Court Opinion

ID: 3421882
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:49:13.734227+00
Date Added: 2024-06-11T14:03:28.981686
License: Public Domain

DISSENTING OPINION.
This is a suit on a promissory note which bore interest at six per cent. per annum from date, due thirty days after date, and was in renewal of a note that had been altered by the payee. The questions involved relate to §§ 124 and 125 of the Uniform Negotiable Instruments Act, Acts 1913 p. 120, §§ 11483, 11484 Burns 1926, §§ 9089t4, 9089u4 Burns 1914; and also the question of consideration. The pleadings were: (a) An ordinary complaint on a note past due for principal, interest, and attorneys' fees; (b) an answer of general denial, and two special answers: (1) Want of consideration; and (2) alleging that the note sued on was in renewal of a note which was materially altered by the payee, by changing the rate of interest, which alteration was made without the assent of the party liable thereon; (c) a reply in: (1) General denial to all answers; and (2) confession of the alteration of the prior note and an avoidance under the allegation that the alterations were made to conform with the intentions of the parties at the time said prior note was executed, to the third paragraph of answer.
The case was tried by the court without the intervention of a jury, which resulted in a general finding for the plaintiff (appellee herein), and a judgment. Appellant's appeal is based upon a motion for a new trial, *Page 412 
because: (1) The decision of the court is not sustained by sufficient evidence; (2) is contrary to law; and (3) (4) and (5) on account of the admission in evidence of certain exhibits.
To make the case as clear as possible, the statement of the facts is divided into those which are undisputed and those which are disputed. The undisputed facts necessary for an understanding of the case are: appellant gave his promissory note based upon a good consideration, to the appellee as payee, "with interest from maturity until paid, at the rate of eight per cent. per annum," due four months after date. After the note was executed appellee (payee) altered the note by marking out the word "maturity," and writing the word "date" above the word "maturity," and by marking out the word "eight" and writing the word "six" above the word "eight," which made the note read, "with interest from Date until paid at the rate of six per cent. per annum." Six months and twenty-five days after the execution of the first note, appellee made several demands for payment upon appellant at appellant's office, in reply to which appellant said he could not pay the note, and asked for an extension of thirty days time, at the end of which he said he would be able to pay the note. At the times the several demands were made, the note was not presented or shown to the appellant maker by the appellee payee; neither did appellee payee bring with it the note from its office to the appellant maker at his office. After appellant had asked for extension of time, appellee inquired if he would be able to pay the accrued interest, to which appellant replied that he wanted an extension of the full amount, principal and accrued interest. Appellee departed, and within a half hour, returned to appellant's office, and presented to him a new promissory note, and informed appellant that this note was a note in renewal of the *Page 413 
other note, and presented it to appellant for his signature, which was immediately signed and handed back to appellee by appellant. Thereupon appellee handed to appellant the old note, which was by him immediately handed to his bookkeeper with instructions to place it in his safe, which was done, and thereupon appellee departed. Appellee at none of the visits by it in demand of payment, or in presenting the renewal note, acquainted appellant with the fact that it had altered the promissory note for which the note in suit was given in renewal, without his assent. Suit was begun upon the renewal note after its maturity. The facts in dispute are on the part of the appellee: that before the original note was given, it was understood and agreed between the maker and payee that it was to bear interest at the rate of six per cent. per annum from date, but through inadvertence in preparing the note appellee failed to mark out the printed word "maturity" and the printed word "eight" in the note, and insert therein the words "date" and "six" respectively. Appellant's evidence says that the original note as executed was according to the original agreement, and that he at no time agreed that the note should bear interest from date at six per cent. per annum.
The materialness and legal effect of an alteration of a promissory note under § 125, Uniform Negotiable Instruments Act, are purely questions of law, for the court. Whether there be an alteration, the manner of making it, the time at which it was made, by whom it was made, with what authority, are questions of fact. 2 Parsons, Bills and Notes 576. As to the questions of fact, there is not much doubt, because, based upon appellee's reply, the alteration is admitted, and by the evidence, the time at which the alteration was made and the manner of doing it, by whom it was made, and that it was made without the authority or assent of the *Page 414 
maker. There being an admitted and proved alteration, § 125, Uniform Negotiable Instruments Act, decides the question by saying, "any alteration which changes: * * * the sum payable, either for principal or interest; is a material alteration," and inasmuch as such material alteration was made without the assent of the party liable thereon, the court is unquestionably governed by § 124, Uniform Negotiable Instruments Act, which makes the rule that "where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided." The conclusion must unequivocally be that this note was avoided.
