96

A different principle applies to deeds and other written contracts; and the exception is made in respect to negotiable paper because, being intended for circulation, the greater strictness and watchfulness is necessary.

§ 1419. In California it has been held that it is not necessary for the plaintiff to explain the alteration where it has been made in printed words, it being then presumed that the parties had changed the printed form to suit their intentions. And accordingly, where the plaintiff sued on a note on which the printed words "payable at the banking-house of Dale and Simpson" had been erased by a line drawn through them, he was allowed to recover without showing how or when the erasure was made. And, in Iowa, it is considered that the fact that a portion of an indorsement signed by the defendant is written in a different ink and handwriting from the balance, does not afford prima facie evidence of a fraudulent alteration so as to require the plaintiff to explain the same,98 and that an erasure does not necessarily vitiate the paper or put the holder on inquiry.99

97

volved on plaintiff. Farnsworth v. Sharp, 4 Sneed, 55. In Sayre v. Reynolds, 2 South. 737, it appeared the word "first," in the date "first September," had been erased, and "second" written over it. The court said that, as alteration could produce no effect but make the note bear interest one day later, to presume a forgery "would be a violation of all probabilities." In Sedgwick v. Sedgwick, 5 Cal. 213, "1871" the date appeared to have been changed to "1870." Held not to have been presumably done after execution of note. Cumberland Bank v. Hall, 1 Halst. 215; Bailey v. Taylor, 11 Conn. 531; Davis v. Jenney, 1 Metc. (Mass.) 221; Smith v. Terry, 69 Mo. 142; Patterson v. Fagan, 38 Mo. 70; Cochran v. Nebeker, 48 Ind. 459; Dodge v. Haskell, 69 Me. 429; Wilson v. Hayes, 40 Minn. 531; Odell v. Gallup, 62 Iowa, 254.

96. In Doe v. Catamore, 16 Q. B. 745, 5 Eng. L. & Eq. 349, Lord Campbell, C. J., said: "A deed cannot be altered after it is executed without fraud or wrong; and the presumption is against fraud or wrong." Hoey v. Jarman, 39 N. J. L. 524. As to interlineation, see Herrick v. Malin, 22 Wend. 394. That alteration of deed must be explained. See Piercy v. Piercy, 5 W. Va.

199.

97. Corcoran v. Dale, 32 Cal. 89.

98. Wilson v. Harris, 35 Iowa, 507. In Paramore v. Lindsey, 63 Mo. 67, it is said: "If nothing appears to the contrary, the alteration will be presumed to be contemporaneous with the execution of the instrument. But if any ground of suspicion is apparent on the face of the instrument, the law presumes nothing, but leaves the question of the time when it was done, as well as the person by whom, and the intent with which, the alteration was made, as matters of fact to be ultimately found by the jury upon proof to be adduced by the party offering the instrument in evidence." Stillwell v. Patton, 108 Mo. 352, 18 So. 1075.

99. Shepard v. Whetstone, 51 Iowa, 457.

§ 1420. By some authorities it is considered that where the alteration is against the interest of the party claiming under it, then, at all events, the law will not throw upon him the burden of accounting for it, since it would be unreasonable to presume that a party acted against his interest.1 But it is answered that the plaintiff may have intended and expected the alteration to be beneficial to him; and while the presumption may be very slight against him, and easily removed, that it is better to adhere to the general principle, which seems best calculated to prevent frauds. The exception, however, seems to be a reasonable one, as self-interest is a prevailing motive to human action; and it is against all probability that one should do an act calculated to injure himself.

§ 1421. Where an alleged alteration is not apparent on the face of the instrument, the burden of proving it is upon the party alleging it. And it has been held in some cases that an indorsement on the back of the instrument will be deemed to have been contemporaneous with its execution; in others the contrary.5

§ 1421a. Observations on conflicting authorities. The question as to the burden of proof in respect to alterations is generally affected by all the surrounding circumstances; and one fact or another shifts it to and fro, the jury being left to weigh the testimony and determine the issue with all the lights that can be thrown upon it. Very slight circumstances may operate to

1. 1 Greenleaf on Evidence, § 564; Bailey v. Taylor, 11 Conn. 531; Huntington v. Finch, 3 Ohio St. 449 (1854); Pullen v. Shaw, 3 Dever. 238. See also Tillon v. Clinton, etc., Ins. Co., 7 Barb. 568; Heffelfinger v. Shutz, 16 Serg. & R. 46.

