Moore v. Macon Savings Bank

Hall, J. If the indorsement of the memorandum of the agreement between the plaintiff and the bank upon the back of the instrument in suit was an alteration of the instrument, then thereby was Shdrtridge, the surety, released, under the facts hypothetically stated to the jury in the instruction given by the court. Because £ £ the rule is now firmly established in this state that any alteration of a written instrument, after delivery, however immaterial in its nature, or however innocently made, without the consent of all the parties, vitiates the instrument.” Morrison v. Garth, 78 Mo. 437; Bank v. Fricke, 75 Mo. 178; Moore v. Hutchinson, 69 Mo. 429; Bank v. Armstrong, 62 Mo. 59; Bank v. Dunn, 62 Mo. 79; Evans v. Foreman, 60 Mo. 449; Haskell v. Champion, 30 Mo. 136. The first question for our determination, therefore, is, was such indorsement an alteration of the instrument % This identical question was passed upon in Bucklen v. Hubb (53 Ind. 474). That was an action upon a promissory note. The defendant in his answer, as a defence, pleaded that he was a surety only; that between the principal in the note and the plaintiff, an agreement had been made for the extension of the time of the payment of the note for an indefinite period of time, without the defendant’s knowledge or consent, and that in pursuance of such agreement the note was, without defendant’s knowledge or consent, ££ altered and changed in a material part thereof, by writing on the back thereof the following agreement: — 690 — “I hereby agree to pay ten per cent, interest on this note hereafter. “July 29, 1868. M. E. Cole.” A demurrer was sustained by the trial court to so much of the answer as set up said defence, and the supreme court held, properly sustained. The court said: “ We do not regard the contract by the principal in the note, shown by the indorsement, as of itself sufficient to change, alter, or supersede the contract evidenced by the face of the note. It was the agreement of the principal to pay a higher rate of interest than that mentioned on the face of the note. It does not purport to be an alteration of the contract evidenced by the face of the note, but only an additional stipulation to which the principal and creditor only are parties. Had it been on a separate paper, it would hardly have been supposed to be an alteration of the note.” See, also, Huff v. Cole, 45 Ind. 300. The agreement for the extension of time was held to constitute no defence for the surety, because it was for' an indefinite time. “An alteration of an instrument is something by which its meaning or language is changed, either in a material or immaterial particular. If what is written upon, or erased from the paper containing the instrument, have no tendency to produce this result, or to mislead any person, it cannot be said to be an alteration.” Morrill v. Otis, 12 N. H. 472. The question we are now considering is different, and must be distinguished from a change of the contract, such, for instance, as a valid agreement for the extension of the time of th'e payment of the note without the surety’s consent. We are now considering the question of the alteration of the instrument, and not the change of the contract. A valid parol agreement between the holder of a note and the principal in the note, without the surety’s consent, for the extension of the time of the — 691 — payment of the note, will release the surety, because thereby the surety’s contract is changed. The question now is, would the indorsement of such an agreement upon the back of the note be an alteration of the note itself, the written evidence of the contract? We think, not. Such indorsement would not purport to alter in any particular the meaning or language of the note. By the agreement indorsed upon the note the contract evidenced by the note would be changed, but the meaning and language of the note would remain the same, unaltered. The indorsement upon the note of a new and distinct agreement between the payee and the principal in the note is only evidence of the new agreement; it cannot be said to alter the note, which is the evidence of the prior •agreement. By such indorsement, the meaning and 1am-.guage of the note are left unaltered, and the new agreement is simply evidenced. A change in the original -contract cannot be said to have been attempted by an alteration of the written evidence of it, when a new and distinct agreement is made and indorsed upon the note in such a manner as to show that the indorsement is of a new agreement, and that in no manner can it alter or affect the language of the note. The indorsement on the instrument in this case was only a memorandum of the agreement between the plaintiff and the bank; it did not set out the agreement in full. The indorsement was, however, signed for the bank by J. B. Melone, cashier, and by him alone, and it can have no other effect as to this point than it would have had had it set out the agreement in full. The indorsement purported to bind only the bank; it purported to be a new and distinct agreement by the bank: it in no way purported to alter the meaning or language of the note, or to be a part thereof. The indorsement showed for itself what it was, so far as it concerned the note; it was separate and apart from the note, in the sense we are now considering it, not as the contract, but as the evidence of the contract. The indorsement comes within — 692 — the rule that, “if the new writing is amere memorandum outside of the note, it is not an alteration.” 