66 66 an instrument has been materially altered and 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." 34 This provision is in effect the same as a provision of the English Bills of Exchange Act.35 36 b. Effect of alteration.- If an alteration of an instrument is made prior to its delivery, it will not void the instrument. The alteration of a negotiable instrument after its execution will not invalidate it if made without a fraudulent intent.37 But there are authorities to the effect that a material alteration of an instrument made by one of the parties thereto without the consent of another will avoid the instrument, although such party had no actual fraudulent design. If the alteration be made by a 38 34. Neg. Inst. L. (N. Y.), § 205. For same section in statutes of other States see Appendix. Section construed, Hoffman V. Planters' Nat. Bank, 99 Va. 480, 39 S. E. 134; Schwartz v. Wilmer, 90 Md. 136, 44 Atl. 1059. 35. English Bills of Exchange Act, § 64 (1). without the procurement or knowledge of either party, and the note is accepted by the payee, without any knowledge that it has been attested, and without relying upon the attestation as a part of the contract, the attestation is not such a material alteration as will make the note void, but may be stricken out. 66 36. Webb v. Mullins, 78 Ala. 111; 38. Intent not material.- In the Cady v. Bond, 19 Me. 461, 36 Am. Dec. case of Draper v. Wood, 112 Mass. 767; Ward v. Allen, 2 Metc. (Mass.) 315, the word we was inserted for 53, 35 Am. Dec. 387; Williams v. "I" in the body of the note and the Starr, 5 Wis. 531. It has been held words "at twelve per cent." were that until acceptance or negotiation, added. The court held that this cona bill drawn for a debt due from the stitutes a material alteration of the drawee to the drawer, and while in instrument, and if done without the the hands of the drawee and before knowledge of one of the promisors it acceptance, does not become a valid was void as against him, although the security. Ratcliff v. Planters' Bank, payee had no knowledge of the altera2 Sneed (Tenn.), 424. But if a bill tion, and it was made without frauduprior to its acceptance is altered by lent intent. In the case of Booth v. the payee and accepted as altered, the Powers, 56 N. Y. 22, it was held that acceptor himself may be held, but the to void a note altered in a material instrument will be void as to the particular without authority after drawer and those who indorsed prior to acceptance. Walton v. Hastings, 4 Campb. (Eng.) 223. execution, it is not necessary to show fraudulent intent, and the court said: "If a note be altered in a material 37. Fraudulent intent.- Montgom- particular, without authority, after ery R. R. Co. v. Hurst, 9 Ala. execution that voids the note. It is 513; Croswell V. Labree, 81 Me. not of moment whether it was done 44, 16 Atl. 331, 10 Am. St. Rep. 238; with fraudulent intent save as the Gordon v. Robertson, 48 Wis. 493, 4 existence of such intention affects the N. W. 579. In the case of Church right to resort to the original inv. Fole, 142 Mass. 12, 6 N. E. 764, debtedness; and then the fact of the which arose under a statute provid- unauthorized material alteration is a ing that an action might be brought matter for the consideration of the upon an attested note within twenty jury in determining the question of years after the cause of action ac- fraudulent intention." See also Fay v. crues, it was held that if a promis- Smith, 1 Allen (Mass.), 477, 79 Am. sory note is attested, before delivery, Dec. 752. stranger to the instrument, the rights of the parties are not affected.39 c. Authority and consent of parties.—A duly authorized agent of one of the parties to an instrument may consent to its alteration. If an agent makes an alteration without the knowledge or consent of his principal and not within the scope of his authority, his act is that of a stranger, and will not render the note void.