Kingan & Co. v. Silvers

• Decision Date: 09 May 1894
• Citation: 37 N.E. 413,13 Ind.App. 80
• Court: Indiana Appellate Court
• Parties: KINGAN & CO., Limited, v. SILVERS et al.

13 Ind.App. 80

37 N.E. 413

KINGAN & CO., Limited,

v.SILVERS et al.¹

Appellate Court of Indiana.

May 9, 1894.

Appeal from circuit court, Marion county; E. A. Brown, Judge.

Action by Kingan & Co., Limited, against William F. Silvers and James Silvers, on a promissory note. From a judgment for defendants, plaintiff appeals. Reversed.

L. B. Swift, for appellant. T. J. Terhune, for appellees.

LOTZ, J.

The appellant was the plaintiff and the appellees the defendants in the court below. The complaint is in one paragraph, and alleges that on September 25, 1888, the defendants, at Lebanon, Ind., executed to the plaintiff the following note: “$388.03. Lebanon, Ind., Sept. 25th, 1888. Ninety days after date we promise to pay to the order of Kingan and Co., at the Meridian National Bank of Indianapolis, Ind., three hundred and eighty-eight and 03-100 dollars, with eight per cent. interest after maturity until paid, and five (5) per cent. attorney's fees; value received; without any relief from valuation or appraisement laws. And it is hereby understood that the drawers and indorsers severally waive presentment for payment, protest, and notice of protest, and nonpayment of this note. W. F. Silvers. James Silvers. Due Dec. 24th, 1888.” The complaint further alleges that the note was procured from defendants by the plaintiff's traveling salesman, one W. H. Nichols; that said salesman was not a general agent, and had no general authority to make settlements or take notes on plaintiff's account, nor was that a part of his duties; that, being about to go to Lebanon in the course of his duties as such traveling salesman, the plaintiff instructed him to procure for plaintiff from defendants a note on account of an indebtedness to plaintiff amounting to $388.03; that this agent accordingly procured the note sued upon; that, after the execution of the note, the agent took it to another part of Lebanon, entirely away from and out of communication with defendants, or either of them, and there, while he was in the process of conveying the note to plaintiff, and without the authority or knowledge or consent of the plaintiff or of the defendants or either of them, he altered the note by striking out the words “after maturity” and inserting the words “from date,” so as to make the note read, “with eight (8) per cent. interest from date;” that the agent then transmitted the note to plaintiff, but did not inform plaintiff of the alteration, nor did plaintiff have any knowledge of it until after the note became due, and was sent to Lebanon for collection; that the plaintiff has never in any way ratified or approved the agent's act in changing said note, but, since learning of the same, has only demanded, and now only demands, payment of the note as originally executed; that the agent believed that he had the right to make the alteration; that the note was written on a printed blank; and that in commerce it is the constant practice, if the instrument is to bear interest from date, to make a change exactly similar to this change, and that there was nothing in the appearance of the note to put plaintiff upon inquiry. The defendants separately demurred to the complaint for want of sufficient facts. The demurrers were sustained, to which ruling the plaintiff excepted, and, electing to abide by its complaint, final judgment on demurrer was rendered for the defendants.