A material alteration of a promissory note avoids the instrument, because, as altered, it no longer represents the agreement between the parties. Wood v. Steele (1867), 6 Wall. 80, 18 L.Ed. 725; Angle v. Northwestern, etc., Ins. Co.
(1875), 92 U.S. 330, 23 L.Ed. 556; Mersman v. Werges (1884),112 U.S. 139, 5 Sup. Ct. 65, 28 L.Ed. 641; Greenfield SavingsBank v. Stowell (1876), 123 Mass. 196, 25 Am. Rep. 67;Johnson, Rec., v. May (1881), 76 Ind. 293; Coburn v. Webb
(1877), 56 Ind. 96, 26 Am. Rep. 15; Cochran v. Nebuchar
(1874), 48 Ind. 459, 462.
The effect of a material alteration of a negotiable note, under § 125, does not involve fraud, for it is immaterial whether the intent with which the alteration was made, was fraudulent or not.Booth v. Powers (1874), 56 N.Y. 22; Evans v. Foreman
(1875), 60 Mo. 449; Heath v. Blake (1887), 28 S.C. 406, 5 S.E. 842; Edington v. McLeod (1912), 87 Kans. 426, 124 P. 163, 41 L.R.A. (N.S.) 230, Ann. Cas. 1913E 315.
The State of Kansas enacted the Uniform Negotiable Instruments Act in 1905. In 1912 the Supreme Court of that state held that a promissory note altered by the payee by increasing the rate of interest, without fraudulent intent, to make it conform to the contract in pursuance *Page 415 
of which it was given, is avoided. Edington v. McLeod, supra.
It is therefore the conclusion of the writer that the confessed alteration of the original note without the assent of the party to be bound thereby, was a material alteration in that it changed the tenor of the note, and that the note was thereby avoided.
It is to be settled whether the new note — the renewal note — the note in suit — is so connected with, so contaminated by, the altered note for which it was given in renewal, that it is without consideration. Appellee does not contend that the note in suit was given for the precedent debt upon which the altered note, as it existed before alteration, was given, and independent of the altered note, and even though it were contended that the note in suit was based upon the precedent debt, the agreement concerning the interest on the debt was and is in dispute. It has been noted as one of the disputed facts, contended for by the payee, that the note was altered by changing the tenor thereof concerning interest, to make it conform to the agreement upon which the note was to be based. The consensus of the holdings of the courts of the several states was, prior to the enactment of the Uniform Negotiable Instruments Act, that the payee might do no such thing; that the maker of a note understood that it was to carry certain interest does not authorize the insertion in the instrument after its execution, without his knowledge, of a clause expressing that fact. Merritt v. Dewey (1905),218 Ill. 599, 75 N.E. 1066, 2 L.R.A. (N.S.) 217, 41 Am. L. Reg. (N.S.) 437, 499, 561; Brannon, Negotiable Instruments Law (3d ed.) p. 533; Murray v. Graham (1870), 29 Iowa 520; Jeffrey
v. Rosenfeld (1901), 179 Mass. 506, 61 N.E. 49; Myers v.Huneke (1874), 55 N.Y. 412.
The opinion in the case first cited was rendered two *Page 416 
years prior to the enactment of the Uniform Negotiable Instruments Act by the State of Illinois. In contrast to the above case as to time, and in support of its opinion, the same court held in 1920, that a material alteration of a negotiable instrument by a party to it, even though it reduced the amount, without the consent of the maker, rendered the instrument void; and that it could not be enforced, even by a subsequent purchaser in good faith without notice, whether the alteration was injurious or beneficial to the party liable. Keller v. RockIsland State Bank (1920), 292 Ill. 553, 127 N.E. 94, 9 A.L.R. 1082; Johnston, Rec., v. May (1881), 76 Ind. 293.
