43

and if the holder chooses to receive the paper with erasures or other marks of infirmity upon it, he takes it at his own risk. It has been held that the question whether the alteration bears. marks of suspicion is for the court, on inspection of the instrument. Any addition to any instrument already complete is an undoubted forgery.45

66

§ 1409. In Scotland the doctrine of the text obtains, and there the acceptor and indorser were held bound upon a bill in which the sum had been altered from 66 eight" to "eighty-four" pounds; there being so much room for the alteration that it was made without giving the bill a suspicious appearance. In another case in which two bills came under consideration - one in which the words "four hundred and " had been added before 'fifty-eight" without appearing suspicious; and the other in which an alteration had likewise been made in the sum, but 20 as to have a crowded appearance; it was held that the acceptors were bound upon the first bill to the full amount to a bona fide holder without notice; but upon the second, that the parties were discharged altogether. A Pennsylvania case well illustrates the principles enunciated. The defendant signed an agreement constituting him agent for the sale of a patented article, which agreement was so framed that a part of it could be cut off, leaving a perfect negotiable note. It was so cut without defendant's knowledge, and transferred for value to the plaintiff. It was held that the defendant was not bound, as he had not signed a negotiable note, and was not guilty of negligence in the premises. 47

43. Angle v. M. W., etc., Ins. Co., 92 U. S. (2 Otto) 342. 789.

44. Paramore v. Lindsey, 63 Mo. 63.

See ante, $$ 788.

45. Ivory v. Michael, 33 Mo. 398; McGrath v. Clark, 56 N. Y. 36. See vol. I, § 142; Meise v. Doscher, 83 Hun, 580, 31 N. Y. Supp. 1072; Farmers' Nat. Bank v. Thomas, 79 Hun, 595, 29 N. Y. Supp. 837.

46. Pagan v. Wylie, Graham v. Gillespie. See Thompson on Bills (Wilson's ed.), 42; Ross on Bills, 104, 195.

47. Brown v. Reed, 79 Pa. St. 370 (1875), Sharswood, J., distinguishes and explains Phelan v. Moss, Garrard v. Haddan, and Zimmerman v. Rote. The paper which was perverted into a note was as follows:

NORTH EAST, April 3, 1872.

Six months after date I promise to pay J. B. Smith or
order Two Hundred and Fifty Dollars

for value received, with legal interest, without
defalcation or stay of execution.

T. H. BROWN.

bearer, fifty dollars when I sell by worth of hay and harvest grinders appeal and also without

Agent for Hay & Harvest Grinders.

The paper was divided by cutting through where the asterisks are placed, but when the paper was written the context was close and natural, with

SECTION VII.

THE EFFECT OF ALTERATION.

§ 1410. The effect of material alteration of a bill or note will be considered, (1) in respect to fraudulent alterations, and (2) in respect to alterations innocently made. The effect of immaterial changes, not amounting to alterations, will be separately considered.

§ 1410a. Fraudulent alteration destroys instrument and extinguishes debt. In the first place, as to fraudulent alteration, when a party to a bill or note fraudulently alters its legal effect, he not only destroys the instrument by thus destroying its legal identity, but he also extinguishes the debt for which it was given. And it cannot afterward be made the basis of, or evidence for, a recovery in any form of action whatever;48 though, of course, it might be admissible to defeat a claim on the ground of fraud, or convict a party of a crime.49 It is necessary that the law should impose this forfeiture of the debt itself upon one who fraudulently tampers with the instrument which evidences or secures it; and it is done upon the principle that "no man should be permitted to take the chance of gain by the commission of a fraud, without running the risk of loss in the case of detection." 50

nothing to indicate that any portion was to be detached. The left-hand half was negotiated as a note, but was not recoverable upon as such by even a bona fide holder. Upon like principles the defendant-maker of a note in the hands of an innocent indorsee, was relieved in Tennessee, where it appeared that a." stub" attached to the note, and containing a limitation of the maker's liability, had been fraudulently detached. Stephens v. Davis, 85 Tenn. 272; Scofield v. Ford, 56 Iowa, 372, citing the text.

