McClure v. Little

• Citation: 49 P. 298,15 Utah 379
• Decision Date: 14 June 1897
• Docket Number: 787
• Court: Supreme Court of Utah
• Parties: WILLIAM H. McCLURE ET AL., APPELLANTS, v. JAMES T. LITTLE ET AL., RESPONDENTS; THE DESERET SAVINGS BANK, INTERVENER

49 P. 298

15 Utah 379

WILLIAM H. McCLURE ET AL., APPELLANTS, v. JAMES T. LITTLE ET AL., RESPONDENTS; THE DESERET SAVINGS BANK, INTERVENER

No. 787

Supreme Court of Utah

June 14, 1897

Appeal from the Third district court, Salt Lake county. M. L Ritchie, Judge.

Action by William H. McClure and others against James T. Little and Elias A. Smith. The Deseret Savings Bank intervened. From the judgment, plaintiffs appeal.

Affirmed.

C. F. &amp F. C. Loofbourow, for appellants.

If the alterations were fraudulently made, not only the notes, but the original debt for which they were given, are destroyed or wiped out. If innocently made, while the notes are hereby destroyed, resort may nevertheless be had, according to the prevailing opinions in this counttry, to an action upon the original indebtedness, if any existed. Draper v Wood, 112 Mass. 315; Meyer v. Huncke, 55 N.Y. 417; Bloat v. Brown, 13 Ohio St. 364; Wallace v. Jewell, 21 Ohio St. 163; Harsh v. Keppler, 28 Ohio St. 200; Wood v. Steele, 6 Wall. 80; Mersman v. Werges, 112 U.S. 139; 2 Parsons on Notes and Bills, pp. 571-2, 580-1, 1st Ed; 3 Randolph, Commercial Paper, sec. 1742.

But the destruction of the notes by alteration destroys the mortgage as well, even though no alteration had been made in it, because all the instruments are parts of one completed contract. Warring v. Smythe, 2 Barb. Ch. 119; Meyer v. Huncke, 55 N.Y. 412; Sherman v. Sherman, 3 Ind. 337; Tale v. Fletcher, 77 Ind. 105.

Moyle, Zane & Costigan, for respondent.

The courts hold that the mortgage may be enforced when the note secured by it has been altered without fraudulent intent. Vog'e v. Ripper, 34 Ill. 100; Clough v. Seay, 49 Iowa 111; Elliot v. Blair, 47 Ill. 342; Gillette v. Smith, 18 Hun 10; Cheek v. Nall, 112 N. Car. 370; Heath v. Blake, 28 S. Car. 406.

The alteration of a note by a stranger does not affect the contract, but merely mutilates the evidence of it and is pure spoliation; and even if the person making the alteration is the agent of one of the parties, unless he had express or implied authority for the act, he will be regarded as a stranger, the alteration not being imputable to the principal. Nickerson v. Swett, 135 Mass. 514; Collins v. Makepiece, 13 Ind. 448; Davis v. Carlisle, 6 Ala. 707; Reese v. Overbough, 6 Cow. 746; Cerry v. Haxlewood (Ky.) 1 Duv. 109; Piersol v. Grimes, 30 Ind. 129; Nichols v. Johnson, 10 Conn. 192.

This rule is especially true where only a blank is filled, as in this case. The words "interest payable" were followed by a blank and that blank alone was filled. Hunt v. Adams, 6 Mass. 519; Angle v. N.W. Ins. Co., 92 U.S. 330; Weyhauser et al. v. Dun et al., 100 N.Y. 155; McGrath v. Clark, 56 N.Y. 34; Redlich et al. v. Doll, 54 N.Y. 234; Weaner v. Bromley, 31 N.W. 839; 3 Randolph on Com. paper secs. 1765, note 8 and sec. 1768. 2 Parsons on Contracts, 719-720; Chitty on Contracts, 786; Chitty on Bills, 184 and 185, star paging; 2 Daniel Negotiable Instruments, p. 207, secs. 1403-4; 2 Exception to article 248, p. 252 of Benjamin Chalner's digest Bills and Notes.

Also on the principle of estoppel the bank here has the right to claim against McClure. Putnam v. Sullivan, 4 Mass. 45; Bank v. Kimball, 10 Cush. 373; Violette v. Patton, 10 Cranch 142; Bank of Pittsburg v. Neal, 22 How. 96; Charlton v. Reed, 61 Iowa 166; Cronkhite v. Nebeker, 81 Ind. 319; Wessell v. Glenn, 108 Pa. St. 104.

MINER, J. ZANE, C. J., concurs.