It is the opinion of the writer that the evidence proves that the note in suit was given in renewal of the altered note. There is no inference that can be drawn from the evidence that the note in suit was based upon any other foundation or consideration. In the case at bar the note in suit was not given in renewal of the original note, which was a binding obligation, but it was given in renewal of the altered note, which alteration was material and avoided it; and which altered note was not a binding obligation. Mr. Daniel, in his work on Negotiable Instruments (6th ed.) § 205, says, "When the first note was without consideration a renewal note is also." Cochran v. Perkins (1906), 146 Ala. 689, 40 So. 351; Earle v. Robinson (1895), 36 N.Y. Supp. 178, 91 Hun 363.
Mr. Joyce, in his recent work on Defenses to Commercial Paper, § 222, says, "A note given in renewal for a note avoidable for want of consideration is without consideration." Cochran v.Perkins, supra; Gilbert v. Brown (1906), 123 Ky. 703, 97 S.W. 40, 7 L.R.A. (N.S.) 1053; Hill v. Buckminster (1827),22 Mass. 5 Pick. 391.
The taint which attaches to a negotiable note is incorporated *Page 417 
into its renewal note. In other words, a promissory note is not purged of its taint by mere renewal thereof without changing or restoring the contract in the renewal note so that the taint carried into it is utterly removed. Clark v. Sisson (1855), 4 Duer (N.Y.) 408; Macungie Savings Bank v. Hottenstein (1879), 89 Pa. St. 328; Denick v. Hubbard (1882), 27 Hun (N.Y.) 347; Joyce, Defense to Commercial Paper § 305.
We are not without authority in the decisions of this court upon the question of consideration of a renewal note. Bray v.Pearsoll (1859), 12 Ind. 334. The altered note was without consideration. In the light of the judicial opinions that a material alteration of a promissory note avoids it, even though the act in so doing was not tinged with fraud, it follows that the party to the note in so doing an unlawful act, committed a wrong. It is the law, that presumptions between a wrong doer and a person wronged, should be made in favor of the latter.Costigan v. Mohawk, etc., R. Co. (1846), 2 Denio (N.Y.) 609, 43 Am. Dec. 758; Jackson v. Miller (1830), 6 Wend. (N.Y.) 228, 21 Am. Dec. 316; Snyder v. Riley (1847), 6 Pa. St. 164, 47 Am. Dec. 452. The sum of money named as principal in the renewal note was the amount of the principal of the original note before alteration and after alteration, plus interest computed upon the terms stated in the altered note, which was "from date until paid at the rate of six per cent. per annum," which aggregate principal of the renewal note was larger than it would have been had the sum named in the renewal note as principal been for the principal named in the original note plus the interest computed upon the terms named in the original note, which terms are "interest from maturity until paid at the rate of eight per cent. per annum." *Page 418 
Following the trend of the decisions of various courts I am compelled to hold that the act of the appellee in materially altering the note in question not only avoided it, but that such act thereby vitiates every act following and based thereon; especially, on account of the fact that the appellee had opportunity, time after time, to acquaint the maker with his act, but withheld such information, to which in all good conscience the maker was entitled to know at the hand of the payee.
One other excuse is presented. It is maintained by appellee, in support of the action, in altering the note, and of the validity of the renewal note, that the maker, by his act in renewal, ratified the act of the alteration, and that the renewal note becomes legal thereby. What would have been the situation, if the maker of the note which was altered, under this same statement of facts on which this case is predicated, up to the time the appellant signed the renewal note, had paid appellee the exact amount of principal and accrued interest represented by the altered note, in cash, and appellee thereupon surrendered the altered note to appellant, without any explanation whatever, that the note appellant was paying, was an altered note not assented to by him? This very situation has been passed upon by several courts. Where money has been paid on an altered instrument without the knowledge of the party to be bound by such alteration, the general principles applicable in cases where money is paid under a mistake of fact govern, and such money may ordinarily be recovered back. National Bank of Commerce v.National Mechanics Banking Association (1873), 55 N.Y. 211, 14 Am. Rep. 232; Fraker v. Little, Rec. (1880), 24 Kans. 598, 36 Am. Rep. 362.
