Garner v. Thomas

• Decision Date: 17 January 1938
• Docket Number: 5917
• Citation: 94 Utah 287,75 P.2d 168
• Court: Utah Supreme Court
• Parties: GARNER v. THOMAS et al

75 P.2d 168

94 Utah 287

GARNER v. THOMAS et al

No. 5917

Supreme Court of Utah

January 17, 1938

Rehearing Denied April 20, 1938.

For opinion denying rehearing see94 Utah 295, 78 P.2d 529.

Appeal from District Court, Second District, Weber County; Eugene E Pratt, Judge.

Action by Henry J. Garner against George S. Thomas and another on notes and to foreclose a realty mortgage securing them wherein Rulon B. Garner, executor of the estate of Henry J Garner, deceased, was substituted as plaintiff upon the death of Henry J. Garner.From a judgment for the plaintiff, the defendants appeal.

REVERSED AND REMANDED, WITH DIRECTIONS.

Cyrus G. Gatrell, of Salt Lake City, for appellants.

Thatcher & Young, of Ogden, for respondent.

LARSON, Justice.FOLLAND, C. J., and HANSON, MOFFAT, and WOLFE, JJ., concur.

OPINION

LARSON, Justice.

This is an appeal from the district court of Weber county and involves a claim of error in the description of lands covered by a mortgage, and a claimed novation or alteration in the notes secured by the mortgage.On November 12, 1919, Henry J. Garner and defendantGeorge S. Thomas entered into a written contract for the sale of Garner's 60-acre farm to Thomas for $ 11,500, to be paid as follows: "Amt to be paid from federal loan 6000.00.Not less than 5000.00 soon as loan is made.Bal on second mortgage on property which covers federal loan $ 5500.00 five thousand five hundred for five years at 7% interest per annum annually."In May, 1920, a federal farm loan for $ 6,000 was secured and the defendants executed in favor of Garner five promissory notes aggregating $ 5,310, payable one each year for five years, interest at 7 per cent, and a mortgage to secure the same covering the farm and some other lands of George Thomas, and one lot in Plain City, the home, title to which was in the name of Mrs. Thomas.At the time these papers were finally executed, a Mrs. Hancock, sister of Mrs. Thomas, paid Garner $ 1,000 cash from her savings account for the benefit of the purchasers.There was thus put into the purchase $ 6,000 federal loan, $ 5,310 secured notes, and $ 1,000 cash, a total of $ 12,310.The two notes maturing first, one for $ 800 and another for $ 1,200 were paid in full, and various sums paid as interest on the balances due.On November 1, 1933, Henry J. Garner brought suit to recover on the three remaining notes, two for $ 1,000 each and the other for $ 1,310, with interest at 8 per cent per annum, and for foreclosure of the mortgage.Defendants answered, alleging that since their execution and delivery the notes had been altered to read with interest at 8 per cent per annum instead of 7 per cent; and also that the lot of Mrs. Thomas, the home above referred to, had, by inadvertence, been included in the mortgage, or had been inserted after the execution of the mortgage.Defendants prayed that the notes and mortgage be canceled.Plaintiff in reply denied any alteration in the notes or mortgage, denied the home (lot 1) was included in the mortgage by "any inadvertence, accident or mistake," and alleged that the interest rate in the notes was changed from 7 to 8 per cent "with the full knowledge and consent of the defendants."Just after the action was commenced, plaintiff died, and his executor was substituted as plaintiff.Upon the trial had in November, 1936, the court entered judgment for plaintiff, and defendants appeal.

The following questions are presented: (1) Does the record show a material alteration of the notes without the consent of the defendants?(2) If so, what effect does it have on the judgment?(3) Does the record show that the home of Mrs. Thomas (lot 1) was erroneously and inadvertently included in the mortgage?(4) If so, to what extent does it affect the judgment?We shall answer them in order.

(1) Four of the five notes are in evidence--the three upon which plaintiff's action is based, and the $ 1,200 note that had been paid and canceled.The first note to mature, for $ 800, is not in evidence, but is conceded to have been paid.The notes, on printed forms with the blank spaces filled in, all read "with interest at the rate of seven per cent per annum," the word seven being in ink and the other words printed.The mortgage recites that the notes carry 7 per cent interest, as does also the written agreement for the sale made prior to the execution of the notes and mortgage.On the $ 1,200 note the ink written word seven has been crossed out and Eight written above it in ink.On the next note to mature the same change is made.On the other two notes the word seven is not crossed out, but over it in pencil is the figure "8%."It is conceded that the word Eight on the two notes and the figure "8%" on the other two notes are in handwriting different from the other script on the face of the notes; that it is not in defendants' handwriting, and probably not plaintiff's script.It is also admitted that all payments made and credited on these notes were credited on an 8 per cent basis.In a book in evidence, kept in the handwriting of the payee, Garner, and purporting to show the payments made by defendants commencing in June, 1922, all interest charges are made at 8 per cent.On another exhibit of plaintiff a statement in the handwriting of the payee under date of November 22, 1922, is the statement, "If principal not paid at date, I will carry notes if interest is paid in advance @ 8% per annum on full amount of notes, until paid. * * *"Plaintiff testified that on one occasion his father, the payee, had told him that it had been agreed with Thomas that, since the notes were not paid as due, the interest should be 8 per cent.There is no testimony from Thomas in regard to the matter; no denial of this statement.It appears from the brief that counsel for defendants took the view that, since Garner was deceased, Mr. Thomas would not be permitted to testify in regard to the matter.In this, counsel was in error because, the executor having opened up this alleged conversation and agreement, Mr. Thomas could testify as to that matter and explain or deny the same.There is no evidence at all about Mrs. Thomas having any knowledge thereof.Thomas testified that he could not figure interest, and he had always paid what Garner claimed was due.That is all the evidence on the matter.

The evidence, though meager, sustains the finding of the trial court, that the changing of the rate of interest on the notes from 7 to 8 per cent was done after execution and delivery of the notes, and was done by or at the instance of Mr. Garner, the payee.We are also of the opinion that the evidence sustains the finding that such change was made with the knowledge and approval of the defendantGeorge S. Thomas, but was without the knowledge, consent, or approval of the defendantClara L. Thomas.

(2) What then is the effect of such change or alteration of the notes?As to the two notes where the penciled figure "8%" is written above the word "seven" but the "seven" not scratched out, there is no alteration.The notes still on their face call for the 7 per cent as originally agreed upon.The other notes, where the word "seven" was scratched out and the word "Eight" written in ink above it, were thereby changed in their terms and tenor and this constitutes alteration.That such alteration constitutes a material change cannot be doubted.Idaho State Bank v. Hooper Sugar Co., 74 Utah 24, 276 P. 659, 68 A. L. R. 969.That a material alteration in a note voids it in the hands of the one who makes the change as to all parties then liable thereon who do not consent thereto, is...