Matteson v. Ellsworth , 33 Wis. 488 ( 1873 )

The following opinion was filed at the June term, 1872.

Oole, J.

The counsel for the defendant insists that the circuit court erred in allowing three new and distinct causes of action to be inserted in the complaint as an amendment of- the same, on the trial. But this amendment amounted to nothing more than stating the original consideration of the note sued on. It was what would have been termed, under the former system of pleading, adding the common counts to the special count. It was doubtless competent for the court to allow the amendment, and it could not possibly have prejudiced the defendant in any way.

Nor do we think there was any error in refusing the defendant’s motion to compel the plaintiff to elect whether she would proceed upon the claim for money loaned and interest, or upon the note. This was a matter resting in the discretion of the court. Both claims were for the same money, and there was no inconsistency in the plaintiff seeking to recover on the original indebtedness, if she should fail to prove that] the note was altered with defendant’s consent.

A number of instructions were asked on the part of the defendant, which, we think, were properly refused. A few general remarks will express all that we deem it necessary to say in reference to these instructions, and exceptions taken to certain portions of the charge of the court.

In the first place, it will be borne in mind that the note was offered in evidence on. the trial, and of course was cancelled by the judgment. Again, it is to be observed that the court in effect charged the jury that if they found that the note was altered by the plaintiff after it was made, without the consent of the defendant, then there could be no recovery upon the note. The instructions of the defendant assumed that there could be no recovery in the case unless upon the note. Why not ? The giving of that note did not extinguish the debt due the plaintiff from the defendant. This proposition is too obviously correct to need illustration or comment. And therefore, assuming that there could be no recovery upon the note on account, of its unauthorized alteration by the plaintiff, still what rule of law prevents a recovery on the other causes of action stated in the complaint? These were the counts for money loaned and interest. We are unable to perceive any objection to a recovery upon those causes of action, providing they were sustained by the evidence. The defendant himself testified on the trial that he had received two hundred dollars, which was loaned him by the plaintiff. He does not pretend that this money has ever been paid. And the instructions assume that there could be no recovery for this amount admitted to be due the plaintiff. It is said, if the note was altered from $200 to $300, without the consent or ratification by the defendant, that then there could be no recovery on, the original consideration. It seems to us that this is an erroneous view of the matter. If the note was altered without the consent of the defendant, it is conceded that there could be no recovery upon it. But the original indebtedness still remains. That has not been satisfied and discharged. The position of the defendant is simply this: he admits that he had $200 of the plaintiff’s money,, which he has never paid ; and that he gave a promissory note for the amount; but he alleges that this has been altered without his consent, and that therefore there can be no recovery for the money conceded to be due the plaintiff. This would be a strange condition of the law, if such a defense were good and sanctioned by it. And this is the manifest error in the instructions asked on the part of the defendant — that there could be no recovery on the other causes of action stated in the complaint, if the note had been altered so that there could be no recovery upon it. Since the plaintiff produced the note, and in effect cancelled it on the trial, we know of no principle which would prevent her from recovering upon the original consideration for which the note was given. So, whether the jury found that the note was altered with the assent of the defendant, and based their verdict upon it, or based such verdict upon the other causes of action, seems to us quite an immaterial inquiry. There was probably some compromise about the verdict; but there is evidence to sustain it.

By the Court.— The judgment of the circuit court is affirmed.

A rehearing was allowed upon appellant’s motion, and the cause was reargued.