** If one of two or more joint makers consent to a material alteration of the note, it will not be binding upon the other joint makers." If a note is signed by the members of a firm, in their individual names and not as a firm, one of the makers cannot bind the others to a material change without their consent.42 But a member of a firm while acting in behalf of the firm may bind the other members by his consent to a material alteration.43 It is a general rule that the alteration of a negotiable instrument made with the consent of a party liable thereon will not avoid the instrument as to him.44 The consent to an alteration may be given after as well as before it was made.45 Where a person after full knowledge of an alteration unconditionally promises to pay, it is N. W. 583, 13 L. R. A. 313; Port Huron Engine & Thresher Co. v. Sherman, 14 S. Dak. 461, 85 N. W. 1008. 41. Flanigan v. Phelps, 42 Minn. 186, 43 N. W. 1113; Goodman v. Eastman, 41 N. H. 455; McVey v. Ely, 5 Lea (Tenn.), 428. 42. Horn v. Newton City Bank, 32 Kan. 518, 4 Pac. 1022. 39. Alteration by stranger.- An alteration in a written instrument made by one not a party thereto, without the knowledge or assent of the party, and in a matter not material, does not invalidate the instrument; the alteration is of no effect and the original validity of the instrument remains. Gleason v. Hamilton, 138 N. Y. 353, 34 N. E. 283, 21 L. R. A. 210. In 2 Cyc. 151, it is said: "Erasures, interlineations, and changes, however material, made in and upon an in- 44. Grimstead v. Briggs, 4 Iowa, strument by a stranger to it, are in 559; Humphreys v. Guillow, 13 N. H. legal contemplation wholly imma- 385, 38 Am. Dec. 499; Vidvard v. terial and ineffective to give to the Cushman, 35 Hun (N. Y.), 18; Wooley instrument any other or different v. Constant, 4 Johns. (N. Y.) 54, 4 meaning or operation than that which Am. Dec. 246. In the case of Stodattached to it before such interlinea- dard v. Penniman, 113 Mass. 386, it tion." A change of an indorsement by a thief will not affect the instrument, or the rights of the owner thereon. Colson v. Arnot, 57 N. Y. 253, 15 Am. Rep. 496; Densmore v. Duncan, 57 N. Y. 573. See also Eckert v. Louis, 84 Ind. 99; Blakey v. Johnson, 13 Bush (Ky.), 197, 26 Am. Rep. 254. 40. Hunt v. Gray, 35 N. J. L. 227, 10 Am. Rep. 232; White Sewing Machine Co. v. Dakin, 86 Mich. 581, 49 43. Taylor V. Taylor, 12 Lea (Tenn.), 714; Howell v. Adams, 68 N. Y. 314. was held that an alteration of a note, made with the assent of a party thereto, with a view to its immediate discount, but upon an agreement to obtain the consent of another party to it, then absent, does not, although such consent was not obtained, render the note so negotiated invalid. 45. Pelton v. Prescott, 12 Iowa, 567; Bell v. Mahin, 69 Iowa, 408, 29 N. W. 331; Conable v. Smith, 61 Hun (N. Y.), 185, 15 N. Y. Supp. 924. a sufficient ratification;46 if a party subsequent to the alteration and with knowledge thereof makes a payment upon an instrument, either of the principal or interest, he will be held to have ratified the alteration;47 and if the party liable on an instrument, with knowledge of the alteration, applies for and receives an extension of the time of payment, he will be deemed to have ratified it.48 d. Presumptions as to alterations.— If upon its face the instrument appears to be valid, it is incumbent upon the party alleging a material alteration to establish it.49 But where an alteration is apparent upon the face of an instrument, the party claiming under it is bound to show that the alteration was made under such circumstances that it does not affect his right to recover. Or, in other words, when the circumstances are such, as shown by the proof, that it is evident that an alteration has been made in an instrument, the burden of proof is shifted and the party producing the instrument must explain the alteration.50 And where an alteration is shown, the plaintiff will be required to prove that it was made with the consent of the defendant.51 If the appearance of 46. Emerson v. Opps, 9 Ind. App. 581, 34 N. E. 840; Goodspeed v. Cutler, 75 Ill. 534. 47. Jacobs v. Gilreath, 45 S. C. 46, 22 S. E. 757; Evans v. Foreman, 60 Mo. 449; Johnson v. Johnson, 66 Mich. 525, 32 N. W. 413; Prouty v. Wilson, 123 Mass. 297. 48. Bell v. Mahin, 69 Iowa, 408, 29 N. W. 331. 