Johnson v. T. M. Dover Mercantile Company

• Decision Date: 19 May 1924
• Docket Number: 394
• Citation: 261 S.W. 913,164 Ark. 371
• Parties: JOHNSON v. T. M. DOVER MERCANTILE COMPANY
• Court: Arkansas Supreme Court

261 S.W. 913

164 Ark. 371

JOHNSON v. T. M. DOVER MERCANTILE COMPANY

No. 394

Supreme Court of Arkansas

May 19, 1924

Appeal from Polk Circuit Court; B. E. Isbell, Judge; reversed in part.

Judgment affirmed.

Lake & Lake and Minor Pipkin, for appellant.

There was such an alteration within the meaning of C. & M. Dig § 7891, as to avoid the note. Change of payee is a material change. 2 C. J. 1215; 8 C. J. 728. See also 102 Ark 302; 49 Ark. 40; 143 Ark. 292; 150 Ark. 85; 8 C. J. 730.

Appellee is not a holder in due course. 99 Ark. 459; 115 Ark. 44; L R. A 1918F; C. & M. Dig. §§ 7815, 7824; 119 Ark. 334. The erasure of one of the signatures to the note without the knowledge or consent of the others is such an alteration as avoids liability of the nonconsenting parties. 88 Mo. A. 117. A restoration of an instrument once materially altered is ineffective. 86 A. S. R. 119, note. The court should have instructed a verdict in favor of J. C. Allen, G. H. and F. L. Johnson, since their signatures to the note were proved to be forgeries.

Norwood & Alley, for appellee.

The name of the payee was not changed after delivery of the note, but, if so, the change as made was not such as to avoid the payment of the note by the appellants or any of them. See L. R. A. 1916F, p. 294; 139 Ala. 286; 48 Cal. 147; 143 Ill.App. 244; 62 Ind. 401; 3 Page, Cont., 1514, 1515; 22 Min. 257; 187 Mo.App. 621; 46 Iowa 515; 80 Iowa 151; 130 Mo.App. 665; 74 Tex. 222; 83 Wis. 233; 127 Ark. 234; 131 Ark. 185. The name of W. T. Rowe was never stricken off the note. No mention of forgery was made in the answer of J. C. Allen, F. L. and G. H. Johnson, and they should be held to the issues tendered by the answer. 46 Ark. 129. It is no defense that the note was delivered without the security being given to the signers, and before all the sureties had been secured. 70 Ark. 512; 99 Ark. 319.

OPINION

SMITH, J.

The T. M. Dover Mercantile Company, a corporation hereinafter referred to as the company, owned on and prior to July 10, 1921, $ 3,600 in United States Government bonds, which on that date it sold and delivered to L. H. Johnson and received in payment therefor the note upon which this suit is based. Johnson at the time was vice- president of the Bank of Hatfield, and he knew that the company had these bonds in the vault of the bank. Johnson had applied to the company several times to buy the bonds. He had no money to pay for the bonds, but proposed to give a note. Finally M. J. Dover, the president of the company, agreed to sell the bonds to Johnson upon the condition that Johnson could procure the indorsement of twelve or fifteen solvent sureties. Johnson prepared the note and proceeded to obtain the required indorsements. The note used was one of the printed notes which the bank kept in stock for its own use, and it named the bank as payee therein, and it read that it bore interest from maturity, the note evidently having been prepared in contemplation of the fact that the bank would deduct interest on any loan made by it in advance. Johnson proceeded to get signers on the note and reported progress to Dover, and he finally secured the signatures of fifteen persons, and the note was then considered sufficient.

R. B. Holder was the cashier of the bank at that time, and he delivered the note to Dover and took possession of the bonds for the account of Johnson and sold them and credited the proceeds of the sale to Johnson's account, the principal portion thereof being used to discharge an overdraft of Johnson's outstanding in the bank at the time of the sale of the bonds. At the time of this sale Dover and the company were customers of the bank, but neither owned any stock or had any part in the management of the bank.

The note was not paid at maturity, and this suit was brought to enforce payment. In bringing the suit the company alleged that the note was originally made payable to the bank and was afterwards transferred to the company by delivery. The name of the bank as payee had been stricken out with a pen and the name of the company inserted as payee, and the word "maturity" had been erased and the word "date" inserted, the effect of these changes being to make the note payable to the company instead of to the bank and to bear interest from date instead of from maturity.

After instituting this suit the company was advised that the makers of the note intended to deny liability on the ground that there had been a material alteration in the note by changing the name of the payee, whereupon the company amended its complaint to allege that the note as executed was payable to the bank and that some one without authority changed the name of the payee, in which condition it was assigned to the company.

Dover, who acted for the company in the matter, testified that he made no alteration of any kind, and that, so far as he was advised, no alteration had ever been made, as the note, when delivered to him, was payable to the company and bore interest from date instead of maturity, and, as the note should have been executed in this manner, he supposed it had been. According to Dover, the company acquired the note without notice that any alteration had been made, but the complaint was amended to meet the proof which Dover was advised the makers of the note intended to offer.

The answer denied that the company was the owner of the note and denied that the company acquired it in due course, and alleged that the note was void because of the alterations mentioned above; alleged that there had been a premature delivery of the note in that Johnson had agreed that he would, before the delivery of the note, indemnify the sureties by executing to them a mortgage on certain cattle he owned, but this he never did; alleged that certain signatures were forgeries, and that, after the delivery of the note, the name of W. T. Rowe, one of the makers, had been erased from the note and the name of Ober Rowe substituted therefor, and that this had been done without the knowledge or consent of the other makers of the note, and that the note had been prematurely delivered in that it was agreed that certain other signatures would be secured before the note was delivered.

Dover testified that the bank had no interest whatever in the transaction and that its name was brought into the litigation only because Johnson had used one of the printed notes of the bank, and there appears to be no doubt about this fact. Dover testified that he noticed the written changes that had been made, but he attached no significance thereto, as there were changes which should have been made to conform the note to his contract with Johnson, and he assumed without inquiry, when Holder delivered the note to him, that they had been made before the note was signed. There was testimony on the part of some of the makers that the note was payable to the bank and bore interest from maturity instead of from date when they signed it, and that Johnson had agreed to execute a mortgage to indemnify them before delivering the note, and that certain other signatures were to have been procured before the note was delivered. There was no testimony that Dover knew, before receiving the note, of any of the conditions about getting other signers or giving a mortgage to indemnify those who did sign.

It is first insisted that the verdict should have been directed in favor of all the defendants for the reason that the note had been materially altered.

It may be conceded that a change of payee and of the date from which interest was to be computed were material changes (§ 7891, C. & M. Digest); but it does not follow that the verdict should have been directed in defendants' favor on that account, for, according to Dover, no alteration of the note was made after its delivery to him for the company, and, if this is true, he acquired such rights as the bank had, and these rights will be discussed in connection with the instructions given in the case.

The makers of the note insist that there is no question about the alteration of the note to submit to the jury, as the most casual observation would disclose an alteration, and they insist that, on this account, the verdict should have been directed in their favor. We do not so interpret the testimony. It is true the printed blank was changed as stated above, but these changes were not alterations at all within the meaning of the Negotiable Instruments Act, if they were made before the note was signed. Altering the blank note to conform to the agreement between Johnson and Dover before the note was signed would not be an alteration of the note itself, for the printed piece of paper with...