Moses Hooper, for appellant, contended that all the authorities cited on the other side were either eases where the note was originally void, and so to be treated as though there never had been any note, or cases where there was a subsisting right of action antecedent to the transaction out of which the note grew; that in this case there never was any contract, as to the $200, except the note, the evidence on both sides showing clearly that the transaction was a loan of money upon the note ; that in such cases there is no room for an implied promise (2 Parsons on Con., 392 ; Eastman v. Porter, 14 Wis., 39 ; Meshke v. Van Doren, 16 id., 319, 330); and that an alteration of the note in such a case, without the knowledge or consent of the maker, so as to avoid it, will prevent a recovery altogether. Martendale v. Follett, 1 N. H., 95; Wheelock v. Freeman, 13 Pick., 167-8 ; Byles on Bills, *257, note 1; Smith v. Mace, 44 N. H., 558; Bigelow v. Stilphen, 35 Vt., 521; White v. Hass, 32 Ala., 430; Newell v. Mayberry, 3 Leigh, 250; Mills v. Starr, 2 Bailey, 359 ; Wood v. Steele, 6 Wal., 82; Whitmer v. Frye, 10 Mo., 348, 350. He also contended that Alderson v. Langdale, 3 Barn. & Adolph., 660, Blade v. Noland, 12 Wend., 173, and Waring v. Smyth, 2 Barb. Ch., 119, cited for the respondent on the former argument, are really authorities against him; and that the other authorities cited by respondent’s counsel do not reach the point. (2) As to the amendments allowed at the trial, he contended that the second and third counts (and especially the third, for $30 loaned) stated entirely new causes of action ; that defendant’s testimony denied the existence of any such causes of action, but he could not produce any other proofs, because he had no notice that he would be called upon to try such issues. (3) To the point that plaintiff should have been required to elect whether she would proceed upon the common counts or upon the note, after it clearly appeared from her own testimony that they were based upon the same consideration, he cited Muzzy v. Ledlie, 23 Wis., 446.

Gillet & Taylor, contra, contended that the alteration of the note, even if made fraudulently, did not destroy the respondent’s right of action for the money actually loaned. Where the terms of a contract are reduced to writing, and that fact is made to appear upon the trial of an action to recover upon or by reason of the contract, there the writing must be produced in evidence, and no other evidence of the contract can be received, unless it be made to appear that the writing is lost or destroyed without fault of the party offering the other evidence, or that it is iu the possession of the opposite party, who, upon proper notice, refuses to produce it. Upon this theory all the cases proceed, which hold that a recovery cannot be had by a resort to the original contract where it appears that 'the written ■ instrument executed at the time has been altered in a material part by the party seeking to recover on it. Most of the cases which hold that a party to whom a note has been given for goods purchased, or for money loaned, cannot -recover upon the contract for the sale of the goods or the loan of the money, when it appears on the trial that the note has been altered by the payee and vendor, or loanor, proceed upon the same theory, i. e., that the contract of sale or loan bas been reduced to writing and is embodied in tbe note; and those wbicb do not proceed upon this gound, cannot be supported by any logical reasoning, and ought not to be followed. But in this state the giving of a note is held not to be a reduction of the contract to writing, nor does it in any way destroy the original contract by way of merger or by way of satisfaction and payment. Ames v. Ames, 5 Wis., 160; Williams v. Starr, id., 534; Blunt v. Walker, 11 id., 334; Ford v. Mitchell, 15 id., 304; Eastman v. Porter, 14 id., 39 ; Meshke v. Van Boren, 16 id., 319; Lee v. Peckham, 17 id., 383 ; Webster v. Stadden, 14 id., 277; 18 id., 381; Paine v. Voorhees, 26 id., 526. Tbe same doctrine is held in England, in New York, and in many of the other states. 2 E. C. L., 378; 12 id., 427; 29 id., 293 ; 37 N. Y., 409; 53 Barb., 191; 1 Hill, 516; 1 Cow., 230, 306 ; 5 Wend., 490; 19 id., 516 ; 21 id., 450, 452 ; 5 Denio, 558 ; 17 Johns., 34. In Massachusetts and Maine the contrary doctrine is held. In those states where it is held that the giving of the note is not a payment or satisfaction of the original contract, the note cannot be considered as the reduction of the contract to writing ; if it was, then, according to the rules of evidence, the original contract must be merged. In these countries and states it is held, as a logical conclusion, that the alteration of the note does not destroy the right of action upon the original indebtedness. Atkinson v. Hawdon, 29 E. C. L., 169; Morrison v. WeTby, 18 Md., 169; 2 A. & E., 628 ; 2 Parsons on Bills, 572; 17 Wend., 238 ; 4 Ohio, 160. It is immaterial that the note was given at the time the debt was incurred. Paine v. Voorhees, 26 Wis., 526 ; Ford v. Mitchell, 15 id., 308 ; Porter v. Talcott, 1 Cow., 359, 384-5; Morrison v. Welty, 18 Md., 169. In a case where the original contract is not merged in the note, and an action is brought on such original contract, the only object of the production of the note in court is to insure the maker that he shall not be afterwards charged with it in the hands of other parties. The production of the written paper in its altered shape fully secures that object. (As to the necessity of producing the paper at all, counsel cited 12 E. C. L., 427, and 28 Wis., 254. And on the general question of recovery on the original contract in cases where a note was given'wbich has lost its validity, he cited and criticised 1 N. E, 95, and 44 id., 558.) It is only in those cases where the action is necessarily based upon the writing, that the party loses all right of action by an alteration which avoids the written instrument. Thus, where there has been a loan of money, secured by a bond and mortgage under seal, the original contract is merged in the bond ; and in Waring v. Smith, 2 Barb. Ch., 135, it was held that the mortgagee, by an improper and voluntary alteration of the bond and mortgage, having released or discharged the debt, “ ought not to be permitted to sustain a suit in any court for the recovery of his debts, the basis of which suit must be the securities thus voluntarily destroyed or made void.” In Wheelock v. Freeman, the oral agreement had been reduced to writing, the conditions upon which the notes were to be paid being stated in a memorandum on the same sheet upon which the notes were written; the writing was therefore the only existing contract. Counsel further contended that the alteration in this case was not fraudulent, even if not assented to by defendant.