The Negotiable Instruments Law was agreed upon for recommendation to the legislatures of the states by the National Conference of the State Boards and Commissioners *Page 419 
for promoting the Uniformity of Legislation in the United States, at its meeting in August, 1896, since which time forty-six states have adopted the same, a few of which have made some very slight alterations in the law as drafted and agreed upon by the commissioners. This law was enacted by the legislature of this state in 1913, and, according to the information of the text writers, is an exact copy of the Uniform Negotiable Instruments Law as prepared by the commissioners, except a slight change made in § 85. At the time of the drafting of this law, the several states were widely apart in the jurisprudence relating to negotiable instruments. It could not be otherwise than that there would be a lack of harmony in all the law, as interpreted by the courts of the several states, because of a lack of uniformity of the texts of the statutes of the several states in relation thereto. Since the adoption of this Negotiable Instruments Law under the tentative arrangement to have it uniform throughout all of the states, it has been the policy of the courts to construe the law liberally in the interests of uniformity. Many opinions of different courts have stated that the law in relation to the material alteration of an instrument rests upon public policy, in that, to maintain the integrity surrounding commercial relations no party to be benefited should be permitted under any guise to alter the written obligation of another without his authority or assent. To do otherwise would open a door to the perpetration of all kinds of fraud, inasmuch as written instruments, and especially commercial paper, are passed from hand to hand, through the hands of citizens, banks, and clearing houses, many hundreds and even thousands of miles distant from the party or parties to be bound, who have no control whatever over the possession of such instruments, and on account of which, cannot prevent any person in the possession *Page 420 
thereof from doing therewith as his inclination might dictate, in utter disregard of honesty and good conscience. The matter is well summed up in the opinion in a New York case, which says: "It is necessary to commercial transactions that the rules of liability of parties to negotiable paper should be fixed and certain. It is better that such rules be arbitrary than that they lack precision and certainty." First National Bank, etc., v.Gridley (1906), 98 N.Y. Supp. 445, 452, 112 App. Div. 398, 407.
Three cases are cited by appellee to sustain its point, that the payee of a promissory note may materially alter the same to make it conform to the intention of the parties thereof.Busjahn v. McLean (1892), 3 Ind. App. 281; Osborn v. Hall
(1903), 160 Ind. 153; John Kindler Co. v. First Nat. Bank
(1915), 61 Ind. App. 79. These cases are not controlling. In the case of Busjahn v. McLean, supra, the note read "$175" in figures and "one hundred and seventy" in writing. The alteration was by adding the word "five" to "one hundred and seventy." The written words controlled the figures. The alteration therefore changed the tenor of the note and was material, which under the present statute would have avoided the note. Former decisions held that changing an ambiguity in a note did not avoid it.Murray v. Graham, supra. In the case of Osborne v. Hall,supra, the alteration was not material. It has never been the law that an immaterial alteration avoided the note. In the case of the John Kindler Co. v. First Nat. Bank, supra, the alteration of this note is based upon the rules relating to the filling in of blank lines. The facts disclose that the case was decided upon the order of the maker of the note in letters and that it did not avoid the note. These cases are not to be overruled, but rather they have distinguished the rule of law in relation to the alteration of written instruments, to *Page 421 
make them conform to the agreement of the parties as understood by one party and without the consent of the party or parties to be bound. The statute in force now must surely change the jurisprudence of this state from what it was at the time the three cases were decided, if the interpretation of them is to be such as put upon them by the appellee. It is the opinion of the writer, based upon said §§ 124 and 125, that a party cannot alter a negotiable note for the purpose of making it conform to the original agreement without the assent of the party or parties to be bound, and then be permitted to recover on the note. For to permit this would be in effect to render all written instruments oral ones, subject to change at the will of the party or parties to accord with his or their remembrance of the contract. Murray
v. Graham, supra; Hunt v. Gray (1871), 35 N.J. Law 227, 10 Am. Rep. 232.
It is the opinion of the writer that the note sued upon was given in renewal of a note which, at the time of such renewal, had theretofore been materially altered by the payee, appellee herein, which avoided it, and that the note which had been so materially altered was insufficient upon which to base a renewal note, and that the renewal note based thereon is without consideration.
Myers, J., concurs in this dissenting opinion.