49. Burden of proof on party alleging alteration.- Montgomery v. Crossthwait, 90 Ala. 553, 8 South. 498, 24 Am. St. Rep. 832; Conable v. Keeney, 61 Hun (N. Y.), 624, 16 N. Y. Supp. 719; Odell v. Gallup, 62 Iowa, 253, 17 N. W. 502; Shroeder v. Webster, 88 Iowa, 627, 55 N. W. 569; Franklin v. Baker, 48 Ohio St. 296, 27 N. E. 550, 29 Am. St. Rep. 547. In the case of Smith v. United States, 2 Wall. (U. S.) 219, 17 L. Ed. 788, the court said: "The general rule is, that where any suspicion is raised as to the genuineness of an altered instrument, whether it be apparent upon the instrument, or is made so by extraneous evidence, the party producing the instrument and claiming under it is bound to remove the suspicion by accounting for the alteration." See also Wisdom v. Reeves, 110 Ala. 418, 18 South. 13; Averman v. Robb, 52 Miss. 653, 24 Am. In the case of Citizens' Nat. Bank v. Williams, 174 Pa. St. 66, 34 Atl. 303, it was said: "One who takes a promissory note with a material alteration on its face takes it with notice that it has been tampered with, and he is chargeable with all the consequences of such knowledge, and he cannot recover upon it unless the alteration is affirmatively shown by him to have been innocently made, without prejudice to the rights of the party sought to be charged with liability." 50. Shroeder v. Webster, 88 Iowa, 627, 55 N. W. 569. In this case it was shown by evidence that the word "drawer" was substituted for the word "order" and it was held that it was for the plaintiff to show that the alteration was made with the defendant's knowledge. See also Winter v. Pool, 100 Ala. 503, 14 South. 411. 51. Mundy v. Stephens, 61 Fed. 77, 52 an instrument is such as to produce a suspicion as to its validity, it seems to be the rule that the entire question as to whether material alterations have been made therein, is a question of fact for the jury, and the party producing the instrument has the burden of explaining the suspicious appearance. And where an instrument appears on its face to have been materially altered, and it is alleged that the alteration was made prior to the execution or delivery of the instrument, the party who produced the instrument must prove that fact.53 This rule, however, is not universally adopted; in many jurisdictions it is held that the presumption is that a material alteration was made subsequent to the execution of the instrument.54 § 126. What constitutes a material alteration. a. Statutory provision.- The Negotiable Instruments Law provides that: "Any alteration which changes: "1. The date; 9 C. C. A. 366; Glover v. Gentry, 104 Ala. 222, 16 South. 38; Capital Bank v. Armstrong, 62 Mo. 59; Dewees v. Bluntzer, 70 Tex. 406, 7 S. W. 820. 52. 2 Cyc. 243, citing among other cases the following: Hayden v. Goodnow, 39 Conn. 164; Harris v. Jacksonville Bank, 22 Fla. 501, 1 South. 140, 1 Am. St. Rep. 201; Case Threshing Machine Co. v. Peterson, 51 Kan. 713, 33 Pac. 470; Acker v. Ledyard, 8 Barb. (N. Y.) 514. 53. Chism v. Toomer, 27 Ark. 108; Dodge v. Haskell, 69 Me. 429; Heffner v. Werick, 32 Pa. St. 423; Kennedy v. Moore, 17 S. C. 464. 54. The question of presumption and burden of proof, where interlineations or erasures appear on the face of an instrument, is one upon which there is a multitude of authorities and much conflict of opinion. Any attempt to cite or consider the innumerable cases on this question would be both impracticable and useless. The rule adopted by some authorities is that the presumption, in the absence of evidence to the contrary, is that the alteration was made before execution, and, therefore, that no exception is required in the first instance; while others hold, in accordance with the instruction of the trial court in this case, that the presumption of law is that the alteration was made after delivery, and, there fore, the burden is upon the holder to explain it and show that it was made under circumstances that would not invalidate the instrument. Wilson v. Hayes, 40 Minn. 531, 42 N. W. 467, 12 Am. St. Rep. 754, 4 L. R. A. 196. The court in this case goes on to say: "Unless the alteration