The following opinion was filed at the June term, 1878.

Cole, J.

A re-argument was granted in this case upon the point whether we were right in holding that the plaintiff could recover upon the original consideration, providing the jury should find from the evidence that the note was altered by her without the consent of the defendant. And it is proper to say in the outset, that there is no foundation in the record for imputing to the plaintiff any fraudulent intent or bad motive in making the alteration, even if it was thus made. She accounts for the alteration very naturally, by saying that she changed the note from $200 to $300 in order to make it include the $65 note and the $30 in cash which she sent the defendant from St. Paul, subsequeut to the execution of this note, and that she informed the defendant of what she had done, and that he after-wards recognized the validity of this note, and paid interest upon it. It is true, the defendant denies that he ever recognized the validity of the note'or knew of its alteration, and he says that in fact he only had $200 of the plaintiff, and that he never received, after' the $200 note was executed, any other note or money through the mail, as testified to by the plaintiff. But it is very manifest from the verdict of the jury that they did not credit his statements in regard to his indebtedness to the plaintiff; and it is perhaps the most natural inference from the verdict, that the jury found that the defendant assented to the alteration. But at all events the question of fraudulent intent is out of the case, there being no evidence upon which to found such an imputation — the error complained of on this branch of the case really being the refusal of the court to give certain instructions asked by the defendant, and exceptions taken to certain portions of the charge. And those instructions and exceptions raise for consideration this simple question, whether, if the proof showed that the plaintiff altered the note without the consent of the defendant — though from no improper motive, but supposing that she had the right under the circumstances to do so — the law will permit her to recover upon the other causes of action stated in the complaint, which are founded upon the original consideration of the note. In the former opinion it was held that she might recover, and the correctness of this conclusion was the only point we desired further argument upon. And we now think our first view of the case wras correct, and that the alteration did not destroy the right of action for the money actually loaned. The position of defendant’s counsel is, as we understand it, that the note is the only means by which the plaintiff derives a right of action. If the note has been altered so that no recovery can be had upon it, the right of action is totally extinct and gone. His fundamental proposition is, in the language of the note to Waring v. Smyth, 2 Barb. Ch. R., 119-125, that “ where an agreement is reduced to writing, whether under seal or not, so as to merge the original promise, and the written agreement is so altered as to avoid it, the party cannot resort to the original contract.” And he cites in support of this proposition, Martendale v. Follett, N. H., 95 ; Wheelock v. Freeman, 13 Pick., 165 ; Byles on Bills, side page 257, note 1; Smith v. Mace, 44 N. H., 553; Bigelow v. Stilphen, 35 Vt., 521; White v. Huss, 32 Ala., 430, Newell v. Mayberry, 3 Leigh, 250 ; Mills v. Starr, 2 Bailey (S. C.), 359; Wood v. Steele, 6 Wallace, 80; and Whitmer v. Frye, 10 Missouri, 349.

