First Nat. Bank of Butte v. Weidenbeck

• Decision Date: 06 November 1899
• Docket Number: 1,205.
• Parties: FIRST NAT. BANK OF BUTTE v. WEIDENBECK et al.
• Court: U.S. Court of Appeals — Eighth Circuit

97 F. 896

FIRST NAT. BANK OF BUTTE v. WEIDENBECK et al.

No. 1,205.

United States Court of Appeals, Eighth Circuit.

November 6, 1899

This is an action by the First National Bank of Butte, plaintiff in error, against Sigmund T. Weidenbeck and Gustave J. Heinrich the defendants in error, to recover from them the sum of $4,000 on a note executed by the Twin City Butte Mining Company, a corporation existing under the laws of the state of Montana, of which the defendants were trustees. The complaint alleges that the mining company, which was a corporation organized and existing under the laws of the state of Montana, borrowed from the plaintiff in error the sum of $4,000, and executed therefor its note; that, after the execution and delivery of the note, the bank entered into an agreement with one George H. Tong, whereby Tong, for a valuable consideration, undertook and promised to guaranty the payment of the note, and in pursuance of such agreement, and in evidence thereof, wrote his name upon the note, intending thereby to guaranty the payment of the indebtedness, and by inadvertence placed his name upon the face of the note; that at the time it was expressly understood and agreed between the bank and Tong that he did not sign the note as maker or surety, but only as guarantor; that this contract of guaranty was made solely between the bank and Tong, the mining company not being a party or privy thereto; that after maturity of the note the bank and Tong entered into an agreement whereby Tong was discharged from his contract of guaranty of the payment of the note, and thereupon his name on the face of the note was erased, and the note left in the same condition it was when delivered by the mining company to the bank; that the agreement of guaranty between the bank and Tong, as well as the discharge from the guaranty, were innocently made and done, and entirely independent of any contract of the bank and the mining company; that, with the exception of some small payments which were indorsed as credits on the note, it still remains unpaid, although frequent demand has been made upon the mining company for payment thereof; that the mining company is wholly insolvent, and has no property out of which the note could be paid; that by the provisions of the statutes of the state of Montana, under which the mining company was created, it is the duty of the officers of every corporation to make a report annually, within 20 days of the 1st of September, of its financial condition, which is to be published in some newspaper published in the city in which it is located, and filed in the office of the county clerk of the county where the business of the company is carried on that this report is to be verified by the president or secretary of the company, and signed by the president and a majority of the trustees, and, upon failure of the company to comply with these requirements of the law, all the trustees of the company shall be, jointly and severally, liable for all debts of the company then existing, and for all that shall be contracted before such report shall be made; that the defendants were at the time the debt was contracted, and ever since then, and are now, trustees of the mining company that the business of the mining company is carried on in the county of Silver Bow, in the state of Montana, and has its principal office and place of business in the city of Butte, in that county and state; that the mining company failed and neglected to publish such report or file it in the office of the clerk of Silver Bow county, or any county of the state of Montana, within 20 days from the 1st of September, 1894, by reason whereof the defendants are liable, jointly and severally, for the indebtedness of the mining company; and it prays for judgment on the note. A demurrer to the complaint was sustained, and final judgment rendered for the defendants, whereupon the plaintiff sued out this writ of error. The opinion of the circuit court sustaining the demurrer is reported in (C.C.) 87 F. 271.

George B. Young, John A. Shelton (T. J. Walsh, on the brief), for plaintiff in error.

J. O. P. Wheelwright (Albert C. Cobb, on the brief), for defendants in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

CALDWELL Circuit Judge (after stating the facts as above).

Formerly it was held that any alteration of a contract, whether material or immaterial, by a party claiming under it, avoided the contract. But the modern doctrine is that an immaterial alteration of a contract by a party claiming under it does not avoid the contract. 2 Pars.Cont. 717-720; Rand. Com. Paper, Sec. 1743; Daniels, Neg. Inst. 1398. The principal and most important question in this case is, did the addition of Tong's name to the note as guarantor, and its subsequent erasure therefrom, in the manner and under the circumstances stated in the complaint, constitute a material alteration of the note which avoids it? The learned counsel for the plaintiff in error and the defendants in error, respectively, have furnished us with a full citation and exhaustive discussion of the authorities on both sides of this interesting subject. But, in view of the decision of the supreme court of the United States in the case of Mersman v. Werges, 112 U.S. 139, 5 Sup.Ct. 65, 28 L.Ed. 641, we do not feel called upon to indulge in any general discussion of the question. We think all that is there said by the court was fairly called for by the facts of that case, and that this court would not be justified in treating it as obiter dicta. Treating the opinion in that case as authoritative, as the courts and law writers who have had occasion to discuss this question have very generally done, we are constrained to hold that placing Tong's name on the note as a guarantor, and its subsequent erasure under the circumstances stated in the complaint, was not a material alteration of the note which avoided it. The court in that case said:

'The present case is not one of a change in the terms of the contract, as to amount or time of payment, but simply of the effect of adding another signature, without otherwise altering or defacing the note. An erasure of the name of one of several obligors is a material alteration of the contract of the others, because it increases the amount which each of them may be held to contribute. Martin v. Thomas, 24 How. 315, 16 L.Ed. 689; Smith v. U.S., 2 Wall. 219, 17 L.Ed. 788. And the addition of a new person as a principal maker of a promissory note, rendering all the promisors apparently jointly and equally liable, not only to the holder, but also as between themselves, and so far tending to lessen the ultimate liability of the original maker or makers, has been held in the courts of some of the states to be a material alteration. Shipp v. Suggett, 9 B.Mon. 5; Henry v. Coats, 17 Ind. 161; Wallace v. Jewell, 21 Ohio St. 163; Hamilton v. Hooper, 46 Iowa, 515. However that may be, yet where the signature added,

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