Newman v. Cover

• Decision Date: 12 May 1930
• Docket Number: 153
• Citation: Newman v. Cover, 300 Pa. 267, 150 A. 595 (Pa. 1930)
• Parties: Newman, to use, Appellant, v. Cover et al
• Court: Pennsylvania Supreme Court

150 A. 595

300 Pa. 267

Newman, to use, Appellant, v. Cover et al

No. 153

Supreme Court of Pennsylvania

May 12, 1930

Argued March 26, 1930

Appeal, No. 153, March T., 1929, by plaintiff, from judgment of C.P. CambriaCo., Sept. T., 1926, No. 92, on verdict for defendants, in case of C. J. Newman, to use of J. M. Wright v. Park O. Cover et al.Affirmed.

Issue to determine validity of judgment entered on judgment note.Before McCANN, J.

The opinion of the Supreme Court states the facts.

Verdict and judgment for defendants.Plaintiff appealed.

Error assigned, inter alia, was refusal of judgment for use-plaintiff n.o.v., quoting record.

The assignments are all overruled and the judgment is affirmed.

Charles C. Greer, with him Ernest O. Kooser, for appellant.-- It was error to refuse binding instructions, to deny judgment non obstante veredicto for plaintiff and to enter final judgment on the verdict: Barnard v. Kell,271 Pa. 80;Marshall v. Gougler, 10 S. &R. 163;Swank v Kaufman,255 Pa. 316;Burke v. Harkins,296 Pa. 414;Simpson v. Bovard,74 Pa. 351;Grotefend v. Laundry Co.,88 Pa.Super. 510;Com. v. Gutelius,287 Pa. 441;Kentucky Bank v. Bank, 1 Parson's Equity 180;King v. Bank,227 Pa. 22;Wolfgang v. Shirley,239 Pa. 408, 410;P.R.R.'s App., 86 Pa. 80, 84;Shattuck v. Cement Co., 205 Pa. 197, 210.

Robert C. Hoerle, for appellee.-- The legal effect of the phrase added to the note was for the court alone: Lancaster v. Barrett, 1 Pa.Super. 9, 13.And at the trial, the court properly charged the jury that the phrase "Given for the debt of Park O. Cover," was a material alteration: Craighead v. McLoney,99 Pa. 211;Iron City Nat. Bank v. McCord,139 Pa. 53;Bensinger v. Wren,100 Pa. 500;Janes v. Benson,155 Pa. 489;Volk v. Shoemaker,229 Pa. 407;Shiffer v. Mosier, 225 Pa. 552.

Before MOSCHZISKER, C.J., FRAZER, WALLING, SIMPSON, KEPHART, SADLER and SCHAFFER, JJ.

OPINION

MR. CHIEF JUSTICE MOSCHZISKER:

The five defendants in this case moved the court below to open a confessed judgment and let them in to a defense; this was done and the jury found in their favor.The use-plaintiff then moved for judgment n.o.v., which was refused.Final judgment was entered for defendants, and the use-plaintiff has appealed.

On June 9, 1926, the five defendants executed a demand note payable to C. J. Newman, for $12,000, and left it with Park O. Cover, one of the makers, for discount at the Peoples' State Bank of Boswell, of which Newman, the payee on the note and legal plaintiff here, was cashier.Cover at that time was the largest stockholder in a corporation called Park O. Cover, Inc., and the manager of it.This concern ran a garage at Johnstown, and dealt in motor vehicles.When the note in suit was executed, the account of Park O. Cover, Inc., at the Peoples' Bank, was overdrawn, as also was Cover's personal account.Cover took the note, signed by himself and the four other defendants, to the bank, of which he was an old customer, for purposes of discount.He presented it to Newman, who instructed him to add to the paper, which was in the usual form of a judgment exemption note, the words, "Given for the debt of Park O. Cover"; this alteration was executed in the presence of Newman.The change thus made was calculated to and did in fact benefit Newman's bank as well as Cover (as will be shown more fully later on); it was effected without the knowledge or consent of the four other defendants, none of whom at any time ratified Cover's betrayal of trust.On the contrary, when informed of the alteration, they promptly petitioned the court below to open the judgment entered on the note.