In the cases of Waring v. Smyth, Wheelock v. Freeman, Newell v. Mayberry, and Wood v. Steele, the original promise was merged in the written agreement, and the plaintiff’s only right of action was derived from, and was founded on, such written contract. In Bigelow v. Stilphen, where the court thought'that the weight of authority was in favor of the doctrine that an alteration of a note worked the forfeiture of the debt, and that there could be no recovery for the original consideration, still they held that while Cook was the agent of the plaintiffs to sell the property for which the note in question was given, and also their agent to take it and transmit it to them, yet he was not their agent to alter it, and that they were in no respect responsible for his acts in making the alteration, and did not ratify them by bringing suit upon that note. The act of Cook, therefore, in altering the note was regarded as the act of a stranger, and in no way affecting the validity of the note as originally drawn. Whitmer v. Frye was “ an action of debt on a sealed instrument,” and “ the declaration contained a count on the instrument, and the money counts.” The court says that “ where a party, by his own act, renders an instrument so that it cannot be the foundation of any legal remedy, he will not be permitted to prove the covenant or promise contained in it, by other evidence, and that this principle will prevent a resort to the common courts in order' to sustain the plaintiff’s right of recovery. ” In this case there might well be held to be a merger of the simple contract in the instrument under seal, though this reason for the decision is not given. In White v. Huss, the court say in the opinion that if the plaintiff failed to prove the assent of the defendant to the alteration of the note, “ he was not entitled to recover, either upon the note, or under any count founded on the same consideration with the note,” for, “as the note was at first valid, there can be no recovery upon the contract unless the note still continues valid, and is produced in evidence or proved to have been lost by time or accident.” Mills v. Starr was an action upon a sealed note, and for goods sold and delivered, and an insimul computassent. The several counts were for the same debt. The note appeared to have been altered so that there could be no recovery upon it. The court said: “ Here the debt was originally an account, a simple contract debt; the plaintiff’s intestate accepted a specialty, a note under seal, and that, according to the last rule, was an extinguishment of the account.” Martendale v. Follett and Smith v. Mace seem to go upon the assumption that a' fraudulent alteration of a promissory note operates really as an extinguishment of the debt for which it is given. In the latter case Mr. Justice Bellows observes that “ the discharge of the notes by a release would discharge also the original contract; and we think that the same effect would be produced by such a fraudulent alteration of the notes by the vendor as would render them void.”

How it seems to me that the rule laid down in some of the foregoing cases, that an unauthorized alteration of a promissory note not only avoids the instrument and prevents a recovery upon it, but also destroys the right of action upon the original consideration, ought not to be followed in this state, where it has been uniformly held that the taking of the promissory note of the debtor does not extinguish the original debt, nor operate as a payment, unless so agreed by the parties. Of course there is no question of merger under the decisions of this state, as the promissory note is only another security for the original debt. It is not like the case of a bond or other sealed instrument, given for a simple contract, where the latter is said to be merged or swallowed up in that under seal. In Ford v. Mitchell, 15 Wis., 308, and Paine v. Voorhees, 26 id., 526, the doctrine is said to be well settled, that “ the taking of a promissory note, either for a precedent liability or a debt incurred at the time, is no payment, unless expressly so agreed.” See also Williams v. Starr, 5 id., 534; Blunt v. Walker, 11 id., 334; Eastman v. Porter, 14 id., 40; Meshke v. Van Doren, 16 id., 319. It is the logical result of this rule, that the giving of a promissory note for goods sold or money loaned is no payment or extinguishment of the debt, unless such was the agreement, and that the taking of the note only suspends the action on the contract until the note is due. Porter v. Talcott, 1 Cowen, 359 ; Codies v. Cumming, 6 Cowen, 181. But when the term of credit has expired, the creditor may bring his action and recover either upon the original consideration or on the note, as he may elect. Bullock v. Green, 15 Johns., 247 ; Jones v. Savage, 6 Wend., 658; Butler v. Haight, 8 id., 535; Dayton v. Trull, 23 id., 345; Price v. Price, 16 M. & W., 239. In Wright v. The First Crockery Ware Co., 1 N. H., 281, Woddbury, J., states the common law rule upon this subject as follows: “ If a person sells goods and pays money, and at the same time receives therefor the note of a third person payable to himself, or any note or bill not having the name of the person with whom he deals upon it, it will be presumed to be a sale of the note, and to be in satisfaction, until the contrary appears. The rule is different, however, when such note is received for a precedent debt. But if the creditor receive the note or bill of his debtor, or of a third person indorsed by the debtor, either for a precedent debt or a debt arising at the time, it is not presumed it has been received in satisfaction.” The case is approved in the subsequent one of Jaffrey v. Cornish, 10 N. H., 505. And see cases cited in note (m), p. 156, 2 Parsons on Notes and Bills. The rule, therefore, being in this state, as before observed, that the promissory note of the debtor is not, a payment or extinguishment of the debt for money loaned or goods sold, though given at the time, but a concurrent security, which the creditor, when due, has his right of action upon, or upon the original contract, and the plaintiff not relying upon the altered note as the foundation of the right of recovery, but resorting to her remedy on the other counts, why should she not recover the money actually loaned the defendant? Why should the alteration of the note be attended with any such destructive consequences as the forfeiture of the money actually loaned ?