48. Wheelock v. Freeman, 13 Pick. 165; Meyer v. Huneke, 55 N. Y. 412; Booth v. Powers, 56 N. Y. 31; Newell v. Mayberry, 3 Leigh, 254; Smith v. Mace, 44 N. H. 553; Clute v. Small, 17 Wend. 238; Merrick v. Boury, 4 Ohio St. 70; Wallace v. Harmstad, 44 Pa. St. 492 (a deed); 2 Parsons on Notes and Bills, 572; Wallace v. Tice, 32 Oreg. 283, 51 Pac. 733; First Nat. Bank v. Laughlin, 4 N. Dak. 391, 61 N. W. 473, citing text; Glover v. Green, 96 Ga. 126, 22 S. E. 664; Magguire v. Eickmeier, 109 Iowa, 301; Hurlbut v. Hall, 39 Nebr. 889, 58 N. W. 538; Walton Plough Co. v. Campbell, 35 Nebr. 173, 52 N. W. 883, citing text.

49. Chitty on Bills (13th Am. ed.) [*191], 219.

50. Newell v. Mayberry, 8 Leigh, 254; Vogle v. Ripper, 34 Ill. 107; Whitmer v. Frye, 10 Mo. 350.

Thus in Massachusetts, where a memorandum was written upon two notes, providing that they should be payable in a certain contingency in two years, and was cut off by the plaintiff, it was held presumptively fraudulent, and that he could not recover.

51

§ 1411. In the next place, as to alterations innocently made.— It is considered by a number of authorities that when the alteration is material, the instrument is ipso facto avoided, and the original consideration forfeited; no regard being paid to the inquiry whether or not the alteration was fraudulent as well as material; it being said in a case of this character in Vermont, by Pierpoint, J.: "The forfeiture of the debt is one of the penalties which the law imposes upon the party who alters or tampers with the written evidence which he holds of his claim." 52 On the other hand, in a number of English and American cases, it has been considered that a material alteration only avoided the instrument, and if it were given for a debt,53 or in renewal of a bill or note, the holder might still sue upon the original cause

54

51. Wheelock v. Freeman, 13 Pick. 168, Shaw, C. J.: "If the plaintiff claims upon the notes, he is not entitled to recover, because he has made a material alteration in the notes since they were signed. Master v. Miller, 4 T. R. 320. That it was fraudulent is a conclusion of law from the fact that it was done wilfully, for his own benefit and to the injury of the defendant, by accelerating the payment. It has been made a question whether the alteration was material. This is easily tested by inquiring whether the notes would have the same legal effect and operation after the alteration as before. After the alteration they were payable on demand; before it, on time. The difference is apparent. And so the parties understood it. When written on demand,' the defendant refused to sign them, and only consented to do so after the qualifying memorandum was made. But there is no magic in the word memorandum.' And it has often been decided that any words written on an instrument which qualify and restrain its operation, constitute a part of the contract. Jones v. Fales, 4 Mass. 245, where the words 'foreign bills,' written in the margin of the note, were held to be part of the contract; Springfield Bank v. Merrick, 14 Mass. 322; Homer v. Wallis, 11 Mass. 309; Heywood v. Perrin, 10 Pick. 228." Meade v. Sandidge, 9 Tex. Civ. App. 360, 30 S. W. 245. 52. Bigelow v. Stephens, 35 Vt. 525; Martendale v. Follett, 1 N. H. 99; Gillette v. Smith, 18 Hun, 10; Savings Bank v. Shaffer, 9 Nebr. 1. See Toomer v. Rutland, 57 Ala. 379.

53. Atkinson v. Hawden, 2 Ad. & El. 169 (29 Eng. C. L.); Owen v. Hall, 70 Md. 100; Sullivan v. Rudisill, 63 Iowa, 158. Bill altered in date from 30th to 28th of December. Held, drawer could recover original consideration of aeceptor. Warren v. Layton, 3 Harr. 404; Clute v. Small, 17 Wend. 242: Clough v. Seay, 49 Iowa, 111; 2 Parsons on Notes and Bills, 572. See § 1413; Baskin v. Wayne, 62 Mo. App. 515.

54. Sloman v. Cox, 1 Cromp., M. & R. 471. Bill given in renewal altered in

of action no question of fraudulent intent being raised in the pleadings or appearing in the case. But the holder could not sue any party whose remedy, after making payment, would be impaired by the alteration. If the alteration is material, all authorities agree that the instrument is avoided.56 The alteration vitiates it regardless of intention. In New York the effect of material alteration innocently made has been stated by Folger, J., as follows: "If the alteration was made without fraudulent intention, the payee may resort to the original indebtedness, if that was independent of the note, and has not been discharged by the execution of it, and pursues the maker upon that. But to have such resort, he must be able to produce and surrender the note." 1958

And in Rhode Island, Matteson, C. J., said in a case where the rate of interest had been without fraudulent intent altered from 10 to 5 per cent.: "The presumption of fraudulent intent being rebutted, the plaintiff can recover under the common counts in the declaration, the debt for which the note was given against the parties who received the consideration." 59

§ 1412. Presumption from material alteration. It is maintained by a number of authorities, that if a bill or note appear on its face, or be shown by extraneous evidence to have been materially altered, there will be no presumption that such alteration was fraudulent, and that, therefore, although the instrument be

date from 20th to 24th of June, and it was held that there could be suit on original bill.