The errors assigned are the rulings of the court in sustaining the separate demurrers to the complaint. According to the allegations of the complaint, the note, as originally executed, provided for “eight per cent. interest after maturity until paid.” It was altered or changed by striking out the words “after maturity” and the words “from date” inserted, so as to make it read, “with eight per cent. interest from date.” This was a material alteration, and so changed the terms of the note as to increase the obligations of the makers. A contract is an agreement and promise enforceable by law. In every express contract the minds of the contracting parties must come to and consent to the same stipulations and conditions. Such a contract rests primarily in mental processes, which are invisible and intangible. The parties may, at their option, put the terms of the contract in writing, and cause the same to be signed by the persons to be charged thereby. The writing then becomes the deed or act of the parties who signed the same. Owing to the fixed methods of procedure in courts of justice, and the illiberal rules of evidence that formerly existed, the importance of preserving written instruments in their original integrity was much greater than in more recent times. Custom required that the acts which marked the completion of certain kinds of contracts should be attended with great solemnity and formality. The purpose was to preserve and perpetuate the evidence of the contract. In the execution of certain written instruments the formal requirements became of as much importance as the contract itself. Holmes, Com. Law, 261. A written instrument in the hands of an adverse party is easily susceptible of alteration, to the injury of the maker. Many written contracts are negotiable, and perform important functions in commercial transactions. It is of the highest importance to the commercial world that they be preserved in their original state or condition. Public policy demands this, for the prevention of frauds upon and of loss to innocent persons. The most effectual means of preserving the integrity of such instruments are the rule that a material alteration destroys the instrument so that no recovery can be had upon it either in its original or altered condition, and the rule that no recovery can be had upon the original consideration if the change be made for a fraudulent purpose. The object of these rules is to enjoin the highest care upon the holder, and to punish him with loss for his negligent or fraudulent conduct.

One of the early decisions of the English courts on the subject of the alteration of written instruments is that of Pigot's Case, decided by Sir Edward Coke in the year 1614. 11 Coke, 27. It was there resolved: “That when any deed is altered in a point material by the plaintiff himself, or by any stranger without the privity of the obligee, be it by interlineation, addition, erasing, or by drawing of a pen through a line or through the midst of any material word, the deed thereby becomes void. * * * So if the obligee himself alters the deed by any of the said ways, although it is in ways not material, yet the deed is void; but if a stranger, without his privity, alters the deed by any of the said ways, in any point not material, it shall not avoid the deed.” Since the time of Pigot's Case we find in the books a multitude of adjudications bearing upon the subject of the alteration of notes and other written instruments. They are not all consistent, nor easily reconciled. But, after all that has been said, each case must stand much more on its own facts than upon the rules announced in any given case. The rules announced in Pigot's Case have been modified in England, and they never did prevail in America to their full extent, or in their original vigor. The rules that now prevail, as we gather them from the decided cases, are: (1) That the alteration of a note or written instrument in a material matter by a stranger is but a spoliation, and does not destroy it, and a recovery may be had on it in its original condition. (2) If the plaintiff, the obligee, or the holder make an alteration in an immaterial matter, the alteration does not destroy the note, but a recovery may be had on it in its original condition. (3) But if the alteration be in a material matter, and be purposely or intentionally made by the plaintiff, the obligee, or the holder, such alteration destroys the note or instrument, and no recovery can be had upon it in either its original or altered condition. The last rule is the same as one of the rules laid down by Lord Coke in Pigot's Case, and is still the law. If the case at bar falls within this latter rule, then the demurrers were correctly sustained. The change in the note was not made by the plaintiff's order or direction, but it intrusted certain business to another as its agent, and such person made the alteration. If the alteration was made by the agent while in the transaction of the principal's business, and in the scope of his authority, then the act of the agent is the act of the principal,-“qui facit per alium facit per se.”

The solution of this case depends upon the relation existing between Nichols and the plaintiff at the time the alteration was made. If he was the plaintiff's agent, and the act was within the scope of his authority, then his act must be deemed the act of the plaintiff, and the law is with the defendants. If his position was that of a mere stranger to the note, then the law is with the plaintiff. The appellees rely confidently upon the case of Eckert v. Louis, 84 Ind. 99, as furnishing a rule binding upon this court, and as decisive of the questions here involved. The facts of that case briefly are that a note had been signed by a principal and his surety, and was by the principal delivered to the agent of the payees. In a short time after the delivery the note was altered in a material respect, by the person to whom it had been delivered. Such change was made in the presence of the principal, and with his consent; but the change was without the knowledge or consent of the surety. Suit was instituted against the surety alone on the note in its altered condition. The court held that there could be no recovery in such an action against the surety. It seems to us that the bare statement of the facts shows the correctness of the holding. The note was changed in a material respect, and yet the effort was to enforce it in its altered condition. The position occupied by the person making the change was wholly...