The counsel for the defendant says there never was any right of action except upon the note. But this is assuming the point in controversy. It is well to remember that the note does not show the real terms of the loan, according to the concessions of counsel on both sides. When the note was signed by defendant, it drew interest at twelve per cent. But m his letter of the 10th of June, 1867, on returning the note to the plaintiff, he says: “ The rate is too high; there is plenty of money here at ten per cent. I will take it at that if you see fit.” This was a modification of the terms of the loan, and shows that the real contract is not embodied in the note. The note, however, became void in consequence of the alteration, and of itself cannot be the foundation of a recovery in any form of action. But the debt for the money loaned still exists. Prof. Parsons states the effects of an alteration of a note as follows : “ An alteration by the original payee of a note, or by the drawer or payee of a bill, if not fraudulent, although it avoids the instrument and so destroys their claim under it, may still remit them to their original consideration, and revive their claim under it.” 2 Parsons on Notes and Bills, p. 571. Ohitty says: “ The material alteration, as in the case of subsequent usury, does not extinguish the prior debt; and between the original parties the original debt or consideration is recoverable upon adducing their evidence in proof thereof.” Ohitty on Bills, 212. See Atkinson v. Hawdon, 29 Eng. C. L., 169; Alves v. Hodgson, 7 Term, 241; Farr v. Price, 1 East, 55, note (a), p. 58; Steele v. Norton, 9 M. & W., 309; Sutton v. Toomer, 14 Eng. C. L., 66; Sloman v. Cox, 1 C., M. & R., 471; Morrison v. Welty, 18 McL, 169; Clute v. Small, 17 Wend., 238. Even in the celebrated case of Master v. Miller, 4 Term, 320, which was an action by indorsers against the acceptor of a bill of exchange, where the date of the bill had been altered after acceptance, Lord KeNYON, C. J., opens his opinion as follows: u The question is not whether or not another action may not be framed to give the plaintiffs some remedy, but whether this action can be sustained by these parties on this instrument,— for the instrument is the only means by which they can derive a right of action. The right of action which subsisted in favor of Wilkinson and Cooke could not be transferred to the plaintiffs in any other mode than this, inasmuch as a chose in action is not assignable at law.” But the implication is that Wilkinson and Cooke might have recovered on the money counts, if they had brought the action; and Mr. Justice Buller is astonished “ that a jury of merchants should hesitate a moment in finding a verdict generally for the plaintiffs.” Smith’s Leading Cases, vol. 1, part 2, p. 1141. And we think the better authority is, that “ an unauthorized alteration of the note works no forfeiture of the debt, so that there can be no recovery by the party making such alteration, for the original consideration for which the obligation was given ;” and that this rule necessarily results from our decisions that the taking of the note of the debtor is not a payment or extinguishment of the demand for which it is given. Courts have sometimes treated the subject as though there were some uncompromising principle of public policy involved, which prohibited all recovery . by the party making the alteration. But the effect of an alteration has frequently been obviated in England since the adoption of the rules of H. 4, W. 4, as will be seen in Sibley v. Fisher, 7 A. & E., 444; Hemming v. Trenery, 9 id., 926 ; Mason v. Bradley 11 M. & W., 590; Davidson v. Cooper, id., 778, and Parry v. Nicholson, 13 id., 778 ; from which it is apparent that the courts iu that country do not so regard'the matter.

The alteration of a promissory note is not to be visited with the same consequences in respect to a right of action on the original debt, as a note given on a usurious loan. For in'the latter case the contract for the loan is void, and' all securities given for it are void. There is no valid obligation or demand which the creditor can recover upon, since the statute condemns all usurious loans and all securities tainted with usury. The distinction between such a case and the one under consideration is very marked, and need not be dwelt upon.

It follows from these views that the judgment of the circuit court must be affirmed.

By the Court. — Judgment affirmed.