of Judd and Mann, before it was signed by Lane, and that plaintiff refused to discount it, but offered to discount $2,000 upon it, provided additional security was obtained tbereon— tbat thereupon Seymour took the note and procured the signature of Lane thereto, and returned with the same to the plaintiff, who thereupon discounted thereon the said sum of $2,000, and, by its cashier, indorsed thereon the memorandum appealing across the face of said note — that said Lane was not present at either of the interviews between the defendant Seymour and the said plaintiff, and that the entire agreement, in respect to the discounting of said note, was exclusively between the said plaintiff and the said defendant Seymour — that the money discounted thereon was paid by said plaintiff to said Seymour; and there was no other or further evidence as to the knowledge of the defendant Lane in the premises, nor further evidence upon either side.
Thereupon the court, among other things, charged the jury as follows:
“ It is claimed that the writing- on the face of the note, in connection with the agreement made with Seymour at the time of the discount, as proved hy the cashier, is such an alteration of the note as avoids the note as against the surety.
“ Upon this point, the court say to you, that if you find that Lane was merely a surety; that, the note when signed by him was a note for $3,000, and was executed by him for the purpose of being discounted by the plaintiff for that amount; that the plaintiff refusing to discount it for that amount, did, without the knowledge or consent of Lane, discount it for $2,000 only, the plaintiff proposing and Seymour assenting thereto; and the plaintiff, by its agent, the cashier, did thereupon, also without the knowledge or consent of Lane, make the writing upon the face of the note as thereon appearing, the same was in law a material alteration of the note, and the plaintiff is not entitled to recover against Lane.”
J. S. H. G. JRanney, for plaintiff in error.
Samuel Strawder, for Lane.

Opinion:
Peck, J.
The regularity of the judgment below, in favor of the defendant, Gustavus Lane, and the propriety of its reversal, depend mainly upon the legal effect of the negotiation by which the plaintiff in error acquired the property in, and control over, the note upon which the suit is brought; for, if upon the whole record, it is manifest that the plaintiff is not entitled to a recovery against Lane, under the present form of pleading, or any amendment thereof consistent with the facts proved or admitted, the plaintiff' will not be entitled to a new trial, even though some of the positions assumed by the court should, in our opinion, be incorrect. In such case, the plaintiff has not been in law injured by the action of the court; as, in no event, under the law and the facts, would the plaintiff be entitled to a judgment.
In accordance with this acknowledged principle, the case has been argued, mainly, as to the legal effect of the note so far as Lane was concerned, under the circumstances surrounding its negotiation and transfer to the plaintiff in error. And I propose briefly to pursue the same line of inquiry and argument.
What, then, was the legal effect of writing across the note, upon its discount by the plaintiff', the words and figures " $2,000. This note was discounted for two thousand dollars, which amount is due upon it. July 25, 1851. John H. Ebbert, Cashier?" Did it have the effect of reducing the note from a note for $3,000 to a note for $2,000, as claimed by the defendant in error, or did it still leave the note a promise on the part of the makers, or any of them, to pay the plaintiff in error the sum of $3,000 ?
It is to be borne in mind, as appears from the bill of exceptions, that the note was prepared, so far at least as the defendant Lane is concerned, to obtain from the plaintiff a loan for that sum, for the use and benefit of Seymour & Co.; that Lane was, as the plaintiff well knew, a mere surety; that such being the object and purpose for which it was prepared, it had no legal validity as against any of the makers while it remained in the hands of Seymour & Co., and was not an available security to any one until its delivery to, and negotiation by, the plaintiff, the payee named in it. Douglass & Dunn v. Davenport, 17 Wend. 431.
It was not, as seems to have been supposed when the ease was first tried in the district court, a valid and subsisting obligation, inter partes, for the sum of $3,000 or any other sum, prior to its negotiation to the plaintiff, which was or might be pledged by Seymour & Co. to the bank for $2,000, loaned on its security. It was, I repeat, so far as Lane was concerned, a note prepared to invite and secure a loan for $3,000, to be made by the plaintiff to Seymour & Co., and to become operative when the purpose for which it was drawn should be accomplished.