2 Parsons ©n Bills and Notes (2 Ed.) 546. In our opinion the indorsement upon the instrument was not an alteration of it. And in this opinion we are-supported by an intimation in 8tilwell v. Aaron (69 Mo. 543), and by the logic of Williams v. Jensen (75 Mo. 684). II. Was the agreement for the extension of the time of the payment of the instrument a valid agreement ? The consideration of the agreement was the promise-by the bank to pay ten per cent, interest, to be compounded every six months. It is contended by counsel for the defendant, that the instrument in suit drew ten per cent, interest only until maturity. In this state an instrument drawing a specified rate of interest before maturity draws the same rate of interest after maturity. Borders v. Barber, 81 Mo. 644; Bank v. Forbes, 9 Mo. App. 575; s. c., 79 Mo. 226 ; Briscoe v. Kenealy, 8 Mo. App. 77. Had the instrument in suit, by so many words, called for ten per cent, interest “from date,” or “until due,” it would, under the above decisions, have drawn the same rate of interest after maturity. The words used by the instrument are, “with interest at the rate of ten percent. per annum for the time specified.” By the terms of the instrument the amount of the deposit was payable in sixty days after date, and “the time specified” meant from date until maturity, and nothing more; the instrument drew the specified rate of interest after maturity just as it would have done had it in express words called for such interest “from date,” or “until due.” The agreement for the extension of time was made-after the maturity of the instrument. Still, inasmuch as the instrument drew the same rate of interest after maturity as it did before, the consideration of the -agreement was the promise by the bank to pay the rate of — 693 — interest drawn by tbe instrument, to be compounded every six months. Was the promise by the bank to pay the same rate of interest as that drawn by the instrument sufficient, without more, to support the agreement for an extension of time ? Upon this question there is a conflict of authorities. We think the better opinion is that it was not, for the reason that it was merely a promise to do what the bank was already bound to do. 2 Daniel on Neg. Ins., sect. 1317a, and authorities cited. But even if the note bore only six per cent, interest after maturity, the result in this case would be the same. If the instrument, as contended for by the counsel for the defendant, bore, after maturity, six per cent, interest, the bank could not make a valid agreement to pay a greater rate than such rate, except in writing. Rev. Stat., sect. 2724; Dinsmore v. Livingston Co., 60 Mo. 241. Besides, the compound interest, a different rate not being expressed in the indorsement upon the back of the note, could only be at the same rate as the interest on the principal debt. Rev. Stat., sect. 2728. If the interest on the principal debt was at the rate of six per cent., at the time of the making of the agreement for an extension of time, then the agreement, “compound interest to be allowed on the within every six months,” indorsed upon the note, called for such rate of interest: The whole of the agreement not having been reduced to writing parol evidence was admissible to add to the written memorandum of the agreement, but parol evidence was not admissible to contradict the terms of the’written memorandum. Therefore, the interest called for by the agreement for an extension of time, was at the same rate as the interest then borne by the principal debt. The only consideration for the agreement for an extension of time was the allowance of compound interest on the instrument every six months. Was that a sufficient consideration to support the agreement ? We tbinlr not. By section 2728, Revised Statutes, it is provided — 694 — that “parties may contract, in writing, for the payment of interest, but the interest shall not be compounded oftener than once in a year. Where a different rate is not expressed, interest upon interest shall be the same rate as interest on the principal debt.” The undertaking to allow compound interest every six months was prohibited by statute, and was invalid. The bank did not, in consideration of the agreement to extend the time, pay the illegal and prohibited interest; it only undertook to do so. The undertaking by the bank to pay such interest was not a sufficient consideration to support the agreement for an extension of time. Stillwell v. Aaron, supra. The agreement was, therefore, invalid, and the defendant was not released thereby. III. The reply to the answer contained a general denial of the new matter of the answer, and also a plea of ratification of the agreement for an extension of' time, and of the alteration set up in the answer. It is contended by defendant that the general denial and the plea of ratification were inconsistent; that they both could not stand ; that the effect of the plea of ratification was to withdraw the general denial, and that, therefore, the making of the agreement, and of the alteration, as set up in the answer, were admitted by the plaintiff by the reply. Conceding this to be true, it does not follow that the plaintiff admitted the legal effect of such agreement and alteration to be such as contended for by the defendant. The act of making the agreement was admitted, but not its validity. The act constituting what was called an alteration was admitted, but not that the act did constitute an alteration. Lee v. Dodd, 20 Mo. App. 275. The two statements, under our system of pleading, are not inconsistent, if both may be true, in fact. Nelson v. Brodhak, 44 Mo. 598-9. The plaintiff could deny that, the act done was an alteration or extension, and then — 695 — plead -that tlie other party acquiesced in and affirmed the act, whatever its effect or purport was. Cases supra. We have considered all the questions presented'in this case by counsel in their briefs. One other question was presented by counsel for defendant in the oral argument, but in addition to its not being presented in their brief, we desire to say that we consider it of no material consequence. Judge Ellison does not sit in this case, having been of counsel. With the concurrence of Philips, P. J., and the Hon. Geo. W. McCreary, who sits as special judge herein, the judgment of the circuit court is reversed, and the cause remanded.