Danville UAW CIO Local No. 579 Credit Union v. Randle

• Decision Date: 19 April 1965
• Docket Number: No. 10605,10605
• Citation: 58 Ill.App.2d 84,206 N.E.2d 253
• Parties: DANVILLE UAW CIO LOCAL NO. 579 CREDIT UNION, Plaintiff-Appellant, v. Paul A. RANDLE, Jack W. McCoy, Robert Lee Jackson, Reginald Cloyd, Joseph L. Malone, Henry Foster, Samuel H. Suggs, Jack D. Burroughs and R. L. Kelley, Defendants-Appellees. Gan.
• Court: United States Appellate Court of Illinois

Page 253

206 N.E.2d 253

58 Ill.App.2d 84

DANVILLE UAW CIO LOCAL NO. 579 CREDIT UNION, Plaintiff-Appellant, v. Paul A. RANDLE, Jack W. McCoy, Robert Lee Jackson, Reginald Cloyd, Joseph L. Malone, Henry Foster, Samuel H Suggs, Jack D. Burroughs and R. L Kelley, Defendants-Appellees.

Gan. No. 10605.

Appellate Court of Illinois, Fourth District.

April 19, 1965.

Ralph J. Swanson, Sebat, Swanson, Banks, Jones & Dukes, Eldon L. McLaughlin, Danville, for appellant.

John B. Jenkins, Gunn, Hickman & Kesler, Danville, for appellees.

TRAPP, Justice.

The plaintiff, Danville UAW CIO Local No. 579 Credit Union appeals from the judgment of the Circuit Court for the Fifth Judicial District, Vermilion County, that plaintiff take nothing by its action on a judgment note against the nine defendants, who were cosigners on the note. Plaintiff seeks a reversal of that judgment and asks judgment in its favor in the amount of $4,472.29 and costs.

The promissory note, which is the basis of the action and bears date March 7, 1961, was given to secure a loan by the plaintiff credit union to one William R. Fultz, who subsequently became bankrupt and was not made a party defendant. The note is a negotiable instrument upon which the nine defendants were accommodation makers. One E. V. Thompson was also an original signer of the note as an accommodation comaker, but his signature has been lined through with three or four lines, and E. V. Thompson was not made a defendant. The note contained a power of attorney to confess judgment and an original judgment was entered against the nine defendants on a cognovit. This original judgment was vacated on motion, the cause heard by the trial judge, without a jury, and judgment for the defendants was entered as above stated. A post trial motion was denied.

The plaintiff contends that the drawing of lines through the signature of E. V. Thompson, co-maker, was not a material alteration but a mere spoliation of the note, having no legal effect thereon. The defendants contend that the crossing out of the signature was a material alteration, which invalidated the instrument sued on.

In support of its contention, plaintiff says the note was completed with eleven signatures as an effective note, and that one George Lawrence, the credit union treasurer, who was deceased at the time of the trial, crossed out the name of E. V. Thompson, without having authority to do so. They contend, therefore, that the co-maker, E. V. Thompson, remained liable upon the note and, as a result, no material alteration occurred. Pursuing this line plaintiff contends that the claim of material alteration is an affirmative defense which must be supported by proof of authority of the agent to cross out the signature, which proof is said to be wholly lacking. Additionally, plaintiff says that, as a matter of law, an agent cannot release his principal's debtor without consideration, that no proof of consideration has been made, and hence, the authority of Lawrence to cross out the name has not been proven.

Defendants contend that the action of George Lawrence, treasurer of the credit union, was within the scope of his authority, and that where the alteration appears on the face of a negotiable instrument, the burden of proof of lack of authority to alter a negotiable instrument is upon the person asserting such want of authority; that no proof of want of authority was introduced, but rather, there was plentiful evidence of conduct ratifying the action of the agent.

This court is required to affirm the judgment of the trial court, after trial without a jury, if issues of fact could determine the matter, unless the judgment of the trial court, is clearly contrary to the manifest weight of the evidence. Horns v. Johnson, 17 Ill.App.2d 314 on 318, 149 N.E.2d 437; Floyd v. Smith's Estate, 320 Ill.App. 171 on 177, 50 N.E.2d 254; United States v. Chicago, Rock Island and Pacific Ry. Co., 171 F.2d 377 (CCA 10). If necessary, this court will search the record to affirm the trial court. Richman Chemical Company v. Lowenthal, 16 Ill.App.2d 568, 571, 149 N.E.2d 351.

We think that under the evidence, the trial court was correct in entering judgment for the defendants.