This purpose never was accomplished; the note never was discounted by the bank as a note for $3,000; the indorsement itself negatives the idea that it ever was received by the bank as a note for $3,000, or that the officers of the bank treated or regarded it at the time as a promise to pay to them, or any one else, the sum of $3,000 in any event. The indorsement is of the same date of the note, (July 25, 185Í,) and says, over the signature of the cashier, " This note was discounted for two thousand dollars, which amount is due upon it."
It is apparent, from the circumstances surrounding the making of this note, and its reception by the plaintiff, first, that prior to its reception by the plaintiff^ the note was not an available security to any one, or for any amount; and second, that on its delivery to the plaintiff, if operative at all, as against any of the parties to it, it was only operative as a note for $2,000, the amount for which the plaintiff had discounted it.
Clearly the note never became operative as a promise, on the part of Seymour & Co., and much less of defendant Lane, to pay to the plaintiff the sum of three thousand dollars on its maturity. In the very act of receiving it, the plaintiff says that it was discounted for only $2,000, and that only that amount is due upon it; and as a part of the same transaction, and in the presence of Seymour, who delivered it to plaintiff, the cashier writes this acknowledgment and limitation across the face of the paper itself. The expression, " which amount is due upon it," written by the cashier of the plaintiff at the time, has much significance, and clearly evinces that the plaintiff understood that, in legal effect, it was at that time a note for $2,000, and no more — "which amount is due upon it" —not whieh amount is due to us, and the residue to some other person. The plaintiff knew it was valueless in Seymour's hands; that no portion of it had ever been paid, and specify its value when delivered to them. And the act of the notary in New York, when about to demand, and, if need be, protest for non-payment, in erasing the figures $8,000 in the left hand margin, and writing thereunder, in pencil, the figures $2,000, was in strict accordance with the legal effect of the instrument, and also indicates the construction put upon such instruments by the commercial world.
It was discounted for $2,000, that is, it was discounted as a note for $2,000, deducting the interest. This is also apparent from the figures $31.00, Oct. 25, 1851, noted at the bottom of the note, that being the interest for that period on the sum for which it was discounted.
"When was the $2,000 due or to become due on the note? Clearly at the maturity of the note, for the plaintiff had deducted the interest on the loan to its maturity.
If, therefore, the note was ever operative as a promise to pay to the plaintiff any sum, it' was never anything more than a promise to pay them the sum of two thousand dollars at the time and place specified in the note for payment. Douglass & Dunn v. Wilkinson, 17 Wend. Rep. 481.
The last case cited from Wendall, was one in which a note had been drawn by Norton, to be discounted for the benefit of Norton, Goodman & Co., and payable to Wilkinson, who was to indorse the same for the accommodation of Norton, Goodman & Co.; the note was drawn for $2,500 at ninety days. Wilkinson declining to become liable for the whole sum named, indorsed the note as follows : " Mr. Olcott, pay on the within seven hundred and fifty dollars. S. Wilkinson." And re-delivered the note to Norton. The amended declaration described tbe note as having been made for seven hundred and fifty dollars. Bronson, L, in commenting upon the note and its agreement with the declaration, uses this language: "This never was a valid note for anything more than $750, although drawn for a larger amount; the defendant refused to indorse it for anything beyond that sum. It was accommodation paper, and of no value whatever until negotiated by the bank. In legal effect, this was, I think, a note for $750, and no more; and as such, was a valid security to the bank, and one which could be enforced against the makers and all the other parties, as though originally drawn for that sum."
So, in the case under consideration, the note being an accommodation note, and in the hands of the party for whose benefit it had been drawn, had no legal validity, as a note for any amount, until it had been delivered to, and discounted by, the plaintiff'. It was discounted as a $2,000 note, the plaintiff declining to discount it at its face, or for any larger sum.
The negotiation imparted to the note its legal vitality, and it then, by the united act of the principals, Seymour & Co. and the plaintiff, received the impress of a note for $2,000; and was, in legal effect, so far as they were concerned, a note for that amount, and no more.
In the case cited from 17 Wend, supra, the surety himself was a party to the reduction, and was, therefore, a party to the note in its altered form, and bound by its terms as altered. But in the case at bar, the defendant Lane, was no party to the reduction, never assented to the change wrought in the character and legal effect of the note, and is not, therefore, bound to pay it as a note for $2,000; while the plaintiff, by its own voluntary act, is now precluded from treating or regarding the note thus tampered with, as a note for anything more. In short, as a contract to pay the plaintiff the sum of $3,000, ninety days after the date thereof, the note sued on never had any legal existence and vitality; it became, on its negotiation, in substance and legal effect, a promise to pay to the plaintiff, or order, the sum of two thousand dollars, and no more.To this contract, the defendant Lane never, in terms, assented, and no agreement or assent on his part can, under the law, be implied.