OPINION

MINER, J.:

Prior to 1890, defendant Smith and others owned Central Park, in Salt Lake, and sold it to one Andrews. In part payment, Smith took two notes for $ 20,000 each secured by mortgage on the property. Plaintiff McClure bought the property subject to the mortgage. Negotiations afterwards took place between Smith and McClure by which McClure agreed to give his notes secured by trust deed on the property, to Smith, and take up the incumbrance. The notes and trust deed were drawn up and delivered to McClure for him to take to Colorado for his wife's signature. They were afterwards signed and returned to Smith by mail. The notes and trust deed were drawn upon printed blanks. The notes were all in the following form, except as to date of payment and amount: "$ 16,250.00 gold. Salt Lake City, Utah, October 1, 1891. One year after date, for value received, we, or either of us, promise to pay to the order of Elias A. Smith sixteen thousand two hundred fifty dollars, negotiable and payable at the Deseret National Bank of Salt Lake City, in U.S. gold coin, with interest at the rate of nine per cent. per annum from date until paid. Interest payable . [Signed] William H. McClure. Amanda M. McClure." When the notes were delivered to Smith, the word "semiannually" was left out of the blank following the words "interest payable." When Smith received the notes, October 21, 1891, he showed them to Mr. Young, who discovered that the word "semiannually" was left out of the blank, and suggested the error. Smith remarked that it was a clerical error, and immediately wrote the word "semiannually" in each note, so that they would read, "Interest payable semiannually." Plaintiffs claim the word "semiannually" was not in the trust deed when delivered to Smith, but the testimony is conflicting on this point. The notes and trust deed were made payable to Smith, with James T. Little as trustee, and contained the usual power. Smith was the indorser on the Andrews note. Smith and McClure were indorsing the new notes. Both were procuring the new loan for themselves as well as for the bank. While Smith was acting for the bank he had no authority from the bank officials to alter the notes. In July, 1893, proceedings were begun to foreclose this trust deed, by publication, on account of the non-payment of the semiannual interest falling due April 1, 1893. Thereupon plaintiffs brought this suit against Smith and Little, the trustee, to restrain the sale, and have the securities canceled and adjudged void on account of the alleged material and fraudulent alteration. Little and Smith answered, and admitted the alteration of the notes so as to conform to the agreement of the parties, by filling in the blank left, and that it was an immaterial alteration, done innocently with the plaintiffs' consent, and that the plaintiffs ratified the same. They denied any alteration in the deed. The Deseret Savings Bank then filed its complaint in intervention, alleging that it became the owner of the notes after their execution, that at the time the notes were executed the makers agreed to pay interest at 9 per cent. per annum, payable semiannually, until paid, and set out therein the consideration therefor, but that by a clerical omission of the party making out said notes the word "semiannually" was by mutual mistake and oversight left out of said notes from the blank left for that purpose; that other parties indorsed the notes as indorsers; that Smith was the cashier of the intervener. Alleged that the notes had become due. Claimed $ 1,000 attorney's fees. Asked for a foreclosure of the trust deed; that the notes be reformed so as to include the words "semiannually" in the blank left for that purpose in them, following the words "Interest payable"; for judgment, deficiency judgment, and for further relief. It appears from the proof that there was full value moving to the plaintiffs as a consideration for these notes. It clearly appears from the testimony that it was agreed between the parties at the time these notes and trust deed were drawn that they should draw interest at 9 per cent. per annum, payable semiannually, from date until paid, but by a clerical error of the draftsman, the word "semiannually" was left out of the printed blank in the notes; that the notes were signed and returned to the payee, the mistake not being discovered until after they were signed and delivered by mail; when Smith saw the mistake, he said it was a mistake, and immediately filled the blank so as to have it conform to the agreement of the parties, supposing he had a right to do so. The change, however, was made without the consent of the makers, except that there was some slight testimony offered tending to show that plaintiffs afterwards ratified the change by making payments of interest, and offering to make part payment on one note. The testimony on all these questions was conflicting, but we are of the opinion that the contention on the part of the intervener is sustained by a strong preponderance of the testimony. The alteration was made innocently, for the purpose of making the instrument conform to the understanding and agreement of the parties. It was not made fraudulently, for the purpose of injuring any one. It does not sufficiently appear that the trust deed was altered in the respect mentioned. The alteration of the notes was a material alteration, but, as it was made under the circumstances mentioned, we are of the opinion that the prayer for reformation should be granted. A fraudulent alteration not only avoids the instrument itself, but also extinguishes the debt which constitutes the consideration for the instrument. But when the alteration was innocently made for the purpose of making the instrument conform to the agreement of the parties, without any fraudulent intent, and it appears that no one was injured by the filling of the blank left for that purpose, then the instrument is not annulled, nor the debt extinguished. We do not want it understood, however, that we approve of this method of tampering with written instruments for any purpose. This correction could more properly have been made by a court of equity. The alteration made was clearly improper, and should not have been made by Mr. Smith. In this case ...