2. 2 Parsons on Notes and Bills, 579; Chism v. Toomer, 27 Ark. 108. Note altered from $310 to $110. Held, that plaintiff must show it was made before delivery, or by maker's consent.

3. Meckel v. State Sav. Inst., 36 Ind. 357; Harris v. Bank, 22 Fla. 501; Williamsburgh Sav. Bank v. Town of Solon, 136 N. Y. 465, 32 N. E. 1058; Shroeder v. Webster, 88 Iowa, 627, 55 N. W. 569; Glover v. Gentry et al., Admrs., 104 Ala. 222, 16 So. 38; Moddie v. Breiland, 9 S. Dak. 506, 70 N. W. 637, citing text; Cosgrove v. Fanebust, 10 S. Dak. 213, 72 N. W. 469; McClintock v. State Bank, 52 Nebr. 130, 71 N. W. 978.

4. Brooke v. Smith, Moor, 679.

5. Emerson v. Murray, 4 N. H. 171.

6. See on this subject Admrs. of Beaman v. Russell, 20 Vt. 210; and the instructive opinion of Hall, J., Bailey v. Taylor, 11 Conn. 531; Davis v. Jenney, 1 Metc. (Mass.) 221; Kountz v. Kennedy, 63 Pa. St. 190; ante, § 1412; Neil v. Case, 25 Kan. 510, and 37 Am. Rep. 260, and notes; Bank v. Morrison, 17

shift the burden of proof, and it has been well said by Horton, C. J., in Kansas, that "it is impossible to fix a cast-iron rule to control in all cases."' 997 When all the facts are undisputed some presumption must arise; and that presumption must be conformable to the experience of mankind, and according to what that experience shows to be most probably the truth of the matter. The authorities are every way; and generally each case must rest largely on its own peculiar surroundings.

Nebr. 341; Goodin v. Plugge, 47 Nebr. 284, 66 N. W. 407; Courcamp v. Weber, 39 Nebr. 533, 58 N. W. 187; Stough v. Ogden, 49 Nebr. 291, 68 N. W. 516.

7. Neil v. Case, 25 Kan. 510, 37 Am. Rep. 259. This was an action on a note. It appeared from its face that the rate of interest had been changed either from 7 to 10 per cent., or vice versa. Horton, C. J., said on the question of burden of proof: "This is a vexed question, and the books are full of diverse decisions. Four different rules are generally stated. First: That an alteration on the face of the writing raises no presumption either way, but the question is for the jury. Second: That it raises a presumption against the writing and requires, therefore, some explanation to render it admissible. Third: That it raises such a presumption when it is suspicious, otherwise not. Fourth: That it is presumed in the absence of explanation to have been made before delivery, and, therefore, requires no explanation in the first instance. Generally the instrument should be given in evidence, and in a jury case should go to the jury upon ordinary proof of its execution, leaving the parties to such explanatory evidence of the alteration as they may choose to offer. If there is neither intrinsic nor extrinsic evidence as to when the alteration was made, it is to be presumed, if any presumption is said to exist, that the alteration was made before, or at the time of, the execution of the instrument. Perhaps there might be cases when the altera. tion is attended with manifest circumstances of suspicion that the court might refuse to allow the instrument to go before the jury until some explanation; but this case is not of that character." In Landauer v. Sioux Falls Improvement Co., 10 S. Dak. 205, 72 N. W. 467, it is held that a change in a guaranty on a note, changing the word we to "I" (thereby changing a joint contract to a joint and several obligation) was sufficient to put a subsequent purchaser upon notice.

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CHAPTER XLIV.

THE LAW OF SET-OFF IN ITS APPLICATION TO NEGOTIABLE INSTRUMENTS.

SECTION I.

THE GENERAL DOCTRINES OF SET-off.

§ 1422. A brief statement of the general principles of set-offof those especially which have application to negotiable instruments — is all that would be appropriate to this treatise. By set-off is meant the discharge of one claim by another, which is "set off" against it. It was formerly sometimes called "stoppage," because the amount sought to be set off was "stopped " or deducted from the cross-demand.1

The United States Supreme Court defines it as "the discharge or reduction of one demand by an opposite one."