We must hold that where a signature on a negotiable instrument appears to have been cancelled, the burden of proof lies upon the party asserting that such cancellation was made without authority. (Ill.Rev.Stat.1961 ch. 98 sec. 144.) In this case the signature of E. V. Thompson does appear to have been cancelled. This cancellation is on the face of the instrument. The language of the statute is so specific that nothing else is required to support this position. An almost identical principle is announced by the Illinois Supreme Court on alteration of documents other than negotiable instruments. In Ruwaldt v. W. C. McBride Inc., 388 Ill. 285, at p. 292, 57 N.E.2d 863, at page 867, 155 A.L.R. 1209 (1944), the court, referring to an alteration of an oil lease, said:

'Where an alteration in a deed is admitted, or where it is established by inspection, the burden of proof shifts to the person claiming the benefit of the instrument, as altered, to show the alteration was made under circumstances rendering it lawful. Tucker v. Kanatzar, 373 Ill. 162, 23 N.E.2d 823; Waggoner v. Clark, 293 Ill. 256, 127 N.E. 436. * * * 'The rule is elementary that any alteration of a written instrument is material which so changes its terms as to give it a different legal effect from what it originally had, and thus work some change in the rights, obligation, interests or relations of the parties. It is immaterial whether this effect is brought about by interlineation, substitution, change of words or erasures, or by deleting some material provision of the instrument. Such an alteration renders the instrument void. Newlan v. Harrington, 24 Ill. 206, 207; Hayes v. Wagner, 220 Ill. 256, 77 N.E. 211; Wood v. Steele, 6 Wall. 80, 18 L.Ed. 725; Keller v. State Bank of Rock Island, 292 Ill. 553, 127 N.E. 94, 9 A.L.R. 1082.' (Emphasis supplied.)

In Merritt v. Dewey, 218 Ill. 599, at p. 606, 75 N.E. 1066, at p. 1069, 2 L.R.A.N.S., 217, where an alteration, not apparent on the face was shown, the court said:

'When the defendant had introduced evidence showing a material alteration the burden of proof then shiften to the plaintiff, and it was for him then (where he did not meet such evidence by denial) to show that suc alteration had been made under circumstances rendering it lawful or under circumstances which would not preclude a recovery by him. 2 Cyc. 234; Shroeder v. Webster, 88 Iowa 627, 55 N.W. 569; Maguire v. Eichmeier, 109 Iowa 301, 80 N.W. 395; Winter v. Pool, 100 Ala. 503, 14 So. 411; Glover v. Gentry, 104 Ala. 222, 16 So. 38; National Ulster County Bank v. Madden, 114 N.Y. 280, 21 N.E. 408; Gleason v. Hamilton, 138 N.Y. 353, 34 N.E. 283, 21 L.R.A. 210; Capital Bank v. Armstrong, 62 Mo. 59; Dewees v. Bluntzer, 70 Tex. 406, 7 S.W. 820.'

The general rule is that one claiming under an instrument shown to have been materially altered after execution has the burden of establishing the liability of the maker notwithstanding the alteration. 4 Am.Jur.2d p. 78, sec. 85. This is made so specifically, in the case of apparent cancellation of a signature on a negotiable instrument. Britton, Handbook of the Law of Bills and Notes, 2d ed. 1961, p. 650 et seq.

A change in the number of the parties is a material alteration (Ill.Rev.Stat.1961, ch. 98 para. 146(4)) and avoids the instrument (Ill.Rev.Stat.1961, ch. 98 para. 145).

The plaintiff contends that as a matter of law there could be no authority in an agent to release a maker, without consideration for such release, after execution of the note. Plaintiff cites Central Republic Trust Co. v. Evans, 378 Ill. 58, 37 N.E.2d 745. In that case a bank president orally promised certain signers of a note that they would not be held on the note, but that the bank would sell certain securities and look to other parties for payment. The court, on page 66, 37 N.E.2d 745, stated that an executive officer of a bank has no implied authority to bind it by a promise that one who signs a note shall not be required to pay it. The case is in no way controlling here because it does not deal with the alteration of an instrument and especially does not deal with the effect of alteration of a negotiable instrument.

Sections 119(3), 120(2) and 123 of the Negotiable Instruments Law (Ill.Rev.Stat.1961, ch. 98 sec. 140(3), 141(2) and 144 provide for cancellation of liabilities of parties to negotiable instruments without regard to consideration. The fact that, as a matter of general contract law, obligations may not ordinarily be, and sometimes cannot be released without consideration, does not establish such a policy of the law with regard to negotiable instruments. In Keller v. State Bank of Rock Island, 292 Ill. 553, 127 N.E. 94, 9 A.L.R. 1082 (1920), the Supreme Court of Illinois held that the alteration of a check by reduction of the amount voided the instrument. The court said, on p. 557, 127 N.E. on p. 95:

'It is immaterial whether the alteration is injurious or beneficial to the party who is liable on the instrument. Reducing the amount without the maker's knowledge will avoid the instrument.'

The court, on the same page, quoting from Montgomery v. Crossthwait, 90 Ala. 553, 8 So. 498, 12 L.R.A. 140, said:

'The law proceeds on the idea that the identity of the contract has been destroyed--that the contract made is not the contract before the court--that the party did not make the contract which was before the court; and, so adjudging, it cannot go further and hold him bound by it, on speculations, however probable and plausible, that he would or ought to have entered it in [into] the altered agreement, because in involved less liability than the original and only paper executed by him.'

In McCrystall v. Connor, 331 Ill. 107 on p. 123, 162 N.E. 375, the Supreme...