The counsel for the plaintiff in error now assume that the note was a valid note of all the makers for $3,000, when delivered to the bank to be discounted, and have declared upon it as such; and that the bank, having advanced upon its security a sum less than its face, is entitled to recover from the surety, Glustavus Lane, the amount thus advanced, as it falls within the terms of his guaranty, as defined and limited by the accommodation note signed by him. It is claimed that he has no legal nor moral right to complain, inasmuch as the recovery asked falls far below the sum stipulated in the note which he was content to guaranty, and the arrangement between the principals and the plaintiff did not vary the parties to the contract nor enlarge its obligation, either as to the time or the manner of performance; and that the rule, that a surety can only be made liable by the terms, that is, the very letter of his contract, and that any alteration of the terms between the principal and creditor, without the consent of the surety, will avoid the obligation as to him, must, under the authorities, be restricted in its application to cases where the alteration either operates to change or alter the parties to the contract, or the time, place or manner of performance, or in some degree enlarges or increases the liability or amount to be paid by the surety, and has no application to a case like the present, where no change or alteration whatever is made, except to relieve the surety from the payment of a portion of the amount he, by the contract, had voluntarily assumed.
Admitting the'premises assumed by the plaintiff's counsel to be true — that the note, in its original form, ever had any legal vitality or binding obligation as to Lane — the positions of the plaintiff's counsel, as to the true construction of the surety's engagement and his liabilities, would be difficult to answer, and might require us to pause before holding the surety discharged by such a modification of his liability, under the strict rule before referred to. But, as we have already seen, the contract, in its original form, never had any legal validity, as against Lane, and it therefore is not necessary for us to determine what would have been the effect of such a modification of a subsisting and valid agreement. It is enough to say, that the original note — being, so far as Lane is concerned, nothing more than a proposition for a loan, by the plaintiff, to Seymour & Co. of the sum of $3,000, neither more nor less — was never accepted by the plaintiff, nor any modification of that proposition ever assented to by Lane, the paper never had, as against him, any legal vitality; and to hold him liable thereon for any amount, or for the money actually loaned by the plaintiff, would be to create a liability of a surety, by mere implication, which all the authorities forbid.
The conclusion, then, to which we have arrived — that, under the circumstances surrounding the making, negotiation, and delivery of the note in suit, no right of action exists in favor of the plaintiff against the defendant Lane upon the note, or for the money loaned — renders it unnecessary for us to examine into the nature and effect of the charge delivered to the jury, by the judge presiding at the last trial in the district court; for even if that charge was erroneous, and found to be so, we could not reverse the judgment, because such reversal, under the law, as applied to the facts proved or admitted, could not result beneficially to the plaintiff.
The judge, in his charge, after alluding to the manner in which, and the purpose for which, the note in suit had been prepared, submits to the jury the question, whether the note was altered by the plaintiff and Seymour, without the assent of Lane, by the writing appearing on the face of the note, and instructs them that, if it was so made, it amounted to a material alteration, and would exonerate tbe defendant Lane.
We entertain a decided opinion, that, by tbe facts alluded to by tbe judge, in bis charge, the note was changed from a note for $3,000 to a note for only $2,000, and that Lane is not hable on it as a note for $3,000, because it never was, in legal effect, a valid note for that amount; and that he is not liable on it as a note for $2,000, because he never assented to the making of such a note. We do not, then, pronounce the note sued on void as to Lane, because it had been altered, but because the note executed by him never had any legal validity.
The other errors assigned, that the verdict is contrary to the evidence, etc., have not been argued by the counsel, nor our attention called to the points wherein any further errors are said to exist; and entertaining, as we do, the decided opinion that, upon the whole record, the plaintiff is not entitled to any recovery against the defendant Lane, we hereby order and direct that the judgment of the district court be and the same is hereby affirmed, with costs.
Sayan, C. J., and Brinkerhoee, Scott and Suture, JJ., concurred.