Some time in May, 1926, prior to the making of the note in suit, it became known to the five defendants that the business of Cover, Inc., was not prospering and that Cover himself was financially embarrassed.Cover, with his brother, R. W. Cover, and three employees (being the five defendants in this suit), decided to form a new corporation to be known as the Park O. Cover Co., in which all were to own stock and have a financial interest.Park O. Cover was selected as treasurer.It was agreed that the proposed company should have $50,000 authorized capital stock.In the course of the negotiations and conferences for the formation of this new concern, the advisability of purchasing the business of Park O. Cover, Inc., was discussed, but there is nothing before us to show that this was agreed upon.It does appear, however, that counsel for defendants would not permit the execution of the charter application for the proposed company until $5,000 in cash was deposited in the hands of its treasurer.For the purpose of raising necessary cash for the new corporation, the five defendants, together with the wife of one of them, on June 9, 1926, executed the instrument in suit and left it with Cover on a mutual understanding that he was to have the note discounted at the Peoples' Bank, for the purpose just mentioned.

On June 14, 1926, judgment was confessed on the note in the court below, and June 16th, a statement of this judgment was exhibited to the board of directors of the Peoples' Bank, which institution accepted the note and judgment as security for $8,000, then advanced by it.J. M. Wright, the use-plaintiff, who was Newman's father-in-law, paid the remaining $4,000, to make up the full amount of the note, $12,000.The bank placed the whole fund to the credit of Park O. Cover, and then forthwith appropriated it toward liquidating Cover's individual indebtedness and the indebtedness of Park O. Cover, Inc., to that institution; none of the other makers of the paper in suit nor the new corporation, for whose benefit it was to be discounted, received any part of the proceeds or profited therefrom.The entire judgment entered on the note was subsequently assigned by Newman to Wright, the present appellant.

The real question in the case is, In the eyes of the law, was the alteration, made by Cover at the demand of Newman, a material one, which would prevent recovery by those taking through the latter?The trial judge charged that it was, and that, under the circumstances above stated, the leaving of the note with Cover for purposes of discount did not constitute him the agent of the other defendants to make the alteration in question, or estop them from complaining of it.Appellant contends that the court below erred in adhering to these views; but we are not convinced there was error in that regard.

A note to 2 Corpus Juris 1180, section 11, plainly states the broad principle which underlies the rule forbidding the enforcement of a materially altered instrument, thus: "The policy of the . . . law that an unauthorized material alteration of a written instrument by the holder, or with his consent, vitiates it as to nonconsenting parties, is to preserve the integrity of legal instruments by taking away the temptation of tampering with them.[Therefore,] the law does not permit the plaintiff to fall back upon the contract as it was originally; [on the contrary,] in pursuance of a stern but wise policy, it annuls the instrument as to the party sought to be wronged."

In Craighead v. McLoney,99 Pa. 211, 214, Chief Justice SHARSWOOD truly said that "Each case" where the materiality of an alteration to a written instrument is involved "must stand much more on its own facts than upon the rules announced in any given case"; but guiding principles which govern a case such as the present will be found discussed by us in Shiffer v. Mosier,225 Pa. 552.There the paper sued on was, as here, a nonnegotiable instrument, signed by several persons, who stipulated that they would make payment of a certain sum of money to the payee (plaintiff).After the execution of this paper, the payee asked a stranger, who was familiar with the handwriting of the makers, to sign his name as a witness, which he did, without the knowledge or consent of defendants.This unauthorized attestation was held to constitute a material alteration, and plaintiffs were denied the right of recovery.We affirmed on appeal, stating, inter alia, that, under our cases(citing them), such an addition to a written instrument constituted a material alteration, and that (page 558)"An altered instrument is so far vitiated that no recovery can be had on its original or altered terms; it cannot be considered as void for the unauthorized change and valid in other respects, but is void altogether."At page 559, we said, "Any material alteration releases a party who does not consent thereto . . . [and] avoids a contract not only as to the party making [the alteration] but as to an innocent transferee."See alsoSwank v. Kaufman,255 Pa. 316, as to the signature of a witness, subsequently added, constituting a material alteration.In Shaub v. Shaub,71 Pa.Super. 456, 467, the Superior Court held that, under the peculiar facts of that case, the paper attacked might stand in law despite a subsequent witnessing, the court saying that the attestation, or alteration, appeared to have been done "without connivance or unlawful purpose."If such considerations can be taken into account, it will be observed that the alteration in the present case is not only material (as will be shown later on), but the making of it appears to have been accompanied by both connivance and unlawful purpose.

Daniel on Negotiable Instruments, volume 2, page 1578, section 1394, contains the following statement, which is enlightening here: "It has been held that if a bill be expressed generally 'for value received,' and words are added describing such consideration as 'for the good will and lease in trade' of a certain person [citingKnill v. Williams,10 East. 431], or 'for a certain tract of land,' it is materially...