Waugh v. Cook

• Decision Date: 11 May 1914
• Docket Number: 316
• Citation: 167 S.W. 103,113 Ark. 127
• Parties: WAUGH v. COOK
• Court: Arkansas Supreme Court

167 S.W. 103

113 Ark. 127

WAUGH v. COOK

No. 316

Supreme Court of Arkansas

May 11, 1914

Appeal from Independence Circuit Court; R. E. Jeffery, Judge affirmed.

STATEMENT BY THE COURT.

On the 3d day of February, 1913, Mrs. Lou Cook instituted this action in the circuit court against M. J. Compton, T. J Hood, J. Arthur Porter, William A. Porter and C. H. Waugh, to recover upon a promissory note for seven hundred dollars alleged to have been executed by them in her favor. On the 7th day of April, 1913, the plaintiff dismissed the cause of action as to T. J. Hood and filed an amended complaint in which she stated that subsequent to the delivery of the note originally sued on by her M. J. Compton, one of the original signers of the note, altered the same by raising the rate of interest from 8 to 10 per cent, and by allowing T. J. Hood to sign the note as surety, without the consent of the other signers to said note to make such alteration. The complaint states that plaintiff expressly disclaims any right under the note as altered, and seeks recovery on the note as originally executed.

The facts are as follows: At the time of, and prior to, the execution of the original note upon which this action is founded, M. J. Compton and J. Arthur Porter were partners in business in Independence County, Arkansas. They borrowed seven hundred dollars from Mrs. Cook on February 24, 1911 and William A. Porter and C. H. Waugh signed the note as sureties. Subsequently Compton purchased Porter's interest in the business and sold it to T. J. Hood. On February 4, 1912, a few days before the note became due, Mrs Cook sent her son-in-law, Joe Martin, to collect it. Martin testified substantially as follows:

I went to Compton and demanded payment of the note. He told me that if the collection of the note was pressed the sureties would have to pay it. I told him that Mrs. Cook could get a higher rate of interest for her money. Compton told me that he would give her 10 per cent per annum, instead of 8 per cent, if payment of the note would be extended. I asked him what security they could give, and he said the same ones. I then carried the note back to Mrs. Cook to obtain her consent, and she gave it. I then carried the note back to Compton and told him that Mrs. Cook was a widow woman and I wanted the matter fixed right. I asked him if the securities would stand for it. I never received any information prior to the bringing of this suit that the sureties had not consented to the change in the note. Compton altered the note by raising the interest from 8 to 10 per cent, and the note was then signed by T. J. Hood. The other sureties to the note did not again sign it, but I understood from Porter that they had agreed to it. He said in the first instance that he would give the same sureties.

In his cross examination, there appears the following:

Q. You did not tell her you had seen Mr. Waugh?

A. No, sir; I did not say anything about him. I did not know anything about my having to see him. I just took Compton to be a man of his word. He told me the same securities would stand.

Q. He just said that was his understanding?

A. He left the impression on me that he had done seen them and talked it over.

Q. He did not tell you that he had seen Mr. Waugh?

A. No; he did not just come right out and say that.

Q. And you did not ask him if he had seen Mr. Waugh?

A. No; I just asked him what securities he could give, and he said the same ones.

Mrs. Lou Cook testified: I understood from Mr. Martin that the sureties had consented to the change of interest in the note. I did not know that Mr. Waugh claimed that the note had been altered without his consent until after this suit was brought. As soon as I found out that he claimed that he had not authorized the change in the note, I filed an amended complaint in this action and disclaimed any rights under the note as altered, and sued on it as originally executed.

Other evidence was introduced in favor of plaintiff to the effect that payment of the note had been demanded of Waugh after the alterations in it were made and that Waugh did not at that time claim that he was released from liability on the note because it was altered.