was of such a suspicious character as to furnish intrinsic evidence to the contrary, we think the natural inference would be that it was a legitimate part of the instrument, and was made at or before its execution. We are, therefore, of opinion that the correct rule is that the burden is upon the maker to show that the alteration was made after delivery, or, to state the proposition with more precision, the proof of omission of a signature of a party to an instrument is prima facie evidence that the instrument written over it is his act, and this prima facie evidence will stand as binding proof, unless the maker can rebut it by showing by evidence that the alteration was made after delivery and that the question when, by whom, and with what intent the alteration was made is one of fact to be submitted to the jury upon the whole evidence, intrinsic and extrinsic." See also Farmers' Loan & Trust Co. v. Olson, 92 Iowa, 770, 61 N. W. 199; Hagan v. Merchants & Bankers' Ins. Co., 81 Iowa, 321, 46 N. W. 1114, 25 Am. St. Rep. 493. "2. The sum payable, either for principal or interest; "3. The time or place of payment; "4. The number or the relations of the parties; "5. The medium or currency in which payment is to be made. "Or which adds a place of payment where no place of payment "is specified, or any other change or addition which alters the "effect of the instrument in any respect, is a material altera"tion." 55 A somewhat similar provision is also contained in the English Bills of Exchange Act.56 b. In general. It is not every alteration of an instrument which will invalidate it. As has been stated, "Any change in words or form merely, even if made by an interested party, which leaves the legal effect and identity of the instrument unimpaired, and which in no manner affects the rights, duties, or obligations of the parties, and leaves the sense and meaning of the instrument as it originally stood, is not material and will not destroy the instrument or discharge the parties from liability thereon." 57 The effect of an alteration in a negotiable instrument depends upon its nature, the person by whom, and the intention with which, it was made. If none of the rights or interests, duties, or obligations of either of the parties are in any manner changed, an alteration may be considered as immaterial.58 55. Neg. Inst. L. (N. Y.), § 206. For same section in statutes of other States see Appendix. Section construed and applied. Hoffman v. Planters' Nat. Bank, 99 Va. 480, 39 S. E. 134. 56. English Bills of Exchange Act, § 64 (2). 57. 2 Cyc. 190, and cases cited. that this alteration, though made with the makers' knowledge, did not invalidate the note, since it did not change their liability. In the case of Iowa Valley State Bank v. Sigstad, 90 Iowa, 491, 65 N. W. 407, the words were written upon the back of a note above the defendant's signature and without his knowledge. The defendant was an 58. Alteration not material unless indorser on the note. It was held that rights are affected.- Vogle v. Rip- since the legal effect of the instruper, 34 Ill. 106. In the case of ment was to make the defendant Reilly v. First Nat. Bank, 148 Ill. liable in case the makers failed to 349, 35 N. E. 1120, it appeared pay at maturity the addition of the that the purchasers of goods gave words "payment guaranteed," could the seller in payment therefor their note payable at a bank. In order to have it discounted by the bank, the seller signed his name below the makers', intending thereby to indorse the note. Afterward he induced the cashier to change the note so as to make it payable to his order, and he immediately indorsed and guaranteed it to the bank, erasing his signature on the face of the note. It was held not affect his liability and were, therefore, immaterial. And where, when a note was delivered, the rate of interest was not specified in the blank space therefor, it was held that the insertion of the figure "6" in the blank space was not a real alteration, since without the insertion of such figure the note would have borne the same rate of interest. James v. Dalbey, 107 Iowa, 463, 78 N. W. 51. |