2

Set-off was unknown to the common law, it being considered inconvenient to try two opposing claims in one suit. But still greater inconvenience arose from disallowing it; and courts of equity first introduced it, the want of it at law being productive of great mischief. "The natural sense of mankind was first shocked at this doctrine in the case of bankrupts; they thought it hard that a person should be bound to pay the whole that he owed to a bankrupt and receive only a dividend of what the bankrupt owed him." 3 In Virginia, the setting off of crossdemands was allowed by statute as early as 1644. In England, various statutes have perfected the law concerning it; and in all of the United States it is regulated likewise by statutory

enactments.

§ 1423. In what actions set-off is available.— In England, and generally in the United States, actions ex contractu are the only

1. Byles on Bills (Sharswood's ed.) [*350], 523.

2. Auten v. United States Nat. Bank, 174 U. S. 125, 19 Sup. Ct. Rep. 628. 3. Byles on Bills (Sharswood's ed.) [*350], 524; Patterson v. Wright, 64 Wis. 292, citing the text.

4. See 5 Rob. Pr. 958, and see the existing Virginia statute expounded in Allen v. Hart, 18 Gratt. 727, and Wartman v. Yost, 22 Gratt. 603.

suits to which matters of set-off may be pleaded, and they must be actions for definite ascertainable amounts. Actions sounding in damages, such as trespass, trover, etc., are not subject to the defense of set-off, because the sums recoverable are unliquidated;" and actions ex contractu for unliquidated damages follow the same rule.

6

A set-off is not available as a defense against a lien, as for instance, that of a workman on a chattel for his wages. In Virginia, it is available in an action upon a forthcoming bond taken on a warrant of distress.8

§ 1424. Nature of demand available as a set-off. In an action at law, none but a legal debt can be set off in England and in some of the States. But in other States a plea of equitable setoff is admitted.10 Equity will not relieve a party who has neglected to plead a set-off at law. But there are cases in which set-off is not available at law, and which present peculiar circumstances for equitable relief.

11

§ 1425. The counter demand, in order to be available as a setoff, must be an actual subsisting debt which has matured,12 and

5. Byles on Bills (Sharswood's ed.) [*351], 525; 2 Parsons on Notes and Bills, 616; Vancleave v. Beach, 110 Ind. 269; Clause v. Printing Press Co., 118 Ill. 612. In trover, however, it has been held that mutual demands arising out of the same subject-matter might be adjusted. Stow v. Yarwood, 14 Ill. 424; Gantt v. Duffy, 71 Mo. App. 91.

6. Gordon v. Brown, 2 Johns. 150; Byles on Bills [*259], 373.

7. 2 Parsons on Notes and Bills, 617.

8. Allen v. Hart, 22 Gratt. 722.

9. Wake v. Tinkler, 16 East, 36; McDade v. Mead, 18 Ala. 214; Milburn v. Guyther, 8 Gill, 92. A set-off cannot be pleaded to a set-off. See Chaplin v. Sullivan, 128 Ind. 50, 27 N. E. 425.

10. Watkins v. Hopkins' Exrs., 13 Gratt. 743.

11. Ex parte Ross, Buck, 127; United States Bung Mfg. Co. v. Armstrong, 34 Fed. 94.

The holder of a debt not due cannot
Kinsey v. Ring, 83 Wis. 536, 53 N. W.

12. Evans v. Prosser, 3 T. R. 186. enforce set-off against one that is due. 842; Kling v. Irving Nat. Bank, 21 App. Div. 372, 47 N. Y. Supp. 528. But where the indorser of a note, having no security for its payment except the promise of the maker who is insolvent, procures the same to be discounted by a bank, and the avails to be credited to a deposit account, which he has with such bank, he may, in the event of the bank becoming insolvent before the maturity of the note, elect that it become due at once, and have the amount of his deposit applied in liquidation of his liability as indorser upon it. See O'Connor v. Brandt, 12 App. Div. 596, 42 N. Y. Supp. 1079; Peymen v. Bowery Bank, 14 App. Div. 432, 43 N. Y. Supp. 826; Clute v. Warner,