Compton testified that he raised the rate of interest from 8 to 10 per cent, and that Hood signed the note. Compton says that he did not tell Martin that the same sureties would stand on the altered note; that he did not see them and did not know whether they would agree to the alteration or not.

C. H. Waugh testified: I knew nothing about the change of the rate of interest. I was not consulted about it by any one. I never gave my consent to any change in the note to anybody.

Other evidence introduced tended to show that the defendant, Waugh, was the only solvent signer of the note. The firm of Porter & Hood became bankrupt.

The jury returned a verdict in favor of the plaintiff, and the defendant, Waugh, has appealed.

Judgment affirmed.

Dene H. Coleman and Chas. F. Cole, for appellant.

1. Any unauthorized material alteration of a promissory note avoids it as to all nonconsenting parties. 5 Ark. 377; 27 Ark. 108; 32 Ark. 166; 35 Ark. 146; 48 Ark. 426; 57 Ark. 277. This is especially true as to nonconsenting sureties. 65 Ark. 550; 93 Ark. 472.

The contention that, although the alterations were material and avoided the note, appellee should be permitted to recover upon the note as originally executed, would be good only as against principals or makers who received the consideration or some benefit under the contract in question, and who would be bound independently of the writing. 2 Am. & Eng. Enc. of L. (2 ed.) 200; 2 Cyc. 184-5; 63 Ia. 158.

Many courts have upheld the rule that after a material alteration, no recovery can be had against a nonconsenting surety either upon the original or altered terms of the contract. 68 Pa. 237; 4 T. R. 320; 3 L.R.A. 724-727; 24 L.R.A. (N.S.) 1155; 2 Cyc. 182; 13 Am. Dec. 684; 11 Bush (Ky.) 69; 93 Ark. 478-9; 65 Ark. 550.

2. The court should have given the instruction numbered 2, requested by appellant.

Appellee seeks to repudiate the altered instrument under the claim that she relied upon the fraudulent representation of Compton that "the same sureties would stand."

The means of ascertaining whether or not appellant had consented to the change were as accessible to appellee as to Compton. It was her duty to seek the assent of the surety, and, in failing to do so, she took upon herself the hazard of changing the contract and relieved the surety. 65 Ark. 550; 4 Pa.St. 348.

She will be presumed to have informed herself of the truth of Compton's statements, and, if she has failed to do so, must abide the consequences of her own carelessness. 95 Ark. 136; 31 Ark. 170; 30 Ark. 686; 11 Ark. 58; 26 Ark. 28; 1 Ark. 31.

Samuel M. Casey, for appellee.

1. Appellee, relying upon the statement of Martin, her agent, that the sureties were consenting to the alteration, authorized him to have the note changed in accordance with their agreement. It subsequently developed that the sureties had not consented to it. The change, therefore, having been made without the consent of the sureties, it was also made without her consent.

An alteration of a note, allowed by an agent without authority, amounts to nothing more than an alteration, a spoliation, by a stranger, and the rights and liabilities of the parties are not affected thereby. 50 Ark. 360, and cases cited; 2 Cyc. 151, 152; Id. 155.

2. If appellee was bound by the act of Martin, she is nevertheless entitled to recover, because his consent to the alteration was obtained through fraud and misrepresentation practiced upon him by Compton, one of the makers of the note. 32 Cyc. 203; 55 Am. St. Rep. 871; 2 Mason, 478, 27 Fed. Cas. No. 16365.

OPINION

HART, J., (after stating the facts).

The unauthorized alteration of a promissory note by raising the rate of interest is a material alteration and avoids the note. Exchange National Bank v. Little, 111 Ark. 263, 164 S.W. 731; N. Y. Life Ins. Co. v. Martindale et al., 75 Kan. 142, 12 Am. & Eng. Ann. Cas. 677, 88 P. 559.

In the case of McDougall v. Walling, 15 Wash. 78, 55 Am. St. Rep. 871, 45 P. 668, the court held:

"1. An agreement extending the time of...