Court Opinion

ID: 3516591
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:27:58.842131+00
Date Added: 2024-06-11T14:05:45.957943
License: Public Domain

I do not agree with the conclusion announced in the main opinion, as to the effect of the subordination agreement entered into by the Missouri State Life Insurance Company and W.P. Holland subordinating several of the series of notes to the payment of a like number of the series, in point of time due prior to the subordinated notes.
The Gidden-Townsend and McNally notes sued upon herein contained this statement on the face of each note: "Secured by deed of trust of even date herewith." This statement was on the face of the notes when executed, and when indorsed by Brewer subsequent to execution and delivery, and was a material part of the notes before they were altered, as much so as any other part of it. In Bay v. Shrader, 50 Miss. 326, the court said, touching this point: "If such memoranda" or indorsement was made "on the back of the" notes "when executed, they constitute a part of the contract." Key v. Cross, 23 Miss. 598; Effinger v.Richards, 35 Miss. 540. The entry on the back of the notes sued on immediately reduced the face value of the notes in any market in the world. It was a patent alteration, and the Canal Bank 
Trust Company is seeking to recover on the notes. It took them with the patent alteration, and is now seeking to recover for the benefit of Holland, to be credited on his indebtedness to it, and therefore it took the notes in their altered shape with knowledge of the alteration.
The alteration was material, controlling, and before they were altered the fact that they were secured by a trust deed must have been an inducement to secure another to indorse them; especially is this true when the *Page 918 
record shows that they were indorsed at a time when the surety was under no obligation of any kind to indorse the notes. Before they were altered, the notes plainly provided that they would receive a share pro rata with all the other notes of the proceeds of a sale under the trust deed, pro rata and equal to the share of any other notes. After the agreement was entered thereon, this right was destroyed, the legal effect of the note was materially changed, and the rights of all the parties to the contract obviously changed.
It makes no difference whether this subordination agreement was written on the face of the notes or on the back. 1 R.C.L. 799; Id. 977, section 15; Burgess v. Blake, 86 Am. St. Rep. 115, section 2; Kurth v. Farmers'  M. Bank, 77 Kan. 475, 94 P. 798, 15 L.R.A. (N.S.) 612, 127 Am. St. Rep. 428; 1 R.C.L. 967, section 4; Sanders v. Bagwell, 32 S.C. 238, 10 S.E. 946, 7 L.R.A. 743; Bank of Lauderdale v. Cole, 111 Miss. 39, 71 So. 260.
Those notes sued on here are separate debts upon which the liability of the defendant is to be determined by the instrument itself, and not by what the defendant's liability may or may not be upon some other paper. The question presented here is the right of recovery as against the indorser on the paper as presented as altered. Neither the Canal Bank nor Holland could contend as against the Missouri State Life Insurance Company in opposition to their solemn agreement. They were bound by it, but it did not bind the maker or the surety, and the cases cited in the main opinion do not in the remotest degree affect the question of the release of the surety, and the effect of an alteration of this kind upon the surety under existing statutes.
Section 119 of Uniform Laws Annotated, volume 5 of the Negotiable Instruments Act (Hemingway's Code, section 2697), reads as follows:
"Instrument; How Discharged. — A negotiable instrument is discharged: *Page 919 
"1. . . .
"2. . . .
"3. . . .
"4. By any other act which will discharge a simple contract for the payment of money."
Section 125 of the Negotiable Instruments Act, Uniform Laws Ann. vol. 5 (Hemingway's Code, section 2703), defining what constitutes a material alteration, is, in part, as follows:
"Any alteration which changes:
"1. . . .
"2. . . .
"3. . . .
"4. . . .
"5. . . . Or which adds a place of payment where no place of payment is specified, or any other change or addition whichalters the effect of the instrument in any respect, is a material alteration." (Italics ours.)
Section 124 of the same act (sec. 2702, Hemingway's Code), is as follows:
"Alteration of Instrument; Effect of. — Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized or assented to the alteration, and subsequent indorsers.
"But when an instrument has been materially altered and it is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor."
These notes are being sued upon as collateral for the Holland note. Holland, as the holder, made the alteration himself, without Brewer's consent or the maker's consent.
On the subject of material alterations, in the case of Born
v. La Fayette Auto Co. (Ind. Sup.), 139 N.E. 364, this statement of that court is illuminating as to the effect of the adoption of the Negotiable Instruments Act by the several states, wherein that court said: *Page 920 
"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 interest 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 thereof from doing therewith as his inclination might dictate, in utter disregard of honesty and good conscience."
When this note came into the hands of the Canal Bank  Trust Company this alteration was as manifest and as open to view and shown out on the paper as clearly as chalk marks upon a blackboard. In Mississippi, we are controlled by the Negotiable Instruments Act; and whatever might have been the law before this act, under the decisions of our courts it is now the statute in Mississippi that a material alteration discharges the instrument.
HOLDEN and ETHRIDGE, JJ., concur in this opinion.