Kurth v. The Farmers and Merchants State Bank
| Decision Date | 07 March 1908 |
| Docket Number | 15,430 |
| Citation | 77 Kan. 475,94 P. 798 |
| Parties | OTTO KURTH et al. v. THE FARMERS AND MERCHANTS STATE BANK |
| Court | Kansas Supreme Court |
Decided January, 1908.
Error from Riley district court; SAM KIMBLE, judge.
Judgment reversed.
SYLLABUS BY THE COURT.
1. PROMISSORY NOTES -- Memorandum Written on Back at Time of Execution. A memorandum written on the back of a promissory note at the time of execution which limits its consideration, affects its operation, and was intended to be a part of the contract, must be regarded as a substantive part of the note.
2. PROMISSORY NOTES -- Verified Denial of Execution -- Contemporaneous Indorsements. A verified denial of the execution of a promissory note is sufficient to put in issue the execution as well as alterations of indorsements of credits written on the back of the note contemporaneously with its execution and before its delivery.
Robert J. Brock, W. H. Rossington, Charles Blood Smith, and Samuel Barnum, for plaintiffs in error.
C. B Daughters, A. M. Story, A. A. Godard, and H. E. Valentine, for defendant in error.
In an action brought by the Farmers and Merchants State Bank of Leonardville, Kansas, to recover on a promissory note executed by Otto Kurth and ten others, the bank in its petition set out the following copy of the instrument:
"$ 600.
RILEY, KAN., December 15, 1904.
The note was indorsed on the back as follows:
"By cash T. E. Pierce, $ 5, five dollars.
By cash Hy. Stonge, $ 5, five dollars.
By cash M. Swart, $ 5, five dollars.
By cash Wm. Keith, $ 10, ten dollars.
Without recourse.
Robt. Burgess & Lukyn.
Robert Burgess & Thos. Lukyn."
The defendants' answer was, first, a general denial; second, an averment that before the note was executed and delivered the payees caused to be indorsed on the back of the note the following indorsements:
They also alleged that since the execution and delivery of the note the indorsements were so altered as to make it appear that Pierce, Stonge and Swart were each credited with only $ 5 and Keith with only $ 10, and that these alterations were made without the knowledge or consent of the makers. The third defense was a denial of the execution of the note as set forth by the bank; and, fourth, a defense relating to the insurance of the horse for the price of which the note was given. There was a verification of so much of the answer as denied the execution of the note, but no specific denial of the indorsements on the back of the note.
At the opening of the trial it was admitted that each of the defendants signed the note in suit; and after proof had been offered by the bank tending to show that it purchased the note before maturity and without notice of any defenses, and that the note then bore the indorsements that are on it at present, the bank rested its case. The defendants then proposed to show that the indorsements had been altered, and that at the time Pierce, Stonge and Swart signed the note there were indorsements written on it crediting each of them with the payment of $ 50 and that when Keith signed it he was credited with the payment of $ 100. This testimony was refused, the court ruling that the verification of the count denying the execution of the note was not a verified denial of the allegation of the execution of the indorsements on the back of the note. The defendants then asked leave to amend their answer by verifying the count relating to the alteration of the indorsements, but the court held that it was not warranted in allowing the amendment, because of the lateness of the application and for the reason that the amendment would introduce a new defense. Exceptions to these rulings were taken and error is predicated on them.
Were the allegations as to the execution of the indorsements put in issue by the verified denial of the execution of the note or did the indorsements stand admitted as pleaded? It is alleged that the indorsements of credits on the back of the note were written there contemporaneously with the signing of the note, by the persons to whom credits were given. Indorsements placed upon a note at the time of execution and before delivery which limit the obligation and qualify its operation become a substantial part of the instrument itself. The note did not rise to the rank of an obligation until it was delivered, and the makers are only bound by such conditions and obligations of the note as were written on it at the time of delivery. They had signed the note, it is true, but if the note executed was materially altered after execution it cannot be said to be the note which was executed. If the memoranda entered on the back of the note before delivery fixed the amount of the obligation which the makers were to pay, and the memoranda were altered so as to increase the obligation, it was no more the note of the makers than if the consideration named on the face of the...
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