55. Alderson v. Langdale, 3 B. & Ad. 660.

56. Angle v. N. W., etc., Ins. Co., 92 U. S. (2 Otto) 342; Harsh v. Klepper, 20 Ohio St. 200; Booth v. Powers, 56 N. Y. 31; Stephens v. Elver, 101 Wis. 392, 77 N. W. 737; Hurlbut v. Hall, 39 Nebr. 889, 58 N. W. 538.

57. Evans v. Foreman, 60 Mo. 449; Moore v. Hutchinson, 69 Mo. 429; Morrison v. Garth, 78 Mo. 437; Eckert v. Pickel, 59 Iowa, 545. In a recent case (decided in 1898) the Supreme Court of Oregon held that where the alteration of an instrument is prompted by honest motives, with a purpose of correcting it to correspond with what the party in good faith believed to be the true engagement of the parties at the time of its execution, the act does not destroy the legal efficiency of such instrument and recovery may be had on it when restored. See Wallace v. Tice, 32 Oreg. 283, 51 Pac. 733; Keene v. Weeks, 19 R. I. 309, 33 Atl. 446.

58. Booth v. Powers, 56 N. Y. 31. See also Clute v. Small, 17 Wend. 238; Meyer v. Huneke, 55 N. Y. 412; Keene v. Weeks, 19 R. I. 309, 33 Atl. 446. 59. Keene v. Weeks, 19 R. I. 309, 33 Atl. 446.

61

destroyed as the foundation of an action, the party who held it may recover upon the original consideration, or enforce any other security for the debt. On the other hand, others maintain that if the alteration be material, it will be presumed to have been fraudulent also, and that until this presumption be rebutted by explanation there can be no recovery in any form of action whatever. 62 The latter doctrine seems correct. The party in default should bear the burden of explaining it, and of extricating himself. He must know the circumstances which induced the alteration, and to require the party wronged to go into his enemy's camp for testimony would be to facilitate the inventions of fraud. Still, the question is one that must be resolved by the peculiar circumstances of each case, and the presumptions which arise are frequently so slight and so shifting that no fixed and invariable rule can well be established.63

64

§ 1413. Suit not maintainable on altered instrument. When an instrument has been materially altered it cannot be sued upon in its altered form, nor read in evidence to support an action, even when brought by a bona fide holder without notice, and even though the alteration has been so skillfully made as to escape detection upon the closest scrutiny. But when the party making the alteration discharges the burden of proof upon him by showing that the material alteration was made by mistake and without fraudulent intent, the right of action upon the consideration for which it was given remains.66 And there is au

65

61. Vogle v. Ripper, 34 Ill. 100. A note secured by mortgage was materially altered. Held, that a mortgage securing it might be enforced, the mortgagor not alleging fraud. But see Eckert v. Pickel, 59 Iowa, 545.

62. Whitmer v. Frye, 10 Mo. 349, Scott, J.: "There is no question but that the alteration was a material one, and it is prima facie fraudulent." Wheelock v. Freeman, 13 Pick. 165; Robinson v. Reed, 46 Iowa, 221; Shroeder v. Webster, 88 Iowa, 627, 55 N. W. 569.

63. In Kountz v. Kennedy, 63 Pa. St. 190, Thompson, C. J., said: “Each case must stand much more on its own facts than upon the rules announced in any given case." Craighead v. McLoney, S. C. Pa., Cent. L. J., March 10, 1882, p. 193.

64. State Sav. Bank v. Shaffer, 9 Nebr. 1; Horn v. Bank, 32 Kan. 523, citing the text; Otto v. Halff, 89 Tex. 384, 34 S. W. 910, 59 Am. St. Rep. 56, text quoted.

65. Kulb v. United States, 18 Ct. of Claims, 560, citing the text.

66. Hunt v. Gray, 35 N. J. L. 227; Matteson v. Ellsworth, 33 Wis. 488: State Sav. Bank v. Shaffer, 9 Nebr. 7; ante, § 1411; Otto v. Halff, 89 Tex. 384, 34 S. W. 910, 59 Am. St. Rep. 56, text quoted.